ML20151G648

Arkansas Power & Light Co 1987 Annual Rept

ML20151G648
Person / Time
Site:	Arkansas Nuclear
Issue date:	12/31/1987
From:	Howard D, Maulden J ARKANSAS POWER & LIGHT CO.
To:
References
NUDOCS 8804200085
Download: ML20151G648 (49)

Text

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.g 10CFR50.71(b) fG}

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10CFR140.15(b)1 I

ARKANSAS POWER & LIGHT COMPANY POST OFFICE BOX 551 UTTLE ROCK. ARKANSAS 72203 (501) 377-4000 April 12, 1988 OCAN048808 U. S. Nuclear Regulatory Commission Document Control Desk Washington, DC 20555

SUBJECT:

Arkansas Nuclear One - Units 1 & 2 Docket Nos. 50-313 and 50-368 License Nos. DPR-51 and NPF-6 1987 Annual Financial Report Gentlemen:

In accordance with 10CFR50.71(b) and 10CFR140.15(b)1, enclosed is the 1987 Annual Financial Report for Arkansas Power & Light Company.

This report contains financial statements for the fiscal years 1985, 1986, and 1987.

The financial statements include balance sheets and operating statements, plus supporting schedules which may be used for interpretation of the balance sheets and operating statements.

Very truly yours, Dan R. Howard Manager, Licensing

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I Arkansas Power & Light Company PERFORMANG IIIGIILIGil'IS (AP&L) owns electric facilitio in 65 of Arkansas' 75 counties and in 13 of Sliv souri's 114 counties At December 31, 1987 1986 Change 1987, the Company furnished retail Total operating revenues (millions)

$1,405

$1.389 I

clectric senice in 328 Arkansas and Operation and nuintenance expenses (millions)

$1,143

$ 1,145 Sliw>urt incorporated municipalities.

Allowance for funds used during The Company also prmides power at construction (millions)

$ 10 5 10 wholesale to eight Arkamas and two Net income (millions)

$ 141 5 125 13 Sliwouri municipalities and in Arkansas Capitalintion-end of year (milliom)

$2,454 52,451 to two rural electric cooperatives and Comtmetion expenditures (mi!!iom)

$ 137 5 144 (5) one awociation of rural electric cooper-atives Total utility plant-at ) car end (milliom)

$4,077 53,969 3

j AP&l. is a member of one of the I lectric customers-at year end 577,175 571,576 1

largest imrstor owned public utility Gas customers-at year end 62,673 62,553 holding companies in the United States:

I nergy sales to retail customers Sliddle South Utilities, Inc (51W).

Electric (million kwh) 13,892 13,208 5

Natural gas (million cubic feet) 8,523 9.397 (9)

Ranked fourth in assets among the na-

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tion's electric and gas utilities in 198' the NisU S) stem is the leading electric Peak demand (mtyawatts) 3,860 3.806 1

energy supplier to the Sliddle South, a Astrage residential use per customer (kwh) 10,284 10,001 3

region comprisal of Arkansas, louisiana, Atruge commercial use per customer (kwh) 57,5 M 56,tni 3

Sliwiwippi and southeastem Niiwouri.

Average residential uw per customer (mc0 83 86 (3) cuge Comnmia uw per customer (mcf) 309 335 (8)

Gas senice is provided in New Orleam and portions of Arkansas and Aliwouri.

Network Encompasses Region communities with an aggregate popula-l tion of five million Table of Cnntents 1

l The Alw System uses a vast, inter.

At the heart of the 5) stem are five Ms0 smm stap inude rn >nt cmtr connected tran miwion and distribution operating companies working together.

APW Mstw. ice Areas.

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network and a balanced ytem of fowil AP&l InuisianJ Pow er & IJght Com-l'erform.uur ibghhghts

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fuel and nuclear generating plant 3 o pany. Sliwiwippi Ptmer & Iight Com.

Preudenti Mewage 2

meet the electric need3 of 168 million pany, New Orleans l%Iic Scnice Inc.

Year in Resiew customers in the 91,000 square mile and System Encry Rootsces, Inc which M'dC""3 1

Sliddle South area, encompawing 1,300 is respon ible for the management and

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6 operation of the Grand Gulf Nuclear Regurt of Management and anon Audit Comnuttee letter

.10 Additional subsidiaries include ManagementNDiscuwinna Analpis 11 DV TH/i ColZE

.I isurker dentrfot /n Sisti System Senices, Inc. w hich pn>

hnandal statenrnts

.I4 bis c/irnh of t/v 417 foot totter sides utrious technical. administrathe Norn to linancial su:enrnis

.18 at.likansas Ntsr/orr One ant / a /9/ J and corporate senict', that benefit all of Auuuntanti opinion.

y line orte at l'ine /s/nff litchfVotograp/,

the \\lW System companies in common, I tes en Years of Progrns 38 s/wks of the /Wlage andprugrrss S)', tem l'ueF 'ne, a fuels subsidiary, and ik >ard of Ibra tors Otlkers 42 during.trkansas /btser 6 //ght's Ilectec,in( a subsidiary that markets Amciated Natural Gas u

75 jmis of operation.

the commercD1 capabilities, expertise t hrn tory inude b.n k m er al resources of the S) stem companies I

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Your Company lud a good operating to retail customers. excluding Reynolds Marketing is Key year in 198". You will find that sirtually Metah Company. boosted res enues from cscry an a of Arkansts hm er & Iight ti cw customers by appnnimately s39 Our financial perfornuxc is direct-( Al%Il pnxluced nurked impnnement milliini Additiosully. net income in-

1) attnhutahic. in large p.irt. to Ihe I am confident the momentum of 198~

creased s16 3 milhon to s111.2 million nuturing of our marketing program will continue in 198K our ~5th ) car

.tnd our rate of retum on common equity begun in 19H5 We arc concentrating of operation.

u as 12 3 percent, compared to an ab much of our ellort in the industrial wc-Our beacon of corporate direction limed rate of 13 percent tor because of the potential for sdes and for dr r.av. two years he been a stratcp We implementnl the third annual large returns from a relatively few cus-toward accomphshment of chew goah ra c increase awociated with the pluw.

tomers and industrialN direct influence Goal 1: /> clay the necc/for an r in of our portion of Grand Gulf 1 in on residential and commercul sales general rote incnme hr hect,im Ahwissippi slut h of it was offsct. how.

'the industrial wetor offers the greatest ing snonuy/ioent am/ hr market-escr. because of a reduction in our t rnk through kns of sites also ing our pnn/m I km ed rt turn on common equity Growth in our industrial sales.

Goal 1: Huil</ Inf</ges to our Certan iwucs continue to confront euluding Rquolds. was eight percent.

( ustoiners the Compan) whi(h could lus e an ad-pushing resenues from these customers it is by design. not coinudence, scrw impact. As discussed later in this up about s16 million.

that our stratcp is in absolute harmony report. an unfavorabic ruling by the 13 with the spiemwide nuwinn statement supreme Court in Miwiwippi Pow cr &

of our parent (ompany. \\ liddle south I.ight CompanyN case could cause a i tilitics Inc. ( \\lst ') to guide our nest deterioraCon of our financial health det.ide:

1ikeniw. if thestatement of "tle n'ill het onic, run/ he uit/c/r Iinancial /wcounting stan-ns ogni:n/ as a t astoner onento/.

dards No 92 iwuc is not suc-un sallr rey =nivh!c. financially strong.

cewfully resobcd. the Company %

W sua cuful coni /vtitor in the ci oli vny finantial posni in and results of 1 '

clet titc cncigt husincu '

operaf' m (ould be nutcriall)

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At Al%I, the aggrcwise pursuit of and ad,rwly attc(tcd

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our own str.ucp has (ontnbuted directly tow rd a(hicung our goah for o nt con-tainment and customer relations while Producth ity increases at the same ame prouding the operat-ing cnuronment to impnn e our oscrall

\\\\ c concluded the analysis of our litunual performance 1 or the coming work fonc nmh begun in 1985. the Scars wcTc sct stnngent budgetary goah resuh of utmh was the climination of that wc intend to mcet or surpaw.

553 cmployce posinons or a reduction As w c min e t.no 1988 our strategy of about 1I percent.

wdilook n u(h the same e it lus for the t )ur kc) generating units including past tw o Scars lx cause our diret tion our tw o nuticar units w cre among the and priorines are the right ones top performers an>v.hcre in the muntry Jerry 1. Alaulden our suct cw n m ard ac hicung Goal I in 19s' l' nit 1 of Arkans.o Nuticar One President and Chicf laccutn e oth,ccr can be measured by the f.a t that a tise at Ruwellut!c achiesed a ~9 9 percent percent increer in kilow att hour sales availabihty. while l' nit 2 athicsed 85 3 penent Acailahinty at our wal and g.n units we imprewn c. also 1

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45 Our etrorts extend to orry poten-sas-saying it would play a significant Net Income 8 W'"""

tial market. retained. new and expanded role in attracting more students to these industrial use; residential including areas.

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m ~~ % nm m replacement of space heating and water Relations with our customers con-150 heating and electric product sales tinue to improse due to our emphasi' R

rhrough third-party dealer and builder on a personalizal appr udi for customer l

N t wistance.

senice and a dramatic increase in com-O In the 1983 to 1987 time penod munity senice aethities. In 1985, fol-AP& L increawd annual retail tornues, lowing the Grand Gulf allocation con-

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cxcluding Reynolds by approximately troversy, only about 25 percent of our

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$282 million. 33 percent from increased customers gave us famrable marks in

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sales and 6' percent from rate increases our latest sun ey in September 1987, the so We expect to continue to increase ro e-number um % percent. We still luve a C

nues from retail ules in 1988 by an esti-long way to go, but I befin e all our nuted W million mer 198'; 59 [xrcent programs and eflorts form the correct from increased sales and 41 percent strategy to accomplish Goal )

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from price increases Ileritage, Future from Same Ideals Concern for Major Issues As the ground rules continue to he Customer Satisfaction h"'

AP&l. demonstrates through pn>

determined we belior we hase a pretty grams and outreach its concern for the clear vision of how we wiM operate in m N"ad*

mW w important iwe afic(ting the people of the future. If you have succewfully con-sme;me n,u.,.

our semce area l'lwwhere in this report.

fronted. as >vur Company has a large we discuw other elements of our nur-energv user who was about o install a kcting progrant including our co>nomic nujor cogeneration facility or me w cigh-declopment effon, Teamwork Ark.unw ing expansion outside your sen ice area.

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Miwouri We are serv cxcited about you h.ne dealt head-on with the "winds these programs. both as they relate to of change" that are and uill continue to

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our own financial perfornunce and as buffet our industry.

So they contribute to more and hetter jobs We know wlut it takes to get the

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Another nupt a nncem in our region job done. lhe 1950s and 19Nb lulled us f4 I

2' is (ducation lhis past > car, your Com-into an expectation of tranquility and m;

1 pany announced a 10 point pnigram of predictability. Much of the 19 Os and a'

b' educational support developed with 1980s was a senes of political and regu-

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guidance from education o0icials it is latory battles that left us and our indus-pnmanly directed toward mathenutics trv internally oriental Today, the com-and wience curriculums because Arkan-petitise nurketplace shapes our future saw hke most states, h.n a problem With 's ) cars of "llelping Build attracting new scat hers to these ficids Arkansac as a guide, we continue to I ducation othials especiali),qv follow the path of sua cw shown us by plauded one element of our program-founder llanry Coudt finding it as po n iding s 1.600 s(holarships to college beneficial to our state and Company students u ho will pledge to sj rnd a few today as it was in 1913 years teaching nuth or s(icnt e in Arkan-5 k

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A succewful nurketing program 18 companies, many of them working tially increased the Company's pur luse must be able to addrew different situa-closely with various aspects of the of local ga Kh and senices in addition tions, but the philosophy renuins un-Teamwork pn> grant built new facilitic to directly adding nuny millions of changed. I se the skill, expertise and and another 73 companics announced dollars to the stateN cconomy, thew corporate support of AP&lls nurketing expansions thew new facilitin and increased purcluws tuse aJded an and economic development program to expansions totaled some 4.500 new estinuted 125 jolw to state payrolls.

increase our sales-large and snull-jobs. Alany of these companin took Mhile much of our acthity is and bring more and hetter jobs to adtintage of AP&l?Q>h espansion rate directed toward the industrial cetor.

Arkanus and Southeast Miw>uri.

tlut pnnides incentisc rates for new or we are aggresshe in the rnidential area.

licre are two examples that illuv espanded huds as well. Al &L helped organize the trate.Se umbrella approact v e di largnt heat pump dealeri aw>ciation in Teamwork Arkansasoliw.uri-America-3"N drierships lhe aw> cia-1 Aituation t)ne 71cpotential nere Knowledge of Region Invalnable tion has been a significant factor in industry uus imprnsit e-a $ / 5 nullion, helping at hics e a 16 percent increase in highly sophisticated indi.std;/ gas de-The Teamwork group. composed of home heating comersions in 198~ and re/opment pmcess t/=st nun /d use 19 profcwinnals u ho are as likely to user a to percent increase in com cr.

aboutfir e meganutts ofchttridty show up at awembly lines as at national sion heat pump sale since its formation

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annind Ilv clot k 71v.1/GL industrial corporate ottices, use their knowledge two y cars ago.1his program exemphfies destlopment team unrked closely uith of the regioni nurketpLice to help our the concep of promoting alhes to the com/=my's loadership to der clop an customers find new ways to market and accomplish goah that are mutually inmnuth e "interniptih/c" rate that met espand pnx!uct lines and customer beneficial.

theprus/wt's e/cctricalmst new/s but base. as well as to help communitin pnitected the interrsts ofd/GL andits develop their pott ntial for growtit totalcustomerInise..lfGIndustries ni//

l'or esampic, an aluminum pn>cew.

Grass Roots go on-line soon uith an ultra-nustern ing faciIity w as faced with pn>ductinn fiicility sening et nen steel millin curtailment and job layoth because of a It is not really all that different fn>m Illyt/viil/c..trkansas, and other nonhy lack of r.iw material until Teamwork put when llatuiCouch hn>ught in l' astern markets the company in contact uith two in-and foreign tinanciers in our early ye. irs Situation Dm Oscarconjmrs nus state s"ppliers to learn first-hand the advantages of pirtty much a oneman operation in 1 Isen here. a metah casting com-AP&l. and Arkansas lhete are nuny

/frinkhy, Arkansas-thatis, untilbe pany was shown by a Teamwork profn-industrin operat'ng today tlut are camefacetoface uith the.l/G/ toint.

sional how a comersion to electric monuments to his acthitin toward R= lay Crmjmrs his siv ernphijws and furnaces w ould cut costs and impnn e "liciping fluiM Arkanus" contnicts uith A/GL to npiir artuity the quality ofits product. Today tlut

". lust hke llan ey Coutit" said "nightuutc/vr"hghisfor / css thui /=ilf company's energy costs are ins and the Vice Pre ident for Marketing Ken.,cth Ilv cost of nere ones and to paint and impnncd quality tus indeed. resulted lireeden. "we started at the graw roots tvpair strcellightpoles Conjurrs G in increased utes.

huilding a program where we wurk scry Com/minypmtides quality unrk to Aho, Teamwork pnnides an impor-closely with h> cal communitics and A/GL u hi/e ru/ ding offical netejohsfor tant link in the research ficid. Our n enbody internted in economic do ci-his sma// cmnmunity company lus worked with the l'niver-opment, and once again. as in Couch's AP&l. remrded an eight percent sity of Arkanus to doclop techniqun day. AP&l.is synonvnnus with ecemomic increase in industrial sales in 1987 to uw microwave technoh>gy in appli-do clopment "

Why? Prinurily because during the year cations for poultry procewing Arkanus is the nation's leading poultry pnw!ucer.

AP&l. has instituted an aggrewire "thry Arkansas" program tlut has substan-i

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Dx c/dcr/r imman, akine swd on reaching the elderly and minority O)mpany b willing to wek non tradi-fnkhtenal by t/x uurst snou'stonn in groups tional wap to reach all its customers Arkansas' history, s/ orc /r aiu/ tt /ucte rnt/r lhe Company brought together os er a openalher/mnt door to t/c stnmger-dozen groups including those w ho on/r af?cr she is us messunv/ hy the Insch High Marks were considered Iraditional adveruries ta ith itsfamiliar logo p n ke</ outside.

AP&lA position was simple: Tell us how

//e explainal t/vrt he had been uskal to lhere is good news AP&!. scores w e can do a twtter job of sening Suu delit sr ina// cine her doctor said she sery high in its senice categories in a and the people }uu reprnent. llegun necdal sunvy at the end of last summer,93 primarily as a 1.ittle Rock or Central No, 4/6/ tais not a de/isirr sers percent of our custamers gas e the Com.

Arkansas progrant it is being expanded t ice, hurfortunately this stonn inJan-pany exccikut nurks for reliable wnice, into all of the Compan>% districts

1. 4arr 198N badn't d unagolany lines or 94 percent gave a positive rating for opupment so emplowes inn using emergency restoration. 8 i percent said their time to help psur ide eineryency the Company lud courteous and helpful Incal Management seniws to t/c c/ der /n //x nkin explainal employees and HI percent thought

//na6/e tofight /unt the tons s/x AP&l.was well-organized and ellicient-lhe districts, themwhes, are anoth-thanka/ himfor caring "We did not wore as wrli in another er dement of the Compan>% new out-

!!cing there to help is part of our category that we consider one of the reach attitude. A significant element of traditiori most important-our customeri per.

the work force redudion and subsc-During the 192* liood when the ception of whether we care about them quent reorganization was to sittually Miwissippi River covered over 26 000 as indniduals" said llurgew Only about remove an entire le el of management square mile in een states. nothing

% percent gave the Company high hetween the corporate orlice and fictd cmdd move except AP&l. hnemen who marks in this category.

districts 1his mmo management deci-patrolled lines on horschack or lual.

