ML20151F520
| ML20151F520 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 07/22/1988 |
| From: | Counsil W TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| To: | NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM) |
| References | |
| TAC-R00416, TAC-R416, TXX-88578, NUDOCS 8807270132 | |
| Download: ML20151F520 (255) | |
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=M Log # TXX-88578
_ 5 File # 231, 234
= = 843,10047 10101 1010
TUELECTRIC Ref # 10CFR50.30 10CFR50.90 Wihm G. Couanil t=m *"""*"'
July 22, 1988 U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555
SUBJECT:
COMANCHEPEAKSTEAMELECTRICSTATION(CPSES)
DOCKET NOS. 50-445 AND 50-446 hCUEST FOR AMENDMENT TO CONSTRUCTION PERMIT N05 C?oR-126 AND CPPR-127 AND APPLICATION FOR OPERAi M LICENSES FOR CPSES UNITS 1 AND 2 Gentlemen:
Pursuant to 10CFR50.30 and 50.90, Texa Utilities Electric Company (TV Electric), licensee under the referenc d NRC Construction Permits for the Comanche Peak Steam Electric Station (LPSES), acting for itself and the other licensees named in the referenced Const;uction Permits, hereby requests amendment of the said Pennits and hereby amends its Application for Operating Licenses to reflect revised ownership interests as described below. In support thereof, the following information is submitted.
i A. Proposed Amendments of Construction Permits ,
l Applicants propose the amenJments to reflect a re-allocation of ownership interests in CPSES as follows:
The transfer by the Brazos Electric Power Cooperative, Inc. (Brazos) of its 3.8% ownership interest in CPSES to TV Electric, which presently holds an 87-5/6% interest therein. By letter dated March 4,1988 (TXX-88285),
TV Electric, acting for itself and the other licensees named in the ,
referenced Construction Permits, requested amendment of the said Permits I to reflect a re-allocation of ownership interests in CPSES occasioned by an Agreement between TV Electric and Texas Municipal Power Agency (TMPA)
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' July 22, 1988 Page 2 of 3 dated February 12, 1988. That letter requested amendments to reflect the transfer of TMPA's 6.2% ownership interest in CPSES to TV Electric, thereby bringing the aggregate interest of TV Electric to 94-1/30%.
Approval of the amendments requested on March 4, 1988, together with the amendments requested in the instant letter will bring TV Electric's aggregate interest in CPSES to 97-5/6%. * /
The transfer of the Brazos interest is memorialized in the Agreement between Brazos and TV Electric dated as of July 5, 1988 (the Agreement), which is discussed below. Under the terms of the Agreement, the foregoing transfer is subject to certain conditions precedent and regulatory approvals including the Commission's approval. Applicants sequest that the amendments involving the Brazos ownership interest be approved at this time and be made effective as of the date of completion of the transfer of the Brazos ownership interest as set forth in the Agreement.
B. Supporting Material in support of this request, there is submitted for the Commission's convenience a copy of the Agreement.
TV Electric has the financial qualification and ability to complete construction of the 3.8% share of CPSES which it proposes to purchase under the Agreement, To support that conclusion, we furnish TV Electric's most recent SEC Form 10-K dated December 31, 1987, TV Electric's Form 8-K dated July 5, 1988, and the 1987 Annual Report of Texas Utilities Company.
C. General This request is being submitted pursuant to 10CFR 50.30 and 50.90. The amendments herein requested are administrative in nature and involve only the transfer of an ownership interest from one entity to another entity which is already an owner and licensee. This transfer will in no way affect the provisions of the Joint Ownership Agreement with respect to responsibility for the operation and control of CP$ES nor in any way affect the design or construction of the facility. Accordingly, the proposed transfer does not involve any increase in the probability or consequences of accidents previously considered, does not create the possibility of an accident of a type different from any evaluated previously, does not involve any decrease in a safety margin, and therefore does not invcive a significant hazards consideration. Finally, the proposed transfer will not have a significant impact on the environment.
- / The interest of the remaining other owner, Tex-La Electric Cooperative of
_ Texas, Inc., (2-1/6%) remains unchanged.
1
TXX-88578 July 22, 1988 Page 3 of 3 t in view of the fact that the transfer proposed by these amendments does not i raise any complex issue, and that the proposed transfer is also subject to the jurisdiction of other regulatory agencies whose approval is a condition precedent to the transfer, TV Electric respectfully requests an expedited processing of these amendments so that the tralisfer can be consummated at the earliest possible date.
Pursuant to 10CFR170.12(c), this application for amendments to the referenced !
permits is accompanied by a check for $150 to cover the application fee.
- Further, in accordance with 10CFR50.4(b)(2)(ii), one (1) signed original and thirty seven (37) copies of this request are enclosed.
Very truly yours, l W. G. Counsil I RSB:tgw Enclosures ,
cc: J. H. Wilson, OSP-NRC Mr. R. D. Martin, Region IV !
Resident Inspectors, CPSES (3) ;
r STATE OF TEXAS :
i COUNTY OF DALLAS :
There personally appeared before me W. G. Counsil, who being duly sworn did state that he is Executive Vice President, Nuclear Engineering and Operations, I
of TV Electric; that he is duly authorized to sign and file with the Nuclear Regulatory Commission this amendment request for amendment of Construction Permit Nos. CPPR-126 and CPPR-127, this amendment to the Application for Operating Licenses for Comanche Peak Steam Electric Station, Units 1 and 2, 1
and the supplemental information regarding the foregoing; that he is familiar with the content thereof; and that the matters of fact set forth therein are true and correct to the best of his knowledge, information, and belief.
L4A- W My commission expires:
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1 AGREEMENT between BRAZOS ELECTRIC POWER COOPERATIVE, INC. 1 Brazos and TEXAS UTILITIES ELECTRIC COMPANY TU Electric Dated as of July 5,1988 I
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TABLE OF CONTENTS PAGE DEFINITIONS .. ................. ........... 1 R E CIT A LS . . . . . . . . . . . . . . . . . . . . . . . . ........ 8 ARTICLE !, S ALE AN D PURCHASE . . . . . . . . . . . . . . . . , .... 9 1.1 Properties and Assets Sold and Purchased .......... 9 1.2 C l os i ng . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 10 1.3 Transfer of Purchased Assets . . . . . . . . . . . . . . . . . . . 10 1.4 M e thod of Paym ent . . . . . . . . . . . . . . . . . . . . . . . 10 1.5 Payment of Total Payment . . . ................. 10 (a) Payment Upon Signing . . . . . . . . . ........... 10 (b) Payment at the Closing. . . . . . . . . ........... 10 (c) Deferred Payment . ......... .......... 10 ARTICLE 0, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BRAZOS 11 2.1 L egal S t a t us . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.2 Authority for Agreement. . . . ................. 11 2.3 A pprovals . . . . . . . . . . . . . . . . 12 2.4 L iabili ties . . . . . . . . . . . . . . . . . . . . . . . . . . .
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- 2. 5 T a x es . . . . . . . . . . . . . . . . . . ..........
2.6 Title to Real Property . . . . . . . . . . . . . . . . . . . . . . 14 2.7 Title to Personal Property . . . . . . . . . . . . . . . . . . . . 15 2.8 Litiga tion . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.9 C on tra c ts . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.10 Exclusion of implied Warranties . . . . . . . . . . . . . . . . . . 16 2.11 Accuracy of Representations and Warranties . . . . . . . . . . . . 16 ARTICLE III, REPRESENTATIONS, WARRANTIES AND AGREEMENTS O F T U E L E CT RI C . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.1 Corpora te S ta tus . . . . . . . . . . . . . . . . . . . . . . . . 16 3.2 Authority for Agreement. . . . . . . . . . . . . . . . . . . . . 17 3.3 A pprovals . . . . . . . . . . .
.............. 17 3.4 Authority for TUC Guaranty . . . . . . . . . . . . . . . . . . 18 3.5 Accuracy of Representations and Warranties . . . . . . . . . . . . 18 A RTICLE IV, PRE-CLOSING OBLIGATIONS . . . . . . . . . . . . . . .. 19 4.1 Representations, Warranties and Covenants. . . . . . . . . . . . . 19 4.2 Abatement of Participation in Pending Liti 19 4.3 Agreement to Obtain Approvals. . ..............
. . gation . . . . . . . . . . 23 s .*W
ARTICLE V, CONDITIONS TO OBLIG ATIONS TO CLOSE. . . . . . . . . . . . 23 5.1 Conditions to Obligation of Brazos to Close. . . . . . . . . . . . . 23 (a) Representatioc.s and Warranties . . . . . . . . . . . . . . . . . 23 (b) Compliance With Agreement (c) Receipt of Payment . ................. .................. 24 24 (d) Rec eip t o f Cic sing Doc u m en ts . . . . . . . . . . . . . ..... ..... 24 l
(e) Consent to Assignment Agreement. ......... ;
24 (f) Receipt of LR.S. Determina tion . . . . . . . . . ....... ....... 24
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5.2 Conditions to Obligation of TU Electric to Close ..... . . . . 24 (a) Representations and Warranties . . . . . . . . . . . . .... 25 (b) Compliance with Agreement
.................. 25 (c) Delivery of Pending Litigation Documentation . . . . . . . . . . . 25 (d) Receipt of Closing Documen ts. . . . . . . . . . . . . . . . . . . 26 5.3 Conditions to Obligation of Both Parties to Close . . . . . . . . . . 26 (a) No Adverse Proceeding . . . . . . . . . . . . . . . . . . . . . 26 (b) Walver of Right of First Refusal. . . . . . . . . 26 (c) Approval by P UC . . . . . . . . . . . . . . . . .. .. .. .. .. .. 28 (d) Appro val by N R C . . . . . . . . . . . . . . . . . . . . . 29 (e) Approval of R EA, CFC and FFB . . . . . . . . . . . . .... 31 (f) Execution of Transmission Services Agreement .......... 32 ARTICLE VI, CLOSING DOCUMENTS FROM BRAZOS .
............ 32 6.1 Deeds and Transfers, etc.
6.2 Uer. Search .................... 32
................... . . . .. 32 6.3Counsel 6.4 Certificate of Opinion Secretarial Officer . . . . . . . . . . ...... 32
........................ 33 ARTICLE Vil, CLOSING DOCUMENTS FROM TU ELECTRIC . . . . . . . . . . 33 7.1 Proof of Payment. ............. 33 7.2 Other In s tr u m en ts . . . . . . . . . . . ........... ............ 33 7.3 Certificate of Secretarial Officer . ..
7.4 Counsel's Opinion . . . . . . . .............. ................. 33 34 ARTICLE Vill, CLOSING AND INDEMNIFICATION ~
............. . 34
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8.1 Inde.nnification by Bra::os . . . ......, .
. . . . . . . 34 8.2 Indemalfication by TU Electiic . . . . . . . . . . .... . . 34 8.3 Survival of Representation and Warranties . . . . . . . . . . . 35 8.4 Notice and Opportunity to Participate in Defense . . . . . . . . . 35 ARTICLE IX, SETTLEMENT OF PENDING LITIG ATION . . . . . . . . . . . . 35 9.1 9.2 Brazos Bra zCovenant os R eNotlea se . .....
to Sue .... .................... 35
. . . . . . . . . . . . . 3G 9.3 TU Elec tric Release . . . . . . . . . . . . . . . . . . . . . . 40 9.4 TU Elect
- Covenant Not to Sue. . . . . . . . . . ......
9.5 Assump', n cf Liabilities and Obli 41 9.6 Covenare of Cooperation. . . . gations ......
and Indemnification . . . . . 44
. . . . . . . . . . 46 9.7 Termination of Participation . . . . . . . . ........., 46 9.8 TU Electric Actions and Litigation Costs . . . . . . . . . . . . . . 48 9.9 Termination of Joint Ownership Agreement Relationship . . . . . . . 49 t
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ARTICLE X, TERMINATION OF AGREEMENT . 0 ............. 49 10.1 Termination of Agreement by TU Electric . . . . . . . . . . . . . 49 !
10.2 Termination of Agreement by Brazos ............... 50 10.3 Automatic Termination . . . . . . . . . . . . . . . . . . . . . 50 10.4 Termination of Covenants, Releases and Indemnifications. . . . . . . 51 ARTICLE XI, MISCELLANEOUS PROVISIONS ................ 51 11.1 Bulk Sales Law Walver . . . . . . . . . . . . . . . . . . . . . . 51 LI.2 Further Assurance ....................... 51 ll.3 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . 51 11.4 Default ............................ 52 11.5 Property and Transfer Taxes . . . . . . . . . . . . . . . . . . . 52 (a) P roper ty Taxes . . . . . . . . . . . . . . . . . . . . . . . . 52 (b) T rans f e r T ax es . . . . . . . . . . . . . . . . . . . . . . . . 52 1 1. 6 E xpe nses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 1 1.7 G overning L a w . . . . . . . . . . . . . . . . . . . . . . . . . 53 1 1.8 A nnounc e m en ts . . . . . . . . . . . . . . . . . . . . . . . . . 53 11.9 Entire Agreement, Amendments ................. 53 1 1.10 A ssigns, e tc. . . . . . . . . . . . . . . . . . . . . . . . . . 53 1 1.1 1 N o t ic es . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 1 1.12 H ea dings . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 11.13 Execution and Counterparts .................. 54 i 11.14 Interest on Past Due Payments . . . . . . . . . . . . . . . . .
54 11.15 Use of Representations or Recitals ............... 55 i
11.16 Separate Litigation . . . . . . . . . . . . . . . . . . . . . . 55 !
11.17 Construction of Comanche Peak ................ 55 11.18 S everability. . . . . . . . . . . . . . . . . . . . . . . . . . )
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11.19 Time of the Essence. ..................... 56 i
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l LE!rr OF EXHIBITS I
PAGE Exhibit A - Assignment Agreement 1 Exhibit B - Guaranty 2 !
Exhibit C - Brazos Members 3 Exhibit D - Mortgage 3 Exhibit E - Note 4 Exhibit F - Special Warranty Deed With Vendor's Lien and Bill of Sale 7 Exhibit G - Notice of First Right of Refusal 26 Exhibit H - Joseph Robert Riley Opinion 33 Exhibit I - Worsham, Forsythe, Sampels & Wooldridge O inion 34 Exhibit J - Brazos Release 36 Exhibit K - Brazos Covenant Not to Sue 38 Exhibit L - TU Electric Release 41 Exhibit M - TU Electric Covenant Not to Sue 42 Exhibit N - TU Electric Acsumption and Indemnity Agreement 45 Exhibit O - Brazos Indemnity Agreement 46,
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1 THIS AOREEMENT is made and entered into this 5th day of July,1988 by and between the following parties:
BRAZOS ELECTRIC POWER COOPERATIVE, INC., a Texas non-profit electric cooperative corporation, having its principal office at 2404 LaSalle Avenue, Waco, McLennan County, Texas ("Brazos"), and TEXAS UTILITIES ELECTRIC CO11PANY, a l Texas corporation, having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Dallas County, Texas ("TU Electric", and where appropriate in the context of this Agreement, TU Electric may include TU Electric's corporate predecessors, Dallas Power
& Light Company, Texas Electric Service Company and Texas Power & Light Company). ,
DEFINITIONS As used in this Agreement and in the Exhibits attached hereto, unless otherwise specified therein, the following terms shallhave the following meanings:
(a) "Agreement" means this Agreement and the Schedule and all Exhibits attached to this Agreement.
(b) "Assignment Agreement" means the Assignment Agreement attached hereto as Exhibit A.
(c) "Brazos Comanche Peak Debt" means the aggregate of the indebtedness of Brazos to the REA. the CFC and the FFB with respect only to Comanche Peak, which at the date hereofis the unpaid principalamount of One Hundred Ninety Four Million, Six Hundred Ninety Thousand, ihree Hundred Fifty and 14/100 Dollars ($194,690,350.14), and is evidenced and represented by documentation previously delivered by Brazca to TU Electric, i
(d)
"Business Day" means a day on which banks in Dallas, Texas are open for regular banking business.
(e)
"CFC" means the National Rural Utilities Cooperative Finance Corporation, or its successor.
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(f) "Closing" metns the consummation, pursuint to this Agreement, of the sale of the Purchased Assets by Braz:s to TU Electric and the purchase of the Purchased Assets by TU Electric from Brazos, as described herein.
(g) "Closing Date" means such date as may be agreed upon by the parties for the Closing, which date shall be within thirty (30) days after the last to occur of the NRC Affirmative Date, the PUC Affirmative Date or the granting of the necessary approvals of the REA, the CFC and the FFB with respect to the Brazos Comanche Peak Debt referred to in Section 5.3(e) hereof.
(h) "Closing Payment" means the aggregate of (1) Two Million, Four Hundred Fif ty Four Thousand, Eight Hundred Ninety Dollars ($2,454,890), plus (ii) the amount of principal paid by Brazos with respect to the Brazos Comanche Peak Debt from (and including) March 1,1988 until the Closing Date and not previously paid as part of the Signing Payment, plus (iii) an incremental amount calculated at a rate equal to nine and one-half percent (91/2%) per annum on said principal outstanding from time to time from (and lacluding)
March 1,1988 until the Closing Date and not previously paid as part of the Signing Payment.
(i) "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervel! Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related properties, and is the aggregate and combination of the l Station, Fuel and Transmission Facilities, and all other rights and interests
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associated with or relating to all of the same.
(j)
"Deferred Payment" shall have the meaning set out in Section 1.5(c) hereof.
(k) "FFB" means the Federal Financing Bank, or its successor.
(1)
"Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
(m) "Guaranty" means the form of Guaranty of TUC attached hereto as Exhibit B.
(n) "Joint Ownership Agreement" means that certain instrument entitled on the cover page thereof "Joint Ownership Agreement Between Dallas Power &
Light Company, Texas El;ctric Sirvice Company, Texts Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. for Comanche Peak Steam Electric Station," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos and Tex-La, together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos and Tex-la.
(o)
"Members" means the twenty (20) Texas non-profit electric cooperative corporations that are the members of Brazos, as set out in Exhibit C attac,hed hereto.
(p)
"Mortgage" means the purchase money mortgage in the form of the Deed of Trust and Security Agreement attached hereto as Exhibit D creating a first lien and granting to Brazos a first and prior security interest in the Purchased Assets to secure payment of the Note.
(q)
"New lawsult" means the lawsuit that, pursuant .to Section 4.2(e) of this Agreement, may be filed by Brazos or TU Electric, and if filed will be filed in Dallas County, Texas, in the event that nonsults are taken by Brazos and TU Electric in the Pending Dallas Suit pursuant to Section 4.2(d) of this Agreement or this Agreement is terminated under Article X hereof.
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(r) "Note" meins the non-negotiable promissory note, in the form attached hereto as Exhibit E, to be made and delivered at Closing by TU Electric as provided in Section 1.5(c) of this Agreement.
(s) "NRC" means the United States Nuclear Regulatory Commission, or its successor.
(t) "NRC Affirmative Date" shall have the meaning set out in Section 5.3(d) hereof.
(u) "Owners" means collectively TMPA, TU Electric, Tex-La and Brazos, as owners of Comanche Peak in accordance with the terms of the Joint Ownership Agreement, or singularly any of such parties.
(v) "Pending Austin Suits" means Cause No. 399,482 - Brazos Electric Power Cooperative, Inc. v. Texas Utilities Compajn , Texas Utilities Electric Company, Texas Utilities Mining Company, and Texas Utilitics Services Incorporated, -in the District Court of Travis County, Texas, 345th Judicial District, and Cause No. 399,336 - Tex-La Electric Cooperative of Texas, ;
i Inc., and Texas Municipal Power Agency v. Texas Utilities and Texas Utilities '
Electric Company - in the District Court of Travis County, Texas, 98th Judicial District. 1 I
(w) I "Pending Dallas Suit" means Cause No. 86-6809-A - Texas Utilities Electric Company v. Tex-la Electric Cooperative of Texas, Inc., et al. - in the District Court of Dallas County, Texas,14th Judicial District.
(x) "Pending Houston Suit" means Cause No. 83-29889 - Charles A. Atchison, et al v. Brown & Root, Inc., et al. - in the District Court of Harris County, Texas, 215th Judicial District, removed in April,1988, to the United States District Court for the Southern District of Texas, Houston Division, and numbered Civil Action No. H-88-1409.
(y)
"Pending Litigation" means the Pending Dallas Suit and the Pending Austin Suits.
(z) "Pending Somervell County Sult" means Cause No. 2692 - Clementine_
Mathews and her husdand Dolphin Mathews v. Comanche Peak Electric Steam Station, et al., - in the District Court of Somervell County, Texas, ISth Jud!cial District.
(aa) "Permitted Exceptions" means Matters affecting Brazos' title to all or any part of the Purchased Assets existing immediately prior to the time the same were acquired by Brazos from or through TU Electric or TU Electric's predecessors-in-title; Matters affecting Brazos' title to all or any part of the Purchased Assets created by the acts or omissions of (i) all parties owning l interests in Comanche Peak at the time involved acting collectively, or (ii) the Project Manager or TU Electric or both;- I De lien for unpaid taxes and assessments relating to taxes and !
assessments unpaid by parties other than Brazcs or imposed with I I
respect to the periods prior to which Brazos owned the property j interest involved and after the Closing; i
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De rights of third parties in and to the Purchased Assets created by the acts or omissions of parties other than Brazos and not arising by, through or under Brazos; !
Re Joint Ownership Agreemeat and Mi licenses, permits, leases, i
franchises and contracts relating to the Purchased Assets applied for, l
obtained or created by the acts or omissions of (i) any Owner other than Brazos, (ii) all parties owning interests in Comanche Peak at the time involved acting collectively, or (iii) the Project Manager or TU Electric or both; and Liens (existing or inchoate) in favor of mechanics, materialmen, laborers and suppliers of materials, goods, services, equipment, inventory (of subcontractors) and labor to or for the Station, the Fuel 5-
1 or the Transmission Facilities created by the acts or omissions of (1) any Owner other than Brazos, (II) all parties owning interests in Comanche Peak at the ti.7e involved acting collectively, or (iii) the Project Manager or TU Electric or both. 1 1
(bb) "Project Manager" means TU Electric designated and acting as such in i accordance (or purportedly in accordance) with the terms of the Joint Ownership Agreement.
(cc) "PUC" means the Public Utility Commission of Texas, or its successor.
(dd) "PUC Affirmative Date" shall have the meaning set out in Section 5.3(c) hereof.
(ee) "Purchased Assets" means the aggregate of all that part of Comanche Peak (as Comanche Peak exists and is constituted on the Closing Date) owned by Brazos or to which Brazos has a right, title or interest, including without li aitation the following, to the extent of Brazos' ownership interest therein:
all real property and rights appurtenent thereto, and improvements thereon and fixtures thereto; that portion of Brazos' Certificate of Convenience and Necessity heretofore issued by the PUC relative to Brazos' ownership interest in the Station and the Transmission Facilities; all personal property and rights therein, tangible or intangible, including all machinery, equipment, furniture and vehicles; all rights and entitlements to electric power and energy that may hereafter be generated at Comanche Peak; all rights or claims with respect to charges, payments or prepaid items; all warranties and claims and proceeds therefrom; all rights under all agreements, permits, licenses, franchises and authorizations; all intellectual property rights; all computer hardware and software and related rights and interests; all books and records in the possession of the Project Manager or otherwise owned by all of the Owners in combination; the Fuel; the Transmission Facilities; and all other l l
properties and assets pertaining to Comanche Peak; but excluding, however, l any Subject Claim of Brazos arising out of or under this Agreement or the
f o'.her documents delivered to Brazos pursuant hereto; and excluding all I i
do'cuments and other written material relating to Comanche Peak in the custody, control or possession of Brazos, and its agents, attorneys and consultants, except all such documents and other written material pertaining to or involving the Pending Litigation other than cople: of those which have been filed in the Pending Litigation or at the NRC or which are privileged or t t
which may be the work product or the product of Brazos' attorneys' or consultants' joint defense activities or correspondence to or from TU Electric l
or its attorneys or other correspondence or documents copies of which have been provided to TU Electric or its attorneys.
(ff)
"REA" means the Rural Electrification Administratica of the United States !
l Department of Agriculture, or its successor.
(gg)
"Signing Payment" means the aggregate of (i) Fifteen Million, 'lhree Hundred Twenty Two 'Ihousand, Five Hundred Eighty One Dollars ($15,322,581), plus (ii) the amount of principal paid by Brazos with respect to the Brazos !
l Comanche Peak Debt during the period from (and including) March 1,1988 until the date hereof, plus (iii) an incremental amount calculated at a rate I
equal to nine and one-half percent (91/2%) per annum on said principal outstanding from time to time from (and including) March 1,1988 until the date hereof.
(hh)
"Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in liood and Somervell Counties, Texas, and more particularly described on the Schedule attached hereto. 1
, (ii)
"Special Warranty Deed with Vendor's Lien and Bill of Sale" means the form l
of Special Warranty Deed with Vendor's Lien and Bill of Sale attached hereto as Exhibit F.
I (jj)
"Station" means the Site, all improvements thereon (including Squaw Creek lake and Park) and all fixtures and attachments thereto, as well as (i) all personal property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all
easements and other interests of any nature essociated therewith or related thereto and owned by the Owners, excluding, however, the Fuel and Transmission Facilities.
(kk) "Subject Claims" means any and all claims, actions, controversies, causes of action, disputes, demands and complaints of whatsoever kind or nature and whether known or unknown.
(11) "Tex-It' means Tex-La Electric Cooperative of Texas, Inc.
(mm) "TMPA" means the Texas Municipal Power Agency.
(nn) "Total Payment" means the amount to he paid by TU Electric to Brazos i hereunder in connection with the purchase of the Purchased Assets and in connection with the settlement of the Pending Litigation; which shall be the '
total of (i) the Signing Payment, (11) the Closing Payment and (iii) the Deferred Payment, as described in Section 1.5 hereof.
I l
(oo)
"Transmission Facilities" means the Comanche Peak - DeCedova 345 kV '
electrical transmission line approximately 14.4 miles in length, and ;
associated ri ts-of-way, equipment, fixtures and personal property.
(pp)
"TUC" means Texas Utilities Company, a Texas corporation, which is the corporate parent of TU Electric. i RECITAIE I A. '
TU Electric is an investor-owned utility which, pursuant to a statutory merger that occurred on January 1,1984, succeeded to all the rights, title and interests and assumed and became liable for all obligations of Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, and Texas Utilities Generating Company under the Joint Ownership Agreement, and is engaged in the 1
generation, purchase, transmission, distribution and sale of electric energy within the State of Texas.
B.
Brazos is a Texas non-profit cooperative corporation, established pursuant to Tex.
4 Rev. Civ. Stat. Ann art.1528b, which is engaged in the generation, transmission and sale of electric energy within the State of Texas.
C.
Brazos and TU Electric have previousti entered into the Joint Ownership Agreement.
D.
Brazos and TU Electric each own an undivided interest in Comanche Peak, which in the case of Brazos consists of such interest in the Station and Fuel (stated to be an undivided 3.8% interest in the conveyance involved) that was conveyed and transferred to Brazos by TU Electric (or its predecessors) and such interest in the Transmission Facilities (stated to be an undivided 32.2% interest in the relevant instrument but is subject to adjustment) that was conveyed and transferred or agreed to be conveyed and transferred to Brazos by TU Electric (or its predecessors).
E.
Brazos and TU Electric have been involved in the Pending Litigation and would like to settle their disputes involved in the Pending Litigation and otherwise relating to Comanche Peak and Brazos would Uke to sellits interest in Corranche Peak and be relieved of its obligations under the Joint Ownership Agrectnent and TU Electric would like to acquire such interest and is willing to relieve Brazos of such obligations under the Joint Ownership Agreement.
F.
Brazos and TU Electric have concluded this Agreement in order to provide for the sale by Brazos and the purchase by TU Electric of all of Brazos' right, title and interest in Comanche Peak and the settlement of all Subject Claims between Brazos and TU Electric and between Brazos and TU Electric's affiliates pertaining to Comanche Peak, the Pending Litigation, and all matters in connection therewith, upon and subject to the terms and conditions set out herein.
ARTICLE I SALE AND PURCHASE 1.1 Properties and Assets Sold and Purchased. Subject to the terms and conditions of this Agreement, Brazos hereby agrees to sell, transfer, assign, convey and deliver to TU Electric and TU Electric hereby agrees to purchase from Brazos, and pay Brazos for, the Purchased A;4ets in the manner and at the times hereinalter described.
1.2 Closing.
De Closing will occur at 10:00 a.m., Dallas, Texas time, on the Closing Date.
De Closing will be held at the offices of Worsham, Forsythe, Sampels &
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Wooldridge, 8001 Bryan Street, Suite 3200, Dallas, Dallas County, Texas or at such other address as the parties may agree. The fact that the Closing is or was intended to be held in Dallas County shall not be used by TU Electric as evidence for venue purposes in any proceeding related to a Subject Claim arising out of or under this Agreement.
1.3 Tranrfer of Purchased Assets. At the Closing, Brazos will sell, convey, assign and transfer to TU Electric, and TU Electric will purchase, under and pursuant to a form of the Special Warranty Deed with Vendor's Lien and Bill of Sale, the Purchased Assets.
1.4 Method of Payment. All payments made by TU Electric to Brazos under tais Agreement shall be made by wire transfer of immediately available funds through the federal reserve system to Brazos' bank designated in writing to TU Electric. If the due date of any payment under this Agreement falls on e day that is not a Business Day, such payment shall be paid on the first Business Day following the date on which such payment is due.
1.5 Payment of Total Paymeat. TU Electric shall pay to Brazos the Total Payment as follows:
(a) Payment Upon Signing. On the date af execution of this Agreement, TU Electric will pay to I> azos the Signing Payment. The Signing Payment shall be held in a separately segregated fund by Brazos until Closing, but {
Brazos may invest same in its sale discretion. The Signing Payment will be subject to refund prior to the Closing as provided in Article X of this Ag:acment. Upon the Closing, the Signing Payment will be deemed a part of l
the Total Payment.
(t,)
Payment at the Closing. At the Closing, TU Electric will pay to Brazos the ,
Closing Payment. !
l (c) Deferred Payment. At the Closing, TU Electric will execute and deliver to Brazos in payment of the remaining portion of the purchase price the Note, in !
an original principal amount equal to the total unpaid principal amount of the Brazos Comanche Peak Debt at the Closing Date, the payment of which will be secured by the Mortgage given as a purchase money mortgage and the vendors lien providd for in the Special Warranty Deed with Vendors Lien and
Bill of Sals, it being understood and agreed that Brazos will contemporaneously therewith assign and transfer the Note and the Mortgage together wl.h the vendors lien retained in the Special Warranty Deed with Vendors Lien and Bill of Sale to the REA pursuant to and in accordance with the Assignment Agreement as a mechanism for payment of the Brazos Comanche Peak Debt. The Note shall bear interest at the rate of nine and one-half percent (9-1/2%) per annum on the principal balance unpaid from l i
time to time for the period described therein and at the rate of eight and l one-half percent (8-1/2%) per annum on the principal balance unpaid from time to time for the remainder of the term thereof, which term shall be the same as the remaining, term of the Brazos Comanche Peak Debt at the Closing Date. 1 ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMEN'IS OF BRAZOS Brazos represents and warrants to, and agrees with, TU Electric as follows: l 1
2.1 _lAgal Status.
Brazos is a non-profit electric cooperative corporation, duly organized, validly existing and in good standing under the laws of the State of Texas, with full, requisite corporate power and authority to carry on its busines; as now conducted and I to own, sell and transfer the Purchased Assets as provided for in this Agreement.
2.2 Authority for Agreement. Brazos has full, requisite corporate power and authority to execute, deliver and perform this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale and each other agreement and instrument to be executed and delivered in connection with this Agreement, and to carry out its obligations hereunder and thereunder. Brazos has full, requisite corporate power and authority to act 4
for itself and the other persons or entitles, private and governmental, acting by, through and under Brazos, in connection with this Agreement, the Special Warranty Deed with j
Vendor's Lien and Bill of Sale and the other agreements and instruments to be executed \
j and delivered by it pursuant hereto. 'This Agreement has been, and at the time of the l
Closing, the Special Warranty Deed with Vendor's Lien and Bill of Sale and such other l l
l agreements and instruments as are delivered by Brazos will have been, duly authorized, '
executed and delivered by Brazos and this Agreement does, and at the time of Closing, the Special Warranty Deed with Vendor's Lien and Bill of Sale and such other agreements and instruments as are delivered by Brazos will, constitute valid and legally binding obligations of Brazos and the other persons or entitles, private and governmental, acting by, through and under Brazos, enforceable against such parties in accordance with their respective terms. Except for the approvals set out in Section 2.3, the execution, delivery and performance of this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale and such other agreements and instruments will not conflict with or result in any violation of, or constitute a default under, (i) the Articles of Incorporation or by-laws of Brazos, or (ii) any material provision of any mortgage, indenture, lease, agreement or other instrument, including any evidence of indebtedness, including without limitation the Brazos Comanche Peak Debt, to which Brazos, or any of Brazos' properties or assets, is subject or a party, or (111) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Brazos or any of its property, including the Purchased Assets; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein, except no representation is made with respect to any instrument, permit, concession, grant, franchise or license (and the laws and regulations with respect thereto) made or obtained by TU Electric or the Project Manager on behalf of the Owners.
- 2.3 Approvals. Brazos has obtained all necessary consents, approvals, orders and authorizations of, and made all necessary registrations, declarations and filings with, each governmental authority or other entity required in connection with the executio1, delivery, and performance by Brazos of this Agreement, the Spealal Warranty Deed v.ith Vendor's Lien and Bill of Sale and the other agreements and instruments to be executed and delivered by Brazos hereunder, except (i) for any such required to be obtained by the Project Manager, (ii) with respect to the rights of first refusal referred to in Section 5.3(b) hereof, (iii) for any such required to be effected from the PUC and NRC referenced in Sections 5.3(c) and (d) hereof, and (iv) those that must be obtained from the REA, the CFC and the FFB refererced in Section 5.3(e). No other fillng or registration with, and no
other consent, approval, authorization, permit, certificate or order of any court, tribunal ce governmental agency or authority, Federal, state, county or municipal, or any other entity is or will be required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or agreement with any other entity to permit Brazos to execute, deliver and perform this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale or any agreement or instrument required hereby to be executed and delivered by it at the Closing.
2.4 Liabilities. 'Ihere are no obligations or liabilities or other obligations or other evidence of indebtedness, of Brazos, including without limitation the Brazos Comanche Peak Debt, whether accrued, absalute, contingent or otherwise, which TU Electric may become liable for or is assuming as a result of the purchase of assets provided for herein or which mcy apply with respect to the Purchased Assets, except such as currently exist with respect to Comanche Peak and which were entered into or incurred by (1) all parties owning interests in Comanche Peak at the time involved acting 1
collectively, or (ii) the Project Manager or TU Electric or both. Brazos has no debt for financing its interest in Comanche Peak except for the Brazos Comanche Peak Debt and all mortgages, other liens and security interests for all debt which applies to Brazos' interest in Comanche Peak will be released or terminated prior to or at the Closing. .The l documentation previously delivered by Brazos to TU Electric with regard to the Brazos l Comanche Peak Debt comprises all relevant information with respcct thereto and omits I no information which would be material to an understanding thereof. The amounts specified by Ikazos to TU Electric as the amounts paid or payable by Brazos with respect to the Brazos Comanche Peak Debt de-!ng the periods of March 1,1988 until the date hereof and from the date hereof until the Closing Date and the amount specified by Brazos to TU Electric as the unpaid principal balance of the Bretos Comanche Peak Debt at the Closing Date and the payment and other terms of such debt at such time are and will be at the Closing Date true and correct in all respets.
i l
I 2.5 Taxes. Apart from all taxes and similar charges owed by the Project ;
Manager on behalf of all the Owners collectively, Brazos owes no taxes or similar charges or impositions with respect, or the nonpayment of which would apply, to, or result in any lien or other encumbrance upon, the Purchased Assets to any taxing authority. No tax charge, tax expense or tax claim against the Purchased Assets originating with or caused by the action or inaction of Brazos individually or in combination with any of the Owners l other than TU Electric or the Project Manager will attach to or affect any portion of the Purchased Assets conveyed at the Closing.
2.6 Title to Real Property. Brazos has such title in and to the Site and all real t
property interests therein and the real property interests included in the Transmission Facilities as was conveyed to Brazos by or through TU Electric or by TU Electric's predecessors-in-title. Except in combination with, or in conjunction with action by, all of the Owners of the Site and the real property interests included in the Transmission Facilities acting collectively either directly or through the Project Manager, Brazos has not encumbered the Site or any of the real property interests therein or the real property interests included in the Transmission Facilities with any mortgages, tiens, claims, charges, security !nterests or encumbrances, except In connection with the Brazos Comanche Peak Debt and other Brazos debt, all of which liens and security interests pertaining to the Site or any.of the real property interests therein or the real property I 1
interests included in the Transmission Facilities will be released prior to or at the Closing.
Brazos, separately or in combination with any or all of the Owners other than l
TU Electric or the Project Manager, has not taken any action which would result in the I structures, improvements and fixtures on such real property constituting a part of the Site not being in conformity with all applicable Federal, state and local zoning, building, health safety and environmental laws, ordinances, rules or regulations. No notice from i
any governmental body, which has not otherwise been' disclosed to TU Electric or the i Project Manager in writing, has been served upon Brazos claiming any violation of any i
such law, ordinance, rule or regulation or requiring any work, repairs, construction, alterations or installation on or in connection with such real property or the buildings,
\
structures, fixtures or improvements thereon, nor t. 'kazos' knowledge has any such violation, which has not otherwise been disclosed to TU Electric or the Project Manager in writing, been claimed or action with respect thereto threatened.
2.7 Title to Personal Property.
Brazos has the title to such interest as was conveyed to Brazos by or through TU Electric or TU Electric's predecessor-in-title in all of the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, to the extent the same are parts of the Purchased Assets to be conveyed at the Closing.
Except in combination or in conjunction with action by TU Electric, the Project Manager or all of the Owners acting collectively, and except in connection with the Brazos Comanche Peak Debt and other Brazos debt, the security interests in connection with which pertaining to the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, which are part of the Purchased Assets will be released prior to or at the Closing, Brazos has not, apart from any personal property and similar charges owed by the Project Manager on behalf of all of the Owners collectively, encumbered the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, which are part of the Purchased Assets, with any mortgages, liens, claims, charges, security interests, encumbrances or other restrictions or limitations, and assuming payment by TU Electric of any and all transfer taxes that may become due on account of the transfer of"the l
Purchased Assets contemplated by this Agreement and except for the liens for ad valorem I taxes not yet due and payable.
2.8 Litigation. There are no Subject Claims, suits or proceedings, administrative or otherwise, pending (i.e. Brazos having been served with process with respect thereto or otherwise having knowledge thereof) against Brazos or, to the best of Brazos' knowled threatened against Brazos affecting the Purchased Assets, whether such be at law, in equity or in arbitration, or before or by any governmental department, commission, boa bureau, agency or instrumentality which, if adversely determined against Brazos, would affect Brazos' ability to perform its obligations under this Agreement, except the Pend Lltigation, the licensing proceedings to which TU Electric is a party, the Pending Houston
Suit and the Pending Somervell County Sult; and Brazos, separately and apart from the Owners in combination or in conjanction with action by all of the Owners acting collectively either directly or through the Project Manager (but without acknowledgment l 1
that such exists with reference to the Owners), is not in default with respect to any order, !
l writ, injune'. ion or decree of any court, arbitrator o'r governmental department, l
commission, board, bureau, agency or instrumentality affecting the Purchased Assets.
2.9 Contracts. There is not in effect any executory contract, agreement, order or commitment to which Brazos is subject or a party, and to which TU Electric or the Project Manager is net a party, which would bind TU Electric after the '" with respect to the Purchased Assets and which would adversely affect the value of the Purchased Assets after the Closing.
2.10 Exclusion of implied Warranties. THE PURCHASED ASSETS ARE BEING SOLD " AS-IS". BRAZOS MAXES NO WA RR ANTIES CONCERNING THE MERCHANTABILITY OR CONDITION OF THE PURCHASED ASSETS OR OF THEIR FITNESS FOR ANY PARTICULAR PURPOSE, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH HEREIN.
I 2.11 Accuracy of Representations and Warranties. All representations and 1 warranties of Brazos contained herein are, and will be at the time of the Closing, l accurate and complete in all material respects and all documents delivered by Brazos to i
TU Electric incident hereto are, and will be at such time, valid and authentic in all respects.
1 ARTICLE E REPRESENTATIONS WARRANTIES AND AGREEMENTS OF TU ELECTRIC TU Electric represents and warrants to, and agrees with, Brazos as follows:
3.1 Corporate Status.
TU Electric is a corporation duly organized, validly I ex! sting and in good standing under the laws of the State of Texas with full, requisite corporate power and authority to carry on its business as now conducted and to own, buy and accept the transfer of the Purchased Assets as provided for in this Agreement.
1 l
l 3.2 Authority for Agreement. TU Electric has full, requisite corporate power and authority to execute, deliver and perform this Agreement, to receive delivery of the Special Warranty Deed with Vendor's Lien and Bill of Sale, and to execute, deliver and perform the Note, the Mortgage and each other agreement and instrument to be executed and delivered by TU Electric in connection with this Agreement, and to carry out its obligations hereunder and thereunder. TU Electric has full, requisite corporate power and authority to act for itself and the other persons or entitles, private and governmental, acting by, through and under TU Electric in connection with this Agreement, the Note, the Mortgage and the other agreements and instruments to be executed and delivered by it pursuant hereto. This Agreement has been, and at the Closing the Note, the Mortgage and such other agreements and instruments will have beer., ddy authorized, executed and delivered by TU Electric, and this Agreement constitutes, and at the Closing the Note, the Mortgage and such other agreements and instruments will constitute, valid and legally binding obligations of TU Electric enforceable against it in accordance with their respective terms. The execution, delivery and performance of this Agreement, the Note, the Mortgage and such other agreements and instruments will not conflict with or result in any violation of, or constitute a default under, (i) the Articles of Incorporation or by- l laws of TU Electric, or (11) any material provision of any mortgage, indenture, lease, agreement or other instrument to which TU Electric is subject or a party, including any bonds or other obligation or other evidence of indebtedness, or (111) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TU Electric or any of its property, including Comanche Peak; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein.
3.3 !
_ Approvals. TU Electric has obtained all necessary consents, approvals, order: '
and authorizations of, and has made all necessary registrations, declarations and filings with, each governmental authority or other entity required in connection with the execution, delivery, and performance by TU Electric of this Agreement, the Note, the I
l
)
Mortgage and the other agreaments and instruments to be executed and delivered by TU Electric hereunder, except (1) with respect to the rights of first refusal referred to in Section 3.3(b) and (ii) for the filings with the PUC and NRC referenced in Sections 5.3(c) and (d) of this Agreement. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or other entity is ,
or will be required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or agreement with any other entity to permit TU Electric to execute, deliver or perform this Agreement, the Note, the Mortgage or any agreement or instrument required hereby to be executed and delivered by it at the Closing, except as referred to above.
3.4 Authority for TUC Guaranty. TUC has full, requisite corporate power and authority to execute, deliver and perform the Guaranty and to carry out its obligations thereunder. At the Closing, the Guaranty will have been duly authorized, executed and delivered by TUC, and will constitute the valid and legally binding obligation of TUC enforceable against it in accordance with its terms. The execution, delivery and
{
performance of the Guaranty will not conflict with or result in any violation of, or constitute a default under, (1) the Articles of Incorporation or by-laws of TUC, or (11) any material provision of any mortgage, indenture, lease, agreement or other instrument to I
which TUC is subject or a party, or (iii) any permit, concession, grant, franchise, license, 1 i
judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TUC or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein.
3.5 Accuracy of Representations and Warranties. ' All representations and warranties of TU Electric contained herein are, and will be at the time of the Closing, accurate and complete in all material respects and all documents delivered by TU Electric to Brazos incident hereto are, and will be at such time, valid and authentic in alt respects.
ARTICLE IV PRE-CLOSING OBLIGATIONS
, Brazos and TU Electric, as appropriate, covenant that between the date of this Agreement and the Closing Date:
4.1 Representations, Warranties and Covenants. Brazos shall not take any action I which would result in the representations and warranties set forth in Article II hereof '
vel g inaccurate, incorrect or incomplete to the extent appilcable as of the Closing Date ar.d Brazos shall take all such action as may be necessary to insure that all covenants and agreements of Brazos set forth in this Agreement which are required to be performed by l It at or prior to the Closing Date will have been so performed.
TU Electric shall not take any action which would result in the representations and warranties set forth in Article III hereof being inaccurate, incorrect or incomplete to the extent applicable as of the Closing Date and TU Electric shall take all such action as may I be necessary to insure that all covenants and agreements of TU Electric set forth in this Agreement which are required to be performed by it at or prior to the Closing Date will have been so performed.
4.2 Abatement of Participation in Pending Litigation. For purposes of this Section 4.2, the term "TU Electric" shall include not only TU Electric but TUC and its subsidiaries, Texas Utilities Mining Company and Texas Utilities Services Inc., all of which are parties to the Pending Litigation.
Immediately after the execution hereof and to the fullest extent that would not i
violate court orders in effect in the Pending Dallas Suit, Brazos shall abate all of its voluntary activities in connection with the Pending Litigation, including cessation of the furnishing of any assistance, financial or otherwise, to any party to such litigation and the retention and furnishing of advice or direction to any attorneys of or consultants to any party to such liUption, and any other activity adverse to TU Electric pertaining thereto.
In such regard, Brnos agrees that it will immediately direct any attorneys and consultants retained solely by it in connection with the Pending Litigation to abate their
work, and, consistent with any agreements Brazos may have with TMPA and/or Tex-La and consistent with any agreements Brazos may have with consultants hired jointly with TMPA and/or Tex-La (all of which agreements are terminable and will be abated by Brezos immediately after the date hereof and terminated by Brazos upon the Closing),
Brazos will as soon as possible withdraw its authorization to sny other attorney or consultant employed jointly by it and any of the other parties to the Pending Litigation to
!ncur fees or expenses chargeable to Brazos. Specifically with regard to the Pending Litigation, Brazos (and TU Electric to the extent specified herein) agrees to take the following actions:
(a) Brazos agrees to the continued abatement of the Pending Austin Suits and agrees not to revive such actions during the pendency of this Agreement and to take any action necessary to oppose such revival as to Brazos. In the event the Pending Dallas Suit is nonsulted in accordance with paragraphs (d) and (e) hereof, Brazos shall not claim that such nonsul. .4 titles Brazos to i revive the Pending Austin Suits; (b)
Brazos and TU Electric agree to file within three (3) days after the date hereof and diligently pursue a joint motion to sever each of their respective l Subject Claims against each other in the Pending Dallas Suit;
{
(c) . 1 Brazos and TU Electri, agree as part of the joint motion required by l l
paragraph (b) hereof to request jointly that the Court in the Pending Dallas !
Suit approve a standstill agreement with respect to the severed Subject Claims whereby the current scheduling order is withdrawn with respect to the severed Subject Claims and no new scheduling order or trial setting is made, l and no discovery or any other steps to advance the litigation between Brazos and TU Electric shall be taken unless this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Closing Date, provided, however, any costs incurred and assessed against Brazos by the Court in the Pending Dallas i
l
)
Suit after approval of such Mandstill agreement shall be paid by TU Electric entil such time as ihis Agreement is terminated or the transactions contemphted hereunder to be consummated prior thereto are not con.ammated on or prior to the Closing Date; !
(d) If for any reason the Court in the Pending Dallas Suit refuses to grant the severance or refuses to approve the standstill agreement referenced above l prior to the end of three (3) weeks after the date hereof, Brazos and j TU Electric agree to immediately nonsuit each of their respective Subject Claims against each other filed in the Pending Dallas Suit on such date which shall be three (3) weeks after the date hereof (or the next day the Court is open for business if such date is a holiday), provided that, as specified in i
Section 9.7 of this Agreement, TU Electric shall have the right to retain l
Brazos as a party to the Pending Dallas Suit but only for the purposes I specified in said Section 9.7; (e)
If it is necessary for Brazos and TU Electric to nonsult the subject Claims i
1 filed against r ach other in the Pending Dallas Suit, Brazos and TU Electric agree that suca nonsults will not operate to prejudice either party's position with respect to the Subject Claims they have made and legal positions they have taken in the Pending Litigation. In the event this Agreement is terminated or the transactions contemplated hereunder to be consummated i
i prior thereto are not consummated on or prior to the Closing Date, Brazos and TU Electric agree that their Subject Claims in the Pending Dallas Suit shall be iefited in Dallas County in the New Lawsuit in the 14th Judicial i i
District Court (and if such suit is not assigned initially to such Court, Brazos and TU Electric agree to thereafter file a Joint Motion to transfer such suit to such Court), within five (5) Business Days after such termination of this Agreement or failure to close hereunder on the Closing Date, with TU Electric as the plaintiff and Brazos as defendant and counter-plaintiff,
and that Brazos will not oppose venue in Dallas County, Texas except to the extent that Brazos could on the date of this Agreement contest venue in Dallas County, Texas in the Pending Dallas Sult. In the event this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Closing Date, Brazos will retain, without limitation, any and all rights Brazos may now have to appeal the order of the Court in the Pending Dallas Suit dated September 19, 1986. For all purposes, including, without limitation, (1) any statute of limitations claim, (ii) any claim concerning S16.069 of the Texas Civil Practice and Renedies Code, and (iii) any claim asserted in the Pending Austin Suits (including without limitation, any Subject Claim concerning which suit was first filed), the New Lawsuit will be considered as having been filed by TU Electric on May 29, 1986, and Brazos' counterclaim in the New Lawsuit will be considered as having been filed by Brazos on June 20,1986.
All discovery, including documents produced and depositions taken, which had been conducted in the Pending Dallas Suit up to the execution of this Agreement, shall be for all purposes considered as having been taken in the New Lawsuit, and all orders issued by the Court in the Pending Dallas Suit up to Ole execution of this Agreement (except the scheduling order) shall have the same force and effect as if they had been issued in the New Lawsuit; (f) No efforts made or cooperation given by Brazos' officers, employees, agents, consultants, experts or attorneys (including, without limitation, Joseph Robert Riley, Spiegel & McDiarmid and Locke Purnell Rain Harrell) pursuant to or under any provision of this Agreement shall create any conflict of interest which would prevent any such employees, agents, consultants or attorneys from participating adversely to TU Electric in any legal proceeding brought by TU Electric against Brazos and/or by Brazos against TU Electric should this Agreement be terminated or should the transactions contemplated
h under this Agreement to be consummated prior thereto not be consummated j on or before the Closing Date. TU Electric hereby waives any such confilet of interest which might otherwise exist because of any such effort or cooperation; and (g) If it is necessary to nons' ult the current Subject Claims, as set forth in paragraphs (d) and (e) above, then in such event upon or at any time after the Closing, if TU Electric requests, Brazos and TU Electric agree that their !
Subject Claims in the Pending Dallas Suit shall be refiled in the New Lawsuit in Dallas County and that the New lawsuit er;d all such Subject Claims shall {
l then immediately be dismissed with prejudice.
4.3 Agreement to Obtain Approvals. Brazos shall use all reasonable efforts to i
obtain with respect to Brazos and TU Electric shall use all reasonable efforts to obtain with respect to TU Electric all necessary consents, approvals, authorizations, permits, certificates or orders of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or other entity which are required by any applicable statute or )
other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, stato, county or municipal, or any agreement or other requirement to permit each of them, respectively, to execute, deliver or perform this Agreement and any agreement or instrument required hereby to be executed and delivered by either of them at the Closing. '
ARTICLE V CONDITIONS TO OBLIGATIONS 'lv LuCSE 5.1 Conditions to Obligation of Brazos to Close. The obligation of Brazos to consummate and close the transactions contemplated by this Agreement at the Closing is subject to the satisfaction of each of the following conditions at or prior to the Closing (a) . Representations and Warranties. 'Ihe representations and warranties of TU Electric contained in this Agreement shall have been true and correct on and as of the date hereof and shall be true and correct on and as of the Closing Date in all material respects as though such representations and
-2 3 -
warranties had b:en made on and as of the Cl2 sing Date, and TU Electric shsil have delivered to Brazos a certificate, dated as of the Closing Date, of its Chairman of the Board, a Division President or a Vice President to the foregoing effect; (b) Compliance With Agreement.
TU Electric shall have fully performed and complied with all of the covenants, agreements and conditions to be performed or complied with by it at or prior to the Closing (including without limitation its assumption obligations with respect to the Joint Ownership Agreement), and TU Electric shall have delivered to Brazos a certificate, dated as of the Closing Date, of its Chairman of the Board, a Division President or a Vice President to the foregoing effect; l (c) Receipt of Payment.
TU Electric shall have delivered to Drazos the payments referenced in paragraphs (a) and (b) of Section 1.5 hereof; (d)
Receipt of Closing Documents. Brazos shall have received the fully executed Closing documents described in Article VII hereof to be delivered at the Closing; and I (e) 1 Consent to Assignment Agreement. De REA shall have entered into the Consent to Assignment Agreement attached to the Assignment Agreement, thereby accepting assignment of the Note as a mechanism for paying the Brazos Comanche Peak Debt and assignment of tne Mortgage and the vendbrs lien contained in the Special Warranty Deed with Vendors Lien and Bill of i
Sale as security for the payment of the Note.
(f)
Receipt of I.R.S. Determination. Brazos shall have received an acceptable Internal Revenue Service determination or Letter Ruling that no payments to be made under this Agreement and the Note will, when added to other nonmember revenues of Brazos, adversely affect Brazos' tax-exempt status under Section 501(c)(12) of the Internal Revenue Code of 1986.
5.2 Conditions to Obligation of TU Electric to Closg. De obligation of TU Electric to consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction of each of the following conditions at or prior to the Closing:
(a) Represtntations and Warranties. The representations and wtrranties of Brazos contained in this Agreement shall have been true and correct on and as of the date hereof and shall be true and correct on and as of the Closing Date in all material respects as though such representations and warranties had been made on and as of the Closing Date, and Brazos shall have delivered to TU Electric a certificate, dated as of the Closing Date, of its President or Executive Vice President and General Manager to the foregoing effect; (b) Compliance with Agreement. Brazos shall have fully performed and complied with all of the covenants, agreements and conditions to be perfortned or complied with by it at or prior to the Closing, and Brazos shall have delivered to TU Electric a certificate, dated as of the Closing Dete, of its l'recident or Executive Vice President and General Manager to the foregoing effect; (c) !
Deliv*ry of Pending Litigation Documentation. At the Closing, Brazos shall l 1
have delivered to TU Electric the originals and all copies of all documents 1
and other written material in its custody, control or possession (including without limitation those held by Brazos' agents, attorneys and consultants) pertaining to or involving the Pending Litigation, other than copies of those which are filed in the Pending Litigation or at the NRC o. which are privileged or which may be the work product or the product of Brazos' attorney's or consultant's joint defense activities, if any, prepared 'in connection with the Pending Litigation or correspondence to or from TU Electric or its attorneys or other correspondence or documents copies of l
which have been provided to TU Electric or its attorneys. Such documents or !
other written material which are essential to the conduct of Brazos' on-going ;
business activities may be retained by Brazos except for one copy which will l
have been delivered to TU Electric prior to t;ie Closing. As coricerns privileged or joint defense documents or written material, Drazos shall, to the full extent permitted by law, exercise such privileges and claims of confidentiality as may be available to prevent disclosure thereof to any person or entity, private or governmental; and
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(d) Receipt of Clising Documents.
TU Electric shall have recsived the Closing documents described in Article VI hereof to be delivered at the Closing.
5.3 Conditions to Obligation of Both Parties to Close. The obligation of the parties to consummate the transactions contemplated by this Agreement at the Closing Date is subject to the satisfaction of each of the following conditions at or prior to the
} Closing Date:
{
(a)
No Adverse Proceeding. There shall not be pending any suit, action or other proceeding by any person before any court or arbitrator or any governmental department, commission, board, buresu, agency or instrumentality in which it i is sought to restrain or prohibit any of the transactions contemplated by '.his l Agreement.
(b) Waiver of Right of First Refusal. Immediately Lpon execution of this l Agreement, Brazos will notify TMPA and Tex-la of the execution of this 1
Agreement by means of the notice attached hereto as Exhibit G. By the Closing Date, TMPA and Tex-La will have executed an irrevocable waiver or other sufficient relinquishment of any rights of first refusal or consent to sale that TMPA and Tex-La may have under the Joint Ownership Agreement (it being agreed that failure to exercise such right in accordance with the terms of the Joint Ownership Agreement by TMPA or Tex-la in response to the notice from Brazos within the time period specified in the Joint Ownership Agreement will constitute sufficient relinquishment of the rights of first refusal of TMPA or Tex-La as the case may be) with respect to any transaction provided for herein or such rights shall have been validly exercised, in whole or in part, by either or both of TMPA and Tex-14 and the
(
I purchase which arises as a result of such exercise fully consummated. In the l
event that either or both of TMPA and Tex-La shall have exercised any such l
rights of first refusal to the extent that TMPA and/or Tex-La acquire all of Brazos' interest in the Purchased Assets, Brazos shall promptly refund to TU Electric the full amount of the S!gning Payment less $15,322,581 and Braa. 3 shall, in consideration for retaining said $15,322,581 of the Signing
l Payment, perform its obilgations pursuant to Article IV, Sections 5.2(c),
Section 8.1, Section 9.1, Section 9.2, Section 9.5, Section 9.6 and Section 9.7 1 hereof. It is agreed by Brazos and TU Electric that the purchase price under i
this Agreement of the Purchased Assets includes an amount, in addition to the payment of cash and delivery of the Note by TU Electric, which !
represents the forgiveness of certain indebtedness of Brazos to TU Electric under the Joint Ownership Agreement which TU Electric contends Brazos j
owes it but which Brazos does not admit is owing to TU Electric (the "Brazos JOA Debt"). In such connecilon, it is understood that inasmuch as such forgiveness of the Brazos JOA Debt is part of the purchase price of the Purchased Assets, Brazos shall require either TMPA or Tex-IA, as purchaser of Brazos' interest in the Purchased Assets pursuant to any rights of first l refusal or consent to sale under the Joint Ownership Agreement to pay, and,
)
therefore, such purchaser would be required to pay TU Electric and fully satisfy it with respect to the Brazos JOA Debt pertaining to Brazos' interest I in the Purchased Assets, purchased by TMPA and/or Tex-la. In the event ;
)
that TMPA and/or Tex-La exercise any such rights of first refusal to the extent that all of Brazos' interest in the Purchased Assets has not been l t
acquired by TMPA and/or Tex-La, after consummation of the sale to TMPA and/or Tex-la, Brazos shall promptly refund to TU Electric a proportional I amount of the Signing Payment (calculated after deducting $15,322,581) equivalent to the proportion of the Purchased Assets' which TMPA and/or Tex-la has elected to acquire. i Brazos shall be entitled to retain the
$ 15,322,581, together with the balance of the Signing Payment not refunded to TU Electric and Brazos and TU Electric agree to perform this Agreement with respect to the portion of the Purchased Assets not acquircd by TMPA ;
and/or Tex-la in the manner set forth herein, with appropriate proportional
)
modifications to the payment obligations of TU Electric herein, and to the
. .- _. . - - . . = . -
obligations of.Brazos herein to deliver all of the Purchased Assets, as well as j all of the other provisions of this Agreement. In addition, Brazos shall refund to TU INtric a proportional amount of the payments that TU Electric has 1
made with respect to the Brazos Comanche Peak Debt equivalent to the proportion of the Purchased Assets being acquired by TMPA and/or Tex-IA, and TMPA or Tex-14 shall pay TU Electric the Brazos JOA Debt to the I
extent set forth hereinbefore.
(c) Approval by PUC. By final action subject to no further appeal, the PUC shall have approved the transfer to TU Electric of Brazos' certificate of convenience and necessity with respect to the Station and the Transmission Facilities permitting TU Electric's acquisition and ownership of Brazos' ownership interest in the Station .and the Transmission Facilities in accordance with the terms hereof. In such connection, TU Electric and Brazos will file within fifteen (15) Business Days of the date of this j Agreement and prosecute to the best of their ability a joint application for approval of the transfer of such certificate of convenience and necessity rights and such other applications or filings with the PUC as shall be :
necessary and essential in connection with the transactions contemplated under this Agreement. In connection with all such proceedings, each party 3
will bear its own cost and expense of prosecuting such applications or filings.
Upon the issuance by the PUC of any order or other document purporting to give the approval contemplated under this Agreement with or without conditions, the parties, with their respective attorneys and other consultants, shall promptly confer and endeavor in good faith to determine if such order or other document evidences the final approv'l a contemplated by this Agreement without any condition that is deemed by either party to be inconsistent with the provisions or this Agreement. It is understood and agreed that, ir, c.onnection with such applications and filings, TU Electric will j i
l l 1
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- , . - _ - - - . , - , ,, - , , , . , . _ . _ - _ . , , , , , , , , - - - - ~ . -,,._,,.n, ,ew,n,_n,-n,.,,-,,----+--,,n.,,,,
request the PUC not to prejudge either the reasonableness or the recoverability in TU Electric's rates of the consideration payable hereunder and to defer any such determinations to a subsequent TU Electric rate case; however, should the PUC refuse to defer such determinativa and determine in such certification proceedings that all or any portion of the consideration payable hereunder is unreasonable or shall not be recoverable in TU Electric's rates, such determination shall be deemed by TU Electric to be inconsistent with the provisions of this Agreement and therefore shall be inconsistent for the purposes hereof. If such determination is affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is negative, the parties, at their own cost and expense, respectively, will undertake to cause the PUC to issue such further order or document evidencing its approval as contemplated by this Agreement, including the elimination of any such condition that was deemed by either party to be inconsistent with this Agreement and upon the issuance of any further order or other document by the PUC in such proceedings the same procedures will be followed by the parties as provided in the case of the order or other document first issued by the PUC in such proceedings, including the execution of a stipulation dated currently evidencing the affirmative action by the parties in respect of the order or other document issued by the PUC.
He date of any stipulation executed by the parties under this paragraph is referred to as the "PUC Affirmative Date." De provisions of this paragraph shall not affect or detract from the rights of Brazos or TU Electric under Sections 10.1 or 10.2 hereof.
(d) Approval by NRC. We NRC shall have granted all necessary and essential approvals and consents with respect to the transactions provided for herein, including without limitation the entry of a final non-eppealable order approving the sale of Brazos' right, title and interest in the Station and Fuel
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- - - - - - - - - - - - - - ---- - -~~ --
to TU Electric in accordance with the terms hereof. In such connection, it is understood and agreed that TU Electric will file within fifteen (15) Business Days of the dath of this Agreement and prosecute to the best of its ability all l
appilcations or filings with the NRC as shall, in its judgment, be necessary
)
and essential in connection with the transactions contelarlated under this Agreement. TU Electric will deliver promptly to Brazos copies of all such applications and filings and will advise Brazos on a current basis with respect to the status of any such proceeding. In connection with all such proceedings, Brazos will, at Brazos' reasonable cost and expense, at the request of TU Electric, render all such assistance as may be appropriate under the l circumstances, including without limitation, providing such of its personnel as mey be appropriate to testify and otherwise participate in any such proceedings in support of this Agreement.
Upon the issuance by the NRC of any order or other document purporting to approve the transactions contemplated under this Agreement with or without conditions, TU Electric will promptly deliver to Brazos a )
l reproduced legible copy of such order or other document, and the parties, with their resnative attorneys and other Jonsultants, shall promptly confer and endetvor in good faith to determine if such order or other doeurnent evidences the final approval of the NRC of such transactions contemplated by this Agreement without any condition that is deemed by either party to be i l
inconsistent with the provisions of this Aflreement, if such determination is 1
affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is negative, TU Electric, with the assistance of Brazos, which shall be at Brazos' reasonable cost and expense, will undertake to cause the NRC to issue such further order or document evidencing its approval of such transactions including the elimination of any such condition that was deemed by either party to be inconsistent with this
l Agreement and upon the issurnee of any further order or other document by the NRC in such proceedings the same procedures will be followed by the l I
parties as provided in the case of the order or other document first issued by the NRC in such proceedings, including the execution of a stipulation dated currently evidencing the affirmative action by the parties in respect to the order or other document issued by the NRC. The date of any stipulation {
I executed by the parties under this paragraph is referred to as the "NRC Affirmative Date." The provisions of this paragraph shall not affect or l detract from the rights of Brazos or TU Electric under Sections 10.1 or 10.2 hereof.
(e) Approval of REA. CFC and FFB. 'Ihe REA, the CFC and the FFB shall have granted all necessary and essential approvals and consents with respect to the transactions provided for herei'1, including without limitation, their consent to the Assignment Agreement and the acceptance by them of the assignment '
of the Note, the Mortgage and the vendors lien contained in the Special Warranty Deed with Vendors Lien and Bill of Sale as a payment mechanism and security for such payment mechanism with respect to all promissory notes, mortgages, or other evidences of indebtedness and security agreements or arrangements with respect to the psyment thereof, that Brazos may have in favor of the REA, the CFC and the FFB with respect to the Brazos Comanche Peak Debt, so that at the Closing Date Brazos, TU Electric and the REA will enter into the Assignment Agreement and pursuant thereto deliver to the REA the Note and the Mortgage in return for which the REA,
)
i the CFC and the FFB will execute and deliver to Brazos all such receipts, '
releases, termination statements and other documents as shall be necessary i
or appropriate in the estimation of Brazos and TU Electric to provide for and l
evidence the termination and release of all mortgages, liens and other 1 security instruments in connection with the Brazos Comanche Peak Debt. In 1
l
such aonnection, it is understood and agreed that Brazos will carry on discussions with the REA, the CFC and the FFB in order to obtain their consent and agreement in the foregoing respects. In connection with all such ;
l undertakings, TU Electric will, at TU Electric's cost and expense, at the i request of Brazos, render all such assistance as may be appropriate under the circumstances, including without limitation, providing such of its pet sonnel as may be appropriate to participate in any such undertakings in support of this Agreement. '
(f) Execution of Transmission S2rvices Agreement. Brazos and TU Electric shall ;
have executed an appropriate amendment of the Transmission Agreement between Brazos and TU Electric's corporate predecessc s, executed on July 25,1979, to reflect Brazos' sale of the Transmission Facilities to TU Electric.
ARTICLE VI CLOSING DOCUMENTS FROM BRAZOS As a condition of Closing, Brazos and the referenced attorney, in each case as appropriate, will deliver to TU Electric on the Closing Date the following:
6.1 Deeds and Transfers, etc. (i) An executed and acknowledged Special Warrady Deed with Vendor's Lien and Bill of Sale; (ii) duplicate counterparts of the amendment contemplated under Section 5.3(f) hereof; and (iii) the Release, Covenant'Not to Sue and Indemnity Agreement specified in Sections 9.1,9.2 and 9.5 hereof.
6.2 Lien Search. Real property search certificates from a reputable title company and a UCC search certificate from the Secretary of State of Texas disclosing no securit) Interests, judgments or other liens outstanding against Brazos' ownership interest in the Purchased Assets, other than the Permitted Exceptions and liens securing the Brazos Comanche Peak Debt and other Brazos debt to be released at or prior to the Closing.
6.3 Certificate of Secretarial Officer. A certificate of the Secretary or an Assistant Secretary of the Board of Directors of Brazos, dated the Closing Date, with
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respect to the incumbency of officers and their signatures, the existence and good standing of Brazos, and the due adoption of resolutions by the Board of Directors of Brazos and the requisite number of the Members of Brazos authorizing the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered to TU Electric at the Closing.
6.4 Counsel Opinion. An opinion of Joseph Robert Riley, counsel for Brazos, dated the Closing Date and addressed to the TU Electric in the form set forth in Exhibit H attached hereto.
ARTICLE VU CLOSING DOCUMEN'IS FROM TU ELECTRIC As a condition of Closing, TU Electric and the referenced attorneys, in each case as appropriate, will deliver to Brazos on the Closing Date the following:
7.1 _ Proof of Payment. Proof of the payment to Brazos pursuant to Section 1.5(b) hereof.
7.2 Other Instruments. (i) The executed Note and Mortgage; (ii) duplicate counterparts of the amendment contemplated under Section 5.3(f) hereof; and (iii) the Release, Covenant Not to Sue, Assumption and Indemnity Agreement specified in Sections 9.3, 9.4 and 9.5 hereof; and (iv) the executed Guaranty.
7.3 Certificate of Secretarial Officer. A certificate of the Secretary or an Assistant Secretary of TU Electric and TUC, dated the Closing Date, with respect to the incumbency of officers and their signatures, corporate existence ar.d good standing, and, l in the case of TU Electric, the due adoption of resolutions of the Board of Directors of !
TU Electric authorizing the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered by TU Electric to Brazos pursuant l
hereto at the Closing and, in the case of TUC, the due adoption of resolutions of the l
Board of Directors of TUC authorizing the execution, delivery and performance of the i
Guaranty to be delivered by TUC to Brazos pursuant hereto at the Closing.
{
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704 Counsel's Opinion.
An opinion of Worsham, Forsythe, Sampels & Wooldridge, counsel for TU Electric and TUC, dated the Closing Date and addressed to Brazos in the form set forth in Exhibit I attached hereto.
ARTICLE VIII CLOSING AND INDEMNIFICATION 8.1 Indemnification by Brazos. Brazos agrees to indemnify, hold harmless and defend TU Electric and anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyone related to or affiliated with such parent, subsidiaries or affiliates, from and against any and all claims, demands, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which TU Electric or anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyone related to or affiliated with such parent, subsidiaries or affil'ates, may sustain and which arise out of or are based upon or relate to the inaccuracy or falsity of any
{
representation or warranty made by Brazos set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto or the breach or nonperformance by Brazos of any covenant or agreement with TU Electric or anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyona related to or affiliated with such parent, subsidiaries or affiliates, made by Brazos set forth in this Agreement or in any other agreement or instrument delivered pursuant herato.
8.2 Indemnification by TU Electric. TU Electric agrees to indemnify and hold harmless and defend Brazos and Brazos' Members and anyone related to or affiliated w Brazos and Brazos' Members from and against any and all claims, demands, liabi losses, costs and expenses, including reasonable attorneys' fees, which Brazos, its Members or anyone related to or affiliated with Brazos or its Members may sustain and which arise out of or are based upon or relate to the inaccuracy or falsity of any representation or warranty made by TU Electric set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto or the breach or nonperforma by TU Electric of any covenant or agreement with Brazos, its Members or anyone relat
1 I
l i
to or affiliated with Brazos or its Members made by TU Electric set forth in this '
Agreement or in any agreement or instrument delivered pursuant hereto.
8.3 Survival of Representation and Warranties. The representations, warranties, covenants and agreements of the parties hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated henunder for a period of four (4) years after the Closing Date or for such longer period as may be commensurate therewith for any document delivered pursuant hereto which is in effect for a longer period than such four years.
8.4 Notice and Opportunity to Participate in Defense. in the event that Brazos, its Members or TU Electric or any of its parent, subsidiaries or affiliates, or anyone related to or affiliated with any of them, receives notice of the commencement of any action or proceeding or the assertion of any claim in respect of which Brazos, its Members or TU Electric or any of its parent, subsidiaries or affiliates, or anyone related to or effiliated with any of them, may be entitled to indemnification, the party receiving such !
notice shall give the indemnifying party written notice within ten (10) calendar days thereof (except that failure to so notify will not relieve the indemnifying party of its obligations hereunder except to the extent it has been prejudiced thereby) and the opportunity to participate in the defense thereof and in any settlement negotiations with respect thereto, and will cooperate with the other party in all reasonable respects *and make available to the other party all records, evidence and personnel for consultation and i i
testimony reasonably requested by the other party in connection therewith. The -
i settlement of any such action, proceeding or claim without the prior written approval of '
the indemnifying party shall relieve such party of any obligations to the indemnified party in respect of the subject matter of the settlement of such action, proceeding or claim.
ARTICLE IX SETTLEMENT OF PENDING LITIGATION 9.1 _Brazos' Release.
Upon the Closing, Brazos, for :tself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including l
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without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Brazos' Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, cormitants, attorneys and representatives, shall waive, release, discharge, renounce and relinquish any and all Subject Claims relating to Comanche Peak it has or they have, or may have, whether known or unknown, contingent or absolute, including, without limitation, those based on common law, whether contract (expressed or implied, including express or impued warranty) or tort (including, without limitation, intentional tort, negligence or gross negligence, sole, joint or concurrent) or strict liability or fraud, and tmse based upon any Federal, state or local statute, law, order or regulation, I including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended, or the Securities Act of 1934, as ramended, and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V. A.T.S.) and the Texas Deceptive Trade Practices and Consumer Protection Act, against TU Electric or TUC, or both, in any capacity, whether individually, as Project Manager of Comanche Peak or otherwise, and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servar$ts, employees, officers, directors, shareholders, consultants, attorneys and representatives, ;
past and present, except Subject Claims arising out of or under this Agreement or any of the other agreements or instruments to be delivered by TU Electric or TUC pursuant hereto.
Brazos hereby covenants and warrr.nts that it has not assigned any Subject Claims that are to be released at the Closing. At the Closing, Brazos will execute and deliver to TU Electric the form of Release attached hereto as Exhibit J.
9.2 Brazos Covenant Not to Sue. Except as provided for in Section 4.2(g) hereof, upon the Closing, Brazos, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including without limitation, to the
1 l
l extent it has the standing and right under law to do so, its Members and customers
[
(including the customers of Brazos' Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, '
attorneys and representatives, shall agree and covenant that it and they, individually, collectively or in any combination, will forebear from asserting against, and never sue for or look for satisfaction with respect to, TU Electric and TUC and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, any Subject Claim (including without limitation any Subject Claim ;
against any contractor, subcontractor, supplier, consultant, vendor or othe.r person, firm or entity in privity in any manner with any of them which may therefor or as a result thereof have a right over or Subject Claim in subrogation) in any manner '.nvolving, concerning, arising out of, or relating to, the design, construction, management and licensing of, or any other matter relating to, Comanche Peak, and the management, procurement, conversion, enrichment, fabrication, shipping, transportatlan and storage of the Fuel, except for claims arising out of or under this Agreement 2 any of the other agreements or instruments to be del!vered by TU Electric, or e.rsy of TU Electrlc's
- affiliates, subsidiaries or parent company, pursuant hereto; and Brazos, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Brazos' Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directort, consultants, attorneys and representatives hereby ft cther agrees and covenants that, upon and after the Closing, neither it nor they, Individually, collectively or in any combination, will dW stly or indirectly, challenge, contest or assert !
any complaint in any court or before any administrative agency or body or in any other l
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forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the incidents and attributes thereof including, without limitation, the design, construction, management and licensing of Comanche Peak or any other aspect thereof, the costs and schedule of construction and completion of Comanche Peak, and the reasonableness, prudency or efficiency of the planning, design, construction management and licens!:.g of Comanche Peak, and the reasonableness, prudency or efficiency of the management, procurement, conversion, enrichment, fabrica tion, shipping, transportation and storage of the Fuel, and the costs incurred in connection with the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, and the breach of the Joint Ownership Agreement and any express or implied warranties arising out of the Joint Ownership Agreement, and any representation, misrepresentation, disclosure or non disclosure in connection with the negotiations or preceding the execution by Brazos of thei Joint Ownership AgreemeM and in connection with the performance or nonperformance by TU Electric of its duties, responsibilities or obligations under the Joint Ownership Agreement at Project Manager or otherwise, and the failure of TU Electric to pursue any remedies, either at law or otherwise, that may be, or may have been, available against any and all contractors, subcontractors, suppliers, consultants, vendors or others with respect to Comanche Peak (including separately the Station, Fuel or Trant, mission Facilithna) and on account'of anything that has occurred or may have occurred, in whoh or in part, with respect to Comanche Peak, (including separately the Station, Fur. or Transmission Facilities) and the incidents and attributes thereof and any of the ioregoing whether known or unknown, except with regard to Subject Claims arising out of or under this Agreement or any of the other agreements or instruments to be delivered by TU Electric, or any of TU Electric's affiliates, subsidiaries or parent company, pursuant hereto. At' the Closing, Brazos will execute and deliver to TU Electric the form of Covenant Not to Sue attached her Exhibit K.
Further, Brazos covenants and agrees that it will cooperate and assist TU Electric in connection with all necessary approvals of this Agreement and that it will
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encour:ge and sollelt its attorneys,. including Joseph Robert Riley, Spiegel & McDiarmid and Locke Purnell Rain Harrell, and Brazos' separately employed consultants, not to oppose or assist any third party in opposing TU Electric in connection with any matters relating to Comanche Peak (except that nothing herein shall be construed to prohibit said attorneys and consultants from representing Brazos in connection with proceedings in which TU Electric's rates are being determined provided that no opposition, or assistance to any third party opposition, to Comanche Peak related costs is made); and, if Occessary to prevent a conflict of interest, it being understood and agreed that Brar.os' separately employed consultants and attorneys may have obtained or detekped information regarding Comanche Peak in the course of the Pending Litigatio", that arguably could be inequitable for them to otherwise utilize in view of the % sideration being rendered b TU Electric hereunder in order to obtain a final settlement of the matters ref this Agenment, Brazos covenants and agrees that it will take all such action as may be necessary or appropriate in order to prevent the consultants and attorneys, including ;
Joseph Robert Riley, Spiegel & McDiarmid and Locke Purnell Rain Harrell, separa employed ay it in connection with, the Pending Litigation, from participating or ass '
in any manner adverse to Brazos' duty of cooperatica herein or to TU Electric in connection with the Pending Litigation, the Pending Houston Suit, the Pending Somerve County Suit or any current or future proceedings or matter before the PUC (except t
- nothing herein shall be construed to prohibit said attorneys and consultants from repres~nting Brazos in connection with proceedings in which TU Eleutric's rates arj l determMed provided that no opposition, or assistance to any third party oppositiol i Comanche Peak related costs is made) or the NRC involving or relating to Comanche Peak, or any current or future proceedings (except that nothing herein shall be constru to prohibit said attorneys and consultants from representing Brazos in connection with proceedings in which TU Electric's rates are being determined provided that no op or assistance to any third party opposition, to Comanche Peak related costs is mad i
before any court or before any administrative agency or body or in any other forum
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whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to (i) the acts or omissions of TU Electric or the Project Manager referred to or I in question in the Pending Litigation or which could have been brought into question in the
{
Pending Litigation; or (ii) the acts or omissions of TU Electric or the Project Manager with respect to Comanche Peak that occur, in whole or in part, prior to the Date of Commercial Operation (as said term is defined in the Joint Ownership Agreement). The covenant set forth in the prior sentence shall survive Closing hereunder and remain in ,
force until the expiration of any Subject Claim covered thereby.