"We intend to maintain our high sionuloser to the customer and also We also prosided power to the refugee ratings for senice and to demonstrate gives the local team more freedom to I

centers wt up for the 10 WOO residents by our actions that we do, indeed, care develop its on n programs displaced by the flood about our customers as indisiduals" 1he Company is equally comnitted liut in 19M, a decade of political ilurgew vid to maintaining programs that h.ne and regulatory strtfe, coupled with the worked wellin the past. Pro}u-t De erve, controversy surrounding the allocation begun in 1982. continues to pnnide a of the Grand GullNuclear station in Elderly / Minority Outreach way for ctatomer to add a dollar to Miniwippi. lud left AP&l. with a decid.

their electric bills, which, coupk d w ith edly"internal perspecth c" and the AP&I. w as rec mtly the nu ning force donations from the Compan)% stock-Compan>% public report card at an all.

that led to the do clopment of a consor-holders goo to American Red Crow time low.

tium of utilities and ge nernmental groups dupters in AP&lls senice territory. To Talay, howeser, AP&lXice.'resi-that pnnides enices to the elderly.

date, the Red Crow has administered dent for Customer Ncnices 1.ouis Burgew Additionally, the Compan>% minor.

20.000 awistance checks totalling mer assewes the situation thn war sty businew doelopment pn> grant si milhon in aid "We're on the road had, but we growing out of a Fair Share Agreement "I sincerely belin e the customer don't for a moment minimiec the chal-signed with the N AACP. lus become wcs a ditTerence in our O)mpany and lenge> facing us" widely recogniicd for its accomplish-our emploien. I wn e in our employ-l'or the pwt two 3 cars the Company ments in the black community. AP&L ecs a deep commitment to prove to our lus launched a wore of programs aimed has expanded its minority purchases nistomers they are very important to us at "building bridgn" to customers lhe from 5200.000.: year to an as crage of as indisiduah And, will continue that effort is nurked by nuny non-traJitional mer s i million a year.

effort every day with nery customer,"

asjuts and indudo particular emplusis Operation Cooperation. now in its widflurgew wcond > car, is an cumple of inw the l

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"It u as.i dollar and u nts perfor-Ikufget Njumni mn istn e dnu for for not /otr o/vrutions mant c for our customers and stot k-niade In o tospos tant < /u ks on his holders" siid.lohn Gntlin. senior e e lhc 1988 thrust of the pnslut tion ynte k dos e to o m k at. ti h un.n \\in In tr prtwident of generation aiki tr.msmw area w ill he to o >ntinue the high leu I of tinc. ute o/ 110/ 's tuo nus /nir umts sion ' Itcauw of tlus c\\tra generanoit

[wmcr plant pedornuiu e and to gne niur kunc//cs//c /he t tu ks ine//r our(cno twr kihm att hoor nin icar

.uktni cmptusn to s ost uint rol "A large tirren I net twtry hut //v1 a/n at, ns,tdc prtwith tion c\\lvnses ucre 16 pcr(ent lh ertion til (lic ( t unpanis ojw.r.itiiH1 ainj htm fa. j w kl \\he n t/i n//cr /on utg lcw than the) utnthlluse lwcn at the niainiciunt c eslw ine n in citir area.tnd

/w eene. /v n as ah/c to siv t/c rtany 19MO gctwrahon In cl ll thn c\\tra th.It gn es us the oplk utucil) to sigtuli f a/M pr fi/turh' /n Put tim' ( r *s 1/nly 18 n( t7

[hin t t had het n pD Milit ni h) ciul 4 n!r canih linp.R I thC ( ~tinip.in)'% lh itit ln A /!nig him on thn i old I)n emhci tuct cosh w ouhllus e twen some 90 hnc." sud Gollin "I s c ( hallcogt il eat h nie et nnly //WI Ilvs e n a sn I nun h a ni./

nulln in luglicr "

til inir tlepartments to bc.it their Inkl-stinitig /hith ututs a cte r ejvialnly gets h at Ic.nl lO lvrt ent and I'n) us/vih/i im./ n on/d hkc/r i om /nde t/c confident thm w dl" nun n ith in ord at ai!ahrhtr an Ige n-Sdery Paramount As nith am (ost (ont rol program, tvating in ott/s itssutttw asts % ith indnidu.ils ~l hct r t nunn/c or to o lahv the set on /

lhe ( ompan)N nut lear pringram a tlurge i het k Ilv a ta< k/r and /=.p on hn e ar a nuture one and has atlunnt lugh e /Inr on/r n /w/ ts injunn/

sa.hu as /v /unn/ rnader liv /ar ce Int k of ojwratmg and safets \\n rior-

• Ikr un/s n hat u na cuary la gel pon er hne Itut < anin/ ha prodin I man (c as u(ll as.n.olatuhh lat fors "\\\\ c theJoh donc em at /nsnt //v /.h h air ' 6 e i toh inter s rt t isgnUc the spn ial irsjkinstluht) any e ( ornfant/) /s =#k f4 et n un to at n m t v state //v statti in t:1/et cut c nut lear tiperath en !us" said (inthn cl/nnnate ninte

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' t hctc art no shiitit uts to he taken t he grocraHon and t ransnuwion

/I n tn /'iY stuh/r /w nt / / / s ul,tlnt:4 w hen it Jpplics bl ink lc.nr %.it h \\Milph (lepartnknt In't uth rcierg. int /cd til one of. t / 0 / i pt.mvn ny c/n Inc al put. sou ( annot lwt ome so fot uwd on a(lun e int rrawd t th t int new and engmcce\\ /c/t n hen the _'i on/c tians t mt t utImg dut 3ou Imc ught of 3our motc (Icarh dt hncd.a(ountaluhty nnumn /mc he plotto/ on foot N tu een responutuhh to m.unt.un the Inghtst I bc ('ompan>N w ork fort c rt duc-Ilah r, n and in kadelphia t tot 0/cd h e lo ch of s.lct) and rt gul.non rt spon hon reduu d the departnwnt h) ost r h/c. witory t/v sta;sc /e s //e c/n In/tcu sncorw? added(;nthn 'ilshne we 4HOlmunons tron o/ ts kan %n prou d in 198' tlut good peiformant e

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// 4 e t nh t' n ilr h a stin t li ns f and t 41st tinntnll can lv Jt him ct! w hile stime sch buigh tin nH His in the p.ht mos nnig soll full) mecong our satt n and rt gult t ouple of 3 cars Hut. thne n no ques A nutor iontnbutor to the ( om ton irsponululmes "

tion that wc are now a Irant r. more p.un N alulns to stahitur raics in 198' Al%I N tuo oul stations \\\\ lute lis owtl( omp.m>.tnd wt are dedicated W

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dcparimcnt tht ir lugh 'nt I of pt ttornunt c ailun mg (miv" pledgt d (,ollin it w as a inord scar for Al%I s as.nlahilus t.n nors and operatmg (mis llant) ( ous h and lus awot utes out lear umb u tut h twgan gt neraung ilut rankut tin m among the top uma m also knt w aluut iutung iosh and cln train m 19' 4 and I'mo I sub l and the nato ist "()ur oldcr oil and g.n unit s tot uung on realnar goals.n thn 2 4 l Arkan\\n \\ut ! car ()ne In Eirdt d a!MI me etc flun t ar Urd thMr w Mght '

hrought lhe (omenu nt c nhj salt h of c\\t clk nf perttirm.nk t s. gcurrating Nud ( erilhn

• t he.n.ulahlhh 4 >t h m s t Wt (In tInc i ncrgs 01 \\rk.m%n % m, t he nc nis tre th.in l I niillHin MK gan att h4 tur% J iuturJI gas lM rnuttol in til t >l4 rate

%unc phth Niphics att bring 11wd iti 22 ptit ent mt reaw iner 19sh thew umts at mot h luglu r ( ap.u in a a tinh ihr t narc \\bddle \\outh tat lors tlun anta ipainl an I to nuke a unmht am number of ott sutem sales" added ( s ollin M

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_m lhe nuiugement of Ark.uisas Power accountability progr.im and a compre-other procedures as they deem necewary

& l.ight Company has prepared and is hensisc internal audit pr > grant to reach and exprew an opinion of the responsible for the financial.tatements

'lhe ikurd of Directors pursues its fairnew of the financial st.itements and related financial information in-responsibility for reported financial We beliese llut thew policies and cluded in this annual report 'the finan-infomution ti rough its audit mnunitter, procedures pnnide insonable awurance (ial statements are bawd on generally composed of outside directors lhe tlut our operations are carried out with accepted accounting principles consiv

.iudit committec meets periodically a high standard of businew conduct.

tently apphed. I inancial infornution with nurugement, the internal auditors included el cwhere in this report is and the independent certified public consistent with the financial statements accountants to discuw auditing, intenul

[h To meet its re ponsibilitics with control and financial reporting nutters respect to financial infornutiott nunage-and repwts thereon to the lloard of

.lcrry I..\\l.iulden ment nuintains and enforces a s> stem of Dire (tors 'the independent certified President & Chicf IActutise Orbccr intenul accounting controls u hith pro-public accountants has e full and frec sides reasonable awurance. on a cost accew to meet with the audit commit-i cricctisc h. isis as to the integnty, ob ce-tec at any time without members of i

tiuty and relubility of the fin.incial Company matuyement being prewnt.

records and as to the protection of awets lhe independent certified public

! h this *) stem indudcs communication accountants pnnide an ob;cctive awesv through w ritten policics and pnice-ment of the degree to w hk h manage-Michael H Bemis durcs. an organi/ational structure tlut ment meets its responsibility for fairnew IAccutive Vice President.

pnnides tor appropriate dmsion of of financi/l reporting 'lhcv regularly Operations & Sct rctary responsihihty. the sclet tion and training esaluate the system of intenul account-((Jurf f inancial Otticer of quahlied personncl. a perfornunce ing control and perform su(h tests and to March 1,1988)

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'ihe Arkansas Pow cr & Iight mg. and fituncial mntrols are in esiv ent. Io dncuw the resuhs of their exam-Compan) Audit Committcc of the ikurd tence and are adequately resicwed h3 inations th(ir evaluations of the Com-of I)ne:: ors is compriwd of wsen programs of intenul and uternal aude, pan >N intertul wmrols and the oserall t hret iors w ho are not of N crs of the

'lhe AtJit Committee diwuwed quaht) of the Comgun>N tinancial

( ompany llal l' ilunter.J r. ( luirnun.

u nh thc Company's intenul auditor and reporting the meetings alvi w ere de-lomm) t hllnun.1)r Ra:mond P \\hlicr.

the indepcodent public accountant signed to facihtate any prnare commun-Nr,.lohn J l lake. Kancaster I h niges J r.

(Dtioitte liaskins & s l19 the userall ication with the comnuttee desired by e

% n! son D Walkcr. and Mkluci i st ope and specific plans f or thcir ibe mternal audnor or independent Wilvin Ihr mmmittcc Scid four meet-respcttne audu, lhe commitacc also public au ountant ings during IW dncuwcd the CompanyN consolidated

'lhe \\utht Committee oscrwes the financial slacments md the adequaq of

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( ompan>N finant ui reporting pn n ew the t ompamN internal tontrols lhe on lx lulf ot she lloard of t hrcciors a.d committre met u uh the Compam's pnnides reasonahic awutant c to the micrnal authtor and mdcprudent pubhc flal i llunter.Jr.

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Hoard that sufficient ops rating..n coun0 anountant. w phout m.uugemeni prc+

( luirnur \\udu t omnunec In

Financial Condition continue to be deferred. In this connec-ters" and "Commitments and Contin-Net income in 1987 increased tion, the Company has requested and gencies" ropectntly.)

516.3 million or 13.1 percent over 1986 obtained the appnnal of the Federal and 531.1 million or 28.2 percent osrr Energv Regulatory Commioion (FERC) la,qu,dity and Capital Resources 1985. lhe Compan>% financialimprost-to mndnue MernMostdor pur-h Onnpandus adopted 5FA5 ment can be attributed primarily to the poses of financial reporting to the i ERC Nu 95. "Statement of Cash Ilow3" and reduction in intere t expense on long-In February 1988, the Company filed acturdingly has prn(-nted Statements of term debt which significantly contrib, with the 5ccuritics and Exchange Cash Ilows for the 3rars ended Decem-uted to increased net income, and to Commiwlon ($EC) an application for an her 31.1987,1986 and 1985. (See Note reduced capital requirements awociated rder which wuuld permit it'e Com-12 to the iinancial Statements "Cash with increased current rec n cry of pany to continue deferrah of such ano.

and Cash Equivalent ")

in financial statements filed with the Net cash from operating actisities Grand Gulf I c(nts punuant to the Compan)% settlerdent agreement

$1 C l'nder the transition pnnisions of in 1987 of 5230 8 millkm increased

( Arkanus Scalement Agreement) with WAS Na 92, application of that state-572.1 million <n er 1986 due primarily the Arkanus Public Sersice Conuniulon ment nuy be delayed if the Company to incre.ded net income of 516 3 million has filed or intends to file as soon as and reduced deferred purclused power /

( A15C) relating to Grand Gulf 1 (see Note 2 to the Financial Statements-practicable an application to amend it excew capacity of 54 5.7 million. Mhile "Rate Statters") and reduced construe, phase in plan and it is reasonably pa n-1987 deferred purchased wmtr/excen t

tion expenditures sible tne regulator will amend the capacity decreased as compared to 1986

'lhe impnnrment in net income, ph.oc in plan so dut it will comply with primarily due to increased reontry of combined with the reduction in intemt the deferral criteria of 5FAS Nu 92. If Grand Gulf I onts under the Arkansas expense, resulted in impnntments i,

the Company is ultimately required to Settiement Agreement such deferrals the Stortgage and Clurter antrage comply with the petnisions of SFA5 omtinued to diminish net cash from ratioi ik>th cmtrage ratios are w ell Nu 92. It may seek under ternw of the operating actisities since actual collec-alxnr the minimum required for twu.

ArkansaOcttlement Agreement. to tion of resvn an to reaner these ants ance of additional securities Without negotiate a mutually acceptable amen 4 will not occur until the future. Net cash accewing long term capital markets in nm to modify the prmisims of the from operating aethitin w cre 5 426A 1987 the Company retired. four lears Arkanus Settlement Agreement w that million. 5400 0 million and 5321.9 prior to nuturity,580 million of 16%

deferrah of costs wuuld comply with million in 1987.1986 and 1985, re pec.

percent first mortgage bonds (E\\lli) and pnnisi ns of SFAS Nn 92. Ilowescr. if tnrly, prior to r duction for dcferred continued to finance deferrals under the the Company w cre to seek such modify-purclused power ant /excen capacity Arkanudettlement Agreement uhile ing amendment and not succeed in of $195 6 million,52 41.3 million and nuinuining significant le rh of tempo-obtaining such modifications to its 590 0 million for those re pecthe per-rary imrstments.

phase in plan, the Arkanveeulement lods Esen though deferral of Grand Gulf 5tatement of Financial Accounting Agreement wuuld terminate, a write off I purch. bed p(mer onts and excew Standards (SFAS) Nu 92. "Regulated of previously deferred costs would be cipacity (both of which are not currently Enterprise - Accounting for phase in required for financial reporting pur-reoncied through rates) significantly Plans" (SFAS Nn 92) was twued by the poses. further deferrah would not be increase cash requirements such defer-financial Accounting Standards Ikurd permitted. and the Company s financial ral renwnn the impact from the income (FA515) in August 1987 and is effective pmition and result of operations uould Statement, excluding the pmion re-for )rars beginning after December 15.

be nuterially and adiersely affected 1he tained tw the Company ( Retained Sture).

1987.1he Compan>% deferrals of costs Arkansas settlement Agreement pnnides (See Notes I and 2 to the Iituncial under the Arkanus settlement Agree, that all c wts awociated with Grand Gulf Statements-Sumnury of Significant ment do not meet the criteria for I which have been deferred by the Accounting Policin" and "Rate Niatters" deferral established by SEAN Nu 92.

Company prior to any such termination respectiwly.)

llowes er, the Company believn that of the Arkanudenlement Agreement The Compan>% investmenh in con-owts it has deferred in accordance with would be reontred in accordance with struction of utility plant / nuclear furt the Ark.mus $cttlement Agreement are ib pnnisions lhe Companyis pre ently and other utility property of $135.3 probable of future recovery and should unable to predict the ultimate outcome million. 5109 6 million and 516 0 of these matters (%ce Notes 2 and 4 to million wetc $8 6 percent. 69.1 pertem the I inancial 5tatementw"Rate Stat-11

e 4e t

b asul *2 0 pctrent of nrt cash available in er 1986. mil $ 19 I 6 million iner 1985 19H7 w as a tits reec of $ 16 2 millhut as from operating arthitics in 19H7,1986 thiring 19H7 anti 1986 5225 millhm oimparnl to ) car rial 1986 as a reuilt aiht 1985, respruhel). Omstnkihm ofI Allt. wIth interest rates ranging from -

of Ihe net cash toguirementuliwuoni esprtwhtures thrreawtl 53 47 nulthus 17% per(ent to into twrcent, were herein Short tennl=>rnming autlutrit)

(turing thk thrtx') car peritsi rrtirol at a unt of $228 6 millhin in ad up to 10 twn ent of capitalitation has

'the Gimpany b a party to Iwo -

asklithut sluring the three > car perlott born Juilu ettint b) the $1 C, unbloct to tuwlcar fuci lcan, w hk h lutl pctmit teil 19801987 thc Onngun) retirnIlmrsu-thc amilability of trnlit reviurus Nnh the Onnpany Io leaw up to 5160 millk m ant to applicable sinking futui pnnisions stunt term tw>rriming auiluirity at ) car in the aggregate. At ikxember 3I,19Hi 40 $ millani proferrnt stm L int halmg entt 1987 was 038 5 millhm At ) car the untrturtnl ont lue of twnh optituul rttirements of $ 13 million.

rnti 19H' am) 1986, reslw Ihely, the leae aggrrgatest s t 13 6 milln ni 1he lhese retiremenis w cre oilset b) the Comluny lutt amilabic,luit was nuit crettit hnes supporting one of these (wuan(c inJuly 19Wi of $50 millant utlheing Wii millhm anil 5616 millhin leae luse tennisutnl I urt presently 104 gwrcent i \\llt, in Nmember 1986 t4 of Atlane lunk hnts (Nr Note 7 to unster thh lease nuy continue to be MO milliint H 92 percent profonni the fliuncial Natements"I.ines of leasnt utail Neptember 1,1990, w hen stiw k ansiin thxember 19H5 of $l20 Crnht aixt Stu>rt Trrm iknrowtogs" the lease termhutes I tu no new ftwl millout hotallment purtiuse onaracts trganhng lines of t ruht auitahic to the nu) lie leawst unaicr thh arrangrnulu for 11 [wrrent [willuthni nint rol tor-Comiuny.)

1hc want nrasc anti suptwming troht nur lunwh (Nr Notes 9 anal 10 to the lhe Gimgmy lus roguestol rego-luns art *theilutett to tenninate 1)ctnir I ituin tal StatrinentsdPrrictrol alul latory authoritatlint to wil tip to 52?u ber 1,19HH In the ostent tlut the Owmnon Stin L" aisl"long letm I h bt'l nullion of I \\lil.uhl til%0 millkm of Com uny (ton not ime supporting lutunct s ant! reittenwnts of prtferrni prrfor rnl sitn k limiugh I obnury 19H9-trnht hnes Ior lunh mk lear turi tra es e L. I \\l11 anti (mtallment purt luse

$1 C autbortration tus txrn tirla)ett Akhtkuul cash enguironwnts wouhl aintracts nwultnl in a nrt rnlu(thm in twame of the runtnt Alkkile N>uth result (Nr Note 4 to the Iinaix V reh id 5% 4 nullion iluring the perhal Splom pniblum aw(latal with Allwiv Mairment#Comnuinwnts anil O m 198 0198?

sippi INmtr anti light Ownpan)N tmgenciril in 19H7 the Company mri @h

( All%1 ) rrrinct) t4 Graial Gulf I onts Ikrause of at mal anti potrntial reigulremenn n^lating ta payment of l' twin St C autimrliatioit the priworth

.uh rrw thuin tal o mwiiurm es rrlaint tlnistetxh. hs onminwtion pnigram ami t4 any saics of wrurttics iluring this time to the Granti(,ull Nut trar Station (we rate plumin plam prinurtly ftom c.nh jw rksl are eslwt tnl to be applin! to Note I to the thundal Statementw inHu operating avnitics I)oring the unhinn tkm rspawbtutts finatur l'oillinitmt nts ant! ConthigetRir%"),

[wth4119NH-1990 the ColupJny CspCrts (irdikt Gulf I pun ha%ctllwmt r (leforf ah the Company thil not iln ;4rc oimnon sube t to unningendes slbouwnlin umirr the ArkamaWttlement Agrec-stiw k sinkleiwh twtu n n June 19Hi anil Note 6 to Ihe I anain tal Statemona.

ment, the pow:ble totirt mont of Akh-Jul) 1987 lim ints rtuption m payment ihrse c.nh roluiremenh Io be mrt Ikwul high ont slobt amt other turpo-of onumon stos k (Initionsh t.norably ptinunty by wh f rom olwrating xt hi-rate purpoe attednl the romgun>% th uktn> gwwi iws (Src Note I io the I hunt tal lhe Compan)N \\torigage ontrage t

tion Gunmon stis L tlnistetuk of O2 6 StatementWCommitmoth anti Con-ratht whkh mmt be a minimum of 2.0 nullhm wt'rc tIrtlJtetlln 1987 Al%IN tingdh iri) lhnes the JniM4Jl nortgJgc Intert4:

pts terrni siis L tinislenti roluittmenh it b anik qutal tlut the Company rotuht mrna for the twtunte of Ahlt-sluring thh gwthiil worr mrt wlih no nu) dmosc to trilnance or retire, thuut i \\llis w as 310 at Ikumber 31.

interruption Onnnen anil prrferral timiugh me of interiully or estenull) 19H", tomiurnt to H9 at t humber stis k dn kletsl paymenh in 198',1986 generatnl fontis high cost ik ht and 31,1986, anti J Hi at 1)n rmbre 31, anti 19H% amountett to 20 H pctrent, proft trnt sto(L in anmunk that cannot 198%. While unfumIctllu uwlabic prop-1 i 4 lwrt ont JIkl %O l lwrtTtil. nwpre prrsent!) be dctrrmiivtl. In.hkltthMt the rrt) anil retilenwnh of peniumly twlWil inel). of not cash auttable from oper.n Owupany nu) enter into arrangemrnh I \\tll w rre au;labic at 1)ntmber 31, ing A thitics As a result of not papng for the ute aial travtut L of pnipert) in 1987, for fututur of up to Mli nnilhan n unmon m u k tin klowls for a lw nuon whk h the pnwenh irom un h transae athlakinall %llt tlw 3 lu ratin at ) car of 198' anti all of 1986 amt of im reasni ikim t ouhl tw uwd to retire drbt at gur.

rtal 1987 woulti hae allowni the not ina>me,19H7 retained rarn6ngs of 1hc Com;uny% tomtwirar) cash Company to n 11 only an askhthqui S lH1 5216 0 nuthou kn reawd 59 4 0 nuthon im o unrnt of C'H ? nullkm at ) car nul nuthon of I \\llt awuming.tn interet atc la

of 13 percent.

Opirating re vnues for 1987 Alaintenance expenses in 1987 The Company's Charter cowrage increased over 1986 and 1985, $15.4 increased $20.5 million and 5284 million ratio, w hich must be a minimum of 1.5 million and 5 40.1 million, respectntly.

oser 1986 and 1985, respecthrly.1 hoe times the Company's annualinterest KM11 ules to retail cintomers, exclud-increases w cre primarily due to increases clurges and preferred stock dhidend ing Reynolds 51ctals Company (Rey in nuclear nuinterunce of $18.5 million requirements to allow the issuance of nolds), increaxtl 5.3 percent with and $25 6 million additional preferred stock, was 1.89 at awiciated rnrnues increasing 4.4 per-Reduced purduwd pm cr dderrals December 31,1987,1.70 at December cent or $38 6 million mrr 1986. Reve-in 1987 were due to increased current 31,1986, and 1.48 at December 31, nues from Re>uolds in 1987 decreased collection of purclused pow er cost pur-1985.1he 1.89 ratio at year end 1987 520.8 million compared to 1986 due to suant to the Arkansas Settlement Agree would hase allowrd the Company to termination of the demand charge pnv-ment. As discuwed in Note I to the issue an additional 5290 million of pre er contract with Reynolds on December Iinancial $tatements "$umnury of Sig-ferred stock assuming a dhidend rate of 31,1986. Roenues from sales to the nificant Accounting PolicicC deferring 13 percent.

Sliddle South power pool in 1987 in-purchawd power cmts which are not The increases in the Company's creav.d 532 0 million Sales to munici-currently recovered through rates coverage ratios since December 31, palities and cmperatives decreased remmes the impact of Grand Gulf 1 1985, were due primarily to increased 516.1 million and sprem sales to others onts which are not being reontred earnings and to decreaxx! interest decreased 512.5 million. Roenues from currently on the income statement, requirements resulting from the Com-gas sales decreased 54.3 million in 1987 excluding the portion retainni by the pany's early retirement of high awt debt due to a mild winter and to the low of Company.

as diwtwsed abin e.

rornues from a large industrial gas etwtomer.

Results of Operations Operation expenses in 1987 de-51aior factors in the Compan)'s On October 22.1986, the Presi-creased $22.3 millior, as compared to m erall financial imprtn ement during dent signed into law the Tax Reform Act 1986 but increased 5133.7 million as 1987 wrre continued ruiuction of high of 1986 ( Act).1he Act has not lud a sig-u>mpared to 1985. In 1987 as am1 pared ont debt and an increase in the portion nificant effect on the Company's resuhs to 1986 there was a 523 8 million of Grand Gulf I expenses being recov-of operations or financial condition decrease in charges to operating ev cred currently, rather than being de-since clunges under the Act h.nr been penses due prinurity to 1986 pnnisions ferred, pursuant to the Arkansas Settle reflected in the Company % rates with for estinuted liabilities aw>ciated with ment Agreement. These reductions in the AlWs approval. (See Note 2 to the certain planned future fowil generating intere t expe w and cash requirements Iinancial Statements "Rate Statter()

facilities flownrr, this decrease was can be expected to posithrly contnbute in December 1987, the l'Asil re otTwt by an increase in nuclear reserve to the Company > financial pnition in leawtl SFA5 Nn 96 "Accounting for and deferred fuel unts of 52 f.4 million.

the future. Ilowntr. the Companys income Taxes." SFAs Na 96 is not (See Note I to the Financial State future fituncial condition u>uld be expected to have a significant eticct on ments ?5umnury of Significant Ao significantly impacted by the outcome the Company's results of operation or counting PolicicC) Mhile the amount of the appeal pending before the l'nited tinancial condition (See Note 3 to the (KMll) of purclused power was approv

$ tate Supreme Court reg.trding N1 Pal?s Iinancial Statement "Income Taxes")

imately the ume in 1987 as in 1986 Grand Gulf I rate relief, the application, lhe narrent yearn net income of purchawd power cost decreawd 522 8 if requirut of si'As Nu 92, as well as

$141.2 million represents an increase of million prirunly due to the use of other commitments and contingencies approximately 516.3 million or 13.1 per-nuc! car generating capacity provided by as diwussed in Note 4 to the Iinancial cent mrr 1986 and an increase of Grand Gulf 1, rather than the buying of StatementWCommitm-ats and Con-approxinutely 531.1 million or 28.2 power from outside sourcn. and low er tingencies" percent compared to 1985. Decreases capacity ont related to Grand Gulf I in totalinternt charges in 1987 as power, increaso in purchawd pmtr of compared to 1986 and 1985 of $18 5 5136.7 million in 1986 compared to million and $13.1 million respectiscly.

1985 were due primarily to Grand Gulf significantly contributed to thew I billings not beginning untilJuly 1985 increaws in net income.

when the unit was placed in commer-cial operation 13

Arkansas Power & Light Company and Subsidiary, December 31 1987 1986 (in fluntsamds)

Assets Utility Plant (Note 4):

Electric plant

$3,663,417 53,519 608 Propcrty under capital leascs (Note 5).. _ _

96,614 97,707 Gas plant _

43,423 41H13 Construction work in progrew 103,416 127,337 Nuclear fuel __

26,380 15.127 Nuclear fuel under capital leasn (Notes 4 and 5) _

143,594 147,277 Total 4,076,844 3,9 6M.869 1 css-accumulated depreciation and amortization 1,068,407 961.615 l'tihty plant-net 3,008,437 2.987.254 Other l'roperty and Investments:

Investments in aw wiated companics. at equity (Note # )

38,842 38,816 t.

cr, at cost (lew accumulated depreciation) 176 181 Total 39,018 39.027 Cunent Assets:

Cash and cash equivalents (Note 12).

Cash 7,615 H,396 Temporary invntments, at cost w bich approximates market ( Note 7) 78,735 121.905 Total 86,350 133.301 Notes ret eivable-nct 730 1,312 Accounts r crivable; Aw w iatcd companies 20,337 30 A >4 Customer (lew allowance for doubtful accounts

-h.42 4JMH) in 198" and $1.32 6.tNM) in 198(0 65,346 69.9~0 0ther 2,427 2,999 I)cferred fuct cost (8,727)

(3 ~59) l ucl inventorv..it.n crage cmt 29,125 28.15%

Malcri als and supphn. at as cr. ige cost 46,982 60,023 l' repayments and other 13,187

-15.863 lotal 255,757 31',908 Ikferred Debits:

1)cfcrred purchased powcr costs (Notn 2 and i) 454,910 286.513 I)cferred cuew capatity(Note 2) 72,002 i4.829

( )ther

$9,329 62.132 l'otal 586 241 393,50 e total

$ 3,x89,453 R'3".694 W Notes to Con udichtted inknichtl \\littenienst 14

k Arkansas Power & Light Company and Subsidiary, December 31 1987 1986 (in thousands)

Liabilities Capitalization:

Common stock,5.01 par value in 1987 and 512.50 par value in 1986:

authorized 325,000,000 shares; issued and outstanding 54,980,196 shares in 1987 and 1986 (Note 9) -

550 5 687,252-Paid-in capital (Note 9) 694,558 7,596 Retained earnings (. Note 8) 244,025 151.063 Total common shareholder's equity _

939,133 815.911 Preferred stock, net of premium and expense, without sinking fitnd (Note 9) _

126,890 126.890 Preferred stock, net of premium and expense, with sinking fund (Note 9) ____ ______

151,255 165,009 tong-term debt (Note 10) __ _ ___

1,236,223 1,313,601 Total 2,453,501 2,451,414 I

Other Noncurrent Liabilities :

1 Obligations under capitalleases (Note 5) _ _ _ _ _ _ _ _ _ _. _ _ _

138,423 134,504 Other(Note 1) ___

20,876 24.974 Total _ _._ _ _ _ _____

159,299 159.478 i

i Oarrent Liabilities:

Currcntly nuturing long term debt (Note 10)

_ _ _ _ _.. _ ~. _. _ _ _ _ _

3,223 2,955 N oto payabl e._ _ __ _ __ ___.____ _ _ __ _.._ __ _ ___ __ _ _

667 Accounts payable:

Aw>ciated companin _. _ _. _

35,342 29,115 l

Other _ _ _ _ _. _. _ _ _ _ _ _ _, _ _ _ _ _ _

97,631 95,794 Customer deposits -.. _ _. _. _ _ _ _ _ _ _ _ _ _. _ _ _ _ _. _ _ _ _ _ _

7,667 7,658 Tasn accrued _ _...__..___. _ _ _ _ _ _.__ _ =. _., _._ _ _._.._ _ _

66,532 20,913 Accumulated deterred income taxes (Note 3).. _ ~. _ _ _ _ _ _

(3,498)

(1,711)

Inte rest accrued _ _. _ _ _ __ -_._ _ -_ __. _. _. _._. _

~

47,555 50,104 j

DMdenda declared (Note 8) 6,261 6,027 Nuck ar refueling reseTe _. _ _ _. _... _ _ _. _ _ _. _.. _.. _ - _.. _ _ _ _ _.. _ _.

16,432 2,527 j

Cmmner advanco (Note 1) __._ __

26,306 27,968 Obligath>ns under capital leases (Note 5). _ _. _. _ _ _ _._. - _ _ __

101,785 110,480 1

Other _.. _ _ _. _. _ _ _ _ _ _. _ _ _ _ _ _ _. _.. _ _ _ _ - _ -. _ _ _ _.. _ _

15,687 21.627 t

Total. ___

421,590 373A57 Deferred Credits and Other I labilities:

l Accumulated deferred income taxes (Note 3)

$35,072 474,395 l

Accumulated deferred imrstment tax credits (Note 3) 186,699 182,509 Other 133,292 96,440 Total 855,063 753,314

(

l Commitments and Contingencies (Notes 2,4 and 5) l Total

$3,889,453 53,737,693 9.

See,%tes to ConsothLatalIhianchd Statementa n

)

Arkansas l'ower & IJght Company and Subsidiary, Years Ended Ikxrmber 31 1987 1986 1985 Statements ofIncume Operating Revenues (Notes 1,2 and 1I):

1:let tric

$1,365,080 51,345,415

$ 1,316,797 Natural g.ts _

39,776

-l1.079 4 /,9H9 Total 1,4M,H56 1,389,19-e 1,366,7H(5 Operating Expenses:

Operation (Note 11).

l'ucl 332,6H7 331,9? $

32H.03H Purt tuwd pimrr 431,716 651,558 317,Hi t Gas purtlusett for resalc 26,(XX>

31,592 35.H 16 Ikfctred fuc t and other 2(<>,420 251,970 239,35H

.\\l.t'otenance 92,048 71,509 (33.6H6 Depreciation 119,104 114,742 109J>H6 Tau e other than in(ome taus 39,466 39,0H9

,603 1m ome tases (Note 3)

(10,6M)

(20.02I) 5H,5 60 Rate Ikferral l

Deterred purdu etl pimer(Notes 2 and 6' (167,956)

(210,33i)

(76,015)

Ino)me f ases(Note 3) 73,170 103.527 37.615 Total operating, espenses 1,195,971 1,l' t.616 1,117,997 f

Operating Incume 208,H85 217.H78 216,7H9 Other income and Iksluctiom:

?

Alkm ante for equity funds used during comtruction 5,605 5, 85 5.998 Mix cilancom-nct (Notc 2) u),24 63.059 10,330 tou>me tam t % e 3)

(14,062)

( l 4.H 6 5)

(l1,659)

Total 60,807 53%a 3LWM Interest Garges:

Interest on long term ddit 219,287 160.566 I \\M.752 Other inttrest-net of debt prcmium 13,410 10.H53

• 310

.\\llowan( c for bortim ed f ands owd during u mstnKtb ut (4,165)

(6.363)

(1 172) lotal 128,532 167.t)56 181,590 Net Ino>me (Note 13)

$ 141,1(4) 5 12 6 H21 5 010.iWI Statements of itetained ihrnings Retainn! lamings-January 1

$ 151,063 5 49cil ?

5 26,101 Add-Net income (Note 13) 141d60 12 4.H21 110,06H Total 292,223 174.238 133 164 1kxluct-Cash dividends:

prt ferrohto(L 25,554 23.175 21,920 Ommu m stot k (Note H) 22,(44

~

63.N 32 l'ot a1 4H,f 98 2 3, t "5 86 ?52 151,(b.

Retainni Earnings-1)etember 31 (Not 3)

• M4,025 5

)

49. I ! ?

. - -.., _ =

An Notes to ConadidatalIinandal \\tatements 1

lb

4 Arkansas Power & Light Company and Subsidiary, Years Ended December 31 1987 1986 1985 (in ilxmsamts)

Statements of Cuh Flows Operating Activities:

Net income _

$141,160 5124,821 5110,068 Noncash items included in net income:

Depreci.ition 119,104 114,742

-109,686 Deferred Inn & investment tn credits 63,050 180f>04 61,748 Allowance for funds used during construction (9,770)

(10,148)

(10,470)

Prosisions for estimated losso (Note 13)

(4,551) 13,978 52,707 Deferred purchased power cost /excew capacity (195,612)

(241,306)

(89,993)

Changes in working capital.