9.3 TU Electric Release. Upon the Closing, TU Electric, for itself and on behalf of its parent, TUC, and their subsidiaries and affiliates and on behalf of any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, including without limitation, to the extent it has the standing and right under law to do so, their customers, and on behalf of their respective insurers, agents, servants, employ.es, officers, directors, consultants, attorneys and representatives shall waive, release, discharge, renounce and relinquish any and all Subject Claims relating to Comanche Peak (including separately the Station, Fuel or Transmission Facilities) It has or they have, or may have, whether known or unknown, contingent or absolute, including, without limitation, these based on common law, whether contract (express or implied, including erfress or implied warranty) or tort (including, without limitation, intentional tdrt, negligence or gross negligence, sole, joint or concurrent) or strict liability or fraud, and those based on any Federal, State or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V. A.T.S.) and the Texas Deceptive Trade Practices and Consumer Potection Act, against Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers) in any capacity, whether individually or otherwise, and its and their respective insurers, agents, servants, employees, officers, directors, consultant
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1 l
i
attorneys and representatives, p st and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servants, employees, officers, directors, members, consultants, attorneys, and representatives, past and present, except Subject Claims arising out of or under this Agreement or the other agreements and instruments executed and delivered pursuant hereto and except that nothing herein shall prohibit TU Electric from charging Brazos for any electric power and energy purchased by Brazos from TU Electric in accordance with the rates set forth in TU Electric's tariff as same may be approved and in effect from time to time even thou said rates may include costs related to Comanche Peak. TU Electric hereby covenants and warrants that it has not assigned any Subject Claims that are to be released at the Closing.
At the Closing, TU Electric will execute and deliver to Brazos the form of Release attached hereto as Exhibit L.
9.4
_TU Electric Covenant Not to Sue. Except as provided for in Section 4.2(g) hereof, upon the Closing, TU Electric, for itself and on behalf of its parent, TUC and their subsidiaries and affiliates, and any person or entity, private or governmental, claimi through or under TU Electric or TUC, including without limitation, to the extent it has the standing and right under law to do so, their customers, and their respective insurers ,
agents, servants, employees, officers, directors, consultants, attorneys and representatives shall agree and covenant that it and they, individually, collectively o'r in any combination, will forebear from asserting against, and never sue for or look for satisfaction with respect to, Brazos and its Members and their respective insurers servants, employees, officers, direc tors, members, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries, and affiliates and their respective insurers, agents, servants, employ officers, directors, shareholders, members, consultants, attorneys and represe past and present, any Subject Claim in any manner involving, concerning, arising ou relating to Comanche Peak, and the management, procurement, conversion, enr fabrication, shipping, transportation and storage of the Fuel, except for claims a
of or under this Agreement or any of the ot!;er agreements or instruments to be delivered by TU Electric pursuant hereto; and TU Electric, for itself and on behalf nf its parent, subsidiaries and affiliates, and any person or entity, private or governmental, claiming by, through or under them, including without limitation, to the extent it has the standing and right under law to do so, its or their customers, and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and ,
representatives hereby further agrees and covenants that, upon and after tiie Closing, neither it nor they, individually, collectively or in any combination, will directly or indirectly challenge, contest or assert any complaint against Brazos or its Members in any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the Joint Ownership Agreement and in connection with the performance or nonperformance by Brazos of its duties, responsibilities or obligations under the Joint Ownership Agreement, and on account of anything that has occurred or i
may have occurred, in whole or in part, with respect to Comanche Peak, (including '
separately the Station, Fuel, or T.'ansmission Facilities) and the incidents and attributes ,
thereof and any of the foregoing whether known or unknown, except with regard to Subject Claims arising out of or under this Agreement or any of the other agreements or instruments to be delivered by TU Electric pursuant hereto and except that nothing her*ein shall prohibit TU Electric from charging Brazos for any electric power and energy l
purchased by Brazos from TU Electric in accordance with the rates set forth in TU Electric's tariff as same may be approved and in effect from time to time even though said rates may include costs related to Comanche Peak. At the Closing, TU Electric will '
execute and deliver to Brazos the form of Covenant Not to Jue attached hereto as Exhibit M.
Further, TU Electric covenants and agrees that it will encourage and solicit its attorneys, including Worsham, Forsythe, Sampels & Wooldridge, Jackson, Walker, i
Winstead, Cantwell & Miller, Hunton & Williams, Ackles, Ackles & Ackles and Roy i
Minton, and TU Electric's consultants, not tc oppose or assist an/ third party in opposin
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Brazcs in conntetion with any matters relating to Comanche Peak (except that nothing herein shall be construed to prohibit said attorneys and consultants from representing TU Electric in connection with proceedings in which TU Electric's rates are being determined even though said rates may include costs N1ated to Comanche Peak and Brazos may purchase electric power and energy pursuant to said rates); and, if necessary to prevent a conflict of interest, it being understood and agreed that TU Electric's separately emphyed consultants and attorneys may have obtained or developed i
information regarding Brazos in the course of the Pending Litigation that arguably could be inequitable for them to otherwise utilize in view of the consideration being rendered by Brazos hereunder in order to obtain a final settlement of the matters referred to in this Agreement, TU Electric covenants and agrees that it will take all such action as may be necessary or appropriate in order to prevent the consultants and attorneys, including Worsham, Forsythe, Sampels & Wooldridge, Jackson, Walker, Winstead, Cantwell & Miller, Hunton & Williams, Ackles, Ackles & Ackles and Roy Minton, separately employed by it in t
connection with the Pending Litigation or otherwise, from participating or assisting in sny 1 manner adverse to TU Electric's duty of cooperation herein or to Brazos in connectMn with any current or future proceedings or matter before the PUC (except that nothing herein shall be construed to prohibit said attorneys and consultants from representing TU Electric in connection with proceedings in which TU Electric's rates are being determined even though said rates may include costs related to Comanche Peak and Brazos may purchne electric power and energy pursuant to said rates) involving or !
relating to Comanche Peak, or any current or future proceedings (except that nothing l herein shall be construed to prohibit said attorneys and consultants from representing TU Electric in connection with proceedings in which TU Electric's rates are being determined even though said rates may include costs related to Comanche Peak and Brazos may purchase electric power .nu energy pursuant to said rates) before any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to the acts or
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omissions of Brazos referred to or in question in the Pending Litigation or which could have been brought into question in the Pending Litigation. De covenant set forth in the '
prior sentence shall survive the Closing and remain in force until the expiration of any Subject Claim covered thereby.
9.5 Assumption of Liabilities and Obligations and Indemnification. Effective upon the Closing, TU Electric agrees to assume all of the duties, responsibilities, liabilities and obligations of Brazos under the Joint Ownership Agreement. Further, effective upon the Closing, TU Electric agrees to indemnify, hold harmless and defend Brazos and its Members and customers (including the customers of Brazos' Members and other wholesale customers) from and against all Oubject Claims or any alleged willful or intentional acts of the Project Manager, its agents, servants, employees or independent contractors acting on behalf of the Project Manager which may be asserted against B .zos and its Members and customers (including the customers of Brazos' Members and other wholesale customers) by any third party (other than Brazos' Membe's and customers and the customers of Brazos' Members or other wholesale customers acting in such capacity),
including without limitation Subject Claims predicated upon the alleged actual or imputed negligence or gross negligence of Brazos and its Members and customers (including the customers of Brazos' Members and other wholesale customers) arising out of or connected 1
with, the location, planning, design, construction, licensing, condition, mUntenarice, operation and decommissioning of Comanche Peak, including but not limited to all claims asserted or which might have been or might hereafter be asserted in the Pending Houston I
Suit and in the Pending Soinervell County Sult; provided, however, that TU Electric specifically shall not indemnify Brazos and its Members or customers in connection with any subject Claims which may be asserted by Brazos' Members and customers, and the customers of Brazos' Members or other wholesale customers, or creditors, acting in such capacity, which in any manner relate to Brazos' participation as an Owner of Comanche Peak or as a party to the Joint Ownership Agreement, or by reason of Brazos' involvement in the Pending Litigation, or by reason of the execution of this Agreems.it and 44
participation in the transactions provided for herein, - and provided further, that TU Electric specifically shall not indemnify Brazos in connection with any Subject Claims which may be asserted by Tex-14 or TMPA or others which in any way relate to Brazos' execution of the Joint Ownership Agreement, or which arise by reason of Brazos' 1
participation in the Pending Litigation, or by reason of Brazos' execution of this l Agreement ar;d participation in the transactions provided for herein. TU Electric will, in i addition to providing such indemnity, assume the defense of Brazos and its Members and customers (and the customers of Brazos' Members and other wholesale customers) in any tribunal where any such claim is asserted. Pursuant hereto, at the Closing TU Electric will execute and deliver to Brazos the form of Assumption and Indemnity Agreement l attached hereto as Exhibit N. !
Effective upon the Closing, Brazos agrees to indemnify, i, hold harmless and defend TU Electric, TUC and their respective subsidiaries, affiliates !
and customers from and against any and all Subject Claims of Brazos or anyone related to I or affiliated with Brazos, including Brazos' Members, customers (including the customers ;
of Brazos' Members and other wholesale customers) and creditors, acting in such capacity, relating to Brazos' execution of, or participation in, the Joint Ownership Agreement, Brazos' execution of this Agreement and participation in tns transactions provided herein, and Brazos' activities as an Owner separate and apart from joint activities with all other Owners or activities by, through and under the Project Manager. Further, effective upon the Closing, Brazos agrees to indemnify, hold harmless and defend TU Electric, TUC and their respective subsidiaries, affiliates and customers from and against any and all Subject Claims of Brazos or anyone related to or affiliated with Brazos, including Brazos' Members and, to the extent they are acting in such capacity, Brazos' customers (includin the customers of Brazos' Members and other wholesale customers) and creditors, with respect to, or in any manner involving, concerning, arising out of, or relating to (i) the acts or omissions of TU Electric or the Project Manager referred to or in question in the Pending Litigation or which could have been brought into question in the Pending Litigation, including without limitation Subject Claims based upon the negligence or gro
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negligence, sole, joint er concorrat, of TU Electric or the Project Manager; and (ii) the i
acts or omissions of TU Electric or the Project Manager with respect to Comanche Peak that occur, in whole or in part, prior to the Date of Commercial Operation (as said term is ' I defined in the Joint Ownership Agreement), including without !!mitation Subject Claims
- based upon the negligence or gross negligence, sole, joint or concurrent, of TU Electric or '
i the Project Manager. Pursuant hereto, at the Closing Brazos will execuN and deliver to TU Electric the form of Indemnity Agreement attached hereto as Exhibit O. ,
9.6 Covenant of Cooperation. The parties hereby covenant and agree to assist, cooperate with, and support each other (other than financial support) in the event that a third party institutes any action against either of theln with respect to Comanche Peak and any incident or attribute thereof, except that neither of them shall be required to take any posi.tlon which it believes is contrary to its material pecuniary interests or contrary to the truth; provided, however, that in any event, Brazos shall not cooperate 4
4 with or supm-t any party in the Pending Litigation with regard to the Subject Claims being made therein by Tex-la and TMPA.
t 9.7 Termination of Participation. To the extent that Brazos can, and not be in l
)
i violation of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983),
upon the execution of this Agteement, Brazos, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including without limitation, to the extent it has the standing and right under law to do so, its Members and
' customers (including the customers of Brazos' Members and other wholesale customers) s and its or their respective insurers, agents, servanta, employees, officers, directors, consultants, attorneys and representatives, agrees and covenants to immediately abate t
any and all currently pending actions whatsoever, directly or indirectly, involving or
, relating to the prosecution or processing of any Subject Claims in any way relating to Comanche Peak against TU Electric or TUC, or their respective directors, officers, employees, agents, insurers, consultants or attorneys, past or present, ant at:y and all of i
I their respective successors, subsidiaries and affiliates and their respective insurers, i
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agents, servants, empl3ytes, officers, directors, shareholders, consultants, attorneys and representatives, past and present, presently or hercefter pending in any court or before any administrative agency or body (except Subject Claims being made in the Pending Litigation, which shall be governed by the provisions of Article IV of this Agreement). In such capacity and to the extent Brazos can and not be in violation of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983) (Brazos hereby representing and warranting that it knows of no violation, actual or alleged, of Section 210 of the Energy Reorganization Act, 47 USC Section 5851 (1983) which has not heretofore been disclosed to TU Electric in writing), Brazos agrees c i covenants that Brazos for itself and on behalf of any person or entity, private or governtnental, claiming by, through or under Brazos, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Brazos' Members and other wholesale customers) and its or thsir respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, shall not prosecute, directly or indirectly, any Subject Claims, objections, motions or other actions adverse to TU Electric in connection with applications for granting the requisite licenses and approvals for Comanche Peak pending before the NRC and its Atomic Safety and Licensing Boards and Atomic Safety and Luc..ng Appeal Boards, including, without limitation, in NRC Dockets Nos. 50-445-OL, 50-446-OL and 50-445-CPA, the ongoing antitrust review relative to the licensing of Comanche Peak, and any and all appeals from rulings and orders of the NRC related to, or growing out of, said Dockets which are !
pending before ar.y court. Within three (3) Business Days after the Closing, Brazos shall l
cause the dismissal, with prejudice to the refiling of same in any forum and in any form i whatsoever, of all of its Subject Claims against TU Electric, TUC and their subsidiaries l and affiliates in the Pending Litigation, and shall withdraw all of its Subject Claims adverse to TU Electric in connection with the granting of the requisite licenses and
)
approvals for Cort,anche Peak pending in the NRC Dockets Nos. 50-445-OL, 50-446-OL i
and 50-445-CPA and any and all proceedings in any manner related to, or arising out of, said Dockets.
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Brazos agrees and covenants, from and after the Closing, to fully cocperate with TU Electric and provide all reasonably requested assistance, including providing the legal assistance of its attorneys (including Joseph Robert Riley, Spiegel & McDiarmid and Locke Purnell Rain Harrell), in a timely manner in connection with any legal proceedings (excluding the Pending Litigation) involving Comanche Peak, including the licendng of Comanche Peak by the NRC, including without limitation the ongoing antitrust review in connection therewith, and all proceedings involving Comanche Peak before the PUC to the extent of not opposing, or assisting any third party in opposing, the position being advocated by TU Electric. Except as specifically provided otherwise in this Agreement, TU Electric shall promptly reimburse Brazos for any and all reasonable out of-pocket expenses and any and all reasonable outside professional fees, including, without limitation, attorneys fees, incurred by Brazos in providing such cooperatiois.
9.8 TU Electric Actions and Litigation Costs. Within three (3) Business Days after the Closing, TU Electric shall cause the dismissal, with prejudice to the refiling of same in any forum and in any form whatsoever, of all of its Subject Claims against Brazos in the Pending Litigation; provided, however, that TU Electric shall have the right to retain Brazos as a party to the Pending Dallas Suit, not for the purpose of seeking any affirmative relief against or from Brazos, but for the purpose of defeating a possible contention on the part of the other parties thereto with respect to the absence bf a necessary pat ty to TU Electric's Subject Claims against the other parties in said case (it being understood that TU Electric's position is that any such contention would not be valid). TU Electric anall promptly reimburse Brazos for any and all expenses reasonably incurred because of any such retention of Brazos by TU Electric in the Pending Dallas suit. It is expressly understood that nothing herein shallin any manner affect, diminish or impair TU Electric's right to fully prosecute any and all of its ' Subject Claims against the other parties in the Pending Litigation. Except as provided otherwise above, all costs and expenses related to or incurred in connection with the Pending Litigation shall be borne I
and paid by the party by whom incurred or to which they are related.
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9.9 Termination of Joint Ownership Agreement Relationship. Except as otherwise provided in Section 9.5 hereof with respect to TU Electric's assumption of Brazos' obligations under the Joint Ownership Agreement, Beazos and TU Electric hereby agree that, upon the Closing, Oe Joint Ownership Agreement, as between Brazos and TU Electric, shall be deemed terminated and of no further force and effect as between them, it being understood that under the circumstances described in Article II, Section 6 of the Deed of Trust the Joint Ownership Agreement may be reinstated.
ARTICLE K TERMINATION OF AGREEMENT ,
10.1 Termination of Agreement by TU Electric. In the event at any time after TU Electric's having given written notice of intent to terminate this Agreement and the lapse of two (2) Business Days of discussion (which shall take place within five (5) days of said written notice of intent) between Brazos and TU Electric with respect thereto, TU Electric reasonably determines that the Closing cannot occur for reasons that are beyond TU Electric's control, TU Electric may terminate this Agreement upon seven (7)
Business Days' written notice of termination from TU Electric to Brazos, and Brazos agrees to promptly refund and pay to TU Electric the Signing Payment, plus in addittors thereto an incremental amount calculated from the date of receipt of the Signing .
. I Payment by Brazos at the rate of eight and one-half percent (8-1/2%) per annum. Brazos agrees that it shall have no right to withhold payment of any amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation.
Payment by Brazos of such funds to TU Electric shall constitute acceptance by Brazos of )
i TU Electric's right to terminate this Agreement under the circumstances. In the event of such termination, the rights of the parties with respect to Comanche Peak shall be governed by the Joint Ownership Agreement, the Transmission Agreement executed on July 25,1979, and the applicable law as determined and applied in the Pending Litigation or the New Lawsuit.
4
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. l 10.2 Termination of Agreement by Brazos. In the event at any time after Brazos' having given written notice of intent to terminate this Agreement and the lapse of two (2) l Business Days of discussion (which shall take place within five (5) days of said written notice of intent) between Brazos and TU Electric with respect thereto, Brazos reasonably l determines that the Closing cannot occur for reasons that are beyond Brazos' control, l
Brazos may terminate this Agreement upon seven (7) Business Days' written notice of i
1
- termination from Brazos to TU Electric and Brazos will immediately refund and pay to i
TU Electric the Signing Payment plus in addition thereto an incremental amount calculated from the date of receipt of the Signing Payment by Brazos at the rate of eight ;
and one-half percent (8-1/2%) per annum. Brazos agrees that it shall have no right to i
withhold payment of any amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation. Acceptance by TU Electric of the return of such funds from Brazos shall constitute acceptance by TU Electric of Brazos' right to 4
terminate this Agreement under the circumstances. In the event of such termination, the rights of the parties with respect to Comanche Peak shall be governed by the Joint !
Ownership Agreement, the Transmission Agreement executed on July 25, 1979, and the
] applicable law as determined and applied in the Pending Litigation or the New Lawsuit.
i 10.3 Automatic Termination. Unless either the Closing has occurred or there is a written agreement signed by TU Electric and Brazos to extend the date set out in tfits paragraph, this Agreement shall automatically terminate at 5:00 p.m., Dallas, Texas time, 1, on the date which is at the end of nine (9) months after the date hereof, without any need 1 i
for the giving of notice or any other action by either TU Electric or Brazos in the event such termination occurs, Brazos will immediately refund and pay to TU Electric the a
l Signing Payment, plus in addition thereto an incremental amount calculated from the date :
I of receipt of the Signing Payment by Brazos at the rate of eight and one-half percent (8-1/2%) per annum.
i Payment by Brazos and acceptance by TU Electric of the amount set i
1 forth in this paragraph shall constitute acceptance by TU Electric and Brazos of
)
termination of this Agreement,
) in the event of such termination, the rights of the parties 4
with respect to Comanche Peak shall be governed by the Joint Ownership Agreement, the Transmission Agreement executed on July 25, 1979, and the applicable law as determined and applied in the Pending Litigation or the New Lawsuit.
10.4 Termination of Covenants, Releases and Indemnifications. If this Agreement is terminated pursuant to the provisions of Article X hereof and all amounts specified therein are refunded and paid by Brazos to TU Electric, all releases, covenants not to sue, '
indemnifications, assumptions and guaranties hereunder or contained in any exhibit hereto shall be void and of no effect whatsoever.
ARTICLE XI MISCELLANEOUS PROVEIONS 11.1 Bulk Sales law Waiver. To the extent it may lawfully do so, TU Electric hereby waives compliance by Brazos with the bulk sales law of any jurisdiction, if applicable, with respect to the transactions contemplated hereby, and Brazos agrees to hold TU Electric harmless from and against any liability, loss, cost or expense, including reasonable attorneys' fees, which TU Electric may sustain by reason of such noncompliance. TU Electric agrees to give Brazos prompt notice of the assertion of any
- claim resulting from such noncompliance.
11.2 Further Assurance. Brazos agrees that, after the Closing, it will from time to time, upon the reasonable request of TU Electric, execute, acknowledge and deliver in proper form any instrument of conveyance or further assurance necessary for perfecting in TU Electric or its successors and assigns, as the case may be, the title to the Purchased Assets or for carrying out the purpose and intent of this Agreement.
11.3 No %Ird Party Benefielaries. De parties hereto acknowledge and agree thei this Agreement is entered into for the sole benefit of TU Electric, TUC, Brazos and Brazos' Members, their respective successors and assigns (to the extent permitted) and, to the extent specifically and expressly set forth elsewhere in this Agreement, their respective insurers, agen ts, servants, employees, officers, directors, subsidiaries, affiliates, representatives and customers, and that nothing in this Agreement shall be I
construed as giving any right, benefit, remedy or claim to any person, firm, corporation or other entity, other than TU Electric, TUC, Brazos and Brazos' Members, their respective successors and assigns (to the extent permitted) and, to the extent specifically and expressly set forth elsewhere in this Agreement, their respective insurers, agents, servants, employees, officers, directors, subsidiaries, affiliates, representatives and customers. Without in any way limiting the foregoing provisions, it is expressly understood that nothing in this Agreement shall affect any of the rights, obligations and remedies among TU Electric and TMPA and Tex-IA under the Joint Ownership Agreement or otherwise, 11.4 Default. In the event of default in performance hereunder by either Brazos or TU Electric, the non-defaulting party shall be entitled to all remedies legally available to it including the remedy of specific performance, the parties hereto agreeing that no adequate remedy at law exists, 11.5 Property and Transfer Taxes.
Property Taxes.
t (a) All real and personal property taxes, and other similar taxes, charges, and fees imposed on or with respect to or measured by the Purchased Assets not heretofore paid by Brazos shall i
be the responsibility and liability of TU Electric, except for such '
taxes, charges and fees caused by the action or inaction of Brazos individually or in combination with any of the Owners other than TU Electric or the Project Manager.
(b) Transfer Taxes. The payment of any and all real estate transfer, stamp, documentary, deed and recording taxes and fees, and all sales and excise taxes imposed in connection with the Purchased Assets or the sale or transfer of the Purchased Assets shall be the responsibility l
and liability of TU Electric.
)
i
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11.6 Expenses. Brazos and TU Electric shall each pay all expenses incurred by-them respectively in connection with this Agreement, including the fees of their respective counsel and accountants, if any, except as may be otherwise provided, 11.7 Governing law. Bis Agreement shall be construed, and the provisions hereof shall be enforced,in accordance with the laws of the State of Texas, 11.8 Announcements. All press releases or other announcements by TU Electric or Brazos prior to or in connection with the execution of this Agreement shall be approved by Brazos and TU Electric prior to the issuance thereof, which approval shall not be unreasonably withheld, 11.9 Entire Agreement. Amendments. Dis Agreement, and the other documents delivered pursuant hereto, constitute the entire agreement between Brazos and TU Electric relating to the subject matter hereof and supersede all other prior agreements, representations and understandings between the parties. No supplement to, or modification or amendment of, this Agreement shall be binding, unless executed in writing by both Brazos and TU Electric, 11.10 Assigns, etc. Dis Agreement shall be binding upon and inure to the benefit of Brazos and its Members, and TU Electric and TUC, and their respective successors and assigns but saall not confer any rights upon any third persons except to the extent expressly provided herein. This Agreement may not be assigned by Brazos without the written consent of TU Electric or by TU Electric without the written consent of Brazos, 11.11 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) If served personally on the party to whom notice is to be given at the addresses and to the attention of the persons named as follows, or (b) If sent by telex or nationally recognized overnight delivery service, or (c) by first class mail, postage prepaid, certified and return receipt requested, and properly addressed as follows:
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l l
(a) To Brazos at: l Brazos Electric Power Cooperative, Inc.
P. O. Box 2585 Waco, Texas 76702-2585 l
Attention: Richard E. McCaskill i For Federal Express:
Brazos Electric Power Cooperative, Inc. l 2404 laSalle Avenue Waco, Texas 76706 !
Attention: Richard E. McCaskill (with copy to)
Joseph Robert Riley Law Offices of Joseph Robert Riley 500 RepublicBank Tower i
P. O. Box 153 Waco, Texas 76703 j (b) To TU Electric at:
1 Texas Utilities Electric Company 2001 Bryan Street 4 Suite 1900 )
Dallas, Texas 75201 Attention: Erle Nye (with copy to) i Worsham, Forsythe, Sampels & Wooldridge 2001 Bryan Street f Suite 3200 ,
Dallas, Texas 75201 Attention: Robert A. Wooldridge 11.12 Headings.
De division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
11.13 1 Execution and Counterparts. His Agreement may be executed in any number l
of counterparts, each and all of which shall be deemed for all purposes to be nne agreement, 11.14 Interest on Past Due Payments. In the event that Brazos or TU Electric fails to timely make any payments to the other which become due under this Agreement, the l
1 incremental amount due on the past due payment for the period between and including the due date and the date actually paid shall be calculated at the rate of twelve and one-half percent (12-1/2%) per annum.
11.15 Use of Representations or Recitals. Any representations or recitals made by 1
Brazos and TU Electric in this Agreement are for the purposes of this Agreement only. In
{
the event that this Agreement is terminated or does not timely close at the Closing Date, neither Brazos nor TU Electric shall use, as evidence or otherwise, iny such representations or recitals against the other in any way in the New Lawsuit or any other lawsuit concerning any Subject Claims which have been made in the Pending Litigation.
11.16 Separate Litigation. Any Subject Claims arising out of or under this Agreement shall be prosecuted in a lawsuit separate from the lawsuit in which any Subject Claims which have been made in the Pending Litigation are prosecuted, 11.17 Construction of Comanche Peak. If TU Electric continues to believe that the completion of Comanche Peak is economically and otherwise feasible, TU Electric covenants that it will use its best efforts to complete, or cause to be completed, the construction of Comanche Peak and placing the same in operation.
11.18 Severability.
The parties hereto agree that the various obligations and undertakings specified in this Agreement and ' the other sgreements or instruments referred to herein are each mutually dependent upon one another and, in the event th'at any fundamental or essential provision of this Agreement or any of such other agreements or Instruments is finally determined to be invalid, illegal or unenforceable by a court or l
l administrative body having jurisdiction, TU Electric and Brazos hereby agree to conduct 1 good faith negotiations for the purpose of reaching a mutually acceptable written agreement to replace the deleted provision with a provision which will most nearly accomplish the purpose and intent of the deleted provision. Falling to reach such a mutually acceptable agreement, the parties shall rescind the transactions provided for herein and therein.
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l
11.19 Time of the Essence. Time is of the essence in the performance of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 1
date set forth at the outset hereof.
TEXAS UTILITIES ELECTRIC COMPANY (Corporate Seal)
~~'
By(
9-
. I i
1 ( __._
ATTEST: Its: Chairman of the board ank Cinief Executive By: ! ^ w "b Its: Corporate Secretary BRAZOS ELECTRIC POWER COOPERATIVE, INC.
(Corporate Seal)
/
By: [
, - . ,_ /,/
Its: Fvocu H vp V_P./ G.li. _
ATTEST:
/&u v
Nts: / sacrat
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SCHEDULE
- FIELD NOTES l CONANCHE PEAR S.E.S. PROPERTY l
All that certain lot, tract or parcel of land in the John W. Fogg Survey, Abstract 27, S. McKelvy Survey, Abstract 44, Jose Antonio Hernander Survey, Abstract 42. Wa. 8. Salth Survey, Abstract 90, Wm. 8. Salth Survey, Abstract 91 and the Wm. Parker Survey, Abstract 83 all in Somervell County, Texas; the Galveston County School Land Survey, Abstract 36 in Somervell and Hood Counties. Texas; the James D. Elliott Survey.
Abstract 170, J. Grace Survey, Abstract 203 and the R. Disney Survey, Abstract 144 all in Hood County, Texas and being more particularly described by metes and bounds as follows:
BEGINNING at a point in the line common to said Fogg Survey and the Wm. W.
Parker Survey, Abstract 82 Somervell County, Texas, said point being South Se degrees 54 minutes 17 seconds West, 2136-22/100 feet along said conson line from the South corner common to said Fogg and Mernanden Surveys THENCE departing said common survey line; North 31 degrees 40 minutes 49 seconds West, 1808-13/100 feet, North 60 degrees 17 minutes 47 seconds West, 422-92/100 feet, North 30 degrees 51 minutes 45 seconds West, 699-34/100 feet, North 37 degrees 09 minutes 49 seconds West, 897-05/200 feet, North 00 degrees 29 minutes 04 seconds East, 34-3/10 feet, South 84 degrees 33 minutes 14 seconds West. 241-71/100 feet,
' South 68 degrees 18 minutes 22 seconds West, 174-9/10 feet, and North 30 degrees 02 minutes 49 seconds West, crossing the line common to said John W. Fogg Survey and stiid Wa. 8. Smith Survey, Abstract 91. in all 3593-27/100 feet; TEENCE South 50 degress 50 minutes 50 seconds West. 904-7/10 feet to a point in the line common to said Wm. 8. Salth Survey, Abstract 91 and said Wa. Parker Survey, Abstract 43. Somervell County, Texas; THENCE with said coanos lias, North 29 degrees 42 minutes 26 seconds West.
3001 feet to a pelat THENCE departlag said common survey line, South 59 degrees 39 sinutes West. 1567 feet, South 60 degrees 20 minutes West, 349 feet. South 59 degrees 21 minutes dest, 263 feet and South to degrees 44 minutes West, 630 feet to a poir t in the Easterly right-of-way (R/W) of State F.M.
Eighway No. 56 (formefly F.M. 201):
TRENCE with said Easterly k/W, North 28 degrees 51 minutes West, 884-25/100 feet to the beginning of a curve to the left having a radius of 1492.39 and Northwesterly with the arc of said curve 321-3/10 feet to a point; Page 1 of 10
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[ TREN(1 departing said Easterly R/W line, North 28 degrees 56 minutes West, l
669-5/10 feet to a point in the North line of said Wo. Parker Survey:
THENCE with said North line, North 60 degrees 44 minutes East, 2454 feet to a point:
TEENCE North 30 degrees 00 minutes West, 17 feet to a point in the fenced Northwesterly corner of said Wo. B. Salth Survey, Abstract 91, common to the Southwesterly corner of said James D. Elliott Survey, Abstract 170.
Hood County, Tszas:
THENCE departing said conson corner, North 21 degrees 39 minutes East.
2001 feet and North 60 degrees 02 minutes East, 2083-55/100 feet to a point:
THENCE North 69 degrees .4 minutes 30 seconds West, ;199 feet to a point at elevation 770 feet, U.S.C.4G.S. D *. '. u e :
THENCE West, with said 770 foot contour, South 69 degrees 14 minutes 30 seconds 87-2/10 feet and North 44 degrees 26 minutes 30 seconde East.
62-75/100 fast:
THENCE departing said 770 foot contour, North 69 degrees 44 minutes 30 seconde West, 2043-75/100 feet to a point:
TRINCE North 02 degrees 10 minutes 30 seconde West, 3642-25/100 feet to a point on the 790 foot contour, U.S.C.40.S. Datus:
THINCE with said 790 foot contour:
South 83 degrees 32 minutes East, 96-4/10 feet.
North 49 degrees 17 minutes East, 154-C/10 feet.
South 83 degrees 31 alautes East, 104-95/i'00 feet, North 77 degrees 03 alantes East, 142-4/10 foot. "
North 49 degrees 00 slastes East, 243-15/100 feet.
South 86 degrees 49 alautes East, 214-2/10 feet, South 40 degrces 38 alautes East, 231-0/10 feet, South 49 degrees 28 slautes 30 seconds East, 151-7/10 feet, North 35 degrees 41 alautes 30 seconds Weet, 138-4/10 feet, North 35 degrees 41 alastes 30 seconds West, 109-0/10 feet, North 29 degrees 84 minutes 30 seconds West, 101-3/10 feet, North 35 degrees 54 minutes 30 seconds West, 81-05/100 feet, North 24 degrees 34 minutes 30 seconds West, 100-75/100 feet, North 28 degrees 26 minutes 30 seconds West, 123-15/100 feet, North 25 degrees 45 minutes 30 seconde West, 144-5/LO feet, North 27 degrees 45 minutes 30 seconds West, 119-2/10 feet, North 18 degrees 11 minutes West, 139-4/10 feet, and North el degrees 08 minutes West, 92-3/10 feet to a point in the North line of said James D. Elliott Survey cosmos to the South line of said R.
Disney Survey, Eood County, Texas: l
Page 3 of 10 l l
l THINCE departing said 790 foot contour and with said conson survey line. )
North 58 degrees 58 minutes East, 74-9/10 feet to a point on the 770 foot contour line, U.S.C.40.S. Datus:
l 7NENCE departing said common survey line and with said 770 foot contour 11ae: )
North 71 degrees 34 minutes West. 96-6/10 feet.
North 83 degrees 51 minutes West, 74-3/10 feet, North 54 degrees 53 minutes East, 93-1/10 feet, North 65 degrees 48 minutes 30 seconde East, 94-0/10 feet, <
North 00 degrees 54 minutes 30 seconde East. 42-3/10 feet. l North 22 degrees 49 minutes 30 seconds West, 111-4/10 feet, '
North 23 degrees 43 minutes 30 seconds West, 102-3/10 feet, North 28 degrees 36 alautes 30 seconds West, 87-5/10 feet, North 32 degrees 42 minutes 30 seconde West, 6 5 - 4 5 / 2 00 f e e . ,
1 orth 43 degrees 57 minutes 30 seconds West, 154-7/10 feet,
'40rth 57 degrees 21 minutes 30 seconds West, 112-95/100 feet dorth 66 degrees 07 alautes West, 134-05/100 feet, North 76 degrees 57 minutes 30 seconds West, 271-6/10 f e s t ,
North 40 degrees 45 minutes West, 111-45/100 feet, North to degrees 27 minutes West. 147-75/100 feet.
North 49 degrees 40 afautes West, 102-08/100 feet, North 80 degrees 23 minutes 30 seconds West, 184-05/100 feet, South 59 degrees 21 minutes 30 seconds West, 96-5/10 feet, South 54 degrees 27 minutes 30 seconds West, 84-35/100 feet, South 51 degrees 25 alautes 30 seconde West, 100-0/10 fiet, South 49 degrees 23 minutes 30 seconds West, 197-35/100 feet, South 40 degrees 06 minutes 30 seconds West. 132-7/10 feet, l South 44 degrees 38 minutes 30 seconds West, 155-35/100 feet, l
South 28 degrees 22 minutes 30 seconds West, 125-9/10 feet, 1 South 37 degrees 40 alautes 60 seconds West, 227-8/10 feet.
l South 62 degrees 25 ulautes 30 seconds West, 428-9/10 feet. l South 87 degrees 41 ufautes 30 secG-ds West. 123-98/100 feet, North 80 degrees 07 minutes 30 seconds West, 78-3/10 feet, South 41 degrees 17 alautes West, 198-18/100 feet, North 40 degrees 04 minutes West, 137-4/10 feet, North 19 degrees 48 alautan 30 seconde West, 194-68/200 feet.
North 39 degrees 00 startes 30 secuads West, 145-08/100 feet, North 55 degrees at sis,stes 30 seconds West, 141-15/100 feet, North 80 degrees 34 alkutes 30 second) West, 82-5/10 feet, South 46 degrees SS alautes 30 secondu West, 105-3/10 feet, South 66 degrees 44 alautes West, 7f-95/100 feet, North 51 degrees 47 afautes East, of!-d5/100 feet, North 41 degrees 06 minutes East, 11t=75/100 feet, South 42 degrees 11 minutes 30 seconde East, 111-7f/100 feet, South 69 degrees 16 alautes 30 seconds East, 135-4/10 feet, South 54 degrees 15 minutes Esst, 123-48/100 feet.
South 23 degrees 02 sinntes 30 seconde East, 98-4/10 feet, South 08 degrees 27 minutes 30 seconds East, 169-8/10 feet.
, , _ , . . . , . . , ,, , .,, - , . _ _ - , _ , , , , , , , , , , _ , _ , _ , . . , _ _ , , . _ , _ - _ , , , , ,n.,,,, __m,,n,.n,w._,an_,<
Page 4 of 10 l North 13 degrees 32 minutes 30 seconds East, 93-25/200 feet, North 19 degrees 32 minutes 30 seconde East, 111-2/10 feet, North 20 degrees 05 minutes 30 seconds East, 95-95/100 feet, North 23 degrees SS ainutes 30 seconds West, 106-96'100 feet.
North 52 degrees 36 minutes 30 seconds West, 100-5/ 3 feet, North 73 degrees 59 minutes 30 seconds East, 164-0/10 feet, North 43 degress 28 minutes 30 seconda East, 171-1/10 feet, Nurth 87 degrees 15 minutes 30 seconds East, 154-1/10 feet, North 35 degrees 50 minutes East, 118-45/100 feet, North 18 degrees 59 minutes East, 218-35/100 feet, North 31 degrees 44 minutes East, 217-9/10 feet, North 24 degrees 36 minutes East, 224-2/10 feet, North 25 degrees 11 minutes East, 181-35/100 feet, North 00 degrees 21 minutes West, 170-7/10 feet, North 09 degrees 00 minutes East, 214-1/10 feet, 1 North 07 degrees 00 minutes 30 seconds East, 138-1/10 feet, !
l North 09 degrees 51 minutes 30 seconds East, 174-6/10 feet, North 05 degrees 47 minutes 30 seconds East, 125-05/100 feet, North 19 degrees 59 minutes 30 seconds West. 214-2/10 feet, North 10 degrees 47 minutes 30 seconds West, 135-35/100 feet, North 78 degrees 18 minutes 30 seconds West, 172-1/10 feet.
North 54 degrees 11 minutes 30 seconds East, 177-1/10 feet, North 30 degrees 59 minutes West, 181-1/10 feet, North 24 degrees 59 alautes West, 119-4/10 feet, North 36 degrees 18 minutes West, 174-13/100 feet, North 51 degrees 15 minutes West, 179-6/10 feet, North 76 degrees 22 minutes West, 232-2/10 feet, North 86 degrees 30 minutes West, 124-35/100 feet, North 76 degrees 11 minutes East, 131-1/10 feet, North 58 degrees 50 alautes East. 83-45/100 feet, North 20 degrees 23 minutes West, 71-9/10 feet.
North 44 degrees 55 minutes 30 seconds West, 263-4/10 feet, North 57 degrees 43 minutes 30 seconds West. 149-75/100 feet. .
North to degrees 12 alastes 30 seconds West. 191-65/100 feet, North 54 degrees 13 alautes 30 seconde West, 144-05/100 feet, North 45 degrees 53 alautes 30 seconds West, 232-65/100 feet, North 73 degress 04 minutes 30 seconds West, 204-2/10 feet, North 47 degrees 29 alastes 30 seconds West. 228-4/10 feet, South 97 degrees 49 alautes 30 seconds West, 184-35/100 feet, South 84 degrees 23 miautes 30 seconds West, 204-4/10 feet, South 41 degrees 52 minutes 30 seconds West, 225-15/100 feet, North 45 degrees 33 etantes East, 213-4/10 feet, North 08 degrees 24 minutes East, 103-9/10 feet, South 70 degrees 07 minutes West, 198-25/100 feet, South 39 degrees 33 minutes West, 291-25/100 feet, South 49 degrees 18 alautes West, 131-8/10 feet, South 69 degrees 29 minutes West. 223-35/100. feet.
South 70 degrees 22 minutes West, 197-35/100 feet, South 71 degrees 25 minutes West. 392-55/100 feet, South 86 degrees 54 minutes West, 398-85/100 feet,
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North 14 detrees 05 minutes West, 467-4/10 feet, {
North 26 degrees 19 minutes West, 411-75/100 feet, I l North 43 degrees 40 minutes East, 91-7/10 feet.
l South 14 degrees 17 minutes East, 214-75/100 feet, i l South 31 degreet 31 alautes East. 94-1/10 feet, l
South 46 degrees "9 sinutes East, 145-4/10 feet, South 79 degrees 4I sinutes East. 329-0/10 feet.
South 44 degrees oc ainutes East, 183-45/100 feet, North 81 degrees 44 aiantes East, 198-45/100 feet, North 10 degrees la minutes East, 501-4/10 feet, North 67 degrees 33 minutes 30 seconde East, 180-4/10 feet, North 73 degrees 05 minutes 30 seconds East, 172-35/100 feet, North $4 degrees 08 minut'es 30 seconds East, 132-1/10 feet, North 34 degrees 00 minutes 30 seconds East, 221-15/100 feet, North 55 degrees 11 minutes East, 201-9/10 feet, North 59 degrees 25 minutes 30 seconds East, 241-95/100 feet, North 41 degrees 29 minutes East, 197-45/100 feet, North 84 degrees 28 minutes East. 262-05/100 feet, North 84 degrees 41 minutes East, 241-45/100 feet, North 51 degrees of minutes East, 133-1/10 feet, North 10 degrees 28 minutes West. 189-9/10 feet.
South 48 degrees 53 minutes East, 224-05/100 feet, South 43 degrees 52 minutes 30 seconde East, 210-4/10 feet, South 66 degrees 33 minutes 30 seconds East, 148-2/10 feet, South 77 degrees 06 minutes 30 seconds East, 275-2/10 feet, North 79 degrees 41 minutes 30 seconde East, 232-0/10 feet, North 18 degrees 26 minutes 30 seconde East, 110-7/10 feet, 1 North 12 degrees 12 minutes 30 seconds West, 88-4/10 feet, North 12 degrees 32 ainutes 30 seconds West, 100-45/100 feet.
North 53 degrees 40 minutes 30 seconde East, 231-15/100 feet, North 22 degrees 36 alantes 30 seconds East, 207-4/10 feet, ,
l South 11 degrees 05 alautes West, 145-0/10 feet. l South 54 degrees 52 alautes 30 seconds West, 140-96/200 feet, .
South 39 degrees 30 slautes 30 seconds West.115-3/10 feet, South 35 degrees 51 alastes 30 seconde East, 134-48/200 feet.
South 19 degrees 30 minutes 30 seconde East, 104-05/100 feet, South 10 degrees 27 alautes 30 seconde East, 134-5/10 feet, North 49 degrees 38 alastes East, 149-05/100 feet, l South 54 degrees 00 slautes 30 seconds East, 212-7/10 feet, South 37 degrees 22 alastes 30 seconds East, 192-8/10 feet, South 31 degrees 43 af astes 30 seconds East, 347-3/10 feet, South 22 degrees 12 alastes East, 144-4/10 feet, North 13 degrees 05 alnates West, 101-55/100 feet, and South 30 degrees 25 minutes East, 85-45/100 feet to a point in the centerline of an old road THENCE departing said 770 contour, South te degrees 44 minutes 30 seconds East, 46-25/ A00 feet to a corner in the Easterly line of said road:
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i THENCE with said Easterly lias; North 14 degrees 04 minutes West, 255-9/10 feet, North 00 degrees 14 minutes West, 1410-9/10 feet, and North 25 degrees 42 minutes West, 68 feet to its intersection with the 790 contour, Squaw Creek Reservoir datua-I THENCE with said 790 foot contour South 05 degrees 53 minutes East, 1658-5/10 feet, )
South 09 degrees 30 minutes East, 91-7/10 feet, '
South 25 degrees 17 minutes East, 101-2/10 feet. l South 17 degrees 07 minutes East, 144-2/10 feet, South 34 degrees 40 minutes East, 121-8/10 feet, )
South 78 degrees 32 minutes East, 56-3/10 feet, North 67 degrees 59 minutes East, 109-6/10 feet, )
1 South 26 degrees 49 minutes West, 66-2/10 feet, 1 South 01 degree 17 minutes West. 147-7/10 feet, i South 39 degrees 05 minutes East, 300-6/10 feet, l South 30 degrees 33 minutes East, 149-4/10 feet, !
South 34 degrees 34 minutes East, 258-0/10 feet, l North 81 degrees 54 minutes East, 63-4/10 feet, '
South 05 degrees 12 minutes West, 57-4/10 feet, South 44 degrees 15 minutes East, 324-4/10 feet, North 77 degrees 11 minutes East, 58-1/10 feet, South 48 degrees 39 minutes East, 113-1/10 feet, South 86 degrees 49 minutes East, 133-0/10 feet, North 46 degrees 27 minutes East, 265-2/10 feet, North 33 degrees 21 minutes East, 403-5/10 feet.
North 02 degrees 41 minutes West, 395-1/10 feet, North 01 degree 18 minutes West, 402-5/10 feet.
North 13 degrees 38 slautes East, 52-4/10 feet,
- North 35 degrees 38 ainctes East, 116-8/10 feet, South it degrees 40 slautes East, 97-4/10 feet, North 43 degrees 21 minutes East, 90-5/10 feet, South 12 degrees 32 alastes West, 122-0/10 feet, South 16 degrees 65 alastes East, 333-9/10 feet, South 52 degrees 18 alautes East, 269-3/10 feet, North 43 degrees 00 slautes East, 135-7/10 feet, North 86 degrees 34 slautes East, 176-7/10 feet, South 43 degrees SS ainutes East, 45-4/10 feet, South 35 degrees 58 aiantes West, 214-4/10 feet, South 05 degrees 14 minutes West, 105-4/10 feet, Sonth 20 degrees 53 alantes East, 97-4/10 feet, South 54 degrees 20 minutes East, 274-1/10 feet, South 74 degeses 21 ainutes West, 437-4/10 feet, South 59 degrees 52 minutes West, 120-0/10 feet, South 34 degrees 14 minutes West. 170-9/10 feet, South 17 degrees 03 minutes West, 344-8/10 feet, l South 04 degrees 02 minutes West, 156-3/10 feet, l
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Page 7 of 10 South 43 degrees 30 minutes East, 180-9/10 feet.
South 72 degrees 08 alautes East. 390-0/10 feet, South 02 degrees 48 minutes West, 83-3/10 feet, Souta 39 degrees 44 ainutes East, 434-5/10 feet, and South 28 degrees 38 minutes East, 323-9/10 feet, THENCE South 28 degrees 35 minutes East at 10-5/10 feet crossing the line conson to said R. Disney Survey and said James D. Elliott Survey in all 354-5/10 feet and continuing with said 790 foot contour; South 53 degrees 48 minutes East, 184-2/10 feet.
South as degrees 47 minutes East, 138-7/10 feet, North 50 degrees 54 minutes East, 173-2/10 feet.
North 37 degrees 55 minutes East, 201-2/10 feet, North Se degrees 44 minutes East, 103-5/10 feet, South 02 degrees is minutes East, 232-4/10 feet, South 43 degrees 07 alautes East, 244-4/10 feet, North 41 degrees 19 alautes East, 51-1/10 feet, South 14 degrees 44 minutes West, 172-0/10 feet, South 35 degrees 30 minutes West, 107-9/10 feet.
South 08 degrees 29 minutes West, 182-5/10 feet, South 13 degrees 25 minutes East, 123-7/10 feet.
South 37 degrees 15 minutes East, 130-7/10 feet, South 58 degrees 59 minutes East, 108-9/10 feet.
South 81 degrees 28 minutes East, 172-5/10 feet, North 73 degrees 32 minutes East, 232-4/10 feet.
South 53 degrees 07 ainutes East, 73-2/10 feet, South 09 degrees 58 minutes West, 53-2/10 feet, South 27 degrees 15 slautes West. 141-1/10 feet, South 38 degrees 41 minutes West, 138-0/10 feet.
South 47 degrees 19 slantes West. 197-8/10 feet, South 32 degrees 17 alautes West, 108-2/10 feet, South 17 degrees 17 aiantes West. 338-7/10 feet, ,
South 08 degrees 03 alautes West, 125-8/10 feet.
South 09 degrees 14 alautes East, 274-4/10 feet.
South 27 degrees la minutes East, 282-0/10 feet.
South 47 degrees 41 alautes East, 248-4/10 feet.
Noeth 52 degrees 49 alastes East, 150-4/10 feet, North 29 degrees 41 alautes East, 324-7/10 feet.
South 48 degrees 18 aiantes East, 183-4/10 feet, North SS degrees 03 minutes East, 121-8/10 feet.
North 35 degrees 44 aiantes East, 250-4/10 feet, North 31 degrees 32 alautes East, 157-4/10 feet.
North 38 degrees 29 alautes East, 143-9/10 feet, North 25 degrees 15 minutes East, 319-3/10 feet, North 04 degrees 39 aiantes West, 44-4/10 feet, North 32 degrees de slautes East, 32-1/10 feet, and
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Page 4 of 10
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TIENCE North 34 degrees 45 minutes East. 113-2/10 feet to a point in the East line of said James D. Elliott Survey common to the West line of said 1 J. Grace Survey:
TIENCE with said common line. North 38 degrees 53 ainutes West, 571-61/100 feet; TNINCE departing said common line:
North 45 degrees 24 minutes East, 1489-25/100 feet.
North 40 degrees 57 minutes East. 949-9/10 feet, North 59 degrees 23 sinutes East, 2111-7/10 feet, ,
South 29 degrees 59 minutes East. 438-9/10 feet, j North 80 degrees 41 minutes East, 2771-8/10 feet, and South 35 degrees 32 minutes 15 seconds East, 1057-5/10 feet to a point in the North line of a road; TIENCE with said North line:
North 59 degrees 57 minutes East, 107-1/10 feet.
North 55 degrees 13 minutes 15 seconds East, 122-3/10 feet.
North 58 degrees 19 minutes East. 278-9/10 feet, North 81 degrees 00 alautes 30 seconds East. 1041-4/10 feet, and South 75 degrees 58 minutes East, 45-9/10 feet; TNINCE South 48 degrees 03 minutes East, 11-5/10 feet to a point on the l South line of the Daa Walton Coates tract described la the deed recorded in Volume 255. Page 13. Deed Records, Nood County, Texas; TIENCE with said South line. South 59 degrees 53 minutes West, 1476 feet:
TRINCE departing said Coates tract South 54 degrees 34 alastes West, 1383-2/10 feet.
South 31 degrees 05 alastes East. 1281-5/10 feet.
North 59 degrees 34 minutes East, 1891-6/10 feet, and South 30 degrees 18 alastes East, 2440-4/10 feet to a point in the line commen to said Joka C. Grace Survey, Abstract 208 and the Galveston County Scheel Land Survey, Abstract 38; TIENCE with said conson line, South $2 degrees 27 alautes West. 76-7/10 feet to a point; i
TNINCE departing said conson survey line South 30 degrees 49 minutes East. 2808-7/10 feet.
North 03 degrees 58 alautes West. 480-0/10 feet, North 57 degrees 57 niantes West, 168-7/10 feet.
North 14 degrees 53 niantes West, 97-1/10 feet, North 49 degrees 19 alantes East, 1013-0/10 feet.
Page 9 of 10 l
South 04 degrees 33 minutes West. 1811-5/10 feet, South 30 degrees 49 minutes East, 305-4/10 feet, :
North 60 degrees 51 minutes East, 1359-88/100 feet, South 34 degrees 10 minutes East, 390 feet, ,
North 59 degrees 30 minutes East, 588-85/100 feet, l North 59 degrees 59 sinutes 30 seconds East, 1530-2/10 feet, South 12 degrees 59 minutes West, 1183-8/10 feet, i South 43 degrees 05 minutes East, 878-9/10 feet, !
South 09 degrees 08 minutes West, 211-1/10 feet, and l South 13 degrees 12 minutes East crossing the line common to said Hood and '
Somervell counties in all 400-5/10 feet to a point TRENCE South 51 degrees 05 minutes 30 seconds West, 881-05/100 feet, South 28 degrees 53 minutes East, 1052-0/10 feet.
North 79 degrees 04 minutes East, 688-4/10 feet, South 15 degrees 29 minutes 30 seconds East, 488-3/10 feet to a polat on the line conson to said Galveston County School Land Survey, Abstract 36 and said Jose Antonio Bernandes Survey, Abstract 42. Somervell County, Texas and with said conson survey line, South 80 degrees 05 minutes to seconds West, 112-1/10 feet:
TRENCE departing said conson survey line:
South 01 degree 35 minutes 15 seconde East, 558-88/200 feet, South 08 degrees 55 minutse 51st, 208-15/100 feet, South 19 degrees 58 minutes 30 seconds West. 1134-75/200 feet, South 04 degrees 16 minutes 30 seconds East, 3018-55/100 feet, South 01 degree 08 minutes 25 seconds West, 1281-25/100 feet to a point in the line coanon to said J. Bernandes survey, Abstract 42 and asid S.
McKelvy Survey, Abstract 88, Somervell County, Texas; I l
TERNCE departing said conson survey 11as, South 29 degrees 25 minutes l East, 2075-1/10 feet; TMENCE South 59 degrees la alautes West, 3844-3/10 feet to a point in the l centerline of Squaw Creek, and Southerly with said centerline some 900 '
feet:
TIENCE departlag said Squaw Creek centerline, South 80 degrees West some 100 feet:
TEINCE North 47 degrees 34 minutes West, 280-44/100 feet, North 40 degrees 21 alautes Wast, 180-43/100 feet, North 12 degrees 17 minutes East, 28-58/100 feet, North 80 degrees 48 minutes West. 484-81/100 feet, North 45 degrees 32 minutes West, 1442-85/100 feet, South 83 degrees 44 minutes SS seconds West, 3934-84/100 feet, South 28 degrees 15 minutes 28 seconds East, 300-0/10 feet.
South 83 degrees 45 minutes 35 seconds West, 544-88/100 feet, North 28 degrees 15 minutes 25 seconds West, 284-8/10 feet, l
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Page 10 of 10 South 63 degrees 44 minutes SS seconds West, 450-54/100 f eet to a point la the line conson to said S. McKelvy Survey, Abstract 88 and the Wa. W. ,
Parker Survey, Abstract 42, Somervell County, Texas, and continuing with said conson survey line, North 31 degrees 21 slautes 40 seconde West, 18-04/100 feet to a point la the South line of said Jose Antonio Bernande Survey, Abstract 42, Somervell County, Texas; '
THENCE with the line conson to said J. Bernandes Surity. Abstract 42 and '
said Wm. Parker Survey, Abstract 82 South S8 degrees 21 minutes 44 seconds West, 1311-50/100 feet to the Southerly corner common to said J. I Hernandes Survey, Abstract 42 and said John W. Fogg Survey, Abstract 27, '
Somervell County, Texas:
j THENCE continuing with the line conson to said John W. Fogg Survey, Abstract 27 and said We, Parker Survey, Abstract 82, Sonstvoll County, Texas, South 58 degrees 54 minutes 17 seconde West, 2138-22/200 feet to the place of beginning. :
Save and except those certain two (2) 10.07 acre tracts conveyed to Billie Williams Durant, et al, and Alma Williams Andrews, et al, described in Volume 1000 Page S$$ through S45, Deed Records, Eood County, Texas.
O l
j EXHIBIT A i
ASSIGNMENT AGREEMENT ,
l between
{
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
Brazos and TEXAS UTILITIES ELECTRIC COMPANY TU Electric dated as of e
ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT is made and entered into this day of
,1988 by and between the following parties:
BRAZOS ELECTRIC POWER COOPERATIVE, INC., a Texas non-profit electric cooperative corporation, having its principal office at 2404 LaSalle Avenue, Waco, McLennan County, Texas ("Brazos"), and TEXAS UTILITIES ELECTRIC COMPANY, a Texas corporation, having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Dallas County, Texas ("TU Electric").
DEFINITIONS As used in this Assignment Agreem ent, unless otherwise specified herein, the following terms shallhave the following meanings:
(a) "Agreement" means the Agreement dated as of July 5,1988 between Brazos and TU Electric providing for the sale by Brazos and purchase by TU Electric of the Purchased Assets.
(b) "Assignment" means the form of Assignment attached hereto as Exhibit A.
(c) "Assignment Agreement" means this Assignment Agreement and all Schedules and Exhibits attached to this Assignment Agreement.
(d) "Brazos Comanch'e Peak Debt" means the aggregate of the indebtedness of Brazos to the REA, the CFC and the FFB with respect only to Comanche Peak, which at the date hereof is the unpaid principal amount of Dollars ($ ), and is detailed on Schedule A attached hereto.
(e) "Business Day" means a day on which banks in Dallas, Texas are open for 1 l
regular banking business.
(f) "CFC" means the National Rural Utilities Cooperative Finance Corporation, or its successor.
(g) "Cicsing" means the consummation, pursuant to the Agreement, of the sale by Brazos and the purchase by TU Electric of the Purchased Assets, as described therein.
(h) "Closing Date" means the Closing Date defined in the Agreement.
(i) "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related properties, and is the aggregate and combination of the Station, Fuel and Transmission Facilities, as defined in the Agreement, and {
all other rights and interests associated with r relating to all of the same.
(j) "FFB" means the Federal Financi"g Bank, or is successor.
(k) "Government" means the United States Government auting by and through the Administrator of the REA.
(1) "Government Obligations" means direct obligations of the United States of America, including obligations the principal of and interest on which are '
unconditionally guaranteed by the United States of America.
(m) "Guaranty" means the Guaranty of TUC attached as Exhibit B to the Agreement.
(n) "Mortgage" means the purchase money mortgage in the form of the Deed of Trust and Security Agreement given to secure payment of the Note, in the l form attached to the Agreement as Exhibit D, creating a first lien on the real property and granting to Brazos a first and prior security interest in the personal property and fixtures, the aggregate of which comprise the Purchased Assets. .
(o) "Note" means the non-negotiable promissory note, in the form attached to the Agreement as Exhibit E, to be made and delivered at Closing by TU Electric as provided in Section 1.5(c) of the Agreement.
. _ . . . - - . ~ ~ - _ - . . - - . - . .
I (p)
"Other Brazos Debt" means the aggregate of the indebtedness of Brazos to the REA, the CFC and the FFB other than the Brazos Comanche Peak Debt.
(q) I "Purchased Assets" means the aggregate of all that part of Comanche Peak (as Comanche Peak exists and is constituted on the Closing Date) owned by Brazos or to which Brazos has a right, title or interest, as further defined in the Agreement.
(r)
"REA" means the Rural Electrificatior. Administration of the United States l Department of Agriculture, or its successor.
(s) "Special Warranty Deed" means the form of Special Warranty Deed with Vendor's Lien and Bill of Sale ettached to the Agreement as Exhibit F.
1 (t) "Transfer of Lien" means the form of Transfer of Lien of the Mortgage l attached hereto as Exhibit B. I (u) "TUC" means Texas Utilities Company, a Texas corporation, which is the corporate parent of TU Electric. i 1
(v)
"Vendors Lien" means the vendors lien retained in the Special Warranty Deed.
RECITA13 A.
Brazos and TU Electric have previously entered into the Agreement.
B.
Brazos owns an undivided interest in Comanche Peak,'which is be!ng purchased by TU Electric on the Closing Date pursuant to the Agreement, and in connection therewith as partial payment therefor, TU Electric is delivering to Brazos the Note, the payment of which will be secured by the purchase money lien of the Mortgage and the Vendors Lien.
C.
Brazos wishes to assign the Note and all payments thereunder to the Government in order to provide thereby for the payment of the Brazos Comanche Peak Debt, it being understood that a portion of the payments under the Note will also be used to pay a portion of the Other Brazos Debt.
. _ . _ _ _ _ ._ _. __ ~ _ . . , _ _ _ _ _ _ . _ _ _ __. _ _ _
l D.
To secure the making of the payments under the Note, Brazos wishes to transfer and assign the liens and rights provided for under the Mortgage and the Special Warranty l
Deed to the Government under and pursuant to the Transfer of Lien.
E.
TU Electric is willing to permit such assignment of the Note, the Mortgage and the Vendors Lien.
F. !
Brazos and TU Electric wish to provide with respect to the terms and circumstances in the event of the prepayment of the Note.
NOW, THEREFORE, for and in consideration of the premises and other good and l valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Brazos and TU Electric do hereby agree as follows: I i
1.
_ Assignment of Note and Guaranty. Brazos does hereby assign the Note and Guaranty to the Government under and pursuant to terms and conditions of, and as evidenced by, the Assignment; and TU Electric does hereby consent to such Assignment as evidenced by its execution of the Consent to Assignment appearing on the Assignment.
Brazos does hereby acknowledge that all payments made by TU Electric in accordance with the Note to the Government as assignee thereof shall be considered to be in full and complete satisfaction of TU Electric's obligation under the Note to Brazos as the original payee thereof or otherwise under the Agreement to the extent of all such payments.It,is
)
understood and agreed that assignment of the Note by Brazos to the Government is being accepted by the Government not in extinguishment, but as a mechanism for payment, of the Brazos Comanche Peak Debt and a portion of the Other Brazos Debt. l
- 2. l Assignment of Mortgage. Brazos does hereby assign the Mortgage and the Vendors Lien to the Government under and pursuant to the Transfer of Lien as replacement security for the liens of the mortgages of the CFC, the FFB and the REA covering the Purchased Assets securing the payment of the Brazos Comanche Peak Debt which are being released incident to the closing under the Agreement of the purchase of P
l the Purchased Assets by TU Electric from' Brazos, it being understood that the Government shall exercise for itself and on behalf of Brazos all rights accruing to the mortgagee in the event of default undu the Note or the Mortgage.
- 3. Payment of,pt%r Brazos Debt. It is understood and agreed that from henceforth, Brazos will pay the Other Brazos Debt by paying to the Government, contemporaneously with payments by TU Electric under the Note, such additional amounts in addition to the payments made by TU Electric under the Note as will fully pay the Brazos Comanche Peak Debt and the Other Brazos Debt in the aggregate at the times they become due and payable, and that nonpayment of such additional amounts by Brazos
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will not constitute a default or event of default under either the Note or the Mortgage or with respect to the Vendors Lien or in any way be the basis for an acceleration of the indebtedness represented by the Note or foreclosure of the lien provided for in the Mortgage, the Vendors Lien or any other lien in favor of the Government or Brazos with respect to the Purchased Assets, the Government being relegated thereby to its remedies under Brazos' notes to the CFC, the FFB and the REA and with respect to the remaining security of Brazos for such debt.
- 4. Prepayment of Note.
TU Electric may prepay the Note at any time in accordance with the provisions thereof. In such event, however, if such prepayment is not permissible at such time, in whole or in part to any extent, under the terms of the Brazos Comanche Peak Debt or the Other Brazos Debt, it is understood and agreed that ,
TU Electric may make a prepayment in full and complete satisfaction of all of its remaining obligations under the Note so as to require release of the lien of the Mortgage, the Vendors Lien and any other lien retained in favor of the Government or Brazos with respect to the Purchased Assets, by irrevocably depositing in a trust account with a trustee, which shall be a national bank with capital of at least $50 million selected by TU Electric and Brazos, and acceptable to the Government, in trust, and irrevocably set
-S -
1 1
aside exclusively for such payment, money sufficient to make payment, or Government Obugations which will mature as to principal and interest at a rate of 81/.1% per annum l thereafter (and the interest rate provided for in the Note will thereby be deemed to be changed to 81/2% thereafter and ipso facto modified to such extent)in such amount and i at such times as will ensure the availability, without reinvestment, of sufficient money to !
i make payment, of the remaining principal and interest (at the rate of 81/2% per annum) !
payments due under the Note.
Contemporaneously with the deposit of such money or Government Obligations in trust, TU Electric shall make payment of the prepayment premium under the Note directly to Brazos in full satisfaction of all of its obligations with respect thereto under the Note, and by its execution of the Consent attached hereto the Government does hereby consent to such method of payment of the prepayment premium tnder the Note. At such time as such money or Government Obligations shall have been deposited in trust with such trustee and the referenced prepayment premium shall have been paid to Brazos, the Note will be deemed to be fully paid and all obligations of TU Electric in connection therewith, under the Mortgage and with respect to the Vendors Lien fully satisfied, and any rights of the Government or Brazos with respect thereto terminated and fully relinquished, and the Government and Brazos will execute and l 1
deliver to TU Electric appropriate releases with respect thereto and with respect to a
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other liens covering the Purchased Assets in their favor.
Such deposit in trust may thereafter be terminated at any time or partially from time to time by TU Electric at its option at such time or times as the underlying Brazos Comanche Peak Debt becomes prepayable, by the release to REA from such deposit in trust by TU Electric of sufficient l funds to prepay any of such Brazos Comanche Peak Debt in accordance with the terms thereof, including prepayment of applicable prepayment penalties if any; provided, however, that any partial prepayment shall not be made if thereaftcr the weighted average annualinterest rate on the remaining Brazos Comanche Peak Debt shall exceed 8 1/2% per annum.
Hi-
- 5. Notices and Payments.
All notices, requests, demands and other communications under this Assignment Agreement shall be in writing and shall be deemed to have been duly given (a) if served personally on the party to whom notice is to be at the addresses and to the attention of the persons named as follows, or (b) if se telex or nationally recognized overnight delivery service, or (c) by first class mail ,
postage prepaid, certified and return receipt requested, and properly addressed as follows:
(a) To Brazos att Brazos Electric Power Cooperative, Inc.
P. O. Box 2585 Waco, Texas 76702-2585 Attention: Richard E. McCaskill (b) To TU Electric at:
Texas Utilities Electric Company 2001 Bryan Street Suite 1900 Dallas, Texas 75201 Attention: Treasurer As a result of the assignment of the Note, all payments made by TU Electric under the Note shall be made by wire transfer to the Rural Electrification Administration ,
02103000410 Treas NYC (12310100) for credit to account of the Administration, U.S. Department of Agriculture, Washington, D.C. 20250. .
In the event the Government desires to provide for a change in the place of p of the Note, it shall notify TU Electric thereof in writing received at least five (5)
Business Days in advance of the next payment date under the Note.
6.
Entire Agreement, Amendments. His Assignment Agreement, and the other documents delivered pursuant hereto or specifically referred to herein, constitute th entire agreement between Brazos and TU Electric relating to the subject matter her
and supersede all other prior agreements, representations and understandings between the parties. No supplement to, or modification or amendment of, this Assignment Agreement shall be binding, unless executed in writing by both Brazos and TU Electric.
IN WITN ESS WHEREOF, the parties hereto have executed' this Assignment Agreemen; as of the date set forth at the outset hereof.
TEXAS UTILITIES ELECTRIC COMPANY (Corporate Seal)
By:
Its: ,
ATTEST:
)
By:
Its:
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
(Corporate Seal)
By: -
Its:
l ATTEST:
By:
Its:
.g
CONSENT TO ASSIGNMENT AGREEMENT The undersigned hereby accepts, consents to and approves the terms, conditions and obligations set forth in the foregoing Assignment Agreement.
UNITED STATES OF AMERICA Byt.
Its: Adminiatrator Rural Electrification Administration 1
l 1
l 4
-9
EXHIBIT A
. ASSIGNMENT FOR VALUE RECEIVED, BRAZOS ELECTRIC POWER COOPERATIVE, INC.
("Brazos"), hereby ASSIGNS, TRANSFERS, CONVEYS and SE15 OVER to the Rur Electrification Administration, or its successor, all its right, title and interest in and to i the attached note dated t
.1988, in the original principal sum of
, executed by Texas Utilities Electric Company ("TU Electric"), hereinafter referred to as the "Note", with full recourse at law or equity to which extent assig shall specifically have the right of recourse against assignor, its successots and Bis assignment of the Note by Brazos to the Rural Electrification Administration is j
for the purpose of establishing a mechanism for payment of Brazos' Comanche Pe and a portion of Other Brazos Debt as defined in the Assignment Agreement to whic form of Assignment has been attached as Exhibit "A".
De Note is not for the purpose of evidencing or creating any additional indebtedness on the part of Brazos, and ever exercises its right to recourse as set out hereinabove, assignor, its successors or assigns, reserves the right, at its option, to fulfill its obligations created by the ex of such right of recourse by paying any payments remaining unpaid en the Note date of the exercise of recourse ereated hereunder is exercised, to the assign payments become due and payable under the terms of the Note with the right to dire that any such payments be credited to assignor's, its successors' or assign ,
obligations on Brazos Comanche Peak Debt or Other Brazos Debt.
And, provided further, that this assignment is made subject to assignor' and reservation for itself of an amount equal to one percent (1%) per annum of principal balance unpaid from time to time on the Note until the no prepa time shown on Exhibit A attached to the Note is reached, which retainage an owing thereon shall at all times remain the sole right, title and interest of assignor but which shall be paid by the Borrower to Assignee in accordance with the Assignment Agreement in full satisfaction and extinguishment of any right or claim Brazos may have against TU Electric with respect thereto.
THIS ASSIGNMENT IS WITH THE CONSENT OF TU ELECTRIC AND IS NOT TO OPERATE OTHERWISE AS A NEGOTIATION OF THE NOTE NOR TO GIVE THE ASSIGNEE THE RIGHT TO COMPEL A NEGOTIATION.
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
By:__
Richard E. McCaskill Executive Vice President and General Manager CONSENT TO ASSIGNMENT The undersigned hereby acknowledges that it is the Borrower set out in the Note and hereby consents to the assignment of the Note to the Rural Electrification Administration !
upon the terms herein stated, j l
TEXAS UTILITIES ELECTRIC COMPANY l By:
Its: l l
EXHIBIT B TRANSFER OF LIENS )
l l
THE STATE OF TEX AS * '
- KNOW ALL MEN BY THESE PRESENTS: l COUNTIES OF HOOD & SOMERVELL :
l TH AT the undersigned, of the County of McLennan, and State of Texas, the present legal and equitable owner and holder of that one certain promissory note in the original principal sum of Dollars ($ ),
dated .1988, executed by TEX AS UTILITIES ELECThiC COMPANY, payable to the order of BRAZOS ELECTRIC POWER COOPERATIVE, INC.,
more fully described in a Special Warranty Deed with Vendor's Lien and Bill of Sale, duly l recorded in Volume , Page , of the Deed Records of Hood County, Texas, and Volume , Page , of Somervell County, Texas; and in a Deed of Trust, duly recorded in Volume . Page , of the Deed of Trust Records of Hood County, i Texas, and Volume , Page , of Somervell County, Texas; said note being secured by said Vendor's Lien and Deed of Trust Lien against the following described property, to-wit:
See Attached Exhibit "A" ,
l for good and valuable consideration paid to the undersigned, the receipt and sufficiency of I which are hereoy acknowledged, has TRANSFERRED, ASSIGNED, GRANTED and CONVEYED and by these presents TRANSFERS, ASSIGNS, GRANTS and CONVEYS unto !
the Rural Electrification Administration of Washington, D.C., the above described note, together with the Vendor's Lien and Deed of Trust Lien and all liens, and any superior title, held by the undersigned securing the payment thereof. . This Transfer of Liens is subject to the terms of that one certain Assignment of even date herewith by and between the parties thereto.
1
EXECUTED this day of ,1988.
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
By:
Richard E. McCaskill, Executive Vice President and General Manager l
THE STATE OF TEX AS :
COUNTY OF McLENNAN : i This instrument was acknowledged before me this day of .1988, by the said Richard E. McCaskill, Executive Vice President and General Manager of Brazos Electric Power Cooperative, Inc.
1 I
Notary Public, State of Texas My Commission Expires:
l i
\
l l
l l
I 2-i
l EKBIBIT B 1
GUARANTY Due and punctual payment of all sums to be paid by Texas Utilities Electric Company to Brazos Electric Power Cooperative, Inc., in accordance with the terms of i
that certain promissory note of even date herewith in the original principal amount of
$ I is hereby unconditionally guaranteed to Brazos Electric Power 1 Cooperative, Inc., by the undersigned. The undersigned agrees that its obligations hereunder shall not be released, diminished, impaired, reduced, or affected by the occurrence of any one or more of the following events: (a) the taking or accepting of any additional security or other guaranty for any or all of the referenced indebtedness; (b) an release, surrender, exchange, subordination, or loss of any security at any time existing in !
connection with any or all of such indebtedness; (c) the modification of, amendment to, or waiver of compliance with any terms of the referenced promissocy nota agreed to by the Borrower thereunder without the notification or consent of the undersigned; or (d) any renewal, extension, and/or rearrangement of the payment of any or all of the referenced indebtedness agreed to by said Borrower. l Executed this day of _ ,1988. I
\
TEXAS UTILITIES COMPANY By:
Title:
1 I
l l
EXHIBrf C ELECTRIC COOPERATIVES THAT ARE MEMBERS OF BRAZOS ELECTRIC POWER CCCPERA'ITVE,INC.
- 1. Bartlett Electric Cooperative, Inc.
- 2. B-K Electric Cooperative,Inc.
- 3. Belfalls Electric Cooperative,Inc.
- 4. Comanche County Electric Cooperative Assn.
- 5. Cooke County Electric Cooperative Assn.
- 6. Denton County Electric Cooperative,Inc.
- 7. Dickens Electric Cooperative, Inc.
- 8. Erath County Electric Cooperative Assn.
- 9. Fort Belknap Electric Cooperative, Inc.
- 10. Gate City Electric Cooperative,Inc.
- 11. Hamilton County Electric Cooperative Assn.
- 12. Hill County Electric Cooperative, Inc.
- 13. J-A-C Electric Cooperative, Inc.
- 14. Johnson County E:ectric Cooperative Assn.
- 15. McLennan County Electric Cooperative, Inc.
- 16. Mid-South Electric Cooperative Assn.
- 17. Navarro County E1.ectric Cooperative, Inc.
- 18. Navasota Valley Electric Cooperative, Inc.
- 19. Tri-County Electric Cooperative, Inc.
- 20. Wise Electric Cooperative, Inc.
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L. -
EXIIIBIT D DEED OF TRUST AND SECURITY AGREEMENT made by and between TEX AS UTIIJTIES ELECTRIC COMPANY and
. _ _ _ . TRUSTEE for the benefit of BRAZOS ELECTRIC POWER COOPERATIVE, INC.
Dated as of - .1988 i
l l
. _ . . __ _. . _ _ _ __ _ _ . _ - --- --- --- -- - -- -I
DEED OF TRUST AND SECURITY AGREEMENT, dated as of ,1988 (hereinafter called the "Mortgage"), made by and between TEXAS UTILITIES ELECTRIC COMPANY, a corporation existing under the laws of the State of Texas (hereinafter called the "Mortgagor"), and (hereinafter called "Truste e"), for the benefit of BRAZOS ELECTRIC POWER COOPERATIVE, INC., a corporation existing under the laws of the State of Texas (hereinafter called "Mortgagee").
NOW, THEREFORE, this Deed of Trust and Security Agreement WIT N ES S RT H:
WHEREAS, Mortgagor has entered into an Agreement with Mortgagee dated July 5, 1988 (the "Adreement") providing for the purchase by Mortgagor from Mortgagee of certain properties and assets (the "Purchased Assets") described in the Agreement and the payment of a portion of the purchase price thereof by Mortgagor to Mortgagee under and pursuant to a Promissory Note of even date herewith from Mortgagor to Mortgagee in the original principal amount of $ (the "Note");
WHEREAS, in order to faellitate the purchase by Mortgagor of the Purchased Assets and in order to secure the payment of the Note, Mortgagee is willing to transfer the Purchased Assets to Mortgagor and accept the Note in partial payment therefor, only upon the condition, inter alia', that Mortgagor shall have executed and delivered this Mortgage as a purchase money mortgage to secure payment of the Note; NOW, THEREFORE, in order to secure the payment of the principal of and interest on the Note (representing a portion of the purchase price under the Agreement), according to its tenor and effect, and further to secure the due performance of the covenants, agreements and provisions contained in th's Mortgage a'id to declare the terms and conditions upon which the Note is to be secured, the Mortgagor, in consideration of the premises has executed and delivered this Mortgage, and has granted, bargained, sold, t
i
, _ _ - , - - w ~' ' ' ~ ~ ' ' ' ~
conveyed, warranted, assigned, transferred, mortgaged, pledged and set over, and by these presents does hereby grant, bargain, sell, convey, _ warrant, assign, transfer, mortgage, pledge and set over, unto the Trustee in trust for the benafit of the Mortgagee, and their respective successors and assigns, all and singular the following-described property (hereinafter sometimes called the "Mortgaged Property"):
1.
All right, title and Interest of the Mortgagee conveyed to the Mortgagor on the date hereof in and to the Purchased Assets, which includes real and personal property, including fixtures, and which is the property described on Exhibit A attached hereto, as well as all appurtenances, betterments and additions thereto, substitutions therefor, and allim'frovements now or hereafter placed thereon; II.
To the extent the same constitute a part of the Purchased Assets, the right, title and interest of the Mortgagor in, to and under any and all grants, privileges, right and easements now owned, held, leased, enjoyed or exercised, or which may hereafte owned, held, leased, acquired, enjoyed or exercised, by the Mortgagor for the pu or in connection with, the construction or operation by or on behalf of the Mortga the Purchased Assets, wherever located; Ill.
To the extent the same constitute a part of the Purchased Assets, the right, tit and interest of the Mortgagor in, to and under any and all 'icenses, franchise privileges and permits heretofore granted, isstied or executed, or which may here i
i granted, issued or executed, to it by the United States of America, or by any sta any county, township, municipality, village or other political subdivision thereof, ol; i
l 1
i i
i l
1 any agency, board, commission or department of any of the foregoing, authorizing the !
construction, acquisition, or operation of the Purchased Assets, insofar as the same may i by law be assigned, granted, bargained, sold, conveyed, transferred, mortgaged, or pledged; IV.
All right, title and interest of the Mortgagor in, to and under any and all accounts, contract rights and general intangibles (as such terms are defined in the applicable Uniform Commercial Code) heretofore or hereafter acquired by the Mortgagor and which are part of the Purchased Assets; V.
Together with all rents, income, revenues, profits and benefits at any time derived, received or had from any and all of the above-described property of the Mortgagor.
TO HAVE AND TO HOLD all and singular the Mortgaged Property unto the Moitgagee and its assigns forever, to scoure the payment of the principal of and interest on the Note, according to its tenor and effect, without preference, priority or distinction as to interest or principal (except as otherwise specifically provided herein) or as to Hen, to secure the due performance of the covenents, agreements and provisions herein, and for the uses and purposes and upon the terms, conditions, provisos and agreements hereinafter expressed and declared.
ARTICLE I PARTICULAR COVENAN'IB OF THE MORTGAGOR ne Mortgagor covenants with the Mortgagee and any other permitted holaer of the Note (hereinafter sometimes collectively called the "Noteholder") as follows:
SECTION 1. De Mortgagor is duly authorized under its articles of incorporation and by-laws and the laws of the State of Texas and all other applicable provisions of law l
to execute and deliver the Note and this Mortgage; all corporate action on its part for the
execution end delivery of the Note and this Mortgage has been duly and effectively taken; and the Note and this Mortage are the valid and enforceable obligations of the Mortgagor in accordance with their respective terms.