Receivables 14,921 21,015 (36.851)

Accounts payable 8,0(A (1,079) 32All I uct inventory (970) 29,788 26.055 Dcferred fuel costs 4,968 (292)

(10,128)

Other working capital accounts 44 (l2,212)

(22,582)

Tnes accrued 45,618 (58.151) 23.863 Other operating actisities 44,776 (3.057)

(l1,592)

Net cash-operating actisities 230,802 158.703 231,922 Investing Activities:

Construction expenditurn (137,277)

(143/4 2)

(172,013)

Nuclear fuel expenditures-net (11,253) 20,556 (8.362)

Allowance for funds used during comtruction (Note 1 )

9,770 10,i18 10,470 Other pn perrv-net 3,468 3.309 2,870 Net cash-imoting actisitic (135,292)

(109,589)

(16'.035)

Financing Activities:

A Pnscenb from sale of Preferred stock 48,563 first mortgage bonds 48,63' Installment purchase contracts Isui 11 h,161 Repa) ment ofimtallment purcha c contracts (837)

(608)

(1,153) 4 1.ong ierm obligations-DOE 4,377 4.0 F 4,""'3 Retirement of first mortgage bonds (84,959)

(146,066)

(19,365)

Dhidends paid.

Common stock (22,(A4)

(93,813)

Preferred stock (25,321)

(22.8M )

(23.013)

Redemption of preferred stock (13,459)

(4,152)

(2,851)

Change in short term horrov,ing 667 other financing acthitin (285) f8n8)

(325)

Net cash-financing acthitin (142,461)

(?! 567)

(I? 58(0 Net increase (decreae)in cah and cash equivalents

$ (46,951)

>(22ciS3) 5 47,301 Cah and cash equivalents at beginning of year 133,301 155,7M 108 453 Cah an3 cash equivalents at end of year (Notes 7 and 12)

$ 86,350 5133.301 55,?5i See Notes to (ansolklatalIin,mthlStaternents I7

I u

u

'"'f mainiciunty anti rctuchng the rncnc

12. Ihtretirement lienefits

~ O ~

~?

e bears internt and h usnt to rnlut c tuel esponse for luct adnntment puriwnn

't he Company has ;w nt retirement RA M E.OP'.

}

dunng the shutdow n periott Islans oncnng sulntantially all of its tm gggg ployn, 'the [wihn of the Company is to 1,

,}

fund pension onts in accordaix c with

~~

w

~. f.'?

D. Utility I'lant and Depadation omtribut km goalchnn ntablishal by the 60s h a.WN Nihyg)M i mployee Rctircment Int ome u urn) At t s

'the oN of additions Io utila) plant of 19'i and Io tunti osher lwniretironent int ludo cont ran tcd w ork. thrn t labor.ind plan o nts.n ins utrett m.uuu aHocaNe o usuis and an aHow-A. Principin of Gmudidation an(c for ihe iom}xni.c u nt ot' t'unds used donng wnstrut tion 'the onts of umb of G. Inome Tnes lhe.nwmpa m ing ( unsolidatul finan-propcrts retired are renanni from utiht) tial sun ments int hale the at u sunk of plant.md sut h anh. plus remin.it onts lhe ( ompam joms in parent in filing i

Arkansas Pimu A Iight ( ompam and ih l

Icw s.ih age, are t lurged to arrumulated a o>nwhdated I nlcral locome in rctunt w hollum ned sulnidun. unt uint deprnianon \\taintenant c and rep.or of hu una inn are albicatal to the ('ompam 1

Natural (..n t ompam propern and rcpl.ncment of itenn deter-in proportion to in tont ribtaion to t onmi-nuned to bc Icw tlun umb of property are alatalinable uw ome Ntand incoint P""""

'" "F'""N Y""

I" " ""'P'"" "'I"'

11 Sutem of Aaounk

~

l>cprn uhon h wmputal on the book and tnable intome to the estent ur.ught kne lusn at raics ha cd on the twrmittal by the regulaton bodin for rate-the auounh of the ( ompan) are niinutct! sen a c in n of the v.iru nn t lawes nuking purposo Im ntment in t rnhh numtamni in an ordant c w uh the umform of propcrt) 1)cprn unon on.n crage de-allocaint to the ( ompam arc det.ctred.ind sy sk m of at uians prew nbnl bs d c l ni pruiabic proports m 19M'.1986 and 19H%

amortiini cncr the au rage usefullile of t ral I ncro Hcgulaton ( ommiwton amountul to appiosinutch A 3 pt rt cnt the n iatut propertt beginnmg w nh the c.n h s car substantully all the ( ompan> N 3 car allow ni m the consolnlatul in retunt untas punt n suht t to the hcn of us Orst G Rnenun and Fuel Ont mortgage tuind nulenture,

11. Alkm ante for Funds Used lhc ( ompam in ords ro cnun as billnlio as tustomcrs on a oiIc hithng During G nstruction on Gen ting Stations ben Hnenue n not at t rued for"un rgs ik incrni but not bdint ' at the cnd of the 1o the cuent tha' the Company b not the ( ompam jointly im ns two ctul-pernuttal bs us regulaton buihn hi n un-Osc.dpu W fuelal gronahng st.auins cat h w uh tu o

( r m current r.Hn the (arning unt of imwh substamulb all of the ratr s(huluto unas c ( ompany the agent for toc used for wnstnk hott the Compam capi.

of the Comp.un intlude aJiustment tlauso luhlcr w hn h flK l tints Jbine t tr l Wit m the

" W 3 " C " * ' * *h

'WeA*

• n e - appn>pnAc (int a d utWW hons D n conb as un ntnwnt and npenso pl.nu. an allow an(c for funds used donng lot b allim al m the s ariotn r.uc st hntuto awot utul u uh unse Manoas to the cuent consuut hon ( \\110 w hk h n caloitatul are penuntnl to bc bdini w rolmrni to be of us ownMup uunnts in du* genaahng and rnorded as prouded by the regul.oon t rnlanl to customc rs the ( ompam tus

• • "n s unitonn elem of aununo l'nder this utd-

dopint a dt taral on thod of at wunung u Dn un r du-( oinpans s H) todustn prat in c. wnstrut tion wotk in for those furt t osh rn os crable onda fuel a nnu of ow nusny and nunnut nt ns pnyn w on the lutark e shu t h (hargul adjustmi m (lausn I nder thn nwthott sus h una arc di c tred to the month m

' P" "'

'"""*"d""""'

"" IU"U d"d the mcome statement h (rnhtal for t

Ninuniintnc sunon P oi the approsunale t om[w nur internt ont of whn h the n Lunt rcu nun arc bdicd 1000 and lodrivn&nt c sicain bornm ni funds aini for a reasonable rcturn t he fut I adruu na nt tat tor t ontains an

' " " " ' " ' " " ~ I

'" thC "Itun funds used for wintnn lion amount for a nut Icar rescnc. ntmutt d to oner the (ost of rcplat cment cocrgs w bcn ihn pns nhire n mtetulnt to remosc f rom the inwmc statement the t tini of the ont the not Icar plant h dow n for w huluk d ut luunt mg the unntnk hon pn gram and 1M

e results in treating the AlDC charge in the tion retained by the Company (Retained same nunner as constructiort latur and Mure). Only those onts pernunently re-nuterial c&tt As noncash items these tained and not recmcred through rates or credits to the income statement h.ne no through ules to third parties result in a effcct on cash ihnvs from operating actisi-rnluction of net income. Ikcauw the actual ties After the property is placed in wnice collection of roenun to recuser the de-the All)C charged to construction cmts is ferred amounts will not occur until the recoserable from customers through depre-future, the Company incurs cash require-ciation provisions included in rates c! urged ments in the anmunt of thne deferrah and for utility senice. The etYective cumpnite at the same time records a deferred awet A11X: rate for the Company w as 9.2 per-representing the amount of the deferral.

cent,9.11 percent and 9 0 percent for 198' 1he carmng charges awociated w ith the 1986 and 1985, respectively.

financing of the dcferrah are recovered wrrently from customers See Note 4 to the l'inancial Statements-Commitments L Other Noncurrent Liabilitics and Contingencies" regarding the iwuance of Statement of l'inancial Accounting Stan.

It is the polig of the Company to dards Nu 92 w hkh addresses accounting pren ide pnnwions for uninsured property for pluw-in plans and criteria for defernng nsks certain employee benefits and claims onts incurred under such plans for injuries and damages through charges to operating expense on an accrual bam Accruah for thew pnnisiom have been allowed for ratemaking purpnes J. Redassificatioru Certain reclawilications of presiously reported amounts tuse tren nude to con-form with current clawtfications lhese rnlawifications lud no ettect on net income.

K. Rate Deferrals l'nder the terms ef the Arkansas Settle-ment Agreement,(see Note 2 to the Iinan-cial Statements-- Rate Matters") the Com-pany will variously retain, deler and reoner tht!'ering portiom of the purchawd pmer onts awociated with its 36 percent aih>

cated share of the capacity and energs from Grand Gulf 1. Ity det rimg Grand Gulf 1 purclused pm er onts which are not cur.

rently recoscred through rates the impact of Grand Gulf I ants w hkh are not being reoncred currently has tren rem <ned fn>m the income statement. culudmg the por-19

MW i

=a, au. h a.

,,1 7

Grand Gulf Nude.tr Station at the ome of salc, untomers of the Com-will be owr a la) car period twgmning pany or through saics to the < umpanyN July 1,1988.

Ihc compam is a parts to ((rt.no retail ctotomers pritett at the Compam%

'the Arkansas Mttlement Agrccment agreements ant! prou nhngs uint t rmng amided encrgs ont. a portion of tk Ark.in-prosides tlut duiuld any other System ytem i ncrgs Resourus Inc 01 RI). and sn (ant rangmg f rom 4 32 percent in Scar operatmg wmpany entcr into a setticment the Grand (, ult Nut k ar stat nin (Gr.md one to ' 92 pen ent in > car nine anti all agreement approsof by the appropriate Gu!!) of w hh h 9n lwn cni is ow nt d h) suct enhng > cars ( Retained sharr) retai: rrgulaton authority whk h prinides si RI ( sce Noic to the i mant ut state-2 il ttu tn e N plember 9.1985, and that an) sta h o>mpany would ahv>rb a pra mentW ( omnuimenn and ( onungent ni ternunanng on August 31 p>95 the ( om-portionately greater dure of the costs w nh respn t to t!u se mattcrs )

pam dctcrs a portion of the Arkansas ('ost awwiated with Grand Gutt I than that ranging from 14 X8 [vrcent in ) car one to prinidcd by the Arkansh s itlement Agree-c 6 nM pcrt ent in Scar ten the unts d(ferred ment. the share of Grand Guli 1 onts to be Arkanur19x1 Rate C.tk (Imenton sharc) sull not begin to lv absorbed in the Compan) w ill be (orre-rconcrni f rom the t'ompan>N Arkansas Pinthngh increasett l)uring 1985 t ci!Jni iwut s nlJlul lo retail Gisnimcr% tintil s ptt (Hiwr 1, l995, lhe ArkamJs $cttIcment Agreement e

a 19x1 \\tkans.n rate t ase w t te remh t d cu cpt under t crt.un (onditions the prm ules the Compant the right to attempt resultmg m tlw ( onyum ru ordmg s il

( ompany wtil be pernutted to reuner on a to renegotute the agreement. if net cwan.

milinin in nwnur and s I A ~ millnin m concnt hasn ( I ) the im rcmental u nt of to.uk!rew an atherse t hange in accountmg mit rest ni 19M finant mg the t!cterral and ( 2 i the avonied standards (Nrc Nite 6 to the iinant ul ont of encrgs f rom sales f rom the hnen-statements-Tommitments and Contin-oln shJrc Iteginfung % plemIWr I. IM.

gencic%")

Arkanus-Itetail Scttiement Agnement ihe ( ompam will amortiic sut h deterred in September 1986. the company u nts on a k u ! lusn. uni reu n er them impicmented the nrst ) carl) ntision to the (in N acmix r 9 lux i the ( ompam ihrough as rot.nl rates mer the renuming Grand Gulf rater. increa<ng the CompamN tiled an apphs anon u nh the \\rkamas dcpru iabic hic of Grand Gutt I or sut h rcscouc requirement b) 53'3 mdhon.

Pubbi N n a c ( omnumon t AIN ) requi st-shortcr period of time as the AIN: may apphrahle to Llw period s ptember 1.1984 e

mg an anmul nw rc.nc m \\rkansas rt tad subscquenti. detcrnune to be approprute.

to August 31.198' Ihr set und anntui ratcs int luding reu n en of ( ost am utul 4 ) ( pn % picmber 9.1985. the ('om-rnnion to the Grand Gull ridcr. impic.

w nh (iranJ (, ult I (in % picmhcr 9 I UM pany began rn ovcn of a portion of the mented hs the('omp.un in s ptember c

the \\lN.n. t ptnt and adopicd a proposal Arkamas ( ost 'lhe portion on w hit h 198', int reawd the ( k pann rcscour bs the ( ompam the \\lN stctl. the \\rkan-reunen began (Currtnt Rctusen Sture) requirements an adihtiotul W ' nulhon sas \\t tornn (.cm ral othe r inn n cnors and rangt

• f rom th Mn [vru nt durme scar one for the following tuche months Rnnolds \\h oh ( ompam. nut nded to lo 2H nM pen cut m ) car clon si all lhe AINC ordt r approung the Arkan-tcmhc all ol ihr dnputed nsucs ( \\rkamas suu rnhng scars \\\\ alun the < tu u nt us % ttirment Agreement n being con-vulcnu ni \\grccmt ori Ru mt n Murr. a pornon of esunuted first-icsted by pleathngs filed m scparate di n kcts t he ( i,mpam's ohhanon for the non Scar t osh n de h rred ('S pen ent m scar with the AIN'in %ncmher 19H5 lhe fuel piirtion of p.n menh to 4 RI t it (. rand one. An [x n ent m Star tuo and 25 pcrt cut

( ompany.uut the AINC stall luse answcred

(. ult I nlaint t harges o approsunait I) s25 m year threc) and n uncrnt m > cars sn and mm ed to thsmin the se uimplainh nothon per m.. nth I nder the a rno of thC through tt n Ihc ( ompam rn ou rs on a lhese nuticrw are prodmg

\\rkans.n % tik na m \\gtn ment. the ( om t urrcot tusn the mt romental(ost of finant -

pam w ill uru eh n t.nn dcit r and n t < n cr mg sus h dt torn d am< iunh thllt rme pornons of tht t osh.nu a uit d in.ukhtion the \\rkanus s iticmcm Arkanue Rate IUden c

uIlh its $h (M rt t Mt alle *t J!t d shJrc 4 bt the

\\grcement dc ned the ( A HUpam a L tifft n!

( ap.a m and t ni re f rom (. rand t. ult I rt tmn on om mcgau atts of generatmg iIIn toe m s ptem!wr 1986 the AINC e

( \\rk.un.n ( ost i.n tollow s ( pt n a nu es t ap.n m ( an t w tw t apat in adnotna nt k apprmni a ( omlum propinni t.is adnnt shou n arc ( sprt w d o a pt a t nugc i >f but allim a d the ( omp.un to carn a full ment rnicr l Ridcr \\148) Ruk r \\1 AM as si RI s on pt u a m dure of (. rand (,ulf I 6 di tern d a turn on the unestment in sta h nodihrd is drugned to rnha c Arkanso I i I tri(inc N pu mix r i 19M the

( apat in At I >u t mht r 41.19H1 s"2 0 retail ran s hs apprusmutt h s 43 nulhon to

( omp.un a t.ons and rt.m ers onk through nullu.n lud twt n ik tctral and. as th w uwcd rt lin t the rnlut ti< in in the t orporate in-pinuhic vics to tinrd p.nucs w ho at c niit m \\rk.unas - Ratr Ridt rs lx low. ru m en (ome las ran mtludul m the las Rcform 20

Act of 1986 ( ACT) and included a corre.

include, anung others (I) the justnew and sponding refund over a three >rar period of reaumablenew of the Company's return on approxinutely 575 million to rdlect rnfuc-oluity and (2) whether the Compan>%

tions in certain accumulated dderred formula rates are reasonable without an income tax accounts.

equity rmpener clause w hich wuuld allow As discuwed in Arkansaw-Retail Settle-an annual rniew of the Compan>% return ment Agreement atxnt, the AP$C has on equity. On November 10.1987, the

.pproved the deferral and recovery of a Company fikxl with the i! RC for author-return on imestment in alleged excew 1/ation to implement new formula rates capacity. Rider 5139 w2s designed to reew-representing an annual increaw in the er such deferred amounts user a 10 year Company % whokwale rates of 55,7 milliort p riod beginningJuly 1.1987,later revised, lhe whokwale customers affected by the with the consent of the Company, to beg a Company % request h,ne filed motions to July 1,1988.

intentne with the i ERC.1hc Company has OnJuly 27,1987, the AISC iwued an reached an agreement in principle with all order appnning an agreement between the partkw which would, if likd and appnnrd, Company, the APsC statt and the Arkansas settle all iwues in both proceedings lhew Attorney General whereby the Company's nutters are pending rates would be reduced by approxinutely 526 million, 522 8 million of which reficcted a reduction in the Compan>% retum on Missouri-1985 Rate Request equity from 14,9 percent to 13 percent.

On Slan,h 9,1988, the AISC appnnrd On June ",1985, the Company fikd an a Company pn> posed rnision to the application with the Public service Com-existing Nuclear Decommiwioning Cost mioion of Siisv>uri(1501) for an annual Rider.\\l26 and a new Depreciation Rate increaw in.\\liwouri retail rates of approxi-Reduction Rider Alll. lhe Riders are nutely $5.0 million and an additional rate schedukx! for simultaneous implenwnta-rider to pnnide approxinutely 512 2 milbon non prior to Apnl I,1988, and will reduce for costs awiciated with Grand Gulf I the CompanyN rates by approximately $1."

( %1iwouri Cost). On April 21,1986, the million annually, composed of a 57.6 1501 entered an order allowing the Com-million increase in decommiwioning cmt p.tn> to recover the Miwiuri Cost of 59.0 and a 59.3 million decreaw in depreciation million, offset by a reduction in non-Grand cost. This order aho approsed the funding Gulf I related costs of 53 0 million, for a of decommiwioning costs with external net annual increase of appn>ximately 56 0 trtnts due to tax incenth n pnnided by the million phased in mrr five 3 ears OnJuly Tax Reform Act of 198 6. (See Note 4 to the 21,1987, after appeal by the Company, the l'inancial 5tatements- "Commitments and

\\liwouri Court of Appeah iwued an opinion Contingencies")

which remanded the case to the 1501 with directions to hear nidence on non-Grand Gulf I related iwucs which had been Arkanus-Wholesale Settlement excluded and then to iwue a new order, Agrerment On starch 11,1988, the 1501 iwued an order Appnning Stipulation and Agree-On June 26,1987, the I ederal l'nergy ment and Tariff 5heets which resolvn! all Regulatory Commioion (i I RC) teued an (wucs in thh and a case related to the ACT order which set for hearing the justnew resulting in no change to the Compan>%

and reau>nablenen of the Compan>%

current rate inel eurpt the implenwnta-formula rates with certain of its w holesale tion of the current year phase in customers lhe iwucs to ir rniewed 21

Income tn expense (credit) consists of the folliming 1987 1986 1985 (in thouwuls)

Current.

I ederal

$13,331 5(75.022) 5 38,921 State 167 (7,231) 6,734 Total.

13,498 (H2,253) 45.665 IItferred-net.

liberalized depreciation 28,419 39,397 22,012 Alternatne minimum tn (19,7N)

Anvirtitation of excew deferred tn (16,008)

(3,954)

Nuclear refuelmg expenses (10,813) 2,178 (3.879)

Deferred restnue and related interest (8,810) 12,714 Nuclear resene and related intetest (5,980) 1,729 6,429 Prosision for otinuted lowes 3,017 7A 22 (25,913)

Deferred purclused [xm er cost 78,659 102.093 36,835 Dcferred excew capacity cost 11,842 15,IH5 6.H79 Other (1,762)

(6,248) 6.H 1 H lbtal 58,860 170,546 49,151 Imestment tax credit ad istments-nct 4,190 10.058 12,598 Recorded income tax cxpense

$76,548 5 98.351 5107,414 Clurged to operations

$62,486 5 H3,506 5 95,9 %

Ourged (credited) to ather inmme 14,062 14.H 6 5 11,459 Recorded inmme tax expense 76,548 98,M i 10",414 Income taxes apphed against the debt component of AllX:

182 1.3 67 I N>l Total income taxes

$76,730 5 99.698 5109,0"8 l

22

O i

Total income taes differ from the amounts computed by applying the statutory federal income tax rate to income before taes

'the reasons for the differences are as followw 1987 1986 1985

% of

% of

% of Amount Pre Tax Amount Pre-Tax Amount Pre Tax (000) income (000)

Income (000)

Income Computed at statutory rate

$87,083 40.0

$102.659 46.0

$100.041 46.0 Increases (rrductions) in tax resulting front Amortization of excess deferred tax _

(16,008)

(7.4)

(3,954)

(l 7)

State income taxes net of federal income tax effect 8,2M 3.8 6,273 2.8 6.899 3.2 Pension expense 1,279

.6 (2,085)

(1.0) 6,137 2.8 Other-net (4,100)

(1.8)

(4,542)

(2.01 (5.663)

(2.6)

Recorded income tu expense 76,548 35.2 98.351 44.1 107,414 49.4 Income taxes applied against debt component of AmC _

182 1,347 06 1,M4 0.4 Total income taxes

$76,730 35.2 5 99.698 4 4

5109.078 49.8 l'nused imestment tax credits at pany to continue prosiding deferred taes No. 96, "Accounting for Income Taxes" December 31,1987, amounted to 528.4 on decommissioning costs of the nuclear (SFAS Na 96), which is effective for years million after the 35% reduction required by plant and prosides for continued normal-beginning after December 15.1988. 5F.6 the Tax Reform Act of 1986. These credits ization of timing differences which are Na 96 retaim the requirement to record may be applied against federal income in required by the Internal Revenue Code or deferred income taxes for temporary differ-liabilities in future years if not used, they State law. In addition, the A15C approved ences that are reported in one year for will expire in 1992 through 2002.

nornulization for deferred purchased financial reporting purposes and a different The alternative minimum in ( AMT) power cost per the Arkan as Settlement year for tax purposes. L'nder the liability l

credit at December 31.1987 is 52.3 Agreement.

method adopted by 5FAs Na 06, deferred million This AMT credit can be carried Cumulathe income tax timing differ-income tn balances will result from all I

forward indefinitely and usal against regular ences for which deferred income tax events rdiected in the financial statements income tat expense has not been prosided are 5251.9 based on enacted tu laws at tax rates that Pursuant to an order of the Arkansas million 5261.6 million and 5233.5 million are expected to be in effect when the tem-PubHc Service Commiwion ( APSC) dated at December 31,1987,1986 and 1985, porary differences reverse. The Company i

March 1,1982, the Company ceased pro-respectiwly.

does not expect implementation of this siding deferred tnes on certain timing in December 1987, the Financial pnnision of SFAS No. 96 to have a material i

differences which were previously normal-Accounting Standards Ikurd twued State-effect on the Company's financial state-lied flowcwr, the order requires the Com-ment ofl'inancial Accounting Standards ments 1

23

r c's Wli Xiii'2l39 ' ?

~

b f'

Construction a series of decisions the iI?RC denied all MP&l. and NOPSI 'llase companics thus lhe Company % construction program requests for rchcaring and took the posi-agreed to scs crally awume shares of Ino contemplateu;onstruction expenditures tion it does not luse authority to require a percent of the responsibilitin and ohuga-(escluding AIUC and nutlear fuel) of refund if theJune 13 Decision iunver, tions of the Company with respect to approsinutely $135 million in 1988, s t il tumed by the murts on appeal, unlew the Grand Gulf under the Availability Agree.

million in 19M9 and 514 3 million in 1990.

court orders a refund Various parties ment, with the Company relinquishing its int hkling the Company and MP&l. appealed rights to the capacity and energy Inim Unit Ibwer Sales Agreement slee orders and vime parties filed motions G, rand Gulf. Ilowescr. theJune 13 Desion and k, w S"vstem Agreement for a stay of these orders with the l'nited eticctwely superwded the Reallocation On June 1 H,19H2. Sptcm 1.ncrgy States Court of Appeals for the District of Agreement insofar as it relates to G. rand Resources, Inc. (S1 RI) tendered for lih.ng Columbia Circuit ( D C Circuit ). On Janu-Gull 1.

with the i ederal1:ncrgy Regulatory Com-a i. I a thndudge panel of the D C Grand Gulf 2 mi aion (il.RCh as an initial ate wtwdule, "U^

""C N*

• I the l' nit Powcr Sales Agreement under Pendmg a final niicw of the cost ous pan apee r niwaring alloc.ition I ctween Grand Gulf 1 and v hich St RI would sell f rom its 90 percent w

w I an pct nions for Grand Gu!f 2, a.s of December 31.198',

Qure of Ihe Gand Gulf Nuticar Station aniouri to the Unind Mates Supa nw (Grand GulO. l' nit 1 (Grand Gulf 1) and

$1 RI estinutedM90 mdlion was imested in oua w n es uprenw Coun l* nit 2 (Grand Gulf 2 L certain percentage Grand Gulf 2 (includmg approsinutely niet ik peons fonennion 5392 million of Al'DC). which was approv allocationuit capacin and encrgv to 1.ouisi-C'

• IUC" 8""'i"8 " *d""M ana Pow cr & laght Compam (IP&I ).

inutely 3 i pen'cnt complete tused on the on two wucs n eJanu g 6,19 C

\\liwimppi Power & l.ight Compant est nuicd nun hours needed to complete

" "' C

'" "" 3 """ h I

( \\lPal ) and New Orlearb Public s nit c the unit. I rom late 19'9 untd September e

nw and renunM in pan, dwJune 1985, only a limited amount of construc-Inc. (NOISI) 'lhe l' nit Pinu r Sales Agree-

"C" '" I"I """ '" ""

C ment,.n appnncd by the Ii RC on June 13.

tion w as performed on Grand Gulf 2.

"""""I""I" d#

1. U"Cd

• C WM5 (June 13 Duiuon) and aflirmed and 1 ilectisc September IM,1985, construction C" "I U "

"N U'

reinstated in its order dated Nincmher 30 actnit es on Grand Gulf 2 wcre suspended

'" ""I" " "P"*

19M', obligates the ystem operating following an order of the Miwiwippi Public s

• I""C N"U C companics to puniuse from si RI. at si RIT s nice Commiwion Sin (c tlut time, St.Rl e

" ' * "i " " "#

"""I

""" U full cost of wnkc, all of St R14 9n percent has continued suspension of construction

' """' P d "

• PCI

""'I"'"

"""A slure of the capaan and encrp from on Grand Gulf 2 and has limited espendi-d* II C"IC I"*

Gund Gulf I in atcontance with the tures to onh those actnities which are Mtunw w n dr K Owun aqucWng following percent. ige allocanons AP&l-absolutch ncccwan for demobilintion and 36 pen ent, IPal.- 1 i percent, \\l1%l ~33 nm o{ dw II O Nowm MM suspension in December 19M6. $1 RI%

"I' " " "' U * "" " "

I* "

"S percent and NOISI-l' percent 'lhe Ikurd o! Dircctors (with thc Middic South Company % ohhgation for the non-fuci por-Availability Agreement and l'tihtics Inc. Ikurd of Dircctors concurr-tion of pa>Turnts to si R1 for Grand Gulf I-Realk> cation Agreement ing) adopicd the reuunmendation of a rclated (lurges is currently approsinutcly

'the Company, together with the other special group of Middle South Spttm 525 milhon gwr month sptem operating companws are sewrally otlitials and outside consultants tlut suv

()n April 3n,1982, the sptem opeut-ohhgated to 51 RI undcr the Asailabilit) pension of omstnwtion he continued and ing (ompanin tendered for fihng with the Agreement, as anwndal. in.x cordance slut a farther decision he nude by 1990 on 11 RC a new agreement (New Sptem Agrce-uith stated gwrcentages( AP&1,1ii per-the future statta of Grand Gulf 2, in hght of ment) which pnnides for the onordmated ccnt. I P&l,26 9 percent, \\1 Pal,31.3

.ilternatnes available at that time, planning constna tion and operation of its percent, and Nt )l51,2 6 ' pen enD to nuie During the period of continued suv generation and transmiwinn faohtics 'lhe paynwnts or subonhnated ath anm adc.

tw;wion, si Rli cyvnthtures on Grand June 13 Duision also addrewed the New quate to oner all of the opentmg cv Gulf 2, as w cli as the increase in its Sptem Agrcement and, generally, appnn cd penws including deprcuation. of si RI imestment in the umt, will he limited it as filed with (crtain minor mothricanons

'lhe Sprem operating (ompanics including i urther, $1 RI does not intend to nuke an Various partin to both pnw ccdings the ( ompany. in Nincmber 1981 cntered apphcation to the il RC dunng the pcriod requested rchcarings and some parties into a Reallocation Agreement wluch wuuld of suspension with respect to rconcry inclutting the Compan), requested a sta) of lute athwated Ihe capatity and encrp thmugh rates of its imestment in Grand impkmentrion of theJune 13 Drusion in

.nailable to si RI f rom Grand Gull to I P& I, Gulf 2. In skw of the contnnersiesiner h

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i the Grand Gulf Station, including the Sptem optrating companics depcadmg quired for financial rep orting purposes, ads crse reat tion of urious rate regulatorv uport anung other things. the timing of the further deferrals would not be permitted bodies to alh> cation of costs, and regulatorv realintion of any such loss and the Company's financial p nition and uncertainties including ratemaking atten~

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SFAS No. 92 dant to a delay in the decision as to the and adscrscly attccted '1he Arkansas s ttic-e St.itcment oflinancial Accountmg future of Grand Gulf 2. there can be no ment Agrerment pnnides thit all costs sundards N.o. 9.,... Regulated I nterpriscs-awurance that the full cost of Grand Gulf 2

.nsociated with Grand Gulf I whit h hase Accounnng for I,hase In i,lans DI.AS N.o.

will be rectn cred or as to the timing of any

92) was iwurd by th(. Iinancial Accounting been deferred by the O>mpany prior to an) reoncr> In addition. during the period to su(h termination of the Arkansas s ttie-e Standarth Ikurd in August 198 and n.

1990 certain iwucs could cause a decrease ment Agreement would be recoscred in ettectis c for i.ncal > cars lx ginn ng after in the caluation of the imestment in Grand

- nhr W W h G>mpnt's dder-accordance with ns prosnions 'the Gulf 2. si RI believes howocr. that it is Company is pr(sent1 unabic to predict the 3

rals of u nts under the Arkansas Settlement justified in cartung Grand Gulf 2 at its full ulunute outwmc of these nutIcrs (see Agrcement do not mect the critcru for salue because the property currently mm-deferral estabbshed bv 51 As No 92. Ilow-prising Grand Gulf 2 is of the same design Q

g gg Mat ters")

gg,

as that of Grand Gulf I and is twing deferred in accordan(c v ith the Arkansas SFl properly nuintained and a thexfore suit-knwm W nm m pibaW M 1h Conpq b a M pnt inet ab!c for in intended purpnc In tha future rouners and should wntinue to be in $ntem I ut.ls Inc ( si l). a jomtly-tm ned connection. the il RC iwucd an order in dcterred in this connectiort the ( omp.im subsidur) of the Sprem operating wm-lanuary 198H. u ha h reused the iI RCN has requested and obt.iined the approval of panics $1I operates on a non-profit hasn polin regardmg reuners of cancelled or ki m wntmur deterrals of onts for for the purposc of planning and imple-abandoned plant una and pnn idcd for purposes ol finant tal reporting to the menting progr. inn for the procurcment of "50 50 shanng" of sut h costs w ha h w cre 11 RC In I thruarc 1988. the Company filed fuel supplies for the 5ptcm operatmg prudently incurred lx tw ccn owncts and with the 5ccuritics and I.u hange Commiv (ompanics its costs are pnnurdy rean-

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• sion ( s1 C).in appHcetion for an order cred through (harges for luct delisered in in connection w ith the ultimate deci-wluth w ould permit the Compan) Io (on-wnnu tion with (crtain of sii. borrowing s

uon regarding the futarc of Grand Gulf L tinur def errals of sut h wsts in financial arrangements Al14 parent wmpanics, m-si RI w ill. at an appropriate omc. make a statements fMed with the si C l'nder the ciudmg the Lompan). lus e cos enanted and determination as to the rt coscrs of its tranution prousions of si As No 92.

agrcut. sncrall) in atcortLmce with their imestment An3 attion by si R1 to seck appbcation of that statement nu) be respc( t n e sh. ires of.ow nt rship of si i. s recosen of Grand Gulf 2 wsts would hkct) dela)ed if the (.ompany has filed or intends common wo(L. that they w di take any and imoh c. tihng with the ii RC requestmg to rile as soon as pra(titable an apphcation all at tion nu cwar) to ku p si i in a w >und sut h reu n cry os er.i period of.3 cars to amend its phase in plan and it h reason-finant tal condition and to pla(c si i in.i through ( harges to the sprem operating abh pinuhic the regulator will amend the pnition to disturgc. and to (auw siI to companics and related lihngs by the phase-in plan so that it will comply with dixlurgc its obhganons under these ar-sptem operating wmpanics bcforc wate the deterral criteria of si As No 92 If the rangemenh At I)nember 31.198, the or local regulaton authonors to recognite

( ompam is ultinutch rcquired to wmply totalloan wmmitment under these arrange-the II RC allowed (furges in retad rates

~

with the pnnisions of si As No 91 it nus menh aminunted to $105 milhon. of whah Suc h prot cedmgs wuld be prott.a ted and set k under terno of the Arkansas s itic-

'9' nullion w as outstandmg Aho $11 c

s strongh wntested on canous grounds ment Agreement. to negotiatr a mutualh parent wmpanics tuse made sinul.ir u nc-mcludmg imprudent c if wsb awociated au cptable amendment to motht) the nanh and agrernx nts m wnnation uith wnh Grand Gut! 2 w crc allocated to the ponidons of the Arkansas s tticment long-term leau s bs sll of od storage and e

( ompan) and u u as unable to rco ner

\\greement so that d(Icrrah of cosh w oukt f undhng f at ihtin and wal hopper cars At thcsc unb f rom ib customers the (.om-wmph with pnnnions of si As No 92 l>u emix r 31.198. the aggregate dn-p.iny% t.uunual wndioon wuld be nuten-llow ner, if the ( ompam w crc to su k wunted ulue of these Icase arr.ingemenh ally and atherselv attccted h failure to su(h modihmg amendment and not suu ced w ass 4 5 tmlhon in connu non u nh st I.

~ s obtam rate rt bt t for all or a subst.mnal M

% em Mh um M m W portion of the wst of (. rand tiutt 2 e ould phase-in plan the Arkansas scitlement tuct uwemoncs. the ( omp.un. IIwl and hase a nutcrial and athcrse (tiu t upon the m mid unme a umW W M M be ed to yhm M inn finant ul wnihtion of si RI and \\bddic prcuoudy deterred unn uoukt be tc-torio finant ed pursuant to thn agrecment st tuth l'tihtics. Int. ( Mst ') and p nsibh the

l in the oent that $11 is unable to fulfill its pany had loaned u I 538 6 nullion under securities IXchange Act of 19.4 6 and the obligation under the horrtming arrange.

the abine and presious loan arrangements Securitics Act of 1933, common law fraud l

ment. At 1)cccmber 31,198', there were Notes nuture in 1992,2002, and 2008 and common law negligent misrepresenta-l no borrowings outstanding under this under prinisions of tbcse loan agreements tion in connection w ith the financial condi-arrangement.