SECTION 2. 'Ih Mortgagor warrants tnat it has good right and lawful authority to mortgage the property described in the granting clauses of this Mortgage for the purposes herein expressed, and that said property is free and clear of any deed of trust, mortgage, tien, charge or encumbrance thereon or affecting the title thereto, except (i) the lien of this Mortgage and the vendors lien retained by Mortgagee, and any liens for taxes, assessments or similar governmental charges not yet due;(ii) deposits or pledges to secure payment of workmen's compensation, unemployment insurance, old age pensions or other social security;(iii) deposits or pledges to secure performance of bids, tenders, contracts (other thsm contracts for the payment of borrowed money), leases, pub!!c or statutory obligations, surety or appeal bonds, or other deposits or pledges for purposes of like general nature in the ordinary course of business and liens, controls, obligations, restrictions or rights in favor of, reserved to or vested in any municipal, public or other governmental authority (iv) liens (eristing or inchoate) in favor c,f mechanics, materialmen, laborers and suppliers of materlais, goods, services, equipment, inventory and labor; (v) matters affecting the title to all or any part of the Mortgaged Property created by the acts or omissions of (a) Mortgagee, or (b) the parties owning interests in the project of which the Mortgaged Property is a part, or (c) Mortgagor as Project Manager acting for the owners of the project of which the Mortgaged Property is a part; (vi) matters of record affecting the Mortgaged Property; and (vil) the Jcint Ownership Agreement dated January 2,1979, as modified and amended, to which Mortgagor and Mortgagee are parties relating to the Mortgaged Property and all licenses, permhs, leases, franchises and contracts relating thereto. The Mortgagor will, so long as the Note shall be outstanding, maintain and preserve the lien of this Mortgage superior to all other tiens affecting the Mortgaged Property, except to the extent referenced in the preceding
sentence, and will forever warrant and defend the title to the property described as being mortgaged hereby to the Mortgagee against any and all claims and demands whatsoever by, through or under Mortgagor. The Mortgagor will promptly pay or discharge any and all obligations for or on account of which any such lien or charge might exist or could be created and any and all lawful taxes, rates, levies, assessments, tiens, claims or other '
charges imposed upon or accruing upon any of the Mortgaged Property (whether taxed to the Mortgagor or to the Noteholder), as and when the same shallbecome due and payable; and whenever called upon so to do the Mortgagor will furnish to the Mortgagee or to any Noteholder adequate proof of such payment or discharge; providt.d. however, that this provision shall not be deemed to require the payment or dlNharge of any tax, rate, levy, assessment or other governmental charge while the Me'tgagor is contesting the validity thereof by appropriate proceedings in good faith rid so long as it shall have set aside on its books adequate reserves with respect thereto.
SECTION 3. The Mortgagor will not, without the consent in writing of the l Mortgagee, charge, pledge, mortgage, or otherwise encumber any of the Mortgaged Property in any manner so as to adversely affect the priority of the lien established !
hereby.
SECTION 4. The Mortgagor will duly and punctually pay the principal of and interest on the Note at the dates and in the manner provided therein, according to the true intent and meaning thereof, and all other sums becoming due hereunder. The Mortgagor may at any time make prepayments on acevunt of all or part of the principal of 1 the Note to the extent and in the manner provided therein.
SECTION 5. The Mortgagor will at all times, so long as any portion of the Note shall be outstanding, take or cause to be taken all such action as from time to time may be necessary to preserve its corporate existence and use its best efforts to preserve and renew all rights of way, easements and similar real property rights now or hereafter granted to it or conferred upoa it N1ating to the Mortgaged Property, and will comply 2
L with all valid laws, ordinancer, cegulations and requirements applicable to the Mortgaged Property, so long as the Mortgagor is not contesting the validity of any thereof in good faith. The Mortgagor will not without the approval in writing of the Noteholder f consolidate with or merge into any other corporation or permit any other corporation to merge into the Mortgagor or acquire all or substantially all of the business or assets of another corporation if such accuisition is analogous in purpose or effect to a merger or consolidation, or so consolidate or merge or permit any such merger or so acquire any such business or assets without the approval in writing of the Noteholder unless the corporation surviving such transaction shall have assumed the obligations of the Mortgagor under the Note.
SECTION 6. 'Ihe Mortgagor will, upon completion, at all times maintain and l
preser9e the Mortgaged Property, as part of an operating system, in good repair, working order and condition, ordinary wear and tear excepted and subject to operating contingencies and maintenance requirements, and in compliance with all applicable laws, regulaticos and orders, which are not being contested in good faith, and will from time to time make all needful and proper repairs, renewals and replacements, and useful and proper alterations, additions, betterments and improvements, so that the operations of the Mortgaged Property as part of an operating system shall be conducted properly and advantageously.
Nothing herein contained, however, shall be held to prevent the Mortgagor from permanently discontinuing the construction or operation, or reducing the capacity, of the plant of which the Mortgaged Property is a part, if, in the judgment of the Mortgagor, any such action (which affects the Mortgaged Property) is necessary or desirable in the conduct of the business of the Mortgagor, or if the Mortgagor fails to obtain the necessary regulatory approvals or is ordered so to do by regulatory authority having jurisdiction in the premises, or if the Mortgagor intends to sell or dispose of the same subject to tle lien of this Mortgage or otherwise and within a reasonable time shall endeavor to effectuate such sale; nor shall anything herein contained be construed to
prevent the Mortgagor from taking such action with respect to the use of the plant of which the Mortgaged Property is a part as is prop under the circumstances, including the cessation or omission to exercise rights, permits, licenses, privileges or franchises which, in the judgment of the Mortgagor, can no longer be profitably exercised or availed of. In the event that any regulatory authority having jurisdiction over the Mortgagor shall determine that the expenditures for repairs and maintenance necessary to make good any such maintenance deficiency as shall have been so determined would be excessive or shall, by order or regulation, prohibit, in whole or in part, such expenditures for repairs and maintenance, then, upon filing with the Trustee a certified copy of such order or a copy of such regulation, as the case may be, the Mortgagor shall, so long as such order or such regulation remains in effect, be relieved from compliance with the covenant contained herein, in regard to the maintenance of the Mortgaged Property, to the extent that such expenditures for repairs and maintenance shall have been held excessive or shall be prohibited.
SECTION 7. The Mortgagor agrees that it will keep or cause to be kept the !
Mortgaged Property insured by property insurance to the extent that the plant of which it !
l is a part is so insured, or that it will, in lieu of or supplementing such insurance in whole or in part, adopt some other method or plan of protection against loss at least equal in protection to the method or plan of protection against loss of companies similarly situated and operating properties subject to similar hazards. The Mortgagor will, upon request of the Mortgagee, submit to the Mortgagee a schedule of its insurance in effect as required herein on the date specified in such request and, upon request of the Mortgagee, will provide certificates of insurance relating thereto. In the event of damage to or the !
destruction or loss of any portion of the Mortgaged Property which shall be covered by insurance, unless the Mortgagee shall otherwise agree, to the extent possible with available insurance proceeds, the Mortgagor shall replace or restore such damaged, destroyed or lost portion so that the Mortgaged Property shall be in substantially the same condition as it was in prior to such damage, destruction or loss, ordinary wear and tear excepted. 'the Mortgagor shall replace the loss or shall commence such restoration promptly after such damage, destruction or loss shall have occurred and receipt of the insurance proceeds, and shall complete such replacement or restoration as expeditiously as practicable, and shall pay or cause to be paid out of the proceeds of such insurance all costs and expenses in connection therewith so that such replacement or restoration shall be so completed that the portion of the Mortgaged Property so replaced or restored shall be free and clear of all mechanics' liens and other claims.
SECTION 8. In the event of the failure of the Mortgagor in any respect to comply with the covenants r.nd conditions hereic contained with respect to the procuring of insurance, the p'.yment of taxes, assessments and other charges, the keeping of the Mortgaged Property in repair and free of liens and other claims or to comply with any other covenant contained in this Mortgage, the Mortgagee shall have the right (without prejudice to any other rights arising by reason of such default) to advance or expend
{
moneys for the purpose of procuring such insurance, or for the payment of insurance premiums, taxes, assessments or other charges, or to save the Mortgaged Property from
- sale or forfeiture for any unpaid tax or assessment, or otherwise, or to redeem the same from any tax or other sale, or other encumbrance thereon, or to make repairs thereon or to comply with any other covenant herein contained or to prosecute or defend any suit in relation to the Mortgaged Property or in any manner to protect the Mortgaged Property and the title there to, and all sums so advanced for any of the aforesaid purposes shall be deemed a charge tpon the Mortgaged Property in the same manner as the Note is secured ;
and shall be forthivith paid to the Mortgagee making such rivance or advances upon demand. it shall r.ot be obligatory for the Mortgagee in making an3 such advances or expenditures to inquire into the validity of any such tax title, or of any of such taxes or 4
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assessments or sales therefor, or of any such mechanics' liens or other encumbrances. 'Ihe '
Mortgagee acting hereunder shali not be Uable to the Mortgagor or the Noteholder except for losses resulting from negugence or wilful misfeasance.
SECTION 9. The Mortgagor will at all times keep, and safely preserve, proper books records and accounts in which full and true entries will be made of all of the dealings, business and affairs with respect to the Mortgaged Property.
SECTION 10. The Mortgagor will from time to time upon written demand of the Noteholder make, execute, acknowledge and deliver or cause to be made, executed, l acknowledged and delivered all such further and supplemental indentures of mortgage, deeds of trust, mortgages, financing statements, continuetion statements, security I agreements, instruments and conveyances as may reasonably be requested by the Noteholder, and take or cause to be taken all such further action as may reasonably be requested by the Noteholder to effectuate the intention of these presents and to provide j for the securing and payment of the principal of and interest on the Note according to the
'~
terms thereof and for the purpose of fully conveying, transferring and confirming unto the Mortgagee the property hereby conveyed, mortgaged and pledged, or intended so to be, l now owned by the Mortgagor and to reflect the assignment of the rights or interests of the Noteholder. The Mortgagor will cause this Mortgage and any and all supplemental indentures of mortgage, mortgages and deeds of trust and every security agreement, financing statement, continuation statement and every additional instrument which shall be executed pursuant to the foregoing provisions forthwith upon execution to be recorded and filed and rerecorded and refiled as c.nveyances and mortgages and deeds of trust of and security interests in real and personal property in such manner and in such places as i
may be required by law or reasonably requested by the Mortgagee in order fully to i
preserve the security for the Note and to perfect and maintain the superior lien of this Mortgage and all supplementalindentures of mortgage, mortgages and deeds of trust and I the rights and remedies of the Noteholder.
9 l
ARTICLE D REMEDIES OF THE MORTG AGEE SECTION 1. If one or more of the following events (hereinafter called "events of default") shall happen, that is to say. ,
1 (a) deft. ult shall be made under the Note;or j l
(b) any representation or warranty made by the Mortgagor herein or in any l certificate delivered hereunder shall prove to have been incorrect or '
untrue in any material respect; or (c) default shall be made in the due observance or performance of any other of the covenants, conditions or agreements on the part of the Mortgagor in this Mortgage contained, and such default shsll continue !
for a period of thirty (30) days after written notice specifying such '
default and requiring the same to be remedied shall have been received by the Mortgagor, unless such default cannot be remedied within such period in which event Mortgagor shall have such period of time to remedy such default as shall be reasonably neceaary provided it begins to remedy such default within such thirty (30) day period and proceeds diligently thereafter in such regard; or (d) the expiration of a period of ninety (90) days following the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Mortgagor under the Federal Bankruptcy Act or any other applicable Federal or State law of a similar nature, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Mortgagor or any substantial part of the Mortgaged Property, or ordering the winding up or liquidation of its affairs unless during such period such decree, order or appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official shall be vacated or shall be stayed on appeal or I
otherwise or shall have otherwise ceased to continue in effect; or )
(e) the commencement by the Mortgagor of a voluntary caso, or the institution by it of proceedings to be adjudicated a bankrupt or !
Insolvent, or the consent by it to the institution of bankruptcy or l insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the Federal Bankruptcy Act or any other applicable Federal or state law of a similar nature, or the consent or acquiescence by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Mortgagor or any substantial part of the Mortgaged Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Mortgagor in furtherance of any such action; i
then in each and every such case the Trustee, to the extent permitted by applicable state law on behalf of the Mortgagee, may, in its discretion (aa) without protest, presentment or demand, declare all unpaid principal of and accrued interest on the Note to be due and payable immediately, i and upon any such declaration all such unpaid principal and accrued interest so declared to be due and payable shall become and be due and f payable immediately, anything contained herein or in the Note to the l contrary.notwithstanding; l
(bb) proceed to protect and enforce the rights of the Mortgagee under this Mortgage by suits or actions in equity or at law in any court or courts of competent jurisdiction, whether for specific performance of any ;
covenant or any agreement contained herein or in aid of the execution of any power herein granted or for the foreclosure hereof or hereunder ,
or for the sale of the Mortgaged Property, or any part thereof, or to I collect the debts hereby secured or for the enforcement of such other )
or additional appropriate legal or equitable remedies as may be deemed I most effectual to protect and enforce the rights and remedies herein granted or conferred; i
(ec) sell or offer for sale the Mortgaged Property in such portions, order and parcels % ihe Mortgagee may determine, to the highest bidder for cash at VL11c auction, such sale to be made at the courthouse door of the j
counties wherein such property (or that portion thereof to be sold) is situated (whether the parts or parcels thereof, if any, in different ,
counties are contiguous or not, and without the necessity of having any personal property hereby mortgaged present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m.
after posting a written or printed notice or notices of the place, time and terms of the sale for twenty-one (21) days prior to the date of the sale at the courthouse door of the county in which the sale is to be mede and at the courthouse door of any other county in which a portion of the property may be situated and filing a copy of such notice (s) in the office of the county clerk in each of such counties, and by serving written notice of the proposed sale at least twenty-one (21) days preceding the date of sale by certified mail on Mortgagor, service of such notice being completed upon deposit of the notice, enclosed in a postpaid wrapper, properly stamped and addressed to the Mortgagor at its most recent address as shown by the records of the Mortgagee, in a post office or official depository under the care and custody of the United States; (dd) in lieu of the foregoing, the sale may be accomplished by following the procedures permitted or required by Tex. Prop. Code Ann. S51.002 (Vernon 1984), as same may be amended from time.to time, relating to the sale of real estate and/or by Chapter 9 of the Tex. Prop. Code relating to the sale of personal property collateral after default by a debtor (as said Section and Chapter may now exist or may hereafter be amended or succeeded), or by any other present or subsequent articles l
or enactments relating to the same, it being understood that nothing i
.n - , - , _ _ , . . - - - - . , - _ _ _ . , _ - _ _ _ . , . , , , , , , , _ - .
contained herein shall be construed to limit in any way the Trustee's rights to sell such properties by private sala if, and to the extent, that such private sale is permitted under the laws of the State of Texas or by public or private sale after entry of judgment by any court of competent jurisdiction ordering the same, and at any such sale (i) whether made under power herein contained, the aforesaid $51.002, the Code, any other legal requirement or by virtue of any judicial procedure or any other legal right, remedy or recourse, it shall not be necessary for the Trustee to have physically present, or to have constructive possession of, the Mortgaged Property, and the title to any such property shall pass to the purchaser thereof as completely as if the same had been actually present and delivered to the purchaser at such sale, (ii) each instrument of conveyance executed by the Trustee shall contain a warranty of title, binding upon the Mortgagor, (iii) each and every recital contained in any instrument of conveyance made by the Trustee shall conclusively establish the truth and accuracy of the matters recited therein and the advertisement and conduct of such sale in the manner provided herein, (iv) any and all prerequisites to the validity thereof shall be conclusively presumed to have been performed, and (v) the receipt of the Trustee or of such other party or officer making the sale shall be a sufficient discharge to the purchaser or purchasers for his or their purchase money and no such purchaser or purchasers, or his or their assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money or be in any way answerable for any loss, misapp!! cation or nonapplication thereof.
1 SECTION 2. At any public sale hereunder the Mortgagee shall have the right to bid ;
for and purchase the Mortgaged Property, or such part thereof as shall be eftered for sale.
SECTION 3. Any proceeds of funds arising from the exercise of any rights or the enforcement of any remedies herein provided after the payment or provision for the l
i payment of any and all costs and expenses in connection with the exercise of such rights or the enforcement of such remedies and any other sums received by the Mortgagee, the disposition of which is not otherwise herein specifically provided for, shall be applied first, to the payment of indebtedness hereby secured other than the principal of or interest on the Note; second, to the payment of interest which shall have accrued on the Note and which shall be unpaid; third, to the payment of or on account of the unpaid principal of the Note; and the balance, if any, shall be paid to the Mortgagor or whosoever else shall be legally entitled thereto.
SECTION 4. Every right or remedy herein conferred upon or reserved to the Mortgagee shall be cumulative and shall be in addition to every other right and remedy given hereunder or now or hereafter existing at law, or in equity, or by statiste. The i
pursuit of any right or remedy hereunder shall not be deemed to be an election and shall ;
i not preclude the pursuit of any other right or remedy.
GECTION 5. If at any time after an event of default and prior to the institution of foreclosure proceedings, all payments in respect of principal and interest which shall have
]
become due and payable by the terms of the Note shall be paid to the Noteholder, and all other defaults hereunder and under the Note shall have been cured, together with reimbursement for any resulting expense or damage, then and in every such case, such default or defaults shall be waived, but no such waiver shall extend to or affect any subsequent default or impair any right consequent thereon.
SECTION 6. If, after the occurrence of any event of default hereunder and pursuit of the remedies provided for hereinbefore, Noteholder should obtain ownership of the Mortgaged Property, it is understood that the Joint Ownership Agreement as defined in '
the Agreement may be reinstituted as between such Noteholder and Mortgagor so as from thenceforth to apply to and control the relationship of the Noteholder as owner of the Mortgaged Property and the Mortgagor as owner of its interest in the plant and other facilities of which the Mortgaged Property is a part, it being understood that the Mortgagor shall have no right to reimbursement from the Noteholder of any amount that the Mortgagor has expended with respect to the Mortgaged Property prior to the resumption of ownership thereof by the Noteholder.
i ARTICLE III POSSESSION UNTIL DEFAULT-DEFEASANCE CLAUSE )
SECTION 1. Until some one or more of the events of default shall have happened, l the Mortgagor shall be suffered and permitted to retain actual possession of the l
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l Mortgaged Property, and to manage, coerate and use the same and any part thereof, with the rights and franchiser, appertaining thereto, and to collect, receive, take, use and enjoy the rents, revenues, issues, earnings, income, products and profits thereof or therefrom. 1 SECTION 2. If the Mortgagor shall well and truly pay or cause to be paid the whole amount of the principal of and interest on the Note at the times and in the manner therein )
i provided, according to the true intent and meaning thereof, and shall also pay or cause to be paid all other sums payable hereunder by the Mortgagor and shall well and truly keep and perform, according to the true intent and meaning of this Mortgage, all covenants herein required to be kept and performed by it, or if the Mortgagor shall comply with the provisions of section 4 of that cerHn Assignment Agreement of even date herewith between the Mortgagor and the Mortgagee, then and in that case, all property, right. id interests hereby conveyed or assigned or pledged shall revert to the Mortgagor and the estate, right, title and interest of the Mortgagee and any Noteholder shall thereupon cease, determine and become void and the Mortgagee and such Noteholder, in such case, on written demand of the Mortgagor but at the Mortgagor's cost and expense, sh:al enter satisfaction of this Mortgage, and all other liens including vendors liens in favor of the Noteholder with respect to the Mortgaged Property, upon the record. In any event, the Noteholder and, if appropriate, the Trustee upon payment in full to him by the Mortgegor I
of all principal of and interest on the Note and the payment and discharge by the l
Mortgagor of all charges due to the Noteholder hereunder, shall execute and deliver to the Mortgagor such instruments of satisfaction, discharge or release as shall be requiret y law in the circumstances. In the event of a partial prepayment of the Note, the Noteholder and, if appropriate, the Trustee shall, upon written demand of the Mortgagor but at the Mortgagor % cost and expense, execute and deliver to the Mortgagor such l instruments of satisfaction, discharge or release of an undivided interest in the Mortgaged Property as shall be equal to, and in proportion with, that portion of the remaining principal amount due under the Note which has been prepaid at the time of such I
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prepayment. In addition, the Noteholder agrees to release to such extent any and all ,
other liens including vendors liens in favor of the Noteholder with respect to the Mortgaged Property by such instruments of satisfaction, discharge and release as shall be required by law in the circumstances.
ARTICLE IV SUBSTITUTE TRUSTEE SECTION 1. In esse of the resignation of the Trustee, or the inability (through death or otherwise), refusal or failure of the Trustee to act, or at the option of the Mortgagee, for any other reason (which reason need not be stated), a Substitute Trustee mey be nams.d, constituted and appointed by the Mortgagee without other formality than an appointment and designation in writing executed by the Mortgagee, which appointment and designation shall be full evidence of the right and authority to make the same and of all facts therein recited, and this conveyance shall vest in the Substitute Trustee the title, i powers and duties herein conferred on the Trustee originally named herein, and the conveyance by the Substitute Trustee to the purchaser (s) at any sale of the Mortgaged Property or any part thereof shall be equally valid and effective. The right to appoint a Substitute Trustee shall exist as often and whenever the Trustee, original or Substitute, 4
resigns or cannot, will not or does not act, or the Mortcagee desires to appoint a new Trustee. No bond shall ever be required of the Trustee, original or Substitute. The recitals in any conveyance made by the Trustee, original or Substitute, shall be accepted and construed in court and elsewhere as prima facie evidence and proof of the facts *!
recited, and no other proof shall be required as to the request by the Mortgagee to the 1
Trustee to enforce this Trust, or as to the notice of or holding of the sale, or as to any !
I particulars thereof, or as to the resignation of the Trustee, original or Substitute, or e.s to the inability, refusal or failure of the Trustee, original or Substitute, to act, or as to the election of the Mortgagee to appoint a new Trustee, or as to appointment of a Substitute Trustee, and all prerequisites of said sale shall be presumed to have been performed. The {
Trustee, original or Substitute, is hereby authorized and empowered to appoint any one or more persons as attorney-in-fact to act as trustee under him and in his name, place and stead in order to take any actions that the Trustee is authorized and empowered to do hereunder, such appointment to be evidenced by an instrument signed and acknowledged by the Trustee, original or Substitute; and all acts done by said attorney-in-fact shall be valid, lawful and binding as if done by the Trustee, original or Substitute, in person.
ARTICLE Y MISCELLANEOUS SECTION 1. All of the covenants, stipulations, promises, undertakings and agreements herein contained by or on behalf of the Mortgagor shallbind its successors and assigns, whether so specified or not, and all titles, rights and remedies hereby granted to or conferred upon the Mortgagee shall pass to and inure to the benefit of the successors and assigns (to the extent permitted) of the Mortgagee and shall be deemed to be granted or conferred for the benefit and security of all who shall from time to time be the holder of the Note.
SECTION 2. The descriptive headings of the various articles of this Mortgage were formulated and inserted for convenience only and shall not be deenied to affect the meaning or construction of any of the provisions hereof.
SECTION 3. All demands, notices, reports, approvals, designations, or directions required or permitted to be given hereunder shall be in writing and shall be deemed to be properly given if mailed by registered mail addressed to the proper party or parties at the following addresses:
As to the Mortgagor:
Texas Utilities Electric Company 2001 Bryan Street Suite 1900 Dallas, Texas 75201 Attention: Erb Nye 1
(with copy to)
Worsham, Forsythe, Sampels & Wooldridge 32nd Floor,2001 Bryan Tower Dallas, Texas 75201 Attention: Robert A. Wooldridge As to the Trustee:
As to the Mortgagee:
Brazos Electric Power Cooperative, Inc.
P. O. Box 2582 Waco, Texas 76702-2585 Attention: Richard E. McCaskill For Federal Express:
Brazos Electric Power Cooperative, Inc.
2404 LaSalle Avenue Waco, Texas 76706 Attention: Richard E. McCaskill (with copy to)
Joseph Robert Riley, Esq.
Law Offices of Joseph Robert Riley 500 RepublicBank Tower P. O. Box 153 Waco, Texas 76703 SECTION 4. Die invalidity of any one or more phrases, clauses, sentences, paragraphs or provisions of this Mortgage shall not affect the remaining portions hereof.
SECTION 5. To the extent that any of the property described or referred to in this Mortgage is governed by the provision of the Uniform Commercial Code this Mortgage is hereby deemed a "security agreement" under the Uniform Commercial Code, and a "financing statement" under the Uniform Commercial Code for said security agreement.
Die malling addresses of the Mortgagor as debtor, and of the Mortgagee as secured party, are as set forth in Section 3 of this Article V.
4
. . _ _ . - - - - .- - ,---_-- , , ,. . . . - . . , < nv.. . . - - - , - - - , . - , . , . - -,
SECTION 6. 'Ihis Mortgage may be simultaneously executed in any number of counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, TEXAS UTILITIES ELECTRIC COMPANY, as Mortgagor, has caused this Deed of 7tust and Security Agreement to be signed in its name and its corporate seal to be hereunto affixed and attested by its officcrs thereunto duly authorized, , as Trustee, has caused this Deed of Trust and Security Agreement to be signed in his name, and BRAZOS ELECTRIC POWER COOPERATIVE, INC., as Mortgagee, has caused this Deed of Trust and Security Agreement to be duly executed in its behalf, all as of the day and year first above written.
TEXAS UTIIJTIES ELECTRIC COMPANY ~
' (SE A L) [
By:
Its: ,
ATTEST: i By:
~
Its:
TRUSTEE 1
j i i
BRAZOS ELECTRIC POWER COOPERATIVE, INC. 1 (SEAL) ;
By:
Its: '
i d
- ATTEST
By:
Its:
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THE STATE OF TEXAS :
COUNTY OF :
THIS INSTRUMENT was acknowledged before me on ,1988, by ,
of TEXAS UTILITIES ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.
Notary Public in and for the State of Texas Itinted Name of Notary:
My Commission Expires:
THE STATE OF TEX AS :
COUNTY OF :
THIS INSTRUMENT was acknowledged before me on .1988, r
by
, as Trustee, in the capacity and for the purposes stated.
Notary Public in and for the State of Texas 1
Printed Name of Notary:
My Commission Expires:_
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i l
i THE STATE OF TEX AS :
COUNTY OF :
THIS INSTRUMENT was acknowledged before me on .1988, by , of BRAZOS ELECTRIC POWER COOPERATIVE, INC., a Texas corporation, on behalf of said corporation.
Notary Public in and for the State of Texas Printed Name of Notary:
My Commission Expires:
s 1
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EXHIBIT E a
PROMISSORY NOTE made by TEXAS UTILITIES ELECTRIC COMPANY to BRAZOS ELECTRIC POWER COOPERATIVE, INC.
Dated as of ,1988 1
1 l
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PROMISSORY NOTE Dallas, Texas
.1988
- 1. For value received, TEXA3 UTILITIES ELECTRIC COMPANY (the "Borrower"), a corporation organized and existing under the laws of the State of Texas, promises to pay to BRAZOS ELECTRIC POWER COOPERATIVE, INC. ("Brazos"), a corporation organized and existing under the laws of the State of Texas, at the times, in the manner, and with interest at the rate, hereinafter provided, the sum of Dollars ($ ), pursuant to an Agreement (the "Agreement") between the Borrower and Brazos, dated as of July 5,1988 (reference to which is made for all pertinent purposes), wita interest payable from the date hereof, on the unpaid principal balance until paid, at the rate of nine and one half percent (9 1/2%) per annum until and at the rate of eight and one half percent (8 1/2%) per annum for the remainder of the term of this note.
2.
De principal of this note shall be payable at the times and in the amounts set forth on Exhibit A attached hereto. Interest shall be due and payable at the rate provided for hereinbefore on the unpaid principal balance hereof during the term hereof with each i installment payment of principal in the amounts set forth on Exhibit A attached hereto, l If at the time set forth for the first payment of combined principal and interest, interest is due and accrued for a period less than a quarterly installment period, as referenced on j
said Exhibit A, the first said payment of interest shall be decreased to a prorated amount of interest payable for the portion of the quarterly period remaining. ne unpaid principal balance shall bear interest after maturity of any installment at the rate of twelve and one half percent (121/2%) per annum.
3.
Each payment made on this note shall be applied first to the payment of interest and then on account of principal and shall be in such funds as are then legal tender for the payment of debts. l
- 4. 31s note represents a portion of the purchase price paid by the Borrower for the transfer to it of certain properties and assets described in the Agreement.
Accordingly, the Borrower acknowledges that this note does not represent a loan or advance to, or investment in, the Borrower in an original or primary manner, but rather indebtedness to Brazos incurred as a portion of such purchase price. De payment of this note is secured by a purchase money mortgage and security interest under a Deed of Trust and Security Agreement of even date herewith from the Borrower to .
Trustee (the "Mortgage"), for the benefit of the hvider of this note which constitutes a ;
lien on, and represents a security interest in, certain property located in Hood and Somervell Counties, Texas. ,
- 5. Bis note may be prepaid at any time in whole or in part, without premium or penalty, except that if this note is prepaid at any time prior to the no prepayment ;
premium time shown on Exhibit A attached hereto, the Borrower shall pay as a c
prepayment penalty the applicable amount shown on such Exhibit A. Reference is hereby made to the Assignment Agreement of even date herewith (the "Assignment Agreement")
between the parties hereto and the United States Government (the "Government") acting by and through the Administrator of the Rural Electrification Administration providing 2
for an assignment of this note, a vendors lien in favor of Brazos referenced in the Assignment Agreement (the "Vendors Lien") and the Mortgage to the Government, the terms of which are hereby incorporated herewith by reference. We holder hereof agrees that prepayment in prtt at any time of this note shall result in a partial release of the Vendors Lien and the lien of the Mortgage pro rata to the extent of the amount of such prepayment. In addition, in accordance with the terms of the Assignment Agreement, it is understood that if this note is prepaid in whole or in part by depositing funds in trust as
, provided for in section 4 of the Assignment Agreement, the rate of interest payable hereunder on the funds so deposited shall thereafter become 81/2% per annum.
s
I 6.
The principal of and all accrued interest on this note shall become due and payable at the option of the holder hereof if one or more of the following events shall occur (i) Default shall be made by the Borrower in the payment of any installment of the principal of or interest on this note when and as the same shall become l
due and such default shall continue for a period of fifteen (15) days after '
1 receipt of written notice tnereof by the Borrower fro n the holder hereof; or (ii) an Event of Default shall occur under the Mortgage, i
i Said option ci. ail continue until all such defaults have been cured. In case any one or more I of the events of default specified hereinbefore shall have happened and be continuing, the I
holder of this note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, or by other appropriate proceedings, whether for the specific l i
performance (to the extent permitted by law) of any covenant or agreement contained in i i
this note, or in aid of the exercise of any power granted in this note, or may proceed to l
enforce the payment of this note or to enforce any other legal or equitable right of the holder of this note, in the event of any such default, the holder of this note may, at its option, declare the entire principal and all interest accrued on this note to be, and this note shall thereupon become, forthwith due and payable, without any presentment, j
demand, protest or other notice or diligence of any kind, all of which are hereby expres waived.
In such event, the Borrower shall forthwith pay to the holder of this note the entire principal of, and all interest accrued on, this note. No right, power or remedy !
conferred by this note or otherwise available in connection herewith shall be exclusive of l any other right, power or remedy hereinafter available to the holder hereof. No failure or delay on the part of the holder of this note in exercising any right, power or privilege 1
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of a right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any otner right, power or privilege.
- 7. 'Ihis note shall not be assignable, negotiable or transferable without the consent in writing of the Borrower, except that it is understood that this note is being assigned on the date hereof in accordance with the terms of the Assignment Agreement.
Any other assignment or transfer of this note shall be void ab initio.
- 8. Notwithstanding anything to the contrary contained herein, or in the Agreement, the Mortgage or any other agreement entered into in connection herewith, b is agreed that the aggregate of allinterest and any other charges constituting interest, or adjudicated as constituting interest, under the laws of the State of Texas and contracted for, chargeable or receivable under this note or otherwise in connection with this transaction shall under no circumstances exceed the maximum amount of interest permitted by applicable law, and any excess shall be deemed a mistake by all partnas and cancelled automatically, and if theretofore paid shall, at the option of the holder hereof, be refunded to the Borrower or credited to the principal amount owing hereon. In the event the maturity of this note is accelerated by reason of an election by the holder hereof resulting from a default hereunder, or in the event of voluntary prepayment in accordance herewith by the Borrower, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until maturity or prepayment, and any unearned interest in excess of the maximum amount permitted by law, computed from the date hereof until maturity or prepayment, shall be cancelled automatically and if theretofore paid shall, at the option of the holder hereof, be refunded to the Borrower or credited on the principal amount owing hereon. All sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the indebtedness of the Borrower to the holder hereof shall, if necessary, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest on account of such indebtedness is uniform throughout the actual term of this note and does
_ _ . _ . _ _ _ _ _ _ _ _ _ , ~. _,
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not exceed the maximum lawful rate throughout the entire term of this note. The terms i 1
and provisions of this paragraph shall control and supersede every other provision of all agreements between the Borrower and the original holder hereof.
P .his note shall be construed and enforced in accordance with, and governed by. f the State of Texas. This note shall be binding upon and inure to the bent. Sorrower and Brazos and their respective successors and assigns (to the I exter.. .ed).
IN WITNESS WHEREOF, the Borrower has caused this note to be signed in its corporate name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, all as of the date and year first above written.
I TEXAS UTILITIES ELECTRIC COMPANY (SEAL) By:
Its:
ATTEST:
By:
. Its:
^
ih!B:* :
?::eatta:e: t: tre Note " t e N:te is tie:wte: are cemere:
atter 6/3CISS are vi te 9/30/85.'
Ltstancir!
.ine Om :ioa. :rincica; interest I: tat : ecavie" A:. 0.arte-
. Balar:e Paveer* Pane t lavee b et L-C 5egiraine, Balance 519b 6i0>35:.14 93088 5190 455 493 37 123bSi6.35 n 623 6i3.52 lb S55,752 3 51543bC5b.:
1231SS 5;90 27b 75S.73 5186,735.Ce 50618359.23 usa M 24.:: 515 272,S3.:'
3 33181 5193 91b136.39 5360,619.64 lb613954.27 ui970576.1: 51b;*b6S ::
6 63:39 5193i619 110.92 5293,027.9) Sb605,36935 uiS96417.52 516,945 CP.3 5 93 39 5193355436.25 5262,674.6' lb 598 43;.13 lb86b104.S" 514,751 63: :3 6 123169 5193 CZ2 75e.97 $332,671.25 lb592d91.6; 54,92b870.89 51661b353.";
7 33190 $192,626,3:2.13 5396 G4.94 5055b290.43 Hi950,745.3: 514 u c 3C? d S 63090 5:92 23b 772.3: $390529.63 5 0 576,874.65 50969.4043; $16 265 599 2 i 93010 519b 616 7B .79 utb990.5: 5056540439 lb980,495.1C 51006Bi163."
- ;23190 519b 3S7d19.85 H29,261.96 ud55i64537 lb9Bb91
- 31 113 90 M il l
11 33191 $19Ci91b56;.04 5475,953.S; $b545,453.6: 55,C2b412.4: 513,725.7;.:"
1: 63*9: 519*423CS2.66 uS8,47333 50534:149.57 55,C22626.15 513d3945:.3 13 93091 5189475 DSS.73 5547d93.73 54 522 448.2: 55,070C41.E 5:3i35b1C6..;
h 123191 5189,343o69.80 553b918.93 54409545.23 55,04b464.16 513 160,12^...
15 33192 5183>72bil55.92 5623413.93 54d96912.16 15120,426.04 112i966 421.6 16 63092 5189 08bC21.97 $636,133.95 50482103.70 55 115 237.65 512,77:>!5756 17 93092 5187.478 729.14 5605,292.83 5Ad66,995.52 55 072,259.35 512 57b313.5: 1 18 123192 5156,96b105.84 $l17,623.3: 54d52,619.82 $5,070,243.12 512,369,757.;i l 19 33193 5186 150 7C4.H 5706:401.26 lb437,951.26 $5,1ui352.52 512:165,461.7.
20 63C93 5185 477 d62.92 5677,241.66 lb42b174.23 15:098415.89 $1b958iS91.C2 i 21 93093 5180 829,722.18 5647,740.74 54,405 C89.74 $5,052,830.48 511,749,017.43 ,
22 123193 118 0 2 % 089.17 553b633.01 50389,705.90 51b 536,6C9. 76 !
$b92b338.91 23 33194 $183411432.01 SP .6,65.'.16 Sb377,079.62 55 263,736.75 5;b 32bO17.47 24 630 % $182 678 486.C5 $732,945.93 5b356021.51 55,088967.44 51b103 06 l" 25 93094 518b973 256.34 5705:229.74 lb338,614.04 55,043,843.78 510,882,304.31 26 l
123194 11Bb3Sb009.26 5592,247.0S 54 32b 864.84 5091b111.92 510,658,620.16 1 27 33195 5180 4 37,634.23 %943,375.03 Sb307,793.97 $5 25b174.00 $10 43b 663.32 j 25 63095 5179,6ue179.65 5793454.58 50285,393.81 55,078,848.39 510 202,242.~i l 29 93095 5173 960 d15.32 $683 764.33 5b266d49.27 Hi950:313.60 59,969 929.27 30 123195 5178 178,659.19 $78b756.13 $b250,309.86 55032,065.99 59,730389.23 31 33196 5177,287.492.87 5891 166.32 $b23b 743.16 $5 122,909.48 59,495,798.36 32 63096 $176d19,620.87 5867872,00 lb210477.96 55078,449.96 59 254,365.34 l 33 93096 5175 534,049.26 5885471.61 Sb189966.00 $5,075,537.61 $9,009,971.55 l 34 123196 517067b332 u $862 716.82 50168,933.67 $5,03b650.49 58 762 495.3: l 35 33197 $173 719,uB.20 $95b884.24 5b148,u4.15 55i100328.39 SBd12d25.2 ,
36 63097 5172,788 867.82 $930480.33 lb125,836.89 55,056417.27 58,258 709.25 l 37 93097 517 b 8 E 650.81 5909,217.01 55,012 952.62 u dO3.735.61 58,002:234.65 38 123197 $170 95b 659.52 5927,991.29 50082,141.7; $5,010,133.C0 57.742483.C; 39 33198 5169 92b481.99 lb O27177.53 $b060,101.91 95,087,279.u $7.479,733.75 40 63098 5168,916,189.4 $b008 292.55 5b035,706.45 $5,043,999.0; 57,213,866.55 41 9309B 5167 926,754.26 $989435.18 lb0lb759.50 $5>00bl94.68 56 H b 871.08 42 123198 5166,916,838.u $b009.915.82 53,983,260.41 u,998176.23 56,672432.T.
43 33199 5165 607,811.u sb109:027.00 53 96b274.91 $5,073 3C1.11 56,397d34.05 u 6399 5160715035.69 Sb 092 775.75 53,93 M 35.52 55,C3;>711.27 56 d18453.e*
45 93099 5163,638,333.29 lbO76 647.40 lb958,629.50 55,B36 785.3:
53 91b 982.10 4 123199 5162,650156.41 $980231.85 53,886411.72 u d70>643.6: 5545b72b;"
47 33100 516b373,197.09 lb280,969.32 $3,863,036.2: 55,263 059.7:
$5debCC5.53 45 63000 5160 179 d33.52 lbl93 345.27 53432,613.19 55,C25961.6c u ,97b 46e.75 49 93000 5159,076 365.21 sb;;5469.6; $340b271.17 50 909 740.7S lb676i660.B:
SC 12310C 5157 8?b 323.49 lb2033C45.7: 53 778,016.27 lbiSt.C61.99 lb 375 353.i.
5: 33;;; 1156475,3:2.15 Sb293iO21.3; 13,749,u3.'3 55,042,465.23 lbC76,7:5.ei
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- ~::eatta:me: t: t e N:te sne N:te .i p e:ete: a : es ne ee ute 6/30/85 ane ui: t: 9/30/66..
Outstancins
. Pe I'inclDal frtPC19at I nterelt
- tal 3*ecavre~t A:. Cua te- Saiance Fayser havnent Favne a ;ew H 63C01 5155,295,599.26 lb232,702.93 53,715 734.65 55 00:437.61 53,7T.,9C...
53 93001 5153,956d;8.82 lb309,190.Ia 53 688 270.I.S 54 997d 60.92 53 463 813.85
- i. 123:01 5152 65C 165.56 51,336>240.2e 53,657>177.2! 56ii9 M 17.47 53,15~,65t.:.
55 33102 515b26b 303.80 lb 363 864.7e 53 625 d41.5; 56959,36.26 $2 837 818.~3 56 63K2 5149,89b227.27 lb392,076.53 53,593 049.72 56,985,126.25 52 519.90s.1.
57 93002 5148d73,338.84 lb420 868.I.3 53 559.987.9: 5b980,876.33 52,195 718.55 Se 123102 5147,05 M 42.82 Sb415 396.02 53,526,241.8 lb94b637.62 lb870257.97
- i 331 3 5145 543,751.80 5b510191.02 53492,626.14 55,006,817.16 lbi46441.1:
6" 63003 514b 032,718.2~ $b51bO33.55 53d56,664.11 54.967 697.66 lb21sd43.55 61 93003 5142,52b 244.10 lb508476.15 53420,777.06 50 929 251.21 558b189.9 62 123103 5140,984,159.63 lb540,084.47 53 38b 950.80 50 925 035.27 55I.3,604.65 63 33104 5139370,314.75 51,613,844.83 53,348,373.79 5b962,218.67 5202,695.55 66 63004 5137,723 015.49 lb647,299.2I., 52.961,619.19 50 608 918.45 5:.C:
65 93004 5136,073 925.63 lb649,089.86 52,926 614.08 5b 575 703.94 5 .~:
66 123104 5130 486 545.1I. Sb587,380.49 52iB9b570.92 50478,951.41 5".:~
67 33105 5132,619 074.42 lb867.470.72 52,857 839.08 lb725,309.80 50.C:
65 63005 5130,839 458.76 lb779,615.66 52,818 155.33 56 597 770.99 50.-~
69 930C5 5129,053,644.80 $1,785,813.96 52,780 338.50 54,566,152.46 50.C:
7C 123105 5127 32b648.48 Sb73b976.32 52,742 389.95 5b47b366.27 50. C 71 331C6 5125,311432.68 52,010,235.80 52,705:585.46 50715,821.26 50.0:
72 63006 5123 379,425.21 sb932,007.47 52,662,867.94 50590875.41 50.0:
73 93006 5121d90598.76 lb884ia26.45 52,62b812.79 5b5:6,639.24 50.0; 74 123106 5119 511 692.35 lb982,906.41 52,58b 760.22 54,56b666.63 50.CC 75 33107 5117,430,309.27 52,08b 383.08 52,539,623.46 54,62h006.54 50.0; 76 63007 5115,333 627.70 52096,681.57 $2d55,394.07 50592,075.64 10.0C 77 93007 5113,193,042.11 52140,585.59 $2d50,839.59 Sb59b425.18 10.:"
78 123:07 511b007,605.72 52,185 436.39 52405,352.14 50 590 788.53 $0.0:
79 33108 5108,769,802.48 2 237,833.24 52,358,911.62 50596,714.86 10.CC 8: 63008 5106d85,173.43 52,280629.C5 52,31b358.30 505YS,9S7.35 50.0:
81 93008 510 0 177.932.81 52,307,240.62 52,262,809.94 $b570,050.56 50.C~ l 82 123108 510b82b854.84 52,356,077.97 52 213,781.07 54 569,859.04 50.0; l 83 33109 599,373,528.76 52,448,326.08 52,163,714.42 50 612 040.50 50.00 l 84 63009 596,897,899.09 52,475,629.67 52dib687.49 54,587,317.16 50.0C l 85 93009 59b 393 250.36 52,506 648.73 52 059,080.36 54,563,729.09 50.00 86 123109 59b 835,311.38 52,557,938.98 52,005,856.57 54 563,795.55 50,0C 87 33110 $89,179,100.31 52,656,211.07 $b95b500.37 50607,711.44 50.00 88 63010 586488i766.82 52,690,333,49 5b895 055.88 5b585,389.37 50.00 i 69 93010 583,762,343.55 52,726d23.27 51,837,886.29 lb564,309.56 '
50.00 9: 123110 58bO37,865.45 52,724478.10 $b779,949.80 5050b' 1.9C 50.CC 91 33111 578,098,187.18 52,939 678.27 5b722,054.64 50.0; 54 66bb2.91 92 63011 575 d73,890.12 52,92 0 297.06 Sb659,586.48 5b583,883.54 50.00 93 93011 572,205,784.06 52>968,106.06 lb597d45.17 lb565,551'2 50.0 94 123111 569,226,153.79 52979i630.27 lb53b372.91 54,51b00518 $0.0C 95 33112 566,093 455.90 53,132,697.89 lb47h055.77 lb 603 753.a 50.0:
96 63012 562,91bl42.20 53,182,313.7: lb404:485.94 50586,799.64 10.C:
97 93012 559,66b530.32 53,249,61'.88 lb336,861.77 lb586473.65
. 11C:
9E 123112 556,343,152.67 53,318 377.65 lb267,807.52 54,586i185.17 50.C:
99 33113 552,957,903.49 53,355,249.18 lbl97,291.99 lb582,541.17 50.C:
10: 63013 549,500,733.52 53d57,169.97 lb125,355.45 54,582 525.4~ 5;.C:
1:1 93:13 545,970iC66.85 53530,666.64 lb05b890.59 54,582,557.23 50.::
1~: 123113 542:375,522.81 53590544.C7 5976,863.92 lb571,407.99 5;.::
1C3 33114 539.732,9:7.94 52642i614.57 5900479.86 53 543,094.73 5".0:
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atte 6/30/85 anc prior t: 9/3C/SS.;
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10' 93:;4 134,297.477.66 12 743 571.45 57571::.:9 53,530 6 % .74 l!.:'
1:e 1231:!. 531 415 8:3.16 52i?Sb664.45 5725. S:'. . '" 13:510 485.52 l'. :
107 331:5 $29 :2*i418.66 12,395,394.52 5659 7;;.:3 53,C65 1C5.5* 1;.::
1CE 63:;5 526 68: 551.87 12 439,866.79 5618 9:i.9: 13,055 675.69 5 : . " '.
109 93015 526 19b 435.45 12 489,116.42 5566.ie:.73 13:056,078.15 5:.":
lit 123115 lib 643 967.24 12 547,468.21 5514,*65."0 53 061 536.2; l".::
111 33116 51944bl43.77 $2,102,823.47 5459.93!.33 52,562,757.77 5" . :~,
12 63:16 li7 39 b942.58 12 149 201.19 1415>245.31 12564,450.5C 5:.::
113 93016 515 199.480.22 12 192,462.36 5369475.78 52462iC41.14 1:.::
114 ::3116 512 969:014.69 52,230 465.53 1322 955.95 12d53454.45 5;.::
115 33;7 1;b259:200.36 lb 7C9,814.33 527549;.56 lb955 405.89 5".::
- 6 63
- 17 59422
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117 93:17 57,751 155.48 lb 7 M 899.95 1202:3!.3.68 lb973 243.63 1 .:: 1 115 123117 56,002540.24 lb 746 615.24 5164.7;~ E. lb913,327.2i l!.C: I 119 33115 14.926 641.74 51,075 898.50 1127d53.93 lb233,452.4S 50.C: l 12C 63016 53 830 336.35 lb 0 % 305.39 5104 69;.11. Sb200,996.53 1:.;;
121 93:18 52i?1b881.85 51,118,454.50 58blia.65 11:199,849.1' 50. :
122 123118 lb570 827.84 lblab054.01 157627.49 lbl98 681.50 5:.C:
123 33119 lb310,0BS.63 5260,739.21 533,35:.09 5294 119.30 10.03 1 124 63019 lb044,308.38 5265,780.25 127439.38 1293 619.63 l'.CC '
125 93019 5773,389.41 1270,918.97 522,;91.55 5293,110.52 10.0 126 123119 1497.404.67 1275 984.74 516:434.52 1292,419.26 l'.0:
127 33120 5439,600.56 557 804.11 110:569.85 568,373.96 1~.00 129 63020 5380 588.77 159,011.79 160,157.32 5934;.51 58,057.51
$68 353.30 568,244.83 l!.C- )
129 93070 1320:431.45 5~.0: l 130 123120 1259,003.47 561 427.9S $6>8'9.17 168,237.15 50.0: I 131 33121 5196,173.70 562,829.77 15d:3.92 56B,333.59 5:.C:
132 63C21 1132 087.29 564,086.41 54,165.69 568,255.1: 5".:".
133 93021 566,688.70 565,398.59 52,6:6.85 568,205.44 1:.::
134 123121 (50.00) 566,688.70 lb4 7.13 568 105.83 10.0 l
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- 23:59 $193 91b!33.E' 5360 619.64 lb6139%.:7 5497b576.1: 5; M ;.465: L 3 63:59 5:93612:110.92 5293,C:7.i7 16 6'5 359.55 56,S98,417.5 5:4 uiiC31.h 4 93059 5193 :i55 436.25 5262,674.9 lb598,43:.0 uiB61106.5: 114.78b631.53 5 123:!9 5193 022,756.9? 5332,679.28 50592>';.6: lb92087*.29 516612,353."-
e 33190 5192i626,302.13 5396,454.84 5b58029'45 54.93:i .:.32 51b u 0,3:6.6?
63C9: 5192,231,772.3: 5390529.83 lb576874.65 lb969,4:6.M 510265,599.43 E 93:9: 5191 916 781.7* H14. sic.M 50565504.59 m 98; 495 '.; SM55.;63 "
9 12319; 5191,387,519.85 5429.J61.94 lb555 648.57 lb9Bb9:0.M 5:3 9:7315.5:
1: 3319 5190,91b561.04 u?5,955.M Hi545453.6". 55> 02b41.4: 5:3i??5 07;.63 1; 63:91 5190,423 CS2.46 H BS 478.55 uiS3bl49.!' 55,C22,628.15 113:539 450.5:
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- 9 5189 875 5SS.73 1547,493.73 5b522545.2
- 55,07C C41.H l'.3 35 b106.;
13 12319: 5159 343,669 S: 553b915.93 ni509545.23 55 041,464.16 6;3 160,:'E.;i it 33192 5188 720 155.92 5623,513.85 5b49e.912.16 55 120 426 .. $12,966 4:'. 69 15 63092 5188 08b 021.97 5636 133.95 Hi482,1C3.7: 55,11F 237.65 512 770 157.71 le 9309: 5157 478 729.14 5605:292.83 ui466995.52 55 ' {>285.35 512 57 b 313.5:
17 123192 5186,861 105.84 5617,623.3: u,452,619.82 55,070 243.12 512 369 757.15 18 33193 5186>150 704.59 5706i?0;.26 54>437,951.26 55,1ui352.52 512 165i461.73 19 63093 5185 477,462.92 5677,241.66 u,421174.23 55,096415.89 5:b958,591.03 M 93:93 518.iB29.722.18 5647,740.74 50405i089.14 55,052 S30.49 5;1,749 017.43 21 123193 518b 298 089.17 553b633.01 Sb389705.90 lb 921 338.91 51b536,609.H 22 331 % 5163,411432.0; $B86 657.16 u,377,079.62 55,263,736.78 51b 32b O17.45 23 630 % 5162 678,486.08 5732,945.93 54 356>C21.M 550S8,967.3 51b103 060.52 24 930 % 513b973 256.34 5705:229.74 lb338>614.04 55i043643.78 510,89L304.34 25 123194 518b;81009.26 5592i247.05 lb32b864.St 5091b111.92 510 65B,620.;7 26 33195 5180 437 634.23 5943,375.03 Sb307.795.9) 55,25b174.00 510 43be63.32 27 63095 5179 64 ,179.65 579),454.58 lb285i393.M $5,078,849.39 5;0,2C2,242.C5 25 93095 5178,960 415.32 5683 764.33 Sb266,549.27 tb950313.6: 59.969 929.25 i 29 123195 5178,178,659.19 578b 756.13 lb250,309.86 55,032,065.99 59,73b389.24 3: 33196 5177,287,492.87 58?bl66.32 lb23b743.16 55,122 909.tr 59.495,798.36 31 63096 5176,419,620.A7 5867872.00 u s210 577.96 55 078 u9.' 9 254 365.3L !
32 93096 5175 530 049.26 5885571.61 lb189.966.00 55,075,5Y 19,009.971.56 33 123196 5174,67b 332. 4 5862,716.82 54 168,933.67 55,03b650.u 58,762,593.33 34 33197 1173 719,u B.20 595b884.24 5b148,H4.15 55 100:32S.39 5BiM2,125.2:
35 63077 5172 788 867.82 Mil 25,836.89 55,056 417.27 53 258,709.25 36 93097 517b879,650.Bi 5930 580.38 5909,217.01 lb103,735.61
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15:012 952.62 53 002 234.65 37 123197 5170 95b659.52 5927991.29 50092141.71 55,010,133.00 57,742>583.01 33 33198 5169 92b481.99 lbO27,177.53 Hi060,101.91 55i087,279.u 57,479.733.75 39 63098 5168 916,189. u 5b008,292.55 50035,706.45 55043,999.00 57,213,866.25 40 93093 5167.926,754.26 5989.435.18 lbulb759.50 55,00bl%.65 56inb87L09 41 12319S 5166 916,838.u lb009915.82 53 988,260.4: lb993 176.23 56,672 632.7:
42 33199 5165:B07 811.u 5b109:027.0: $3>960274.91 15073,301.91 56,317 134 a 43 63099 5164,715 035.69 lb092,775.75 53 93h935.52 55,030,711.27 u ,118 553.63 u 93:49 5163,638,388.29 $bO76 647.4C . 53 91b952.10 5b933,629.50 55.836,755.3 45 123199 5162,65bl56.41 5984 231.85 53 886 611.72 lb870,643.60 4 33:00 $16b373,157.09 Sb250969.32 53,863,036.21 $5,14b0;'.53 55,5M'.721.C?
55 263 C59.'
4' 63000 5160il79iB35.62 Sbl93i348.27 53,832,6:3.19 55,025 961.46 sui 7li&66.h 45 93C:' 5159 070 36' :: lb105161.61 $3,80027.P lb909,74C.75 u i676 66C.53 49 1231C0 515h87b323.45 lb 2'3 045.72 53 776 0:6.27 lb95bC6b9' lb375 353.9 it ?3:0; 5156 578,3:2. ' sb293C2;.3: 53 749 u 3.93 55i;42 ui.:3 lu : F li.t:
M 630:1 5155 2 9 5i9.2d 51,252 702.9? 53718,73b65 55iOCb437.61 lb77b9:2. :
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53 ;"M:: 1;i:450,165.h ib336,2C.26 53 6'7,;7'.:: 54 993.t:7.47 13 152 45. *.:
5 33*:~ 515b286 3:3.5 1*. 363 8 u 7: 53,625,t.'.I: lb i!? 3C6 :t 5 >i31,5;5.:.
il 63D:2 5149iBib227.27 lb392,076.53 53 d93 Cli.':- 14.985,126.25 12 519 9::.;;
e 93;:: 1;G it73 338.St $ bi.20,855.0 53459.957.i; lb93; 57e.33 52,195 7:5.h 57 :231:2 5147.C'7 942.22 11 415 396 :2 13 i:b~u .i: lb9&b637.5: Sb 574 257.ii 55 331C3 5165 d&3 7M .80 lb5;bl91.;2 53 492 62c. h 15:006 817.16 lb b 6,4G .;;
- i 63*:3 51&&i332,7;5.25 lbMbO33 55 53,656 6 6 .'.' lb967,697.66 lb 215 44.::
6C 930:3 5142524 2u.1C lb 5C8,474. 'i 53,420,777.;c 5b929251.2; 535b;i?.~i 6 123;;3 5140980159.63 5b540 Ch.47 53,38b95:.5; 54,925,035.27 Sh3,6:t.6 62 331;. 5:39,37Ci314.7' 51 6;3 4 u.85 53,345 373.79 54,962,216.67 52:21615.ii 63 630:t $137.723,015.49 lb6I.7,299.26 52 9eb 6:9.*.9 506:5918.0 5:.::
6- 93004 5136,073 925.e3 lbet9 CE9.s: 12 926,6;t.;: 5&i575,7C3.96 5:.::
65 123;;c 5134 4B6dG.14 lb537,380.49 5249b57:.9: 54.47a,951.41 51:0 ee 33105 5:32 619:074.42 lb867&7C.7: 52,557,839.:5 54,725 309.8* 5;. .C 67 630 3 5130,839,458.76 Sb779 615.66 52 818:155.33 56597.770.99 5:.::
e5 930:5 512iiC53 6u.8; $b785813.96 52,780 338.5: lb566 152.46 5'.. :
69 123;C5 5127,32b668.4B sb731 976.32 52 742:389.95 54 67b 366.27 5."
70 33106 5125 31b 432.65 52 0!0,235.8; 52,7C5455.e 5b715821.26 $C.~:
71 630C6 5123:379,425.21 lb932,007.67 52,642 867.94 5b590875.41 $0.00 72 93CC6 112bt94 598.76 $b88b826.45 52,62b812.79 54 406 639.24 5C.;C 73 123106 5119:51b 692.35 lb982,906.41 5248b760.22 Sb560666.63 5:.*:
74 33107 5117,630,309.27 52 UBb383.08 52,539,623.46 54,62 BOO 4.54 50.0 ,
75 63007 5115 333,627.70 $2 096,681.57 52 695,354.07 54,572,075.64 10.00 i 76 93:07 1113 193 042.11 $214C485.59 52,450iB39.59 $b59b425.18 50. : )
77 123107 litb007,605.72 52,185,436.39 52,405,352.11, 54490,788.53 50.00 78 33108 51C8,769,802.48 52,237,803.24 $2,358 91;.62 5b596,714.86 5;.C:
79 63005 5106:485,173.43 52,280629.05 52 31b 358.3 50595,987.35 10.:" i S 93'05 5100 177.932.81 52,30?>240.62 52,262 8C9.96 lb570 050.56 l'.:: l 81 123108 510b82b854.84 52,356,077.97 52,213,721.C7 lb569,859.0L 50.0; l 82 33109 599,373,528.76 52,uB 326.08 52163,714.42 54,612:040.50 50.00 l 83 630C9 596,897,899.09 $2,475,629.67 52,11b687.49 54,587,317.16 50.00 84 93009 590 393 250.36 52 500 648.73 52,059C50.36 50543,729.09 $0.0C 85 123109 59b 835,311.38 52,557,938.98 52,005 856.57 54,563,795.55 50.00 86 33110 589,179,100.31 $2 656 211.07 lb95b50C.37 54 607.711.u 5C.00 87 63010 586,488 766.82 52,690,333.49 $b895 055.88 5b5B5,389.37 50.C0 ,
38 93010 $83i762,343.55 52,726,423.27 lb837,886.29 5446b309.56 50.00 89 123110 5BbO37,865.45 52 72&>478.10 lb779,949.80 54,500427.90 50.00 90 33111 578,098,187.15 52,939,678.27 lb722:054.64 5&i66b732.i; 50. 0".
91 63011 575,173,890.12 52,920297.06 lb659,586.&B sb583,883.54 50.00 92 93011 572,205 784.06 52,968 106.06 lb597.445.17 lb56535M.23 50.0:
93 123111 569,226>153.79 52i979433.27 5b53b372.9; $4iS1b C 3.18 50.C0 9a 331:2 56 0 093 455.90 $3 132 697.89 lb47b055.77 50603753.66 5C. :
95 63012 562,911:142.20 53,182313.7 lb40b L85.94 50 586 799.64 50.0; 96 930'.2 559 66b530.32 53 249 611.85 $b336,B6;.77 50586>&73.65 5*. 00 97 1231;; 556 3&3 152.67 53,318:377.65 lb267,807.52 50586185.17 50.C' 95 331:3 552i957,903.49 53365,249.1E lbl97,29'. 97 54,582 541.17 l'.::
99 63013 549 500,733.52 53 457 169.97 lb125,355.0 lb552425.42 50.CC 10: 93;;3 53,97C.066.85 53530,666.6L lbtibti .55 50582457.23 50.~:
10; 12M;3 ldi375d22.M 53dib5u.7 5976 643.9: $4,571407.97 5:. :
102 33;1t 539,732 907.9e 52642,611.5~ 593;it'.h 53d&3iC94.73 5:.".:
103 $3: t $37C&bC&9.;1 52 69b 858.83 SSui32. 25 53536183.12 50.C:
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'I: t attacht: t; tot NCtt
- the N:tt il tiente 4': it'Ivt*t:
after 9/30/SS ano orio* t: 12/31/SS.:
OutStancial
'. int "rtecital "rincisas inte*tst I:ta ar tcavet'it h:. Cya tt Salah*e bavstM baysent Faysert ;rteivr 104 93014 534,297 477.66 52,743 571.45 5757 ;22.29 53:53C,693.76 5;.::
105 123:14 531,515,813.15 52,75:>664.45 5725 821.40 53 510 435.SS 5:.::
1*6 33115 529,120 415.66 12395,394.52 5669.71'. 03 53 06510~.H l' ~;
107 63015 526 680,551.87 $2439,866.75 561 sis *S.93 53 058 675.6i 5:.:'
105 93015 524,191,435.45 52 489 1;6.42 5566 961.73 53,056 C75.li 5:.~~
1C9 123:15 521i643,967.26 52,547 468.21 5514:065.00 53C61,536.2; 52.::
110 33116 519 541 143.77 52,102iB23.47 5659.93c.3: 52 562,757.77 5;.":
111 63016 517 391,942.53 52 149 201.19 1415,249.31 52iS64 450.50 5:.::
112 93016 515,199.480.22 $2 192 462.36 1369 578.75 52.562041.14 5:.::
113 123116 512,969,014.69 52,230 465.53 5322,985.95 52,553454.45 5:.::
114 33117 $11:259,200.3e $1 7C9 814.33 5275 591.56 5 >985 405.67 1:.~~.
115 63:17 59 522,C55.43 51 737,144.93 5239258.01 51,976 402.94 5;.:
lie 93 17 $7,751>155.48 51 770iS99.95 520:i343.65 5;ii13:243.63 5".::
17 123117 56,002 540.24 51 745,615.24 5166.712.05 51 913 327.29 5 .*:
ili 3311S 54>926 641.74 51,075 598.50 112?>553.98 $1,203,452.45 5:.::
119 63018 53,630,336.35 51sC96,305.39 5104,691.14 51,200,996.53 50.::
12: 93016 12,711 881.85 51 115:454.50 58>394.65 51,199,649.15 5 .~;
121 123118 51,570,827.64 51,141,0~4.01 557,627.49 51:196,691.50 5:.:
122 33119 51,310:0SS.63 1260,739.21 533,380.09 5294 1;9.30 $;.--
123 63019 51,044 3CS.3B 5265.7BO.25 527 839.33 5293,619.63 50.;;
124 93019 5773,359.41 5270919.97 122 191.55 5293,110.52 5.-
125 123119 5497.4C4.67 5275>934.74 516 434.52 5292,419.26 50.::
126 33nd 5439,600.56 557 SO4.11 510:569.85 565 373.96 5;.*.
127 63020 536035SS.77 559,011.79 59,341.51 56Si353.30 50.;;
12S 93C20 $320,431.45 560,157.32 58,087.51 568 244.83 50.'
129 123120 5259,003.47 561,427.98 56,S;9.17 568,237.15 5".::
130 33121 5196,173.7C 562.629.77 $5 503.52 568,333.59 50.C:
131 63021 5132,C37.29 564,086.41 54,168.69- 568 255.10 50. '
132 93021 566,683.70 555,399.59 52 506.85 563 2C5.44 5:.;;
133 123121 (50.C0) 566,6SS.70 51,417.13 568,105.83 5;.::
_ _ _ - _ . . _ _ . . _ _ _ _ _ _ . _ _ _ . _ _ _ _ _ . _ . _ ____._____________.-_m_ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ . . _ _ _ _ _ _ _ . _ _ _ _ . _ . . _ _ ___-________..__._.__._________._____.-__m.m _____ _ _ _ _ .
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4 te 12/3;/55 anc o c t: 3/31/59..
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. Se?.M P! Salle:e 5194>27; IDS.73
. 33189 1193 911 138.89 5363,619.54 5.i6:3 951.27 14,974 574.;. 1;ii;;b656.i'
- e3:59 5;93,e;5 1;t.92 5293 C27.97 10 6:5 389.55 50895,&;7.5: 5:si?55 21t.;:
? 93:E' 5193 355 436.2" 526:>674.67 16 595 433.13 lii86b104.80 110 792 03:.:i
- . ;~3189 5193 C2:i?56.97 5332,679.25 5. 592,19;.61 54.920S70.8? 514 6:2>973 ::
5 3319" $192,626,3:2.13 5396>&54.84 lb5?b290.43 5!.i983 745.3: 5;b lil 154.3* .
e 6309: 5192,23b770.3: 1390529.53 56574,874.6E 5&i969 G4.5; 51u276,6H.ii 7 93:90 519b 816>781.79 5410990.M 56565,504.59 lb950s&95.10 514,:99>&75.i:
5 1:319: 519b357,Mi.85 5629 261.96 50555,668.57 lb?SO910.51 513.919 547.i:
i 3319; 5190 91b 561.04 5475,958.81 54545653.60 5542h412.41 513 736,669.::
- C 63091 5190i423 062.46 5488
- 4H.55 iui3bl49.57 55d 2>62E.15 513 5Hi49E ii
- 93
- 9; 5189 875 5B5.73 5547,493.73 56 522 543.21 55,C70iC41.94 513.363,4;;..
- ~ ;23191 5189 343 469.80 553b918.93 Sb509
- 565.23 55 > C4 b &ea .16 5;3 ;7:1693.::
- 3 33
- 92 5183,720,155 92 5623513.85 5b 496 912.16 5'3120426.04 5;2 9791:5!..'i 14 63092 5185,054i02;.97 5636:133.95 Sii&B2103.70 15:118 237.65 512 M3:253.:.
15 13:92 5187 475 729.14 5605 292.53 10 466 995.52 55,072,2SB.35 512:534,697.::
16 123192 5186 86b!C5.84 5617,623.3 56452i619.82 55,070 243.12 512 333 425.::
- 7 33;93 5186 154.7C4.58 5706 01.26 lb437.951.26 15146352.52 512,179,420.3; 16 63093 5185 477.662.92 5677,241.66 $b42b174.23 55,075.415.89 51b972,846.
- 3
- 9 93093 518 0 629.722.18 56&7 743.74 5b 405 089.74 55,052 830.48 511,763 575.5
2: 123193 518b 298 089.17 553b633.01 lb 389,705.9: lb92b338.91 51b55b477 ~3 2: 33196 5183>&11,432.01 5986,657.16 50377,079.62 55i263 736.78 51b336,200.9:
22 63094 5182 678 486.08 5732 945.93 50 356 021.51 55 088>967.44 lib 11 sis 66.5:
23 93094 518b973,256.34 l?C5,229.74 5b 338 614.04 55:043 843.78 510iB98 139.t 26 123194 118b38b009.26 5592247.05 lb32b866.84 lb910111.92 510,67 0 792.2i 25 33195 5180>&37 634.23 5963,375.03 lb307.798.97 55,25b174.00 110:4&B 179.Ce 26 63095 5179,64b179.65 5793 456.58 5b285393.81 15:078,848.39 510,219:105.75 27 93095 5178.960,415.32 5683 764.33 Sb266,5t9.27 50950:313.60 59 987,154.3:
25 123195 5178 178 659.19 578b756.13 sb250,309.86 55,032>065.99 59,75b980.35 29 33196 5177,287,692.87 559b1!6.32 lb23b743.16 55,122.909.48 59,513,763.3:
3: 63096 5176,419>620.87 5867,872.00 lb210d77.96 $5,078 449.96 59,272,712.:5 3: 93096 5175 530 049.26 5885 571.61 5b189,966.00 55 075,537.61 59:028 708.13 32 123196 517b 67b 332.44 5862>716.82 lbl68 933.67 55,031 650.49 58,78b 733.~4 33 33197 1173,719:448.20 595b884.24 5b148,444.15 55,100 328.39 58,53b 666.55 34 63097 5172 708,867.82 $930,580.38 5b125,836.89 55,056 417.27 58 278 665.Ei 35 93097 117b879 650.81 $5,012 952.62 58,022,615.33 l
5909:217.01 '50 103 735.61 1 36 123197 $170>95b659.52 1927,991.29 5b082141.71 55,010:133.00 57.763,396.E i 37 33198 5169.92b 481.99 lbO27>177.53 5b060,101.91 55 087,279.44 57,530 989.E l 35 63098 5168 916 189.44 lb008:292.55 5b035,706.45 55C43>999.00 57,235,574.e.
39 93098 5167>926,756.26 1989.435.18 lbulb759.53 $5 00b l94.68 56 967,040.13 60 123198 5166 916 838.44 lb009,915.82 53988,260.41 50 998 176.23 56>695 272.56 41 33199 5165,837,8:1.4t $b109027.CC 53,96b274.91 55,073,301.91 56 420 255.2:
C 63099 516b 715 035.69 $b092,775.H 53,937,935.52 55,030,711.27 56,142,166.1:
63 93:95 5163,638,388.29 51,076,647.40 53,91b982.10 50928,629.50 55iS60,899.63 L ;23:99 5162>654156.4; 198b231.86 53,556 611.72 50 870 663.60 55,576 347.3 45 33100 $16b373,187.09 lb250969.32 53,863,036.21 55 140 005.53 55,255 209.75 63000 1160 179,833.82 l
46 lbli3:3&E.27 53,932,6:3.19 $5,025 961.66 lb997 15;.:'
47 93 00 1159 074,369.21 51,1C5,469.6; $3,B]b271.17 lb909 743.78 50 702 891.;.
45 1231CC 1157 87b323.49 lb203045.72 13775,016.2' SO96bt6'..ci sbC51G. i i9 32;;; 5156 575,3:2.19 lb 293,021.3: 53 749 u3.93 55 442 665.23 SL;;u:7 .:.
i: 63001 5155,295,599.26 lb282702.9? 13 718:734.65 liiC0b437.6; 13 799 835.::
i; 933C1 5153,986 4CS.52 lb3:9 190.4s 53,688,273.45 5b997.460.92 53 492 345.5 1
I
iM57 6 licteatta:at: :: t$e N:te a t e Note is eie:.ne: a c : were:
atter 12/31/86 an: o>ier t: 3/31/89..
Outstancel Lee *1*:,cai *: c&. ble*est I:tal Erecavse" h:. 6ar te- Baiance Favsert Favie - Favse-t ;res e 5: 1231C1 5152 650 168.56 51 336 240.26 53,657177.21 u 993 417.47' 53,181 45:. -
53 331C2 5151>256,303.80 51,363 864.76 53 625 441.5C usiS9 3C6.26 12 867. P ~:
56 630:2 5149 494 227.27 11:39207643 53593,049.72 54.985 126.25 52 45:>291 :
55 930C2 5148,473 338.84 51,420 883.43 53,559.957.93 54,950 876.33 52 229.75L ::
5e 1231C2 5147,057.942.82 51 415 396.02 53526241.S~ 54.94'.e37.3- 51i93.n3~~
57 331:! 5145 443 751.83 51,514i191.02 53 492 626.14 55,006 817.le 51,575 i:4 i:
M 63~03 5164 032 718.25 51511,033.55- $3 456 664.11 H i967 697.66 51,24950:.::
59 93003 5142,524,2 u .10 11 505 474.15 13420,777.06 u 929,251.21 5916.945.Si 6C 123103 5140,984,159.63 5144008437 53 354i953.8: 54.925 035.27 5578>CS:.92 61 33104 5139,370 314.75 51 613,8u ,83 53 346 373.79 54 962 218.67 $237,9C4.ii 6 63006 5137,723:015.49 51 647,299.26 53,310>:u.93 ui6CSi913.45 5:.:.
63 93]C4 5136 073,925.63 51,649 059.86 53 270,9:1.62 ui575 7C3.94 5:.::
e!. 123104 5134,486,545.14 11:587,383.49 53,231,755.73 54,473,%1A1 1;.:~
65 3315 5132>619:074.42 51 867 470.72 53 194,055.45 u,725,3C9.83 5:.C:
66 633 5 5130,831,455.76 11 779 615.66 53,149.703.02 u d97.770.99 5:.::
67 930 3 5129,053,6 u .80 51,755 813.96 53 107:437.15 54,566 152.46 52.0" 66 123105 5127,321,668.48 51,731,976.32 52,742,337.95 uis74i366.27 5:.::
69 33106 5125,311,632.68 52,010 235.80 $2 705 485.46 54.715 821.26 5:.::
70 63006 5123:379,425.21 51,932,007.47 52,662 867.94 54 594,875.41 5:.:~.
71 930C6 5121 494 598.76 51,884iB26.45 52 621,812.79 $4 5;6,639.24 5:.C:
72 123106 5119 411,692.35 51 982 906.41 12 581 760.22 uiS64 666.63 50.C:
73 33107 $117,430,309.27 62 C81 383.08 52439,623.46 u,621,006.54 50.C:
74 63007 5115 333,627.70 $2,096 681.57 52 495 394.07 54592,075.64 5".C:
75 93007 5113:193 042.11 52 140 585.59 52 450 839.59 uiS91425.18 50. :
76 1231C7 5111:007,605.72 52,185,436.39 52,405:352.14 50590 788.53 50. :
77 33108 1108 769,802.48 52,237,803.24 52 358i911.62 54,596,714.86 53.C:
78 63008 1106 485,173.43 52,284,629.05 52>311,358.30 ui595>987.35 50.0; 79 93008 5104:177,932.81 52 307:240.62 52 262>809.94 54,570,050.56 10.0:
8: 123108 5101,821i854.84 52,356,077.97 52 213,781.07 54569,659.04 5 .::
81 33109 599,373,528.76 52,448,326.08 12 163,714.42 54,612 040.50 5:.0:
82 63C09 596,897,899.09 52,475i629.67 $2 111 687.49 54 587 317.16 5:.::
83 93009 $94 393,250.36 52404,648.73 52,059 050.36 u d63 729.09 50.03 84 123109 591>B35 311.38 52>557.938.98 $2 005 856.57 54 563,795.55 50.0C 85 33110 589,179,100.31 52,656,211.07 51 951,500.37 54,607,711.4 53.0C 86 63010 586 488,766.82 52 690,333.49 $1,895,055.88 54,585 389.37 $0.CC 87 93010 583 762,343.55 52,726 423.27 51,83?iB86.29 54564,309.56 50.0; 88 123110 581>037,865.45 52,724,478.10 51,779i949.80 H.504 427.90 50.C:
89 33111 578:098187.18 52 939,678.27 51 722 054.64 ui661,732.91 $3. ~,
90 63011 575,173 890.12 52,924297.06 11 659 d86.48 u d83iBS3.54 50.;;
91 93011 572205,784.06 52,968 1C6.06 51,597,u5.17 u,565451.23 53.3:
92 123111 569i226,153.79 52 979,630.27 $1,534,372.91 % 414>0:3.18 53.::
93 33112 566 C93 455.90 $3 132,697.89 51,471,055.77 Hi603,753.66 5;.::
94 63 12 162>911 142.20 53,182 313.70 51,404,485.94 54,586 799.64 5:.::
95 93012 $59,661:530.32 53,249,611.88 51 336,861.77 54486>473.65 50.C:
96 123112 556,343,152.67 53 318 377.65 11 267,807.52 u dB6,185.17 St.C:
97 33113 $52,957.903.49 53,355,249.18 51,197291.99 niS82,541.17 50.;;
95 63013 $49,500733.52 53 457 169.97 51 125 d55.4~ uiS82425.42 5:.::
99 93:13 545,970,066.85 53530,666.64 51,051:090.59 u d82,557.23 5 .::
10: 123113 H2 375d22.S'. 53 594 644.07 5976>863.92 u i;71 4D .99 1:.::
101 33114 139 732,907.96 52i642,614.87 5900479.86 53d43,094.73 5:.::
1 C'.' 63014 537041>:4 9 . '. ' 52 691 4 %.53 SSu i324. 9 53d36163.12 5~.::
103 93014 534 297,477.66 52 743 571.45 5787122.29 53530,693.74 50.::
EXHit:'8
- eattac*e: t: t e %te it tre .tte a eiecwte: a o ceuwe:
e ter 12/31/55 arc c :: t: 3/ 31/Ei?.
Outstanc:ns ire Frictima. :
.rincesa, Interest !cta. besayment N:. harte- Ba;an:e Paveent ?aveert Faysert :re: .-
In 1231;6 531d15d13.;: 52 781,66s.tS 5728,62;.4C 53,510665.55 5~.:-
135 23:15 529,12 3 i c'.5. 6- 52:395 314.5: 5661.7;;.:3 53C65,;;5di I:.::
- ~
- 630:5- $26i680 55;.5' 52,439,866.7' 5618,6:E.i; 53C5s,675.6: 50,::
- ~; 93:15 524 191 435.t5 52,469,1;6.L: 5566iis;.73 53C56iO)E.15 53.C:
!C; 123;;5 52i>663167.2i 52 547,465.2: 5514068.;; 53,:61536.2: 5 ' . ~ ~.
109 33116 519 441 163.77 52 102,823.67 5459,934.3" 52 d62 757.77 5:.::
11' 63016 517:391142.53 52 149:201*i 54!5:249.3; 5244Lil50.F. 5: ::
1:1 93016 515,199,683.22 52i:92 462.36 5369575.75 52d62,041.!s 5:.0; 112 123116- $12 969,014,69 52,230465d: 5322 983.95 52453it$4.L5 5:.::
113 33117 511,259,2 0.36 51,709 214.33 5275,591.56 51,9E5605.89 50.:~
11s 63017 19422,055.43 51,73714L.93 5231,255.C; 51 976 6:2.95 52.C; 115 93:17 57.75; 155.ta $1,770,899.95 5202343.65 $1 973,263.63 53.C:-
116 123117 56,002d40.24 11 74Si615.24 5164,712.Ci 51,913 327.29 N.C:
117 3311S 54,926>641.7L 51 075iS93.5: 5127453d5 51,2C3452.45 N.0:
118 63:15 13 833 336.35 51,096i3:5.3i 5104,691.14 51,200,996.53 50.C 119 93018 52>7:1 551.55 51,118,454.5:- 5S1,394.65 51,199d69.15 53.C:
12: 123116 $1 570,827.5e 51,141,054.C: 557,627.ti 51 195.68;.5" 53.00 121 33119 51,310iCSS.63 5260>739.2: 533,333.C9 5294119.30 50.0C 122 63019 51,044 305.35 5265,790.25 527S39.39 5293619.63 50.C:
123 93319 5773,339.61 5270,918.97 522,191.55 5293,113.52 53.00 124 123119 $497.404.67 5275,984.74 516434.52 12923419.26 St.CC 125 33120 5639 6 C.56 557,804.11 510:569.85 568,373.96 50.0C 126 63020 5380 585.77 $59 011.79 59,361.51 568 353.3: 50.C:
127 93020 5320431.4-5 560,157.32 $8,0B7.51 568,264.83 50.C0 126 123120 $259CC3.L7 561 627.98 54,809.17 568,237.15 50.00 129 33121 5196,173.70 562,S29.77 55403.82 568,333.59 53.00 13C 63021 5132 087.29 564086.41 5t:168.69 568,255.10 50.00 131 93:21 566,688.70 565,398.59 -
52 806.85 568205.11 53.00 132 123121 (50.C;) 566,688.70 51,417.;3 5681C5.53 5.:
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Efgienne Stian e tri3 911,135.Si 63:34 5;i! 6;S.1:0.9: 5293 :27.S7 546:ii339.55 54 695 4;7.52 5:4.975 21:.::
- 93:59 5193 355 436.25 5262 674.67 n 598.430.13 5. i S$; i :C t .S". l' >i;;.5;3.i:
- ;23159 5193 C22 756.97 5332,679.25 54 512 191.6; nii26 870.59 5; iol.3 57; ;!