51I cwcuted a centract as amended in tion of.\\blJ and pra)cd for compensatory SFI contracted with a joint venture for Nos ember 1982. for the purchase of lignite and punitive damages, legal costs and fees a supply of coal from a mine in W)uming to be used at a future lignite fueled power and other pnsper relief against M51'.

which, based on estimated reserm is plant in Arkans.ts On Nosember 2,198-various other $3 stem companies including presently espected to pnnide the pnr Sil and the lignite supplier entered into an the Company, and certain otlicers (and iccted requirements of the Indep(ndence agreement whereby 511 was relincd of all former otlicen) of certain System compan-steam Liectric station (Isl~5) for at least 30 obligations and liabilitics under this con-ics and directors of Mst', the Compan>'s 3 cars w hich began in 198 4 1his contra (

tract in addition, on Ninember 2,198' outside auditors and certain underwnters h.ts been awigned to the Company with $1I the Company and the hgnite supplier of Mst' common stoc k. In April 1986, MNl' hasing no further obbgations or invoh e-ewtuted a Memorandum ofl'nderstanding and the other defendants includmg the ment under the contract etlectice I)cccm-Olenuirandum) w hereby the lignite sup-Company, filed a motion to dismiw or, in ber 31,198'. L'nder the contract with the plier shall base the right-of-tirst refusal to the alternathe, a motion for wmp joint scnture, invntment in the mine for xipph fuel for a(khtional generating require.

judgment On January 12,198', tne I)iurict leases. plant and equipment is the respon-men % on the AP& bptem under a con-Court entered a judgment granting defen-sibiht) of the joint scnture. In order to hmit straint that the use of such lignite would be danti motions for sumnury judgment and the joint senturc% im estment nghts and the Icast cost act eptable alternath c to the dismiwed the suit. On i ebruary 6,198' hence the amount to be paid to it as a t.ompany for the gencration of electricity the plaintith in the consolidated action component of the pn(c of coal the Al t C proiously notified the Company that filed a Notice of Appeal in the l' 5 Court of contract prosided that Sii meest any funds it desired to participate in ou ncrship of Appeals for the Iilth Circuit Oral argu-for plant and equipment in escrw of a the plant Alv AlfC prnmusly awumed ment was held on Nosember 5,198'. lhe specified amount he Company. MI'&l.

5n per(cnt of 511% obligation to purchase defendants intend to sigorously oppose the Arkansas i Ic(rne Cooperatn e Corporation hgmte under the contract u hi(h has termi.

appeal of the 1)iurict Court % decision

( Al LC) and the Cuy of tonesboro. as up nated the Memorandum is conduional Middle South System Litigation, Putential owncrs in part of Isl3 (ow ning 9h 5% col-upon rcccipt of regulaton approvals for llankruptcy and Related Matters lectively L promu$ agreed to nuke the the conunntion of the plant Certain of the other 5ptem operating invntments rathcr tlun sli and at cordingh.

1hc Company has agreed to purchase.

compns' rt tail rate orders with respect reimbursed si I for imestments prniously user approsinutely a 20-> car period which W h-u allocated co ts for Grand Gulf I nude. At !)ct ember 31,198'. the Compan3 began in 198n.100 milhon tons of coal for c

i M (ngw uill Mg &l-had a net in estment of vi-a 5 m:lhon in use in the white Idutt 5tcam I lectnc

&g ' nd reconsidered on I chruary 25

rg a

minc faahtics and related capuah/cd awts sution g9g., MP&lfs rate or lcr was re ersed on 1hc Company has nude the required Stockholders' Suit appeal by the Miwiwippi supreme Court im estments on behalf of the other arou n-g.,(crtam other Middle outh and l* s. Supreme Court toicw of tlut s

crs of 151 s (owning 3 5% (ollectncly ) and ntem companics. mcluding the Company, decision is currently pending On Ichruan is bilhng them monthly for the deprecia.

Ed iWde m dd nbe m a L M k mund of h Opf h tion and carning cost of these in estment' rported (onsohdated (law a( tion suit.

Orl cans adopted a roolution requiring a lhe parent (ompanics of M i lud lk m al complaint was filed in Augu i disallow ance and write ott by NOPsl of a agreed to nuke loans to 41 to finance.ts 1985 by an Mst'sharcholder(purporting sum equal to $135 nulhon in NOl%I s fut I supply leinew under a loan agreement g

gg g g, gg.M (md(MfI m ms M dm dat(djanuan 1,198i. as amendedjanuan kilowed h tour similar alleged imprudent e osmo 3

1.198'. w hi( h prosided f or si i to borrow omplaints filed by Mst'sharcholders in Without adequate rates to recuser up to 551 million from its parent compan-h and Nm A r 19851he thc Grand Gulf I charges MP&I and Nol%I ics through 1)cccmber 31,198' lhisloan actions w cre consohdated in the l %

could suficr sut h liquxht) constraints that agreement w as not amended in 1988 and.

IMnd Gm Mr h Mm Mm W Wq would in a h p md of tin, he consequenth. no future loans nu) be nude I

a h onsohdated amended and unahic to meet their comrx ttui obhga-to 51I trom the parent (ompamn at this I

ntal o smplaint alleged siolations Iions to si HI in respct t to Grand Gulf I time As of I)ct cmtwr 41.198'. the < om-of the dixlosure requirements of the and oiuld be rcodcred insohent I ailure of

n

d eny Sptem operating company to maintain nude, it must be recogniicd, in light of the ships betw een and anuing variom Niiddle ituurrent rate structure or to meet its nsks discussed herein, that future ments South Sprem cumpanin would be signifb contractual ebligations to $FRI in respect either singly or in combination. nuy result cantly altered or whether the Sliddle south to Grand Gulf could under certain agree-in such adserse changes in business cir-System wuuld continue to esist in its ments relating to SERii indebtednew (L ut aimstanco or such a decrease in liquidity present form after bankruptcy of one or only upon further action by the requisite as to make it prudent for one or more of more \\ liddle N>uth System companin.

percentage of SERii ;rediton), lead to ac-the ath cted Sliddle South System compani" Unit Ibwer Pur(hee Agrwment celeration of such indebtedness unlew to file a petition for reorganintion under lh un m WAlN m p w (1 ) waiven w ere obtained, (2) the debt Chapter 11. Alany of thcsc future ornts are

, g. it l'owcr purchase Agreen ent tennitut-n was rntructured or (3) other arrange-bqund the control of the Aliddle South ing in Decenter 1989, for the sale to All%1.

ments could be negotiated in addition, in System g

the absence of suth waivers, debt rntruc-1he effects of a bankruptcy pnicced-capacity and energy Irom l' nit 2 of Isf A turing or other negotiated arrangements ing imuhing one or more Aliddle 'louth acceleration of such indchtednew could Sptem companies and the estent of juris.

Nudear Fuel occur if a Sptem operating company were diction of the SEC under the lloiding Q>m.

1he G>mpany has agreements for the rendered inmhrnt as a result of a reduction pany Act and of other federal and state purth.tse and fabrication of fuct aswmblics in rates Ghen the substantial amount of regulatory bodic mer the bankrupt entity for its nudcar plan., Arkansas Nuclear One.

St RFs debt, it would not be able to meet its or entities and over any other Sliddle South the Company has agreed to purchx from obligations if accelerated l'nder SFRIN Sptem companic not in bankruptg cannot KerralcGee Nuclear Corporatism O 630 linancing agreements the Sptem operating be predicted in any nent, wcurity imiden million kg of ur.inium thnnigh s ptember e

companics would not be respmsible for and crediton of tlw Company or companies M 19m 1he Compan) also has agree-the payment of St Rfs accelerated oblip-imuhed in bankruptcy proceedmgs could ments with liabcock & Wilcos Compan) tiom if Si R1 could not meet thent Nlst',

he significantly aficcted by sut h pn cred.

and Combmtion 1:ngineering Onmpany for with its financial rnource currently lim-ingl lhe proceedmgs could last for >can, the fabrication of fuel assembhn used at ted would not at this time be in a position and there are nuny uncertaintin as to how the plant n satisfy $1 RTs obliptions if accclcrated pnwisium of the 1.iw would be applied 1hc Cnmp.iny n a party to two nuclear Aho certain of Sil's financing agree-Rights and remedin of ecurity hoklcn and fuel leaso w hit h had pcmlitted it to Acase, r wnts and leaws nu) require p.iyments b) creditor may tw altered denied or limited in the aggregate. up to a maximum of $160 t w Company and the other Sptcm operat-under such laws lhe obhptiom of Nlst!

tmlhon of nu(lear fuct 1he cretht hnn hg companies %1st'or i R1 in the ocnt and the Splem operating companic under aunciated w th the c5 nuthon nudcar luct s

al f

• obligatiom under sut h documents are tlw Capital I unds Agreement (trtw een lease base termiruttil !! new hon of accelerated as a roult of the imohener of a Si R1 and Nist") and the Availabihty Agree, credit are not obtained, fuel prewntly Sptem olwrating company and Sii is ment, respecthcly, and the awignments undcr leaw (c 4 0 milhon at lkremtwr.41.

unahic to meet thew obliptiom or other-thereof. could aho be litipted and powibly 198') nuv continue to be leawd until wi e to satistv these obligatiom thnogh reduced or chminated (sce above disaw Acptember I,1990, when the leaw tenni-the sale of the collateral wcunng suth sions of the Spicm operating companin-nates but no new furt nu) be leased under obliptiom. In the ntnt of any o' the ropectist obliptiom to make payments or thn arrangement When the Ica e termi-foregoing a(herw dociopments the con-otherwisc support $1 RI under certain nates the Compan) will be required to tinuing siability of the $ptem could be agreements includmg the Availabdity Agree.

repurchaw any nudcar fuel financed under pla(cd in ropardy, and it could tw ditlicult ment and the Reallocation Agreement )

the lease tlut has not been burned up pnor to avoid a bankruptg fihng by one or more lhere muld be no awurance that any Io that date. Ihc (redit linn suppirting of the Niiddle $outh Sptem companin crediton wuuld be able to rectner ihe full the CompanyN s8% milhen nudcar fuel in this mnnc(tion, Nist', \\t1%I. and amount of their claims and ecudtin and IcM whit h were w hcduled to terminate 51 RI he e cach retained independent stoc k with inferior righn could be substi.

1)ct ember 1.19x', lute hern estended to spccial munwl esperienced i;i bankruptc) tutcd for those with priorities I urther.

1)cccmher 1.198M 1he related fud Ica e n nutten and h nc been sto(hing tlw relief holden of equity wourit n nu) not be able aho wheduksi to reemnate 1)ctrmhcr 1, and protection that might be available to to reun er any sulntantial annunt on theit 19881he Company anticipatn coking them un k r Clupter 11 of the I'mted stato imotment \\loreuser, it is unwrtain crnht linn to support both nu(Itar fort llankrupto Code. While no (krisium with whether the bankrupt entity or entitics leaws lo the estent tlut ihn does not reprd to lunknipto tilings hasr )ct twcn could be sounsfully reorgani/cd in their ou ur additiotui cash requiremens w ould prewnt fomt whether the current relation.

rnutt. Le unrconcred ont basn of Imth r

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• • ' ') I"I" Il'"'*"#U bnai airadas e on atqrird aq ontu Aapopd M P"3 #P"N 3"*N unprununutoap xp on paWqnupaaatud Guanris airy, a.natuains aauunsut uad ud ~3HN ap Aq paJapJo Fpuruu xp on t amN aas) spun oru vonntu 991$

J aJr inp suonnxlo uoprupurtunaap Aatp Joj uopptu 9W9s Ap)rmtuudde ol paltiudde 'iW6[ '[{ JA{Wa14J 1r osta{

g e

l k

i i

I i

1 J

tain pnnisions of the Act expired in August to loth the white IMutt and independence owncn of the White liluti and Indepen-i 1987, and Congrew is considering several Stations lhe \\tay 13.1987 deciem awarded dence Statium and the Compan)% niv I

propouls to amend and extend the Act.

the Company approxinutely $22 millmn in tomers will dure in the pnunts

)

L'ntil a bill is adopted by both the Scrute rail tariff reparatiom cm cring the ) cars Ibposition of Subsidiary j

and flouse of Representath'n and signed 1982 thn> ugh 198 6, pim approsimately $9 The n>mpany has entered into a con-4 into law by the President, the pnnisiom of million in interest as a rnult of the exccv uact with Southwotern I:ncrp Compam' j

the Act which expired August 1,198?, will sise transportation charges the Company W it m M d e W e %' b h continuc to apply to all currently licemed was rettoired to pay for coal dppment' Company ( Ark.mus Wntern) for the div l

reactors (includtng the Compan)% reactorsL from %)uming to Arkanus 'lhe reparatiom bb Compann internt in its

'Ihe Company is unable to predict what w cre orderal to Ir paid by the Iturlington

@@ W d N w a W N'a W acion Congrew might ultimately take Northern Railroad Company and the Miv dompany( ANG k by meam of a cash regarding the Act and what ctfect such souri Pacific Railroad Company. The Com-merger of ANG into Arkamas % estent 'the j

action might luw on the Compan>%

pany and t e two railnuds hnt re,n hed a h

M r

ideratim uill N M*J q

potential liability.

settlement which pnnido for payments of milhott with Arkanus Wntem awuming i

28,9 million to the Company in three appnn nutely 5 4 2 million of outstanding i

Intentate Commerce Commission Ibi ion unual inuaHments the 6t haung hen i

On May 13.198', the Interstate long term debt of ANG 1he tranuction, receised by APA1 on Odober 29,1987 w hich is subject to appn nal by variom I

Commerce Commiwion iwued a decision in pniceedings to determine fair railnud Since the dispute imuhed alkged over' regulatory bodies. is espected to be com-l ratn and conditiom for tran porting coal clwyn for paq coat Wpments the c*

pMed in the wcond quarter of 1988 4

d l

r j

i j

1 M

i I

i l

l a

in accordance uith Statement of commitments as slumn in Table M Table to the l'inancial statements-%mmit-1inancial Accounting Standards No. 'I the 5 A esclude nuclear furt obligations relat-ment and Contingencici) Reduction of j

i Company recorded on the balance sheet ing to the unrectncred cost base of the thcsc obligation for nuclear ftKl is lused l

the capital leasn entered into prior to Company's two trae which at l>n ember upon nuclear fuel unge 1983. lhe 1986 balance sheet has been 31,198', w ere s113 6 milliott (see Note 6 i

j rotated to ght et!cct to these capital Capital Operating l

leases Recording of such (caws does not Icases Icases aricct amounts reported as either espcme f hi thous *MdS)

Table 5.A. Minimum Rental Commitments I

or net income.

l Rental cNpense for capital and operat-1988 5 ! ",26' s *,365 j

ing lease (euluding nuclear fut1 leases) 1989 1MMI

• 126 amounted to approsinutely 5183 nulliott 1990 1".533 6 *18 I

522 9 million and 522 3 mdlion in 198',

1991 15.586

6. s 3?

j 1986 and l985. rnpectnel). Nuclear furt 1992 13.2t Ws 5.621 l

expcme, ewlushe of negative uh age, of Ior ) cars thereafter i 2 L606 22.862 v'il million in 198',55'.3 million in Total 5206 62' 556.109 l

1986, and s66 3 milhon in 1985 was i

4 Irw Amount Reprewntinglnternt 110.013 charged to operations At December 31,198', there w cre Present Value of Net \\linimum l

t noncancellable leae with minimum rental trase Pa>ments s 96.61 i i

i J

l

1hc Comp.my lunariotn pmtrctire.

prewnt value of the pn$x-ted twnc0!

ecs are pnnided thn> ugh surious means ment plans etnenng substantially all of its obliption were 9 0% and 5 6%, rnpce-includmg payments of premiums to an emplo)ces lienefits are tused on 3 can of tnoly.1he expected long term rate of insurance company and/or accrtub for self senice and the employecN compensation return on plan aweb was 8 %. Transition insurance policin nusuged by an insur.uur during the last ten yean of employment.

awets are being amortinxl oser 15 trars company. the etnt of pnniding thne lhe CompanyN funding policy is to fand The Company aho pnnidewertain benctits for retired employces h not pension onts in ammiance uith contribu.

health care and hte insurance twncuts for sep.irable fn>m the etnt of pnniding tion guidelino ntablished tw the i mplo>ee retired emploires $ulntantially aU cm-twncHts for 'he acthe emplo)ecs 'lhe total Retirement income kcurity Act of 19'i.

plo)en nuy become cligible for thne etnt of pnniding the e benefits and the lhe perwinn plans are adminktcred by benefits if they reach retirement age wlule astrage number of acthe and retired a inntee w ho is respomib!c for pension still workmg for the Company.1hese twnc-emplo)cn for the last three yean are pa3ments to retired emplopes Varium 6ts and similar bowtits for acthe emplo)-

shown in Tabic (et imotment managen h.nr rnponsibihty for nunagenwnt of the pbni awers in addition,, an independent actuar) perforn" Urs t/muerru/4 the necewary actturial valuatiom for the Tak M Company % plans

g. nice cost-benefits carned during the penml 5 6.875 Total pcmion cywnse of the Com-Internt cint on proiccted bcnctit obligation I iM 6 pan) for 108',1986 and 1985 wa' A(tual return on plan awets (6M2) 50,259Jiott $6.31 Um and 56.31'Jnt ropcethrly (lI E )

Net amorti/ation and dcforral Statement of Iinancial Accounting

' I'"

5 2'660 Standards Nu 8',"I mphe)eri Accountmg for Pemion " became effectise and was y,, ff.ouwsin/s0 adopted by the Company in 1987 Table Gil 1he components of 198' pcmion Actuarial prnent value of actumulated pcmion plan benefits ont, as detennined by the actuan, are Ynted 5125,297 show n in Tabic 6-A Nomrsted 9.H i t The awets of the plan comist prinunl)

An umubted twnc6t obhg.uion 5135,141 of common and preferred stocks fimi inoime secuntin and imurans e contracts Unnn ted Iwnent obligation 51'0,352 Plan awets at fair s alue 191.94%

the funded status of the plan at December 31.1987, is shown in l'able 6-16 Plan awcts in esces. of projected benefit obhgation (21,$93)

At Jamury 1,19% the actturial present l'ornogni/cd prior sonice cmt s alue of snted and nomnted auumulated l'nrecognued tramition awots 29,60i pemion plan twnctits as driennined in t nrcrogni/cd net (g.un) le l ',0 % I acconbnce with St As Nu 35 were 51I"'

Accrued pcmion awet (liabiht))

5 26.862

(

million and 56 8 milhon. ropecthcly, and oct awers availabic for pcmion benc6ts g,

1986 1985 wcre 5176 8 million. 'the awumed rate of Table 6C t

return used in determining the 1986 acta

~ Intal unt of heahh care and hfe imurance arial present s alue of anumulated plan (sit fhotsumd4

$7.716 57.012 56,8 i i v

j twncths w as 9 percent

}

1hc w eighted.n crage dncount rate Astrage number of acthe employon 4,922 5,1 il 5,349 1

and rate of inc rease in future (ompensation Ascrage number of rttired employen 1,214 1,163 1,00' uwd in dctennimog the 198' actuarial

}

4n i

2 1

_.__,..--n--

-_,.__.__,_.__,._n,__

,.,n,n,_,---

.g <.

'll1 k I, 2,

4-

_m lhe Company he retched authoriza-In addition, the Company had approxi-term loans to other companics in the tion from the $ccurities and N hange mately %6' 000 in other short-term bor-Niiddle N >uth sptem lusing + ort tcrm Commiwion under the Public l'tility lloid-rowinp at Ikccmber 31,198'. At Ikccm-Introwing requirements 'lhe ( ompany ing Company Act of 1935 to har outstand-ber 31,19% there w cre no other short nuy borrow from these sourt es suh ect t

ing at any one time short term borrowinp term Iw >rrowinp outstanding on!) to its nuximum authori/cd Icscl of aggregating not more tiun 10 percent of Additionally, the Company participates s!. ort tenn borrowmgs At ikccmher 31, the Company's capitaliatiort such short-with certain other (ompanics of the Niiddle 198' the Compan) lud s'O 5 nullion of term borrowing authority at year end 198' south sptem in a money pool ( Nloney temporary imestments in the stoney Poot At ik(c.ulwr 31,1986 there w cte no w a 5238 5 milliort See Table ' A for short-Pool) arrangement whcrrby those com.

uwestnwnts in the \\lancy Pool term borrowinp.ux! the apphcable interest nics w uh milable funds nuke short-rates (determined bv dniding applicable interest expense by the average amount borrow cd) for the Company 1987 1986 1985 The Company had 550 5 mdhon and (in //wnomdO 561.6 million in lines of creda with Arkan-Table 7 A sn banb at December 31.198', and 1986

\\laximur.1 month cnd borrow ing

$M7 51.mo 55'j o0 respc(tively. The Company had no out-Year end twirrowing

$M7 standing borrow inp under these hncs of Average lorrow ing-credit at year end 198' and 1986 The llank loans

$361

'9.025 523.660 Company will be renegotiating the 198' Amciated compames bank hnes prior to their expiration m the Ascrage interest rate dunng the periini second quarter 1988 in the esent of future g

g yg des clopment iif t criain adscrse es ents discuwed in Note n to the i mancial state-A"ot Lued ( ornpanb Wha 8.3 %

ments-Commitmc nts and Contingencies "

to w hit h reference o hereby nude. these

('ompensating and w orking lulant es negotiations could be adscrsel impatted at end of wrnal 3

t

-, 7 ys,

-==*M Q

(h M.

1. (y;> -

s f,

G' M]

3, h V ce

n y

Y _ y; u..

'- 1.c& ?.h ;'g

~ 4) e s

'the indenture relating to the t om-donds on common stot k As of Ikt cmher quarter of 1986 untd.luh 198'. ( ~ommon pamN long-tenu dc bt and prousions of the 31.19x". all retained carmnp u cre free stot k dnxicods wcie declared for the third artides of incorporation relating to the from sut h restra tions quart ( r and fourth quarter of 198~ tor

( ompan>N prctcrred sto(k proude for the t ompam dal not dedarc am p.nm(nt to \\lst'in the amount of sin 9 restn(tions on the pament of cash dni-tommon suit k dnidends from the sc(ond milhon and *11 " nulhott respct in cly l

%I

A e.

e i

I i

I 1.iIkccmber 19H', AP&l. rniuced the per dure to 5 01 per slure.1his adjust-capital of appnninutely 56H6,702,0(M) and par ulue of all conunon stmL fnim 512.50 ment resulted in an intreaw in paid in a corresponding deertuse in cimnvin va k f

i 1987 1986 1985 Oumges in Shares Outstanding Gimmon stock slures sold A

Prtferred stak dures sold (rnicemn!)

j 5100 par value (38,555)

M 2,12H (15,350) 525 par value (391,325)

(IHJMMI)

(?2,100) 1987 1986 l' referred Stock at Dnember 31 l

4 ithout sinking fund Stated at S itk} a durc

$101,39 5101,350 l

Statnl at 525 a share 25,000 25JMN)

Premium and expense, net 540 5to Total prWrred stock without sinking fund

$126,890 5126.890

% itti sinking fund 4

Stated at 5100 a Qurc

$ 83,134 5 H6,989

)

Stated at 525 a dure 69,095 7H.H'9

{

Premium and espense, net (974)

(H59) i

~lotal preferred sim L w ith sinking f und

$151,255 5165.009

_N

x O

Current Shares Shares Outstanding Call Price Authorized 1987 1986 1%r Share Preferred Shares Outstanding at December 31 Cumulative, $100 Par Value:

Without sinking fund 1

4 32% series

'OJ M K) 70,000

~01NN) 5103 64' i '2% scries 93.500 93,500 93.54 M')

10'.00 1.56% sccies

'5J M K) 75,000

~ 5.q W K) 102 83 a.50% 1965 series

~5JMM) 75,000

'5JMM) 102.50 6 OM% scrics 100JKH) 100,000 1fxuM)O 10283

)

'.32% scrics 1003XH) 100,000 100.t M M) 103.I'

'.801: series 150.000 150,000 150JMH) 103 25

"' 40% serics 200JN xi 200,000 200JW M) 102.80

'.88% series 1SOAMMI 150,000 150J M x)

I th9' Total 1.013.500 1,013,500 1.013.500 With sinking fund *:

10 Nrb wrics i16.012 116,012 129.892 106'n I 104% series 215.325 215,325 2 60Ax)0 10'02 H 52% scries 5(M U N)0 500,000 5003xH) 108 52 Total 831,33' 831,337 869.892 l'niwurd 1.886.500 Total. 5100 Par Value 3.731.33' O.imulative, $25 Par Value:

Without sinking fund M 8 6% scrics 400 000 400,000 400JMMi 2'. I i 10 60% wrics N M U N H) 600,000 NMMWH) 2~ 95 Total 1 J x M) 01 M) 1,000,000 1 J W MU N x)

% ith sinking fund

• 9 92% series 1.246.521 1,246,521 I.3 5~ 521 2'.56 i

13 2HT. wrics 1.51 ~.301 1,517,301 1.~9',626 29 05 l

Total 2.'63.822 2,763,822 3.155.1i" I niwurd 5, im u M M) lotal. 525 Par Value 9.163.822

• 0w w rr, sc to N tt nrid m full thn wh ttw syrate,n id sinLmg hnh Uw 9 9.5 w nn in tm w nn l I ms. w no and i 4 2n w no art N ing rtik imtxt c xh st ar al etw r Att i4 kW l O R I l n O U 20 I E U Afhl Ilkl 4 E El AJf tT roptiInth IkpHHtng %AfmNfl IWI ltM N S.% sCrMM W lo hr ft dtM d At IIM f df( id.'S I 9 O 'aurt s e At h it er in eklomet the (.vnpans tus the niwt t unnilent opei.wi to rtik om an A1ditn sul hkr any unt i4 wat 44ro r4 h itar

,44

4, O,

O e -

y;n NG-

~

n...'

i a sc l

1987 1986 (in thotasmds) long term Debt at December 31 First Mortgage 11onds:

41/2% wnes due 1988 283 5

328 5 5/8% series due 1990 700 800 4 "/H% series duc 1991 12,000 12fM M) 16-1/2% series due 1991

~

80JWx) 4 3/H% series due 1993 15,000 15.0tM) 9 3/8% series dur 1994 4,200 4,620 4 5/8% series duc 1995 25,000 25JXX) 43 / 4% series due 1996 25,000 25AWM) 6 I /4% series duc 1996 2,160 2,360 4*/8%senesdue199" 30,000 30,000 H 3 / 4% weries duc 1998 7,000

",400

" 3 /N1 series duc 1998 15,000 15J M M) 9-1/4% wrics duc 1999 25,000 25jMM) 9 6/8% senes duc 2000 25,000 25JXM1 i

9-3/4% series due 2(MW) 3,200 3,4(M)

%Kt senes duc 2001 30,000 30JXM) 8

% scoes due 2001 30,000 303MM)

' 3/4% senes duc 2fM)2 35,000 35fXX)

" l /2't senes due 2(x)2 15,000 lijMM) 8

% series duc 2tk)3 40,000 40AMM) 8-1/H% wnes duc 2tK)3 40,000 40JXM) 1(F1/2% senes due 2tMbe 40,000 40JM M) 10-1/ 8% senes due 2(MM 40,000 40JWX) 9-1/ H b senes duc 21M)'

75,000

'5JWM) 9 'c N% senes duc 2008 75,000

'5JMM>

10-1/ 4% senes duc 2tMN 60,000 60AM M) 13 0 8 t senes due 2012 75,000

'5JWWI 131 1% wnes duc 2013 25,000 25JMM) 141/ H% senes duc 2014 100,000 l OOJM W) 10-I / 4% series duc 2010 50,000 50 AM M)

Total First Mortgage lionds 919,543 IJHW1908 Installment Purchase Contraas:

t Pope Count), Arkanus, duc 1988 to 2015 at rates ranging from " l / t% to 11%*

140,645 160.'05 letterwn Count). Arkanus, duc 1988 io 2008 at rates ranging from 61 M L to Im.

69,175 69.950 Independens e Counn, Arkansas, duc 2013 at rate of I l 1 m.

45,000 iSAMM)

Totalinstallment Purchase Contracts 2M,820

~

2%6%

long Term Obligation-Depanment of Energy (Note 4 )

71,106 66 '29 Unamortized Premium and Diwunt on Debt-Net (6,023)

(6 '3 3 )

Total 1,239,446 1316M9 Ins: Currently Maturing Ibrtion 3,223 2.9 %

Iong-Term ikbt licluding Anmunt Due Within One Year

$ 1,236,223 s t 313mi s i.9 m.n t i i s n,g <,,unn evw n w,# <..ur.,4 kos mor is us,t,<

i wu na.,.w is a,

-< st i xu mu r im,rr uu.rta in it. a num o os s im wngyc S h

\\i

O.

e At December 31,198', the sinking cadi fund requirements and maturities for long.

Sinking l'und sinking i und*

Mat uritics" term debt for the 3rars 1988 through 1992 (in thouwu/s) are illustratetl in the table to the right.

1988 51,320 4tM88 5 1,148 1989 1,420 6X,8 925 1990 1,390 6.888 1,-625 1991 l.290 6,768 13,135 1992 1,290 6,~68 1,225

'ITnx annual unbog fund trytartna ms nu; bc mcq tw tertirnatam id pn+pt m aAlitwwts ai a rate id 16'*. id sut h reprt mcnts

1hese m.aturitus do rwit rt firti Hi *6 milim o polloin m o mari4 rc w nue N skh a tus b arc wahn t to redcmin m at the opt 8m ii the hidderu d such bornb at a rnlcmpia e prne id bn%

,.. 9, s-. - ~. y ;

~y..

a r.

. A, T.,.,

l '

- !._. ' J-El r,

y

' q

, :,.. :..

.+

.6?5ddid SN l 0 b.i.M i RT:l a

'lhe Company bup n um and clls Gulf Nuclear Station, l' nit 1. In addition, ing to 5252 0 million in 19x',5220 0 electricity to the operating ctmpanics of the Company purchaxw fuct from Aptem million in 198/ and 5262."' million in 19d5 i

\\ liddle South l'tilitics Inc (NIS11 under i ucts Inc., and retcises tethnical and Operating espenx s int lude (harges f rom rate whedules filed w uh the i et leral achisoty wnk es from Sist

• Sptem kt-altitutes for tuct (ost. purt based pim er.

I nergy Regulatory (.ommiwinn the Com-s m inc and tes hnical and athison senites totaling pany also purthae capacity and energv Operating rnenues include rnenues

$383 million in 198',5392 5 million in from 5ptem I ncrgy Resources inc?s Grand from sales to awotiited companics amount-1986 and $2 4 4 3 million in 1985 6

e, l

l Hunt ul \\t t i nun!ing stantlarth ik urtl s cniling.titor lul) I%.19xH I afl) Jtioption mcut i 4 (.idt i b m N the ('ompan) L'i nid141 cts (I \\sti) Stattnw ni of Iinant ul Act ounnog was entouragt d by the 1 Asti ibc ( ompam all highly hqual sk bt instruments lmrttuw ti stantlants No 95. "statenunt of't ash lus atlopteil si b No 9% anil attorihngh with a nuturm of thrre months or Irw to has prewntetl the tatements of Cash f lows hc cash equn alents the f ollow ing supple-llowi(sl e No 9%) requires rept.n cracnt s

of thestateturnt of ( hanges in l'inantial for the seats cixicd I)ct ember 41,19H' nx ntal thw losures are required by si As l'osillon with the statenx nt of ( bh Ilows 1986, and lum % ior purpows of the state No 9%

for finantial stattna nts w nh list al cars S

198-p>so 19s; 4inflMsuuohhl Gish Paid During the Ycs In te rt st

$120444

'I all 41

$1 Rih 6 iniome t ncs

$ (30,243) s(2L44I)

• 2 4." t Nontash Imcsting and 1:inancing-t apnal Icase obliganons int urrni( Note ;)*

$ 61,479 5 6%, e i s

• %1299

% i a s.hio i.iturnrnti ~ s

, peersyne _........., <...

J '

. N u

._.m

()perating results for the tour qturters of 19H' anti 1986 w crc as follow s fin lionwon/o Quarter codcd 1987:

( >pcrating Rescouc

$ UO 619 H3% 480 s i 41.2 0 3301 %st

( )pcrating lnt i sme "bl2 ii 221 86 99 411%%3 NotIntonx-2'.6 H 29, l '-

os 6%

1 %.; un 1986:

t ip rating Hcscauc 4441e"%

s41",1 H 326 86 s3 l 4 po"

()perating lot ome

%1120 69 iso Ho W 3%ximi Nct int ome 2', % I H 2%,%8 :

54806 1,91 e lhe busintw of the ( ornpam n sub for am thrce month perimi shouki not he low of si 4 9 nulhon awit utnl w nh the n(t to scasonalihn itunons wtth the peak i onsalcrnt as a had, for estunatmg the cogun t ong aint design t osts and t stinutal p noil m urring dunng the sununer ic uits for a toll car lubihnt, aw w utn! with t crtain plannnl S

mont hs \\t t ortimgh. carnmgs intornunon the tivunh ytutter of 19.% int Itales ari tiittire fi nsil gcia rating t.it ilint, operating csp nsc prosnion for estmutu!

to

__ a

...;C

. f :-.,, 4,

- OIDRONOP p. WUJA L' gy

.i -g%gpgp u h?4iMM4%%dhi&l Deloitte Haskins-Sells 111 Center soeet L" e Rock. Art sous 72201 Arkanus Powcr & light Company We h.nc cumined the convihdated in our opinion. the ahine mentioned balant e shcets of Arkansas Pow er & Iight convihdated financial statements prewnt Company and its sulwidun as of Detember fairly the finanaal position of the Company 41,198' and 1986 and the rotated conwili-and its sutwidiary at ikt ember.41,198' d.ited statements of income and of reuined and 1986 and the results of their opera-carmngs and of cash flows for ca(h of the tions and their ca4) flow s for cach of the three years in the p< riod ended lxs cmher three S cars in the penod ended 1 As ember 41.198". Our cuminations w cre nude in 41.19H', in conformity with gencrally as cord.tnce w ith generally act epted audit-as ccpted accounting principles applied on ing standarJs and accordingh. intluded a consistent hasis.

sus h tests of the auuuntmg retorth and sud t her auditing pn n edures as w c considered necessary in the circunotanus KKM f httr sto M f(hnury 22.1988

)

i

)

c

Arkansas Ibwer & Ught Company and Suinidiary 1987 19H6 (ort tinitosamis to)' dollars}

Capitalization and Capitaluation llatios Selected Financial Data:

$ 'Id!"o Operating rescnues

$ t,4M,856 51,4H9, t9 6 Net income 141,160 12 6,H21 g g,,,,_, y, g,w,,,,, s Total awets' 3,889,453 3.?37.693 i m i-< r.- m.i Inng term dcht 1,236,223 1,313fo 6 Prcterred stm k. with sinking fund 151,255 i M 009 9

Capitalbation (end of period):

7g 3{3 gg

[1 Preterred stocL anil pronuunvespense. not

$ 278,145 5 291.H99 7 l [ g$j b' h"f ~

('ommon stock and paid in capital 695,108 694.868 "ct'iard carnings 244,025 i5i m 3

L Total 1,217,278 1,14',H 10 g,,

gl y%qha f irst mortgage lund?

911,917 992.810 3

M l ong-term tic ht o

(g h

g $$ g h g,1 o

installment partiuse contractd 253,200 25 4 (M l ong term oblig.nion~ IX)l"

_ 71,106 64 '29 ;

Total 1,236,223

1. 413 M 4 l Total capitalitation

$ 2,453,501 52 451cil t i

^"""# b *#"I

-- x mi xn M t M2 x s a s e m, x-Interest ort Iirst mortgage innds

$ 88,756 5 102.031 l Installment [wt luse contracts 24,565 24 660 l)nidends on prcIctred stock 25,039 2MM i Utility I'lant (end of period):

Plant completed'

$ 3,803,454 53 M9.128 '

( onstruction work in progrew 103,416 12'437 l Nui. Icar fuel' 169,974 162.40 a lotat utiht) plant 4,076,M4 3.9 4 H 869 icw.suumulated dopretiatnin 1,068,407

% I.615 Nct utihty plant

$ 3,008,437 52.9H'.25 4 Income Statement:

Operaung rcs enues

$ 1,4N,856 51389,49:

Operaung expenww I url 332,687 331.993 1%rt luwd pim er 431,716

-454.558 l)cfctred port iuwd jw m er (167,956)

( 210.33 n ) :

Tases-dcterred putt luwd [w m er 73,170 103.52'

( as purtlused for resalc 26,000 31,592 soth Patroll-opcration and nuintenantc 115,765 1103 %

Othn operation and nuintenant e 236,703 21%,524 s o.,r.ne,,i t.wi t+,n.n n4,n,;t,p,

.., ea.o ancm,./ mum.n itnum inin, i..m Ih prct ution i 19,1M i14."42 tu.n /Jv h nam 6d.Ofa in ibn n*.r t e I!s mm lJscs 28,782 19 059 pn..e t. t A I Iser, n-4 to n n. tam f 1.