. 33;i: 5;9 >62b 3:2.;3 1396,4%.h niES4 29C.45 54.98'n745.32 114 472.5;: "i i 63:9: 5192,231 772.3: 5394 529.53 n 574 87!. 63 ui969,4"!. 5; 5;I.i2iS 49: ".
6 93090 $19;,816,78!. i u;I.?i:.i; 5:.ih55%.59 n 95">495.;; 114;~;>751.'.
7 '.2319: 519;>357,519.85 K29 26;.it u.H5,643.57 54.9hi910,5; l;3,i421 ';.
5 3319; 5190,91;>561.N u?5955.8; MiM5 453.6: 55 ::;>!,12.t; n! 76: 1:6..:
9 63:91 5190,423CS2.46 uS8,473.5S uiS34 149.57 55022,623.15 5:3,575,229.5
- " 9309; 5159 575,5M.73 1547,493.P u,522
- 543.2; 55 070,041.94 513:357,et.5./
'1
. 23;9; 5:59 343,669.B: 5531 913.93 usi:i>H5.23 55>:4; 4 3 .16 513187,u3.::
- 33192 5168 720i;55.92 5623:513.55 ui496 912.16 55>;2:>426.C4 5:3,:4 53:..'
- 3 63092 1158,054 C21.97 5636,133.15 ui482,103.7
- 55,;;3 237.45 5:2iS".9 076.'i
- 4 93 92 5157,473 721.14 56C5,292.53 u>666 995.52 55C72,2SS.35 1;;,6;;,05L.'
'i
. ;23192 5186 861,105.S4 1617,623.3: R 452 619.52 55,070,243.12 5:2iG;i3s?.3:
- 6 33193 5156>1% i704.58 $706i401.21 m 437i951.26 55ilu>352.52 12s26 m ..~
17 63093 5165,477 462.92 5677i241.66 u,421 174.23 55 093 415.89 ' 512 0:3 924. -
15 93093 1184,S29,722.15 5647.74*.74 R 405 089.74 $5,052,S30.45 5:1 792 25 .:-
19 123193 5164,298,089.17 5531>633.01 ui3 Sis 7C5.93 ui921,338.91 5:1>55:i?61.ee 20 33194 5163,411:432.01 SSS6i657.16 54 377,079.62 55 263 736.75 511:366 107. .~
21 63094 1!82,678,456.08 5732945.93 54 356 021.51 55iCSS,967.u 511 149i CS.E 22 93094 5181>9?3 256.34 5705 229.74 54 338,614.04- 55,043,843.78 5:0 929 33; ;'
23 123194 5181 381,009.26 5592,247.0S m 321,864.84 54>914,111.92 51: 7:6>646.E 24 33195 1180 437,634.23 1943,375.C3 14 307.795.97 55 251 174.00 51Ci4SO,71C.*3 25 63095 $179,6u ,179.65 579349.58 m 285,393.81 55,078 848.39 510252,331.~.3 26 93C95 5178,960i415.32 5683,764.33 u >266 > 549.27 4 950 313.60 510iC21iCS2.6~
27 123195 5178 178,659,19 $781,756.13 u ,250 309.86 55,032,065.99 59,786,629.5:
25 33196 5177,287,492.87 5891,166.32 54:231 743.16 55 122 909.45 li hi>145.E 29 63096 5176,419,620.87 5567 872,00 u ,210 577.96 55,078 449.96 59,3:5 549.i:
30 93096 5175 534,049.26 5S35 571.61 54189.966.00 15:075,537.61 59 C65,613.E 31 123196 5174,671,332.u $862,716.82 m 168 933.67 55,031,650.49 5Bi819:422.6e 32 33197 5173,719,u8.20 5951,864.24 54148,444.15 55i100:328.39 553570 157.~.:
33 63097 5172,788 867.82 1930,580.38 us125,836.89 55,054 417.27 58,317 974.23 34 93097 5171i879,650.81 5909217.01 4 103,735.61 55012952.62 55,062,759.::
35 123197 1170i951,659.52 5927i991.29 54 052 141.71 55 010 133.00 57,5"4i393.5e 36 33198 5169,924,481.99 51,027 177.53 us060,101.9; 'i5087,279.u 57 542 557.75 37 63098 1168,916,189.u $1,008:292.55 N O35,706.45 $5043,999.00 57,278,332.T 35 93098 5 67, W 1%.26 59E9,435.18 m 011 759.5: 15:001:194.6E $7,0;;>7C6.3 39 123198 5166,916 833.6i. 51 009 915.82 53,9B8 260.41 m 998il76.23 56 739i567."-
4C 33199 5165,807 811.44 c l09:027.00 53964274.91 55 073,301.9; 16 665 7??.::
4; 63099 516I.i715,035.69 51,092,775.75 $3937,935.52 15,030,711.27 56,1SSi675.'i 42 93C99 5163,63Si3SS.29 11 076 647.40 $3 911982.10 4 9BSi629.5C 55ii:Si39'.i' 13 123199 5;62,654 156.41 5954,231.58 53 556 411.72 W B70,643.6: 15,624 555.::
te 33100 $16;i373sli?.C9 51250969.32 53,863,036.2; $5,1a >0:5.* 3 55 337 7 0 .~i 45 63:00 516: ;79i838.82 51,193 348.27 53 532,613.19 $5 025,961.46 55i:47.741.5 a 93 0C 5159 074 361.2; 51,105:461.6; $3 5:. 27*..? m 905,74~.75 k 7h Ht.i" 47 1231:: 5:57 871,323.49 51,203045.72 13,778 016.27 4 9S1 061.99 maliii:L::
es 331C; 5156 575i3:2.;9 ni293C2;.3: 53,749,ul.93 55 > CI.2i465.23 5. ;i" 957 .:
49 630:1 5:55 295 599.26 51252,7"".93 53 115,734.65 H :::i437.e; $3 ii6 565.3:
5: 93'01 M 53 986 4~5.S: m30919:.u $3,635,27C.0 m ?97,460.i" 53 S S 54*.:i 5; 123:0; 5:52,65C ;68.5e I;i336 24:.26 0 657,D7.21 m 993 417.47 53i23Si98Li:
f R-!$." a
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N: G.ane- Baian:e Fa v s e". Favre - Fayeen b ea u 52 33102 5;Y. 256,3'3.S; 51 363 464.76 53,625ee;.5~. . Hi989 3:6.26 12 926 18S.:.
53 63:02 5149 6h d27.27 51 392 076.~3 13 di3. M 72 54.955 126.25 52,610 th.e" h 93 02 5145 473,333.84 51,420,885.43 53 d55,9 0 i; ni96Cd76.33 52,290 8 h.i; E 23:02 5147>:57, % 2.62 51,415,396.02 53d26,2a;.52 n.941 637.92 5 96Si3S2."
55 33:03 $165 d?3 75;.SC 51 414 191.C2 53d92,626 ;c 15006917.16 5;,642666.::
57 63003 51u iO32 719.25 51d11:033.5' 53456i6e..; u 167,617.66 5; 3'3,6:1 55 93C03 5142 d26 2&&.10 51403 474.15 13:42:i777.~t ud29 251.21 5931 443.s 59 123:03 114 i9h il59.63 u d40ich.47 53 384,95;.5: H 925 035.27 5645,955.7' 6: 33104 $139,370,314.75 51,613 844.65 13:345 373.7i n 962,216.67 53:7:255.0 61 63004 5137,723 015.49 51,647,299.26 53,310,0&c.95 ui6CS,918.45 50.::
6: 93 04 5136,C73 925.63 51,649,05i.66 5327:>92'.62 lt575,7'3.94 l' ";
63 123104 $134.456,545.14 ll 587,350.L9 $3 231 755.73 uit75 951.41 5:.::
s 231C5 1132,619 376.42 51,667:47C.7; 13 19&iC55.45 u,725,309.S 50. :
65 63005 5130 839,453.76 $;>779 615.66 13:1t9 7:3.:2 HiS97,770.99 10 ::
66 93:05 5129,C53 6u.at $1,755d13.96 53,1:7. C .'.' u d66 152.46 5: ~:
67 ::310' 5127,321,665.48 31,731,976.32 53,065>C24.06 uit74,366.27 10." i 65 33106 5125 311,422.66 52,010:235.B 53,C23451.63 n.715421.26 5:.;;
69 63006 $123:379,425.21 51,932,007.47 52,662,667.94 S&d94d75.41 5:.:'
70 93006 5121,494 598.76 51,684,826.45 12 621 4 :.79 H5C6,639.24 5:.::
71 123106 5119 411 692.35 11,982,906.41 52 431,76 .22 HiS64,666.63 50.0; 72 33107 5117.430,309.27 52,081,383.06 12 4 39,623.46 54 621 006.54 50.0: ,
73 63007 1115:333 627.70 52,096,681.57 52,495 394.07 u,592,075.6L 10.C: l 74 93007 1113 193,042.11 52,140 585.59 $2:450iB31.59 u d91 425.18 10.C:
75 123107 l!!1,007,605.72 52 165,436.39 12 4C5:352.14 u 590,783.53 10.C' i 76 33108 510S>769 B:2.45 12 237 803.24 52358911.62 H,596,714.86 10.C:
77 63008 5106:485,173.43 J 12:284 629.05 52,311 358.30 ui595,987.35 10.0: i 75 93008 1104:177932.81 52 307:240.62 52,262iSCi.94 54570,050.56 $C.C:
79 123108 5101>S21>854.84 52,356,077.97 52,213,751.07 H 469 859.04 l].C:
60 33109 599,373528.76 12,u8 326.08 $2 163,716.42 u ,612 040.5" 5;.::
il 63009 $96,897499.09 52i&75,629.67 52,111>687.49 u,557,317.16 50.:: 1 82 93009 594,393 250.36 52,504,648.73 52,05908C.36 54,563 729.C9 50.C; i 23 123109 591,835 311.38 52,557,938.98 52,005d56.57 54,563,795.55 50.00 84 33110 589,179100.31 12,656,211.07 51,951 500.37 54,607.711.44 50.0; SS 63010 586,458,766.82 52,690,333.49 51,895 055.88 54,585,389.37 50.00 l 86 93010 583,762,343.55 52,726 423.27 $1,837,886.29 54464,309.56 50.0" 87 123110 581,037,865.45 52,724,478.10 $1 779,949.80 Hi504 427.90 50.0; 83 33111 578,098,187.18 12,939,678.27 51,722:054.64 54 661,732.91 50.C:
69 63011 575,173 890.12 12,924 297.06 51,659,586.48 n.583,883.54 10.C:
90 93011 572,205,784.C6 52,968,106.06 51497at".17 54465,55;.23 50.0; 91 123111 569,226,153.79 $2,979,630.27 51,534,372.91 niS14,003.18 50.::
92 33112 566i093455.90 13:132,697.69 51,471>CH.77 Hi603753.66 5;.;;
93 63012 562,911,142.20 53,182,313.70 51,404 4 5 . % $4 426 799.6L $3.::
% 93012 559,661430.32 53249611.55 51,336,96;.77 54,586 473.65 50.C:
95 123112 556,343,152.67 53,318:377.65 11,267,2C7.52 u dB6,165.17 5 .C:
96 33113 $52 957,903.49 533355i249.15 $1 197,29'. 99 54452,541.17 50.~:
97 63C13 H9,5:L733.52 53,457,169.97 1112535.45 HISS 2,525.42 50.C:
?! 93C13 H5M70,066.88 13430,666.6t. 11 051 !**.59 5t 582d57.23 5'::
H 123113 H2375422.!: 53,5% du.07 5976d63.92 54,571,407.99 50. :
- '. 33;;- 139i?32 9~7.9e 52,642,614.57 590 Cit 79Ee 53543094.~3 50.
- 1 6301& $37,041 049.1; 12691652.83 5%4:32;.9 53536,183.12 50.::
1C2 930;t 134 297.477.66 $2 743 d7;.45 1757:::.29 53 d X 693.7c 5 .::
- 3 123114 531 515 813.19 52 751,664.48 5728 22:.40 53,510 485.89 5 .::
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Ice 23 S 529 123 415.66 52,39537.5: 5669.711.C3 53 C65>105.H 5: ~:
- 5 63: 3 526 650,551.57 52 439,566.79 5618,SCS.90 53 C56,675.69 50. '
93: 3 52&i191,435.65 52 681,116.42 5566>961.73 53, Chic;5 S 50.C:
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106 33.:
. 519:54; 143.77 52,1~2:523.11 5659.934.3 52 562 757. " 50.0".
109 63 :6 517,391,942.53 52 169,201.19 5415:249.31 52 564.453.50 52.:'
110 93C16 515,199,650 22 52,192462.36 5369 575.78 52 562iC&'. '.a 50. :
1:1 123:16 5'2,969 014.69 52,230i&65.53 5322,989.95 52,5534't.4S 5:.:"
112 ?3:17 111,259,200.36 51,709816.33 5275,591.56 51 955>&C5.89 5: ::
113 630:7 59 522:055.43 51,737,141.93 5239,253.01 51 976 4:2.94 50.0:
114 93:D 17 751 155.45 51 770,899.9~ 5202,343.6S 51 973 243.63 50.C".
115 1231 0 56,002 540.2a 51,745 6;5.26 5164.712.05 51,913327.29 50.C:
1:6 32: 3 54.926,641.74 51,075895.50 1127,553.95 51 2:3.452.48 5:.::
- F 63
- 18 53,832,336.35 51,096 3'5.39 510&i691.16 11,20'h996.53 50.:"
13 93 :E 12 711iSSI.65 51 116 454.5 581 39&.65 11 199 849. S 5:.::
119 123118 51 570,827.84 11 141,054.01 557,627.49 51,198,681.50 50.:*
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122 93019 5773,389.41 5270,918.97 522,19;.55 5213,110.5" 5 .":
123 123:19 5497,604.67 5275 984.74 516:434.52 5292,419.26 53.C:
12L 3312: 5439,600.56 557804.11 510:569.85 568,373.96 5 .::
125 63023 1380 588.77 559,011.79 59,361.51 568,353.30 $3.::
126 9302: 5320i&31.45 560,157.32 58 0B7.51 568,246.63 50.0~
127 123120 5259 003.47 561,427.98 56,809.17 568 237.15 50.C:
122 3312: 5196,1?3.70 562,829.77 55503.82 565,333.59 50.C:
129 63:21 5132,087.29 56&iO36.41 54,168.69 568:255.10 53.C:
13: 93:21 566,665.70 165,398.59 $2606.85 565 205.44 1:.C~
131 123:21 (53.00) 566,688.70 51,617.13 569 105.83 53.::
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I EXHIBIT F SPECIAL WARRANTY DEED WITH VENDOR'S LIEN AND BILL OF SALE I
THE STATE OF TEXAS S S KNOW ALL MEN BY THESE PRESENTS:
COUNTIES OF HOOD AND S SOMERVELL S THAT, BRAZOS ELECTRIC POWER COOPERATIVE, INC., a Texas corporation having its principal office at 2404 LaSalle Avenue, Waco, McLennan County, Texas (hereinafter referred to as "Grantor"), for and in consideration of the sum of TEN AND NO/100) DOLLARS ($10.00) and other good and valuable consideration paid in cash to Grantor by the Grantee herein named, has GRANTED, BARGAINED, SOLD, ASSIGNED, TRANSFERRED and CONVEYED, and by these presents does GRANT, BARGAIN, SELL, ASSIGN, TRANSFER and CONVEY unto TEXAS UTILITIES ELECTRIC COMPANY, a Texas corporation having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Texas 75201 (hereinafter referred to, together with its successors and assigns, as "Grantee"), the following:
(a) all of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was conveyed and transferred to Grantor by Grantee or its predecessors) in and to the following (collectively, the "Group I Real Property");
(i) that certain land located in Hood and Somervell Counties of the State of Texas, more particularly described on Exhibit A-I attached hereto and incorporated herein for all purposes, (ii) all buildings and other structures, fixtures and improvements (including Squaw Creek Lake and Park) located on such land, (iii) the estates, rights, privileges, easements and appurtenances belonging or I in anywise appertaining to such land and the buildings, structures and i improvements located thereon, and, (iv) all subsurface rights, oil, gas and mineral ' interests, air rights and development rights; (b) all of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was conveyed and transferred to Grantor by
Grantee or its predecessors) in and to the Purchased Assets as defined in that J certain Agreement dated July 5,1988 (the "Agreement") between Grantor and '
Grantee, a copy of such definition being attached hereto as Exhibit A-II and )
incorporated herein, to the full extent that such Purchased Assets or relevaat 1 parts thereof may be personal property according to the laws of the State of Texas, together with the rights and appurtenances thereto in anywise belonging (collectively, the "Group I Personal Property"); )
(c) all of Grantor's right, title and interest as tenant in common (such right, title i and interest being that which was conveyed and transferred to Grantor by l Grantee or its predecessors as such right, title and interest may, by agreement l of the parties involved, have heretofore been adjusted or be subject to )
adjustment hereafter) in and to that part of the Transmission Facilities (as defined in the Agreement) which is real property according to the laws of the State of Texas including, without limitation, the following (collectively, the "Group II Real Property");
(i) that certain land, and those easements and rights of way affecting land, located in Hood and Somervell Counties of the State of Texas, more particularly described on Exhibit A-III attached hereto and incorporated herein for all purposes, (ii) all buildings and other structures, fixtures and improvements located on such land, including, without limitation, the Comanche Peak-DeCordova 345 kV electrical transmission line approximately 14.4 miles in length to the full extent that such transmission line or relevant parts thereof may l be real property according to the laws of the State of Texas, I (ill) the estates, rights, privileges and appurtenances belonging or in anywise appertaining to such land, such easements and rights of way and such buildings, structures and improvements, and, (iv) all subsurface rights, oil, gas and mineral interests, air rights and development rights; and (d) all of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was conveyed and transferred to Grantor by Grantee or its predecessors as such right, title and interest may, by agreement of the parties involved, have heretofore been adjusted or be subject to adjustment hereafter) in and to that part of the Transmission Facilities (as defined in the Agreement) to the full extent that the same or relevant parts thereof may be personal property according to the laws of the State of Texas including, without limitation, all equipment and also including the Comanche Peak-DeCordova 345 kV electrical transmission line approximately 14.4 miles in length to the full extent that such transmission line or relevant parts thereof may be personal property according to the laws of the State of Texas (collectively, the "Group II Personal Property").
The Group I Real Property and the Group I Personal Property shall be referred to herein collectively as the "Group I Property". The Group II Real Property and the Group II Personal Property shall be referred to herein collectively as the "Group II Prmerty". The 2-
Group I Real Property, the Group I Personal Property, the Group II Real Property and the Group 11 Personal Property shall be referred to herein collectively as the "Subject Property".
THIS CONVEYANCE IS M ADE SUBJECT, however, to the Joint Ownership Agreement (as defined in the Agreement) including, without limitation, Section 3.03 thereof which contains a waiver by the parties thereto of the right to partition, and subject also to the other matters identified on Exhibit B-I attached hereto and incorporated herein. 'Ihe Joint Ownership Agreement (including the amendments thereto but excluding the exhibits to such agreement or amendments) is attached hereto and incorporated herein as Exhibit B-II(the matters set forth on Exhibit B-1 together with the Joint Ownership Agreement shall be referred to herein collectively as the "Permitted Encumbrances").
TO HAVE AND TO HOLD the Subject Property unto said Grantee forever; and subject to the Permitted Encumbrances, Grantor does hereby bind itself and its successors and assigns to WARRANT AND FOREVER DEFEND all and singular the Subject Property unto the said Grantee, against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through and under Grantor, but not otherwise.
By delivery of this Special Warranty Deed With Vendor's Lien and Bill of Sale, l Grantor delivers possession, dominion and control over its right, title and interest in and to the Subject Property. Grantor warrants the Subject Property to be identical to the interests conveyed and transferred by Grantee to Grantor unless and except (i) the same l
have been increased, whether by Grantor or otherwise, or (ii) the same have been diminished by joint activities of Grantor with all other Owners (as defined in the l
Agreement) or activities by, through, or under the Project Manager (as defined in the i Agreement). But it is expressly agreed that a Vendor's Lien, as well as the Superior Title in and to the Subject Property, is retained against the Subject Property until that certain Note of even date herewith executed and delivered by Grantee and payable to Grantor in
the original sum of Dollars ($ -
) and allinterest thereon are fully paid according to the face, tenor, effect and reading thereof, when this Special Warrant:r Deed With Vendor's Lien and Bill of Sale shall become absolute.
THE SUBJECT PROPERTY IS BEING SOLD "AS IS". GRANTOR MAKES NO WARRANTIES CONCERNING THE MERCHANTABILITY OR CONDITION CR FITNESS FOR ANY PARTICULAR PURPOSE OF THE SUBJECT PROPERTY EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT.
All capitalized terms used herein, and not otherwise defined, have the meanings ascribed to them in the Agreement.
EXECUTED on the date of the acknowledgement hereto, to be effective for all purposes on the day of , 19_.
BRAZOS ELECTRIC POWER COOPER ATIVE, INC.
By:
Its: !
ATTEST:
By:
Its:
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THE STATE OF TEX AS COUNTY OF '
Before me, the undersigned authority, on this day appeared ,
known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the instrument by proper authority in the capacity therein stated and for the purposes and consideration expressed in - the instrument.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on ,
Notary Public in and for the State of Texas Typed / Printed Name of Notary My Commission Expires: l l
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EXHIBIT A-I 1
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[ Description to be attached prior to Closing]
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EXHIBIT A-II
[ Description of Purchased Assets, as set forth in subparagraph (ee) of the Definitions in the Agreement, to be attached prior to Closing]
)
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_ _ _ _ _ _ _ _ - - _ _ . . - - - - - _ _ ..~_..,._,-_._..-______2,._____._______-__._--___-____
EXHIBIT A-HI l l
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[ Description to be attached prior to Closing]
EXHIBIT B-I (List of Permitted Exceptions, as set forth in subparagraph (aa) of the Definitions in the Agreement, to be attached prior to Closing]
4
-g.
EXHIBIT B-II
[ Joint Ownership Agreement to be attached l prior to Closing) 1 l
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EXHIBIT G
[On the Letterhead of Seller]
Texas Municipal Power Agency (Certified Mail, Return Receipt P. O. Box 7000 Requested, No. )
Bryan, Texas 77805 Attn: Mr. Ed Wagoner, General Manager Tex-La Electric Cooperative of Texas,Inc. (Certified Mail, Return Receipt P. O. Box 398 Requested, No. )
Quitman, Texas 75783 Attn: Mr. Juan D. Nichols, President Re: Notice of Brazos Electric Power Coooerative,Inc.'s Intention to Transfer its Ownership Interest in the Comanche Peak Steam Electric Station' and in the Fuel to Texas Utilities Electric Company.
Gentlemen:
Each of you are hereby notified, pursuant to Section 16 of the Joint Ownership Agreement (being that certain instrument entitled on the cover page thereof "Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. for Comanche Peak Steam Electric Station," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency (hereinafter referred to as 'T M P A"), Brazos Electric Power Cooperative, Inc.
(hereinafter referred to as "Brazos") and Tex-La Electric Cooperative of Texas, Inc.
(hereinafter referred to as ' Tex-La"), together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & I.ight Company, Texas Utilities Generating Company, TMPA, Brazos and Tex-La)] that Brazos intends to transfer its entire 3.8% undivided ownership interest in the Project and the Fuel (as said terms are defined in Paragraphs 1.16 and 1.09, respectively, of the said Joint Ownership Agreement) to Texas Utilities Electric Company ('TU Electric") which is ready, able and willing to acquire same. Brazos, which desires to make such transfer, has
obtained a written offer from TU Electric as the prospective transferee, which written offer sets forth the consideration and other terms of the offer; a true and correct copy of said written offer, being the Agreement dated July 5,1988, by and between Brazos and TU Electric, is enclosed herewith.
You will please notice that the bona fide written offer from TU Electric, as the prospective transferee, is in cash, payable in installments as specified in the enclosed written offer, together with the requirement that the Brazos JOA Debt, as described in Section 5.3(b) of the enclosed written offer, be paid.
You are hereby notified that Brazos extends to you (either of you and both of you) a right of first refusal to acquire all or any part of Brazos'said ownership interest in the said Project and Fuel on similar terms and for similar consideration. While not subject to any first right of refusal under the Joint Ownership Agreement, if either of you arc interested, Brazos will sell you its ownership interest in the Comanche Peak-DeCordova 345kV electrical transmission line, described in subparagraph (oo) of the Definitions of the enclosed written offer.
The intended transfer is proposed to be consummated on or before February 16, 1989, , by the delivery of instruments of conveyance to Brazos' 3.8% undivided ownership interest in said Project and Fuel to TU Electric, all in accordance with the enclosed written offer. Should you (either of you or both of you) desire to exercise your option and first right of refusal to acquire all or any part of Drazos' 3.8% undivided ownership interest in the said Project and Fuel, you must exercise your option and first right of refusal by serving written notice of your intention upon Brazos and upon all of the other Owners of the Project (TU Electric, Texas Municipal Power Agency and Tex-La Electric Cooperative of Texas, Inc.) within three months after service of this written notice. Your failure to exercise said option and first right of refusal as provided in Section 16 of the i Joint Ownership Agreement within the time period specified shall be conclusively deemed to be an election not to exercise said option and first right of refusal.
Very truly yours, BRAZOS ELECTRIC POWER COOPER ATIVE, INC.
By:
Richard E. McCaskill, Executive Vice President and General Manager CC: Texas Utilities Electric Company 1900 Bryan Tower Dallas, Texas 75201 l Attn: Mr. Erle Nye
i EXHIBIT H !
l (For the letterhead of Joseph Robert Riley]
i I
___.s 198 _.
l Texas Utilities Electric Company 2001 Bryan Street j
Suite 1900 '
Dallas, Texas 75201 i Gentlemen:
I have acted as counsel for drazos Electric Power Cooperative, Inc., a Texas i corporation ("Brazos"), in connection with that certain Agreement dated July 5,1988 (the !
"Agreem ent") by and between Brazos and Texas Utilities Electric Company (the !
"Company"). !
This opinion is delivered to you pursuant to section 6.4 of the Agreement.
Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Agreement. )
In connection with this opinion, I have reviewed executed copies of the Agreement, ,
the Assignment Agreement of even date hereof between the Company and Brazos (the j "Assignment Agreement), the Assignment of even date hereof from Brazos to the Rural Electrification Administration (the "REA") (the "Assignment"), the Transfer of Lien of l
even date hereof from Brazos to the REA (the "Transfer of Lien"), the Amendment of '
even date hereof to the Transmission Agreement between the Company and Brazos executed on July 25,1979 (the "Transmission Agreement Amendment"), the Indemnity Agreement of even date hereof from Brazos to the Company (the "Indemnity Agreement"), the Release of even date hereof from Brazos in favor of the Company (the "Release"), the Covenant Not To Sue of even date hereof from Brazos in favor of the Company (the "Covenant Not To Sue") and the Special Warranty Deed With Vendor's Lien and Bill of Sale of even date hereof from Brazos to the Company (the "Deed") (the Agreement, the Assignment Agreement, the Assignment, the Transfer of Lien, the Transmission Agreement Amendment, the Indemnity Agreement, the Release, the Covenant Not To Sue and the Deed are hereinafter sometimes referred to collectively as the "Agreements"). I have also examined originals or copies, certified or otherwise identified to my satisfaction, of such corporate records certificates and other documents of Brazos and made such investigations of law (subject to the limitations hereinafter set forth) as I have deemed necessary or appropriate as a basis for the opinions expressed below, As to questions of fact material to my opinions expressed herein, I have, when <
relevant facts were not independently established, relied upon certificates of, and information received from, officers of Brazos and have assumed the accuracy of the statements of fact contained in all of the documents reviewed by me. I have not
)
I
-. . ..-- -. .. -- .-.=
. .. - . - ~ ._.. . -
independently investigated or verified the facts represented in such certificates or information and do not opine as to the accuracy of any such facts. With respect to certain matters set forth in paragraphs 1 and 5 below, I have also relied upon certificates and other documents from, and conversations with, public officials, in rendering the following opinions, I have assumed, but not independently verified, the authenticity of any document or other instrument submitted to me es an original, the conformity to the originals of any document or other instrument submitted to me as a copy, and the genuineness of all signatures, except signatures made on behalf of Brazos. I have also assumed, but not independently verified, that all documents executed by a party other than Brazos were duly and validly authorized, executed and delivered by such party, which had requisite power and authority with respect thereto, and are legal, valid and binding obligations of such party enforceable against such party in accordance with their respective terms.
To the extent that my opinions in paragraph 2 below relate to consent requirements which may be contained in any agreement or contract to which Brazos is a party or by which it is bound, the opinion is based solely on certificates of officers of Brazos without any independent investigation.
Based upon the foregoing and subject to the qualifications set forth herein, I am of '
the opinion that:
1.
Brazos is a non-profit electric cooperative corporation duly organized, validly existing and in good standing under the laws of the State of Texas with requisite corporate power and authority to carry on its business as now conducted and to own, sell and transfer the Purchased Assets as provided for in the Agreement.
2.
Brazos has requisite corporate power and authority to execute, deliver and perform the Agreements and to carry out its obligations thereunder. Drazos has full, requisite corporate power and authority to act for itself and the other persons or entities, private and governmental, acting by, through and under Brazos, In connection with the Agreements.
'The Agreements have been duly authorized, executed and delivered by Brazos, and constitute valid and legally binding obligations of Brazos and the other persons or entitles, private or governmental, acting by, through and under Brazos, enforceable against such parties in accordance with their respective terms. The execution, delivery and performance of the Agreements by Brazos does not conflict with or result in any violation of, or constitute a default under, (i) the Atticles of Incorporation or by-laws of Brazos, or (11) to my knowledge, any material provision of any mortgage, indenture, lease, agreement or other instrument, including any evidence of '.'debtedness, including without limitation the Brazos Comanche Peak Debt, to which Braues, or any of Brazos' properties or assets, is subject or a party, or (iii) or to my knowledge, any permit, concession, grant, franchise, license, judgment, order or decree, applicable to Brazos or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein.
3.
Brazos has obtained all necessary consents, approvals, orders and authorizations of, and has made all necessary registrations, declarations and filings with, each governmental authority or other entity required in connection with the execution, delivery, and performance by Brazos of the Agreements, except for any such required to be obtained by the Project Manager. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or other entity is required by any applicable statute or other law or by any judgment, order or decree or any
l I
rule or regulation of any court, tribunal or governmental agency or authority, Federal, {
-state, county or municipal, or agreement with any other entity to permit Brazos to execute, deliver or perform the Agreements.
- 4. No provision of any obligation or liability, including with respect to any evidence of indebtedness, of Brazos, whether accrued, absolute, contingent or otherwise, will cause the Company to assume or otherwise become liable for, or will cause the Purchased Assets to become encumbered by, any liability of Brazos as a result of the purchase by the Company of the Purchased Assets, except such as currently exist with respect to Comanche Peak and which were entered into or incurred by (a) all parties owning interests in Comanche- Peak at the time involved acting collectively, or (b) the Project Manager or the Company or both. The opinion set forth in this paragraph. 4 assumes the Company's forgiveness of the Brazos JOA Debt as described in section 5.3(b) of the Agreement.
5.
- Apart from all taxes.and similar charges owed by the Project Manager on behalf of all the Owners collectively, Brazos owes no taxes or similar charges or j impositions with respect, or the nonpayment of which would apply, to, or result in any tier.
or other encumbrance upon, the Purchased Assets to any taxing authority. Further, no tax charge, tax expense or tax claim against the Purchased Assets originating with or caused by the action or inaction of Brazos individually or in combination with any of the Owners other than the Company or the Project Manager will attach to or affect any portion of the Purchased Assets conveyed after the Closing.
6.
Brazos has such title in and to the Site and all real property interests therein and the real property interests included in the Transmission Facilities as was conveyed to Brazos by or through the Company or the Company's predecessors-in-title. Except in combination with, or in conjunction with action by, all of the Owners of the Site and the real property interests included in the Transmission Facilities acting collectively either directly or through the Project Manager, Brazos has not encumbered the Site or any of the real property interests therein or the real property interests included in the Transmission Facilities with any mortgages, liens, claims, charges, security interests or encumbrances that have not heretofore been fully released.
Brazos, separately or in combination with any or all of the Owners other than the !
Company or the Project Manager, has not taken any action which would result in the structures, improvements and fixtures on such real property constituting a part of the Site not being in conformity with all applicable Federal, state and local zoning, building, health, safety and environmental laws, ordinances, rules or regulations. No notice from any governmental body, which has not otherwise been disclosed to the Company or the Project Manager in writing, has been served upon Brazos claiming any violation of any such law, ordinance, rule or regulation or requiring any work, repairs, construction, alterations or installations on or in connection with such real property of the buildings, structures, fixtures or improvements thereon, nor to my knowledge has any such violation, which has not otherwise been disclosed to the Company or the Project Manager in writ been claimed or action with respect thereto threatened.
7.
Brazos has the title to such interest as was conveyed to Brazos by or through the Company or the Company's predecessors-in-title in all of the eculpment, vehicles, fixtures, machinery and other items of personal property, tangible or intangible, to the extent the same are parts of the Purchased Assets. Except in combination or in conjunction with action by the Company, the Project Manager or all of the Owners actin collectively, Brazos has not encumbered the equipment, vehicles, fixtures, machinery and other items of personal property, tangible or intangible, which are part of the Purchased Assets, with any mortgages, tiens, claims, charges security interests, encumbrances or other restrictions or limitations, assuming payme,nt by the Company of any and all
transfer taxes that may become dus on account of the transfer of the Purchas:d Assets, that have not heretofore been fully released, except for the liens for ad valorem taxes not yet due and payable.
- 8. There are no claims, suits or proceedings, administrative or otherwise, pending against Brazos or, to the best of my knowledge, threatened against Brazos affecting the Purchased Assets, whether such be at law, in equity or in arbitration, or before or by any governmental department, commision, board, bureau, agency or instrumentality which, if adversely determined against Brazos, would affect Brazos' ability to perform its obligations under the Agree:sats, except that which has been previously disclosed in writing to the Company; ar.c Brazos, separately and apart from the other Owners in combination or in conjunction with action by all the Owners acting collectively either directly or through the Project Manager, is not in default with respect to any order, writ, injunction or d6 cree of any cours, arbitrator or governmental department, commission, board, bureau, agency or instrumentality affecting the Purchased Assets.
- 9. There is not in effect any executory contract, agreement, order or commitment to which Brazos is subject or a party, and to which the Company or the Project Manager is not a party, wh.*ch would bind the Company with respect- to the Purchased Assets after the Closing and which would adversely affect the value of the Purchased Assets af ter the Closing.
The opinion expressed in paragraph 2 above as to conflicts with other agreeme. " 4 which Brazos is a party is qualified to the extent that no opinion is given as to compliance with the Joint Ownership Agreement (including but not limited to Section 16 thereof).
The opinions expressed in paragraph 2 above are qualified as to the enforceability of th- Agreements to the extent that they may be subject to the exercise Of judicial discretion in accordance with general equitable principles, with respect to matters of force majeure and by laws relating to bankruptcy, insolvency, moratorium, reorganization or similar laws and are further qualified to the extent that no opinion is given as to (i) the availability of specific performance or other equitable remedies, or (ii) compliance with usury laws.
I am licensed to practice law li. the State of Texas. I do not purport to be an expert on, or to express any opinion herein concerning, any law other than the laws of the State of Texas and the federallaw of the United States.
The foregoing opinicns are limited to the existing laws on the date hereof and I undertake no obligation or responsibility to update or supplement this opinion in response to subsequent changes in the law or future events or circumstances affecting the transactions contemplated herein. This opinion has been delivered solely for your benefit and may not be otherwise reproduced, filed or relied upon by any other person or entity.
Very truly yours, Joseph Robert Riley 4
.u. - _ _ - - . _ , _ . - _
EXHIBIT I For the letterhead of Worsham, Forsythe, Sampels & Wooldridge
,198_
Brazos Electric Power Cooperative, Inc.
P. O. Box 2585 Waco, Texas 76702-2585 Gentlemen:
We have acted as counsel for Texas Utilities Electric Company, a Texas corporation (the "Company"), in connection with that certain Agreement dated July 5,1988 (the "Agreement") by and between Brazos Electric Power Cooperailve, Inc. ("Brazos") and the Company, and as counsel for Texas Utilities Company, a Texas corporation ("TUC"), in connection with the Guaranty of even date herewith given in connection with the Note.
'Ihis opinion is delivered to you pursuant to section 7.4 of the Agreement.
Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Agreement.
In connection with this opinion, we have reviewed executed copies of the Agreement, the Assignment Agreenaent of even date hereof between the Company and Brazos (the "Assignment Agreement"), the Amendment of even date hereof to the Transmission Agreement between the Company and Brazos executed on July 25,1979 (the "Transmission Agreement Amendment"), the Assumption And Indemnity Agreement of even date hereof from the Company to Brazos (the "Indemnity Agreement"), the Release of even date hereof from the Company in favor of Brazos (the "Release"), the Covenant Not To Sue of evu date hereof from the Company to Brazos (the "Covenant Not To Sue"),
the Note of even date hereof from the Company to Brazos (the "Note") and the purchase money Mortgage of even date herect from the Cc 4 any in favor of the Trustee named therein for the benefit of Brazo* (the "Mortgab. ) (the Agreeinent, the Assignment Agreement, the Transmission Agreement Amendment, the Indemnity Agreement, the Release, the Covenant Not To Sue, the Note and the Mortgage are hereinafter sometimes referred to collectively as the "Agreements"), and the Guaranty of even date hereof from TUC, the parent of the Company, to Brazos given in connection with the Note (the "Guaranty"). We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, certificates and other documents of the Company and TUC and made such investigations of law (subject to the limitations hereinafter set forth) as we have deemed necewary .or appropriate as a basis for the opinions expressed below.
As to questions of fact material to our opinions expressed herein, we have, when relevant facts were not independently established, relied upon certificates of, and
information received from officers of the Company and TUC anf have assumed the accuracy of the statements of fact contained in all of the documents reviewed by us. We have not independently investigated or verified the facts represented in such certificates I or information and do not opine as to the accuracy of any such facts. With respect to certain matters set forth in paragrcph I below, we have also relied upon certificates and other documents from, and conversations with, public officials.
In rendering the following opinions, we have assumed, but not independently verified, the authenticity of any document or other instrument submitted to us as an original, the conformity to the originals of any document or other instrument submitted to us as a copy, and the genuineness of all signatures, except signatures made on behalf of the Company and TUC. We have also assumed, but not independently verified, that all documents executed by a party other than the %npany or TUC were duly and validly authorized, executed and delivered by such party, which had requisite power and authority with respect thereto, and are legal, valid and binding obligations of such party enforceable against such party in accordance with their respective terms.
To the extent that our opinions in paragraph 2 below relate to consent requirements which may be contained in any agreement or contract to which the Company or TUC is a party or by which either is bound, the opinion is based solely on certificates of officers of the Company or TUC without any independent investigetion.
Based upon the foregoing and subject to the qualifications set forth herein, we are of the opinion that: 1
- 1. _ ne Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas with requisite corporate power and authority to carry on its business as now conducted and to own, buy and accept the transfer of the Purchased Assets as provided for in the Agreement, l
- 2. De Company has requisite corporate power and authority to execute, delfver and perform the Agreements and to carry out its obligations thereunder and to receive delivery of the Special Warr:nty Deed With Yendor's Lien and Bill of Sale of even date herewith from Brazos to the Company. The Company has full, requisite corporate power and autt.arity to act for itself and the other persons or entitles, private and governmental, acting by, through and under the Company, in connection with the Agreements. The Agreements have been duly authorized, executed and delivered by the Company, and constitute valid and legally binding obligations of the Company and the other persons or entitles, private or governmental, acting by, through and under the Company, enforceable against such parties in accordance with their respective terms. For purposes of the foregoing, we have assumed that the provisions of paragraph 8 of the Note have been and will continue to be complied with and will be construed to override all provisions of the l Agreement, the Note and the Mortgage which may be inconsistent therewith, ne '
execution, delivery and performance of the Agreements by the Company does not conflict with or result in any violation of, or constitute a default under, (i) the Articles of Incorporation or by-laws of the Company, or (ii) to our knowledge, any material provision of any mortgage, indenture, lease, agreement or other instrument to which the Company
' is subject or a party, including any bonds or other obligation or other evidence of indebtedness, or (iii) to our knowledge, any permit, concession, grant, franchise, license, judgment, order or decree, applicable to the Company or any of its property, including Comanche Peak; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein. Assuming valid recordation to make effective the lien of the Mortgage, such lien is a superior lien to the lien of the Mortgage and Deed of Trust, dated as of December 1,1983, of the Company to
] irving Trust Company, Trustee.
1
- 3. De Company has obtained all necessary consents, approvals, orders and authorizations of, and has made all &cessary registrations, declarations and filings with, each governmental authority or other entity required in connection with the execution, delivery, and performance by the Company of the Agreements. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or other entity is required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or agreement with any other entity to permit the Company to execute, deliver or perform the Agreements.
- 4. TUC is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas with requisite corporate power and authority to carry on its business as now conducted and has requisite corporate power and authority to execute, deliver and perform the Guaranty and to carry out its obligations thereunder.
He Guaranty has been duly authorized, executed and delivered by TUC,' and constitutes the valid and legally binding obligation of TUC enforceable against it in accordance with its terms. 'Ihe execution, delivery and performance of the Guaranty does not conflict with or result in any violation of, or constitutu a default under, (i) the Articles of incorporation or by-laws of TUC, or (ii) any material provision of any mortgage, indenture, lease, agreement or other instrument to which TUC is subject or a party, or (iii) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TUC or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein.
De opinion expressed in paragraph 2 above as to conflicts with other agreements to which the Company is a party is qualified to the extent that no opinion is given as to compliance with the Joint Ownership Agreement (including but not limited to Section 16 thereof).
The opinions expressed in paragraphs 2 and 4 above are qualified as to the enforceability of the Agreements and the Guaranty to the extent that they may be subject '
to the exercise of judicial discretion in accordance with general equitable principles, with l respect to matters of force majeure and by laws relating to bankruptcy, irsolvency, moratorium, reorganization or similar laws and are further qualified to the extent that no opinion is given as to the availability of specific performance or oth_r equitable remedies.
We are licensed to practice law in the State of Texas. We do not purport to be experts on, or to express any opinion herein concerning, any law other than the laws of the State of Texas and the federallaw of the United States.
De foregoing opinions are limited to the existing laws on the date hereof and we undertake no obligation or responsibility to update or supplement this opinion in response to subsequent changes in the law or future events or circumstances affecting the transactions contemplated herein. 'Ihis opinion has been delivered solely for your benefit and may not be otherwise reproduced, filed or relied upon by any other person or entity.
Very truly yours, WORSHAM, FORSYTHE, SAMPELS
& WOOLDRIDGE By:
A Partner
EXHIBIT J RELEASE STATE OF TEXAS S
-S ,
COUNTY OF MC LENNAN S <
For and in consideration of the agreements, undertaMngs, promises, and covenants of TU Electric, TUC, and their subsidiaries and affiliates set forth in the Agreement, including without limitation the contemporaneous delivery to Brazos by TU Electric of (1) a Release releasing certain claims which TU Electric, TUC, and their subsidiaries and iffiliates have or may have ageinst Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), (2) a Covenant Not to Sue under which TU Electric, for itself and on behalf of TUC, and their subsidiaries and affiliates and on behalf of any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, covenants not to sue upon certain claims which they may have against Brazos or its Members, and (3) an Assumption and Indemnity Agreement under which TU Electric assumes certain duties, responsibilities, liabilities and obligations of Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), and agrees to indemnify Brazos, its Members and customers (including the customers of Brazos' Members and othu wholesale customers), against certain claims, the adequacy and sufficiency of such consideration being hereby acknowledged and confessed, Brazos hereby agrees to the following:
1.
Definitions. As used herein, the following terms have the following meanings:
A. "Agreement" means that certain Agreement dated July 5,1988, by and between Brazos and TU Electric.
B. "Brazos" means Brazos Electric Power Cooperative, Inc. j C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related
propertits, and is tha sggregate and combination of the Statiori, Fuel, and Transmission Facilities, and all other rights and interests associated with or relating thereto.
D. "Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, .
TEXAS ELECTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING COMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
Ligh'. Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non-profit electric cooperative corporations that are members of Brazos, as set out in Exhibit C to the Agreement.
G. "Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as owners of Comanche Peak in accordance with the terms of the JOA, or singularly any of such parties.
H. "Pending Litigation" means Ceuse No. 399,482 _Brazos Electric Power Cooperative, Inc. v. Texas Utilities Company, Texas Utilities Electric Company, Texas Utilities Mining Company, and Texas Utilities Services Incorporated. - in the District Court of Travis County, Texas, 345th Judicial District; Cause rio. 3S9,336 -Tex-Im Electric Cooperative of Texas, Inc., and Texas Municipal Power Agency v. Texas Utilities and Texas Utilities Electric Company -in the District Court of Travis County, Texas, 98th Judicial District; and Cause No. 86-6809-A - Texas Utilities Electric Company v.
{
Tex-La Electric Cooperative of Texas, Inc., et al. - in the District Court of Dallas County, Texas,14th Judicial District.
- 1. "Project Manager" means TU Electric designated and acting as such in l accordance (or purportedly in accordance) with the terms of the JOA.
J. "Site" means approximately 7,669 acres owned (in fee or other estate or i l
interest) by the Owners, as tenants in common, and located in Hood and Somervell l l
Counties, Texas.
K. "Station" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (i) all personal property thereon and associated therewith ce related thereto and owned by the Owners, and (!!) all rights (tangible or intangible), and all easements and other interests of any nature associated therewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilities. .
L. "Subject Claims" means any and all claims, actions, controvers'es, causes of action, disputes, demand t, and complaints of whatsoever kind or nature and whether known or unknown.
M. "Tex-La" means Tex-La Electric Cooperative of Texas, Inc.
N. "TMPA" means Texas Municipal Power Agency.
O.
"Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical trammission line approximately 14.4 miles in length, and associated rights-of-way, coe.pment, fixtures and personal property.
P. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric.
Q. "TU Electric" means Texas Utilities Electric Company, which is a Texas corporation.
IL Release. Brazos, except as provided in paragraph 111 herein, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including without limitation, to the extent it has the standing and right under law l
to do so, its Members and customers (including the customers of Biazos' Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys, and representatives does hereby waive, release, discharge, renounce, and relinquish any and all
\
Subject Claims relating to Comanche Peak which it has or they have, or may have, I whether known or unknown, contingent or absolute, including, without limitation, those based on common law, whether contract (expressed or implied, including express or implied warranty) or tort (including, without limitation, 'ntentional tort, negligence or gross negligence, sole, joint, or concurrent) or strict liability or fraud, and those based upon any Federal, state, or local statute, law, order or regulation, including without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the United States Nuclear Regulatory Commission, the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V. A.T.S.) and the Texas Deceptive frade Practices and Consumer Protection Act, against TU Electric or TUC, or both, in any capacity, whether individually, as the Project Manager, or otherwise, and their respective l 4
insurtrs, agents, servants, employees, officers, directors, shareholders, cons iltants, {
l attorneys and representatives, past and present, and any and all of thi.ir respective '
successors, subsidiaries, and affiliates, and their respective insurers, agents, servants, i
employees, officers, directors, shareholders, consultants, attorneys, and representatives, past and present, j
-4 l
\
III. Exceptions to Release. Brazos specifically does not release the following:
(a) Any Subject Claims arising out of or under the Agreement or any of the .
agreements or instruments to be delivered by TU Electric or TUC pursuant to the Agreement.
(b) Any Subject Claims which could not have been brought in the Pending Litigation and which accrue on or after the Date of Commercial Operation (as that term is defined in the JOA) and which are based upon the acts or omissions of TU Electric or the Project Manager other than acts or omissions in connection with the planning, design or construction (or the management thereof) of Comanche Peak.
IV.
Covenant. Brazos hereby covenants and warrants that it has not assigned any Subject Claims that are hereby released.
V. Control. To the extent any provision of this Release conflicts with any provision in Section 9.1 of the Agreement, this Release shall control as to the agreement of the parties.
EXECUTED this the day of _,1988, as duly authorized by an appropriate resolution of its Board of Directors.
BRAZOS ELECTRIC POWER COOPER ATIVE, INC.
(Corporate Scal) By:
ATTEST: Its:
By:
Its:
l i
t
l EXHIBIT K COVENANT NOT TO SUE STATE OF TEXAS S S
COUNTY OF MC LENNAN S For and in consideration of the agreements, undertakings, promises, and covenants of TU Electric, TUC, and their subsidiaries and affiliates set forth in the Agreement, including without limitation the contemporaneous delivery to Brazos by TU Electric of (1) a Release releasing certain claims which TU Electric, TUC, and their subsidiaries and affiliates have or may have against Brazos, its Members and customers (including the l customers of Brazos' Members and other wholesale customers), (2) a Covenant Not to Sue under which TU Electric, for itself and on behalf of TUC, and their subsidiaries and affiliates and on behalf of any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, covenants not to sue upon certain claims which they may have against Brazos or its Members, and (3) an Assumption and Indemnity Agreement under which TU Electric assumes certain duties, responsibilities, liabilities and obligations of Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), and agrees to indemnify Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), against certain claims, the adequacy and sufficiency of such consideration being hereby acknowledged and confessed, Brazos hereby agrees to the following:
I. Definitions. As used herein, the following terms have t'e following meanings:
A. "Agreement" means that certain Agreement dated July 5,1988, by and between Brazos and TU Electric.
B. "Brazos" means Brazos Electric Power Cooperative, Inc.
C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related
properties, and is the aggregato and combination of the Station, Puel, and Transmission Facilities, and all other rights and interests associated with or relating thereto.
D. "Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, TEXAS ELECTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING COMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brezos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non-profit electric cooperative corporations + hat are members of Brazos, as set out in Exhibit C to the Agreement.
"Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as owners s .,manche Peak in accordance with the terms of the JOA, or singularly any of such parties.
H. "Pending Litigation" means CIuse No. 399,482 - Brazos Eltetric Power Cooperative, Inc. v. Texas Utilities Company, Texas Utilities Electric Company, Texas Utilities Mining Company, and Texas Utilities Services Incorporated, - in the District Court of Travis County, Texas, 345th Judicial District; Cause No. 399,336 -Tex-La Electric Cooperative of Texas, Inc., and Texas Municipal Power Agency v. Texas Utilities and Texas Utilities Electric Company, - in the District Court of Travis County, Texas, 98th Judicial District; and Cause No. 86-6809-A - Texas Utilities Electric Company v.
Tex-La Flactric Cooperative of Texas, Inc., et al. - in the District Court of Dallas County, Texas,14th Judicial District.
I. "Project Manager" means TU Electric designated and acting as such in accordance (or purportedly in accordance) with the terms of the JOA.
I J. "Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and Somervell I l
Counties, Texas. ;
K. "Station" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (i) all personal property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all easements and other interests of any nature associated thucewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilities. i L. "Subject Claims" means any and all claims, actions, controversies, causes l of action, disputes, demands, and complaints of whatsoever kind or nature and whether ;
known or unknown.
M. "Tex-La" means Tex-La Electric Cooperative of Texas, Inc.
N. "TMPA" means Texas Municipal Power Agency.
O. ' Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical transmission line approximately 14.4 miles in length, and associated rights-of-way, equipment, fixtures and personal property.
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P. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric.
Q. "TU Electric" means Texas Utilities Electric Company, which is a Texas corporation.
II. Covenant Not to Sue and Agreement Not to Challenge. Brazos, except as provided in paragraph 111 herein, for itself and on behalf of any person or entity, private or governmental, claiming by, through, or under Brazos, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Brazos' Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys, and representatives, does hereby covenant and agrees (a) 'Ihat it and they, individually, collectively, or in any combination, will forebear from asserting against, and never sue for or look for satisfaction with respect to, TU Electric, TUC, and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys, and representatives, past and present, and any and all of their respective successors, subsidiaries, and affiliates and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys, and representatives, past and present, with respect to any Subject Claims (including without limitation any Subject Claim against any contractor, subcontractor, supplier, consultant, vendor or other person, firm or entity in privity in any manner with any of them which may therefor or as a result thereof have a right over or Subject Claim in subrogation)in any manner involving, concerning, arising out of, or relating to, the design, construction, management, and licensing of, or any other matter relating to, Comanche Peak, and the management, procurement, conversion, j l
enrichment, fabrication, shipping, transportation, and storage of the Fuel.
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U (b) That neith;r it nor they, individually, collectively, or in any combination, will directly or indirectly challenge, contest, or assert any complaint in any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the incidents - and attributes thereof including, without
- limitation: (1) the design, construction, management, and licensing of Comanche Peak or any other aspect thereof, (2) the costs and schedule of construction and completion of Comanche Peak, (3) the reasonableness, prudency, or efficiency of the planning, design, construction, management, and licensing of Comanche Peak, (4) the reasonableness, prudency, or efficiency of the management, procurement, conversion, enrichment, fabrication, shipping, transportation, and storage of the Fuel, (5) the costs incurred in connection with the management, procurement, conversion, enrichment, fabrication, shipping, transportation, and storage of the Fuel, (6) the breach of the JOA and any express or implied warranties arising out of the JOA, (7) any representation, misrepresentation, disclosure, or non-disclosure in connection with the negotiations, or preceding the execution by Brazos of the JOA, (8) in connection with the performance or nonperformance by TU Electric of its ;
1 duties, responsibilities or obligations under the JOA as Project Manager or otherwise, (9) the failure of TU Electric to pursue any remedies, either at law or otherwise, thet may be, or may have been, available against any and all contractors, subcontractors, suppliers, consultants, vendors, or others with respect to Comanche Peak (including separately the Station, Fuel or Transmission Facilities), and (10) on account of anything that has occurred or may have occurred, in whole or in part with respect to Comanche Peak (including separately the Station, Fuel or Transmission Facilities) and the incidents and attributes thereof, and any of the foregoing whether known or unknown.
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III. Exetptions to Covenant Not to Sua cnd Agreemtnt Not to Challengt. Brazos specifically does not covenant not to sue, and specifically does not agree to not assert, challenge or contest, with regard to (a) Any Subject Claims arising out of or under the Agreement or any of the other agreements or instruments delivered pursuant to the Agreement.
(b) Any Subject Claims which could not have been brought in the Pending Litigation and which accrue on or after the Date of Commercial Operation (as that term is defined in the JOA) and which are based upon the acts or omissions of TU Electric or the Project Manager other than acts or omissions in connection with the planning, design or construction (or the management thereof) of Comanche Peak.
(c) Any defenses which Brazos has or may have to Subject Claims asserted against Brazos by any persons or parties whomsoever, provided that Brazos may not seek any type of affirmative relief hereunder against TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, ,
i agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives.
l (d) Any counterclaims which Brazos has or may have against any party other than TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, acting in such capacity, !
I with respect to any Subject Claims being asserted against Brazos by anyone other than TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, employees, officers, directors,
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shareholders, consultants, attorneys and representatives.
(e) Any proczding in which TU Electric's r;tes ars being determined, provided that Brazos shall not oppose, or assist any third party opposition to, the inclusion in TU Electric's rates of any and all costs related to Comanche Peak.
IV. Control. To the extent any provision of this Covenant Not to Sue conflicts with any provision in Section 9.2 of the Agreement, this Covenant Not to Sue shall control as to the agreement of the parties.
EXECUTED this the day of ,1988, as duly authorized by an appropriate resolution of its Board of Directors.
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
(Corporate Seal) By:
A'ITEST: Its:
By:
Its:
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EXHIBIT L RELEASE STATE OF TEX AS S S
COUNTY OF DALLAS S For and in consideration of the agreements, undertakings, promises, and covenants of Brazos, including without limitation the contemporaneous delivery to TU Electric by Brazos of (1) a Release releasing certain claims which Brazos and any other person or entity, private or governmental, claiming by, through, or under Brazos, including, to the extent it has the standing and right under law to do so, Brazos' Members and customers (and the customers of Brazos' Members and other wholesale customers), have or may have against TU Electric, TUC, or their subsidiaries and affiliates, (2) a Covenant Not To Sue under which Brazos, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including, to the extent it has the standing and right under law to do so, Brazos' Members and customers (and the customers of Brazos' Members and other wholesale customers), covenants not to sue upon certain claims which they have or may have against TU Electric, TUC, or their subsidiaries and affiliates, and (3) an Indemnity Agreement under which Brazos indemnifies TU Electric against certain claims, the adequacy and sufficiency of such consideration being hereby acknowledged and confessed, TU Electric hereby agrees to the following: I
- 1. Definitions. As used herein, the following terms have the following meanings:
A. "Agreement" means that certain Agreement dated July 5,1988, by and between Brazos and TU Electric.
B. "Brazos" means Brazos Electric Power Cooperative, Inc.
C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related I
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properties, tnd is the aggrcgate cnd combinati:n of th2 Station, Fu:1, and Transmission Facilities, and all other rights and interests associated with or relating thereto.
D. "Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, TEXAS ELECTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING COMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, togetic with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, l together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non-profit electric cooperative corporations that are members of Brazos, as set out in Exhibit C to the Agreement.
G. "Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as ;
owners of Comanche Peak in accordance with the terms of the JOA, or singularly any of such parties.
l H. "Project Manager" means TU Electric designated and acting as such in l accordance (or purportedly in accordance) with the terms of the JOA.
I "Site" means approximately 7,669 acres owned (in fee or other estate or l
interest) by the Owners, as tenants in common, and located in Hood and Somervell Counties, Texas.
J. "Station" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (1) all personal property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all easements and other interests of any nature associated therewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilities.
K. "Subject Claims" means any and all claims, actions, controversies, causes of action, disputes, demands, and complaints of whatsoever kind or nature and whether !
known or unknown.
L. "Tex-La" means Tex-La Electric Cooperative of Texas, Inc. I M. 'TMPA" means Texas Municipal Power Agency.
N. ' Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical transmission line approximately 14.4 miles in length, and associated rights-of-way, equipment, fixtures and personal property.
O. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric.
P. "TU Electric" means Texas Utilities Electric Company, which is a Texas corporation.
II. Release. TU Electric, except as set out in paragraph III herein, on behalf of I itself, TUC, their subsidiaries and affiliates, and on behalf of any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, including without l limitation, to the extent it has the standing and right under law to do so, their customers,
and on behalf of their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys, and representatives, does hereby waive, release, discharge, renounce, and relinquish any and all Subject Claims relating to Comanche Peak which it has or they have, or may have, whether known or unknown, contingent or absolute, including without limitation those based on common law, whether contract (expressed or implied, including express or implied warranty) or tort (including, without limitation, intentional tort, negligence or gross negligence, sole, joint, or concurrent) or strict liability or fraud, and those based upon any Federal, State, or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the United States Nuclear Regulatory Commission, the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V. A.T.S.) and the Texas Deceptive Trade Practices and Consumer Protection Act, against Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), whether individually or otherwise, and their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, past and present, and any and allof their respective successors, subsidiaries, and affiliates, and their respective insurers, agents, servants, employees, officers, directors, members, consultants, attorneys, and representatives, past and present.
IIL Exceptions to Release. TU Electric specifically does not release with regard tol (a) Any Subject Claims arising out of or under the Agreement or any other agreement or instrument executed and delivered pursuant to the Agreement. (
(b) Any right or authority to charge Brazos, its Members and customers for i
any electric power and energy purchased by any of them from TU Electric in i
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accordance with the rates set forth in TU Electric'* tar!!f as mn.e may be approved )
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and in effect from time to time even though said rates may include costs related to Comanche Peak.
(c) Any defen es which TU Electric has or may have to Subject Claims asserted against TU Electric by any persons or parties whomsoever, provided that TU Electric may not seek any type of affirmative relief hereunder (other than rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446c, V.A.T.S.) against Brazos, its M embers and customers (including the customers of Brazos' Members and other wholesale customers), their respective insurers, agents, empic,jees, officers, directors, consultants, attorneys and representatives.
(d) Any counterclaims which TU Electric has or may have against any party other than Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives, acting in such capacity (other than in connection with rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446c, V.A.T.S.) with respect to any Subject Claims being asserted against TU Electric by anyone other than Brazos, its Members and customers (including the customers of Brazos' Members and other l wholesale customers), individually or otherwise, their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives.
IV.
Covenant. TU Electric hereby covenants and warrants that it has not assigned ;
any Subject Claims that are hereby released.
V. Control. To the extent any provision of this Release conflicts with any !
provision in Section 9.3 of the Agreement, this Release shall control as to the agreement of the parties.
EXECUTED this the day of ,'1988, as duly authorized by an appropriate resolution of its Board of Directors.
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. TEXAS UTILITIES ELECTRIC COMPANY - I 1
(Corporate Seal) By:
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EXHIBIT M COVENANT NOT TO SUE STATE OF TEX AS S S
COUNTY OF DALLAS S For and in consideration of the agreements, undertakings, promises, and covenants of Brazos, including without limitation the contemporaneous delivery to TU Electric by Brazos of (1) a Release releasing certain claims which Brazos and any other person or entity, private or governmental, claiming by, through, or under E'azos, including, to the extent it has the standing and right under law to do so, Brazos' 51 embers and customers (and the customers of Brazos' Members and other wholesale customers), have or may have against TU Electric, TUC, or their subsidiaries and affiliates, (2) a Covenant Not To Sue under which Brazos, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including, to the extent it has the standing and right under law to do so, Brazos' Members and customers (and the customers of Brazos' Members and other wholesale customers), covenants not to sue upon certain claims which they have or may have against TU Electric, TUC, or their subsidiaries and affiliates, and (3) an Indemnity Agreement under which Brazos indemnifies TU Electric against certain claims, the adequacy and sufficiency of such consideration being here!y acknowledged and confessed, TU Electric hereby agrees to the following:
- 1. Definition. As used herein, the following terms have the following meanings:
A. "Agreement" means that certain Agreement dated July 5,1988, by and between Brazos and TU E'ectric.
B. "Brazos" means Brazos Electric Power Cooperative, Inc.
C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related
properties, and is the aggregate and me; .a.1 of the Station, Fuel, and Transmission Facilities, and all other rights and intu v ' un ed with or relating thereto.
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D. "Fuel" means the Cm . 1 e e.ak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, TEXAS ELECTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING JOMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non profit electric cooperative corporations that are members of Brazos, as set out in Exhibit C to the Agreement.
G. "Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as owners of Comanche Peak in accordance with the terms of the JOA, or singularly any of such parties.
H. "Prcject Manager" means TU Electric designated and acting as such in accordance (or purportedly in accordance) with the terms of the JOA.
I. "Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and Somervell Counties, Texas.
J. "Station" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (i) all personal property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all easements and other interests of any nature associated therewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilities.
K. "Subject Claims" means any and all claims, actions, controversies, causes of action, disputes, demands, and complaints of whatsoever kind or nature and whether known or unknown.
L. "Tex-La" means Tex-La Electric Cooperative of Texas, Inc.
M. "TMP A" means Texas Municipal Power Agency.
N.
"Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical transmission line approximately 14.4 miles in length, and associated ~
j rights-of-way, equipment, fixtures and personal property.
O. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric.
P. "TU Electric" means Texas Utilities Electric Company, which is a Texas corporation.
II. Covenant Not to Sue and Agreement Not to Challenge. TU Electric, except as provided in paragraph III hereof, for itself and on behalf of TUC and their subsidiaries and affiliates and any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, including without limitation, to the extent it has the standing and
i right under law to do so, their customers, and their respective insurers, agents, servants, employees, officers, directoes, consultants, attorneys and representatives, does hereby covenant and agrees (a) Dat it and they, individually, collectively, or in any combination, will forebete from asserting against, and never sue for or look for satisfaction with respect to, Brazos, its Members, and their respective insurers, agents, servants, employees, officers, directors, m embers, consultants, attorneys, and representatives, past and present, and any and all of their respective successors, subsidiaries, and affiliates and their respective insurers, agen ts, servants, employ?es, officers, directors, shareholders, members, consultants, attorneys, and representatives, past and present, with respect to any Subject Claims (including without limitation any Subject Claim against any contractor, subcontractor, supplier, consultant, vendor or other person, firm or entity in privity in any manner with any of them which may therefor or as a result thereof have a right over or l
Subject Claim in subrogation)in any manner involving, concerning, arising out of, or relating to, the design, construction, management, and licensing of, or any other matter relating to, Comanche Peak, and the management, procurement, conversion, enrichment, fabrication, shipping, transportation, and storage of the Fuel.
(b) nat neither it nor they, individually, collectively, or in any combination, ,
will directly or indirectly challenge, contest or assert any complaint against Brazos or its Members in any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the JOA and in connection with the performance or nonperformance by Brazos of its , duties, responsibilities or obligations under the JOA, and on account of anything that has occurred or may have occurred, in whole or in part, with respect to Comanche Peak (including
separately the Station, Fuel or Transmission Facilities) and the incidents and attributes thereof, and any of the foregoing whether known or unknown.
!!!. Exceptions to Covenant Not to Sue and Agreement Not to Challenge.
TU Electric specifically does not covenant not to sue, and specifically does not agree to not assert, challenge or contest, with regard to:
(a) Any Subject Claims arising out of or under the Agreement or any other agreement or Instrument executed and delivered pursuant to the Agreement.
(b) Any right or authority to charge Brazos, its Members and customers for any electric power and energy purchased by any of them from TU Electric in accordance with the rates set forth in TU Electric's tariff as same may be approved and in effect from time to time even though said rates may include costs related to Comanche Peak.
(c) Any defenses which TU Electric has or may have to Subject Claims asserted against TU Electric by any persons or parties whomsoever, provided that TU Electric may not seek any type of affirmative relief hereunder (other than rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446c, V. A.T.S.) against Brazos, its Members and customers (including the customers of Brazos' Members and other wholesale customers), their respective insurers, agents, employees, officers, directors, censultants, attorneys and representatives.
l (d)
Any counterclaims which TU Electric has or may have against any party 1 other than Brazos, its Members and customers (including the customers of Brazos' l
Members and other wholesale customers), their respective insurera, agen ts, employees, officers, directors, consultants, attorneys and representatives, acting in such capacity (other than in connection with rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446c, V.A.T.S.) with respect to any !
i Subject Claims being asserted against TU Electric by anyone other than Brazos, its Members and customers (including the customers of Brazos' Members and other l
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wholesale customers), Individually or otherwise, their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives.
IV. Control. To the extent any provision of this Covenant Not to Sue conflicts with any provision in Section 9.4 of the Agreement, this Covenant Not to Sue shall control as to the agreement of the parties.
EXECUTED this the day of ,1988, as duly authorized by an appropriate resolution of its Board of Directors.
TEX AS UTILITIES ELECTRIC COMPANY (Corporate Seal) By:
Its:
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EXHIBIT N ASSUMPTION AND INDEMNITY AGREEMENT STATE OF TEXAS S S
COUNTY OF DALLAS S 1
For and in consideration of the agreements, undertakings, promises, and covenants of Brazos as set forth in the Agreement, including without limitation the contemporaneous delivery to TU Electric by Brazos of (1) a Release releasing certain claims which Brazos and any other person or entity, private or governmental, claiming by, through, or under Brazos, including, to the extent it has the standing and right under law I to do so, Brazos' Members and customers (and the customers of Brazos' Members and other wholesale customers), h've or may have against TU Electric, TUC and their subsidiaries and affiliates,(2) a Covenant Not To Sue under which Brazos, for itself and an behalf of any person or entity, private or governmental, claiming by, through or under Brazos, including, to the extent it has the standing and right under law to do so, Brazos' Members and customers (and the customers of Brazos' Memb~ and other wholesale customers), covenants not to sue upon certain claims which they hav. may have against TU Electric, TUC and their subsidiaries and affiliates, and (3) an Indemnity Agreement under which Brazos indemnifies TU Electric against certain claims, the adequacy and sufficiency of such consideration being hereby acknowledged and confessed, TU Electric j hereby agrees to the following:
- 1. Definitions. As used herein, the following terms have the following meanings:
A. "Agreement" means that certain Agreement dated July 5,1988, by and between Brazos and TU Electric.
B. "Brazos" means Brazos Electric Powei ' ooperative, Ir.c.
C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands si'.uated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related
properties, and is the aggregate and combination of the Station, Fuel, and Transmission Facilities, and all other rights and interests associated with or relating thereto.
D. "Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, cXAS EL2CTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING COMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (t) the Amendment of Joint Ownership Agreement, executed on December 9, 1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, together with and as amended by (ii) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non-profit electric cooperative corporations that are members of Brazos, as set out in Exhibit C to the Agreement.
G. "Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as owners of Comanche Peak in accordance with the terms of the JOA, or singularly any of such parties.
H. "Pending Litigation" means Cause No. 399,482 - Brazos Electric Power Cooperative, Inc. v. Texas Utilities Company, Texas Utilities Electric Company, Texas Utilities Mining Company, and Texas Utilities Services Incorporated, - in the- District Court of Travis County, Texas, 345th Judicial District; Cause No. 399,336 -Tex-La Electric Cooperative of Texas, Inc., and Texas Municipal Power Agency v. Texas Utilities and Texas Utilities Electric Company, - the District Court of Travis County, Texas, 98th Judicial District; and Cause No. 86-6809-A - Texas Utilities Electric Company v.
Tex-La Electric Cooperative of Texas, Inc., et al. - in the District Court of Dallas County, Texas,14th Judicial District.
I. "Project Manager" means TU Electric designated and acting as such in accordance (or purportedly in accordance) with the terms of the JOA.
J. "Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and Somervell Counties, Texas.
K. "Sistion" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (i) all personal property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all easements and other interests of any nature associated therewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilitics.
L. "Subject Claims" means any and all claims, actions, controversies, causes of action, disputes, demands, and complaints of whatsoever kind or nature and whether known or unknown.
M. ' Tex-La" means Tex-La Electric Cooperative of Texas, Inc.
N. "TMPA" means Texas Municipal Power Agency.
_ -. . -_~
O. "Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical transmission line approximately 14.4 miles in length, and associated' rights-of-way, equipment, fixtures and personal property.
P. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric. I
-i Q. "TU Electric" means Texas Utilities Electric Company, which is a Texas corporation.
II. Assumption of Liabilities. TU Electric assumes all the duties, responsibilities, I l
liabilities, and obligations of Brazos under the JOA and under the Atomic Energy Act of 1954, as amended, and the rules and regulations of the Nuclear Regulatory Commission thereunder pertaining to Comanche Peak.
III. Indemnification. TU Electric further agrees to indemnify, hold harmless, and defend Brazos and its Members and customers (including the customers of Brazos' Members and other wholesale customers) from and against any and allliability, loss, cost, 69 mage, or expense (including without limitation reasonable attorneys' fees, court costs, costs of appeal, supersedeas bonds, and costs of investigating, defending, attempting to settle, and, if TU Electric approves the settlement, settling any claim, demand, or cause of action) arising out of the following:
(a) all Subject Claims (INCLUDING WITHOUT LIMITATION SUBJECT l CLAIMS PREDICATED UPON THE ALLEGED ACTUAL OR IMPUTED l NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY OF BRAZOS AND ITS l MEMBERS) arising out of or connected with the location, planning, design, construction, licensing, condition, maintenance, operation, and decommissioning of Comanche Peak, including without limitation all claims asserted or which might have been or might hereafter be asserted in Cause No. 83-29889 in District Court of Harris County, Texas, 215th Judicial District, removed in April,1988, to the United States District Court for the Southern District of Texas, Houston Division, l
numbered Civil Action No. H-88-1409, and styled Charles A. Atchisor et al v.
Brown & Root, Inc., et al., and in Cause No. 2692 in the District Cour' of Somervell County, Texas, 18th Judicial District, and styled Clementine Mathews and her husband Dolphin Mathews v. Comanche Peak Electric Steam Station, et al.
(b) all Subject Claims arising out of any alleged act (including willful or intentional acts) of the said Project Manager, its predecessors, agents, servants, employees or independent contractors acting for or on behalf of the Project Manager or its predecessors.
IV. Exceptions to Indemnification.
Without limitation, TU Electric specifically does not agree to indemnify Brazos, its Members or customers in connection with the following:
(a)
Any Subject Claims which may be asserted by Brazos' Members, customers, the customers of Brazos' Members or other wholesale customers, or creditors, acting in such capacity, which relate to Brazos' decision to participate as an Owner of Comanche Peak, or which relate to brazos' decision to become a party to the JOA, or which relate to Brazos' involvement in the Pending Litigation, or which relate to Brazos' execution of the Agreement and participation in the transactions provided for in the Agreement.
(b)
Any Subject Claims which may be asserted by Tex-La, TMPA, or others (except TU Electric, TUC, and their affiliates, subsidiaries, successors and assigns, and except for their insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys, and representatives, past and present, acting in such capacities) which relate to Brazos' decision to become a party to the JOA, or which arise by reason of Brazos' participation in the Pending Litigation, or which arise by reason of Brazos' execution of the Agreement and participation in the transactions provided for in the Agreement.
(c) Any liability, cost or expense pursuant to TU Electric's rates set forth in TU Electric's tariff as same may be approved and in effect from time to time, even though said rates may include costs related to Comanche Peak, for electric power and energy purchased by Brazos, its Members and customers from TU Electric.
(d) Any Subject Claims relating to .Brazos' performance under the Agreement or any other agreement or instrument executed or delivered pursuant to the Agreement.
V. Assumption of Defense. TU Electric will, in addition to providing the foregoing indemnity, assume the defense of Brazos and its Members and customers (including the customers of Brazos' Members and other wholesale customers) in any tribunal where any claim set out in paragraph III, and not excepted in paragraph IV, is asserted. Provided, however, that, in the event Brazos or any of its Members or customers (including the customers of Brazos' Members or other wholesale customers) receive notice of the commencement of any action or proceeding or the assertion of any claim with respect to which any of them may be entitled to indemnification hereunder or
)
under the Agreement, the party receiving such notice shall give TU Electric written l
1 notice within ten (10) calendar days of such notice (the failure to so notify will not relieve l TU Electric of its obligations hereunder except to the extent it has been prejudiced by a failure to so notify) and shall give TU Electric the opportunity to participate in the defense and in any settlement negotiations with respect thereto, and will cooperate with TU Electric in all reasonable respects and make available to TU Electric all records, evidence and personnel for consultation and testimony reasonably requested by l
TU Electric in connection therewith. The settlement of any such action, proceeding or claim without the prior written approval of TU Electric shall relieve TU Electric of any obligations to the indemnified party in respect of the subject matter of the settlement of such action, proceeding, or claim.
VI. Control. To the extent any provision of this Assumption and Indemnity Agreement conflicts with any provision in Section 9.5 of the Agreement, this Assumption and Indemnity Agreement shall control as to the agreement of the parties.
EXECUTED this the day of ,1988, as duly authorized by an appropriate resolution of its Board of Directors.
TEXAS UTILITIES ELECTRIC COMPANY (Corporate Seal) By:
ATTEST: Its:
By:
Its:
i EXHIBIT O INDEMNITY AGREEMENT STATE OF TEX AS S S l COUNTY OF MC LENNAN S l l
l For and in consideration of the agreements, undertakings, promises, r.d covenants of TU Electric, TUC and their subsidiaries, and affiliates, set forth in the Agreement, I
including without limitation the (1) contemporaneous delivery to Brazos by TU Electric of a Release releasing certain claims which TU Electric, TUC, and their subsidiaries and affiliates have or may have against Brazos, (2) a Covenant Not to Sue under which l TU Electric, for itself and on behalf of TUC, and their subsidiaries and affiliates and on behalf of any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, covenants not to sue upon certain claims which they may have against Brazos or its Members, (3) the contemporaneous delivery to Brazos by TU Electric of an Assumption and Indemnity Agreement under which TU Electric assumes certain duties, responsibilities, liabilities, and obligations of Brazos and agrees to indemnify Brazos against certain claims and (4) the payment by TU Electric to Brazos of the Signing Payment and the Closing Payment (as those terms are defined in the Agreement), the adequacy and sufficiency of such consideration being hereby acknowledged and confessed, Brazos hereby agrees to the following:
L Definitions. As used herein, the following terms have the following meanings:
A. "Agreement" means that certain Agreement dated July ,,1988, by and between Brazos and TU Electric.
B. "Brazos" means Brazos Electric Power Cooperative, Inc.
C. "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties. Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related
properties, and is the aggregate and combination of the Station, Fuel, and Transmission Facilities, and all other rights and interests associated with or relating thereto.
D. "Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto.
E. "JOA" means that certain instrument entitled on the cover page thereof "JOINT OWNERSHIP AGREEMENT BETWEEN DALLAS POWER & LIGHT COMPANY, TEXAS ELECTRIC SERVICE COMPANY, TEXAS POWER & LIGHT COMPANY, TEXAS UTILITIES GENERATING COMPANY, TEXAS MUNICIPAL POWER AGENCY AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. FOR COMANCHE PEAK STEAM ELECTRIC STATION," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas l Municipal Power Agency and Brazos Electric Power Cooperative, Inc.: For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power &
1 Light Company, Texas Utilities Generating Company, TMPA, Brazos, and Tex-La, !
together with and as amended by (11) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities l
Generating Company, TMPA, Brazos, and Tex-La.
F. "Members" means the twenty (20) Texas non-profit electric cooperative corporations that are members of Brazos, as set out in Exhibit C to the Agreement.
G. "Owners" means collectively TU Electric, Brazos, TMPA and Tex-La, as owners of Comanche Peak in accordance with the terms of the JOA, or singularly any of such parties.
H. "Pending Litigation" means Cause No. 399,482 - Brazos Electric Power Cooperative, Inc. v. Texas Utilities Company, Texas Utilities Electric Company, Texas Utilities Mining Company, and Texas Utilities Services Incorporated, - in the District Court of Travis County, Texas, 345th Judicial District; Cause No. 399,336 -Tex-La Electric Cooperative of Texas, Inc., and Texas Municipal Power Agency v. Texas Utilities and Texas Utilities Electric Company, - in the District Court of Travis County, Texas, 98th Judicial District; and Cause No. 86-6809-A - Texas Utilities Electric Company v.
Tex-La Electric Cooperative of Texas, Inc., et al. - in the District Court of Dallas County, Texas,14th Judicial District. ,
I. "Project Manager" means TU Electric designated and acting as such in accordance (or purportedly in accordance) with the terms of the JOA.
J. "Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and Somervell Counties, Texas.
K. "Station" means the Site, all improvements thereon (including Squaw Creek Lake and Park) and all fixtures and attachments thereto, as well as (i) all personal j property thereon and associated therewith or related thereto and owned by the Owners, and (ii) all rights (tangible or intangible), and all easements and other interests of any nature associated therewith or related thereto and owned by the Owners, excluding, however, the Fuel, and the Transmission Facilities, i
l L. "Subject Claims" means any and all claims, actions, controversies, causes of action, disputes, demands, and complaints of whatsoever kind or nature and whether known or unknown.
M. "Tex-La" means Tex-La Electric Cooperative of Texas, Inc.
N. "TMPA" means Texas Municipal Power Agency.
O. "Transmission Facilities" means the Comanche Peak - DeCordova 345 kV electrical transmission line approximately 14.4 miles in length, and associated rights-of-way, equipment, fixtures and personal property.
P. "TUC" means Texas Utilities Company, which is a Texas corporation and the parent of TU Electric.
Q. 'TU Electric" means Texas Utilities Electric Company, which is a Texas I corporation. ;
II. Indemnification. Brazos hereby agrees to indemnify, hold harmless, and defend TU Electric, TUC, and their subsidiaries, affiliates and customers, from and against any and all liability, loss, cost, damage, or expense (including without limitation reasonable attorneys' fees, court costs, cost of appeal, supersedeas bonds, and costs of investigating, defending, attempting to settle, and, if Brazos approves the settlement, settling any claim, demand or cause of action) arising out of Subject Claims of Brazos, or I
anyone related to or affiliated with Brazos, including Brazos' Members, customers (including the customers of Brazos' Members and other wholesale customers) and creditors, acting in such capacity, relating to (1) Brazos' execution of, or participation in, the JOA, (2) Brazos' execution of the Agreement and participation in the transactions provided therein, and (3) Brazos' activities as an Owner separate and apart from joint l activities with all other Owners or activities by, through, and under the Project Manager.
Further, Brazos hereby agrees to indemnify, hold harmless and defend TU Electric, TUC, I and their subsidiaries, affiliates and customers, from and against any and all liability, loss, cost, damage, or expense (including without limitation reasonable attorneys' fees, court costs, cost of appeal, supersedeas bonds, and costs of investigating, defending, attempting to settle, and, if Brazos approves the settlement, settling any claim, demand or cause of j action) arising out of Subject Claims of Brazos, or anyone related to or affiliated with Brazos, including Brazos' Members and, to the extent they are acting in such capacity, Brazos' customers (including the customers of Brazos' Members and other wholesale
l i
I customers) and creditors, with respect to, or in any manner involving, concerning, arising out of, or relating to: (1) the acts or omissions of TU Electric or the Project Manager referred to or in question in the Pending Litigation or which could have been brought into question in the Pending Litigation, INCLUDING WITHOUT LIMITATION SUBJECT CLAIMS BASED UPON THE NEGLIGENCE OR GROSS NEGLIGENCE, SOLE, JOINT OR CONCURRENT, OF TU ELECTRIC OR THE PROJECT MANAGER; and (2) the acts or i
omissions of TU Electric or the Project Manager with respect to Comanche Peak that '
occur, in whole or in part, prior to the Date of Commercial Operation (as said term is ,
l defined in the Joint Ownership Agreement), INCLUDING WITHOUT LIMITATION SUBJECT CLAIMS BASED UPON THE NEGLIGENCE OR GROSS NEGLIGENCE, SOLE, !
JOINT OR CONCURRENT, OF TU ELECTRIC OR THE PROJECT MANAGER.
111. Exceptions to Indemnification. Without limitation, Brazos specifically does not agree to indemnify TU Electric, TUC, and their subsidiaries, affiliates and customers in connection with the following:
(a) Any Subject Claims which may be asserted by TUC's or TU Electric's shareholders, customers or creditors, acting in such capacity, which relate to TU Electric's decision to become a party to the JOA, or which relate to TU Electric's involvement in the Pending Litigation, or which relate to TU Electric's execution of the Agreement and participation by TU Electric and TUC in the transactions provided for in the Agreement.
1 (b) Any Subject Claims which may be asserted by Tex-La, TMPA, or others (except Brazos, its Members and their affiliates, subsidiaries, successors and assigns, and except for their insurers, agents, servants, employees, officers, di ectors, members, consultants, attorneys, and representatives, past and present, acting in such capacities) which relate to TU Electric's decision to become a party to the JOA, or which arise by reason l of TU Electric's participation in the Pending Litigation, or which arise by l
reason of TU Electric's execution of the Agreement and participation by TU Electric and TUC in the transactions provided for in the Agreement.
(c) Any liability, cost or expense pursuant to Brazos' rates set forth in Brazos' tariff as same may be approved and in effect from time to time, even though said rates may include costs related to Comanche Peak, for electric power and energy purchased by TU Electric from Brazos.
(d) Any Subject Claims relating to TU Electric's or TUC's performance under the Agreement or any other agreement or instrument executed and delivered pursuant to the Agreement.
IV. Assumption of Defense. Brazos will, in addition to providing the foregoing indemnities, assume the defense of TU Electric, TUC, and their subsidiaries, affiliates and customers, in any tribunal where any claim set out in paragraph II, and not excepted in paragraph III, is asserted. Provided, however, that in the event TU Electric, TUC, or their subsidiaries, affiliates or customers, receive notice of the commencement of any action or proceeding or the assertion of any claim with respect to which any of them may be entitled to indemnification hereunder or under the Agreement, the party receiving such notice shall give Brazos written notice within ten (10) calendar days of receiving such notice (the failure to so notify will not relieve Brazos of its obligations hereunder except to the extent Brazos has been prejudiced by a failure to so notify) and the opportunity to participate in the defense and in any settlement negotiations with respect thereto, and will cooperate with Brazos in all reasonable respects and make available to Brazos all records, evidence, and personnel for consultation and testimony reasonably requested by Brazos in connection therewith. The settlement of any such action, proceeding, or claim without the prior written approval of Brazos shall relieve Brazos of any obligations to the indemnified party in respect of the subject matter of the settlement of such action, proceeding, or claim.
7 V. Control. To tha exttnt any provision of this Indamnity Agreement conflicts with any provision of Section 9.5 of the Agreement, this Indemnity Agreement shall control as to the agreement of the parties.
EXECUTED this the. day of ,1988, as duly authorized i by an appropriate resolution of its Board of Directors.
BRAZOS ELECTRIC POWER COOPER ATIVE, INC.
(Corporate Seal) By:
A'ITEST: Its:
By:
1 Its:
1 L
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"As long as'I can remember, my1 ~) l
' dad would get these salls, and; q
' l
'cause he works for the electric.
company, he has to'go . . . j l} A COMMITMENT TO SERVICE . . .
l . . . is the commitment of more than 16,000 employees E~ c j doing nearly 2,100 different jobs in the Texas Utilities
,[ j Company System. It is exemplified in the cover j ; photograph taken from a television spot (shown at left)
. "It aIudy's seems to be 3:ormy' j which emphasizes this commitment, and th'undering and stuff . . . While emergency restoration of electric service is one ef j
7 the more visible jobs, there are literally hundreds "behind
- the switch" that customers never see. Some of the jobs,
, 1 people, and activities necessary to providing round the-clock reliable electric service are pictured in this report.
c .. .
4 j .
l
-1 .
1 1
- "he tells' me he just rides 'around -'
in the truck . . . ;j
- l think he 'says 'that'io I don't' 5 uorry.
. . 3 "Hey, Dad, you OK!" i !
s "1UELF CTRIC
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[w_ighlightsj mm.c. J j #,
, , ,n
~
- , . . ,3? ( (f 1
%- (D,'i - Kilowatt-Hou~r Sales 1 .
1987 1986 Change g; juiyopqgg, by , .
b t
.o .Qp Utility Plant * . . ..... .. ... $15,172,994,000 $13,566,133,000 11.8% L :; ._[- 4 Construction Expenditures.. $ 1,688,831,000 $ 1,519,619,000 11.1 i M. j ,, [ !ig 4
q- p Electric Energy Sales in Kilowatt-hours (000's) . .... 77,772,652 75,254,775 3.3 fM, 1f f.
e
'I "c,
Peak Demand (Kilowatts)t.. 16,680,000 16,537,000 0.9 C U Operating Revenues... ... . $ 4,082,923,000 $ 3,932,045,000 3.8 7 'q;: .( 3 Fuel and Purchased Power .. $ 1,585,610,000 $ 1,479,213,000 7.2
-;y;._.*
Operating Expensest... .... . $ 1,648,430,000 $ 1,643,272,000 0.3 l.y y , C[ ,
Consolidated Net Income . . $ 679,976,000 $ 626,851,000 8.5 se -j s
- tg
); -b r Earnings per Share . . . $ 4.55 $ 4.45 2.2 fn i" - b) t Dividends Declared per P P'
E Share .. . . . . . . $ 2.80 $ 2.68 4.5 ik .1: e Book Value per Share * . . $33.02 $31.24 5.7 +
o d ,,
i.}
Customers *. . . .. 2,094,866 2,074,766 1.0 is
[.
('.
[
Employees * . ..... . ... . 16,086 16,927 (5.0) ,
- N of pr l '" " * * " " " " ' ' "
' h}
t i987 al }936 ind:de Ii3,000 and 130,000 laknauts of intemqwible demand, rqwhely Q '[3 [,
, K }T7 "~" *" ,,
(( , ,
- Edda fiel and pecf.aul puer [ . y _ y ,f, ,
hy Cumulative Gmwth in i 4 ,
p ; Customers Serpd (Thousands);
j;m Am 1:
.3 e
[ .. V t Contents i. }j w. _ _
{
p* a, Management's Letter 2 0 . L System Companies . ,
4 ,if 3
i -
a System Report 5 l*- -?!
Operations 5 [I H E w Fuel and Purchawd Power . 6 [; i:l .
Resource Planning . 8 g- j ?
Comanche Peak . 9 r y r Rates and Regulation 12
[ 1* -
Research and Development 13 ; -jj
., i[
Financial Report . 14
(
- p. ,
- y'p Shareholder Information 40 [ ! C
. i 100 E' Directors and Officer 3 41 [p Jqo }.' 3
- n. p- .p ,
( 3 7s n e as at si s4 as u );
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y- - -
m, , g >
,.m; ' wn e,
c expected to begin later in 1588. frorn participation in the g y. q- ... gyg g m y _g g .. ~ :gg
- g . , pg Because the reinspection, dividend reinvestment and y 4fg reanalysis and corrective action employee savings plans. A :qggg g g, 4 ggwyg program is demonstrating that portion of these funds was used & W y e a t u s ([ A u Comanche Peak is being built to retire $132.5 million of high- W6 abgg with a high level of quality, interest debt. OA
- k' WW9 management is confident that The elections of Jerry WS %
an operating license will be Farrington as chairman of the MM W 9@i %
WW
[f D granted. board and chief executive and In March 1988, the company estimated that Unit I would be Erle Nye as president became effective in February 198t.
g Fw y,
f.
W[
in commercial operation at the Farrington succeeded Perry G. Mg -
end of 1989, with that estimate Brittain, who retired in the dfv " 4.
based on the granting of an spring of 1987 after 37 years of F T 7 operating license and fuel load valued service to the Company. WS .%d in mid 1989. Construction and in February 1988, the Board . . . W4N ~
capitalization of allowance for raised the regular quarterly @[E J 4 yl . g C,3 j 4 funds used during construction dividend from 70 cents per g 4.g g'gg g on Unit 2 will be suspended for share to 72 cents. The new wg - wp -
alx>ut one year, beginning in quarterly rate is payable April l;f W m 1 ,
g @.g m.W April 1988. The suspension of 1. Dividends declared on the m in qq Qg .cyk 5%
construction will allow common stock have been @rJ*BMOUNOM?nd concentration of resources on increased for 41 consecutive $T'dWnMNMNNM Unit 1. Suspending capitalization of AFUDC will years.
Continuing commitment to (P M I M M M kh .p @
reduce earnings. Unit 2 is not expected to be in commercial providing low-cost, reliable service to customers is essential Q[E #T**
g Q' gg g yQf operation until after the peak season of 1991.
if the Company is to succeed in today's competitive business b4 k j u h;ii;Gi ey,4 If the schedule for Unit 1 is climate. The employees of the FK . W ##
achieved, it is estimated that System continue to perform W:
D WA4 TU Electric's 94 percent share with distinction, and their 0MM will cost $8.54 billion, or $3,950 continued dedication and E f,iM;1/i per kilowatt. Because of uncertainty about the commitment to safety, improved productivity and excellence in @%g M
~&
commercial operation date of all aspects of customer service (Oh ,.a, UM, Unit 2, no estimates for will ensure that success. Their w -
44 ,3;WL VMO AFUDC after construction resumes have been included.
efforts and the continued interest and support of our Thm "
N#
aY @M JWM"% .49%
Operating results for 1987 shareholders are appreciated. *' / ;$ M "' ' % %
reflect the effect of cost control m - M 2 "
- W#9 and productivity efforts. '
Mf y(h h - I ' %mMX , ' ~J-[' [1(
Earnings per share of common March 18,1988 90 stock were $4.55, compared to
$4.45 in 1986. Electric energy
[D((h[
E 4 W',WnT -
,y sales were up 3.3% #r ' 71- WdD' . .
Construction expenditures
' N; > J 3 during the year totalled $1.69 .J' billion. Funds from operations (b '
" '" ^'
.[ ae provided 18.2% of 1987 k j ['.[,'
construction expenditures. S" , #~
During 1987, the System
- n, > ,
.fl' h, /Co raised about $1.49 billion ;x >
through long-term financing, p '
e ircluding about $142.5 million P V i y,.
s-r -
Vpy ,
T t',,
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F .. =.
1
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^'
1 % ttOur ' Uh ';I t, ..
% ! y h p,iM h wa..; ns); m a ,M y g g' ,
1987 1986 Change.
h ;M = _ _ -
h4 Utility Plant * . . ..... .. $ 15,172,994,000 $13,566,133,000 11.8%
$ 1,519,619,000 11.1 c Jj E yM Construction Expenditures.. $ 1,688,831,000 : .t p%w; , ~ - n y
3.
Electric Energy Sales in p z a r.1 n ,
Kilowatt-hours (000's) .. ... 77,772,652 75,254,775 3.3 -- -
Peak Demand (Kilowatts)t.. 16,680,000 16,537,0C0 0.9
$ 3,932,M5,000 3.8
[ : fl!
f so
'W '
Operating Revenues. . . .. . $ 4,082,923,000 Fuel and Purchased Power .. $ 1,585,610,000 $ 1,479,213,000 7.2 t[
- ? gj- [pg' Operating Expensest... .... . $ 1,648,430,000 $ 1,M3,272,000 0.3 pp, y Consolidated Net Income ... $ 679,976,000 $ 626,851,000 8.5 @ ' 6y
{ _gq '
Earnings per Share . . .. $ 4.55 $ 4.45 2.2 c 9- -n Dividends Declared per (7 S h are . . . . . . . . . . . . . . . . . . . . $ 2.80 $ 2.68 4.5 gk ' ]L.= _L,.
Book Value per Share * . ..
$33.02
$31.24 5.7 h p,a y
.y %
Customers * . . . . . . . . . . . . .. 2,094,866 16,086 2,074,766 1.0 16,927 (5.0) b .; __ [
Employees * . .. .... .. 1 dj , F:
,, y y (1 [~ n n m u n n nu f,
t 1%7 and I%6 indide I13,000 aal 130,000 (:; " ~"" "T"7,T""~"O : -
huru of intcmeiNe Amnf. resturisdy y g ,4 s
[4 t Ed:dcs fiel and pdml gwr . . . 4 %..
p1 0* oQ7LSeM(busan Csmaladse' GM ..in. 9 , ,,
f -1 . _. _ ._.
b
.g Y 4: . <
Contents N d,w. -. ..
7 bi
,f t nj p Management's Letter 2 P -
System Companies . . 4 rl ' cyd.? .' [e '*
System Report 5 {6 il * - - -
M, i- A C Operations . 5 Fuel and Purchased Power . 6 '~a v '
Resource Planning . 8 f6 D
Comanche Peak . . 9 F f'
Rates and Regulation . 12 ff. ', .lj;} * --
i-Research and Development 13 f
Financial Report . 14 [ l "'- h Shareholder Information 40 I -
I
, . . i= _ . .p i Directors and Officers 41 F s L
i.
(. >.
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1 g' ~ gu,
number of customers without and a life-extension program for m an increase inemployees. number More than 20,000 of existing natural gas and oil-
_ fueled units.
customers were added last year, Significant progress was made To the Shareholders: even though growth in the during the year in the effort to Daring 1987, efforts t service area has slowed from . assure the safety of Comanche the record levels experienced Peak's design and construction. t complete and license the Comanche Peak nuclear plant earlier this decade. TU Electric's detailed i continued. It was a year in The Company continues to reinspection of construction and adapt to today's changing and review of design, underway I which the Company mad increasingly competitive business since 1984, have been l gains in resolving those nuclear environment, and a more completed and all reports issues, as well as in improving competitive spirit was. submitted. A Corrective Action competitiveness, holding down demonstrated in a number of Program for Unit 1 is costs through better efficiency respects in 1987. The Fuel- underway. The programs, which and productivity, and further diversifying its resources used t Company paid the lowest include validation of safety-generate electricity. average price for natural gas related construction work, as fuel since 1980 because of its well as 100% of the safety-Continued emphas.is was placed during the year on the pursuit of low-priced spot related design of the plant, Company s tradinonal market gas and renegotiated have received the approval of commitment to providing low- contracts. Late in the year, a the Nuclear Regulatory cost, reliable electric service t corporate marketing department Commission staff.
its customers and a fair return was created to' further in January 1988, the consolidate certain related Comanche Peak Response Team E tl 198 , the new "TU functi ns and thereby effectively reported that about 98% of the Electric" identity was adopted meet the needs of customers in reinspection and documentation for use throughout the Electric n inn asingly mmpetitive reviews were in comphance with ,
Company. By year end, the m rketplaw. In addition, three applicable design requirements. l new identity was becoming mw mmbustion turbine The CPRT also reported that !
widely accepted by customers generating units - the the corrective action program and employees, helping focus companys first new generating provides reasonable assurance attention on the company as units since 1981 - were that the plant's structures, l bmught on hne m early 1988 an efficient provider of quality systems, and components will i service. head of schedule and under be capable of performing their I budget. intended functions.
implementation of the TU The new mmbust on turb,ne ,
i TU Electnc agreed m, System reorganization that ,
began in 1984 continued last units, the first of nine February 1988 to purchase, '
year with the consolidation of scheduled to be m service m subject to regulatory approval, the System's communications, 1988, are designed to serve peak the Texas Mumcipal Power I d h ng p ri ds of demand and provide Agency's 6.2% share of important flexibility in the Comanche Peak and settle behar ents. Efkcienc System s resource plan for pending litigation between the achieved through the reorganization and the need to pr viding reliable electric parties. The company wdl sev w. Reduwd forecasted purchase TMPA's share for a further control costs resulted in an early retirement program, gmwth rates in demand for current dollar cost of el etncity were reflected m the approximately $456 md, h,on,
.h h 800 1 Ia ing a7 vantage of th op ion. deferral of the two Twin Oak which is based on TU Electric's Most were long-service lignite generating units and the cost per kilowatt for its exisung empj oyees, and the.ir Forest Grove hgnite unit for share of the plant.
two to three years each. The in November 1987, the accomplishments over many years of dedicated service are resource plan includes a Atomic Safety and Licensing carefully planned mix of lignite Board issued a schedule for dee y r iat
,e d and nuclear generation, along resuming the Comanche Peak productivity, the System wie mmbusuon tuMns, operadng kensing kanng mgenuation, load management, process. Public hearings are continues to serve a growing 1
i i
4 pyry g. m vs ~ ,
expected to begin later in 1988. from participation in the . [ [MQajj%
g] { j g ,j g g Q . j Q y [y Because the reinspection, dividend reinvestment and reanalysis and corrective action employee savings plans. A ;gg f program is demonstrating that portion of these funds was used n y $ g g @d a .gg pqw g /j4p gigg Comanche Peak is being built to retire $132.5 million of high- c 4 (4 ptgm with a high level of quality, interest debt. Di
- O M6 W ':
management is confident that an operating license will be The elections of Jerry Farrington as chairman of the Ny c 'I M. tf# @
granted, board and chief executive and N.k y In March 1988, the company estimated th.,t Unit I would be Erle Nye as president became effective in February 1987.
g 33 ge in commercial operation at the Farrington succeeded Perry G.
end of 1989, with that estimate Brittain, who retired in the F based on the granting of an spring of 1987 after 37 years of pp operating license and fuel load valued service to the Company. R3 in mid 1989. Construction and In February 1988, the Board $f r capitalization of allowance for raised the regular quarterly dividend from 70 cents per hy' -
g funds used during construction gg on Unit 2 will be suspended for share to 72 cents. The new Q.,,-gy[g,p w3 e gg f @p q ,
about one year, beginning in quarterly rate is payable April Nu m M wmnhycypi@
April 1988. The suspension of construction will allow
- 1. Dividends declared on the common stock have been im%g C"5 N Opi da mMWrM@@G t@
concentration of resources on increased for 41 consecutive DNhfMMMNM$ M Unit 1. Suspending capitalization of AFUDC will years.
Continuing commitment to fM.Mw YP
- W W WON ^ W"Oh g gd MM reduce earnings. Um,t 2 is not providing low-cost, reliable p ., ya expected to be in commercial service to customers is essential y4 -
g/jg operation until after the peak if the Company is to succeed in qu W cwM season of 1991. today's competitive bu iness W$ s 9@,3 If the schedule for Unit I is climate. The employees of the be M achieved, it is estimated that System continue to perform W; MND TU Electric's 94 percent share with distinction, and their 55 7 T9 vill cost $8.54 billion, or $3,950 continued dedication and hj j ]dNN
.er kilowatt. Because of commitment to safety, improved ' $ .y tmcertainty about the productivity and excellence in f' 4
< gg.n 4
g66 d
commercial operation date of all aspects of customer service y. -
r s #
Unit 2, no estimates for will ensure that success. Their b WV" hwig AFUDC after construction efforts and the continued M c #E resumes have been included. interest and support of our UM -Mf~d)m ^
N#WsWT Operating results for 1987 shareholders are appreciated. N ~#
a~u 9
m"mt # wL.*w w*'@*
re0cct the effect of cost control . ,
m.Wc
., . /E n ~sx and productivity efforts.
y-A
+aa,, ;w a ym & 9 Earnings per share of common March 18,1988 [,1 +G^,w;g ,3g%f[ Gd stock were $4.55, compared to p 7 w~m My ? _ gf -
$4.45 in 1986. Electric energy "wt "Wn Vi sales were up 3.3% -. ,'s.'- ' i-+,,.
'+. ' , W. WH m Construction expenditures 4 V -
, ' . '- m during the year totalled $1.69 billion. Funds from operations provided 18.2% of 1987 f.[ M
- i [q#A.[(m .
w <
'/~l C*
m
.7 y'~=
construction expenditures, fpe '
g ~
- A ,
During 1987, the System p'i' . - - .. .
raised about $1.49 billion er >
m cu , .
+ ' ' ,
$D
{'
4 through long-term financing, +
including about $142.5 million c
We s:
W e i
3g
- c ,
e~'s m .c r % Texas Utilities Company is Texas Utilitics Fuel
'a NE '
N an investor owned holding Company owns a natural gas WWM
- 4 company for an electric utility pipeline system; acquires, stores, J <^ L '
] system. The Company provides and delivers fuel gas; and
- *^
- d its six wholly owned subsidiaries provides other services for the with common stock capital and generation of electric energy by sliort-term funds required for TU Electric.
c-A '
O( ,
their construction programs. At . . .
we's.o. g""** ,
year end, the common stock of Con $Nny ns at ok ates y m ,,,,. the Company was owned by fuel production facilities for the
[ e u n.a 14, .} some 93,300 registered shareholders. The Company,s surface mining and recovery of lignite for use as fuel for TU principal subsidiary is Texas '
Electric's generating stations.
Utilities Electric Company, now a known as TU Elecd . Texas Utilities Services Inc.
- - M Texas Utilities Electric (TU Services) furnishes Anancial, accounung, computer, Company (TU Electric) is Tu Euenue .
nga g in ; g ion, and other administrative i:- so,i, m. services at cost to the System c e,
, gg%% # 6 g Q distribution, and sale of c mpanies.
N '
electricity. The company Basic Resources Inc. is y >
operates 19 gas-/ oil-fueled and engaged primarily in the j}
yl
? four lignite-fueled generating development of energy resources stations. and related technology and
, e" "' TU Electric provides electric services.
"[.. , energy to approximately Chaco Energy Company 3,160,000 people-about one-
- 3 third of the state's population. w s organkqd to own and o = j The service territory extends P".".f cihties for the v a .'N acquisin n, pr duction, sale, 11 600 miles from far West Texas
'/ ', 8 eastward to near Louisiana, and and delivery of coal and
- b
/
i]l j is about 250 miles deep, from the Oklahoma border 1 southward into Central Texas.
j Service is provided in 87 s D counties to 361 incorporated GENERAUNo STATIONS cities, including Dallas-the
- unna . ',, j nation's eighth-largest city-and g . usnw-twor. ,
+
n ,d Fort Worth, Niidland-Odessa, o I , .au con aw GAS MPEUNE SYSTEM
]j Wichita Falls, Arlington, Irving, Flano, Waco, Tyler, and o- nnt*
- una- na .oo, if Killeen. The economy of the 1 service area is highly diversi6ed.
u -
T hiajor industries include
- - defense, electronics, aerospace v , m i] manufacturing, and oil and gas 4 development, in addition, the
.m. . %
.. area is a center for banking,
, insurance, commerce, d distribution, farming and
, ~
a ranching, and recreational and 4 cultural activities. Dallas-Fort 2 Worth International H Airport-the world's fourth-
~ busiest airport-has helped 4 . make the Dallas Fort Worth
^~
d area third in the nation in n ,.
Jj '
concentration of corporate headquarters.
- a. j
. 'E' l
- 7 p
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,j
y _ w,
[; ,
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~
L N pw SystemzReportt Employees meet challenges -
[w.m:weprw-n.yyqf=3~my
, - - m.mm m." ~ ~
j ,
Employees' dedication, skills, lf .
OPERATIONS and efforts helped meet the record demand and other [ l'yj u d, m a m.
J a , m; challenges in carrying out the L w:
The System continued its growth at a slower pace dun.ng System's commitment to service during 1987.
I . ]'
1987, adding some 20,000 new customers, despite an overall Employees from around the W
System were called on to slowdown in the state's restore two units damaged by
' ~%
economy. fire in February at the Lake '.
The diversity of the service Hubbard generating station near J area contributed to better Dallas and were able to restore U economic conditions than most both units in time for service in bN m -
of the state experienced. Service area unemployment was 3.5%
the summer peak seamn. m i dM 4miNM Employees also responded to @?# # - >P4 b at year-end 1987, compared to weather problems during the O . k# "v '
6.5% at the end of 1986 and t year. On November 16, a #c #
the December 1987 state-wide
- tornado 3 wept through Palestine figure of 6.8%. in East Texas, knocking out '
TU Electnc s energy sales n ;a ,
electric service and damaging b were again the highest of any transmission towers, lines, and A investorewned electne unhty in '~ ^
the nation, totalling nearly <8 other equipment. Round the- <
y 11 n ki vatt- urs, a 3.3%
clock efforts by employees .. .
Ac & 8 :
restored service in three days.
An ice storm in early January MEM Peak demand record set On August 6, customers set a 1988 again tested employees' preparedness and ability to f , P(( '],' ~' lh!MM s, w;g 2
%" ?
gg respond to an emergency p1 record peak demand of situati n, nd their efforts 16,680,000 kilowatts, including helped minimi:e power outages. e '
113,000 kilowatts of interruptible demand, exceeding The System emphasizes safety [ y[{ .
the previous record set in Julv in my phaw of its ynnions. g g j 1986 by about 1%. System net Thse eforts wm again g ,4T ,
capability at the time of the 'ff""'
- l98 ' ' * ""* "S L 6
mpi yee gr ups re ched safety g
{p % .;
j peak was 19A65,000 kilowatts, _
- II"' "".S' . set records, and y. ..
including 850,000 kilowatts of earned disunguished safety 0 ;J . hp ..-
short-term cogeneration and awards. The continuing g,s y 3 130,000 kilowatts of other p 7.J.:2 ,
4 nenti nt safety contributes e -.- --
4 purchased power capacity.
sm6 candy to employee A new daily record for i
health and welfare, as well as ~ h cnergy consumption was set on , . . L> a- ~
J to the System s pnxiuctivity. L August I t, as customers used g , .. .m 317,657,000 kilowatt-hours. Consolidations continue F Serse crucF ,n Weather conditions for the summer of 198/ were n-ider As part of continuing efforts k "[ ;
to serve customers more b' w' +
than normal and comparable to efficiently at lower cost, a new o >
those of 1986. The peak load corporate identity, "TU F n", 9p#
occurred during a 102-degree Electric," was introduced for b' temperature day, after four '
- Texas Utilities Electric
,^'
consecutive days of 100-degree Company in early 1987. Also (, ' s* %'
or higher temperaturu. in 1987, Texas Utilities Services inc. became known as "TU Services."
[h b
^
t-
{}
n .
[ y fu, g ,
qa g , , - r m ,
A m 11' The realignment of mana ement has reduced s@s g w' ,1 growt in peak load by more
- accounting and treasury l Y. .' J -
operations in TU Electric that than 785 megawatts, an amount W ,
f pgg j'y 1 was effective January 1,1987, is more than the output of one i
' " providing savings and improved large lignite unit. The program
, , , , [grk*M ,, , l 9** -
management and accounting has been successful Excause it f_, q, Pp ' 1 j{ information. The Personnel, provides participating customers a#gg ' '4-y Purchasing, and the convenience and reduced K ,
.a 4 <d
.. "d Communications functions were operating costs of high-ef6ciency equipment and building
- e.
- consolidated in 1987 to achieve l L ~
N additional econom;es. structures. All customers bene 6t l F -
^
NN Because of the consolidations through reductions in the [ k'I and the continuing emphasis on cost control, a special early company's construction expenditures. u
' 3 -
. retirement program was offered FUEL AND PURCHASED
- a. u. . o ]a m June. More than 800 MSyssan. opmstonsceneN employees accepted the plan.
U , W,j ; 23 7, my , Computerization continues to Assured supplies of fuel at g ~ f'f +' % make more ef6ciencies possible. competitive prices and 6exibility
'4 The new Mountain Creek Data in their acquisition and use are "t Center went into operation in vital to the System's
, gg late 1987. The new facility is commitment to be a low-cost ya the TU Systera's second supplier of electricity.
kg' ".. K. computer center. It will absorb During 1987, the Fuel
>N' part of the growing load and Company continued its f "
.- eventually will serve as a aggressive efforts to make
"'1 backup facility to the Mesquite favorable natural gas purchases iA on the spot market and to u
Data Center. I m_ - _ .
'""N# " 9"; "" '"'* ' ""
fMMownesia Greek Marketing role to increase
- eN Dses Censer >
, s mcr . helped lower the price of gas by gq wg&;%'A gg In 1987, the company took 8% to $2.56 per million Bru,
, gg , , ' , * - ' "
Wm ^ steps to return to more down from the 1986 average
*gy aggressive marketing in an of $2.77.
# increasingly competitive business The cost of lignite still ki ;; ( '
environment. A marketing function was averaged considerably less than half that of gas at $!.07 per
.g.7 . , created at the TU Electric million Bru. The composite f>:e!
,,,,,,,,,,,,,, , corporate level to plan and cost for 1987 of $1.82 per
, develop the company's million Btu, compared to $1.84
?- marketing policies and programs in 1986, is the lowest since to more effectively serve the
~
- . > 1981. The dowaward trend of
- 3 . needs of customers and to fuel costs over the past three 4 % tuarnamn years appears to have support economic devek3pment.
, ~
tomun a A campaign began in 1987 to leveled off. gg -
,- ( inform customers, builders, and The Fuel Company delivered developers of the company's 376 billion cubic feet of natural s LComperisive markedar ,
mf,: comparatively attractive rates, gas to TU Electnc in 1987, and
. high-quality service, and the its pipeline system's operating N
bl '
? benefits of homes huilt to TU 6cxibility was enhanced with Electric's Energy Action the completion of a 58 mile standards, natural gas pipeline in East
,_ _ TU Electric continues to Texas. The new addition, y ,
, emphasi:e load management as jointly owned with two other
[g N a key element in reducing the gas companies, gives the Fuel g j expense of new generating Company better access to East q " capacity needed for customer Texas gas supplies, particularly growth. Since 1981, load during peak demand periods.
, e. H
,s Ni , ;.
The company owns more than storage capacity can be p.. *
.. e.
M 2,200 miles of pipeline along increased, if needed, until the M "* with underground gas storage federal government opens a ,l , ,
.'l reservoirs with a total usable capacity of some 28 billion permanent disposal facility. 7 ,p' j$ ' , a 4 Chaco litigation continues "
cubic feet. A. n ; Lignite supply increased
. Discovery continues in b J ^
litigation involving Chaco , Lignite coal leases on 8,700 Energy Company, a nonutility 1' acres in Titus County were subsidiary of the Company, and ,, obtained in 1987 to help assure Santa Fe Industries, Inc., and C a future source of low-cost its subsidiaries. A trial date is & lignite fuel for the nearby expected to be set sometime .. s . . mm Nionticello power plant. in 1989. E M risc The availability of more than In 1977, Chaco signed , NNF6 L g 80 million tons of additional agreements for more than 320 6 : 4 m N " // recoverable lignite will provide million tons of coal in f a M.dbhO as$ additional savings to TU northwestern New Nicxico. In G N' -g" ' Electric customers. The new December 1981, the Company { g 54/ f jj . ip' supply increawd the company's and Chaco filed suit against , proven recoverable lignite Santa Fe Industries, Inc., and . reserves to about 800 million two of its subsidiaries and s tons at year end. TU Electric's lignite plants burned against Thercol Energy Company and Peabody Coal "id approximately 29 million tons Company, alleging, among $Q 4 in 1987. The Niining Company other things, violation of federal '
^
continues to be the nation's and state antitrust laws and y ' W.#NN#8M1 % fourth largest coal miner in .. ' % other unlawful conduct annual tonnage mined. involving these agreements, L ; P *' s' ,
, @ '_. J #
Nuclear fuel ready which have made the - ,+ J: " h E C W - commercial mining of th.is coal , q u Nuclear fuel <ssemblies uneconomical. The suit seeks to a ~i needed for initial operation of have the agreement.; declared < J '7 Comanche Peak's Unit I are void and unenforceable and . stored at the plant site. also seeks damages and other L" Additional assemblies needed relief. for the start-up of Unit 2 are In January 1983, the in storage at the vendor's n Company and Chaco settled all fabrication facility. Additional claims against Thercol and a fuel is under contract. Peabody. The setdement did Spent fuel for more than 20 not affect the claims asserted > years of plant operation can be against Santa Fe Industries and v .. - . .. safely stored on site. This # its subsidiaries. M ains henic a :Heemy #
. . spreader Sources of Kwh and Fuel Cost '
4 , Percent Kwh by Cost #
- Per Niillion Btu
/
Fuel and Purchases q m ~ 1987 1986 1985 1987 1986 1985 K . , Fuel Use: d' - Gas / Oil * . . . . . . . . . . . . . . 43% 44 % 50 % $2.56 $2.77 $3.41 , w W p;l Lignite.. . .. 44 50 47 1.07 98 .96 _
.."u~
Total / Average Cost . . 87 94 97 $ 1.82 $1.84 $2.25 y c - Purchased Power .. ... ... 13 6 3 ; :n ' ' TOTAL 100 % 100 % 100 %
- Oil less than 1% M , -
m l
ll% ,f. [ ' + [" Mg f ' g - 3(5q RESOURCE PLANNING Construction and testing at full load of three new Su % y <k Innovation and flexibility in 65,000-kilowatt turbine units N *
' ^
%
- i* *j long range planning enable the were completed in late 1987 at System to provide service to a
';'h' '
- growing number of customers when and where it is needed.
the Permian Basin Plant in far West Texas. Six similar units are being constructed at the Q , A revised resource plan for Morgan Creek Plant for a total e < meeting expected requirements of 5S5,000 kilowatts to be in y _
~ fer electricity for the next 10 service for the 19SS summer E - 3
^
years was announced in March peak season. An additional six 4,J 1988. Customer needs are units 090,000 kilowatts) are y[ ,, ^"7%,,w ggj expected to increase by more scheduled for 1990. than 8,700,000 kilowatts over w#
^
Cogeneration added [m.
^
>. , J+- l ' y the next 10 years, based on a W3
.: .x,ma.m j fmadL. Skg projected average annual load Three long-term cogeneration
""hejg c R increase of 2.5% and maintaining necessary reserve capacity.
projects, with a total of 611,000 kilowatts of capacity, were plac-ed in service during 1987, mak-11
- 4 "
The Comanche Peak nuclear plant remains a con.erstone of ing a total of 681,000 kilowatts of such capacity.
- l' t; the plan and is needed, along Under the new resource plan,
[ ( with lignite and existing gas- cogeneration and enall power , gym . M y
,1 ,
fired power plants, for added fuel diversity and stability and sources will provide at least an additional 624,000 kilowatts of A '
';, ~ 0;' " '" . f to assure reliable power for the new capacity from 1988-1997. If o
~j -
'y 1s 4
. T future. needeJ, more cogeneration is an s ,
nM '@" b!' The 10 year plan includes option, provided qualifying g - load management programs to facilities are found and the y i LT : . p' reduce the need for new economics prove to be ,' ,e
~
, generation by some 1,400,000 beneficial.
l
% kilowatts. Other resources in June 1987, TU Electric ;
utili:ed are combustion turbines, signed its fifth long-term l M'd M* "-
.% cogeneration, and a life cogeneration contract. Under i extension program for existing the 13-year contract, Encogen gas-fired plants. One Partners, Ltd., will provide iNew control system as an: j "**" * *"""
c exisWns plaat , Resource Plan 1988 1997 ' by December 1989 from a facih.- q 1 *' : Jq , mp' A Resource (h at ) Percent ty located near Sweetwater, eo ' o unte uso.m 26 % Texas. The company plans to m-
- t. + % -
, wear ,is,w :s% continue to contract for short-
%c cO U Combumn turhnes i,40s,w 17 % .
lead management 1,422,w term cogeneration to help meet
~"']a .
c wenerarm 16 % winter and summer peak needs s 1 1 uher rurthad m. in 19SS ang 19S9. y unwr w arm i,m,w p rma sm,w im Life of gas units to be m wuac, una, mtar. =u "her rear =
~
extended
+w .
~ ~M Combustion turb.ines ready
. A significant change in the
~
revised Resource Plan involves d Combustion turbines will sup- greater reliance on existing gas-
/ M. ply a significant portion of the fired units through a life exten-projected increaced need for sion program. Planned replace-l capacity Juring periods of peak ment of certain equipment, usage. Almost 1,500,000 coupled with existing h kilowatts will come from these maintenance programs, can ex-y fast-starting units over the next tend the life of a unit beyond g q 10 years. its normal life expectancy.
;8 t i 0 . .j d,
- f. >
t Compared to other options, the Office of Special Projects, which relatively low cost of extending is assigned to manage all aspects [ , , . x the life of existing generating of the NRC staffs licensing and [: units and the availability of gas inspection efforts at Comanche [. w supplies make this program especially attractive in today's economy. The life extensions of Peak, announced its approval of the CPRT and CAP efforts. The office said the plans [ ' j f"r777] r-c i; 4 P.. < ~ ' ei' . ':.[ h some power plants will ensure adequately describe the means ( j[L; ' i their continued availability and by which TU Ebetric intends j h^w ^> __ P dependability for several to establish the safety of the a b ; more years. plant's design and construction. t d .,i ; F Lignite units deferred The programs have included 1 h ~ 73 = validation of safety-related f([; (
~
~j f .
l In September 1987, the construction as well as 100% of . company announced it would the safety-related design of the F 1 defer construction of three plant (except for components j. q lignite units. Twin Oak Units 1 and 2 in Robertson County provided by proven nuclear (b j I vendors). k k were postponed until 1994 and 1995, respectively. Forest Grove Another milestone was reached when the NRC staff, in [ ]{ O l h Unit I near Athens was rescheduled for 1997. March 19S8, issued a Supplemental Safety Evaluation p[: j d . .,, . ij The deferral was in response 1
"" r [
Report on TU Electric's to the decrease in the growth programs to address all piping d [' A ;;"6g Mggg;7 ", . of long-range forecasted and pipe-support issues. The j customer demand for electricity report concluded that the and a decision to defer some programs are sufficient to [% %g ~~ previously planned retirements b y 37" ensure that licensing h b - ' of certain gas fueled generating units. commitments are satis 6ed and [ j that the issues raised are being ptoperly resolved. [ , Construction schedule t. p,,g in December 195< and ! l carabairy seawn February 1988, the CPRT [F Unit (Kilowatts) Service suhmitted to the Nuclear l' f cmtonon cursne Cornanthe Peak 1 c m bu eniursne ss5Av Iw 1.081.m tw Regulatory Commission two reports - the Collective P me tw t jm y fak 2 Qg y Evaluation Report and [ ' gmpgoy,, c,,,,,;,y 1 l mn cu : :se,w iws Collective Significance Report pogong,,n
% orove i me 1*7 - stating its overall summary [ -V y^ ' Net canastry to TU Elettrx niuJing hs and conclusions about the -c w
curtha<c of TMPNs shan plant's design, quality of [j . @ q COMANCHE PEAK construction, and its quality assur nc nd testing programs. [ - t liapr emphasis during NS7 ; ; continued to be on TU Electric's reinspection program, In the Collective Evaluation Report, the CPRT stated that [
- which was nearing completion about 9S% of the reinspection i- e by early 1988, and the and documentation reviews +
Corrective Action Program. were in compliance with [ , Through this effort, which applicable design requirements f, M-began in late 1984, the and identified no programmatic 7 Comanche Peak Response Team problem not already being ; $ addressed. "- has been addressing all concerns [ , o about the plant's construction The Re<ponse Team also l found that the present quality and derign aJequacy. A milestone was attained assurance program is chective A, > early in 1988 when the Nuclear and the historic quality ' Regulatory Commission staffs j-C # t f 9 0 _ _L___-__
%' , - < ,. 'g g e gj
~
.e ,
>'- assurance program was generally shift operations supervisors
, " + -
g adequate. Those problems that experience through participation
%gg - -
were identified have been in control room operations in 9 , nw yy s
#y.7 '* 7s ' "~
corrected and actions have bers an on line nuclear plant. As of
# taken to prevent recurrence, in December 1987, the program to 'j. Q addition, the testing program carry out that commitment was W . Ml9 -
and other start up activities 8S% complete. Further i
.<<; ,6 -
g were found to have b.en operational experience also was l
.m~ m generally adequate and properly gained in 1987 when a number EJ w <a implemer:ed. of Comanche Peak ;e. ctot l M D' > According to the Collective operators and auui'.y y A M Significante Report, the operators assisted peparing a Q [y,1' Corrective Action Program unit at the Braidwood nuclear ji - provides reasonable assurance plant in Illinois for initial ~' ' A._# .
Q: 3 sensniassion e,eg a W that the structures, systems, and components at Comanche Peak start-up. Licensing effort continues _4 p x,, - will be capable of performing M, 3 their intended safety functions. IJ November 1987, the y . .up'> :@% J m'
'Mm In December 1987, TU Atomic Safety and Licensing N .,
~
Electric and Gibbs & Hill, Inc., a p (Q[ reached agreement settling TU Ik>ard issued a schedule for resuming the Comanche Peak _ w* , , pgl' C Electric's potential claims against Gibbs & Hill related to operaung licensing hearing process. Hearings had been 4 4 Z _,_b d h engineering and design services suspended since January 1985 so
? g -9 performed for Comanche Peak. the CPRT could address U l yi TU Electric and the joint concerns about the plant's J l- owners are to receive a total of design and construction.
- r ; ^1 $25 million in cash, deferred Under the schedule, which is ,
yd , [ j" payments, and future similar to ones prooosed by TU l engineering services to be Electric and the NRC staff, l
+{@ 'w' :[? ':",'Su6ssassed provided to TU Electric on public hearings are expected to
<3 l i, ;e - non nuclear projects. begin later in 19S8 after the l
'4 Vll 1Ipaw.zM y The settlement is considered NRC staff issues its favorable to TU Electric and its Supplemental Safety Evaluation @ft i
' [
Reports on the Collective
' ,. customers. Protracted litigation l
$[n d '%' M would have depleted Gibbs & Significance Report and status l f, N' k
'% Hill's limited resources and created large legal expenses for reporn an the Corrective Action Program.
1 7gT the Comanche Peak owners. In July 1987, the Atomic l',i$ ' '
~
s
- [g- " Preparations made for
. Safety and Licensing Appeal x Ik>ard ruled that an amended i
7 s w&[' s Ag , operation contention contesting the f F7 p Progress was made during the NRC's extension of the
, ,4 a. E year toward fully staf6ng TU construction permit for Unit 1 KM -W O Electric's permanent on site is appropriate as the basi for E.
q % My3 (' engineering staff. in addition, advances were ASLB hearings on the W, ]K h 3 d, extension. The contention was made in preparing for filed by two intervenors, [ TN Ogh'M M commercial operation. A Citi: ens Association for Sound training annex building, which Energy and a former plant TDhadme[en he woh o - - will allow plant maintenance employee. 4'
' j-employees to receive hands-on training in laboratories and in March 1988, the company filed a motion to consolidate
, , . realistic environments, opened the construction permit i
' %,j during the year. extension and operating license d TU Electric is committed to proceedings because of their M 1 providing all Comanche Peak many common issues.
. l0 : m ,
1
.e '
l
3%L JQ:ypW ,p % [ '. w,. t L ,,,3 Cost and schedule rev.ised Revised cost and schedule
- m. ,
,9 4: 4
-e estimates were announced in >
Becsuse of the schedule March 1988. The company , Mi 4:/ m,qwk m.m W ,; W N4 established by the Atomic estimates that Unit I will be in .
*'FWMOMM "" "
Safety and Licensing Board for commercial operation at the f ' 4 resumed licensing hearings and end of 1989, with that estimate based on the granting of an b,y
+
g TU Electric's schedule for completing reports on which operating license and fuel load , y the hearings would be based, in mid-1989. s the company announced in Construction and capitali:ation m Fa November 1987 that the of allowance for funds used '@ M cchedul estimate for Un't 1, during construction on Unit 2 i* 9 made in November 19S6, was will be temporarily suspended for h' '
~
M no longer achievable. about one year, starting in April M =-
, x 7 cinj YW. B ~ ;gquN
** A ; . 2:i; Construction expenditures y mm 73 %W gg49 N " di A M Estimated - L iso , ,
~
w 1987 1988 1989 1990 . Millions of Dollars V' Electric property:
$ 972 $ 842 $ 592 $ 438 (pi[]
Production
- 4 Transmission 61 50 69 76 ,l . g Distribution 209 195 225 233 77 ~
General . 34 20 28 30 _ s, ,, Other utility property 26 43 23 73 1,302 1,150 850 Total . 937 (m,u'pcep . m
.. ; 4 m
AFUDC*t . 387 350 Total construction expenditures *t $1,689 $1,500 $1,400 $ 900 463 50 (g7 so r y, yh,annsson ai' M bE A sl JW ~ w .. Such expenditures do not include [1 *j ' AFUDC on Unit 2 of Comanche Peak for any period n . after March 1988 or the 2 f followine: .g ; Nuclear fuel * $1 $33 $15 $15 W u Non-utility property 28 37 48 59 .,
- w. *te IN A % , . , ow . ,incloJes oneoing amounts for an [h . Computee sewiningi f,,
aJJitiorn! 6.2 b interest m m ; ,. < , , j# m ,
~
. _ Je Comanthe Peak, wEith is
?
subject to purchaw from ' %,,$' ' W "
<;C TMPA as follews bee Note 11 );h ' , , 1.'
s',
]Q '
to Financial Statementsh .,, . g; . Production 5 50 $ 32 $ 16
~
*yp ~ '
AFUDC . 23 30 1 Total censtruction
- - ~~
l* MYM - AO' evenditures . $ 73 5 62 5 17 y, ,
;btbuf gg , m m wp 'r
' i Nudear fuel . $1 $1 Jrm .,. . 'o tAllowance for funds uwd Juring conaruttion. *% x .s M.<,
s. G- J m' ,'
' ;^ .u tEstimated construction exbnditures do not include amounts for the 1988 and IWO combustion turbine units. Plans call for the 1988 combustion turbines to 4 . M be owned and constructed by a third party and sold to a lessor after the tax in-service date; TU Electric wdl then lease the units. Turnkey construction of M.:o 1*
sl , m n the 1(N0 combustion turbines i< planned, and TU Electric wd! then enter into ,
', My L
an operating lease agreement. <
~gw 1 m. -11:
+.
)__
I w , 3 1988. The suspension of minority owners-the Texas
- w e j j
construction will allow Municipal Power Agency, concentration of resources on Bra:os Electric Power
# 1 Unit 1. Suspending Cooperative, Inc., and Tex-La l M j capitali:ation of AFUDC will Electric Cooperative of Texas,
#j reduce earnings. Unit 2 is not Inc.-asking the court to resolve 4 g expected to be in commercial disagreements over the J irst 1 W l operation until after the peak Comanche Peak joint
, j season of 1991. Ownership Agreement. In i l The new estimates "present a response, cross. actions and I 4' >d delay of about a year ihr Unit lawsuits against TU Electric and l o
d 7 I and about two years for Unit 2 from the estimates announced the company were filed by the minority owners. v
' t )F .vp H a.
2 ds in November 1986. In February 1988, TU Electric My Cotomer inforination center ' j Based on this schedule, it is agreed to purchase TMPA's
' ~
, , l1 estimated that TU Electric's 6.2% share of Comanche Peak da 87% percent share of Comanche and settle pending litigation Peak will cost $7.98 billion, between the parties. Under imiuding AFUDC, compared terms of the agreement, which
- N '
to the $6.7 billion estimated in is subject to regulatory November 1986. approval, the present value of p$ ; In early 1988, the company the amount TU Electric will
- J agreed to purchase the Texas pay TMPA over the next five i 1 Municipal Power Agency's 6.2 years for its share of Comanche j percent share of Comanche Peak, nuclear fuel, transmission 4
Peak. With regulatory approval, facilities, and costs related to C 4' ; the company's share of the the pending litigation is _ plant will be increased to approximately $456 million. approximately 94 percent and The company believes the t{ Telephone customer service g)will bring TU Electric's
, , , agreement is in its best ii *erests C
g f estimated completed cc,st to since it provides TU Electnc l j .l $8.54 billion, including with additional needed i AFUDC, or about $3,950 per generating capacity without l kilowatt. The previous estimated increasing the company's cost i
.: m = __ . .j cost was about $3,300 per per kilowatt in the Comanche Mgg '
q kilowatt. Peak project and reduces its
~f'* -
a Because of uncertainty about expenses associated with the j the commercial operation date litigation. of Unit 2, the cost projecnons Additional discovery is
! do not incia le estimates for scheduled with the other two Displey at State Fair of Texas j AFUDC aftt - construction of parties, Bra:os and Tex.La, with l the unit resui. >s. trial set for October 19SS.
j Since the con ,anv 5as only limned control o. ine RATES AND heenung process, no assurance REGULATIONS a . j can be given that estimates of TU Electric's current rate commercud operation dates of levels, excluding fuel charges, O. e the Comanche Peak units can were ser by the PUC in F% ,] be met or tha their estimated No. ember of 1984. Based on T : completion costs will not be factors that m oresently known, Tl ' . tric does not exceeded. Y. '
- I
. plan to re a i rate increase Lu. .igation j . _
until Com - .ie Peak Unit 1 is 4 In May 1086, TU Electric in commercial operation.
. O +
tiled suit in State District Court Since the ate changes made i in Dallas County against the in 1984, TU Electric's rates
; have decreased by more than 12 :
s i
w 4 V y . c g-c 10% because of declining fuel programs at the System's lignite , T ' . ~- costs and the Fuel Company's facilities. m ,
'B' -
aggressive gas contract The System also actively '
.1 >S [3M, renegotiations. The company supports research conducted f " " "_ .
1
'"^""
- D continues to believe that the through the Electric Power rate increase when Comanche Research Institute. EPRI
,]'s Peak Unit I goes into service administers a coordinated, hj
)
k4 can be held to almut 10%. nationwide research and Therefore, the increase for Unit development program to ensure bd I would bring the company's future availability, efficient current rates only to the level production, delivery, and use of they were after the 1984 rate electric energy while minimi:ing 9 proceedings. effects on the environment. d'.-. YH . @.^..N As an example, EPRI is F' ~ _% ~ Rates decrease involved in a number of major l <:n.- The company's rates compare research programs related to y .e bm favorably to others in the state electric and magnetic fields '
" ar' and nation. For the 12 months produced by power lines, which p*
ended February 1988, TU were the subject of considerable . Electric had the second lowest publicity in 1987. Research has residential ratec of investor- not proven that electric or ;# owned utilities in Texas. It also magnetic fields cause any ; had the sixth lowest residential adverse health effects. ' rates of the 25 largest cities in System pr jects save money - % the nation. 4 i in 1987, two fuel-related TU Electric continues to be a O< refunds were made. A request leader in innovative uses of M l% h' M to refund over $55 million was technology. In 1987, employees N6 OO , authori:ed for February and a received three First Use Awards l' f second approved for nearly $70 from the Electric Power N_.. .. million for May. Also, the Research Institute for their W"h"h ' composite fuel charge was involvement in: ! cd "f.mN lowered in February 1987. dince
- Developing on-line 4 + _N February 19S6, $391 million in monitors for use on large fuel costs have been refunded to customers and rates have economical base-load generating units. The P. [i
~
been lowered overall by 10.3% monitors ensure early ,. RESEARCH ANO detection of potential pr blems before they cause {g DEVELOPMENT g lengthy outages that would o, The System continues to be make it necessary to a involved in research and operate less-efficient units. O m development of new products,
- Solving chemical process n % =
F #. procedures, and technok>gies problems in flue gas - - that improve service and save desulfuri:ation systems, an F w een e the customer money. achievement that has
- + w' 4 At the Environmental reduced scrubber system k(Lgeonsees e.
Research Center at Big Brown, operating costs by 20% Ng 'W ; #-
~
graduate level studies continued and saved customers
~
for the 17th consecutive year. millions of dollars . . The research, coordinated annually. , C ' through an independent committee of university
- Eiiminating boiler feed [ ,
professors, addresses pump vibration and p - ". .,, hydraulic instability, F
'(
environmental concerns and thereby improving the ' ' provides information to improve p? ' reliability of major ' , the land, sir, and water quality generating units.
'e s y, , ,
.3 t
s n . . 1 ..
Financial Report Contents Management's Discussion and Analysis of Financial Condition and Results of Ogrations . . . ... . . . 15 Statement of Conmlidated Income 18 Statement of Consolidated Retained Earnings .... 18 Statement of Consolidated Source of Funds for Construction . . . 19 Conmlidated Balance Sheet. . . 20 Notes to Financial Statements . .. . 22 Statement of Respensibility . . . . . 35 Accounta; a' Opinion . . . . . 35 Financial Statistics . . . ... .. 36 l Operating Statistics . . . 38 1 14
TEXAS UTILITIES COMPANY AND SUBSIDIARIES Managem:nt's Discussion and Analysis of Financiti Condition end Results of Operations 1,iquidity and Capital Resources he primw/ capital requirements for 1987 and as estimated for 1988 through 1990 are as follows: 1987 19S8 1989 1900 Thuunds of Dullars Construction expenditures (excluding AFUDC) ...... . . ... . $1,302,000 $1,150,000 $ 937,000 $ 850,C00 Nuclear fuel and non utility property...... . . . . . . . . . . . . . . . . . 29,000 70,000 63,000 74,0C0
- Maturities of long<enn debt and sinking fund requirements (includes early redemptions in 1987 of $133,000,000).. ..... .............. .... . . . . . . . . . . . . 188,000 55,000 52,000 135,000 Installment / principal payments to TMPA (see Notes 10 and 11 to Financial Statements).. .. . .. ..... - 125,000 58,000 64,000 -
Total . . . . . . . .. . . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,519,000 $1,400,000 $1,110,000 . $I,123,000 For detail concerning major construction work now in progress or contemplated by the System Com-panies and commitments with respect thereto, see Resource Planning and Comanche Peak. The System Companies generate funds from operations sufficient to meet operating needs, pay disidends on capital stock and finance a portion of capital requirements. Rese funds are derived from consolidated net income, depreciation, deferred taxes and irwestment tax credits. Factors affecting the ability of TU Electric to continue to fund a portion of its capital requirements from operations indude adequate rate relief and regulatory practices allowing a substantial portion of construction work in pro-I gress (CWIP) in rate base, adequate depreciation rates, normali:ation of federal income taxes, recovery of. the cost of fuel and purchased power and the opportunity to earn competitive rates of return required in the capital markets. For 1987, approximately 18% of the funds needed for construction was generated from operations. External funds of a permanent or long-term natum are obtained through the sale of comns rk by the Company, and the sales of preferred stock and long-term debt by the System Companies. . .e capitali:ation ratios of the Company and its subsidiaries at December 31, 1987 consisted of approximately 45% long-term debt,10% preferred stock and 45% common stock equity. Similar ratios are expected to be maiatained in the future. For information regarding bank lines of credit and short term borrowings of the Company, see Note 2 to Financial Statements. Financings in 1987 by TU Electric and the Company included the following: ImTim Ddt GU Ekstrth Princiral hkwh _ Onount Dacrit tim R4vuary $ 250,000AV 9%% b hkngage and Gameral Trun ank &e 2017 March kVAVAV T,% G4aceralced Ibilurkn Ontrd benue ank &e 2017 Arn! 250,000AV 10%% % hkrtgage ard Guarcral Trus ank due 2017 July 15DAVA10 9%% b hkngme and QAateral True Rnis due IW7 July 150AVAV 10%% b hkytgage ard QAmeral Trum ank &e 2017 Sqtenk 67AVAV 9% G4aeraked Rautan Ornd benue Ryds due AT7 Oxk jl2AV000 7,% Geacralced Rauton Omerd benue Rnh due 2017. Tcmal $159,000A10
~
) IMemi hk (TU Ekstrsk hkwh Shares Net Prawds Dacntnan July lA10A10 $98.215A10 Staed Race Auctro hefermi Sak. Senes A Ginrran hk (the Camrenyk j hkwh Shares Net Prawa _ Dmiprin j Abrch 5,000A10 $170,452A10 Gnmn Suk sale to the ruble Early redemptions of long-term debt by TU Electric in 1987 induded the following: Principal hiernreion hkwh Amount Gut thirtin Arnt $ 32.53t A10 $ 3ts523AV 16% b hknpge Ruh &e 2012 June 50A10AT %065,0LV 15%% b hkrtyge hah due 2012 July SOA10,000 %115,000 16% % hkngv &nk due 2012 Taral $112.511 AV 'iM941A10 15
l TEXAS UTILmES COMPANY AND SUBSIDIARIES Managernent's Discussion cnd Analysis of Financial Conditi n'- . and Results of Operations (concluded) Additional early redemptions may occur from time to time in amounts presently undetermined. He' Company anticipates the sale to the public of 5,000,000 shares of its authori:ed but unissual common stock in April 1988 and the issuance in April-1988 by the Brazos River Authority of $100,000,000 prin-cipal amount of pollution, control revenue bonds to be collateralized by the issurnce of an equal principal amount of TU Electric's first mortgage and collateral trust bonds. Le System Companies expect to sell securities as needed, including the possible future sale by TU Electric of up to $300,000,000 principal amount of first mortgage and collateral trust bonds and up to 1,000,000 shares of cumulative preferred stock, both currently registered with the Securities and Exchange Commission for oiTering pursuant to Rule 415 under the Securities Act of 1933, sales of additional shares of common stock of the Company pursuant to various plans described in Note 3 to Financial Statements and sales of additional securities from time to time, in amounts and of types presently undetermined. He Tax Reform Act of 1986 (IRA), among other things, repealed the inwstment tax credit, lengthen-ed depreciation lives, created an alternative minimum tax and lowered ie corporate tax rate subject to certain transition rules. Other tax accounting changes were required including the capitalization of items previously expensed and a change in the timing of income recognition for certain items. Substantially all of the tax changes, with the exception of the rate reduction, will result'in the Company paying more taxes currently, will eliminate sources of internally generated funds for the Company and thereby increase finncing requirements in the future. Ec 1RA did not have a material effect on the Company for the years ended December 31,1987 and 1986. Although TU Electric cannot predict future regulatory practices, the ex*ent of any further delays in the licensing of the Comanche Peak Nuclear Generating Station (Comanche Peak) or any changes in economic and securities market conditbns, no changes are expected in trends or commitments which might significantly alter its basic financial position or ability to unance capital requirements. However, TU Electric has indicated that it does not currently plan to implemen: increased electric sersice rates which reflect any additional Comanche Peak costs until Unit 1 is ready for commercial operation and TU Elec- , tric continues to believe, based upon revised cost estimates and using acceptable rate making approaches and assumptions, that the rate increase, when Unit I goes into service, can be held to about 10%. Herefore, prior to the completion of Comanche Peak and its inclusion in rate base, a relatively small percent.ae of capital requirements may be generated internally. (See Notes 10 and 11 to Financial Statements.) See Financial Statistics for additional information. Results of Operations Operating revenues increased $150,878,000 in 1987 and decreased $238,112,000 in 1936. Le 611owing table details the factors contributing to the increase and decrease: , increase (Decrease) Factors 1987 1986 i Thunds of Ddlan j Fuel revenue . . ... . .. .. .. .. $ 73,589 $(316,H5) 1 Power cost recovery factor rewnue .. . . 32,485 25,MS i increased energy sales . . . ... . . . 51,954 61,492 1 Ocher . . . . ... (7,150) (8,727)- Total . . . . . . . .... $150,878 $(238,112) Le increase in operating revenues for 1987 was the result of increased fuel and purch sed power revenue and increased energy sales. Energy sales for 1987 increased 3.3% and were attributable to increased customers and customer usage. Operating revenues decreased in 1986 as the result of decreased fuel evenue partially offset by increases in purchased power revenue and energy sales. See Operating Statistics. Fuel and purchased power expense increased $106,397,000 in 1987 and decreased $309,671,000 in 1986. Le increase for 1987 was due primarily to increased offsystem purchases partially offset by lower , fuel costs. Lower fuel expense for 1987 reflects the decrease in the unit cost of gas from $2.77 per million 1 Btu in 1986 to $2.56 in 1987. He decrease in 1986 was due primarily to the decrease in the unit cost of ! gas ofEset in part by increased purchased power. See Operating Statistics. l Operation expenc increased $66,115,000 and $38,901,000 for 1987 and 1986, respectively. Operation expense for 1987 was affected by increases in the cost of labor, liability and property insurance and the one-time cost of the special early retirement program, increases in wheeling costs and liability and proper-ty insurance had a significant impact on operation expense for 1986.
Maintenance expense decreased $18,619,000 for 1987 and increased $19,540,000 for 1986. He decrease for 1987 was due primarily to revisions in the secte of certain scheduled overhauls, ne increase in maintenance for 1986 was the result of increases in power production expenses associated with lignite and gas plants and programs to improve and ensure the availability of all generating units. Increased distribu-tion maintenne also added to the increase for 1986. Taxes rlaer than income increased $13,755,000 and $4,117,000 for 1987 and 1986, respectiwly. He increar., for 1987 and 1986 resulted primarily from increases in franchise and pmperty based taxes. Mowance for funds used during construction (AFUDC) increased as a result of the ongoing con-stuction program and the resultant increase in the level of CVAP of W Electric not inc'uded in rate t ase partially ofEset, in 1987, by the reduction in the AFUDC rates and the sus;wnsion of AFUDC on t he Twin Oak and Forest Grove generating stations. Other income and deductions . net increased $9,359,000 and.$11,585,000 for 1987 and 1986, respec-mely, ne increase for 1987 was due primarily to increased interest on temporary cash irwestments. The increase for 1986 was the result of a gain on the sale of certain properties. Interest on first mortgage bonds increased in 1987 and 1986 due to the sale of new issues during the years and annualized interest of issues sold in the prior years, partially offset by retirements and redemp - tions of certain higher interen rate issues. Other intemst charges decreased $16,347,000 for 1987 and increased $9,570,000 for 1986. He decrease for 1987 reflects decreased interest cost on owr-recovered fuel rewnue and short term borrowings. %e in-crease for 1986 reflects increased interest cost on over recovered fuel revenue offset in part by decreased interest on short-term borrowings. Preferred stock dividends increased for 1987 and 1986, $10,663,000 and $12,099,000, respectively, due to new issues sold during these periods and the full year's effect of prior period issuances, offset in part in 1986 by lower dividend rates on the adjustable rate series. Consolidated net income increased $53,125,000 in 1987 and $39,093,000 in 1986 which represents a culmination of the factors described above. Included in consolidated net income were increases in AFUDC of $83,297,000 in 1987 and $74,114,000 in 1986 which represent non cash earnings to the Com-pany. Estimated Effect of Pending Accounting Change in December 1987, the Financial Accounting Standards Board issued Statement of Financial Account-ing Standards No. % entitled "Accounting for Income Taxes" which becomes effective for fiscal years brginning after December 15,1988. He Statement, among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net of<ax accounting and reporting. Certain provisions of the Statement provide that regulated enterprises are permitted to recognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to customers in future rate Although the application of the Statement will increase both total assets and liabilities, these requirements are not expected to have a material effect on the Company's financial posi-tion or results of operations. Suspension of Capitalization of AFUDC in September 1987, TU Eletric announced the suspension of construction on the Tvin Oak and Forest Grove generating stations. Herefore, capitalization of AFUDC was <uspended in October 1987 un-til active construction resumes. Expenditures not included in rate base as of December 31,1987, ap-plicable to these stations, totaled approximately $468,000,000. In March 1988, m Electric announced the temporary suspension or construction on Unit 2 'of Com-anche Peak for an anticipated period of one year, nerefore, beginning in April 1988, capitalization of AFUDC will be suspended until active construction resumes. Expenditures not included in rate base as of December 31, 1987, applicable to this unit, totaled approximately $1,513,000,000. He above suspensions of AFUDC reduced consolidated net incom- by approximately $10,000,000 in 1987 and are expected to reduce consolidated net income in 1988 by approximately $160,000,000 from the level it would otherwise have been. 17
7
~ I TEXAS UTILMES COMPANY AND SUBSIDIARIES Statannnt of Consolidated Income Er Ended December 3., .
1987 19S6 1985
- Thiands of D&rs OPERATING REVEht'ES . . . . . . . . . . . . . . .. .. .. ..... $4,082,923 . $3,932,045 $4,170,157 OPERATING EXPENSES Fuel and purchased power . . . .. ... .... . .. ... 1,585,610 1,479,213 1,788,8H Operation . . . . . . . . . . . . .. ... ... . .. 624,053 557,938 519,037 Maintenance . . .. . . . . ... .. . .. .. 300,451 319,070 299,530 Depreciation . . . . .. .. ... .. .... 234,139 220,381 207,592
- Federal income taxes (Note 7) . . ... .. . . .. .. 194,460 261,311 276,711 Taxes other than income . . . . . . ... . .. 295,327 281,572 277,455 Total operating expenses . . . .. . . .. , . . 3,234,040 3,122,485 3,369,209 OPERATING INCONE . . . ...... . . .. .. . ... 848,883 809,560 800,H8 OTHER INCOhE Alk>wance for equity funds used dunng construction. . . . .. . 283,061 231,880 173,846 Other income and deductions-net . .. . . .. . . 14,371 5,012 (6,573)
Federalincome taxes (Nete 7) . .. .. .. . .... .. (232) 3,034 2,165 Total other income .. . . . . . . . . 297,200 - 239,926 169,438 TOTAL INCOhE. . . .. . .. .. . .... . 1,146,083 1,019,486 970,386 INEREST CHARGES Interest on mortgy bonds . . . .. . .. ... ... 402,389 317,978 285,693 Interest on other long-term debt . .. . ..... 67,934 71,073 68,H0 Other interest ....... . .. . ... . . . . 10,808 27,155 17,585 Allowance for borroud funds used during construction . . . . . . . (104,062) (71,H6) (55,866) Total interest charges . . .... . .... . . . . . . 377,069 344,260 316,352 PREFERRED STOCK DIVIDENDS OF SUBSIDIARY . . .. ,.. .. 89,038 78,375 66,276 CONSOLIDATED NET INCOhE . ... ... ..... . . .. . $_679.976 } _626.851 5 587.758 Awrage shares of common stock outstanding (thousands) . . . . . . . . . . . . 149,449 140,982 135,267 Earnings and dividends per share of common stock: Earnings (on average shares outstanding) . . . .... . . .. . $4.55 H.45 $4.35 Dividends declM. . . . ... .. . . 2.80 2.68 2.52 Statement of Consolidated Retained arnings Year Ended December 31, 1 1987 1986 1985 l i Thoutands o[ Olllas l l BALANCE AT BEGINNING OF YEAR , $2,180,293 $1,931,307
. ... .. .. $1,6S6,913
)
ADD--Consolidated net income . . .. .. . 679,976 626,851 587,758 Total . . . . . . ... .. . .. . . .. 2,860,269 2,558,158 - 2,274,671 j DEDUCT-Dividends declared on common stock (for amounts ter i share, see Scatement c(Consolidated Income) . . .. . ........ 421,418 377,865 343,364 ~! BALANG AT END OF YEAR (Note 4) . .. . .. $2,438,851 $2,1!O,293 $1,931,307 l Sn> aarmpmying Notes to Finanaal Statemenu. j i l a 18 a I
. i TEXAS LHILmES COMPANY AND SUBSIDIARIES
. _ - - - _= - .-.
Statem:nt of Consolidated Source of Funds for Construction Year Ended December 31,1 1987 1986 1985 Thcxcands of Ddlars FUNDS FROh! OPERAT10NS
- Consolidated net income . ... .. . ....... $ 679,976 5 626,851 $ 587,758 Depreciation (induding amounts charged to fud). ... . .. 260,808 248,329 231,711 Deferred federal income taxes-net . . ..... . .... . ... 48,912 140,479 174,325 Federal inwstment tax credits-net. ... . . ... .... .. 56,012 66,302 77,285 Albwance for funds uscd during construction . . . .. .. (387,123) - (303,826) (229,712)
Total funds from operations .. . ........ . . .. . 658,585 778,135 - 791,367
- 1. css-Dividends dedared on common stock . . . . .. 421,418 377,865 343,364 Net funds from operations .. . ... . .. 237,167 400,270 448,003 l FUNDS FROM FINANCING l Sales of securities:
l Fint mortgage bonds . . . . ... .. 1,058,852 970,000 475,000 Other bng-term debt. .. . . .. .. - - 75,000 Preferred stock . . .... . . .... . 98,697 197,728 83,513 Common stock . .. . . .. .. . . 312,952 145,171 249,167 Retirement of bng-term securities (Note 6). . . . . .. . . (188,324) (305,792) (258,156) Increase (decrease) in notes payable-commercial paper . . .. (11,300) 11.300 (59,700) Net funds from financing . . . .... 1,270,877 1,018,407 564,824 OTHER SOURCES (USES) OF FUNDS Changes in working capital, exduding notcs payable, bng<erm debt due currently and owrrecovered fuel rewnue: Cash in banks and temporary cash investments . . . .... (88,936) (129,345) - 0 9,613) Accounts receivable-net. .. . . . . .. . . ...... (122,238) 10,H4 (37,4M) Imentories . . .. . . . ... . 12,976 9,397 9,795 Accounts payable ... .. . .. .. . . 41.703 43.034 18,777 l Taxes accrued . . . .. . .. (35,710) (41,209) (18,420) l Other-net . .. .. . . . . . .. . .. 86,510 (25,M9) 5,40S Net change. . . . . . .. . (105,695) (132,22S) (61,537) Non-utility property-net . . . . . (28,232) (20,880) (19,925) Nuclear fuel . . . ... . . .. ... . . . (797) 2,760 (54,803) Owr /under recowred fuel rewnue-net of ckferred income taxes ... .. ..... .. . . . . (60,834) (12,309) 52,301 Unamorti:ed bss on reacquired deh-net (Note 6). .. . (15,548) (23,398) (32,021) Other-net . .. . ... . . .. .. 4,770 (16.829) (17,693) Net other sources (uses) of funds . . .. . (206,336) (202,8M) (133,678) Total . . . . . . . $1,301,708 $1,215,793 $ 879,149 CONSTRUCI1ON EXPENDITURES
' Utility plant . . ... .... . . . ... . . ... $1,688,831 $1,919,619 $1,108,861 Alk)wance for funds uscd during constructen . . . . . . .. (387,123) (303,826) (229,712)
CONSTRUCFION EXPENDITURES (exdudmg albwance for funds used during construction) . .. . . $1,301,708 $1,215,793 $ 879,149 See <mmamsg Notes to Finavial Statements. 19
I TEXAS UTTLMES CokiPANY AND SUBSIDIARIES 2 Consolidated Balancs Sheet December 31, 1987 1986 Thuands of Ddlan ASSETS UU111Y PLANT in senice: Producaon . . . .... ....... . . ....... ... ..... ........ $ 3,968,345 $ 3,902,898
, . Transmission . . . . . . . . . . . . . . . . . . . ...... .. ......... .. 1,214,642 - 1,166,066 Danbution . . . . . ...... .... .. .. . ...... . . ........ 2,696,523 2,543,163 General . . . . . . . . . . . . . .. .... .. .... ..... . .... 377,590 343,347 Taal . . . . . . . . . . . . . . . . . . . . . . . ............ ..... . 8,257,100- 7,955,474 Constnxtion work in progress (Notes 10 and 11) . . . . . . . . . . . . . . . . . . 6,642,707 5,351,565 -~
Nudear fuel . . . ....... . ..... . . ..... ................... ^ 252,761 251,964 Hekt for futune use . ... ... .. . .. . ... . .... .. ... ... .. -20,426 ' 7,130 Total utility plant . ........ .. . ... ..... . . ... ... 15,172,994 13,566,133 Less accumulated depredation . . . . ... .... .....'. . ... 2,718,328 ' 2,522,016 Utility plant,less accumulated (kpreciation . . ... . ... .. . 12,454,666 ~ 11,M4,117 INVESIliENTS , Non-utility property (Note 11) . . . . . . . .... .... ....... ...... .. 234,847 206,615 Other investments (Nae 1) . .. .. .. ..................... 22,107 15,113 Taalinvestments . . ..... ... .... . .. . .. ... . 256,954 221,728 CURRENT ASSEIS Casn in hanks (Nae 2) . . . . . . . .. . . .. ... .. . ........ .. 7,230 6,4H - Temporary cash investments-at cast . . .. ...... .. .. . .. . .. 272,400 184,200 Special deposits . . . . . .... .. .. .. . .............. .......... .. .38,114 35,299 Accounts receivable: Customers . ... . ....... ........ . ... .. .. . ....... 250,684 212,153. i hiinority owners of Comanche 1%ak (Note 10) . . . . . . . . . . . ..... ., 109,284 58,826 Other .. ........ . .. ... .. . . ........ ... . ...... 66,522- 33,847 Alkwance for uncoucctible acccents . . . .. . . ....... . .. ...... (13,243) (13,817) Imentones--at awrage cost: I hiaterials and suppbes ... ..... . .. .. ......... . .. . 130,941 126,865 Fuel stock . . . ... .... . ..... ... . .. . ......... 160,613 177,665 Deferred federal inwme taxes (over recovered fuel revenue) . . ........ . . - 29,253 Other current assets . . . . . . . . .. ........ ....... '47,867 76,586 Taal current assets . . . . . ..... ... ..... .. . . ... 1,070,412 927,371-DEFERRED DEBfTS Under-recowred fud revenue. . . . . . ..... ..... ..... ..... 44,119 - Unamom:ed loss on reacquurd debt (Nae 6) .... ... .... . .... 70,% 7 55,419 CanceDed lignite unit costs (Nae 11). . . . . .. ..... . ..... . . . . 37,246 36,810 Other deferred debits . . . . . . . . . . ... .. . .. .. . ....... .. 51,896 32,747 Total deferred debits . .. .. ... . . .. .... .. 2N,228 124,976 Taal . , ... . .. ., .. ... ............ . .. $13,986,260 ' $12,318,192 See amntunymg Naes to Rnancial Statements. 20
1987 1986 Munis of Dtam CAPITALIZATION AND 1. LABILITIES CAPITAUZATION Common stock, without par value (Nae 3): Authori:cd shares-200,000,000 Outstanding shares-1987,152,408,942; 1986,142,805,206 . $ 2,593,480 $ 2,280,518 Retained eamings (Note 4) . . . . . . 2,438,851 2,180,293 Taal common stock equity . 5,032,331 4,46),821 Prekrred stock (Nae 5): Na subjett to mandatory redempion . . . . . . 909,633 811,418 Subject to mandatory redempion . . 232,906 232,424 Long<erm &bt, less amounts due currently (Nae 6) . . . 5,141,491 4,283,791 Taal capitali:ation . . . 11,316,361 9,788,454 CURRENT LIABILIRES Nues payaNe--commerdal paper (Nae 2) . .
- 11,3C0 long4erm ddx due currently 54,980 M,480 Total (to be refmanced) . . . . 54,980 65,780 Acounts payable . . 347,478 305,775 Dnidends dedared . . . 130,365 116,821 Customers' & posits .. 51,259 44,8'i7 Taxes accrued . . . 106,587 142,297 Interest acenni 139,222 107,707 Owr recovered fuel rewnue . . .
- 63,591 Other current liabihtia. . .. 33,021 23,856 Total current habilities 862,912 870,707 DEFERRED CREDTTS AND OTHER NONCURRENT LIABIIIRES Amumulated deferrtd federal inmme taxes . 998,476 931,938 Unamorti:ed fakral investment tax credits . . 768,203 712,193 Other deferred crcuts and noncurrent liabilitia . 40,308 14,900 Taal deferred credits and aber noncurrent liabilities 1,806,987 1,659,031 COMMITMINIS AND CON 71NGENCIES (Notes 10 and 11)
Taal $13,986,260 $12,318,192 See ammtunying hbecs to Fnnial Starcments. 21
HXAS UTILTTIES COMPANY AND SUllSIDIARIES Notes to Financial Statennnts
- 1. Significant Accounting Policies Consolidation-%e consolidated financial statements indude Texas Utilities Company (Company) and all of its subsidiaries; all significant intercompany items and transactions have been eliminated in consolida-tion.
Utility Plant-Utility plant is stated at original cost. He cost of property additions charged to utility plant includes labor and materials, applicable overhead and payroll-related costs and an allowance for funds used during construction. Allouunce kr Ends U3d During Constmcrion-Allowance for funds used during construction (AFUDC) is a cost accounting procedure whereby amounts based upon interest charges on borrowed funds and a returr. on equity capital used to Anance construction are charged to utility plant. Le accrual of AFUDC is in accord with generally accepted accounting principles for the industry, but does not represent current cash income. Texas Utilities Electric Company (TU Electric) is capitalizing AFUDC, compounded semi-annually, on expenditures for ongoing construction work in progress (CWIP) not otherwise allowed in rate base by regulatory authorities. In 1985 and 1986, AFUDC was capitali:cd using a net of tax rate of 9%% in 1987, pursuant to the passage of the Tax Reform Act of 19S6 (TRA), TU Electric lxyan using a com-pcrable gross capitali:ation rate on projects commenced after March 1,1986. Beginning July 1,1987, a netof-tax rate of 9% and a gross rate of 10h% have been used. All such rates were determined on the basis of, but are kss than, the cost of capital used to finance the construction program. Depraiation-Depreciation is based ugn an amortization of the original cost of depreciable properties on a straight-line basis over the estimated service lives of the properties. Depreciation as a percent of average depreciable property approximated 3.4% for 1987,1986 and 1985. Other Intestments-%e difference between the amount at which the investment in a subsidiary is carried by the Company and the underlying book equity of such subsidiary at the respective dates of acquisition of $14,439,000 is included in other investments. Ihnes-Revenues include billings under approved rates (including a fixed fuel factor) applied to meter readings each month on a cycle basis and an amount for under or over recovery of fuel rewnue representing the difference between actual fuel cost and billings on the approved fixed fuel factor. Pur-suant to a rule adopted in July 1986 by the Public Utility Commission of Texas (PUC), TU Electric is required to refund owr recowred fuel revenue if the amount of over-recovery, including interest, exceeds the lesser of $40 million or 4% of its annual known or reasonably predictable fuel costs most recently ap-proved by the PUC. Reconciliation of fuel costs is to be made in a general rate case or a reconciliation proceeding. Reconciliatien may be requested only if it has either been over one year since the utility's last fmal reconciliation or the utility has materially under-recovered its known or reasonably predictable fuel Costs. Faleral Inctnne Tates-Le Company and 5 subsidiary companies file a consolidated federal income tax return, and federal income taxes are allocated to all subsidiary companies based upon taxable income or loss. Deferred federal income taxes are currently provided for timing differences between book and taxable income; such differences r sult primarily from the u<c of liberali:ed depreciation and cost recovery dedoc-tions allowable under the Internal Revenue Code, the under or over recovery of fuel revenue and unbill-ed revenues on a cyde basis. Cumulative timing differences in earlier years for which deferred federal in-come taxes were not provided approximated $237,000,LTO at December 31, 1987. Investment tax credits are being amortized to income owr the estimated service lives of the properties. In December 1987, the Financial Accounting Standards Bosed issued Statement of Financial Account-ing Standards No. % entitled "Accoimting for Income Taxes" which becomes effective for fiscal years beginning after December 15, 1988. Le Statement, among other things, requires the liability method of rwcognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an , enacted change in tax laws or rates and prohibits netof-tax accounting and reporting. Certain prosisions ! of the Statement provide that regulated enterprises are permitted to recognize such adjustments as regulatory as< cts or liabilities if it is probable that such amounts will be recovered from or returned to customers in future rates. Although the application of the Statement will increase lx th total assets and liabilities, them requirements are not expected to haw a material effect on the Company's financial posi-tion or results of operations. 22 l
_ ~.~___ -_ _ _ ____ = _. u_,._ wm _ _ - _ .---- ; --_w- -
- - - - - _.u --_w
- 2. Bank Balances and Short. Term Bormwings At December 31, 1987, the Company had lines of credit aggregating $1,025,000,000 under an eight. year credit facility agreement with a group of commercial banks. The facility, for which the Company pays a fee, will be reduced in 1993,1994 and 1995 by $325,000,000, $350,000,000 and $350,000,000, respectively.
This credit facility may be used to finance new construction, as backup for commercial paper and for general corporate purposes. The total amount of borrowings authorized by the Board of Directors of the
. Company from banks or other lenders at December 31,'1987 was $1,075,000,000.
- 3. Common Stock The Company issued and sold shares of its authorized but unissued common stock during the years 1987,1986 and 1985 as follows:
Automatic Dividend Reimestment and Empkwees' Thrift Plan Common Stock and Employee Public Offering Purchase Plan Stock Owmership Plan Total Year Shares Amount Shares Amount Shares Amount Shares Amount 1987 5,000,000 $170,452,000 3,633,187 $111,lM,000
~
970,549 $31,316,000 9,603,736 $312,952,00) 1986 - - 3,826,687 115,148,000 935,3S7 30,023,000 4,762,N4 145,171,000 1935 5,000,000 130,650,000 3,431,846 90,199,0J0 1,025,8 7 28,318,C00 9,457,493 249,167,000 At December 31, 1987, 6,315,927 shares of the authorized but unissued common stock of the Com-pany were reserved for issuance and sale pursuant to the above plans. The Company has 50,000,000 authorized shares of serial preference stock having a par value of $25 a share, none of which has been issued.
- 4. Retained Earnings The artides of incorporation, the mortgages, as supplemented, and the debenture agreements of TU Electric contain provisions which, under certain conditions, restrict distributions on or acquisitions of its common stock. At December 31,1987, $138,736,000 of retained earnings of TU Electric were thus restricted as a result of the provisions of such artides of incorporation. Retained earnings at such date also induded $431,243,000, representing the Company's equity in undistributed earnings since acquisition included in transfers by TU Electric from its retained earnings to stated value of common stock, making a total of retained earnings which was restricted of $569,979,000 at December 31, 1987.
I 23
1
. Notes to Financial Statsments (continued) j 1
~
- 5. Preferred Stock of TU Electric (cumulative, without par.value, entitled upon liquidation to $100 a share)
. Redemption Price Per Share . ..
Shares Outstanding Amouct , (before adding accumulated dividends) Series Groupe December 31, December 31. Current Ewntual Minimum
. From To 1987 -1986- 1987 1986 From To From To Tksamds of Dollars Not Subject to Mandatory Redemption -
$ 4.00 $ 4.84 . . . 1,142,942 1,142,942 $114,588 $114,588 $101.79 $112.00 $101.79 $112.00 5.08 7.80 . . . ,, .. 1,629,675 1,629.675 163,270 163,270 ' 102,40 ; ' 104.82- 102.40 . 103.60 8.16 8.92 . .. . 1,999,475 1,999,475- 198,642 198,642 103.60 106.13 101.00 103.60 9.32 - 11.32 . . . . . .1,550,000 1,550.000 153,205 153.205 104.66 111.32* 100.00- 102.73 :
Adiustable rate (a) . .. . '1,850,000 1,850,000 181,713 181,713 - -- 100.00 100.00 - Stated rate auction (b) . ,. 1,000,000 -- 98,215 - - - 100.00 .100.00 Total . . . . . .. 9,172,092 .8,172,092 ~ $909,633 $811,418 Subject to Mandatory Redemption (c)
$ 8.92 ' $ 9.48. . 1,500,000 1,500.000 . $148,610 $148,315 ' $108.92* $109.48* $100.00 $100.00 10.00 -10.08 . . 850,000 850,000 84,296 84,109 110.00* 110.08* 100.00' 100.00 Total . . . . 2,350,000 2,350,000 $232,906 $232,424
*ltakngum may rat te e&oni nrmuly dmah cman retning qwsnum.
W Myralie rue ernes A bears a aiksd rue te de rmd enkd Jarmary 31. Its d 7.55% rw anran ad afumable nre am B tems a eiksd rue te the smd enkd thember 31.1987 d 81M rer annn, huh d 3Rh are band on a and keminn r r e d $K040 rw share. The sens are rrt mkernable swir so Jure 1.19t!J ard June I,1M, ,egatiwly. H Srmal rue matin um A bears a ativd rue d 6.24% rn annwn is the and chilen! smd themsh Squember M 19J2 ard shmen we rm.t valmnable gne to Screemhv 29.19J2. Tk aiisd rue Er eah 49 day chiked reid there:frev mil te driermnd on de has d certan mann taxaina Tir mae knun rue avermund by de emum may rarve frum 110% => 2LM d de today *AA" cominwre amnenial sqw rare Irdes. Al rafrnynwu are a a gnw d $10040 rer shee ar m ananulared ailm.h. El TU Ekcrr b mpared so mitm a gutmd inansnurn runntwr d shmen annudy amnevurg cm the insial das siswm ht=, exert ir de $&92 ames m&h dvs nts how a unkiri urd f gewin TU Ehrrs may annueBy mkem, a as an n, an siveyre d te as een de nurnter d shees damn Er eah arnes. Al exh redsistars are a a svke d $KU40 su sherar n ausmilmed 4*kak Minsmum Rahemable Inishi Dane d srriss Siares Mardamry Rahmten
$10IB 14/10 annually 4/1/W 9 48 (AXO armudy 4/IM2 1 1040 20/t0 anaally 7/IM2 8.92 Al asmanki ihmes 7/IM . l Tk carryvg value d ree&md mai sket a mardmory misnprun is hus incremed smanay so ecpal the adv<gnm arounts a de mardanwy rnavngtum ama uh a anconing kuese ti svefemd mak ankak.
TU Electric issued and sold shares of its authorized preferred stock as follows: July' 1987,1,000,000 shares of stated rate auction series A for $98,215,000; July 1986,500,000 shares of $10.00 series ; cumulative preferred stock, subject to mandatory redemption, for $49,413,000; July 1986, 500,000 shares
.l of $8.92 series cumulative preferred stock, subject to mandatory redemption, for $49,437,000; February-1986, 1,000,000 shares of $9.48 series cumulative preferred stock, subject to mandatory redemption, for
$98,878,000; and June 1985, 850,000 shares of adjustable rate series B preferred stock for $83,513,000.
l i i i i i 24 l l
.~~~m
- 6. IongTerm Debt of Subsidiaries, less amounts due currently December 31, Maturity Groups Interest Rate Groups 1987 1966 From To From To Thnunds of DAns First mortgage bonds:
1988 1992 45 % 45 % .......... . . . . .. ..... $ 12,000 $ 34,500 1993 1997 4% 9% ................ . .... .. 356,000 206,000 1998 2002 6% 9% ... ...... .. ..... ........ 340,000- 340,000 2003 2007 7% .10% ..... ... . .... .. ... . . . 750,000 750,000 2008 2012 9% 16 .......... .... .. .. . ...... 250,000 382,531 2013 2017 9% 13% ........ .. ..... .... . .... 2,200,000 1,550,000 Pollution control series: 2007 2017 7h- 10 ..... ... .. .... .. . . . 589,000 310,000 Funds on deposit with trustee. . . . ... .... . ..... ....... ... (20,148) - Sinking fund debentures: 1%9 1989 4% 4% ...... ...... . . .. ....... 17,854 31,735 18,4M 32,448 1993 1994 6% 7% .. . .. .. . ........ .. .. Total . ........ .. . . . .. ... . ...... .. 4,526,441 3,623,933 Pollution control revenue bonds: 20M 2009 5.70 7% .. .. . .... .. .. 160,000 160,000 Senior notes: 1990 1999 8.50 1220 .. . ... . ........ ... . 502,380 534,860 Unamorti:ai premium and dismunt . .. .. ... . .. .... .. ...... (47,330) (35,002) Total long<erm debt, less amounts due currently . . . . . . . . . . $5,141,491 $4,283,7)1 Sinking fund and maturity requirements for the years 1988 through 1992 under longterm debt instru-ments in effect at December 31, 1987, were as follows: Sinking Minimum Cash Year Fund (a) Maturity Requirement (b) Thousands of Duas 1988. .. ... .. .. ..... $49,850 $ 22,500 $ 54,980 1989. . . ... ... 50,932 17,854 50,916 1 1990. . . .... 50,956 100,000 133,180 1991.. . . . , .. 50,776 12,000 45,180 l 1992. . .... .. . 31,846 - 34,250 : 1 (a) Excluding requirements satisfied prior to December 31,1987: $2,433,000 for 1988, $438,000 for 1989, l
$320,000 for 1990, $320,000 for 1991 and $320,000 for 1992. ;
(b) Other requirements may be satisfied by certification of property additions at the rate of 167% of such re. quirements, except for eighteen issues at 100% in 1987 and prior years, various principal amounts of first mo gage bonds were redeemed by TU Electric prior to maturity. Pursuant to expected regulatory treatment, the net losses on reacquired debt have been deferred and are being amorti:ed over the remaining lives of the bonds retired. Utility plant of 'IIJ Electric is generally subject to the liens of its mortgages. 25
Notes to Financial Stat:m:nts (continued)
- 7. Federal Income Taxes The details of federal inconu taxes are as follows:
- l. ear Ended December 31, 1987 1986 1985 Thands of Drdm Charged to operating expenses:
Current .... ..... .. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,909 $ 55,M5 - $ 127,114 - Deferred-net: Differences betwwn depreciation methods and liws ..... ......... 64,115 79,148 85,950 - Certain capitali ed construction costr ........... .... ..... ........ . (2,010) 19,320 19,390 Over/under<ecovered fuel rewnue.... . . . . . . . . . . . . . . . . . . . . , 46,856. I1,935 : (44,553) Cancelled lignite unit...... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (971) 11,293 ' - Early redemptions of long<erm ddx ... . . . . . . . . . . . . . . . . . . . . . . . . ~ 6,091 10,763 14,730 ' prepaid (accrued) pension cost.' ... ......... .. . ....... ... ...... .. ..
. -(12,443) _6,181 4 Unbilled revenues .. .... ........... .. ... .. .... . ....... . . . . . . . . . . . . . . (17,367) (322) 932 Other................................................ . . . . . . . . . . . .
(732) 3,146 . (4,137) Total................................ . . . . . . . . . . . . . . . . . . :83,539 142,4M 72.312 Imustment tax credits-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,012 66,302 77,285 Total to operating expenses . ..... . .. ....... .... ...... . .... 194,460 2M,311 - 276,711 Charpxl (credited) to other income-Current ....... .................................................. (12,020) (11,535) (9,625) Deferred-net.... ... ... ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12,252 8,501 7,460 Total to other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232- (3,0 34) (2,165) Total federal income taxes.. . . ... ...... ... . ..... .... $ 194,692 $261,277 $274,546 Federal income taxes were less than the amount computed by applying the federal statutory rate to pre <ax book income as follows: Year Ended December 31, 1987 1986 1985 Thotanis of Dilars Federal income taxes at statutory rate (39.95% for 1987 and 46% for 1986 and 1985)..... ... . .................................. $385,001 $444,591 $427,147 Reductions in federal income taxes resulting from: 1 A!!owance for funds used during construction ......... ... . . .. .... ... 152,816 139,76) 105,668 Depletion allowance .. . . .. . . . . . . . ... ... . . . .. . . . . .. . . . .. . . . . . . . . . . . 26,437 24,006 25,442 Amorti:ation of imestment tax credits . ...... ... .. . . .. .. . .. .. 16,126 14,982 13,781 Other .. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,070) 4,566 7,710 Total reductions... . .......... . . . .. . . . . . . . . . . . . . . . . . 190,309 183,314 152,6)1 Total federal income taxes.. ... . ...... ................ $194,692 5261,277 $274,546 EEcctive tax rate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.2 % 27.0 % 29.6 %
- 8. Retirement Plans and Other Postretirement Benefits ne System Companies have uniform retirement plans covering substantially all employees. The benefits are based on years of accredited service and the employee's average annual carnings received during the three years of highest earnings. The costs of the plans are determined by independent actuaries. Con-tributions to the plans were determined using the frozen attained age method which is one of the several actuarial methods allowed by the Employee Retirement Income Security Act of 1974. During 1986, the System Companies adopted the Financial Accounting Standards Board's Statement of Financial Account-ing Standards Nc. 87, "Employers' Accounting for Pensions." ne new <tandard requires, among other things, the use of the projected unit credit actuarial method for determining pension cost for financial reporting purposes. The cumulative difference between pension cost as determined under the new stan-dard and contributions to the plans is recorded either as prepaid pension cost or as accrued pension liability. He adoption of the new accounting standard did not have a material effect upon the Com.
pany's financial position or results of operations. 26
_ _ - = _- ___m_ ~_._ _ _ _ . _ . _ _ _._ In 1987, the Company offered a special early retirement program to those employees who had attained the age of 55 and had 15 or more years of accredited senice. He offer provided for a waiver of reduced benefits for early retirement plus 5 additional years of accredited service up to a maximum of 40 years. He cost of the program was recorded in accordance with Financial Accounting Standards Board's State-ment of Financial Accounting Standards No. 88, "Employers' Accounting for Settlements and Cur-tailments of Defmed Benefits Pension Plans and for Termination Benefits." He following table sets forth the plans' funded status and amount recogni:cd in the Company's con-solidated balance sheet: Dnymive 31, 1987 1986 Ananfs el adas Atuanal ptwrv value d axumulmed hners: Accumulant kna cHvim. irxidre wsed kn6s ($K0219p for 1997 arst 5387,775M Er 1%).. $5%238) R446,129) Ihntal kne (Heim Er wie rerdml to d.re.. $G38,359) h654,102) b awn a hr value, gnmanly equay inw enuns, pummtts hva ars! urprate knh 732,713 729,003 Ilan man in cues d des than) rnpted Emft cHvarxn.., (5,M6) 74,901 Unrmynced rat g:nn frtwn pa expnente ddibrent frtrn thar a'eunni arsi c&sts d thaws in avumpins .. C,?01) (51,631) Pnte mie un rat ytt retamed in rst pna yan n expnee.. 16,149 17A12 Unrcumzed rian amu in cues d ptytai hue olharin at January 1,1% .. (19,718) C2M4) Prepel psan ow cauurd psan Iwhhry).. . . . . $ (12,0k9 $ 17,728 Assumptions used for 1987 and 1986 include a discount rate of 8.0%, an expected long-term rate of return on assets of 8.0% and increases in compensation levels of 5.3% and 6.3%, respectively. Total pen-sion costs for 1987 and 1986, including amounts charged to fuel cost and capitali:cd, were comprised of the following components: Decemlvr 31, 1987 1986 j Ananfs c( Dans Smie aw -luuss camed &nry the pmL $ 30,120 $ 32,7S2 Intens etw on rnyun! hwh cHgnm .. 54,515 46p> Actual return en rian ants .. (34 7) (I C P) Mt ansvtmain arsi deferral . (Y/64) 51,103 Mt pnsic psean aw 25,624 30,062 Termann uw . M,6V) - Ttval rman uw.. 5 M,274 5 V,062 He cost of the plan for 19S5, including amounts charged to fuel cost and capitalized, approximated
$48,283,000.
In addition to retirement plans, the System Companies offer certair health care and life insurance , h:nefits to active and retired employees. He costs of such benefits are generally reccpi:ed as claims are I paid. He costs of providing such benefits to retired employees, net of empk3yee contributions, approx-imated $8,367,000 for 1987, $6,759,000 for 1986 and $4,831,000 for 1985. 27
i l I
- Notes to Financial Statements (continued) l
(
- 9. Leases The System Companies have entered into operating leases covering vanous facilities and properties in-duding such items as data processing, transportation and mining equipment and office space. Lease costs charged to operation expense for the years ended December 31,1987,1986 and 1985 were $46,732,000,
$40.466 000 and $ E012 000, re<pectiwly.
In December 1987, TU Bectric entered into an operating lease arrangement covering certain combus-tion turbine generating facilities with an initial lease term of approximately 27 years. TU Bectric expects to lease additional similar facilities in 1988. The Company's future minimum lease commitments under such operating leases that have initial or re-maining noncancelable lease terms in excess of one year as of December 31, 1987 wwe as follows: Com b en Turtenes Odwr Total T6nh of Dars BE 1988 $- $40/63 $ 40463 19tN . 6 S 82 30.381 36,463 1940 6SB2 16356 22.938 1991- 64E2 10 /46 16,928 1972 6 S 82 8,362 14.444 hafter 153,130 17J85 175,515 Taal anunum leme w... 6. $182,458 $124/43 $107,151
- 10. Comanche Peak Nuclear Generating Station TU Bectric is constructing two nudear-fuded generating units at the Comanche Peak Nuclear Generating Station (Comanche Peak), each of which is designed for a capability of 1,150 megawatts. This project is subject to the jurisdiction of the Nudear Regulatory Commission (NRC). NRC regulations govern the granting of licenses for the construction and op-ration of nuclear power plants. After gising efect to the anticipated mmpletion of the 1988 agreement to purchase the 6.2% ownership interest of Texas Municipal Ibwer Agency (TMPA) in the facility, W Bectric's share of the net espability in each unit is 1,081 megawatts, or approximately W% Ee other participants in the facility are Bra:os Sectric Power Cooperative, Inc. (BEPC) and Texia Bectric Cooperative of Texas, Inc. (Tex.La) which own 3.8%
and 2%%, respectively. Otcating Lanse Appikanon ' The NRC has been reviewing TU Bectric's application for operating licenses for the Comanche Peak I units. As a part of that resiew, a proceeding was initiated before an Atomic Safety and Licensing Board (ASLB) and proceedings on various issues have been ongoing since December 1981. After completion of such proceeding, the ASLB will make recommendations to the NRC regarding the issuance of operating licenses for the Comanche Peak units. An interwnor is actively involved in this ASLB proceedmg. The one remaining Contention before the ASLB in the operating license proceeding relates to TU . Sectric's quality assurance / quality mntrol (QA/QC) program for the plant. In December 1983, the l ASLB issued a memorandum questioning the QA program for design of certain pomons of the plant and requested that TU Bectric offer additional proof of adequate design and design resiew procedures. The ASLB is also reviewing several other related issues and has indicated its intent to miew the results of the NRC's Technical Review Team (FRT) imestigation disemsed below. In July 1984, a separate l ASLB, induding two of the three members of the original ASLB, was cotwened to receive testimony on i allegations that QC inspectors at the plant had been subjected to an atmosphere of harassment and in-timidation which is alleged to have affected the implementation of TU Bectric's QA program. In January 1986, this separate ASLB was disestablished with all issues thereafter to be reched by the original ASLB. As a separate part of the NRC's review of TU Bectric's operating license application, in March 1984, the NRC established a task force to mnsolidate and carry out the various reviews necessary for the NRC i Staff to reach its decision regarding the operating license, his effort imuhrd the establishment of the l TRT, which began an intensive onsite investigation in July 1984 and subsequently has issued reports re-questing additional infonnation from TU Bectnc with resgct to several functional areas of the plant's con-struction program. TU Batric then formed a special team, the Comanche Peak Reponse Team (CPRT), which indudes a number of independent experts In each area addressed by the TRT, and submitted a , 28 ' l
i l l
-- _ . - . - - - ----.w __--- -
J 1 Program Man (Dan) to respond to the questions raised. Such Plan, which is described further below, is presently being implemented and has been expanded to address the design and other ASLB issues descrihd herein. In January 1985, the TRT issued a report on its resiew of the QAiQC programs at Comanche Peak. He report stated that although the QA program documentation met NRC requirements, the implemen-tation of the QA program demonstrated that W Electric had lacked the commitment to aggressively im-plement an eEcctive QA/QC program in several areas. De TRT indicated that it had found evidence of faulty construction and inedective QA and QC inspections. Questions were also raised concerning the training and quali6 cation of QC permnnel and in the reporting of denciencies, ne TRT further found that prior to July 1934 problems had existed in the control of documentation. In addition, de6ciencies in several other areas were described. TU Electric was requested to submit to the NRC a program and schedule for completing a detailed and thorough assessment of these QA/QC issues presented by the TRT. TU Electric also was asked to consider the use of management personnel with a fresh perspective to evaluate the ET Andings and implement cortctrive action, and to consider the use of an indegn-dent consultant to oversee the corrective action program. In June 1985, TU Electric 6!ed with the NRC and the ASLB a revision to the Plan which is being utili:cd by the CPRT to address all outstanding design and construction concerns. This Plan, which was substantially revised and reissued in January 19S6, and further revised in July 1987, provides for a com-plete design review of virtually all safety related systems in the plant, and for the development of a cor-rective action program as required. In August 1985, the ASLB issued a hiemorandum which describcd areas of the Plan that concerned the ASLB. The hiemorandum indicated, however, that if the Plan were revised to address the ASLB's concerns and if it were appropriately implemented, the Plan may demonstrate the quality of the plant, in hiay 1986, the Staff of the NRC issued a Supplemental Safety Evaluation Report (SSER) containing an evaluation of the Plan as it existed at that time. Le SSER con-cluded that the Plan provided an overall structure and process for addressing and resolving all existing construction and design issues and any future issues that may be identi6ed from further evaluations. In June 1966, the ASLB issued a hiemorandum which addressed "Board Concerns" about the adequacy of the CPRT program. The hiemorandum stated that, based upon the ASLB's current knowledge of the program, after having reviewed the Grst results reports and the SSER on the Plan, the ASLB continued to have the concerns expressed in the earlier memorandum described above. Le ASLB also raised addi-tional concerns about how nndings in one area of the reinspection effort may affect TU Electric's pro-gram in other areas, whether sufEcient attention is being paid to problems of quality assurance and quali-ty control nyarding design, the adequacy of the CPRT sampling program, and perceived oversights in one of the results ren>rts that had been issued. TU Electric is addressing these concerns. In November 1987, the ASLB established a schedule for resolution of all issues remaining in the operating license pro-ceeding. In January 1988, the Staff of the NRC, after further review and analysis, approved the Plan and corrective action program as the basis to resche outstanding issues. At the end of February 1988, the CPRT completed the publication of its final reports. In hiarch 1988, the Staff issued an SSER approving the design of piping and pipe supports at Cc,manche Peak, which had been a major issue in the oprating license pnxeeding, and conduded that the Plan provides an effective means to ensure proper implementation of corrective action in this regard. Delivery of this report sets into motion a prehearing schedule adopted by the ASLB which should result in the resumption of hearings on issuance of the operating licenses in the late summer of 19SS. hieanwhile, implementation of the corrective action pro-gram continues. In December 1937, TU Electric entered into an agreement to settle potential daims against Gibbs & Hill, Inc. (G bbs & Hdl), the original architect <ngineer for Comanche Peak, relating to engineering and design services performed by Gibbs & Hill for Comanche Peak. Under the terms of this settlement, the owners of Comanche Peak will receive a total of $25 million in cash, deferred payments and future engineering services which will be provided to TU Electric on non-nudear projects. TU Electric has made a number of key management changes in the nudear program for Comanche Peak, induding the adJ2 tion of several new ofEcers who bring substantial nudear exgvience to TU Elec-tric. His new management team is resp >nsible for oversight and implementation of the reinsortion and corrutive action program. The NRC has created an Office of Special Projects to manage all aspects of the NRC's licensing and inspection efforts for Comanche Peak and certain other nudear power plants. 29
Notes to Financial Statements (continued)
~
- 10. Comanche Peak Nuclear Generating Station kontinuni)
Consnuction Permit Extenens in January 19S6, TU Electric 6 led an application with the NRC for an extension of the construction grmit for Unit I to reflect a new "latest date for completion" of August 1,19SS; presiously such date had been August 1,1985. In the application, TU Eleu.ic stated that the teamn the request for extension of the con:,truction permit was not 61ed at an earlier time was administrative oversight. In February 1986, the NRC issued an order extending the "latest date for completion" of Unit I to August 1,1988. Subsc-quently, the intervenor imchrd in the ASLB operating license proceeding ft!cd with the NRC a request to stay the effectiveness of the construction permit extension and to require TU Electric to file a new ap. plication for a construction permit for Unit 1 or to order that hearings be held prior to any decision on whether to grant the construction permit extension. The request for a stay was denied by the NRC and the question of whether to hold such hearings was remanded to an ASLB, the members of which are the same as the ASLB for the operating license. in November 1986, the ASLB issued a Memorandum and Order in which it accepted for litigation a new Contention, raised by two intervenors, which alleges that the delay in completing Comanche Peak, which has occurred and has necessitated the extension of the construction permit by the NRC, was the result of dilatory action on the part of TU Electric and that, therefore, gtxxl cause did not exist for the extension of such permit. No schedule for hearings on this Contention has been adopted by the ASLB at this time. TU Electric has also applied to the NRC for an extension of the construction permit for Unit 2. Such application is presently under review by the Staff of the NRC. In early March 1988, TU Electric 61ed with the ASLB a motion to consolidate pro-cmiings in the operating license and construction permit proceedings. Ciul Penalties in Apnl and June 1986, TU Electric paid civil penalties to the NRC, each in the amount of $40,000, relating to allegations of harassment and intimidation at Comanche Peak. Le June 1986 penalty was part of an aggrqate of $120,000 in civil penalties presiously proposed by the Staff of the NRC. TU Elet-tric requested the Staff to revisit the other alleged violations to determine whether they did in fact occur and to consider mitigating the amount of the penalties, and in August 1987, the Staff decided not to assess the remaining $80,000 in proposed civil penalties. In August 1986, TU Electric paid a civil penalty of $200,000 previously proposal by the Staff of the NRC relating to the findings of the TRT, descritxxl above. In addtion, TU Electric has paid another civil penalty of $50,000 relating to two alleged violations in TU Electric's reinspection and corrective action effort. Intestigation Regar&ng NRC Region IV in December 1986, a portion of a report was released by the OiBcc of Inspector and Auditor of the NRC (OIA Report) containing the results of its investigation of allegations of misconduct by the manage-ment of Region IV of the NRC with respect to Comanche Peak. The OIA Report expressed concern about allmations of harassment and intimidation by Region IV management to pressure Region IV in-spectors to downgrade or delete progml inspection 6ndings at Comanche Peak. In addition, the OIA Report concluded that it wouki not be g,ssible to rely on the Region IV QA inspection as esidence of the safe construction of Comanche Peak. Consequently, it stated that it will be necessary for the NRC to rely largely on recent detailed technical inspxtions conducted by the NRC, including the TRT, at Com-anche Peak. He OIA Report aim indicated that the data contained in an internal NRC report on in-spection procedures was inaccurate and unreliable due to a luk of understanding by NRC inspectors of the proper method of completing a certain NRC form. NRC ofBcials have indicated that a thorough assessment of the results of this investigation will be made; and in adition, certain personnel changes in the Region IV ofBce have occurred. The OIA Rep >rt's fmdings are restricted to activities in Region IV and do not question other NRC regulatory activities with respect to Comanche Peak, including the detaiksi technical insgttions conducted by the TRT as discussed above. The intervenor in the ograting license proceedings, discussed above, has indicated its intent to 61e a motion raising the OIA Repon's 6ndings as issues to be the subject of hearings in such proceedings. 30
J -, . Litigation Rdating to Comanche Peak W Electric, ThiPA, BEPC and Tex b have been the owners of 87%%,6.2%,3.8% and 2%% in-terests, respectiwly, in Comanche Peak under the terms of a joint Ownership Agreement (Agreement)
~
which provides that TU Electric is the Project Manager hr Comanche Peak. BEPC has failed to make numerous payments of its portion of the costs of Comanche Peak. BEK' has been experiencing difficulty in obtaining additional financing for Comanche Peak from the Rural Electrification Administration. In addition, since hiay 1986, Tex-La has failed to make payments to W Electric for its portion of Coman-che Peak and ThiPA has made payments under protest. Accounts receivable at December 31,1987 in-cluded $109,284,000 of amounts c'ae from BEPC and Tex La The portion of future construction expen-ditures due from BEPC and Tex-La is estimated to be $48,200,000 in 1988, $30,900,000 in 1989 and
$15,300,000 in 1990. In hiay 1986, TU Electric filed suit in the 14th Judicial District Court of Dallas County, Texas against ThiPA, BEPC and Tex La because of controwrsies which exist under the Agree-ment with respect to the obligations of the parties. TU Electric asserted that each of the defendants has either claimed that it has no further obligation to pay its share of the remaining costs of construction of Comanche Peak, er has claimed that TU Electric has failed to properly construct Comanche Peak or otherwise has breached its obligations under the Agreement. TU Electric sought recovery of damages against Tex La for its anticipatery breach of the Agreement and asked for a declaratory judgment against Tex b, BEPC ar,d ThtPA declaring among other things that they were obligated to pay their share of the remaining costs of construction of Comanche Peak and that TU Electric has not failed to use pru-dent utility practices in constructing Comanche Peak in accordance with the Agreement. ThiPA, BEPC and Tex La filed cross actions in such suit against TU Electric and the Company asserting various muses of action, including a number of alleged breaches of the Agreement by TU Electric and siolations of the Texas Deceptive Trade Practices Act (DTPA). In September 1986, the Court in the Dallas County suit ruled in favor of TU Electric with regard to a plea of the defendants attempting to change the venue of ;
such suit. The ca<c is in the discowry phase and trial is currently scheduled for October 1988. In June 19S6, ThiPA and Tex La filed suit in the 98th Judicial District Court of Trasis County, Texas against TU Electric and the Company. The petition asserted various causes of action, including a number of alkyed breaches of the Agreement by TU Electric and siolations of the DTPA. ThiPA and Tex La asked for rexission and modification of the Agreement and payment for damages, including treble damages based upon violations of the DTPA. W Electric and the Company intend to vigorously contest this suit, which has been stayed . s a result of the ruling in the Dallas County suit. In February 1988, TU Electric entered into an agreement with ThtPA pursuant to which TU Electric will purchase ThiPA's ownership interest in Comanche Peak and all outstanding claims and pending lawsuits between ThiPA and TU Electric will be settled and terminated. Finali:ation of the agreement is subjwt to the approval of the NRC and the PUC with respect to the transfer of ThiPA's ownership in-terest. TU Electric has filed applications to obtain such approvals and cannot predict when action with respect thereto will be taken. (See Note 11 to Financial Statements.) In June 1986, BEPC filed suit in the 345th Judicial District Court of Travis County, Texas against TU Electric, the Company, Texas Utilities hiining Company and Texas Utilities Services Inc. BEPC alkges that the defendants have breached the Agreement, certain implied warranties and fiduciary duties, and have been grossly negligent, acted with willful misconduct and have violated the DTPA and Texas and federal securities laws. BEPC asks for an injunction against efforts by the defendants to remver additional payments, rescission and reformation ,f the Agreement and payment for damages, trebled pursuant to the DTPA. BEPC alleges actual damages to that date of at least $216 million. The defendants intend to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. In hiarch 1987, BEPC filed a request with the NRC to mcdify the construction permits and licenses already issued and to impose a prospective condition to any permits and licenses subsequently issued or renewed to require W Electric to assume BEPC's owner < hip interest in Comanche Peak by purchase thereof at its net book cost, and for other unspecified relief, in June 1987, the NRC Office of Special Projects denied this request and TU Electric is unable to predict what further action may be taken. 31
Notes to Financial Statements (continued)-
- 10. Comanche Peak Nuclear Generating Station kundA1)
- Cast and Schahde Estimates in March 1988, TU Electric announced that following its review of the cost and schedule for Coman-che Peak, commercial operation of Unit 1 is presently anticipated at the end of 1989.'All Unit I correc -
tive action activities are scheduled for completion to permit fuel loading in mid-1989, TU Electric also an-nounced the temporary suspension of construction activities and accrual of AFUDC on Unit 2 beginnmg in April 1988 for a period of approximately one year. Unit 2 is not expected to be ready for' commercial operation until after the 1991 peak season. The delay of Unit 2 was implemented to allow TU Electric to concentrate its resources 'on the completion of Unit 1, thereby reducing the duplication of effort that would be required to maintain the previous timing between the two units and strengthen TU Electric's . ability to manage construction and start-up actisities for both units more efliciently with fewer personnel Additionally, such delay will allow time to make a more complete determination of any modifications that may be required for Unit 2 based upon the knowledge gained from the reinspection and corrective action program applied to Unit 1. The delay of Unit 2 will also pennit TU Electric time to implement rates for Unit I prior to the final completion and operation of Unit 2. Although conswcrion on Unit 2 has been temporarily suspended, there will be some ongoing expenditures required to' maintain the unit until construction is resumed. Additionally, to the extent the work necessary to place Unit ! into ser ice effects various common systems, some capital expenditures will be associated witl Unit 2. Based upon this revised schedule, the total cost of TU Electric's 94% share of the plant, exduding AFUDC, is estimated to be $6.37 billion. TU Electric's estimated cost ofits share, including AFLOC, is
$8.54 billion or about $3,950 per kilowatt. Because of the uncertainty regarding the date of commercial operation of Unit 2, no provision has bcen included In such amount for reestablishing the accrual of AFUDC on Unit 2 after construction resumes. The total cost of the plant, excluding AFUDC, is estimated to be $6.62 billion. Because of the uncertainties regarding payments by the other owners of Comanche Peak of their share of the remaining construction costs, no estimate of the amount of AFUDC that may be attributable to their interests in the plant has been made. .
TU Electric had presiously estimated, in November 19S6, that commercial operation of Unit I would be achievable in early 1989 and that Unit 2 would not be ready for commercial operation until after the 1989 summer peak season Based upon such schedule, the total cost, exduding AFUDC, of TU Electric's 87%% share of the plant (which exdudes the presently anticipated purchase of TMPA's share) was estimated to be $4.63 billion. 'IU Electric's estimated cost for its 87%% share, induding AFUDC, w-as
$6.70 billion or about $3,300 per kilowatt. The total cost of the plant, exduding AFUDC, was estimated to be $5.27 billion.
Because of numerous uncertainties in the licensing process, no assurance can be giwn that the revised estimated schedule can be met or that the estimated ccmpletion cost will not be exceeded. Failure to secure timely and fasurable regulatory approvals or further delays occasioned by additional reanalysis, reinspection or rework will increase the cost of the plant and will likely increase financing requirements. At December 31,1987 and 1986, TU Electric's inwstment in Comanche Peak, induding AFUDC, was
$5,808,000,000 and $4,600,000,000, respectively, of which $1,284,000,000 has been allowrd in rate base by regulatory authorities. TU Electric has indicated that it does not currently plan to implement increased electric service rates which reflect any additional Comanche Peak costs until Unit 1 is ready for commer-cial operation. TU Electric cont nues to believe, based upon reviel cost estimates and using acceptable ratemaking approaches and assumptions, that the rate increase, when Unit I goes into senice, can be hdd to about 10%. Such rate application will be subject to challenge with respect to the prudence of cer-tain costs, for which an estimate is not presently determinable.
i 32
- - m
'11. Commitments and Contingencies Caututtion Pmgram For major constructbn work now in prcgress or contemplated by the System Companies, and com-mitments with respect thereto, see Resource Planning and Comanche Peak.
Coc!ing Water Contraas TU Electric has entered into contracts with public agencies to purchase cooling water for use in the generation of electric energy and has agreed, in effect, to guarantee the principal, $47,920,000 at December 31, 1987, and interest on bonds issued to fmance the resenuits from which the water is sup-plied. The bonds mature at sarious dates through 2011 and have interest rates ranging from 5%% to 9% TU Electric is required to make periodic payments equal to such principal and interest for the years 1988 through 1992 as folk)ws: $4,387,000 for 1988, $4,3%,000 for 1989, $4,423,000 for 1990, $4,435,000 for 1991 and $4,430,0&) for 1992. In addition, TU Electric is obligated to pay certain variable costs of operating and maintaining the resenuits. Total payments, including amounts capitali:ed, under such con-tracts for 1987,1986 and 1985 were $4,400,000, $4,833,000 and $4,719,000, respectively. TU Electric has assigned to a municipality all contract rights and obligations of TU Electric in connection with
$100,695,000 remaining principal amount of bonds at December 31, 1987 issued for similar purpce which had previously been guaranteed by TU Electric; TU Electric is, however, contingently liable in the event of default by the municipality.
Chaco Cad hoperties Chaco Energy Company (Chaco) entered into an agreement in 1977 for the rights to over 200 million tons of surface mineable coal located in New Mexico. The agreement provides, subject to certain limita-tions, for advance royalty payments, payable over a period of approximately 35 years, which are based upon annual quantities ranging from approximately 5.1 million cons in 1988 to a maximum of approx-imately 8.3 million tons in 1991. Such payments approximated $6.60 per ton in 1987 and are subject to exalation in the future due to inflation. In connection with the foregoing, the Company entered into a surety agreement pursuant to which it has undertaken to assure the performance by Chaco with respect to this agreement. Non-utility property at December 31,1987 and 1986 includes $145,900,000 and
$114,400,000, respectively, of minimum advance royalties paid by Chaco under the terms of this agree-ment.
Capaaty and Enero nachase RJ Electric entered into an agreement in 1982 with Tex-La, a 2%% owner of Comanche Peak, whereby TU Electric agreed to purchase an assignment of portions of Tex La's entitlement to capacity and energy from Comanche Peak in declining amounts owr the first eight years of commercial operation of each generating unit. Under the agreement, TU Electric is required to make annual payments to Tex-La comprising a pro rata share of operating costs plus a capital charge on Tex-La's net investment ap-plicable to the portion of Tex Ids entitlement assigned. (See Note 10 concerning litigation proceedings regarding Tex La's particioation in Comanche Peak.) Mmrin IAe Unit 4 Cautnetion Cxwellanon in November 1986, TU Electric announced that it was not economically feasible to construct a fourth unit at the Martin Lake Steam Electric Station (Martin Lake Unit 4) and cancelled the project which waa scheduled for senice in 19M. Pursuant to expected regulatory treatment, expenditures of approximate-ly $37,246,000, including contractor termination costs, have been recorded as a deferred asset to be amor-ti:ed as approved by rq;ulatory authorities. The application in 1988 of Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 90 entitled
- Regulated Enterprises - Accounting for Abandonments and Disallowances of Plant Costs" to the accounting for the abandonment of Martin Lake Unit 4 will not have a material effect on the Company's financial statements.
t 33
. Notes to Financial Statements (concluded)
- 11. Commitments and Contingencies - konduded) nachase of Utility Plant and %kar Fwl
-In February 1988, TU Electric entered into an agreement with ThiPA pursuant to which TU Electric !
will purchase niPA's ownership interest in Comanche Peak. Under the terms of the agreement, W Electric will make a series of payments to ThiPA over approximately a five year penod totaling about
$456 million on a present value basis, ne purchase price is based on TU Electric's incurred cost per.
kilowatt, including AFUDC, for its existing share plus payment for ThiPA's interest in the nuclear fuel for Comanche Peak, certain transmission facilities associated with Comanche Peak and certain expenses. In connection with the purchase of ThtPA's ownership interest by W Electric, all outstanding claims and pending lawsuits between ThiPA and TU Electric will be settled and terminated. Finalization of the agreement is subjixt to the approval of the NRC and the PUC with respect to the transfer of ThtPA's ownership interest. An initial payment of approximately $58,7 million w~as made by W Electric in February 1988; following such regulatory approvals, which must be receiwd no later than September 22, 1988, TU Electric will make an additional payment of approximately $51.8 million plus interest to the date of initial closing. Thereafter, W Electric will make ten equal semi-annual payments, including in-terest, each in the amount of approximately $45 million, for the balance of the purchase, General In addition to the above, the Company and its subsidiaries are inwhrd in various legal'and ad-ministrative proceedings which, in the opinion of the Company, should not have a material edect upon its financial position or results of operations.
- 12. Supplementary Financial Information (Unaudited)
In the opinion of the Cc.npany, the following information includes all adjustments (constituting only normal recurring accruals) necessary to a fair statement of such amounts; quarterly results are not necessarily indicatiw of expextations for a full year's operations because of seasonal and other factors, in- ; cluding rate changes and variations in maintenance and other operating expens patterns. Eaminsi lir ! , h of I Connokineed Common l Operanna Rewnues Operanns inconw Net inconw _ Seock ; Quaner Erad 1987 1% 1987 L%6 p67 L%6 1987 1%6 Thiandi # dan kutt per Are assad Mah 31.. $ 870,525 $ 830,2% $172,941 $164til $130,298 $119,167 $0.90 $0.86 JuneX)...... 1,010,889 H2,481 199,646 173,711 159,083 122/62 .l.07 0.83 i Settemht 30 . 1,269,525 1,248,119 299,9tc 297h56 158,5 % 249,2W !.71 1.76 l Daerter 31 931,984 911,147 176,316 169,712 131,999 1M,703 . 0.87 y i T(tal .. $4,082,923 $1,912P45 $848,883 - StM5ec $679,976 5626,851 $4.55 g r I 34 i
Statement'of Responsibility t The management of Texas Utilities Company is responsible for the preparation, integrity and objectisity of the consolidated 6nancial statements of the Company and its subsidiaries s.nd other information in-duded in this report. The consolidated Anancial statements have been prepared in conformity with < generally accepted accounting principles applied on a comistent basis. As appropriate, the statements in-clude amounts based on informed estimates and judgments of management. i The Company's system of int-rnal accounting control is designed to provide reasonable assurance, on a costdctive basis, that asse s are safeguarded, transactions are executed in accordance with management's authorization and Gnancial records are reliable for preparing consolidated Anancial statements. Manage-ment believes that the system of control prosides reasonable assurance that errors or irregularities'that could be material to the consolidated Gnancial statements are prevented or would be detected within a timely period. Key elements in this system include the effective communication of established written policies and procedures, selection and training of quali6ed personnel and organizational arrangements that provide an appropriate division of responsibility. This system of control is augmented by an ongoing in- , ternal audit program designed to evaluate its adequacy and diectiveness. The Board of Directors of the Company addresses its owrsight responsibility for the consolidated Gnan-cial statements through its Audit Committee, which is composed of directors who are not employees of. 1 the Company. The Audit Committee meets regularly with the Company's management, internal auditors and independent certi6ed public accountants to review matters relating to 6nancial reporting, auditing and internal controls. To ensure auditor independence, both the intemal auditors and mdependent certi6ed ; public accountants have full and free access to the Audit Committee. ' The independent certi6ed public accounting firm of Deloitte Haskins & Sells is engaged to examine, in accordance with generally accepted auditing standards, the consolidated Gnancial statements of the Com-pany and its subsidiaries and to express an opinion thereon. l j Accountants' Opinion 1 DELOrITE HASKINS & SELLS Ctxi.nto it'BLIC ACCOUNTANTS To the Shareholders of Texas Utilities Company: 1 We have examined the conolidated balance sheet of Texas Utilities Company and subsidiaries as of December 31,1987 and 1986 and the related consolidated statements of income, retained earnings and source of funds for construction for each of the three years in the period ended December 31,1987. Our
- examinations were made in accordance with generally accepted auditing standards and, accordingly, in-duded such tests of the accounting records and such other auditing procedures as we considered ,
necessary in the circumstances. In our opinion, the consolidated fmancial statements referred to above present fairly the financial posi-tion of the companies at December 31,1987 and 1986 and the results of their operations and the source i of their funds for construction for each of the three years in the period ended December 31,1987, in .
- conformity with generally accepted accounting principles applied on a consistent basis. .
DELOOH HAsKrxS & SELLS 2 Dallas, Texas . ] March 18,1988 1 , i f j I 1 1 i i I
, , . _ - _ , 4 . , . _
-..__,_._.7 _
_"EXAS,.UTILIT7ES COMPANY SYSTEM Financial Statistics 1987 1986 1965 TOTAL ASSm end d year Wuunds) . . . . . . . . . . . . . . . . . . . . . . . . . $13,986,260 $12,318,192 $10,867,022 UT1111Y PLANT end d year Suunds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,172,994 . $13,566,133 $12,144,563 . Accumulated depreaation end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,718,328 - 2,522,016 2,331,783 Consruction expenditures (including alkmunce for funds used dunng consmction) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688,831 .1,519,619 1,108,861 CAPITAUZATION end d year (tkuunds) long<erm ddx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,141,491 $4,283,791 $3,615,669 Preferred sock: Not subject to mandatory redempion . .. . . . . . . . . . . . . . . . . . . . . 909,633 811,418 811,418 Subject to mandatory redempion . . . . . . . . . . . . . ......... 232,906 232,424 M,696 Common mock equity . . . . . ...... ... .... ...... . ....... 5,032,331 4.4(0,821 4,066,6M Total . . . . . . . . .. . . ..... ....... ............ ' $11,316,361 $9,788.4H $8,528.447 CAITTAUZAT10N RATIOS end d year long<erm delt . . . . . . . ,. . ....... ...... ............. .. 45.4% 43.7 % 42.4 % Preferred sock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 10.1 10.7 9.9 j Comrnon mock equity . . . . . . . . . . . . . . . . ....... ... .. . . 44.5 45.6 47.7 Total . . . . . . . . . . . . . . . . . . . . . . .... .............. . 100.0 % 100.0 % 100.0 % EMIEDDED INEREST COST ON 1.ONO-TERM DEBT end d year . 9.9% - 10.0 % 10.3% - EMBEDDED DMDEND COST ON PREFERRED STOCK end d) ear . . 8.3% 8.1% 8.2% CONSOUDATED NET INCOME Suunds) . . . . . . . . . . . . . . . . . . . . $679,976 .4 26,851 $587,758 DMDENDS DECLARED ON COMMON S1DCK Wnanfs) . . . . . . . . $421,418 $377,865 $343,3M COhBiON STOCK DATA Shares outmarshng-awrage . . . . ..... . .......... ........... 149,449,134 140,961,671 135,266,534 Shares outsanding-end of year . . . . . . . . . . . . . . . . . . . .......... 152,408,942 142,805,206 138,M3,162 ' Earnity per amage share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.55 $4.45 $2.15 Dividen& dedared per share . . . . . . . . . . .. . .. ... ......... $2.80 $2.68 $2.52 Ekk value per share-erxl d year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33.02 $31.24 $29.46 Retum on average common aoek equity . . . .... . . ............. 14.3 % 14.7 % 15.4 % ALLOWANCE FOR FUNDS USED DURINO CONSTRUCTION . AS PERCENT OF CONSOUDATED NET INCOME . . . . . . . . . . . . 56.9 % 48.5 % 39.1% ! NET FUNDS FROM OPERAT10NS AS ERCENT OF CONSIRUCT10N EXTENDITURES (exduing alkmance br funa tml dunng cmarucnon) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2 % 32.9 % 51.0% , i I a 11
- 36
i 19M 1983 1982 1981 1980 1979 1978 1977 l l $9,759,148 $8,7N,954 $6,021,407 $7,306,658 $6,552,972 $5,821,933 $5,161,808 $4,563,806
$11,031,6W $9,967,653 $9,051,442 $8,1W,803 $7,438,877 $6,631,618 $5,862,096 $5,111,037 2,143,863 1,958,103 1,758,156 1,5@,7M 1,378,654 1,213,927 1,057,068 917,637 951,323 906,930 891,5 @ 792,268 807,008 872,916 737,353 7M,282 $3,322,925 $3,103,452 $2,973,253 $2,713,863 $2,527,716 $2,368,612 $2,038,654 $1,859,057 727,911 629,779 600,1@ 600,109 KO,109 535,824 506,22] 476,578 34,696 M,6% - - - - - -
3,573,10] 3,235,375 2,810,195 2,421,864 2,@0,520 1,830,472 1,624,298 1,432,830
$7,658,635 $7,003,302 $6,383,557 $5,735,836 $5,218,34! $4,734,908 $4,169,185 $3,768,465 43.4 % 44.3 % 46.6 % 47.3 % 4&4% 50.0 % 48.9 % 49.3 %
10.0 9.5 9.4 10.5 11.5 11.3 12.1 12.7 46 6 46.2 44.0 42.2 40.1 38.7 39.0 3&O 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.C i 100.0 % 100.0 % 10.1% 9.7% 9.5% 9.0% &3% 7.9% 7.5% 7.M 8.3% 8.0% 7.7% 7.7% 7.7% 7.4% 7.3% 7.2%
$526,04! $461,468 $428,M6 $359,398 $297,844 $211,151 $200,738 $175,919
$298,878 $262,659 $227,076 $192,306 $1M,527 $142,262 $119,H5 $103,250 126,626,241 118,454,R6 111,356,815 102,292,239 93,719,257 86,319,3 % 79,026,7?7 73,lH,444 128,585,669 123,6S5,058 114,182,319 105,236,301 96,088,645 87,985,WS 80,665,839 75,000,000 54.15 $ 3.90 $3.S5 $3.51 $3.18 $2.45 $2.54 $2.40
$2.36 $2.20 $2.M $1.88 $1.76 $1.64 $1.52 $1.40
$27.79 $26.16 $24.61 $23.01 $21.76 $20.@ $20.14 $19.10 15.5 % 15.3 % 16.4 % 15.9 % 15.2 % 12.2 % 13.1 % 13.0 %
32.7 % 34.4 % 31.7 % 26.1 % 26.2 % 2&2% 26.9 % 33.3 % 58.4 % 53.9 % 610% 58.3 % 52.7 % 40.3% 44.1% 36.4 % 37
TEXAS tmtmES COMPANY SYSTEM Operating Statistics 1987 1956 1985 EECIRIC ENERGY GENERATED AND PURCHASED (muN Generated-net station output . . 71,878,925 75,467,871 76,355,3 % Purchased and net inter.hange . . . .. . .. . . 11,019,037 4.712,062 2,057,490 Total generated and purthased . . . .. .. 82,897,962 T,179,953 78,412,8 % Company use, kwses and unaccounted for . ., . ... 5,125,310 4,925 178 5,N2,9V Total electric encigy sales . . ... 17,772,652 75,254,775 73,369,896 ELECTRIC ENERGY SALES (muN Residential . . . . 25,716,080 24,6N,1N 24,3&),78S Commercial . . . .. . . . .. . . . 22,324,328 21,453,435 20,M9,334 Indusnil ....... ... . . . 21,420,705 21,013,278 20,921,530 Government and municipal 2,499,981 2,385,168 2,324,785 Total general business . . .. . 71,%1,094 69,455,9V 67,896,437 Other electric utihties . . . . 5,811,558 5,798,785 5.473,459 Total ekstric energy sales 77,772,652 75,2 9,775 73,369,896 OPERATING REVENUES (:haanO Residential . $1,603,446 $1,530,258 $1,673,378
^h . . 1,166,832 1,137,H4 1,207,7M Industrial ....... ..... 800,635 822,831 935,M9 Gowrnment and municipal . . 140,291 134,927 145,256 Total general business . . 3,711,204 3,625,960 3,962,267 Other electric utilities . . . 221,413 222,M4 250,857 Total from electric energy sales . ...... ........ .. 3,932,617 3,M8,6N 4,213,124 Other operating revent es (including owr /under-recowred fuel revenue) . 150,306 83,441 (42,%7)
Total operating rewnues. . . $4,082,923 $3,932,N5 $4,170,157 ELECTRIC CUSTOMERS end of year Residential . . 1,838,467 1,820 El 1,7MJ46 Commercial . 218,641 217,232 214,3S6 InJustnal ..... . . 24,006 23,912 24,148 Gowrnment and municipal... 13,690 13,180 12,0 0 Total general business . . 2,094,804 2,074,705 2,014,9t V Other elettric utihties . 62 61, 63 Total electne customers. 2,094,866 2,074,7t6 2,015,023 RESIDENTIAL STATISUCS (exdudes master-metered customers, mwh sales and rewnues) Awrage kwh nv customer 13,147 12,749 13,062 Average revenue per kwh 6.33e 6.31e 6.9k Industrial clawfication includes service to Alec.a-Sardow: Electric energy saks (muN . . . 3,409,332 3,W2,606 2,MI,454 Onranng revenues channW . $62,630 $65,(64 $68,H6 38
Y i 1-Q <
.1934 1983. 1982 1981. 1980 1979- 1978. 1977 72,582,637 67,706,5 % , 61,224,726 62,447,413 62,865,641 58,051,429 57,196,077 - ' 53,156,235 382,651 343,551 ~ 371,190 91,091 56,388 , 75,695 79,688 72,845 72,965,288 68,050,175 M,595,916 62,538,504 62,922,029 58,127,124 - 57,275,765 .'53,229,080 3,839,517 '5,340,248 4,215,774 4,166,327 4,422,762 4,001,684 4,NI,486 3,549,768 69,:25,771 62,709,927 60,380,142, 58,372,177 58,499,267 54,125,440 53,234,279 49,679dl2 22,693,290' -20,162,506 19,H5,087 18,676,240 19344,409 .17,3W,402 17,H3,224 _ 16,642,382 19,02Q67 17,366,563 16,475,253 15,383,162 14,683,1M 13,2M,436 13,117,202 12,M7,755 20,343,558 16,690,077 17, 0 6,412 17,992,261 17,581,265 17,275,859 16,469,636 15,678,2 %
1,920,420 1,790,476 1,730,273 1,692,106 '1,796,988 1,669,726 - 1,728,056 1, % 5,518 63,983,535 58,009,622 55,677,025 53,743,769 53,905,765 49,@l,423 49,258,1 W 46,233,90) 5,142,236 4,700,305 '4,703,117 4,628,408 4,593,501 4,521,017 3,976,1o1 ' 3,445,403 69,125,771 62,709,927 M,3M,142 . 58,372,177 58,499,267 54,125,440 53,234,279f 49,679,312
$1,546,M! $1,306,912 $1,237,632 ' $1,N4,761 $ 877,555 $ 672,340 x $ N0,Wl $ 552,331 1,127,766 998,362 : 911,487 778,008 590,921' 488,170 439,146 375,822 893,531 808,016 735,243 659,678 482,919 419,224 . 373,456 310,811 117,793 104,730 95,673 83,077 68,396 54,565 49,623 - 40,331 -
3,685,171 3,218,020 2,990,035 2,565,524 2,019,791 1,634,299 1,502,836 1,279,295-233.2 % 202,387 190,727 161,998 123,188 105,306 07,502 ' 69,975 3,918,467 3,420,407 3,180,762 2,727,522 2,142,979 1,739,M5 1,590,428 1,349,270 13,768 67,509 57,263 10,855 31,574 16,684 13,928 -18,508
$3,932,235 $3,487,916 $3,238,025 $2,738,377 $2,174,553 $1,756,289 $1,Mi,356 $1,367,778 1,659,735 1,556,7M 1,477,097 1,421,273 1,356,651 1,287,701 1,221,468 1,159,885 208,477 198,548 187,065 177,269 171,495 161,291 160,170 153,658 24,058 22,761 21,478 20,692 19,590 18,654 17,953 .17,216 11,455 10,210 10,143 10,263 10,488 11.257 11,260 11,274 1,913,725 1,788,279 1,695,788 1,629,497 1,558,224 1,481,903 1,410,851 1,M2,033 66 68 75 78 80 80 62 60 1,913,791 1,788,347 1,695,863 1,629,575 1,558,3M 1,481,983 1,410,913 1,M2,093.
12,887 12,073 12J20 11,862 13,125 11,897 12,747 12,213 6.93e 6.Me 6.34e 5.72e 4.Me 3.98e 3.70e 3.45e 2,989,272 2,660 561 2,316,308 2,S48,917 2,918,7 % 3,076,399 2,891,259 2,786,027
$70,825 $68,121 $68,035 $64,016 $48,813 $48,400 $41,572 $36,878
- 39
,vggy ,;
,, eqmSL'sl]q i ib Sharehhlder .
Qu rterly hfarket Price Ranges Directory T clnformati0n7 J Nb
~
U' -; E '# Pike Range TRANSFER AGENTS AND REGISTRARS Quarter Ended - 1987 1986
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High low High lo w htTrust Corp, N.A.
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, Dallas, Texas
>' N" @ p. liarch 31. $36% $31% $34% $29h hiorgan Shareholder Services Trust ji
,<[l/ SCConsolihed Earnings ' g 4.IO g~ i[Q 4g + '
June 30.. 33% 30 35% 29% Company Septemtvr 30.. 34 % 30 % 375 30 % New York, New York 4 ik Wj Dunber 31. 31% 25% 34 % 3th ) Divid_
--_m ends Declared'& I ,m.. ,
at DIVIDEND DISBURSING AGENT
- 7. j - -
1 Dividends Paid per Share hiorgan Shareholder Services Trust 1 9m Dq of Common Stock Company 30 West Broadway j r i, r . p ap j- - - -- a , a . New York, New York 10007 2192 { j . . *. h Disidends Paid I( h 3 vi 1 50 .,-- I 9[ ' [. 6
' . (.
I .g[ t jh Quarter Ended 1987 1956 AGENT FOR PARTICIPANTS
; AUTOhiATIC DIVIDEND 9 L '-
- - i h lFi REINVESThtENT AND COhihiON
[ l.* J[ ~ [ [.( [ . N[ hiarch 31. $0.67 $0.63 STOCK PURCHASE PLAN
.) ILl '! h I' l ' k' 0.70 0.67 hiorgan Sharcholder Service Tru=t 2m 2.w ). Yh June 30..
1+t" Company f' < i
.4 !~ i September 30.. 0.70 0.67 Dividend Reinvestment Plans
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- I{t pjh' " j;. p] December 31.. 0.70 0.67 P.O. Box 3506, Church Street Station y ,,w :bi f 3
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$2.77
--- -$2M New York, New York 10008-3506 T' ~ ^ d) STOCK EXC*iANGE LISTINGS t The Company has dalared common stak jy] dnidends payable in cash in each year since New York Stock Exchange, Inc.
New York, New York d its incorporation in 1% and has continual j ~ dfj]i its raurd of annual dnidend incre e, which commerwed in 1948. At its February hiidwest Stock E cchange, Incorporated Chicago, Illinois M q~j 1988 nwring, the Ibard of Dirators again The Pacific Stock Exchange incorporated is n m> si si n u as a er . l raised the quarterly dnidend by two cents Los Angeles and San Francisco,
']7
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t ; per share, from 70 cents to 72 cents. This rq:ular quarterly daidend is payable Apnl 1, Cahfornia Ticker Symbol - TXU
.. . ,, - e., g .m t , ..) 1%S, to sharehoklers of record on hiarch 7.
^I Dnidends are paid in cash to shareholders t.
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s who are not participating in the Automatic Disidend Reinwrment and Common Stock The Annual Report has been prepa ed for Purchase Plan; all dnidends are rqurtable the purpose of protid ng sharcholders uith i]y
, for federal income tax purgm as ordnary infonnation conceming the Company and nor 77
'm- 0
. cl daidend income. Reference is maJe to Note in connection uith any sale or purchase of, 4 to Financial Statements ry:ard ng hmita. or any offer or solicitation of an offer to buy p' j.ig tions upon payment of daidends on or sell, any securities.
.yy common stock.
- %1 Taas Unlaies Company &stnbutes a d , ,
1988 Annual hiceting boouet mntaining detailed system fmancial 1
+
and operating data, uhich hate been wrnpil-
, y '
The Annual hiecting of ,a fo, ,3, mns,nc, of f_cior anai,,,,. H Shareholders of the Company a copy u,Il be furnished upon request.
'r i will be held at 9:30 a.m. on m 4 Friday, hiay 20,1988, in the ^ *P) of the ^'aual Report to the Securitics and Exchange Comm , ion, Form C,i Pla:a Ballroom at the Pla:a of 10-K, uilt be fumished by the Compans the Americas Hotel, 650 North q upo, ,cq,,,,.
~
c I Pearl Street, Dallas, Texas.
? Shareholders aie cordially Requests for copies or other sharcholder invited to be prewnt at the mlormanon5houldhed""talto:
+ '
p.[ annual meeting. Those unable to attend are urged to exercisc
$$8$"y pfj 2001 Brun Touer #
' * , ' ~Q their right to vote by proxy. Dallas, Texas 75201
; Notice of meeting and proxy alo 812 4646 y, '"
p statement and form of proxy h, . r will be mailed shortly after
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# , hiarch 21, the record date for m 3{ the meeting. Following the
- 3. m j meeting, a report of the a .. ,, proceedings will be prepared
, . j Cr " .
. 1 and distributed to all g qo , @ .
i shareholders. s .
1 l 1 Directors and Officers-Directors Officers JAMES K. DOBEY MARGARET N. MAXEY JERRY FARRINGTON Aptos, California Austin, Texas . Chairman of the Board and-Retired Chainnan of the Director of the Chair of Free Chief bectaite Board, Wells Fargo & Enterpnse and Professor, Biomedical gg;y gyg Company Engineering Pwgram, College of p,g,
- Engineering a: He Unitersity of JACK W' EVANS Texas at Atotin. T. L BAKER Vice President n f the Board and ERLE NYE Chief Deceite Officer Dallas, Texas W. H. GOODENOUGH of Ctditan Canpanies, Inc. President of the Company Treastaer JERRY FARRINGTON CHARLES R. PERRY H.A. HORN Dallas, Texas Odessa, Texas Assistant Treastner and Chainnan of *he Board Intestments, Oil and Gw erests Atststant Secretary and Nf Lemdte CHARLES N. PN GRO S. S. SWIGER I' E "7 Wichita Falls, Te>as .
Controller WILLIAM M. GRIFFIN Otmer, Pe kins.Prochm Company rd, nnecticut PEER B. TINKHAM WILLIAM H. SEAY Secretary and Assistant Treastner Dallas, Texas BURL B. HULSEY, JR. Intestments, Retired Chairman and Fort Worth, Texas Chief &cacite Offiar of Retired Vice Chainnan of the Sotahuestem Life Instaance Board of the Company Company I l 1 l I , I 41 l i
~ ---r - . . ., , __. ..-_. , , ,
TEXAS UTILITIES COMPANY 2001 BRYAN TOWER DALLAS, TEXAS 75201 (214) 812-4(0 0 1 l l l I I l 1 l l l
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - July 5,1908
.nr TEXAS UTILITIES COMPANY (Exact name of registrant s s specified in its dierter)
TEXAS 0-11442 75-1837355 (State or other jurisdiction (Commission II.I,.S. Employer) ofincorporation) File Number) Identification No.) 2001 BRYtN TOWER, DALLAS, TEXAS 75201 (Address of principal executive offices) Registrant's telephone number, including area code - (214 812-4600)
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I ITEM 5, 0 tiler EVENTS Reference is ma'de to the Texas Utilities Company's-(Company) 1987, Form 10-K in Item 1. Business und2r Peak Load and Capability and under Comanche Peak Nuclear Generating Station,,in Item 2. Properties under Construction Program, in item 3. Legal Proceedings under Comanche Peak Nuclear Generating Station and in Item 8. under Note 10 to Financial Statements. Reference is also made to the. Company's Form 10-Q for the quarter ended March 31, 1988 in Item 1. under Note 10 to Financial Statements and in Item 5. to the Company's Form 8-K dated February 12, 1980 in Item 5. and to the Company's Form 8-X dated' July 1, 1988_in Item 5. Texas Utilities Electric Company (TV Electric), which is the principal subsidiary of the Company, is constructing two nuclear-fueled generating units at the Comanche Peak Nuclear Generating Station (Comanche Peak). TV Electric owns an 87 5/6% interest in such facility. Other owners of Comanche Peak are the Texas Municipal Power Agency (TMPA), Brazos Electric Power Cooperative, Inc. (BEPC), and Tex-La. Electric Cooperative of Texas, Inc., which own 6.2%, 3.8% and 2 1/6% interests, respectively. In February 1988, TV Electric entered into an agreement with TMPA pursuant to which TV Electric will purchase TMPA's ownership' interest in Comanche Peak, subject to obtaining certain regulatory approvals for which applications have been made and are currently pending. On July 5, 1988, TV Electric entered into an agreement with BEPC (Agreement) pursuant to which TV Electric will purchase BEPC's ownership interest in Comanche Peak. Under the terms of the Agreement, TV E!ectric will make initial payments and issue a promissory note to BEPC payable over approximately 33 years, said payments and the principal amount of said note totaling about $213 million plus interest from March 1, 1988. The purchase price is based on TV Electric's incurred ~ cost per kilnwatt, including allowance for funds used during construction and net of past due BEPC payments paid by TV Electric, for its existing share plus payment for BEPC's interect in the nuclear fuel for Comanche Peak, certain transmission faciliie ' associated with Comanche Peak and certain expenses. In connection with the purchase of BEPC's ownership interest by TV Electric, all outstanding claims and pending lawsuits between BEPC and TV Electric will be settled and tenni na ted . Finalization of the Agreement is sut' ject to obtaining the approval of the Nuclear Regulatory Commission and the Public Utility Conrnission of Texas, with respect to the transfer of BEPC's ownership interest, for which TV Electric plans to promptly file applications, and is also subject to obtaining the approval of the Rural Electrification Administration and the National Rural Ut;lities Cooperative Finance Corporation, for which BEPC is making application. Finalization is also subject to BEPC obtaining an acceptable tax ruling from the Internal Revenue Service. TV Electric cannot predict when action with respect to these metters will be taken. I SIGNATURE Pursuart to the reouirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEXAS UTILITIES COMPANY ; By: /s/ k'. H. Goodenough W. H. Goodenough Treasurer Date: July 5, 1988 i
==
i SECURITIES AND EXCHANGE COMMISSION WASIIINGTON, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACF OF 1934 For the Fiscal Year Ended December 31,1987 Commission File Number 0-11442 Texas Utilities Electric Company (Exact name of registrant as speciped in its charter) A Texas I.R.S. Employer Corporation No. 75-1837355 2001 Bryan Tower, Dallas, Texas 75201 Telephone Number (214) 812-4600 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Preferred Stock, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by l Section 13 or 15(d) of the Saurities Exchange Act of 1934 during the preceding 12 months (or for such I shorter period that the registrant was required to file such reports), and (2) has been suWeet to such ; filing requirements for the past 90 days. Yes f_ No Aggregate market value of Common Stock on February 29,1988 held by non-affiliates: None Common Stock outstanding at February 29, 1988: 112,150,000 shares, without par value i i DOCUMENTS INCORPORATED BY REFERENCE None 1 l l
1 TABLE OF CONTENTS . 1
'1 g- Description Pg PART I 1 Business....................................................................... 1 Th e C o m p a n y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 1 Peak L.oad a n d Ca pabilit y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Fuel Supply a nd Purchased Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R egula t i o n a n d Ra t es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Comanche Peak Nuclear Generating Station . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 En vironmental hiat t ers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 2 P ro pe rt i e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Construction Progra m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Com pany Syste m hia p . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3 Legal Proceed i ngs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 1 4 Submission of hiatters to a Vote of Security Iloiders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 PART 11 5 hfarket for Registrant's Common Equity and Related Stockholder hiatters . .. .... .. 19 6 Selected Fi na ncial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 7 hianagement's Discussion and Analysis of Financial Condition and R esults o f Operatio n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 9 Changes in and Disagreements with Accountants on Accounting and Fi nancial Disclosu re . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 PARTlil 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 11 Execu tive Co m pensa tio n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 12 Security Ownership of Certain Beneficial Owners and hianagement . . . . . . . . . . . . . . . . 50 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 PART IV 14 Exhibits, Financial Statement Schedules and Reports on Form 8.K . . . . . . . . . . . . . . . . 51 I
DEFINITIONS When used herein the following terms will have the meanings indicated. Term Denaltions AFUDC Allowance for funds used during construction Agreement Joint Ownership Agreement'among the owners of l Comanche Peak Nuclear Generating Station ASLB Atomic Safety and Licensing Board Basic Basic Resources Inc. BEPC Brazos Electric Power Cooperative, Inc. Chaco Chaco Energy Company Comanche Peak Comanche Peak Nuclear Generating Station Company Texas Utilities Electric Company (the Registrant) CPRT Comanche Peak Response. Team CWIP Construction work in progress DTPA Texas Deceptive Trade Practices Act EPA Environmental Protection Agency ERCOT Electric Reliability Council of Texas FERC Federal Energy Regulatory Commission Fuel Company Texas Utilities Fuel Company Lone Star Lone Star Gas Company hiining Company Texas Utilities hiining Company NPDES National Pollutant Discharge Elimination System NRC Nuclear Regulatory Commission NWPA Nuclear Waste Policy Act of 1982 OIA Report Report by the Office of Inspector and Auditor of the NRC OPUC Office of Public Utility Counsel of Texas PCBs Polychlorinated biphenyls Plan Program Plan addressing Comanche Peak design and construction concerns PUC ublic Utility Commission of Texas QA/QC Quality assurance / quality control RCRA Resource Conservation and Recovery Act of 1976 SSER Supplemental Safety Evaluation Report of the NRC System Companies Texas Utilities Company and Its Subsidiaries TACB Texas Air Control Board Texas Utilities Texas Utilities Company Tex La Tex La Electric Cooperative of Texas, Inc. Thercol Thercol Energy Co. Thil Texas hiunicipal League Th1PA Texas hiunicipal Power Agency TNh1P Texas New hiexico Power Company TRA Tax Reform Act of 1986 TRT Technical Review Team of the NRC TU Services Texas Utilities Servir.es Inc. TWC Texas Water Comtr.ission l l ii l
4 PARTI i l Item 1. BUSINESS. ' Tile COMPANY I Texas Utilities Electric Company (Company) was incorporated under the laws of the State of Texas in 1982 and has perpetual existence under the provisions of the Texas Business Corporation Act. The Company is an electric utility engaged in the generation, purchase, transmission, distribu-tion and sale of electric energy wholly within the State of Texas. The Company possesses all of the necessary franchises and certificates required to enable it to conduct its business (see Regulation and Rates). The Company is the principal subsidiary of Texas Utilities Company (Texas Utilities). Texas Utilities also has three other subsidiaries which perform specialized services for the Texas Utilities Company System (System Companies), including the Company: Texas Utilities Fuel Company (Fuel Company) owns a natural gas pipeline system, acquires, stores, and delivers fuel gas and provides other fuel services for the generation of electric energy by the Company; Texas Utilities Mining Company (Mining Company) owns and operates fuel production facilities for the surface mining and recovery of lignite for use at the Company's generating stations; and Texas Utilities Services Inc. (TU Services) furnishes financial, accounting, computer and other administrative services at cost. Effective January 1,1984, the Company became the successor by merger to Dallas Power & Light Company, Texas Electric Service Company and Texas Power & Light Company which had been subsidiaries of Texas Utilities. , The Company is engaged in the generation, purchase, trannmssion, distribution and sale of electric energy in the north central, eastern and western parts of the State of Texas, with a population 1 estimated at 5,160,000 - about one-third of the population of Texas. Electric service is provided in l 87 counties and 361 incorporated municipalities, including Dallas, Fort Worth, Midland, Odessa, i Wichita Falls, Arlington, Irving, Plano, Waco, Tyler and Killeen. The area is a banking, insurance I and commercial center with substantial electronics, aerospace, petrochemical and specialized steel manufacturing, and automotive and aircraft assembly. The territory served also includes a major portion of the Permian Basin oil and gas area and part of the oil and gas fields of East Texas, as well l as substantial farming and ranching sections in West Texas, the agricultural blacklarids of Central j Texas, the farming and ranching sections north and east of Dallas and the Dallas-Fort Worth Inter-national Airport. At December 31,1987, the Company had a total of 12,675 full-time employees. For energy sales and operating revenues contributed by each class of service, see item 6, Selected Financial Data - Operating Statistics. PEAK LOAD AND CAPABILITY Net capability, peak load and reserve at the time of peak were as follows during the years indicated:
~
Peak load (s) Net Increase Capability Oier Prior Resene(t) Year (meg.w atts) Megawatts Year (megaway 1987 ......... . ... ... ... . . .. ... 19,465 16,680 0.9% 2,893 1986 .... .... .. .. . .. . . .. 18,854 16.537 4.0 2,417 1985 . .. ......... . ...... .. .... . 18,614 15,898 4.1 2,865 (a) Includes interruptible loa i of 113 megawatts in 1987,130 megawatts in 1986 and 129 megawatts in 1985. (b) Excess of net capability over peak load, excluding interruptible, at the time of peak. The peak load increases for 1987 and 1986 resulted primarily from customer growth and weather factors in the service area. The peak load in 1987 occurred on August 6. Summer cooling degree days in the service area during 1987 were 4% below normal while heating degree days during 1
Item I. BUSINESS (Continued). the winter were approximately 3% below normal. Included in the 1987 net capability was 1,661 megawatts of firm purchased capacity, including 1,531 ' megawatts of cogeneration. The Company expects' to purchase additional capacity during 1988 and 1989 from various sources. (See Fuel Sup-ply and Purchased Power and item 6, Selected Financial Data - Operating Statistics.) Peak load increases through the mid-1990's are expected to' average approximately 2.5% annu-ally, after giving effect to an aggressive load management program (including interruptible contracts).' The Company's resource plan provides for meeting the increases in required capability (taking into consideration, among other factors, expiring purchased power contracts and possible retirements of older gas-fired generating units) through the acquisition of purchased power capacity (including cogeneration and small power production), through the completion of various nuclear, lignite and gas / oil fueled capacity additions and through the Company's conservation and load manvgement programs. The resource plan is subject to annual review as part of the Company's regular planning - process. The components of the resource plan (see item 2, Properties - Construction Program) are as follows: Resource Plan 19881997 Capability Resource Additions (megawatts) Percent Lignite..................................... 2,250 26% N u c l ea r * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,162 25 Combustion tu rbines . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,495 17 Load management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,422 16 Cogeneration, other purchases and unspecified . ... 1,444 To t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,773 J 100 %
==
- Assumes acquisition of additional 6.2% interest in the Comanche Peak nuclear generating station from the Texas Municipal Power Agency (see item 2, Properties - Construction Program and Note 1I to Financial Statements).
FUEL SUPPLY AND PURCIIASED POWER Net input for 1987 was 82,898 million kilowatt-hours of which 71,879 million were generated by the Company. During this period,786,928,885 million Btu of fuel (including 37,676,335 million Blu furnished by Alcoa at no cost) were consumed for electric generation. A comparison of the resource mix for net input and the unit cost per million Btu of fuel to the Company during the last three years is as follows: Stix for Net Unit Cost Input _ Per Stillion Btu 1987 1986 1985 1981 1986 1985 l Fuel for electric generation: ' Gas............................. 42.1% 44.2% 49.7% $2.56 $2.77 $3.41 Oil.............................. 0.3 0.1 0.7 4.82 6.14 4.26 Lignite * . ................. ... .. 44.3 49.8 47.0 1.07 0.98 0.96- l Total / Average fuel costs for electric generation ......... 86.7 94.1 97.4 $ 1.82 $ 1.84 $2.25 Purchased power . . . . .. ............ 13.3 5.9 2.6 To t al . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% Average fuel and purchased power cost (excluding capacity charges) per kWh of net input was 2.0$c for 1987,2.02c for 1986 and 2.49c for 1985.
- Lignite cost per ton to the Company was $13.72 for 1987, $12.74 for 1986 and $12.58 for 1985. :
1 2
l l. Item 1. BUSINESS (Continued). Gas 1 oel gas for units at nirdeen of the principal generating stations of the Company, having an aggregate gas / oil capability of 11,959 megawatts, was provided during 1987 by Fuel Company. Fuel Company supplied approximately .2,% of mch fuel gas requirements under contracts with producers at the wellhead and other contracts with dedicated reserves,13% under contracts with Lone Star Gas Company (Lone Star) and 29% under contracts with other commercial suppliers. Fuel Company has acqui ed under contmets expiring at intervals through 2007, with producers at the wellhead, supplies of gas which are generally expected to be produced over a ten to fifteen year period. As gas production d:clines and/or contracts expire, new contracts are expected to be negoti-ated to replenish or augment such supplies. During 1987, no curtailments were experienced under these contracts. In addition to negotiating gas purchase and transportation contracts with Lone Star expiring in 2007, Fuel Company has negotiraed gas purchase contracts, ranging in terms from two to ten years, with a number of other commercial suppliers. Additionally, Fuel Company has entered into a num-ber of short-term gas purchase contracts with other commercial suppliers at spot market prices; however, these contracts typically do not provide for a firm supply obligation from the seller nor a firm purchase obligation from Fuel Company. During periods of winter peak gas demand, curtail-ments of gas deliveries have been experienced; however, such curtailments have been of relatively short duration and have had minimal impact on operations. Fuel Company owns and operates an intrastate natural gas pipeline system which extends from the gas-producing area of the Permian Basin in West Texas to the East Texas gas fields and south-ward to the Gulf Coast area. This system includes a one-half interest in a 36-inch pipeline which extends 395 miles from the Permian Basin area of West Texas to a pohit of termination south of the Fort Worth-Dallas area and has a total estimated capacity of 800 million cubic feet per day with i existing compresrion facilities. Additionally, Fuel Company owns a 39% undivided intarest in I another 36-inch pipeline, connecting to this pipeline and extending 58 miles eastward to one of Fuel Company's underground gas storage facilities. Fuel Company also owns and operates over 1,750 miles of various smaller capacity lines which are used to gather and transport natural gas from other gas-producing areas. The pipeline facilities of Fuel Company form an integrated network through l which fuel gas is gathered and transported to certain generating stations of the Company for use in l the generation of electric energy. Fuel Company also own3 and operates underground gas storage facilities with a usable capacity of 27.9 billion cubic feet witt. approximately 20.5 billion cubic feet of gas in inventory at Decem-ber 31,1987. Gas stored in these facilities is currently capable of being withdrawn at a rate of approximately 785 million cub'c feet per day for use daring periods of peak demand, to meet sea-sonal and other fluctuations or curtailment of deliveries by gas suppliers. Oil During 1987, the Company's utilization of fuel oil as an alternate source of boiler fuel amounted to 389,447 barrels or 0.3% of total fuel recuirements. Fuel oil is stored at a4 nineteen of the princi-pally gas-fueled generating stations. At December 31,1987, the Company had fuel oil storage capac-ity sufficient to accommodate the storage of approximately 6.2 million barrels of oil, with approximately 2.7 million barrels of oil in inventory. It is anticipated that oil required to replenish that removed from storage and consumed fer the generation of electric energy will be obtained primarily through purchases in the open market. Fuel Company has access to an oil pipeline and owns terminal facilities to provide for more deptadable and effi&nt movemen. of oil. Lignite Two units in service at the Big Brown generating station, three units at the Monticello generating station, three units at the Martin Lake generating station, and one unit at the Sandow generating 3
t , t 1 Item 1. BUSINESS (Continued).
- station (see Item 2, Pro'perties), having an aggfegate net capability of 5,845 megawatts, use lignite as-fuel;~three other lignite-fueled units, with an aggregate net capability lof 2,250 megawatts, are now in.
- design or under construction (see Item 2,' Properties -- Construction Program). These lignite units, 2 which are or will be base loaded to_ operate at th'c maximum practical capacity factor, have been or
. are being constructed adjacent to lignite reserves which will be surface mined.' At the present _ time,
~
the Company owns in fee or has under lease an estimated 800 million proven' recoverable tons ofc <
- such reserves. Mining Company. owns and operates equipment;to remove the overburden and to recover lignite. On'e of the Company's lignite units, Sandow 4, is fueled from lignite deposits' owned by Alcoa,~ which furnishes fuel at no cost to the Company for that' portion of energy generated from such unit and dedicated to Alcoa (see Item 6, Selected Financial Data - Operating Statistics). For information concerning applicable air quality standards, see Environmental Matters.
. Lignite production operations at the Big Brown,'Monticello and Martin Lake generating stations .
are accompanied by an extensive reclamation program which returns the land to productive uses and includes a vegetation restoration program. Similar programs are planned for future lignite-fueled generating stations mentioned above. For information concerning federal and state laws with respect to surface mining, see Environmental Matters. Nuclear Two nuclear fueled units are under construction at the Comanche Peak nuclear generating sta-tion (Comanche Peak)(see Comanche Peak Nuclear Generating Station, Item 2, Properties - Con-- struction Program and Item 3, Legal Proceedings). The nuclear fuel required for the first operating - cycle of Unit I is now onsite at the station. Commitments have been obtained for anticipated ura-nium ore concentrate requirements and fabrication services for both units for the first 5 years of operation. Uranium hexafluoride conversion services have been contracted for through 1988, with an extension thereafter being negotiated; and uranium enrichment contracts, having a duration of approximately 30 years, have been made with the Department of Energy. Additional contracts for uranium ore concentrates and nuclear fuel cycle services will be required in the future; however, it is not possible to predict the ultimate availability or cost thereof. The Nuclear Waste Policy Act of 1982 (NWPA) provides for tise development by the federal government ofinterim storage and permanent disposal facilities for spent nuclear fuel and/or high level radioactive waste materials. The Company is unable to predict'when the federal government will be able to provide such storage and disposal facilities. Under provisions of the NWPA, funding for the program will be provided by a one-mill per kilowatt-hour fee levied on electricity generated and sold by nuclear reactors, including the Comanche Peak units. There will be onsite storage capac-ity for spent fuel sufficient to accommodate the operation of Comanche; Peak for approximately 20 years and this storage capacity can be increased, subject to approval by the Nuclear Regulatory Commissien (NRC). Purchased Power In 1987, the Company purchased 11,019 million kilowatt hours or 13% of its energy require-ments and had available 1,661 megawatts of firm purchased capacity at the time of peak load. Firm purchased capacity presently under contract is 1,717 megawatts fo. 1988; 1,723 megawatts for 1989;- ) 1,335 megawatts for 1990 through 1995 and 1,265 megawatts for 1996 and 1997. This firm pur.- i chased capacity is primarily cogeneration and_does not include the capacity to be purchased from Tex La Eketric Cooperative of Texas, Inc. (Tex La) of its entitlement from' Comanche Peak (see Note 11 to Financial Statements). The Company expects to acquire additional purchased' power capacity in the future to accommodate a portion of the System load growth and plans to investigate potential available sources. 4 1 j L - _ ... _ m _ .. _ . _ . _ . _ _
Item 1. BUSINESS (Continued). General The Company is not able to predict: (i) whether or not problems may be encountered in the future in obtaining the fuel and purchased power it will require, (ii) the effect upon its operations of i any difGculty it may experience in protecting its rights to fuel and purchased power now under ; contract, or (iii) the cost of fuel and purchased power. All reasonable costs of fuel and purchased power are generally recoverable subject to the rules of the Public Utility Commission of Texas (PUC). (See Regulation and Rates for information pertaining to the method of recovery of fuel costs.) REGULATION AND RATES l Regulation Texas Utilities and its subsidiaries, meluding the Company, are exempt from the provisions of the Public Utility Holding Company Act of 1935, except as to Section 9(a)(2) which relates to the acquisition of securities of public utility companies. The Company does not transmit electric energy in interstate commerce or sell electric energy at wholesale in interstate commerce, or own or operate facilities therefor, and its facilities are not connected directly or indirectly to other systems which are involved in such interstate activities, except during the continuance of emergencies permitting temporary or permanent connections or under an order of the Federal Energy Regulatory Commission (FERC) exempting the Company from jurisdiction under the Federal Power Act. In view thereof, the Company believes that it is not a public utility as denned in the Federal Power Act and has been advised by its counsel that it is not subject to general regulation under such Act. The PUC has original jurisdiction over electric rates and service in unincorporated areas and i exclusive appellate jurisdiction to review the rate and service orders and ordinances of municipali-ties. Each municipality within the Company's service area has original jurisdiction over the regula-tion of electric rates and service within its corporate limits until such time as any such municipality may elect to have the PUC exercise original jurisdiction. Approximately 19% of the Company's revenues for 1987 were derived from electric energy sales to customers in unincorporated areas and municipalities that have ceded original jurisdiction to the PUC. The Texas Public Utility Regulatory Act prohibits the collection of any rates or charges (including charges for fuel) by a public utility that do not have the prior approval of the PUC (see Rates). The provisions for inclusion of construction work in progress in rate base provide that such inclusion is an exceptional form of rate relief to be granted only when necessary to the Gnancial integrity of the utility and that it shall not be included for major projects to the extent they have been inefRciently or imprudently planned or managed. The System Companies are also subject to various other federal, state and local regulations. (See Comanche Peak Nuclear Generating Station, Environmental Matters and Item 3, Legal Proceedings.) Rates Rates for electric service remained unchanged during 1987, except for reductions in fixed fuel factors discussed below. At appropriate times in the future, the Company intends to file rate appli-cations with the PUC and its municipal regulatory authorities to recover the costs and a return on its investment in its electric plant, including the Comanche Peak nuclear units. It anticipates that such rate applications will be subject to challenge with regard to the prudence of costs incurred. The Company has indicated that it does not currently plan to implement increased electric service rates which reDect any additional Comanche Peak costs until Unit 1 is ready for commercial operation. The Company continues to believe, based upon revised cost estimates and using acceptable ratemak-ing approaches and assumptions, that the rate increase, when Unit I goes into service, can be held to about 10% (see Item 2, Properties - Construction Program). 5
Item 1. BUSINESS (Continued). In March 1984, the Company made applications to the PUC and to its municipal regulatory authorities for upward adjustments in rates for electric service throughout its service area. The pro-posed rate adjustments, affecting all classes of service, were estimated to increase operating revenues by $304.2 million, or 8.0%, based upon the test year ended September 30,1983. On October 12, 1984, the PUC issued its final order which decreased rates by approximately $7.0 million, or 0.2%. The customer classes of Dallas Power, Texas Electric and Texas Power were consolidated and adjust-ments were made, affecting all classes of service, that recognized said revenue reduction. (See Item 3, Legal Proceedings.) On October 31,1984, in response to appeals from the ordinances of various municipal regulatory authorities, the PUC issued its final order fixing the Company's rates within the corporate limits of those municipalities at the same level approved by the PUC in its October 12 order (see Item 3, Legal Proceedings). The present rates were placed into effect in November 1984. Prior general rate levels had been established separately for Dallas Power, Texas Electric and Texas Power. Dallas Power had placed rates into effect in February 1984, which recognized a revenue deficiency for the test year ended hfarch 31,1983 of appioximately $47.3 million, or 6.5%. Texas Electric had placed rates into effect in December 1983, which recognized a revenue deficiency for the test year ended March 31,1983 of approximately $73.9 million, or 6.1%. Texas Power had placed rates into effect in July 1982, which recognized a revenue deficiency for the test year ended Septem-ber 30,1981 of approximately $72.0 million, or 5.8%. In July 1986, the PUC adopted a revised rule relating to the method of recovery of fuel costs. This rule provides for recovery of fuel costs through fixed fuel factors as approved by the PUC. (See Item 3, Legal Proceedings.) The rule requires refunds of material over recoveries of fuel cost rev-enues and reduct!ons in the fixed fuel factors in the event that the utility is materially over-recovered and projects that it will materially over-recover its known or reasonably predictable fuel costs. Mate-rial as defined it, the rule is the amount of over-recovery, including interest, which exceeds the lesser of $40 million or 4% of the approved annual known or reasonably predictable fuel costs most recently approved by the PUC. Final reconciliation of fuel costs is to be made at the time of the utility's general rate case or at a reconciliation proceeding. The rule also provides for an emergency request to increase the fixed fuel factors, which must be acted upon within thirty days on an interim basis by the PUC, if reasonably unforeseeable circumstances have resulted in a material under-recov-ery of known or reasonably predictable fuel costs. Reconciliation may be requested only if it has either been over one year since the utility's last final reconciliation or the utility has materially under-recovered its known or reasonably predictable fuel costs. In such reconciliation, the utility has ; the burden of proving that it has generated electricity efficiently, maintained effective cost controls, ' its non-affiliated fuel and fuel-related contracts have produced the lowest reasonable cost of fuel to ratepayers, and, for fuels acquired from affiliates, all fuel-related expenses are reasonable and neces. l sary and that the prices charged are no higher than prices charged by the supplying affiliate to other l ofits affiliates or divisions or to unaffiliated persons or corporations for the same item or class of l items. Under recovery reconciliation will be granted only for that portion of fuel costs increased by ! conditions or events beyond the utility's control. Interest will be paid or received by the utility on any over or under-recovery of fuel costs at the utility's composite cost of capital as established by the PUC in the utility's most recent general rate case. The rule imposes penalties of up to 10% in the event that interim refunds, when required, are not timely requested and in the event that an emer-gency increase is granted when there was no emergency, in February 1986, the Company received approval from the PUC to reduce its composite < interim fixed fuel factor by approximately 12.4% and such reduction was implemented in March 1986. In April 1986, the Company was authorized to refund approximately $140.4 million, representing the cumulative amount of over recovered fuel revenues, including applicable interest, as of January 1986. The refund was implemented with the May 1986 billings. (See Item 3, Legal Proceedings.) In August 1986, the Company filed an application with the PUC for authority to refund approx-imately $64.8 million, representing the curnulative amount of over recovered fuel revenues, 6 l i l t
Item 1. BUSINESS (Continued). including applicable interest, as of June 30,1986. The refund was implemented with the October , 1986 billings. (See item 3, Legal Proceedings.) In November 1986, the Company filed an application seeking authority to reduce its composite interim fixed fuel factor by approximately 10.3% and to. refund approximately $58.4 million, repre-senting the cumulative amount of over recovered fuel revenues, including applicable inteiest, as of September 30,1986. The refund was implemented with the December 1986 billings and the reduced interim fixed fuel factors were implemented with the February 1987 billings. In December 1986, the Company filed an application with the PUC for authority to refund approximately $55.6 million, rTresenting the cumulative amount of over-recovered fuel revenues, including applicable interest, as of November 30, 1986. The refund was implemented with the February 1987 billings. In March 1987, the Company filed an application with the PUC for authority to refund approx-imately $69.7 million, representing the cumulative amount of over-recovered fuel revenues, including applicable interest, as of February 1987. The refund was implemented with the May 1987 billings. COMANCIIE PEAK NUCLEAR GENERATING STATION Operating License Application The Company is subject to the jurisdiction of the NRC with respect to nuclear power plants. NRC regulations govern the granting oflicences for the construction and operation of nuclear power plants and subject such power plants to continuing review and regulation. Pursuant to such regula-tions, a review is being conducted by the NRC of the Company's application for licenses to operate the Comanche Peak units. As a part of that review, a proceeding was initiated before an Atomic
- Safety and Licensing Board (ASLB) and proceedings on various issues have been ongoing since December 1981. After completion of such proceeding, the ASLB will make recommendations to the NRC regarding the issuance of operating licenses for the Comanche Peak units. An intervenor is actively involved in this ASLB proceeding.
The one remaining Contention before the ASLB in the operating license proceeding relates to the Company's quality assurance / quality control (QA/QC) program for the plant. In December 1983, the ASLB issued a memorandum questioning the QA program for design of certain portions of the plant and requested that the Company offer additional proof of adequate design and design review procedures. The ASLB is also reviewing several other related issues and has indicated its intent to review the results of the NRC's Technical Review Team (TRT) investigation discussed below. In July 1984, a separate ASLB, including two of the three members of the original ASLB, was convened to receive testimony on allegations that QC inspectors at the plant had been subjected to an atmo-sphere of harassment and intimidation which is alleged to have affected the implementation of the Company's QA program. In January 1986, this separate ASLB was disestablished with all issues thereafter to be resolved by the original ASLB. As a separate part of the NRC's review of the Company's operating licecse application,in March 1984, the NRC established a task force to consolidate and carry out the various reviews necessary for the NRC Staff to reach its decision regardmg the operating licenses. This efTort involved the e: tab-lishment of the TRT, which began an intensive onsite investigation in July 1984 and subsequently has issued reports requesting additional information from the Company with respect to several func-tional areas of the plant's construction program. The Company then formed a special team, the Comanche Peak Response Team (CPRT), which includes a number ofindependent experts in each area addressed by the TRT, and submitted a Program Plan (Plan) to respond to the questions raised. Such Plan, which is described further below, is presently being implemented and has been expanded to address the design and other ASLB issues described herein. 7
n , i Item 1. BUSINESS (Continued). In January 1985, the TRT issued a report on its review Sf the QA/QC programs at Comanche Peak. The report stated that although the QA program documentation' met NRC requirements, the - implementation of the QA program demonstrated that the Company had lacked the commitment to ~ aggressively implement an effective QA/QC program in several areas. The TRT indicated that it ha'd ,~ found evidence of faulty construction and ineffective QA and QC inspections. Questions were also. raised concerning the training and qualification of QC personnel and in the reporting of deficiencies. The'TRT further found that prior to Julyil984 problems had existed in the control of documenta ' tion. In addition,' deficiencies in several othe'r areas were' described. The Company was iequested to submit to the NRC a program and schedule for completing a detailed and thorough assessment'of these QA/QC issues presented by the TRT. The Company also'was asked to consider the'use of management. personnel with a fresh perspective to evaluate:the TRT findings and implement corrective action, and to consider the use of an independent consultant to oversee the. corrective action program. In June 1985, the Company filed with the NRC and the ASLB a revision'to the' Plan Which is ^
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being utilized by the CPRT to address all outstanding design and construction concerns. This Plan, which was substantially revised and reissued in January 1986,'and further revised in July'1987, provides for a complete design review of virtually all safety related systems in the plant, and for the development of a corrective action program as required. In August 1985, the ASLB issued a Memo-randum which described areas of the Plan that concerned the ASLB. The Memorandum indicate'd,- however, that if the Plan were revised to address the ASLB's concerns and ifit were appropriately-- implemented, the Plan may demonstrate the quality of the plant. In May 1986, the StalTof the NRC issued a Supplemental Safety Evaluation Report (SSER) containing an evaluation of the Plan as it-existed at that time. The SSER concluded that the Plan provided an overall structure and process for - addressing and resolving all existing construction and design issues and any future issues that may. be identified from further evaluations. In June 1986, the ASLB issued a Memorandum which addressed "Board Concerns" about the adequacy of the CPRT program. The Memorandum stated that, based upon the ASLB's current knowledge of the program, after having.eeviewed the first results reports and the SSER on the Plan, the ASLB continued to have the concerns expressed in the earlier memorandum described above. The ASLB also raised additional concerns about how findings in one . area of the reinspection effort may affect the Company's program in other areas, whether sufficient attention is being paid to problems of quality assurance and quality control regarding design, the adequacy of the CPRT sampling program, and perceived oversights in one of the results reports that had been issued. The Company is addressing these concerns. In November 1987, th'e ASLB estab-' lished a schedule for resolution of all issues remaining in the operating license proceeding. In January 1988, the StafT of the NRC, after further review and analysis, approved the Plan and corrective action program as the basis to resolve outstanding issues. At the end of February 1988,.the CPRT completed the publication ofits final reports. In March '1988, the Staffissued an SSER approving the design of piping and pipe supports at Comanche Peak, which had been a major issue in the operating license proceeding, and concluded that the Plan provides an effective means to ensure proper imple - mentation of corrective action in this regard. Delivery of this report sets into motion a prehearing schedule adopted by the ASLB which should result in the resumption of hearings on issuance of the operating licenses in the late summer of 1988. Meanwhile, implementation of the corrective action program continues. In December 1987, the Company entered into an agreement to settle potential claims against Gibbs & Hill, Inc. (Gibbs & Hill), the original architect engineer for Comanche Peak. rehning to ' engineering and design services performed by"Gibbs & Ilill for Comanche Peak. Under the terms of - this settlement, the owners of Comanche Peak will receive a total of $25 million in cash,- , deferred payments and future engineering services which will be provided to the Company on non-nuclear projects. 8 f
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J Item 1. BUSINESS (Continued). The Company has made a number of key management changes in the nuclear program for Comanche Peak, including the addition of several new officers who bring substantial nuclear experi-ence to the Company. This new management team is responsible for oversight and implementation of the reinspection and corrective action program. , The NRC has created an Office of Special Projects to manage all aspects of the NRC's licensing and inspection efforts for Comanche Peak and certain other nuclear power plants. Construction Permit Extensions in January 1986, the Company filed an application with the NRC for an extension of the con-struction permit for Unit I to reflect a new "latest date for completion" of August 1,'1988; previously such date had been August 1,1985. In the application, the Company stated that the reason the request for extension of the construction permit was not filed at an earlier time was administrative oversight. In February 1986, the NRC issued an order extending the "latest date for completion" of Umt I to August 1,1988. Subsequently, the intervenor involved in the ASLB operating license proceeding filed with the NRC a rer test to stay the effectiveness of the construction permit exten-sion and to require the Company to tile a new application for a construction permit for Unit I or to order that hearings be held prior to any decision on whether to grant the construction permit exten-sion. The request for a stay was denied by the NRC and the question of whether to hold such hearings was remanded to an ASLB, the members of which are the same as the ASLB for the oper-ating license in November 1986, the ASLB issued a Memorandum and Order in which it accepted for litigation a new Contention, raised by two intervenors, which alleges that the delay in completing Comanche Peak, which has occurred and has necessitated the extension of the construction permit by the NRC, was the result of dilatory action on the part of the Company and that, therefore, good cause did not exist for the extension of such permit. No schedule for hearings on this Contention has been adopted by the ASLB at this time. The Company has also applied to the NRC for an extension of the construction permit for Unit 2. Such application is presently under review by the Staff of the NRC. In early March 1988, the Company filed with the ASLB a motion to consolidate proceedings in the operating license and construction permit proceedings. (See item 2, Properties - Construc-tion Program.) Civil Penalties in April and June 1986, the Company paid civil penalties to the NRC, each in the amount of
$40,000, relating to allegations of harassment and intimidation at Comanche Peak. The June 1986 penalty was part of an aggregate of $120,000 in civil penalties previously proposed by the Staff of the NRC. The Company requested the Staff to revisit the other alleged violations to determine whether they did in fact occur and to consider mitigating the amount of the penalties, and in August 1987, the Staff decided not to assess the remaining $80,000 in proposed civil penalties. In August 1986, the Company paid a civil penalty of $200,000 previously proposed by the Staff of the NRC relating to the findings of the TRT, described above. In addition, the Company has paid another civil penalty of $50,000 relating to two alleged violations in the Company's reinspection and corrective action effort.
Investigation Regarding NRC Region IV In December 1986, a portion of a report was released by the Office of Inspector and Auditor of the NRC (OI A Report) containing the results of its investigation of allegations of misconduct by the management of Region IV of the NRC with respect to Comanche Peak. The OlA Report expressed concern about allegations of harassment and intimidation by Region IV management to pressure 9
I Item 1. BUSINESS (Continued). Region IV inspectors to downgrade or delete proposed inspection findings at Comanche Peak. In addition, the OIA Report concluded that it would not be possible to rely on the Region IV QA inspection as evidence of the safe construction of Comanche Peak. Consequently, it stated that it will be necessary for the NRC to rely largely on recent detailed technical inspections conducted by the NRC, including the TRT, at Comanche Peak. The OIA Report also indicated that the data contained in an internal NRC report on inspection procedures was inaccurate and unreliable due to a lack of ' understanding by NRC inspectors of the proper method of completing a certain NRC form. NRC officials have indicated that a thorough assessment of the results of this investigation will be made; and in addition, certain personnel changes in the Region IV office have occurred. The OIA Report's findings are restricted to activities in Region IV and do not question other NRC regulatory activities with respect to Comanche Peak, including the detailed technical inspections conducted by the TRT as discussed above. The intervenor in the operating license proceedings, discussed above, has indi-cated its intent to file a motion raising the OIA Report's findings as issues to be the subject of hearings in such proceedings. Cost and Schedule Estimates For information relating to cost and schedule estimates, see Item 2, Properties'- Construc-tion Program. ENVIRONh! ENTAL 51A'ITERS The System Companies are subject to various federal, state and local regulations dealing with air and water quality and related environmental matters (see Item 2, Properties - Construction Pro-gram for scheduled expenditures). Air Under the Texas Clean Air Act, the Texas Air Control Board (TACB) has jurisdiction over the permissible level of air contaminant emissions from generating facilities located within the State of Texas. In addition, the new source performance standards of the Environmental Protection Agency (EPA) promulgated under the federal Clean Air Act, which have also been adopted by the TACB, are applicable to such generating units, the construction of which commenced after March 5,1972. The Company's generating units have been constructed to operate in compliance with regulations pro-mulgated pursuant to these Acts; however, due to variations in the quality of the lignite fuel, opera-
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tion of certain of the lignite-fueled generating units at reduced loads is required from time to time in order to maintain compliance with these standards. Generating facilities presently under construc-tion have received state and federal permits and are designed to comply with applicable statutes and regulations. However, the Twin Oak generathig station (Twin Oak) and Forest Grove generating station (Forest Grove) will require design modifications in order to comply with more recent EPA standards. Water The Texas Water Commission (TWC) and the EPA have jurisdiction over all water discharges from generating stations and mining areas. The Company's generating stations presently in operation have been constructed to operate in compliance with applicable state and federal standards relating to the quality of discharges of water. The Company and Mining Company have obtained all required l waste water discharge permits from the TWC for facilities in operation and have applied for or obtained all such permits for facilities under construction. Permits have been received from the EPA under the National Pollutant Discharge Elimination System (NPDES) for the discharge of waters from units at the generating stations currently in operation. All NPDES permits required for units under construction and lignite mining areas have been applied for or obtained. The Company and Mining Company believe they can satisfy the requirements necessary to obtain any required renewals. 10 L _. _ - -
Item 1. BUSINESS (Concluded). Diversion of water by the Company for cooling and other purposes is subject to thejurisdiction of the TWC which is empowered to allocate such waters among users. The Company possesses all necessary permits from the TWC for the use of surface water required for its present operations and plants under construction. Other Federallegislation regulating surface mining was enacted in August 1977 and regulations imple-menting the law have been issued. Mining Company's lignite mining operations are currently regu-lated at the state level by the Railroad Commission of Texas. Surface mining permits have been issued for current mining operations that provide fuel for the Big Brown, Monticello, Martin Lake and Sandow generating stations. Treatment, storage and disposal of solid . waste is regulated at the state level under the Texas Solid Waste Disposal Act and at the federal level under the Resource Conservation and Recovery Act of 1976 (RCRA). The EPA has issued regulations under the RCRA and the TWC has issued regulations under the Texas act applicable to the Company's generating units. The Company has registered its disposal sites as required by such regulations. In August 1982, the EPA issued its final rules on the use of polychlorinated biphenyls (PCBs)in transformers, capacitors and other types of electrical equipment. Under the rules, certain PCB capac-itors must be phased out by October 1988. The Company does not expect these regulations to have a material adverse effect on its operations or financial condition. l 11
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' Item 2. PROPERTIES.-
At December 31,1987, the Company owned and operated sixty nine electric generating units at . A twenty three stations having a total net capability of 17,804 megawatts. The locations of the princi-pal electric generating stations and transmission lines of the Company are indicated on the map ' included herein. Forty generating units with a net capability of 8,506 megawatts use natural gas as the primary fuel and are designed to use fuel oil for short periods when the gas supply is interrupted-or curtailed; two units with a net capability of 750 megawatts can use natural gas only; five units with' a net capability of 2,680 megawatts;use natural gas as the primary fuel and are designed to use fuel-
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oil for extended periods; nine units with a net capability,of 5,845 megawatts use lignite as fuel; and thirteen units with a net capability of 23 megawatts are diesel units.~ In December 1987, the Compsn) entered into an operating lease arrangement for nine combus-tion turbine generating units, designed to use natural gas or fuel oil, with a total net capability of 585 megawatts' At that time, three of such units having a total net capability of 195 megawatts went into operation. The other six units are expected to become operational in mid 1988. (See Item 2, Proper- - ties - Construction Program and Note 9 to Financial Statements.) The principal generating facilities and load centers of the Company are connected by 3,820 circuit miles of 345,000 volt transmission lines and 8,805 circuit miles of 138,000 and 69,000 volt transmission lines.
, The Company is connected by six 345,000 volt lines to Houston Lighting & Power Company; by three 345,000 volt, five 138,000 volt and nine 69,000 volt lines to West Texas Utilities Company; by two 345,000 volt, seven 138,000 volt and one 69,000 volt lines to Lower Colorado River Authority; by four 345,000 volt and eight 138,000 volt lines to Texas Municipal Power Agency (TMPA); and at several points with smaller systems operating wholly within Texas. The Company is a member of the Electric Reliability Council of Texas (ERCOT),' an intrastate network of six major investor-owned and seventy-two public entities. ERCOT is the regional reliability coordinating organization for member electric power systems in Texas.
The generating stations and other important units of property of the Company are located on lands owned primarily in fee simple. The greater portion of the transmission and distribution lines-of the Company, and of the gas gathering and transmission lines of Fuel Company, has been con-structed over lands of others pursuant to easements or along public highways and streets as permitted - by law. The rights of the System Companies in the realty on which their properties are located'are considered by them to be adequate for their use in the conduct of their business. Minor defects and irregularities customarily found in titles to properties oflike size and character may exist, but any such defects and irregularities do not materially impair the use of the properties afTected thereby, The Company and Fuel Company have the right of eminent domain whereby they may,if necessary, perfect or secure titles to privately held land used or to be used in their operations. Electric plant of the Company is generally subject to the liens'of its mortgages. During the period from January 1,1985, to December 31, 1987, the Company made gross ' property additions of approximately $4,234,261,000 and retirements of property aggregating approximately $166,677,000. Such gross additions amounted to 29.9% of electric plant at Decem : ; ber 31,1987. ' i I 12 i l .
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l Item 2. PROPERTIES (Continued). CONSTRUCTION PROGRAM Construction expenditures for the years 1988 through 1990 are estimated as follows: 1988 1989 1990 Thousands of Dollars Electric Property: P rod u ct io n * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ _842,000 $ $92,000 $438,000 Transmission .............................. 50,000, 69,000 76,000 Dist ribu t ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,000 225,000 233,000 G e n e ra l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 30,000 20.00_0 Total *..................................... 1,107,000 914,000 777,000 AFUDC*...................................... 350,000 463,000 50,000 Total construction expenditures *. . . . . . . . . . $ 1,457,000 $ 1,377,000 $827,000 Such expenditures do not include AFUDC on Unit 2 of Comanche Peak for any period after March 1988 or the following: Nuclear fuel * . . . . ..... ... ......... .... $ 33,000 $ 15,000 $ 15,000
- Includes ongoing amounts for an additional 6.2%
interest in Comanche Peak, which is subject to , l purchase from TMPA (See Note 11 to Financial Statements): Production . . . . . . . ........ ........... ... $ 50,000 $ 32,000 $ 16,000 AFUDC . . . .................... . . .... 23,000 30.000 1.000 1 Total construction expenditures . ........ $ 73,000 $ 62,000 $ 17,000 Nuclear fuel . . . . . . . . . . . . . . . ........ .. $ -
$ 1,000 $ 1,000 The Company is subject to federal, state and local regulations dealing with environmental pro-tection (see item 1, Business - Environmental Matters). Construction expenditures for additional i items of equipment contributing to the protection of the environment for lignite-fueled generating units (included above in Production) are estimated to be approximately $15,800,000 for 1988, $16,200,000 for 1989 and $26,400,000 for 1990. Similar such expenditures approximated $9,800,000 for 1987, $4,800,000 for 1986 and $6,900,000 for 1985.
Additional generating units in design or under construction are described as follows: Combustion Turbines The Company i: installing gas / oil fueled combustion turbines totaling 585 megawatts at . two locations for service in the peak season of 1988. In addition, the Company expects to install l I 390 megawatts of additional turbines for service in the peak season of 1990. In December 1987, the Company entered into an operating lease arrangement covering the 1988 turbines, which I became effective at that time for 195 megawatts of such turbines. The remainder of the 1988 turbines, with a total net capability of 390 megawatts, are currently owned and being con- I structed by a third party and are expected to be sold to the lessor after the tax in-service date, l which is expected to occur by mid-1988. Therefore, estimated construction expenditures for l 1988 through 1990 do not include these costs. l The Company currently expects to utilize a turnkey construction arrangement for the 1990 turbines, and then enter into an operating lease arrangement with respect to such turbines. l Therefore, estimated construction expenditures for 1988 through 1990 do not include costs asso-ciated with this arrangement. 13
.r s.
l Item 2. PROPERTIES (Continued). l Comanche Peak Nuclear Generating Station The Company is constructing two nuclear-fueled generating units at Comanche Peak, each of which is designed for a capsbility of 1,150 megawatts. After giving effect to the anticipated . completion of the 1988 agreement to purchase the 6.2% ownership interest of TMPA in the facility, the Company's share of the net capability in each unit is 1,081 megawatts, or approxi-mately 94E The other participants in the facility are Brazos Electric Power Cooperative, Inc.
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(BEPC) and Tex La which own 3.8% and 21/6%, respectively. (See Item 3, Legal Proceedings - Comanche Peak Nuclear Generating Station.) In March 1988, the Company announced that following its review of the cost and schedule for Comanche Peak, commercial operation of Unit I is presently anticipated at the end of 1989. All Unit I correciive action activities are scheduled for completion to permit fuel loading in mid-1989. The Company also announced the temporary suspension of construction activities and accrual of allowance for funds used during construction (AFUDC) on Unit 2 beginning in April 1988 for a period of approximately one year. Unit 2 is not expected to be ready for
^
commercial operation until after the 1991 peak season. The delay of Unit 2 was implemented to allow the Company to concentrate its resources on the completion of Unit 1, thereby reducing the duplication of effort that would be required to maintain the previous timing between the two units and strengthen the Company's ability to manage construction and start up activities for both units more efficiently with fewer personnel. Additionally, such delay will allow time to make a more complete determination of any modifications that may be required for Unit 2 based upon the knowledge gained from the reinspection and corrective action program applied to Unit 1. The delay of Unit 2 will also permit the Company time to implement rates for Unit I prior to the final completion and operation of Unit 2. Although construction on Unit 2 has been temporarily suspended, there will be some ongoing expenditures required to maintain the unit until construction is resumed. Additionally to the extent the work necessary to place Unit 1 into service affects various common systems, some capital expenditures will be associated with Unit 2. Based upon this revised schedule, the total cost of the Company's 94% share of the plant, excluding AFUDC, is estimated to be $6.37 billion. The Company's estimated cost ofits share, including AFUDC, is $8.54 billion or about $3,950 per kilowatt. Because of the uncertainty
. regarding the date of commercial erration of Unit 2 provision has been included in such amount for rr stablishing the accrual of AFUDC on Ur . e after construction resumes. The total cost of the p..mt, excluding AFUDC,is estimated to be $6.62 billion. Because of the uncertain-ties regariing payments by the other owners of Comanche Peak of their share of the remaining constructi3n costs, no estimate of the amount of AFUDC that may be attributable to their icterests in the plant has been made.
The Company had previously estimated, in November 1986, that commercial operation of Unit I would be achievable in early 1989 and that Unit 2 would not be ready for commercial operation until after the 1989 summer peak season. Based upon such schedule, the total cost, excluding AFUDC, of the Company's 875/6% share of the plant (which excludes the presently anticipated purchase of TMPA's share) was estimated to be $4.63 billion. The Company's esti-mated cost for its 875/6% share, including AFUDC, was $6.70 billion or about $3,300 per kilo-watt. The total cost of the plant, excluding AFUDC, was estimated to be $5.27 billion. Because of numerous uncertainties in the licensing process, no assurance can be given that the revised estimated schedule can be met or that the estimated completion cost will not be exceeded. Failure to secure timely and favorable regulatory approvals or further delays occa-sioned by additional reanalysis, reinspection or rework will increase the cost of the plant and will likely increase financing requirements. 14
~ - - . --- -.
l l Item 2. PROPERTIES (Continued). Lignite-Fueled Generating Units The Company's resource plan includes two 750 megawatt units at the Twin Oak generating station scheduled for service for the peak seasons of 1994 and 1995, and one 750 megawatt unit at the Forest Grove generating station scheduled for service for the peak season of 1997. Based upon this schedule, the anticipated completed cost of the two Twin Oak units is $2.30 billion, or $1,531 per kilowatt, and for the Forest Grove unit $1.33 billion, or $1,770 per kilowatt. Expenditures through December 31,1987 on the Twin Oak units and the Forest Grove unit were $373 million and $231 million, respectively. The Company's previous resource plan had included the Twin Oak units in 1991 and 1993 and the Forest Grove unit in 1994. As' a part of the Company's regular annual review of its resource plan and in response to the decrease in the long-range forecasted growth in customer demand for electricity and a decision to defer some previously planned retirements of certain gas-fueled generating units, in September 1987 the Company announced a delay in the in-service dates of these units. Concurrently, the Company discontinued the accrual of AFUDC on these units until active construction resumes. The previously disclosed consideration of bids for the turnkey construction of Unit I and common facilities at the Twin Oak generating station has been discontinued. (See Item I, Business - Peak Load and Capability.) The effects ofinflation on construction costs,'the reevaluation of growth expectations er addi-tional regulatory requirements may result in changes in estimated completed costs and in-senvice dates for certain generating units in design or under construction. Actual expenditures and dates of completion may further vary because of other uncertain factors such as licensing delays, changes in peak load requirements and cost and availability of fuel, labor, materials and capital. Commitments in connection with the construction program, principally for generating stations and related facilities, are generally revocable subject to reimbursement to manufacturers for expenditura incurred or other cancellation penalties. Of the funds required to finance the construction program in 1988, present estimates indicate inat approximately 9% will be provided from internal sources. For information regarding financing of the construction program see Management's Discussion and Analyn of Financial Condition and Results of Operations. 1 15
Item 2. PROPERTIES (Concluded). Tile COh1PANY SYSTEh! h!AP December 31,1987
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l l Item 3. LEGAL PROCEEDINGS. Regulation and Rates In December 1984, the Company filed suit in the 98th Judicial District Court of Travis County, Texas, the Office of Public Utility Counsel (OPUC) filed suit in the 147th Judicial District Court of Travis County, Texas, Texas hiunicipal League (Th1L) filed suit in the 200th Judicial District Court of Travis County, Texas, and Texas-New hiexico Power Company (TNh1P) filed suit in the 353rd Judicial District Court of Travis County, Texas, seeking review of the PUC order of October 12, 1984 in the Company's 1984 rate proceeding. The Company's suit seeks judicial review and a rever-sat of certain aspects of the order. The OPUC, ThiL and TNhiP suits complain of certain aspects of the order and ask that excessive rates be refunded. In December 1984, the Company filed suit in the 250th Judicial District Court of Travis County, Texas, and in January 1985 certain municipalities filed suit in the 126th Judicial District Court of Travis County, Texas for review of the PUC order of October 31,1984 in the appeals from various municipal ordinances in connection with the Com. pany's 1984 rate proceeding. The Company's suit seeks judicial review and a reversal of certain aspects of the order. The municipalities' suit complains of certain aspects of the order and asks that excessive rates be refunded. (See Item I, Business - Regulation and Rates.) In April 1986, the Attorney General of Texas, on behalf of several state agencies, filed suit in the 345th Judicial District Court of Travis County, Texas, against the PUC and several utilities, includ-ing the Company, challenging the validity of the PUC's emergency ru'e, adopted in February 1986, relating to the method of making refunds of over-recovered fuel revenues. The suit seeks to enjoin the application of the rule and additional refunds of the difTerence between the amounts that the State agencies were overcharged and the amounts of the refunds they received under the rule. j In June and November 1986, the Attorney General of Texas filed suits in the 98th and 331st Judicial District Courts of Travis County, Texas, respectively, on behalf of several state agencies against the PUC and the Company seekirg reversal of the PUC's orders authorizing the refund of over-recovered f'.el revenues implemented with the hiay and October 1986 Company billings, respectively. These suits seek additional refunds of the difference between the amounts that the state agencies were overcharged and the amounts of the refunds they received pursuant to such PUC orders. (See Item I, Business - Regulation and Rates.) Comanche Peak Nuclear Generating Station The Company, Th1PA, PEPC and Tex-La have been the owners of 875/6%,6.2%,3.8% and 21/6% interests, respettively, in Couurzhe weak under the terms of a Joint Ownership Agreement (Agree-ment) which provides that the Company is the Project hianager for Comanche Peak. BEPC has failed to make rumerous payments ofits portion of the costs of Comanche Peak. BEPC has been experiencing difficulty in obtaining additional financing for Comanche Peak from the Rural Electri-fication Administration. In addidon, since hiay 1986, Tex-La has failed to make payments to the Company for its portion of Comanche Peak and ThiPA has made payments under protest. In hiay 1986, the Company filed suit in the 14th Judicial District Court of Dallas County, Texas against Thf PA, BEPC and Tex La because of controversies which exist under the Agreement with respect to the obligations of the parties. The Company asseried that each of the defendants has either claimed that it has no further obligation to pay its share of the remaining costs of construction of Comanche Peak, or has claimed that the Company has failed to properly construct Comanche Peak or otherwise has breached its obligations under the Agreement. The Company sought recovery of damages against Tex-La fur its anticipatory breach of the Agreement and asked for a declaratory judgment against Tex-La, BEPC and Th1PA declaring among other things that they were obligated to pay their share of the remaining costs of construction of Comanche Peak and that the Company has not failed to use prudent utility practices in constructing Comanche Peak in accordance with the Agreement. Th1PA, BEPC and Tex La filed cross-actions in such suit against Texas Utilities and the Company asserting various causes of action, including a number of alleged breaches of the Agreement by the Company and violations of the Texas Deceptive Trade Practices Act (DTPA). In September 1986, the Court in the Dallas County stit ruled in favor of the Company with regard to a plea of the defendants 17
Item 3. LEGAL PROCEEDINGS (Concluded), attempting to change the venue of sach suit. The case is in the discovery phase and trial is currently scheduled for October 1988. In June 1986, Th1PA and Tex-La filed suit in the 98th Judicial District Court of Travis County, Texas against Texas Utilities and the Company. The petition asserted various causes of action, including a number of alleged breaches of the Agreement by the Company and violations of the DTPA Th1PA and Tex-La asked for rescission and modification of the Agreement and payment for damages, including treble damages based upon violations of the DTPA. The Company and Texas Utilities intend to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. In February 1988, the Company entered into an Agreement with Th1PA pursuant to which the Company will purchase ThiPA's ownership interest in Comanche Peak and all outstanding claims and pending lawsuits between ThtPA and the Company will be settled and terminated. Finalization of the agreement is subject to the approval of the NRC and the PUC with respect to the transfer of ThfPA's ownership interest. The Company has filed applications to obtain such approvals and can-not predict when action with respect thereto will be taken. (See Note 11 to Financial Statements.) In June 1986, BEPC filed suit in the 345th Judicial District Court of Travis County, Texas against the Company, Texas Utilities, hiining Company and TU Services. BEPC alleges that the defendants have breached the Agreement, certain implied warranties and fiduciary duties, and have been grossly negligent, acted with willful misconduct and have violated the DTPA and Texas and federal securities laws. BEPC asks for an injunction against efTorts by the defendants to recover additional payments, rescission and reformation of the Agreement and payment for damages, trebled pursuant to the DTPA. BEPC alleges actual damaps to that date of at least $216 million. The defendants intend to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. In hiarch 1987, BEPC filed a request with the NRC to modify the construc-tion permits and licenses already issued and to impose a prospective condition to any permits and licenses subsequently issued or renewed to require the Company to assume BEPC's ownership inter-est in Comanche Peak by purchase thereof at its net book cost, and for other unspecified relief. In June 1987, the NRC Oflice of Special Projects denied this request and the Company is unable to predict what further action may be taken. See Item 1, Business - Comanche Peak Nuclear Generating Station. Environmental Matters In July 1979, a suit was filed in the 4th Judicial District Court of Rusk County, Texas against Texas Utilities Generating Company (now hiining Company), TU Services, and the former electric utility subsidiaries of Texas Utilities, by the State of Texas on behalf of tht; TACB. The petition alleged that Texas Utilities Generating Company (now hiining Company) and TU Services, acting as agents for the electric utility subsidiaries, violated regulations issued under the federal Clean Air Act, provisions of the Texas Clean Air Act, and permits issued by the TACB,in allowing the start up of Unit 3 at the hfartin Lake generating station before the completion and operation ofits associated air pollution ecntrol equipment. The State sought an injunction against further violations and penalties from each of the defendants of $1,000 for each day and each act of violation. An agreed judgement providing for recavery by the State of $50,000 was eatered in Afarch 1987. (See Item 1, Business - Environmental hiatters.) Item 4. SUBh11SSION OF h! NITERS TO A VOTE OF SECURrfY llOLDERS. None. 18
(. :i; i PART II -
' Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKIIOLDER MATTERS.
All of the Company's common stock is owned by Texas Utilities. Reference is made to Note 5 to Financial Statements regardinglimitations upon payment of divi-
- dends on common stock of the Company.
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j i Item 6. SELECTED FINANCIAL DATA. FINANCIAL STATISTICS Year Ended December 31, 1987 1986 1985 1984 1983 TOTAL Assris end of year (thousands) . . . . . $ 2,938 '55 $ 11,276,886 $9,800,753 - $8,782,507 $7,897.421 ELECTRIC PLANT end or year (thousands) . . . $ i4,i 49,647 $ i2,543,249 $ i i,i34.092 $i0,082,063 - $9,iO8.056 . Accumulated depreciation end of > ear . . . . . . . . . . . . . . . . . . . . . . . 2.355.827 2,174,441 2,0!!,061 1,848.t 46 1,687,098 Construction expenditures (including allowance for funds used during construction) . .. ... .... 1,662,483 1,479,177 1,057,057 878,581 854,307 CArriruZATioN end of year (thousands) Long-term debt . . . . . , ,. $ 4,C9.111 $3,748.931 $3,048,329 $2,798,105 $2,592,152 Preferred stock: Not subject to mandatory redemption. . .. ,,.. 909.633 811,418 811,418 727,911 629,779 Subject to mandatory redemption . . . ... . .. .. 232,906 232,424 34,696 34,696 34,696 Common stock equity. . . . . . ....... 4.827,145 - 4.282,405 3,793,118 3.319.729 3,040.710 Total. . . .. ,. . .. $ 10,608,795 $9,075.178 $ 7.687.561 $6.880,441 $6,297.33 / EMsEDDED INTEREST Cost ON LONG TERM . DEST end of year. . . . . . . .. .... . . 9.8% 10.0% 10.3% 10.1% 9.7% EMsEDDED DmDEND COST ON PREFYRRED stock end of year. . . ... . . .. 8.3% 8.t % 8.2% 8.3% 8.0% NET INeOME (thous 2nds). . . . . .. . . $781,178 $712,292 $654,417 $590.765 $520.901 CASH DmDENDs DECLARED ON COMMON stock (thousands) . ....... $447,200 $395,430 $354,752 $317.638 $282,376 RATto or EARNINGS To FLxED Cl1ARGEs . . 3.3 3.7 3.9 4.D 3.9 SUPPLEMENTAL. ratio or EARNINo.To fixed CHARGES * . .. . .. .., .. . 3.0 3.3 3.4 3.5 3. 5 AUDWANCE FOR FusDs UsED DURIso CONSTRUCTION As PERCENT OF EARNINGS To COMMON STOCK . , . ........ $59% 47.9% 39.1% 32.4% ~ 33.8% RETURN ON AVERAGE COMMON stock Equrry. . .. . .. . I 5.2% 15.% 16.5% 16.7% 16.5% Nc7 FUNDS MtOM OPERATIONS As PERCENT OFCONSTRUCTION EXPENDfTURES (excluding allowance for funds used during construction)... . .. 13.7% 28.1% 44.4% 54.6% 48.8%
- The supplemental ratio ofearnings to fixed charges includes in' .;st billed the Company on senior notes of allihated companies which provide services to the Company. Jee Note 2 to Financial Statements.)
l 1 N 20 t i l _ -- . _ _ _ _ _ _ _ ___ .- .. . ..l
Item 6, SELECTED FINANCIAL DATA (Concluded). OPERATING STATISTICS Year Er.hd December 31, 1987 1986 1985 1984- 1983 EucrRic ENEROY GENERATED AND PURcuAsto(mwh)
- Generated - net statSn output.. ... . 71,878,925- 75,467.871 76,355,396 '72,582,637 67,706,594 Purchased and net interchange. . . . . . . . I1.019.037 4.712,082 2,057,490 382,651 343.581 Total generated and purchased, , . . 82,897,962 80,179,953 78,412,886 - 72,955,288 6b,050,175 Company us . losses and unaccounted for.. ..... ........ 5,125,310 4,925,178' 5,042,990 3,839,517 5.340.248 Total electric energy ules . . . . ,, - 77,772,652 75.254,775 . 73,369,D6 69,125,771 62,709.927 EucrRic ENERGY SAus(mwh)
Residential ... . .... .... .. .... 25,716,080 14,604,109 24,300,788 ' 22,693,290 20,162,506 - Commercial . . . . . . . . . . . . . . . . . 22,324,328 21,453,435 20,349,334 19,026,267 17,366,563 Industrial. ... .... .... .. . . 21,420,705 21,013,278 20.921,530 20,343,558_ 18,690,077 Government and municipal . . .. ,, . 2,499.'81 2,385,168 2,324.785- 1,920,420 1,790.476 Total general business. . . . . . .. 71,961 J. 94 69,455,990 67,fC6,437 63,983,535 58,009,622 Other electric utilities. . . . . . . . . . . 1 811.558, 5,79P,785 5.473,459 5,142,236 4.700.305 Total electric energy sab , .. ., 77.772,6 2 75,254,775 73,369,896 69,125.771 62,709,927 OPERATINo REVENtJES(thousands) ResidentiM . .. ... ..... . $1.603 d46 $1.5'0 3 $1/ /3,378 $ 1,546,081 $1,306,912 Commercial . .. . .. , 1,166,8 2 .,i17,944 I .07,784 1,127.766 998,362 Industrial. . . . . . . . . . . . . , ,. 800,635 822,831 935,849- 893,531 808,016 Government and municipal , , .. !40,291 134,927 145.256 117.793 104.730 Total general business. . . . . . . 3,711,294 3,625,960 3,962,267 3,685,171 3,2I8,020 Other electric utilities. . ... . . 221,413 222,644 250,857 233.296 202,387 Total from electric energy sales . . 3,932,617 3,848,604 4,213,124 3,918,467 3,420,407 Otner operating revenues (including over/under. recovered fuel revenue). . ...... .. . 78,795 (48,744) 7,2?! 67,219 _ 446.684 Total operating revenues . . . . .. $4,079,301 $3.927,399 p.164,380 $3.925.738 $ 3,487,626 Eucraic CUSTOMERS (end of year) ResMential . . .. l.838,467 1,820,381 1,764,346 1,669,735 1,556,760 Comrr.cial . . .. . . 218,641 217,232 214,336 208.477 198,548 Industrial., . ..., .. .... .. 24,006 23,912 24,148 24,058 22,761 Government and municipal . . . 1 J.69C 13.180 12.080 _ i1.455 10,210 Total general usiness.. . . . 2,094.804 2,074,705 2,014,960 1,913,725 1,788,279 Other electric utili'ies.. ., . . 62 61 - 63 66 68 Total etectric customers. 2,094.866 2_,074,766 2,0s5.023 1,913.791 1,788,347 REslDENTtA1. STATISTICS (excludes master. metered eustomers, mwh sales and revenues) Average kwh per customer. . ,, ... 13,147 12,749 13,062- 12,887 12,073 Average revenue per kwh. .. 6.33t 6.31e 6.99c 6.93t 6.60c Industrial classification includes service to Alcoa - Sandow: Electric energy sales (mmh), . 3,409,132 3,092,696 2,861,454 2,989,272 2,660,564 Operating revenues (thousands). . .. $62,630 $65,664 $68,946 $70,825 $68,121 21
~I Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Res:arces The primary capital requirements of the Company for 1987 and as estimated for 1988 through 1990 are as follows: 1987 19f8 1989 1990 Thousands of Dollars Construction expenditures (excluding AFUDC) . $ 1,275,000 $ 1,107.000 $ 914,000 $777.000 Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 33,000 15.000 15.000 Maturities of long-term debt and sinking fund requirements (includes early redemptions in 1987 of $133,000,000) .. ..... .... 156,000 23,000 20,000 2,000 Installment / principal payments to TMPA (see Notes 10 and 11 to Financial Statements).. - 125 400 58.000 64.000 Total . .. .. .. . .. . . .. ...... .. $1,432.000 $ 1.288.000 $ 1.007.000 $858.000 For detail concerning major construction work now in progress or contempiated by the Company and commitments with respect thereto, see Ite.n 2, Properties - Construction Program. The Company generates funds from operations sufficient to meet operating needs, pay dividends on capital stock and finance a portion of capital requirements. These funds are derived from net income, depreciation, deferred taxes and investment tax credits. Factors affecting the ability of the Company to continue to fund a portion ofits capital requirements from operations include adequate rate relief and regulatory practices allowing a substantial portian of construction work in progress (CWIP)in rate base, adequate depreciation rates, normalization of federalincome taxes, recovery of the cost of fuel and purchased power and the opportunity to earn competitive rates of return required in the capital markets. For 1987, approximately 14% of the funds needed for construction was generated from operations. External funds of a permanent or long term nature are obtained through the sales of common i stock to Texas Utilities, preferred stock and long-term debt. The capitalization ratios at December 31,1987 consisted of approximately 44% long-term debt,11% preferred stock and 45% common stock equity. Similar ratios are expected to be maintained in the future. To provide for immediate cash requirements during periods between long term financings, the Company obtains short term loans from Texas Utilities, which had lines of credit with commercial banks aggregating
$ 1,025,000,000 at December 31, 1987. The Company does not maintain separate credit arrange-ments with banks or other lenders.
Financings in 1987 by the Company included the following: long-Term Debt: Principal Month Amount Description February $ 250,000,000 9%% First Mortgage and Collateral Trust Bonds due 2017 March 100.000.000 7%% Col!ateralized Pollution Control Revenue Bonds due 2017 April 250,000,000 10%% First Mortgage and Collateral Trust Bonds due 2017 t July 150,000,000 9%% First Mortgage and Collsteral Trust Bonda due 1997 July 150.000,000 10%% First Mortgage and Collateral Trust Bonds due 2017 September 67.000,000 9% Collateralized Pollution Control Revenue Bonds due 2007 October I12.000.000 9%% Collateralized Pollution Control Revenue Bonds due 2017 Total $ 1,079.000.000 22
1 I Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued). Liquidity and Capital Resources - (Concluded) Preferred Stock: Month Shares Net Proceeds Description July 1,000,000 $98,215,000 Stated Rate Auction Preferred Stock, Series A Common Stock: Month Shares Amount Description June 4,700,000 $ 199,750,000 Without Par Value December 2,300,000 100,050,000 Without Par Value Total $299,800.000 Early redemptions oflong-term debt by the Company in 1987 included the following: Month t os't Description April 5 32,531,000 $ 36,523,000 16% First Mortgage Bonds due 2012 June 50,000,000 56,085,000 15h% First Mortgage Bonds due 2012 July 50,000,000 56.335,000 16% First Mortgage Bonds due 2012 Total $ l 32.531,000 $ 148,943 000 Additional early redemptions may occur from time to time it. amounts presently undetermined. , The Company anticipates the issuance in April 1988 by the Brazos River Authority of $100,000,000 : principal amount of pollution control revenue bonds to be collateralized by the issuance of an equal i principal amount of the Company's first mortgcge and collateral trust bonds. The Company expects j to sell securities as needed, including the possible future sale of up to $300,000,000 principal amount of first mortgage and collateral trust bonds and up to 1,000,000 shares of cumulative preferred stock, both currently registered with the Securities and Exchange Commission for offering pursuant to Rule 415 under the Securities Act of 1933 and sales of additional securities from time to time,in amounts and of types presently undetermined. The Tax Reform Act of 1986 (TR A), among other things, repealed the investment tax credit, lengthened depreciation lives, created an alternative minimum tax and lowered the corporate tax rate subject to certain transition rules. Other tax accounting changes were required including the capitalization of items previously expensed and a change in the timing of income recognition for , certain items. Substantially all of the tax changes, with the exception of the rate reduction, will result I in the Company paying more taxes currently, will eliminate sources ofinternally generated funds for l the Company and thereby increase financing requirements in the future. The TRA did not have a material effect on the Company for the years ended Decc:rber 31,1987 and 1986. Although the Company cannot predict future regulatory practices, the extent of any further delays in the licensing of the Comanche Peak Nuclear Generating Station (Comanche Peak) or any changes in economic and securities market conditions, no changes are expected in trends or commit-ments which might significantly alter its basic financial position or ability to finance capital require-ments. However, the Company has indicated that it does not currently plan to implement incretsed electric service rates which reflect any additional Comanche Peak costs until Unit 1 is ready for commercial operation and it continues to believe, based t.pon revised cost estimates and using acceptable ratemaking approaches and assumptions, that the rate increase, when Unit i goes into service, can be held to about 10%. Therefore, prior to the completion of Comanche Peak and its inclusion in rate base, a relatively small percentage of capital requirements may be generated inter-nally. (See item I, Business - Regulation and Rates and Notes 10 and 11 to Financial Statements.) See item 6, Selected Financial Data - Financial Statistics for additional information. 23 i
i Item 7. MANAGEMENT'S DISCUSSION AND .iNALYSIS OF FINANCIAL CONDITION l AND RESULTS OF OPERATIONS (Continued). Results of Operations Operating revenues increased $151,902,000 in 1987 and decreased $236,981,000 in 1986. The following table details the factors contributing to the increase and decrease: lacrease (Decrease) Factors 1987 1,986 Thousands of Dottars Fuel revenue . . . . . . . . . .............. $ 73,589 $(316,545) Power cost recovery factor revenue ... . 32,485 25,668 Increased energy sales . . . . . . . . . . . . . . . . 51,954 61,492 Other............................... (6,126) (7,596) To t al . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,902 $(236,981) The increase in operating revenues for 1987 was the result of increased fuel and pur'.hased power revenue and increased energy sales. Energy sales for 1987 increased 3.3% and were attributable to increased customers and customer usage. Operating revenues decreased in 1986 as the result of decreased fuel revenue partially offset by increases in purchased power revenue and energy sales. (See Item I, Busir.ess - Fuel Supplv and Purchased Power and Regulation and Rates and item 6, Selected Financial Data - Operating Statistics.) Fuelandpurchasedpower expense increased $108,595,000 in 1987 and decreased $305,814,000 in 1986. The increase for 1987 was due primarily to increased off. system purchases partially offset by lower fuel costs. Lower fuel expense for 1987 reflects the decrease in the tinit cost of gas from
$2.77 per million Btu in 1986 to $2.56 in 1987. The decrease in 1986 was due primarily to the decrease in the unit cost of gas offset in part by increased purchased power. (See item I, Business -
Fuel Supply and Purchased Power and item 6, Selected Financial Data - Operating Statistics.) , Operation expense increased $63,812,000 and $33,069,000 for 1987 and 1986, respectively. Operation expense for 1987 was affected by increases in the cost of labor, liability and property insurance and the one-time cost of the special early retirement program. Increases in wheeling costs and liability and property insurance had a significant impact on operation expense for 1986. Maintenance expense decreased $20,024,000 for 1987 and increased $18,881,000 for 1986. The decrease for 1987 was due primarily to revisions in the scope of certain scheduled overhauls. The increase in maintenance for 1986 was the result ofincreases in power production expenses associated with lignite and gas plants and programs to improve and ensure the availability of all generating units. Increased distribution maintenance also added to the increase for 1986. Taxes other than income increased $ 14,006,000 a ad $5,014,000 for 1987 and 1986, respectively. The increases for 1987 and 1986 resulted primariiy from ircrea:es in franchise and property based taxes. Allowanceforfunds used during construction (AFUDC) increased as a result of the ongoing con-struction program and the resultant increase in the level of CWIP of the Company not included in rate base partially offset, in 1987, by the reduction in the AFUDC rates and the suspension of AFUDC on the Twin Oak and Forest Grove generating stations. Other income and deductions - net increased $13,102,000 and $14,529,000 for 1987 and 1986, respectively. The increase for 1987 was due primarily to increased interest on temporary cash invest-ments. The increase for 1986 was the result of a gain on the sale of certain properties. Interest on first mortgage bonds increased in 1987 and 1986 due to the sale of new issues during the years and annualized interest ofissues sold in the prioi years, partially offset by retirements and iedemptions of certain higher interest rate issues. 24
L I Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Concluded). Results of Operations - (Concluded) Other interest charges decreased $19,890,000 tar 1987 and increased $6,360,000 for 1986. The decrease for 1987 reDects decreased interest cost os over recovered fuel revenue. The increase for 1986 re0ects increased interest cost on over-recoverci fuel revenue. Net incomeincreased $68,886,000 in 1987 and $57,875,000 in 1986 which represents a culmina-tion of the factors described above. Included in net income were increases in AFUDC of $83,297,000 in 1987 and $74,114,000 in 1986 which represent non-cash earnings to the Company. Preferred stock dividends increased for 1987 and 1986, $10,663,000 and $12,099,000, respec-tively, due to new issues sold during these periods and the full year's effect of prior period issuances, offset in part in 1986 by lower dividend rates on the adjustable rate series. Estimated FJfect of Pending Accounting Change In December 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96 entitled "Accounting for Income Taxes" which becomes effective for Gscal years beginning after December 15, 1988. The Statement, among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net-of-tax accounting and > reNning. Certain provisions of the Statement provide the. regulated enterprises are permitted to res ognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to customers in future 'ates. Although the application of the State-ment will increase both total assets and liabilities, these requirements are not expected to have a material effect on the Company's Gnancial positic.: or results of operations. Suspension of Capitalir,ation of AFUDr In September 1987, the Company announced the suspension of construction on the Twin Oak and Forest Grove generating stations. Therefore, capitalization of AFUDC was suspended in Octo-ber 1987 until active construction resumes. Expenditures not included in rate base as of Decembcr 31,1987, applicable to these stations, totaled approximately $46o,000,000. In March 1988, the Company announced the tempr;ry saspension of construction on Unit 2 of Comanche Pnk for an anticipated period of one yee.:. Theiefore, beginning in April 1988, capital-ization of AFUDC will be suspended until active construction resumes. Expenditures not included in rate base as of December 31,1987. applicable to this unit totaled approximately $1,513,000,000. The above suspensions of AFUDC reduced net income by approximately $10,000,000 in 1987 anc. are expected to reduce net income in 1988 by approximately $160,000,000 from the level it wo.ild otherwise have been. 25
. s
.1 Item 8. FINANCI/.L STATEhlENTS AND SUPPLEh!ENTARY DATA.
TEXAS UTILITIES ELECTRIC COhlPANY STATEhlENT OF INCOhtE. Year Ended Decesaber 31.' 1987. 1986 1985
'lnoesande el Doliars OPERATINO REVENt!ES. . . . .... ... .... ....., .... ..... . .... ... $4.079.301 $ 3,927.399 $4.164.380 OPEa4itNO EXPENSES Fuel and purchased power . . . . . . . . . . . . . . . ....... . .. . ....... .... 1,695.769 1.594.174 1,899,988 Operat ion . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . .. ... ..... 575.532 511.720 478,651-Main tenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .. ....... ........ 296,094. 316,118 297.237 Depreciation . , . . . . . . . . . . . .. . ......... ... ..... ... . . ... .... 221.772 209.152 ' 195,959 Federal income taxes (Note 7) .. .... .. .. . .... .. ............ 201,446 264,584 279,012 Taxes other than income . . . . . . . . . . . . . . . . .... . ....... .. . .. 286.777 272.771 267._757 Total operating expenses . .. ....... . ... ............ 3.277.390 3,168.519 3.418,604 OPERAT1NO INCOME . .. ..... . .. ...... .. .......... ..... 801.911 758.880 - 745.776 OTHER INCOME Allowance for equity funds used during construction . ..... .... ... . 283,06l 231,880 173.846 Other income and deductions - net . . . . . . . . . . . . .. .. .. .., 22,676 9.574 (4,9551 Federal income taxes (Note 7) . . .. .. ... ......... ..... . (9.114) (3,091) 2.136 Total other income . . .. ..... . . . .... . .. ... ... 296.623 238.363 171.027 TotAE INeoME . .. . .... . . .... . . ..... .......... ........ I.098.534 997.243 916. 03 INTtRIst CHAn 5 Interest on mortgage bon:is . . . . . . .. .. . . . ......... . ... 401.389 317.978 225,693 Interest on other long-term debt . . . ..... , , . . . ... .. .. 10.484 10,484 10.484 Other interest . .. ...... .. .. . ............... .. .... 8.54 28,435 22.075 Allownce for borrowed funds used during construction . ...... .. .... (104.00. i (71.946) (55.866)
Total interest charges .... . .. . ... ... . .. .... ..... , 317.356 284,951 262.386 NET INCOME . . .... . . .. .. .... . . .... ... ......... 781.178 712.292 654.417 PRIFIRRED STOCK DmoExos .... . .. . ... . ... . 89.038 78.375 66.276 NET INCOME AFTER PRittRREo SioCK DmDENDS . . .. .. . ..... . ... .... .. .. $ 692.140 $ 633.917 $ 588.141 > See accompanying Notes lo Financial Statements. i l , 26 l l \ l l e l I
TEXAS UTILITIES ELECTRIC COMPANY i l STATEMENT OF SOURCE OF FUNDS FOR CONSTRUCTION Year Ended December 31 1987 1986 1985 Thousands of Dollars FUNos FRoM OrERATioNs Net i ncome . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . .. .. ... S 781,178 $ 712.292 $ -654,417 Depreciation . . . . . . . . . . . . . . . . , . . . . . . . .. . .. . ............. . ~ 221.772 209,152 195.959 Deferred federal income taxes - net . . . . . .. .. ... ................ .. 35.894 121,086- 99,834 Federal investment tax credits - net . . . . . . ... . . ...... ..... .... . 59.109 64.243 67,867 Allowance for funds used during construction . . . .. ......... ....... (387,123) -(303.826) (229.712) Total funds from operations . . . . . . . . . . . ........ ..... ... . .. 710.810 802.947' 788.365" Less - Dividends declared: Preferred stock . . . . . . . . . .. ..... ... . ......... ..... 89,038 78.375 66.276 Common stock . . . . . . .......... .. ... ...... ... ...... . 447.200 395.430 ' 354.752 Total dividends declared . .. ... ..... ....... . .... . ... . 536.238 473,805 :421.028 Net funds from operations .. . .. .. .. .. ........ .... 174.592 329.142 - 367.337 . Fusos FRoM FINANCtNG Sales of securitia: .l l First mortgage bu ds . ... . . . .... ... ............ . 1,058.852 970,000 475,000 Preferred stock . . . . . . . . . ... ......... . ... .. . .. .. . 98,697. 197.728 83,513 Common stock . . . . . . . . . . . . . . . . ... ... . ... .. .. 299.800 250.800 240,000 Retirement ofIcts-term securities (Note 6) , . . .. ..... . ..... . . (155,844) (273,312) (225,676) lacrease (decrease)in notes pr; .ble to pa ent . ... ...., .... .. ... - (99.300) (55,400) Net funds from financing . . . . . . . . . . . . . . . . . . ... .. .. 1.301.505 1.045.916 517.437 OTutR SocRcts(Usts)or FUNDS Changes in working capital, excluding notes payable, long-term debt due currently and over-recovered fuel revenue: Cash in banks and temporary cash investments . . . . ... . ... . (79,933) (183,965) 3,209 Accounts receivable - net . . .. . .. ... . . . .. (105.420) 7,824 (39,649) Inventories . . . .... ..... ... ... , ........ ....... . .... . (3.514) 10.314 (2,932) Accounts payable . s. . . . . . . . . . ... ... ......... ..... ........ 33,435 66,884- 28,888 Taxes accrued . ...... .. .. .... .. .. ...... . .......... . (31.056) (32,186) (14,868) Other - net . . .... ...... . .. .. . . .. .. . ....... . .. 63.683 (17.447) 9.140-Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . ..... ... (122,805) (148,576) (16,212) Nuclear fuel .. . . . . . .... .. . ... .. ... . . .. (797) 2,760 (54.803) Over/under recovered fuel revenue - net of deferred income taxes . . . . (60,834) (12.309) 52,301 Unamortized loss on reacquired debt - net (Note 6) .... .. ...... (15,548) (23,398) (32,021) Otha - M . . . . . . . . ............ ......... . .. (753) (22.184) (6.694) Net other sources (uses) of funds . . . . .... . . ....... (200.737) (203.707) (57,429) Total . . .. .. .. ... .. .... . .. . .... .. $ 1.275.360 $ 1.171.351 $ 827,345 CoNsTRucuoN EXPENDITURf3 Electric plant . . . . ..... .. . . . .. .. .... . .. . - $1,662.483 $ 1.475.177 $1.057,057 Allowance for funds used during construction . . .. .. . . . (387.123) (303.826) (229.712) l CONSTRUCTION ExrENDrTURZs(excluding allowauce for funds used during construction) . . . . ... . .. ...... ... $ ! .275.360 $ l.171.351 $ 827.345 See accompanying Notes to Financial Statements. i 27 1 l 1 I
. , , _ , , - , , , - . - - . ~ - -
.]
TEXAS UTILITIES ELECTRIC COMPANY BALANCE SilEET ASSETS December 31 1987 1986 Thousands of Dollars Eucraic Pwer le wrvW: . . . Production . . . . . . . . . . . .......... ...... .. .. . .. ........ . . ........ $ 3.038,866 $ 2.980,395 Tra nsm i sdon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,214,642 1,166.066 Di s tribu t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,696.523 - 2.543,163 General.............................................................. 361,888 . 328.575 Total........................................ . .... .. .... ... 7.311,919 7,018,199 Construction work in progress (Notes 10 and I l } . . . . . . . . . . . ....... . . ... . 6,565,327-- 5,266,729 Nuclear fuel .... . ......... . ......, .... . ............... ....... ... '252,761 251.964 . Held for fu tu re use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... .. . ..., .. 19,640 6.357' Total electric plant . . . . . . . . ... ............ ... .. ...... ... . . .. 14,149,647 12,543,249 Less accumulated depreciation .. . ... ... .. .. ........ . .. ...... 2.355.827 2.174,441 Electric plant,less accumulated depreciation . . .. .... ........ .. .. .. 11,793.820 10.368,808 INytsTMENTs ...... .............. ... .. .. . . .... ......... ..... 7 3.218 6.122 CtlantxT Asstis Cash in banks . . . . . . . . . . ..... . . .. . ... . . .... ................. ... 6,502 4,769 Temporary cash investments - at eost . . . . . . . . . . . .... .. . .. ....... . ... 262,400 .184.200 Special deposits . . . . ... ......... .. .. ... .. ... . . ..... . .... . ..... 37.007 30.203 Accounts receivable: Customers . . . . . . . . . .......... .. .. .. .. , .. .................... 250,684 212,153 Minority ow nets of Comanche Peak (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . 109.284 58.826 Other. . .. . ...... ...... ..... .... . .... ....... ... ...... 42.886 27,029 Allowance for uncollectible accounts . . . ... .. ................. .... (13,243) (13.817) Inventories - at average cost: Materials and supplies . . .. . ...... ........ ................ ... . .. 114,633 - 107,570 Fuel stock . . . . . . . . . ...... .. . . ......... ....... .............. 96.888 100,437 Deferred federal income taxes (over recovered fuel revenue) . . . . . . . . ... ....... - 29.253 Othercurrent assets . . . ...... . ..... ...... . ... .. .. . ............ 34.018 48.340 Total current assets . ........ ....... . . ............ ... .. 941.059 788.963 Dritanto DtarTs Under-recovered fuel revenue . .. . .. .. . ..... ,,.... . .. . ...... ... 44,119 - Unamortized ioss on reacquired debt (Note 6) . . . . . .. . . . . .. ...... ...... . 70.967 55.419 Cancelled lignite unit costs (Note I l) . . . ....... ..... ,. ... . .. .. .... 37,246 36,810 Other deferred debits . . . . . . . . . . . . . . . . . . . . . .. . .... ... .... ... 38.226 20,764 Totaldeferred debits . .. ... .. . . ... . .. .. . ...... .. 190.558 112.993 Total . .......... . ... .. ... .. ... . .... .............. $ 12.938.655 $ 11.276.886 See accompanying Ne~ e Financtal Statements. 28 l
4 TEXAS UTILITIES ELECTRIC COMPANY BALANCE SilEET CAPITALIZATION AND LIABILITIES :jj December 31, 1987 1986 Thousands of Dollars - CArrTAuzArioN Common stock - without pr value (Note 3): Authorized shares - 180.000.000 Outstanding shares - 1987,112.150,000; 1986,105,150,000. . . . . . . . . . . . . . . . . . . $ 2.965,600 $ 2,665,800 Retained earnings (Note 5) . . . . . . . . . . . . . . ....................... ... . 1.861.545 l.616,605 Total common stock equity . . . . . . . . . . . . . . . ...... ...... ......... 4,827,145 ' 4,282.405 Preferred stock (Note 4): Not subject to mandatory redemption . . . . . . . . . . . . ...................... ... 909,633 811,418 - Subject to mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 232.906 - 232,424 long-term debt, less amounts due currently (Note 6) . . . . . . . . . . . . . . . . . . .... . 4.639.111 3,748,931 Total capitalization ....... ........ ....... .... ..... .......... 10.608.795 9.075.178 CURRENT 11ABluTIES te,ng. term debt due currently (to be refinanced) .. . . .... .... . ..... . 22.500 22,000 Accounts payable: Affiliates . . . . . . . . ....... .. . ... ...... ..... ......... 109.591 122,700 Other . . . . . . . . . .. ... ...... . . .... ...... . . . .. 247,875 - 201.331 Dividends declared . .. .. . .. .. ... .... . .. .............. 23.694 21.159 Customers' deposits .... . . . . .. ... . .. ...... . ............. 51,259 44,877 Taxes accrued . . . ....... ... ... ....... .......... ........... ... 119,%0- 150,716 Interest accrued . .. . .. . ... . . . .. .. .. . . . ... .. .. 128.61t 96.755. Over-recovered fuel res enue . . . . . . . ... .. ... .......... .. .. ......... - 63,594 Other current liabilities .. .. .... .. .. . .. ...... ............ .. 24,439 9.052 Total current liabilities ....................... .... ........ ...... 727.531 732,184 Duunto Cataris AND OTmn NoscuantNT 1.iraruTtts Accumulated deferred federal income tases . ...... . .... ..... ..... .. .. 835.410 781,890 Unamortized federal investment tax credits . . . . . . . . . . . . . . . . . . ............... 737,220 678.102 Other deferred credits and noncurrent liabilities . ... .. . ..... ..... ... 29.596 9.532 Total deferred credits and other noncurrent liabilities .. . . . .... . .. ... ... 1,602.226 1,469,524 COMMITMEMS AND CONTINGENC1Es (Notes 2.10 and II) Total . . , . . . .. .. .... . ... ........ . .... . . . $ 12,938.655 $ 11.276.886 See accompanying Notes to Financial Statements. 29
TEXAS UTILITIES ELECTRIC COMPANY STATEMENT OF RETAINED EARNINGS
' Year Ended December 31.
1987 1986 1985 Thousands of Dollars
)
BALANCE AT BEGINNINO OF YEAk . . . . ..... . .. .... ..... ....... ...... $ 1,616,605 $ 1,378,118 $ 1.144,729 I ADD - Nrr INcows . . . . . . . . . . . . . . . . . . . . . . ,, . . . . . ........ -781.178 712.292 654.417 ) Total . . . . . . . . . . . . . . . . . . . . . . . . .. .......... .... ... 2.397.783 2.090.410 1.799.1,46 DEouct Cash Dividends Preferred stocle
$ 4.50 series ($ 4.50 per share per annum) .. ........ ........ .. 334 334 334 4.00 series ($ 4.00 per share per annum) . ... .. .. ........ .. 280 280 280 4.56 series ($ 4.56 per share per annun.) . . .. ... .. . . .. 609 609 609 4.00 series ($ 4.00 per share per annum) . . . . .... . . .. .... . 440 440 440 4.56 series ($ 4.56 per share per annum) .. . . .. . . . . . . . . . . 296 296 296 4.24 se ies ($ 4.24 per share per ancum) . . . . .. . . . .... ....... 424 424 ~424 -t 4.64 se ries ($ 4.64 per share per annum) . . . . . . . . . . . . . . . . . . . . 464 464 464 4.84 :: ries ($ 4.84 per share per annum) . .. . . .. ......... . 339 339 339 4.00 eries ($ 4.00 per share per annum) . . . . . ... . .... 280 280 280 4.7( series ($ 4.76 per share per annum) .... . .. .... ... 476 476 476 5.N series ($ 5.08 per share per annum) . . . . . . . . . . . . . . . . . . . 407 407 407 4 30 series ($ 4.80 per share per annum) . . . . . . . . . . . . . . . . . . . 480 480 480
/.44 series ($ 4.44 per share per annum) . . ......... ... . 666 666 666
'.20 series ($ 7.20 per share per annum) .. . .. ...... . . . . . 1,440 1,440 1,440 7.80 series ($ 7.80 per share per annum) . . . . .... .. ...... 2.339 2,339 2,339 8.92 series ($ 8.92 per share per annum) . . . . . . .. . . .. .. 1,784 1.784 1,784 6.84 series ($ 6.84 per share per annum) . . . . . . . . . . . . . . . . . . . . 1.368 1,368 1.368 7.24 series ($ 7.24 per share per annum) . . . .. ... . ... ... 1,809 i,609 1,809 7.44 series ($ 7.44 per share per annum) .. ... ... .. .... .... 2.232 2.232 2.232 7.48 series ($ 7.48 per share per annum) .. ... . .. .. .. 2.244 2.244 2.244 8.20 series ($ 8.20 per share per annum) . ... ..... ... ... ... 2,460 2,460 2.460 8.44 series ($ 8.44 per share per annum) . . . . . . . . . . . . . . . . . . . . 2.532 2.532 2.532 9.32 series ($ 9.32 per share per annum) . .. . ... ........ . 2.796 2,796 2,796 9.36 series ($ 9.36 per share per annum) .. .. .. ........ 2,808 2,808 2.808 8.68 series ($ 8.68 per share per annum) . . . . . . . . . . . . . . . . . . . 2.604 2.t,04 2,604 8.16 series ($ 8.16 per share per annum) . . . . . . . . . . . . . . . . . . 2,444 2,444 2,444 8.32 series ($ 8.32 per share ter annum) ..... . .. .. . 2,496 2.496 2.496 8.84 series ($ 8.84 per share per annum) . .. ....... ..... . 2.652 2.652 2,652 '
9.48 series ($ 9.48 pei share per ant m) .... .. .. .. . . .. 9,480 8.032 - 8.92 series ($ 8.92 per share per annum) . . . . . . . . . . . . . . . . . 4,460 1,995 - 10.00 series ($10.00 per share per annum) . . . ...... .. . 5,000 2,216 - 10.92 series ($10.92 per share per annum) . . ... .... . ... 3.276 3,276 3.276 10.12 series ($10.12 per share per annum) .. . . .. . ... 3,542 3,542 3,542 10.08 series ($10.08 per share per annum) . . .. .. .. ... 3.528 3,528 3,528 11.32 series ($11.32 per share per annum) ... ..... . .. . .... 3,396 3.396 3,396 Adjustable rate series A .. ...... .. .... . . ... .... . 6,762 6,662 8,713 Adjustable rate series B ... .. .. . .. ., .. 6,162 6.205 4.318 Stated rate auction series A ... . ... .. .... . . 3.525 - - Common stock (per share: 1987, $4.16; 1986. $3.92; 1985. $3.68) . ... 447,200 395.430 354.752 Total cash dividends . . . .. .... ... . ..... .... . 535,834 473,805 42L028 Dividends other than cash . accretions . . . . . . . .. . . . . . .. ... 404 - - Total dividends ... . .. ...... . ... . . . . .... 536.238 473.805 421,028 BALANCE At ENo or YEAR (Note 5) . ... . ... .... ...... .... $ 1.861,545 $ 1.616,605 $ 1.378.118 See accompanying Notes to Financial Statements. ! 30
a TEXAS UTILITIES ELECTRIC COMPANY
]
NOTES TO FINANCIAL STATEMENTS 4 i
- 1. SiosinCANT ACCOUNTING POUCIES Electric Plant - Electric plant is stated at original cost. The cost of property additions charged to electric plant includes labor and materials, applicable overhead and payroll-related costs and an allowance for funds used during construction.
Allowancefor Funds Used During Construction - Allowance for funds used during construction (AFUDC)is a cost accounting procedure whereby amounts based upn interest charges on borrowed funds and a return on equity capital used to finance construction are charged to electric plant. The accrual of AFUDC is in accord with generally accepted accounting principles for the industry, but does not represent current cash income. Texas Utilities Electric Company (Company) is capitalizing AFUDC, compounded semi-annually, on expenditures for ongoing construction work in progress (CWIP) not otherwise allowed in rate base by regulatory authorities. In 1985 and 1986, AFUDC was capitalized using a net-of-tax rate of 9%%. In 1987, pursuant to the passage of the Tax Reform Act of 1986 (TRA), the Company heoan usine a camparable gross capitalization rate on projects commenced after March 1,1986. Beginning July 1,1987, a net-of tax rate of 9% and a gross rate of 10%% have been used. All such rates were determined on the basis of, but are less than, the cost c/ cspital used to finance the construction program. Depreciation - Depreciation is based upon an amortization of the original cost of depreciable properties on a straight line basis over the estimated service lives of the properties. Depreciation as a percent of average depreciable property approximated 3.3% for 1987 and 3.2% for 1986 and 1985. Revenues - Revenues include billings under approved rates (including a fixed fuel factor) applied to meter readings each month on a cycle basis ano an amount for under or over recovery of fuel revenue representing the difference between actual fuel cost and billings on the approved fixed fuel factor. Pursuant to a rule adopted in July 1986 by the Public Utility Commission of Texas (PUC), the Company is required to refund over-recovered fuel revenue if the amount of over recov-ery, including interest, exceeds the lesser of $40 million or 4% of its annual known or reasonably predictable fuel costs most recently approved by the PUC. Reconciliation of fuel costs is to be made in a general rate case or a reconciliation proceeding. Reconciliation may be requested only if it has either been over one year since the utility's last final reconciliation or the utility has materially under-recovered its known or reasonably predictable fuel costs. Federal Income Taxes - The Company is included in the consolidated federal income tax return of Texas Utilities Company (Texas Utilities) and subsidiary companies, and federal income taxes are allocated to all subsidiary companies based upon taxable income or loss. Deferred federal income taxes are currently provided for timing differences between book and taxable income; such differences result primarily from the use of liberalized depreciation and cost recovery deductions allowable under the Internal Revenue Code, the under or over recovery of fuel revenue and unbilled revenues on a cycle basis. Cumulative timing difTerences in earlier years for which deferred federal income taxes were not provided approximated $236,000,000 at December 31,1987. Investment tax credits are being amortized to income over the estimatw service lives of the properties. In December 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96 entitled "Accounting for income Taxes" which becomes efTective for fiscal years beginning after December 15, 1988. The Statement, among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net-of-tax accounting and reporting. Certain provisions of the Statement provide that regulated enterprises are permitted to recognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will 31
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS - (Continued)
- 1. SIGNIRCANT ACCOUNrlNG POUCIES - (concluded) be recovered from or returned to customers in future rates. Although the application of the State-ment will increase both total assets and liabilities, these requirements are not expected to have a material efTect on the Company's financial position or results of operations.
- 2. AFFILIATES Texas Utilities provides common stock capital and short-term financing to the Company. Texas Utilities has three other subsidiaries which perform specialized services for the System Companies, l including the Company: Texas Utilities Services Inc. (TU Services) furnishes financial, accouming, computer and other administrative services; Texas U,ilities Fuel Company (Fuel Company) owns a natural gas pipeline system, acquires, stores and delive s fuel gas and provides other fuel services for the generation of electric ener/,y by the Coiapany; anc' Texas Utilities hiining Company (hfining Company) owns and operates fuel production facilities for the surface mining and recovery oflignite for use at the Company's generating stations.
The Company has entered into agreements with Fuel Company to procure certain fuels and related services and with hiining Company for the procurement and production oflignite; payments are at cost for the services received and are required by the agreements to be "at least equivalent in the aggregate to the annual charge to income on the books" of Fuel Company and of hiining Com-pany. The Company is, in effect, obligated for the principal, $534,860,000 at December 31,1987, and interest on long-term notes of Fuel Company and of hiining Company through payments described above. Such notes mature at various dates through 1999 and have interest rates ranging from 8.50% to 12.20%.
- 3. CoststoN stock Shares Outstanding Amount December 31, December 31, 1987 1986 1987 1986 Thousands of Dollars Common stock without par value; authorized 180,000.000 shares . I12.150,000 105.150.000 $2.965,600 $2,605,800 The Company issued and sold shares of its authorized common stock to Texas Utilities as follows: December 1987, 2,300,000 shares for $100,050,000; June 1987, 4,700,000 shares for
$ 199,750,000; December 1986, 2,400,000 shares for $100,800,000; June 1986,3,750,000 shares for $ 150,000,000; December 1985, 2,600,000 shares Sr $101,400,000; and February 1985, 3,600,000 shares for $138,600,000. No shares of the Company's common stock are held by or for account of the Company, nor are any shares of such capital stock reserved for officers and employees or for options, warrants, conver-sions and other rights in connection therewith. l 1 i 1 32
TEXAS UTILITIES ELECTRIC COhlPANY NOTES TO FINANCIAL STATEhlENTS - (Continued) 1
]
- 4. PREFERRED STOCK (cumulative, without par value; entitlea upon liquidation to $100 a
! share; authorized 17,000,000 shares) Redemption Price Per Share Shares Outstanding Amoest (before adding accamelated divideeds) Series Groups December 31. December 31, Current Deatual Mlaimum From To 1987 1986 1987 1986 From Tc From To Thoesseds of Dr,ilers Not Subject to Mandatory Reiemption
$ 4.00 $ 4.84 .... ....., , 1,142,942 1,142,942 - $114,588 $ 114,588 $101.79 $112.00 $101.79 $112.00 5.08 7.80 ... . . ... 1,629,675 1,629,675 163,270 163,270 102.40 104.82 102.40 103.60 8.16 8.92 ...... .... 1,999,475 1,999,475 198,642 -198,642 103.60 106.13 101.00 103.60 9.32 ' 1 1.32 . . . . . , .... 1,550,000 1,550,000 153,205 153,205 104.65 111.3* 100.00 - 102.73 Adjustable rate (a) . . . , .. . . 1,850,000 1,850,000 181,713 181,713. - - 100.00 100.00 Stated rate auction (b) . . 1,000,000 - 98,215 - - -
100.00 100.00 Total . . . . . .. . 9,172,092 8,172,092 $909,633 $811,418 Subject to Mandatory Redemption (e)
$ 8.92 $ 9.48 . . .. .. 1,500,000 1,500,000 $148,610 $148,315 $108.92* $109.48' $100.00 $100.00 10.00 10.08 ... . . . .. 850,000 850,000 84,296 84,109 110.00* 110.08' 100.00 100.00 Total . . . .... .. .. 2,350,000 3350,000 $232,906 $232,424 ' Redemption may not be effected currently through certa.in refunding operations.
(a) Adjuttable rate series A bears a dividend ute for the period ended January 31,1988 of 7.55% per annum and adjustaNe rate series B bears a dividend rate for the period ended December 31,1987 of 8.00% per annum, both of which are based on a fixed liquidation price of $100.00 per share. The series are not redeemable prior to June I,1989 and June 1.1990, respectively. (b) Stated rate auction series A bears a dividend rate of 8.24% per annum for the fixed dividend period ti rough September 30,1992 and shares are not redeemable prior to September 29,1992. The dividend rate for each 49 day dividend period thereafter will be determined on the basis of certain auction procedures. The maximum rate determined by the auction may range from 110% to 200% of the 60-day "AA" compdsite commercial paper rate index. All redemptions are at a price of $100.00 per share plus accumulated dividends. (c) The Company is req; ired to redeem a specified minimum number of shares annually commencing on the initial dates shown below, except for the $8.92 series which does not have a sinking fund provision. The Company may annually redeem, at its option, an aggregate of up to twice the number of shares shown for each series. All such redemptions are at a price of $100.00 per share plus accumulated dividends: Minimum Initial Date of Redeemable Mandatory Series Shares Redemption
$10.08 14,000 annually 4/1/89 9.48 66.700 annually 4/1/92 10.00 20,000 annually 7/1/92 8.92 All outstanding shares 7/1/96 The carrying value of preferred stock subject to mandatory redemption is being increased periodically to equal the the redemption amounts at the mandatory redemption dates with a corresponding increase in preferred stock dividends.
The Company issued and sold shares of its authorized preferred stock as follows: July 1987, 1,000,000 shares of stated rate auction series A for $98,215,000; July 1986,500,000 shares of $10.00 series cumulative preferred stock, subject to mandatory redemption, for $49,413,000; July 1986, 500,000 shares of $8.92 scrits cumulative preferred stock, subject to mandatory redemption, for
$49,437,000; February 1986,1,000,000 shares of $9.48 series cumulative preferred stock, subject to mandatory redemption, for $98,878,000; and June 1985,850,000 shares of adjustable rate series B preferred stock for $83,513,000.
No shares of the Company's preferred stock are held by or for account of the Company, nor are any shares of such capital stocks reserved for officers and employees or for options, warrants, conver-sions and other rights in connection therewith. 33
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS - (Continued)
- 5. RETAINED EARNINGS RESTRICTIONS The Company's articles of incorporation, the mortgages, as supplemented, and the debenture
- agreements contain provisions which, under certain conditions, restrict distributions on or acquisi- -
tions of its common stock. At December 31,1987, $138,736,000 of retained earnings were thus
~
restricted as a result of the provisions of such articles of incorporation. -! The articles ofincorporation restriction provides in effect that the Company shall not pay any ~ common dividend which would reduce retained earnings to less than one and one half times annual preferred dividend requirements. The mortgage restrictions are based primarily on the replacement fund requirements of the mortgages. The restriction contained in the debenture agreements is designed to maintain the aggregate preferred and common stock equity at or above 33%% of total capitalization.
- 6. LO G. TERM DEBT, less amounts'due currently laterest Rate Maturity Groeps Groups December 31, From To From To 1987 1986 Thousands of Dollars First mortgage bonds:
1988 1992 4%% 4%% .... ......... ... ... ., .. . $ 12,000 $ 34,500 1993 1997 4% 9% ....... ... ... . ...... . .......... 356,000 206,000 1998 2002 6% 9% ... ,. ... . ....... ........ . . 340,000 ' 340,000 2003 2007 7% 10 % ... .. .. . . .. ... .. . .. . 750.000 7$0,000 . 2008 2012 9% 16 .. .. ... .... . ... .............. 250,000 382,531 2013 2017 9% 13% ,. . . ... ... ..... . ... .... .. 2,200,000 1,550,000 Pollution control series-2007 2017 7% 10 . .... ......... . . .. ........... .. 589,000 310,000 Funds on deposit with trustec .... . .. ....... ........... . ..... (20,148) - Sinking fund debentures: 1989 1989 4% 4% ... ............. . ..... .... .. 17,854 ' 18,454 . 1993 1994 '6% 7% ...... ... ...... ... ............ . 31.735 32.448 ! Total . . . . . . . . . . .. ... . . . . . ..... ..... ........ .. 4,526,44 t 3,623,933 Pollution control revenue bonds. 2004 2009 5.70 7% .. . . . ... . . . .... ....... 160.000 160,000 Unamortized premium and discount ... . .. .. . . .... . ... . . .... (47.330) (35.002) Total long-term debt. less amounts due currently . . . . . . . . . . . . . . .. $4.639.111 $3.748,931 Sinking fund and maturity requirer.nents for the years 1988 through 1992 under long. term d'ebt instruments in effect at December 31 1987, were as iollows: Mlaimum Sinking Cash M Fund (s) Maturity Requirement (b) Thoesseds of Dollars 1988 .. .. ....... . .. .. . . ....... . $17,370 $22,500 $22,500 1989 .. . ,. . .... . .. . ... 18.452 17.854 18,436 1990 ..., . .... . ... .... . 18,476 - 700 1991 . .. .... ..... ... .... . ........ 18,296 12,000 12,700 1992 ...... ........ . ... .. ... .. .. .... 19.366 - I,770 (a) Excluding requirements satisfied prior to December 31,1987: $2,433,000 for 1988, $438,000 for 1989, $320,000 for 1990,
$320,000 for 1991 and $320,000 for 1992, (b) Other requirements may be satisfied by certification of property additions at the rate of 167% of such requirements,
- except for eighteen issues at 100%.
l-34 i
, , , . . , . ., - , 1-- ,
TEXAS UTILITIES ELECfRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 6. LONG, TERM DEBT, less amounts due currently - (concluded)
In 1987 and prior years, various principal amounts of first mortgage bonds were redeemed by the Company prior to maturity Pursuant to expected regulatory treatment, the net losses on reacquired debt have been deferred and are being amortized over the remaining lives of the bonds retired, The total amounts of sinking fund debentures authorized in the debenture agreements have been issued. The Company's Grst mortgage and collateral trust bonds may be issued in additional amounts, without limitation as to the maximum thereof, but limited by property, earnings and other provisions of the mortgages. None of the long-term debt is pledged, held by or for account of the issuer, or held in its sinking or other special funds. Electric plant of the Company is generally subject to the liens of its mortgages.
- 7. FEDERAL INCOME TAXES The details of federal income taxes are as follows:
Year Ended December 31, 1987 1986 1985 Charged to operating expenses: Current , , , 5 59.587 $ 67,320 $ 155,864 Deferred - net: Differences between depreciation methods and lises , , 58,600 70,451 70,342 Certain capitalized construction costs (4,444) 19,428 19,080 Oser/under.recosered fuel resenue , 46,856 11,935 (44,553) Cancelled lignite unit (971) 12,293 -
)
Early redemptions of long-term debt 6,091 10,763 14,730 l Prepaid (accrued) pension cost . (11,676) 6,162 - l Unbilled revenues , (17,367) (322) 932 l Other. , 5,661 2,311, (5,250) l Total 82,750 133,021 55,281 l Insestment tax credits - net . 59,109 64.243 67.867 l Total to operating expenses , , 201,446 264.584 279,012 l Charged (credited) to other income: Current . 9,091 4,541 (2,136) Deferred - net 23 (1,450) - Total to other income 9.114 5.091 (2.136) Total federal income taxes $210.560 $267,675 $276.876 1 Federal income taxes were less than the amount computed by applying the federal statutory rate I to pre-tax book income as follows: Year Ended December 31, l 1987 1986 1985
)
Federal income tases at statutory rate (39.95% for 1987 l and 46% for 1986 and 1985) $196.199 $450,785 $428,395 l Reductions in federal income taxes resulting from: j Allowance for funds used during construction , 152,816 139,760 105,668 1 Depletion allowance . 26,393 23,770 25,168 l Amortization of investment tax credits 13,697 13,347 12,410 l Other. (7.267) 6.233 8.273 I Total reductions , 185.639 183,110 151,519 Total federal income taxes $210,560 $267,675 $276,876 Effective tax rate . 21.2 % 27.3% 29.7% 35
, TEXAS UTILITIES ELECTRIC CONIPANY NOTES TO FINANCIAL STATEhlENTS - (Continued)
- 8. RETIREMENY PIANS AND OTHER POSTRETIREMENT BENEFITS The Company has retirement plans covering substantially all employees. The benefits are based on years of accredited service and the employee's average annual earnings received during the three years of highest earnings. The costs of the plans are determined by independent actuaries. Contribu-tions to the plans were determined using the frozen attained age method which is one of the several actuarial methods allowed by the Employee Retirement income Security Act of 1974. During 1986,- i the Company adopted the Financial Accounting Standards Board's Statement of Finar cial Account- l ing Standards No. 87, "Employers' Accounting for Pensions." The new standard requires, among other things, the use of the projected unit credit actuarial method for determining pension cost for financial reporting purposes. The cumulative difference between pension cost as determined under the new standard and contributions to the plans is recorded either as prepaid pension cost or as accrued pension liability. The adoption of the new accounting standard did not have a material effect upon the Company's financial position or results of operations.
In 1987, the Company offered a special early retirement program to those employees who had attained the age of 55 and had 15 or more years _ of accredited service. The offer provided for a waiver of reduced benefits for early retirement plus 5 additional years of accredited service up to a maximum of 40 years. The cost of the program was recorded in accordance with Financial Account-ing Standards Board's Statement of Financial Accounting Standards No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefits Pension Plans and for Termination Benefits." The following table sets forth the plans' funded status and amount recognized in the Company's balance sheet: December 31 1987 1986 Thousands of Dollars Actuarial present value of axumulated benefits: Accumulated benefit obligation, including vested benefits ($457.826.000 for 1987 and $?$6.279,000 for 1986) . ... ... . .. $($10.829) $(403.227) Projected benefit obligation for service rendered to date . . . . .. .. $(652,066) $(575.947) Plan assets at fair value, primarily equity investments. government bonds and corporate bonds . .. ... . ........... ... 632.897 6311997 Plan assets in excess of (less than) projected benefit obligation .. . . (19,169) 56,0$0 Unrecognized net gain from past experience ditTerent from that assumed and effects of changes in assumptions . . . . .. . .. 1.440 (44.474) Prior senice cost not yet recognized in net periodic pension expense .. .. . . . ... . . 15,439 16.292 Unrecognized plan assets in excess of projected benefit obligation at January 1,1986. . . . ... .. .. (11.410) (13.496) i Prepaid pension cost (accrued pension liability) .. . . .... .. 5 (13.700) $ 14.372 l l l
)
l 36 l l
- r_, .
. - ._. - , . . . . - - - - ..t.
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 8. RETIREMENT PLANS AND OTilER POSTRETIREMENT BENEFITS - (concluded)
Assumptions used for 1987 and 1986 include a discount rate of 8.0%, an expected long. term rate of-return on assets of 8.0% and increases in compensation levels of 5.3% and 6.3%, respectively. Total pension costs for 1987 and 1986, including amounts charged to fuel cost and capitalized, were com-prised of the following components: December 31, 1987 1986 Thousands of Donars Service cost - benefits earned during the period . ............ . . . .... $23,919 $26.208 . Interest cost on projected benefit obligation .. ... ......... ....... .. . .. 48,126 40,921 Actual return on plan assets . .. ........ ... .. .... ..... .. .. .. (519) (87,306) Net amortization and deferral ... ... .... .. .. ... .. . ... .. (50.145) 44.904 Net periodic pension cost . ... ..... . .. ...... ....... . . 21,381 24.727 Termination cost . . . ........... ........ ........ ... .. .. .... .. . 36,097 - Total pension cost . . . .. . .. .... ... ... .. . .... . $57.478 $24.727 The cost of the plan for 1985, including amounts charged to fuel cost and capitalized, approximated
$ 39,708,000.
In addition to retirement plans, the Company offers certain health care and life insurance ben, elits to active and retired employees. The costs of such benefits are generally recognized ss claims are paid. The costs of providing such benefits to retired employees, net of employee contributions, approximated $8,040,000 for 1987, $6,570,000 for 1986 and $4,551,000 for 1985.
- 9. LEASES The Company has entered into operating leases covering various facilities and properties includ-ing such items as oflice space and data processing and transportation equipment. Lease costs charged to operation expense for the years ended December 31,1987,1986 and 1985 were $23,554,000,
$22,826,000 and $22,488,000, respectively.
In December 1937, the Company entered into an operating lease arrangement covering certain combustion turbine generating facilities with an initial lease term of approximately 27 years. The Company expects to lease additional similar facilities in 1988. The Company's future minimum lease commitments under such operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31,1987 were as follows: Combustion Year Turtilnes Other Total Thousands of Dollets 1988 ..... . .. . . . .. .. .. $ - $12,043 $ 12,043 1989 . .. . ........ .... . . 6,082 R,802 14,884 1990 . . . . .... .. .. .. . .. . ... .... 6.082 5,286 11,368 1991 ...... ... . .... . . . , . . . .... 6.082 3.552 9,634 1992 ... .. . .. .. . .. . .... . 6,082 3.049 9,131 Thereafter 158.130 1603 164.733 Total minimum lease commitments . .... .. ..... . $ 182.458 $39.335 $221.793 37
TEXAS UTILITIES ELECTRIC CONIPANY NOTES TO FINANCIAL STATE 5 TENTS - (Continued)
- 10. COMANCilE PEAK NUCLEAR GENERATINo STATION The Company is constructing two nuclear-fueled g:nerating units at Comanche Peak Nuclear Generating Station (Comanche Peak), each of which is designed for a capability of 1,150 megawatts.
This project is subject to the jurisdiction of the Nuclear Regulatory Commission (NRC). NRC regu. lations govern the granting of licenses for the construction and operation of nuclear power plants. After giving effect to the anticipated completion of the 1988 agreement to purchase the 6.2% owner-ship interest of Texas hiunicipal Power Agency (Th1PA) in the facility, the Company's share of the net capability in each unit is 1,081 megawatts, or approximately 94%. The other participants in the facility are Brazos Electric Power Cooperative, Inc. (BEPC) and Tex La Electric Cooperative of Texas, Inc. (Tex La) which own 3.8% and 21/6%, respectively. Operating License Application The NRC has been reviewing the Company's application for operating licenses for the Comanche Peak units. As a part of that review, a proceeding was initiated before an Atomic Safety and Licensing Board (ASLB) and proceedings on various issues have been ongoing since December 1981. After completion of such proceeding, the ASLB will make recommendations to the NRC rcprding the issuance of operating licenses for the Comanche Peak units. An intervenor is actively invoived in this ASLB proceeding. The one remaining Contention before the ASLB in the operating license proceeding relates to the Compacy's quality assurance / quality control (QA/QC) program for the plant. In December 1983, the ASLB issued a memorandum questioning the QA program for design of certain portions of the plant and requested that the Company offer additional proof of adequate design and design review procedures. The ASLB is also reviewing several other related issues and has indicated its intent to review the results of the NRC's Technical Review Team (TRT) investigation discussed below, in July 1984, a separate ASLB, including two of the three members of the original ASLB, was convened to receive testimony on allegations that QC inspectors at the plant had been subjected to an atmo-sphere of harassment and intimidation which is alleged to have alTected the implementation of the Company's QA program. In January 1986, this separate ASLB was disestablished with all issues thereafter to be resolved by the original ASLB. As a separate part of the NRC's review of the Company's operating license application,in h1 arch 1984, the NRC established a task force to consolidate and carry out the various reviews necessary for the NRC Staff to reach its decisior, regarding the operating licenses. This efTort involved the estab-lishment of the TRT, which began an intensive onsite investigation in July 1984 and subsequently has issued reports requesting additional information from the Company with respect to several func-tional areas of the plant's construction program. The Company then formed a special team, the Comanche Peak Response Team (CPRT), which includes a number of independent experts in~each area addressed by the TRT, and submitted a Program Plan (Plan) to respond to the questions raised. Such Plan, which is described further below, is presently being implemented and has been expanded ] to address the design and other ASLB issues described herein. In January 1985, the TRT issued a report on its review of the QA/QC programs at Comanche , Peak. The report stated that although the QA program documentation met NRC requirements, the implementation of the QA program demonstrated that the Company had lacked the commitment to , aggressively implement an effective QA/QC program in several areas. The TRT indicated that it had found evidence of faulty construction and ineffective QA and QC inspections. Questions were also , i raised concerning the training and qualification of QC personne' and in the reporting of deficiencies. The TRT further found that prior to July 1984 problems had existed in the control of documenta- i tion. In addition, deficiencies in several other areas were described. The Company was requested to 38
TEXAS UTILITIES ELECTRIC CONIPANY NOTES TO FINANCIAL STATE 51ENTS - (Continued)
- 10. COMANCl!E PEAK NUCLEAR GENERATING STATION - (continued) l submit to the NRC a program and schedule for completing a detailed and thorough assessment of j these QA/QC issues presented by the TRT. The Company also was asked to consider the use of i management personnel with a fresh perspective to evaluate the TRT findings and implement corrective action, and to consider the use of an independent consultant to oversee the corrective action program.
In June 1985, the Company filed with the NRC and the ASLB a revision to the Plan which is being utilized by the CPRT to address all outstanding design and construction concerns. This Plan, which was substantially revised and reissued in January 1986, and further revised in July 1987, provides for a complete design review of virtually all safety related systems in the plant, and for the development of a corrective action program as required. In August 1985, the ASLB issued a hiemo-randum which described areas of the Plan that concerned the ASLB. The hiemorandum indicated, however, that if the Plan were revised to address the ASLB's concerns and if it were appropriately implemented, the Plan may demonstrate the quality of the plant. In hiay 1986, the Staff of the NRC issued a Supplemental Safety Evaluation Report (SSER) containing an evaluation of the Plan as it existed at that time. The SSER concluded that the Plan provided an overall structure and process for addressing and resolving all existing construction and design issues and any future issues that may be identified from further evaluations. In June 1986, the ASLB issued a hiemorandum which addressed "Board Concerns" about the adequacy of the CPRT program. The hiemorandum stated that, based upon the ASLB's current knowledge of the program, after having reviewed the first results reports and the SSER on the Plan, the ASLB continued to have the concerns expressed in the earlier memorandum described above. The ASLB also raised additional concerns about how findings in one area of the reinspection effort may affect the Company's program in other areas, whether sufficient attention is being paid to problems of quality assurance and quality control regarding design, the adequacy of the CPRT sampling program, and perceived oversights in one of the results reports that had been issued. The Company i,s addressing these concerns. In November 1987, the ASLB established a schedule for resolution of all issues remaining in the operating license proceed-ing. In January 1988, the Staff of the NRC, after further review and analysis, approved the Plan and corrective action program as the basis to resolve outstanding issues. At the end of February 1988, the CPRT completed the publication of its final reports, in htarch 1988, the Staff issued an SSER approving the design of piping and pipe supports at Comanche Peak, which had been a major issue in the operating license proceeding, and conclude . nat the Plan provides an effective means to ensure proper implementation of corrective action in this regard. Delivery of this report sets into motion a prehearing schedule adopted by the ASLB which should result in the resumption of hear-ings on issuance of the operating licenses in the late summer of 1988. hieanwhile, implementation of the corrective action program continues. In December 1987, the Company entered into an agreement to settle potential claims against Gibbs & liill, Inc. (Gibbs & 11i11), the original architect-engineer for Comanche Peak, relating to engineering and design services performed by Gibbs & liill for Comanche Peak. Under the terms of this settlement, the owners of Comanche Peak will receive a total of $25 million in cash, deferred payments and future engineering services which will be provided to the Company on non. nuclear projects. The Company has made a number of key management changes in the nuclear program for Comanche Peak, including the addition of several new ollicers who bring substantial nuclear experi-ence to the Company. This new management team is responsible for oversight and implementation of the reinspection and corrective action program. 39
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS'-(Continued)
- 10. COMANCllE PEAK NUCLEAR GENERATING STATION - (continued)
The NRC has created an Office of Special Projects to manage all aspects of the NRC's licensing . and inspection efforts for Comanche Peak and certain other nuclear power plants. Construction Permit Ertensions In January 1986, the Company filed an application with the NRC for an extension of the con-struction permit for Unit I to reflect a new "latest date for completion" of August 1,1988; previously such date had been August 1,1985. In the application, the Company stated that the reason the request for extension of the construction permit was not filed at an earlier time was administrative oversight. In February 1986, the NRC issued an order extending the "latest date for completion" of Unit I to August I,1988. Subsequently, the intervenor involved in the ASLB operating license proceeding filed with the NRC a request to stay the effectiveness of the construction permit exten-sion and to require the Company to file a new application for a construction permit for Unit 1 or to order that hearings be held prior to any decision on whether to grant the construction permit exten-sion. The request for a stay was denied by the NRC and the question of whether to hold such hearings was remanded to an ASLB, the members of which are the same as the ASLB for the oper. ating license. In November 1986, the ASLB issued a Memorandum and Order in which it accepted for litigation a new Contention, raised by two intervenors, which alleges that the delay in completing Comanche Peak, which has occurred and has necessitated the extension of the construction permit by the NRC, was the result of dilatory action on the part of the Company and that, therefore, good cause did not exist for the extension of such permit. No schedule for hearings on this Contention has been adopted by the ASLB at this time. The Company has also applied to the NRC for an extension of the constructic,n permit for Unit 2. Such application is presently under review by the Staff of the NRC. In early March 1988, the Company filed with the ASLB a motion to consolidate proceedings in the operating license and construction permit proceedings. Civil Penalties In April and June 1986, the Company paid civil penalties to the NRC, each in the amount of
$40,000, relating to allegations of harassment and intimidation at Comanche Peak. The June 1986 penalty was part of an aggregate of $120,000 in civil penalties previously propc*,ed by the Staff of the NRC. The Company requested the Staff to revisit the other alleged violations to determine whether they did in fact occur and to consider mitigating the amount of the penalties, and in August 1987, the Staff decided not to assess the remaining $80,000 in proposed civil penalties. In August 1986, the Company paid a civil penalty of $200,000 previously proposed by the Staff of the NRC relating to the findings of the TRT, described above. In addition, the Company has paid another civil penalty of $50,000 relating to two alleged violations in the Company's reinspection and corrective action effort.
Investigation Regarding NRC Region IV In December 1986, a portion of a report was released by the Oflice of Inspector and Auditor of the NRC (OIA Report) containing the results ofits investigation of allegations of misconduct by the , management of Region IV of the NRC with respect to Comanche Peak. The OIA Report e7. pressed concern about allegations of harassment and intimidation by Region IV management to pressure Region IV inspectors to downgrade or delete proposed inspection findings at Comanche Peak. In addition, the OIA Report concluded that it would not be possible to rely on the Region IV QA I . inspection at evidence of the safe construction of Comanche Peak. Consequently, it stated that it will , be necessary for the NRC to rely largely on recent detailed technical inspections conducted by the l 40
h-TEXAS UTILITIES ELECTRIC COh!PANY NOTES TO FINANCIAL STATEhtENTS -(Continued)
- 10. COMANCHE PEAK NUCLEAR GENERATING STATION - (continued)
NRC, including the TRT, at Comanche Peak. The OI A Report also indicated that the data contained in an internal NRC report on inspection procedures was inaccurate and unreliable due to a lack of understanding by NRC inspectors of the proper method of completing a certain NRC form. NRC officials have indicated that a thorough assessment of the results of this investigation will be made; and in addition, certain personnel changes in the Region IV office have occurred. The OIA Report's findings are restricted to activities in the NRC's Region IV and do not question other NRC regula-tory activities with respect to Comanche Peak, including the detailed technical inspections con-ducted by the TRT as discussed above. The intervenor in the operating license proceedings, discussed above, has indicated its intent to file a motion raising the OIA Report's findings as issues to be the subject of hearings in such proceedings. Litigation Relating to Comanche Peak The Company, ThiPA, BEPC and Tex La have been the owners of 87h6%,6.2%,3.8% and 21/6% interests, respectively, in Comanche Peak under the terms of a Joint Ownership Agreement (Agree-ment) which provides that the Company is the Project hianager for Comanche Peak. BEPC has failed to make numerous payments ofits portion of the costs of Comanche Peak. BEPC has been experiencing difliculty in obtaining additional financing for Comanche Peak from the Rural Electri-fication Administration. In addition, since hiay 1986, Tex La has failed to make payments to the Company for its portion of Comanche Peak and Th!PA has made payments under protest. Accounts receivable at December 31,1987 included $109,284,000 of amounts due from BEPC and Tex La. The portion of future construction expenditures due from BEPC and Tex La is estimated to be
$48,200,000 in 1988, $30,900,000 in 1989 and $15,300,000 in 1990. In hiay 1986, the Company filed suit in the 14th Judicial District Court of Dallas County, Texas against Th!PA, BEPC and Tex-La because of controversies which exist under the Agreement with respect to the obligations of the parties. The Company asserted that each of the defendants has either claimed that it has no further obligation to pay its share of the remaining costs of construction of Comanche Peak, or has '
claimed that the Company has failed to properly construct Comanche Peak or otherwise has breached its obligations under the Agreement. The Company sought recovery of damages against Tex La for its anticipatory breach of the Agreement and asked for a declaratory judgment against Tex La, BEPC and ThiPA declaring among other things that they were obligated to pay their share of the remaining costs of construction of Comanche Peak and that the Company has not failed to use prudent utility practices in constructing Comanche Peak in accordance with the Agreement. Th1PA, BEPC and Tex-La filed cross-actions in such suit against the Company and Texas Utilities asserting various causes of action, including a number of alleged breaches of the Agreement by the Company and violations of the Texas Deceptive Trade Practices Act (DTPA).'In September 1986, the Court in the Dallas County suit ruled in favor of the Company with regard to a plea of the defendants attempting to change the venue of such suit. The case is in the discovery phase and trial is currently ) scheduled for October 1988. In June 1986, ThtPA and Tex La filed suit in the 98th Judicial District Court of Travis County, Texas against the Company and Texas Utilities. The petition asserted various causes of action, including a number of alleged breaches of the Agreement by the Company and violations of the DTPA. ThiPA and Tex 12 asked for rescission and modification of the Agreement and payment for damages, including treble damages based upon violations of the DTPA. The Company and Texas Utilities intend to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. 41 1
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS - (Continued)
- 10. COMANCHE PEAK NUCLEAR GENERATING STATION - (continued)
In February 1988, the Company entered into an agreement with Th1PA pursuant to which the Company will purchase Th1PA's ownership interest in Comanche Peak and all outstanding claims and pending lawsuits between Th1PA and the Company will be settled and terminated. Finalization ' of the agreement is subject to the approval of the NRC and the PUC with respect to the transfer of Th1PA's ownership interest. The Company has filed applications to obtain such approvals and can-not predict when action with respect thereto will be taken. (See Note 11 to Financial Statements.) In June 1986, BEPC filed suit in the 345th Judicial District Court of Travis County, Texas against the Company, Texas Utilities, hiining Company and TU Services. BEPC alleges that the defendants have breached the Agreement, certain implied warranties and fiduciary duties, and have been grossly negligent, acted with willful misconduct and have violated the DTPA and Texas and federal securities laws. BEPC asks for an injunction against efforts by the defendants to recover additional payments, rescission and reformation of the Agreement and payment for damages, trebled pursuant to the DTPA. BEPC alleges actual damages to that date of at least $216 million. The defendants intend to vigorously contest this sun, which has been stayed as a result of the ruling in the Dallas County suit. In hfarch 1987, BEPC filed a re luest withshe NRC to modify the construc-tion permits and licenses already issued and to impose a prospective condition to any permits and licenses subsequently issued or renewed to require the Company to assume BEPC's ownership inter-est in Comanche Peak by purchase thereof at its net book cost, and for other unspecified relief. in June 1987, the NRC Ofiice of Special Projects denied this request and the Company is unable to z predict what further action may be taken. b Cost and Schedule Estimates in hiarch 1988, the Company announced that following its review of the cost and schedule for Comanche Peak, commercial operation of Unit 1 is presently anticipated at the end of 1989. All Unit I corrective action activities are scheduled for completion to permit fuelloading in mid 1989. The Company also announced the temporary suspension of construction activities and accrual of AFUDC on Unit 2 beginning in April 1988 for a period of approximately one year. Unit 2 is not expected to be ready for commercial operation until after the 1991 peak season. The delay of Unit 2 was implemented to allow the Company to concentrate its resources on the completion of Unit 1, thereby reducing the duplication of effort that would be required to maintain the previous timing between the two units and strengthen the Company's ability to manage construction and start-up activities for both units more efficiently with fewer personnel. Additionally, such delay will allow time to make a more complete determination of any modifications that may be required for Unit 2 based upon the knowledge gained from the reinspection and corrective action program applied to Unit 1. The delay of Unit 2 will also permit the Company time to implement rates for Unit I prior to the final completion and operation of Unit 2. Although construction on Unit 2 has been tempo-rarily suspended, there will be some ongoing expenditures required to maintain the unit until con-struction is resumed. Additionally, to the extent the work necessary to place Unit I into service affects various common systems, some capital expenditures will be associated with Unit 2. Based upon this revised schedule, the total cost of the Company's 94% share of the plant, exclud-ing AFUDC, is estimated to be $6.37 billion. The Company's estimated cost ofits share, including AFUDC, is $8.54 billion or about $3,950 per kilowatt. Because of the uncertainty regarding the date of commercial operation of Unit 2, no provision has been included in such amount for reestablishing the accrual of AFUDC on Unit 2 after construction resumes. The totcl cost of the plant, excluding AFUDC, is estimated to be $6.62 billion. Because of the uncertainties regarding payments by the 42 i
TEXAS UTILITIES ELECTRIC COSIPANY NOTES TO FINANCIAL STATES 1ENTS -(Continued)
- 10. COMANCliE PEAK NUCLEAR GENERATING STATION - (concluded) other owners of Comanche Peak of their share of the remaining construction costs, no estimate of the amount of AFUDC that may be attributable to their interests in the plant has been made.
The Company had previously estimated,in November 1986, that commercial operation of Umt I would be achievable in early 1989 and that Unit 2 would not be ready for commercial operation until after the 1989 summer peak season. Based upon such schedule, the total cost, excluding AFUDC, of the Company's 875/6% share of the plant (which excludes the presently anticipated pur-chase of TMPA's share) was estimated to be $4.63 billion. The Company's estimated cost for-its 875/6% share, including AFUDC, was $6.70 billion or about $3,300 per kilowatt. The total cost of the plant, excluding AFUDC, was estimated to be $5.27 billion. Because of numerous uncertainties in the licensing process, no assurance can be given that the revised estimated schedule can be met or that the estimated completion cost will not be exceeded. Failure to secure timely and favorable regulatory approvals or further delays occasioned by addi-tional reanalysis, reir.spection or rework will increase the cost of the plant and will likely increase financing requirements. At December 31,1987 and 1986, the Company's investment in Comanche Peak, including AFUDC, was $5,808,000,000 and $4,600,000,000, respectively, of which $1,284,000,000 has been allowed in rate base by regulatory authorities. The Company has indicated that it does not currently plan to implement increased electric service rates which reflect any addi-tional Comanche Peak costs until Unit I is ready for commercial operation. The Company continues to believe, based upon revised cost estimates and using acceptable ratemaking approaches and assumptions, that the rate increase, when Unit I goes into service, can be held to about 10% Such rate application will be subject to challenge with respect to the prudence of certain costs, for which an estimate is not presently determinable. I1. COMMITMENTS AND CONTINGENCIES Construction Program For major construction work now in progress or contemplated, and commitments with respect thereto, see item 2, Properties - Construction Program. Cooling Water Contracts The Company has entered into contracts with public agencies to purchase cooling water for use in the generation of electric energy and has agreed, in efTect, to guarantee the principal, $47,920,000 at December 31,1987, and interest on bonds issued to finance the reservoirs from which the water is supplied. The bonds mature at various dates through 2011 and have interest rates ranging from 5%% to 95 The Company is required to make periodic payments equal to such principal and inter-est for the years 1988 through 1992 as follows: $4,387,000 for 1988, $4,396,000 for 1989, $4,423,000 for 1990,54,435,000 for 1991 and $4,430,000 for 1992. In addition, the Company is obligated to pay certain variable costs of operating and maintaining the reservoirs. Total payments, including amounts capitalized, under such contracts for 1987,1986 and 1985 were $4,400,000, $4,833,000, and $4,779,000, respectively. The Company has assigned to a municipality all contract rights and obligations in connection with $100,695,000 remaining principal amount of bonds at December 31, 1987 issued for similar purposes which had previously been guaranteed by the Company; the Com-pany is, however, contingently liable in the event of default by the municipality. 43
l l TEXAS UTILITIES ELECTRIC CONIPANY NOTES TO FINANCIAL STATESIENTS - (Concluded)
- 11. COMMITMENTS AND CONTINGENCIES - (concluded)
Capacity and Energy Purchase The Company entered into an agreement in 1982 with Tex La, a 21/6% owner of Comanche , Peak, whereby the Company agreed to purchase an assignment of portions of Tex La's entitlement ! to capacity and energy from Comanche Peak in declining amounts over the first eight years of i commercial operation of each generating unit Under the agreement, the Company is required to i make annual payments to Tex La comprising a pro rata share of operating costs plus a capital charge on Tex La's net investment applicable to the portion of Tex-La's entitlement assigned. (See Note 10 concerning litigation proceedings regarding Tex La's participation in Comanche Peak.) Martin Lake Unit 4 Construction Cancellation In November 1986, the Company announced that it was not economically feasible to construct e fourth unit at the hiartin Lake Steam Electric Station (hiartin Lake Unit 4) and cancelled the project which was scheduled for service in 1994. Pursuant to expected regulatory treatment, expen-ditures of approximately $37,246,000, including contractor termination costs, have been recorded as a deferred asset to be amortized as approved by regulatory authorities. Tbc application in 1988 of Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 90 enti-tied "Regulated Enterprises - Accounting for Abandonments and Disallowances of Plant Costs" to the accounting for the abandonment of biartin Lake Unit 4 will not have a material effect on the Company's financia: statements. Purchase of Electric Plant and Nuclear Tuel In February 1988, the Company entered into an agreement with Th1PA pursuant to which the Company will purchase ThiPA's ownership interest in Comanche Peak. Under the terms of the agreement, the Company will make a series of payments to Th1PA over approximately a five year period totaling about $456 million on a present value basis. The purchase price is based on the Company's incurred cost per kilowatt, including AFUDC, for its existing share plus payment for 4 4 Th1PA's interest in the nuclear fuel for Comanche Peak, certain transmission facilities associated i with Comanche Peak and certain expenses. In connection with the purchase of ThiPA's ownership interest by the Company, all outstanding claims and pending lawsuits between ThiPA and the Com-pany will be settled and terminated. Finalization of the agreement is subject to the approval of the NRC and the PUC with respect to the transfer of ThiPA's ownership interest. An initial payment of approximately $58.7 million was made by the Company in February 1988; following such regulatory i approvals, which must be received no later than September 22,1988, the Company will make an
; additional payment of approximately $51.8 million plus interest to the date ofinitial closing. There- ,
1 after, the Company will make ten equal semi annual payments, including interest, each in the amount of approximately $45 million, for the balance of the purchase. General in addition to the above, the Company is involved in various legal and administrative proceed-ings which, in the opinion of the Company, should not have a material efTect upon its financial
- l position or results of operations.
l 44
4 OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS j Texas Utilities Electric Company: We have examined the balance sheet of Texas Utilities Electric Company as of December 31, ; 1987 and 1986 and the related statements of income, retained earnings and source of funds for j construction for each of the three years in the period ended December 31,1987. Our examinations , I were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of the Company at December 31,1987 and 1986 and the results ofits operations and the source ofits funds for construction for each of the three years in the period ended December 31,1987, in confor-mity with generally accepted accounting principles applied on a consistent basis. , Our examinations also comprehended the supplemental schedules listed in Item 14(a)2. In our opinion, such supplemental schedules, when considered in relation to the basic financial statements, present fairly in all material respects the information shown therein. DELOITTE HAsKINS & SELLS
?
Dallas, Texas . March 18,1988 l i
, i 9
9 d t 45 t
Item 9. CilANGES IN AND DISAGREEMENTS WITil ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF Tile REGISTMNT. Identification of directors, ousiness experience and other dilectorships: Other Positions and O mces Presently IIeld With the Present Prlacipal Occupation Company Date First or Employment and Principal (Term Espires Elected as Business (preceeding 5 yrs.), Name of Directcr y-A Stay 20, H88) Director Other Directorships Erle Nye 50 Chairman of September 17, President of Texas Utilities, the parent company the Boad 1982 of the Company; prior thereto Executive Vice and Chief President of Texas Utilities; other Executive directorships: Texas Utilities. R. K. Campbell 61 Division President September 17, Same. 1982 E. D. Scarth 60 Division President May 20,1986 President of Texas Electric, formerly a subsidiary of Texas Utilities; prior thereto Vice President of Texas Electric. Michael D. Spence 46 Division President September 17, President of Generating Division; prior thereto 1982 Executive Vice President of Texas Utihties; prior thereto Vice President of Texas Power, formerly a subsidiary of Texas Utilities. W. M. Taylor 4$ Division President May 20,1986 President of Dallas Power, formerly a subsidiary of Texe Utilities; prior thereto Vice President of the Compaity; prior thereto Vice President of Texas Electne. T. L Baker 42 Senior Vice February 20, Senior Vice President of the Company; prior President 1987 thereto Vice President of the Company; prior thereto Vice President of Dallas Power; prior thereto served in other management positions with Dallas Power. J. S. Farrington 53 None September I?, Chairman of the Board and Chief Executive 1982 Officer of Texas Uiilities; prior thereto President of Texas Utilities; prior thereto President of Dallas Power; 3ther directorships: Texas Utilities. E. L Watson 53 Senior Vice February 20, Senior Vice President of the Company; prior President 1987 thereto Vice President of Texas Elecuic. 46 t I
i Iten 10. DIRECTO.tLS AND EXECUTIVE OFFICERS OF TIIE REGISTRANT (Continued).
!dentification of executive ofricers and business experience: ,
Posities and Offlees Presently llend (Current Date First Term Expires Elected to Busteess Experience Name of Omcer g May 20,1988) Present Omce(s) (Preceeding Flec Years) Erle Nye 50 Chairman of February 20, President of Texas Utilities, the parent company the Board and 1987 of the Company; prior thereto Executis e Vice Chief Executive President of Texas Utilities: other directorships: Texas Utilities. R. K. Campbell 61 Division January 1 Same. President 1984 E. D. Scarth 60 Division Atay 20, Vice President of Texas Electric, forme-ly a President 1986 s3bsidiary of Texas Utilities. hiichael D. Spence 46 Division January 1 Executive Vice President of Texas Utilities, the President 1984 parent company of the Company; prior therete Vice President of Texas Power, formerly a subsidi:ry of Texas Utilities. W.hl Taylor 45 Division hiay 20, Vice hysiden' of the Company; prior thereto President 1986 Vice President of Texas Electric, formerly a j subsidiary of Texas Utilities. ; T. L Baker 42 Senior Vice hiay 20, Vice President of the Company; prior thereto l President 1986 Vice President of Dallas Power, formerly a j subsidiary of Texas Utilities; prior thereto served in other management positions with Dallas Power. E. L Watsor 53 Senior Vice hiay 20, Vice President of the Company; prior thereto j President 1986 Vice President of Texas Electric, formeily a i subsidiary of Texas Utilities. l Thomas E. Blakey $$ Executive July 14, Vice President of Operations for Texas Power, Vice 1987 formerly a subsidiary of Texas Utilities; prior J v President thereto served in other management position: ' with Texas Power. H. Jarrell Gibbs 49 Vice President December 28 Treasurer and Assistant Secretary of TU Electrie 1987 sened in other management positions in the Company and TU Services. 47
a Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF TIIE REGISTRANT (Concluded). , Identifteation of executive officers and business experience: ; Position and 7 Offices Presently lleid 3 (Curient Date First L_ Term Expires Elected to Busir.ess Experience ; Name of Omeer g Stay 20,1988) Present Omce(s) (Preceeding Flie Years) -' T. R. Locke, Jr. 50 Vice President January 1, Vice President of TU Services; prior thereto j 1984 served in other managernent pu.itions with E Texas Electric, formerly a subsidiary of Texas Utilities. T. Michael Ozymy 47 Vice President hf ay 20 Served in other management positions in the 1986 Company. G. W. Sells- 54 Vice President January 1, Vice President of Dallas Power formedy a 1984 subsidairy of Texas Utilities; prior thereto served in other management positions with ; Dallas Power. [ _ a S. C. Swig-r 52 Vice President January 1, Controller of Texas Utilities, the parent and Controller 1984 company of the Company. Paul D. W lliams 48 Vice President December 17, Vice President of Texas Electric, formerly a 1986 subsidiary of Texas Utilities; prior thereto ser ed in other management positions with Texas Electric. Peter B. T3Lham 43 Secretary September 24, Secretary and Assistant Treasurer of Texas 1982 Utilities, the prent company of the Company; prior thereto Assistant Secretary of Texas Utilities.
? >an Farell 38 Treasurec and December 28, Director of Finacce of TU S.nices; Controller of -
Assistant 1987 TU Services a d served in other management Secretary positions in TU Services. J. D. Karney $4 Assistant Cecember 17, Controller of Dallas Power, formerly a subsidiary Controcer 1986 of Texas Utilities; prior thereto Treasurer and Assistant Secretary of Dallas Power.
]
J. P. Knierim 45 Assistant Jacuary 1, Treasurer and Assistant Secretary of Texas Treasurer 1984 Electii- formerly a subsidiary of Texas Utilities; prior thereto sened in other management positions wi.h Texas Electric.
,i Gary L Price 43 Assistant January 1 Treasurer and Assistant Secretary of Texas Controller 1984 Power, formerly a subsidiary of Texas "
Utilities. " There is no family relationshV between any of the sNie named executive omeers. 48 '
d v Ittm 11. EXECUTIVE COMPENSATION. The Company paid cash compensation during 1987 to the following executive omeers for ser-vices in all capacities: Name of Indhldual sad es.mter of Capacity in which Cash jrscis it. group compensation was recched compensation 6 Erle Nye . . . . . . . . . . .. .... Chairman of the Board and $ 316,667(1) Chief Executive Michael D. Spence .... .. .. Division President 266,667 . R. K. Campbell . . . . . . . .. Division Presidect 233,500 E. D. Scarth ....... ... .. Division President 158,750 W. M. Tagor . . . . .......... Division President 158,750 All executive c Ticers of the Company es a group (16), not including those named above . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,4 66,5 F 2 ) (1) Consists entird/ of compensation paid by Texas Utilities. (2) Includes compensation paid by the Company, Texas Utilities and TU Services. Does not include , payments for any portion of the p:riod during which any individual was not an executive omeer of the Company. Under the Employees' Thrift Plan of the Texas Utilities Company System, all employee:, witn at least one year af full time service with any of the System Companies may invest up to 12% of their ragular salary or wages in common stock of Texas Uti!! ties, a United States Gcvernment Bond fand, a guaranteed fixed income fund, an equity mutual fund or a percentage in each. Employer-corpora-tions make a contribution to each participant's account of 40%, 50%, er 60s of the employee's savings, up to the 6% lese!, depending upon length of service, which amount is invested in the common stock of 7exac Utilities. During 1987, employer contributions under this Plan made for all executive omeers of toe Company as a group (21) amounted to $71,691, including contributions made for Messrs. Nye, Spence, Campbell, Scarth and Taylor in the amounts of $10,815, $7,367, (7,981, $5 418 and $1,875, respectively. Employer contributions are not included in amounts under Cash Compnsation in the table above. Under t e Employee Stock Ownership Plan of the Texas Utilities Company System which cos. eis .,abstantiaily al! System employees, Texas Utilities and its suosidiaries, including the Company, have elected additional federal income tax etedits to the extent that amounts equal to such credits have been contributed to the Plan. The Plan Trustee uses contiibutions from the companies and their eligible employees to purchase common stock of Texas Utilities which is allocated to participat. ing employees in proportion to their compensation. During 1987, employer contributions made for Plan year 1986 for all executive omcers of the Company as a group (21) amounted to $8,800,includ-ing contributions made in the amount of $500 for each of Messrs. Nye, Spence, Campbell, Scarth and Taylor. Employer contributions are not included in amounts under Cash Compensation in the table above. Due to changes in federal tax fr.vs eliminating such tax credits subsequent to 1986, the Company does not anticipate making any further contributions to the Plan. Under the Defected and Incentive Compensation Plan of the Texas Utilities Company System adopted during 1987, omcers of Texas Utilities and its subsidiaries v.ith a title of Vice President or above may defer a percentage of their compensation not to exceed a maximum percentage deter-mined by the Board of Directors for each Plan year and in any event not to exceed 15% of the participant's compensation. I%r the Plan year 1987, the maximum deferrat percentage was 10%. Such deferred nmpensation is included in amounts reported under Cash Compensation in the table above. The Cwipany will make a matching award equal to 150% of the deferred compensation. In addition, the Company can also make incentive awards. In no event will the sum of all incentive 49
Item 11. EXECUTIVE COMPENSATION (Concluded), awards in any Plan year exceed 25% of the aggregate compensation of eligible employees. The Com-pany will establish accounts for each participant containing performance units equal in number to the number of shares of common stock purchased by a trustee with an amount of cash equal to the deferred compensation, matching award and any incentive award. On the expiration of the applica-ble maturity period (3 years for incentive awards and 5 years for deferrals and matching awards), the value of the participants' accounts will be paid in cash. The maturity requirement is waived if the participant dies or becomes totally and permanently disabled. The Company maintains a retirement plan qualified under applicable provisions of the Internal Revenue Code. Annual retirement benefits are computed as follows: For each year of accredited service prior to age 65,1.3% of the first $7,800, plus 1.5% of the excess over $7,800 of average annual earnings received by the participant during his three years of highest earnings. Such benefits are not subject to any reduction for Social Security payments. Amounts reported as salaries for , specified officers approximate earnings as defined by the retirement plan. As of January 31,1988, years of accredited service under the plan for Messrs. Nye, Spence, Campbell, Scarth and Taylor were 25, 21, 39, 35 and 19, respectively. The table below illustrates the annual benefit payable at retirement after age 65 under this formula: 3-par aver. ige 20 3 ears 30 years 40 years annual Earnings senice senice senice
$ 25,000 $ 7,188 $ 10,782 $ 14,376 50,000 14,688 22,032 29,376 100,000 29,688 44,532 59,376 200,000 59,688 89,532 119,376 300,000 89,688 134,5.22 179,376 400,000 119,688 179.532 239,376 B 1efits payable from a qualified retirement plan are limited by provisions of the Internal Rev-enue Cvde. The Company maintains an unfunded Supplemental Retirement Plan to provide for the payment of retirement benefits calculatt.iin accordance with the foregoing retirement plan formula which would otherwise be limited by the provisions of the Internal Revenue Code.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security ownership of certain beneficial owners at January 31, 1988: Amount and Nature Percent Name and Address of Beneficial of Title of L. ass of Benencial Owner O wnership Class Common Stock, Texas Utilities Company 109,850,000 shares 100.0% without par value, 2001 Bryan Tower sole voting and of the Company Dallas, Texas 75201 investment power Security ownership of management at December 31,1987: Number of Shares Percent Title of Cl. ss Benencially Onned* of Class Preferred Stock, without par value, of the Company .. . . 4 Less ihan 1% Common Stock of Texas Utilities (parent) . . . . . ... 95,172 Less than 1%
- Amount of shares with respect to which such persons have the right to acquire beneficial owner-shi~
.e
.i 13. CERTAIN RELATIONSillP AND RELATED TRANSACFIONS.
None. 50
PART IV Item 14. EXillDITS, FIN.5NCIAL STATEMENT SCIIEDULES AND REPORTS 0.V FORM 8 K. pag; (a) Documents filed as part of this Report.
- 1. Financial Statements (included in item 8, Financial Statements and Supp!ementary Data):
Statement ofIncome for each of the three years in the period ended December 3 ! , 198 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Statement of Source of Funds for Construction for each of the three years in the period eaded December 31,1987 ........... ....... .. 27 Balance Sheet, December 31,1987 and 1986 ...... ........... .... ...... 28 Statement of Retained Earnings for each of the three years in the period ended De: ember 31,1987 . ..... .. . ...... ........... . 30 Notes to Financial Statements .. . . ..... ...... . ... . .... ......... . 31 Opinion of Independent Certified Public Accountants .. .......... . . 45
- 2. Financial Statement Schedules:
V-Electric Plant for each of the three years in the period ended Dece m be r 3 1, ! 9 8 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 VI-Accumulated Depreciation for each of the three years in the period ended December 31,1987 .......... .. ... ..... .... ... 58 Vill-Valuation and Qualifying Accounts for each of the three ynrs in the period ended December 31,1987 ... ...... .... . ...... . 59 X-Supplementary Information for each of the three years in the period ended December 31,1987 ... .. ......... . ....... .... . 60 The following financial statement schedules are omitted because of the absence of the conditions under which they are required or because the reauired information is included in the Financial Statements or notes thereto: 1, II, III, IV, Vil, IX, XI, XII and XIII. (b) Reports on Form 8.K: Reports on Form 8.K filed since September 30,1987, are as follows: Date of Report Items Reported November 25,1987 Item 5. OTHER EVENTS December 18,1987 Item 5. OTHER EVENTS ' February 16,1988 Item 5. OTHER EVENTS (c) Exhibits:
*3(a)-Articles of Incorporatior of Texas Utilities Electric Company (filed as Exhibit 3(a), File No. 2-80537).
*3(b)-Bylaws of Texas Utilities Electric Company (filed as Exhibit 3(b), File No. 2 80537).
*4(a)-DALLAS POWER & LIGHT COMPANY Mongage and Deed of Trust, dated as of February 1,1937, between Dallas Power &
Light Company and Old Colony Trust Company, as Trustee (The First National Bank of Boston, as successor Trusteej, filed as Exhibit B 2, File No. 2 2801. 51
Item 14. EXillBITS, FINANCIAL STATEhlENT SCIIEDULES AND REPORTS ON FORf .' 8-K ', Continue.1). TEXAS ELECTRIC SERVICE COhlPANY hfortgage and Deed of Trust, dated as of hiaith 1,1945, between Texas El-etric Service Company and The Fort Worth National Bank,(now Texas American Bank / Fort Worth, N.A.) as Trustee, filed as Exhibit 7(b), File No. 2 5609. TEXAS POWER & LIGIIT COh1PANY htortgage and Deed of Trust, dated as of Af ay 1,1945, between Texas Power & Light Company and Republic National Bank of Dallas, (now First RepublicBank Dallas, National Association) as Trustee, filed as Exhibit 7(c), File No. 2-5718. TEXAS UTILITIES ELECTRIC COh1PANY hfortgage < nd Deed of Trust, dated as of December 1,1983, between Texas Utilities Electric Company arid Irving Trust Company, as Trustee, filed as Exhibit 4(a), File No. 2-90185.
*4(b)-Supplemental Indentures to hfortgage and Deed of Trust.
DALLAS POWER & LIGHT COhiPANY Numbsr Dated File Reference Eshibit First April 1,1949 2-7855 7(a) Second June 1,1950 2-8466 7(a)-2 Third hfarch I,1953 2-10071 4(b)-3 Fourth February 1,1956 2-12200 2(b)-1 Fifth December 1,1956 2-77857 4(b)5 Sixth December 1,1959 2 77857 4(b)-6
? 'enth February 1,1963 2-20997 2(b)-7 hth January 1,1966 2-77857 4(b)-8 Winth February 1,1967 2-25805 2(b)-9
, Tenth June 1,1970 2-37161 2(c) Eleventh November 1,197i 2-42043 2(c) Twelfth September 1,1972 2-45403 2(c) Thirteenth h1 arch 1,1975 2 52708 2(c) Fourteenth hiay 1,1977 2-77857 4(b)-14 Fifteenth June 1,1981 2-71621 4(c) Sixteenth November 1,1981 2 77857 4(b) 16 Seventeenth July 1,1982 2-77857 4(c) Eighteenth November 1,1982 2-81476 4(b)-18 Nineteenth February 1,1983 2-81476 4(c) Twentieth June 1,1983 2-90185 4(c)-1 Twenty-first January 1,1984 2-90185 4(c)-2 Twenty-second April 1,1984 2-90185 4(c)-3 Twenty-third Sept (mber 1,1984 2-92738 4(b)-1 T'venty-fourth September 1,1985 2-99940 4(b)-1 Twenty fifth October 1,1986 33 11326 4(b)-l Twenty-sixth Afarch 1,1987 33 14584 4(b)-1 Twenty-seventh July 1,1987 Form 8 K, 4(b) File No. 0-11442 (July 7,1987) 52 l l
l Item 14. EXIIIBITS, FINANCIAL STATEMEFT SCIIEDUL2S AND REPORTS ON FORM 8-K (Continued). TEXAS ELECTRIC SERVICE COhiPANY Number Dated File Reference Esbibit First October 1,- 1947 2 7186 '7(b) Second April 1,1948 2-7423 7(c)
- Third April 1,1949 2 7894 4 7(d)
Fourth June I,1951 2 8982 7(e) Fifth hiay 1,1952_ 2 9547 4(c) Sixth April 1,1953 2 10118 4(c) Sr anth hiaich 1,1955 2 12227 2(c) 9 . Eig 5 hf arch 1, IW 2-60449 2(b)-1 Ninth July 1,195, 2-60449 2(b)-l Tenth November I,1958 2-60449 2(b)-1 Eleventh April 1,1963 2-21105 2(b) Twelfth February 1,1965 2 23056 2(b) Thirteenth February 1,1966 2 24384 2(c) Fourteenth May 1,1967 2-26297 2(c) Fifteenth hfarch 1,1969 2-31474 2(c) Sixteenth October 1,1970 2-38358 2(c) Seventeenth April 1,1971 2 39627 2(c) Eighteenth January 1,1972 2-42552 2(c) Nineteenth April 1,1974 2-60449 2(b)l Twentieth December 1,1974 2-60449 2(b)-1 Twenty-first June 1,1975 2-60449 2(b)-1 Twenty-second hfarch 1,1976 2-60449 2(b)-1 Twenty-third February 1,1979 2-63425 2(c) Twenty fourth hfarch 1,1980 2-66633 2(c) Twenty fifth November 1,1981 2-74809 4(c)-1 Twenty-sixth Decembet I,1981 2 74809 1(d)-1 Twenty-seventh April 1,1982 2 76675 4(c) Twenty-eighth November 1,1982 2 80329 4(c) Twenty ninth December 1,1982 2 80329 4(d) Thirtieth June 1,1983 2-90185 4(d)-1 Thirty first January 1,1984 2 90185 4(d)-2 Thirty-second April 1,1984 - 2-90185 4(d)-3 Thirty-third September 1,1984 2-92738 4(c)-1 Thirty-fourth August 1,1985 2-99940 4(c)-1 Thirty-fifth hfarch 1,1986 33-9583 4(c)-l Thirty-sixth December 1,1986 33 11376 4(c)-1 Thirty-seventh February 1,1987 33 14584 4(c)-1 TEXAS POWER & LIGHT COhfPANY Number Dated File Reference Exhibit First October 1,1947 2 7204 7(a) Second April 1,1948 2 7446 7(a) Third April 1,1952 2-9474 4(c) Fourth hiay 1,1953 2 10204 4(c) Fifth October 1,1954 2 11162 2(b) Sixth November I,1956 2 12856 4(c) Seventh December 1,1958 2-14553 2(b) 53
e Item 14. EXillBITS, FINANCIAL STATEMENT SCIIEDULES AND REPORTS ON FORM 8 K (Continued). TEXAS POWER & LIGHT COh1PANY (Concluded) Number Dated File Reference Eshlblt Eighth January 1,1961 2-19452 2(b)-1 Ninth February 1,1963 2 21028 2(b) Tenth January 1,1965 2 24326 2(c) Eleventh February 1,1966 - 2 24326 2(d) Twelfth February 1,1967 2-25885 2(c) Thirteenth January 1,1968 2 27853 2(c) Fourteenth February 1,1970 2 35941 2(c)
- Fifteenth September 1, IF 0 '2 38171 2(c)
Sixteenth February 1,19" 2 39083 2(c)_ Seventeenth February 1,1972 2-42763 2(c) Eighteenth February 1,1973 2-46740 2(c) Nineteenth February 1,1974 2 73790 4(b)-19 Twentieth October 1,1974 2 73790 4(b)-20 Twenty first April 1,1975 2 52865 2(c) Twenty-second January 1,1976 . 2 55210 2(c) Twenty-third February 1,1977 2 57963 2(c) Twenty-fourth February 1,1979 2-6336') 2(c) Twenty-fifth hiay 1,1980 2 67594 (b)(2)-2 . Twenty-sixth September 1,1981 2 73790 4(c) Twenty-seventh November 1,1981 2-77733 4(b) Twenty-eighth June 1,1982 2 77733 4(c) Twenty-ninth November ' 782 2 90185 4(e)-1 Thirtieth June 1,I" 2-90185 4(e)-2 Thirty-first Octobei ,83 2-90185 4(e)-3 Thirty-second January 1, 984 2-90185 4(e)-4 Thirty-third April 1,1984 2-90185 4(e)-5 Thirty-fourth September 1,1984 2-92738 4(d)-1 Thirty-fifth April 1,1985 2-97185 4(d)-1 Thirty-sixth December 1,1985 33-01774 4(d)-1 Thirty-seventh hiay 1,1986 33-9583 4(d)-1 Thirty-eighth December 1,1986 33 11376- 4(d)-1 Thirty ninth April 1,1987 33-14584 4(d)-1
- TEXAS UTILITIES ELECTRIC COhfPANY Number Dated File Reference Eshibit First April 1 1984 2 90185 4(b)
Second Septer.ib. 1,1984 2 92738 4(a)-1 Third April 1,1981 2-97185 4(a)-1 Fourth August 1,1985 2-99940 4(a)-1 Fifth September 1,1985 2-99940 4(a)-2 Sixth December 1,1985 33-01774 4(a)-2 Seventh hfarch 1,1986 33-9583 4(a)-1 Eighth hie 1,1986 33 9583 4(a)-2 Ninth October 1,1986 33 11376 4(a)-1 Tenth December 1,1986 33-11376 4(a)-2 Eleventh December 1,1986 33 11376 4(a)-3 Twelfth February 1,1987 33-14584 4(a)-l Thirteenth hfarch 1,1987 33-14584 4(a)-2 Fourteenth April 1,1987 33-14584 4(a)-3 Fifteenth July 1,1987 Form 8 K, 4(a) File No. 0 11442 (July 7,1987) 54 1
Item 14. EXillBITS, FINANCIAL STATEN1ENT SCilEDULES AND REPORTS ON FORN18-K (Continued).
*4(c)-Debenture Agreement dated as of February 1,1964, between Dallas Power & Light Com-pany and hforgan Guaranty Trust Company of New York, as Trustee, filed as Exhibit 2(b)-10, File No. 2-22020.
*4(c)-1-First Supplemental Agreement dated as of June 21,1983, to the Debenture Agreement dated as of February 1,1964, between Dallas Power & Light Company and hfor3an Guaranty Trust Company of New York, as Trustee, filed as Exhibit 4(c)-1, Texas Utili-ties Company 1983 Form 10-K, File No.1-3591.
*4(c)-2-Second Supplemental Agreement dated as of January 1,1984, to the Debenture Agree-ment dated as of February 1,1964, between Texas Utilities Electric Company and hfor-gan Guaranty Trust Company of New York, as Trustee, filed as Exhibit 4(c)-2, Texas Utilities Company 1983 Form 10-K, File No.13591.
*4(d)-Debenture Agreement dated as of February 1,1968, between Dallas Power & Light Com-pany and h1 organ Guaranty Trust Company of New York, as Trustee, filed as Exhibit 2(b)-13, File No. 2-28016.
*4(d)-1-First Supplemental Agreement dated as of June 21,1983, to the Debenture Agreement dated as of February 1,1968, between Dallas Power & Light Company and hforgan Guaranty Trust Company of New York, as Trustee, filed as Exhibit 4(c)-3, Texas Utili-ties Company 1983 Form 10-K, File No.1-3591.
*4(d)-2-Second Supplemental Agreement dated as of January 1,1984, to the Debenture Agree-ment dated as of February 1,1968, between Texas Utilities Electric Company and hfor-gan Guaranty Trust Company of New York, as Trustee, filed as Exhibit 4(c)-4, Texas Utilities Company 1983 Form 10-K, File No.1-3591.
*4(e)-Debenture Agreement dated as of February 1,1968, between Texas Electric Service Company and The First National Bank of Fort Worth, (now First RepublicBa.nk Fort Worth, N.A.) as Trustee, filed as Exhibit 2(d), File No. 2-27908.
l *4(e)-1-First Supplemental Agreement dated as of June 29,1983, to the Debenture Agreement dated as of February 1,1968, between Texas Electric Service Company and The First National Bank of Fort Worth, (now First RepublicBank Fort Worth, N.A.) as Trusae, filed as Exhibit 4(d)-3, Texas Utilities Company 1983 Form 10-K, File No.13591.
*4(e)-2-Second Supplemental Agreement dated as of January 1,1984, to the Debenture Agree-ment dated as of February 1,1968, between Texas Utilities Electric Company and Inter-First Bank Fort Worth, N.A. (now First RepublicBank Fort Worth, N.A.), as Trustee, filed as Exhibit 4(d)-4, Texas Utilities Company 1983 Form 10-K, File No.1-3591.
*4(f)-Debenture Agreement dated as of January 1,1964, between Texas Power & Light Com-pany and First National Bank in Dallas, as Trustee, (now First RepublicBank Dallas, National Association, as successor Trustee) filed as Exhibit 2(c)-3, File No. 2-21962.
*4(f)-I-First Supplemental Agreement dated as of June 28,1983, to the Debenture Agreement dated as of January 1,1964, between Texas Power & Light Company and InterFirst Bank Dallas, National Association, as Trustee,(now First RepublicBank Dallas, National Association, as successor Trustee) filed as Exhibit 4(e)-3, Texas Utilities Company 1983 Form 10-K, File No.13591.
55
Item 14. EX1hdITS, FINANCIAL STATEMENT SCllEDULES AND REPORTS ON FORM 8-K (Concluded).
*4(f>2-Second Supplemental Agreement dated as of January 1,1984, to the Debenture Agree-ment dated as of January 1,1964, between Texas Utilities Electric Company and Inter-First Bank Dallas, National Association, as Tnistee, (now First RepublicBank Dallas, National Association, as successor Trustee) filed as Exhibit 4(e)-4, Texas Utilities Com-pany 1983 Form 10-K, File No.1-3591.
*4(g)-Debenture Agreement dated as of April 1,1969, between Texas Power & Light Company and First National Bank in Dallas, as Trustee,(now First RepublicBank Dallas, National Association as successor Trustec), filed as Exhibit 4(c). File No. 2-31966.
*4(g)-1-First Supplemental Agreement dated as of June 28,1983, to the Debenture Agreement dated as of April 1,1969, between Texas Power & Light Company and InterFirst Bank Dallas, National Association, as Trustee, (now First RepublicBank Dallas, National Association, as successor Trustee), filed as Exhibit 4(c)-5, Texas Utilities Company 1983 Form 10-K, File No.13591.
*4(g)-2-Second Supplemental Agreement dated as of January 1,1984, to the Debenture Agree-ment dated as of Arril 1,1969, between Texas Utilities Electric Company and InterFirst Bank Dallas, National Association, as Trustee,(now First RepublicEank Dallas, National Association, as successor Trustee), filed as Exhibit 4(e)-6, Texas Utilities Company 1983 Form 10-K, File No.1-3591.
4(h)-Supplemental Indentures to Mortgage and Deed of Trust. \ Texas Electric Service Company Number Date Thirty-eighth September 1,1987 Thirty-ninth October 1,1987 Texcs Utilities Electric Company Number Date Sixteenth September 1,1987 Seventeenth October 1,1987 4(i)-Agreement to furnish certain debt instruments. 12(a)-Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends. 12(b)-Computation of Supplemental Ratio of Earnings to Fixed Charges and Preferred Dividends. 24(a)-Consent of Deloitte Haskins & Sells. 24(b)-Consent of Counsel. 28-Agreement, dated as of February 12,1988, between the Cotupany and Texas Municipal Power Agency.
- Incorporated herein by reference.
56
TEXAS UTILITIES ELF"fRIC COSIPANY SCllEDULE V - ELECTRIC PLANT For Each of the Three Years in the Period Ended December 31,1987 COLUSIN A COLU51N B COLUSIN C COLUSIN D COLUSIN E COLUSIN F Other Balance at Changes-Beginning Additions Aod Balance at Classification of Year at Cost Retirements (Deduct) End of Year Thousands of Dollars ( Year Ended December 31,1987 Electric plant In service Production , $ 2,980.395 $ 81,311 $22,840 $ - $ 3,038,866 l' Transmission . , 1,166,066 51,457 2,881 - 1,214,642 Distribution , 2,543,163 183,505 30,145 - 2,696,523 General , 328,575 40,368 7,055 - 361,888 Total 7,018,199 356,641 62,921 - 7,311,919 Construction work in progress , 5.266,729 1,317,716 - (19,Il 8Xa) 6,565,327 Nuclear fuel , 251,964 IIeld for future use . 6,357 797 1,583 11,700 (a) 252,761 19,640 g Total electric plant , $ 12,543,249 $ 1,676,73 7 $62,921 $ (7.418) $ 14,149,64 7 Year Ended December 31,1986 Electric plant In senice Production . $ 2,878,212 5 111,519 $ 9.336 $ -
$ 2.980.395 Transmission . 1,111,704 60,686 6,324 - 1,166,066 Distribution . 2,331,764 246,151 34,752 -
2.543,163 General , 283,722 52,980 8,127 - 328,575 Total 6,605.402 471,336 58,539 - 7,018,199 Construction work in progress . 4.288,525 1,007,842 - (29,638Xb) 5,266,729 Nuclear fu:1. 254,724 (2,760) - - 251,964 lield for future use . 5,441 916 - - 6,357 Total electric plant . $ 11,154,092 $ 1,4 77,334 $58.539 $(29,638) $ 12.543,249 Year Ended Deumber 31,1985 Dectric plant in senice Production . $ 2,808,488 $ 77,726 5 8,002 $ - $ 2,878,212 Transmission . 1,042,821 71,050 2,167 - 1,111,704 Distribution , 2,125,962 235,343 29,541 - 2,331,764 General . 249,124 40,105 5,507 - _ 183,722 Total 6.226,395 424,224 45,217 - 6,605,402 Construction work in progress . 3,650,889 637,636 - - 4,288,525 Nuclear fuel , 199,921 54,803 - - 254,724 lidd for future use . 4,858 583 - - 5,441 Total electric plant . $ 10,082,063 $ 1,117,246 $45,217 $ - $ 11,154,092 (a) Includes $11,700,000 associated with the transfer of facilities to electric plant held for future use and $7,418,000 associ. ated with the cancellation oflignite unit. (See Note 11 to Financial Statements.) (b) Cancellation of lignite unit. (See Note 11 to Financial Statements.) 57
TEXAS UTILITIES ELECTRIC COSIPANY SCIIEDULE VI - ACCUhlULATED DEPRECIATION For Each of the Three Years in the Period Ended December 31 1987 COLUSIN A COLUSIN B COLUSIN C COLU5IN D COLUSIN E COLUSIN F Additions Other Balance at Charged to Changes-Beginning Costs and Net Add (a) Balance at Description of Year Espenses Retirements (Deduct) End of Year Thousands of Dollars Year ended December 31,1987 Accumulateo s epreciation . . $2,174,441 1221,772 $49,464 $9,078 $2.355,827 Year ended December 31,1986 Accumulated depreciation . $ 2,011,061 $209,152 $53,622 $7,850 $2,174,441 Year ended December 31,1985 Accumulate 2 depreciation . . $ 1,848,146 $ 195,959 $39,831 $6,787 $2,011,061 (a) Depreciation of transportation and work equipment, based on the estimated iives thereof,is charged to a clearing secount and allocated on the basis of the use of such equipment, and depletion cflignite is charged to fuel. 58
TEXAS UTILITIES ELECTRIC CONIPANY SCIIEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS For Each of the Three Years in the Period Ended December 31,1987 COLUSIN A COLUSIN B COLUSIN C COLUSIN D COLUSIN E Additions Balance at Charged to Charged Balance Beginning Cost and to Other at End Description of Year Expenses Accounts Deductions (a) of Year Thousands of Dollars Valuation account, deducted from related asset on the balance sheet-Year Ended December 31,1987 Allowance for uncellectible accounts $ 13,817 $20,732 $ - $21,3% $ 13,243 Year Ended December 31,1986 Allowance for uncollectible accounts $ 15,011 $20,326 $ - $21,520 $13,817 Year Ended December 31,1985 Allowance for uncollectible accounts $12,360 $21,299 $ - $ 18,648 $15.011 (a) Deductions from the allowance represent uncollectible accounts written off,less recovei es of amounts previously written off, a 59
TEXAS UTILtTIES ELECTRIC COMPANY SCIIEDULE X - SUPPLEMENTARY INFORMATION For Each of the Three Years in the Period Ended December 31,1987 COLUMN A COLUMN B Charged to Espenses and Other Accounts Year Ended December 31, Item 1987 1986 1985 Thousands of Dollars Taxes other than income: Ad valorem . . . . . . . . . ... . .. .. . ... . ....... $ 82,054 $ 69.534 5 63.594 Local gross receipts . . . . . . . . . . ... . . . ............. ..... 101.069 102,017 104,724 State gross receipts . .... . . .... . .. . .... .. . ...... 55.734 56.494 58,965 State franchise .. .... ... . .. ... . ... . . . 30,222 26,523 22,106 Social security and unemployment .. . . ... ,. ..... 34,600 33,286 31,363 Public Utility Commission assessment .. .... ... .. . . . .. . 6,180 6,085 6,630 Miscellaneous . . .. . . .. .. . ....... . . 11.465 8,982 8,211-Total . . ... . . .. .. . .. . . ... $321.324 $302.921- $295.593 Charged to: Operating expenses . . . ... . .. . ... ... . $286,777 $272,771 $267,757 Eldric plant and sundry accounts . .. .. . .. .. . .... 34.547 30,150 27,836 Maintenance and repairs, depreciation, depletion, amortir.ation, royalties, research and development and 6dvertising. other than amounts set out separately in the financial statements, are not material. 60
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEXAS UnunEs ELECTRIC COMPANY Date: March 18,1988 By /s/ - ERLE NYE (Erle N)e, Chairman of the Board and Chief Executive) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. S, Ignature Title Date
/s/ ERLE NYE Principal Executive -
(Eric Nye, Chairman of the Board Omcer and Director and Chief Executive)
/s/ T. L BAKER Principal Financial Omcer (T. L Baker, Senior Vice President) and Director
/s/ 5 S. SWIGER Principal Accounting (S. S. Swiger, Vice President and Controller) O mcer
/s/ R. K. CAMPBELL Director (R. K. Campbell)
/s/ J. S. FARRINGTON Director March 18,1988 (J. S. Farrington)
/s/ E. D. SCARTil Director (E. D. Scarth)
/s/ Nf rCHAEL D. SPENCE Director (Stichael D. Spence)
/s/ W.hf. TAYLOR Director (W. 51. Ts) lor)
/s/ E. L. WATSON Director
~
(E. L Watson) 61 l _ _ _ _ _ - _ _ _ _ _ _ _ _}}