• IIw s e m e 4 I.'IJI 1,195,971

1. l 'l.61 ri

u. a,. " sm.

nv

,,n r n i.~,.s...u in t.gn,an i n - tn - t..c.a,a, vit.n inn., an.i

( )ptrating int ovac 208,8H5 21 ',H'N r,o..,n// w irig,# *,

inn s a tiv t ys % n.la.fr r

g ygg g,

, g gg gg, g

samt, f d.. nt o n. A. c.,f.d le a 4 t i n t... A s u..mun.n,a...,, o.. ru.n Intertwt and other (lurgtw

, t a w - t y.u n.

.a,.i t "'

imm on low-rm dt N 119,287 140 M 5 ? a ra,n.,o i a - in i ovo.a:nsu.a.u,to.'

(4hcr i.urrest-nct of de ht prcnuum 13,410 10 H5j,

tv un 11..v a,,..an a w ra, own n aarat p c,. b h a. s 19 v.

• t.. I m

• nm lou /w / n ye a Foi..n II 8t Ji (c st !ut!!ng SI I M )

I 32 b97 1bI.II9

f. san. A, i,. a,

.o u a.n. a.t <.i um In c ti..v in m n nm 131,390 l 1 i 63 tai a u a u. >I rw / Inn, e

\\on s'Jsh inct Mlle f ron) Al1)(.

(4 t/ t h - all. us ima, b.r fu mh o.nl.(4 rmv o.r s/ein 9,770 to I th tw.,g

\\t'tinctHnc

$ 141,160

% 12 4.H21 4x

~

• ',e j

f i

P 1985 1984 1983 1982 19H1 1980 1979 1978 1977 l

i 4

! 51,366,786 51,307,683 51,206,145 51,066,143 51,015,561 5 750,497 5 5H2,610 5 553,605 5 535,29H 110 068 143,367 126.8 %

107,372 96,140 65,230 82joi M6,014 69,305 3,307.882 3.060,817 2,859,517 2.669J 17 2A74.249 2,147,983 1,940,643 1,693,906 1,% 2,999 1,336,994 1,286.507 1,195,738 1,127,540 993,163 848,667 819,716 749,262 667A86 120.H12 124,170 133,931 141,13H 144,120 147,065 100,518 60,063 60,063

5 247.702 5 251,060 5 260.821 5 268,028 5 271,010 5 273,955 5 227A08 5 171,772 5 171,772 694,764 694,305 693.297 627,709 547,185 458.569 427,960 397,960 382,960 49.417 26.101 28,158 33,365 43,134 54,700 86,333 78.462 54,261 991.MH3 9?lA66 982.276 929,102 861,329 787,224 741,701 648,194 608,993 1,019,342 1,093,065 1,014,797 1,000,255 M19,585 765A30 763,549 709,549 642,979 252,971 135.534 131,541 127,285 143,578 H3,237 56,167 39,713 24,505 62.681 57,908 49A00 1,334.991 1,286,507 1,195,738 1,127,540 993,163 848.667 H19,716 749,262 667A81 j 52326,877 52.257.973 52.I'8.014 52,056.662 51.M54 A92 51.635.891 51,561 A l?

St397A %

51,276A77 I

i 5 121,T'2 5 122A94 5 108,727 5 105,56M 5 H2,986 5 73,551 5 62A36 5 56,536 5 49,366 3

J 2i,704 11.595 11JWM 10.386 14.016 6,593 4,980 4,980 4,103 22,864 23.222 24366 25.131 25A56 25,778 19,568 14.020 14,020 53A78,274 53307,908 52.910 A 70 52,623,319 52,546,046 52,133,701 51,231 H32 51,178f01 51,139,511 92,563 105,?62 306.39H 361,252 255.46M 2H2,376 980,054 7h5,6H 6 610,557 35hM3 27,321 24.9'9 16.869 10,214

" 151 12,747 l 3/06,520 3 A 10,991 3.241,847 3 004,460 2,H 11,"28 2A 23,231 2,211,886 1,961,285 1,762,H15 860.226

'66,53*

6'9.232 605,406 532,261 417A35 366A47 331,231 297A64

' 52,746,294 52.6'4 A 54 52,562.615 52399 036 52,2?9.46?

52.005,796 51.847,439 5 t h33,054 51A65351

)

.513 64,'86 5130*.6H3 51.206.145 51,046,163 51,015.561 5 750.49?

5 582,610

$ $53405 5 535,298 32H318H 33HA29 322.65H 262fd14 307,213 237,346 17th67 167hM I 169,H90 317,821 133,96e 166.126 178.861 141,316 154,126 171,425 120,801 114.225 (76,016) 37,415 35,816 46.894 44,150 40,986 3043' 3

102.N32 9?.659 8',210

?",566 6*.897 49,774 10h07 35,400 29J48 196.212 191.825 150A59 109,500 132.862 100,'00 50N94 MA78 53.011 109fw6 97A 51 92421 81,194

'7,923 59,574 39,708 38,365 36,76M

% 143 161.2'5 131.644 101,146 90.530 54,033 34.94 M 55493 62,753 1,147,997 1.0 M,49' 99 s M6N N5 4,H3?

HnH378 6%,%3 512 349 473A21 466.098 216 '89 242,186 211,2?'

191306 16',l H 3 94,964

'O.261 80.1 N 4 69.200 28,871 11,204 14,15' 12.6M' 1*A97 l'A68 2362?

16.986 12A66 s

138,*52 126.9?4 119,466 108.55' 90,*55 67,036 6',091 56,949 45,04?

",310

',3 '6

• 152 11.2'l 21.03H 17.649 10,296 4.469 3.980 146 062 136350 126 6 t M 119.829 111.'93 M4 6H5

??38' 61AlH 49,02' 99.59H 119,040 99,116 H i, t hi 72.MH7 2','27 16.501 35,?52 32.639 10A?O 24.327 2' 780 23.208 23.253 37,503 65903 50 262 36 666

,5 110.06M 5 14336' 5 126.896 5 10'3'2 5 96,140

$ 65.230 5 H2A04 5 N6 014 5 69 305

't 39 a

w r

--n--g-.

r

-,---m,,

,,p

ELEVEN YEARS OF -

PitOGRES$-OPERATDiG (ELECTRIQ' 1

i Arkancu lbwer & IJght Company 1987 1986 Average Annual Kilowatt.1 tour Use 13ntric Operating Revenues ( thousands of dollan):

Residential Otntomers Residential

$ 406,130 5 391,061 n.m,,un nu n Commercial 230,M2 223,597 cm uve 4, e

Industrial-aluminum pnesing 4,407 25.226 M "= d *

• industrial-other 266,168 250,401 i,. o G<ncmment and tunnicipal 17.9M 17.403

~

p Total'nem retail customen 925,451 907,671

-~

dD$ M O O NU r$- @

t Pubbe ut:htics 409,347

-606.MM 2

' " " gg p[

sliwellaneous rtwnues 30,2H2 31.862 Total electric operating resenues

$1,365,080 51,364,41%

ro u IUntric Sales (millionwf Lilowatt houn):

Remicntul 5,091 4,903 Commercial 3,500 3,363 1 lix!ustrial-aluminurn processing 96 101 Industrial-other 4,921 1.5(d) i 76 G<ntmment and municipal 2M 281 Total to rceall mstomen 13,892 13.20M Public utihtics 15,509 l 6.39M

- x 9 so xi x2 84 xi ss N. x-Total energy sold 29,401 21606 Generation Ily 1:uct (licluding il)dro) iwi,..u..n u it Number of Cmtomers (cnd of ) car):

Resitk ntial 497,878 4 % 569 ng, a n u..,,,, gm 3'*

Commertial 61,125 60,226

, (,,

q Industrul-aluminum pnwcwing 1

I p*

industrial-other 16,%4 16.623

• g p

Gostmmen' and municipal 1,212 1.1-42

.% a lotal retail custinnen 577,160 571,559 r.,

]

Pubhc utihtics 15 l

9 bF2,fj(

.! }

Total customers 577,175 s ? l.5'6 a

,r l' ;1 3, si t

-- ar4 Q~

13ettric Energy (nullions of kilowatt-hours):

, ; p' Q $ ;[ ' k 7 t j

,U '., (( 3 l*i-t ;- y

%urte and dap,wition if 1 io,

i I$){j!I' ii i ;;

Generated-net station output II \\N " [] fi

• l h I![', b i f Coal

0,299 117,15 h

[ ki j i i ; [j --

od 10 Ga, 3,132 2.792 m

6 L+

t ; j; e

E - _y h h w$ ]s Nu(lear 11,369 H N79 x 9 80 si x2 84 xi ss si,x-ii6 150 ihtiru Total generatcd 24,916 2 U06 Purt hawd 5,986 5,974 s,,,n Net interdunge (47)

(4) h gal 30,855 29.2'*6 i w s..,,- i.., s. o..u. y f,,...

h,, n,,c,,,

e I'" Company un hwe ii..,,,,, i.w i,. n.e w, o,..s,,a,,,,,,,c.f o w a.,,a, n...,... y... a,, r o f..,, a,,,,,,, u,,,

and unaccounted for 1,454 1.670 h.,.i,,9w, b,. m, Im,,g m;q.hnt hs Us e. m n 39g,}

g y

, aj,na-o n,,,, f...,,,, i # i as,....o..a., y n.,<

l'cah denund (mcKawatts)2 a,no,s eu, eie rmi m, yihni tu ti,,.

en

,e 19H5 1984 1983 1982 1981 1980 19?9 1978 1977 5 356,492 5 334.693 5 315,960 5282,206 5257,H01 5212,833 5160.992 5166,224 5151,403 202,H56 187,595 169367 153,393 148,938 128,4??

100,*11 98,293 92,999 56,930 94,067 56,629 50,175 69,52' 69,171 65.861 43.972 40,4 H2 242,267 224,392 200,296 183.975 1*9,331 140,422 112,515 101,930 102,264 19,213 23,288 20.989 19.0H1 14,78?

12.H2 4 11.447 11,236 10A68 M77,'3M H(>4,035 763.241 688.828 670.384 563,727 451,556 422.653 400.616 405,767 364,581 379,59H 299,724 298,781 181,650 125,980 124,653 128,174 33,292 IH981 6.052 5.572 5,469 5,120 5.074 6,299 6,50H

51,316?97 51,24? 597 51,148.H91 5994.124 5974,734 5750A97

$582,610 5553/05 5535.298 4,742 4,664 4,612 4,514 4dlH 4AHO 3,MMI 4.062 3,H3H 3.269 3,079 2.92?

2.HTO 2,H19 2fd2 2A44 2A72 2,353 1.676 3,060 2.571 2 0H1 3,061 3,411 3,349 2JW6 2,597 4,548 4,511 4,251 4.246 4,311 3,675 3,681 3,545 3A43 32H 605 394 410 312 292 326 344 325 14.563 15 '19 1i,755 14,121 14,924 14,540 13JW6 13.099 12,556 11,999 H.91 H H.965

• 388 H.35H 5A45 4.206 4A*5 5.170 26,562 24.637 23.?20 21,509 23,282 19.9H5 17,HHH

!?,574 17,726 4 H',275 480,133 4?l,508 462,753 458.941 405,717 400,290 394,766 387A95 59,546 5H,0HO 5',141 56,709 57,133 49,444 49.009 48.424 47,580 1

1 1

1 I

1 1

1 1

16A65 14,811 14,161 13.528 13.529 12.2H 4 12,151 11,724 II,lH2 1,13' 2.652 2,4 H I 2,3?2 2.342 1.54 H 1.617 1.573 1,519

$64.42 4 555,6?'

545,292 535,363 531,936 4(W,991 463D68 4 %48H 4 67,*i?

17 l'

17 IH 23 19 19 19 25 i

561,441 5%694 545,309 535.381 531S59 469.013 463.087 456.50' 44?,H02 l

10.H53

• 191

?,237 5.224 4.293 601 9

'lli 2.9 H 2fM 4,*27 4,* t t 2A68 4'O 487 6

3 35

• 2 3H9 1,653 4.050 6.7 41 6.973

)

93H9 10?70

• 583

' 463 9.173 7,H31 4.101 5.220 5,085 i

20' 235 201 175 140 103 251 131 98 21,882 20310 18.036 15,595 1H'22 14,929 10.H70 12,562 12b63 6,26?

SA 60

'A02 7,241 5.980 6,459

' '4 0 6.162 6.133 96 165 100 82 12 (209) 2%

H (65) 28.223 25,915 25,536 22.918 24,*14 21,l'9 1 H,906 iH?32 18 'l i j

l. Nil 1.27H 1.H 16 1,409 lA32 1,196 1.Ol H 1.15H 9H5 l

26.562 24.63'

'3,720 21, % 9 23,2H2 19.9H5 171488 17,5'4 17,726 3.6HI 3.650 3,? 4 H 3,541 4,369 4,179 3,521 3.654 3.336 i

l l

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7

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1 1

Board William C NolanJr.

John M Griffin l

Attomey Senice \\1ceitysklent, Gen <ratson &

i Juhn A Coopet Jt.

Ilikonkin, Arkansas ThuunAssion l>rsident, Coofwr Cornntitnities, Inc flentuntille, Arkansas Robert D. Pugh Ice W. Randall choirnkin, thirtl<nul Girt

% nlor \\*h e 1% sisissat. I toutnce &

l Cathy Cunningham C<nnfrony Adrninistnation, ChiefInuurci.d aytiar.

2 Rad Estateikulofsr Ibrtinul, Arkansas Assistant Tmosunr & Auistant Murhery 0

lielerut, Arkansas j

~ Wmbon D. Walker Charks L Stet.

Juhn J. flake Attorney 1.terutite \\1ce14rsklent & c.bief14tbloc thunrkUL /Like& Clan [kiny little Rock ArkenMs A))itir$ Of]Ecer i

littleRtxk Arkenus Gto 11. Walton Jr.

Cecil L Akcurxler

}

Marsin L Gernert Partner.1%e Inn el

\\1ce Itrskh4it. Gen ernntent Relatirnu 14rshhtet Arkansts12sstntan Cennftany 1.ittle RcKk Arkansas 114testtile. Arkansas Kenneth R lireeden Mkhael L Wibon

\\ hr /% sklent.tlarh ting Richard P liergetJr.

(hsinruen and Clwifikarutile Officar.

.\\larksging s)rnstor.

lav \\tlison & Cornfurray luuis N. flurgeu

,11arsh &.11clennan, Inc

\\llison, Arbanka

\\ \\ce l%'skh1st. ( usharur %viica littleRotk. Arkansas T. Gene Campbell Tommy thllman Advisory Dirators Ihv itriklent, Nuchssr

}

1%rshlent,18 knn>< k Ianns, Inc, f 4Himut Jm-ann of av c ominung j

& 11ce (hunnart Ricelarullornis Johnj liarton RArK nWer

}

Gurtiste, Arkansas but Owmnan of ttv ito.ml Gemmema S h e l4rsulent. Itrkena d %sisces, Mtunkst ILmk arut twfdes %n sngs & lesun Itnisuni& Assistant %11rtarY A*"h""

Kancaster flodgen Jr.

U"## ""

4' Altonky & lintner IM Terkstor Chark, l. Kelly

]

N<4tf'ewt, Arkansas IL Gntr

\\ 1ce l%skhst!, ( tafs snne t onununu attons l

hut 1+nutml RVe4,uktlenh Rehmt j

llal L llunterJr

$tiagart, 4 rte n Marshall L Pendergrau 1

Atlanocy

\\1ce l+uulent. lossa ojerations

}

Nsw.11<$1M.11tssourt

• l, lg?.p_

& Inonsonisstort

{

Graut/mtst/c tt,ien en I

e l thvin Lupherger M W. (Pete) Rice l

f Chainrkin.1%sklent arkf l;irn tor.

Rcoes f Rstchne s yr jy.sklent. \\ntern Plsvuung 1

.1tidsfle 50toth l'tdaties. Inc

^"' " # ~ """""I" * *'" 5

[

G>mfrony Retumi Ai te Orksins, f oreskirks Infile R = k.trhansu Willie RJ) Southern' ihe 1%3ident & A2sistant to tiv 1%~sklert!

Jerry L Maulden Dr Mudult T Mccl I%mhlent and ihefI.mutit r ofJiar nut Isni. tent Ilerutn r (<JIeye. Retorot I\\enty L Watten

)

nne tiluff.trhansa iy* Cornthiny 1he 0%*sklerd.1%Unnny & (:ordnd isttle Rtn k.trkanw Officers W Dudenkfer Raymond P. Miller Nr4 MD Ausstant %rrrfary lYrnicknL little Run k Intsrrud Jerry L Maukten

.tfatnine ih nic 9urk A Ilunter 3

.g stille Ru n k. irkansas

.issistant %vvtarY Roy L Mu'Phv 1 W"I '" 8'kr c4m n1'n nw nt unl (intimktn & 1%nk1st..\\tadhottib 1.rnwtu r Oce l%nhva. ysvattont

(

encane Januan 4. Pm amt witwrn

^

}[

I utgtru%4,ny (.hrnfrarty llot \\ fir 19tgt Arbinkas 1

h O

i

lhe 3 car 198' w as a good one for Merger Agreement Signed Ricky A Gunter Awmiated Natural Gas Onmpany ( ANG)

.nssistant Tmssurty in nun) w a>wincreased earnit gs re-In 1971 the Semritin and IActunge dtn ed ga unt for the customen, reten-Comminho (St C) ordered Arkanuv Asssslant Secrvtary tion of indtotrial customer and proy,rew

\\liwiuri power Company, the parc at in the nurketing departnwnt osmpan) to disnt all ofits gas proper-Rate increases approwd by the ties in early 1987 our parent compmy.

Directon Aianus and \\liw>uri public scrsice AP&l. prepared a baic infornution Paul C. Ilugivs aimmiwions in the fourth quarter of docunwnt and sought ; ropovls for the

/trsisterit an<l Chief Eurutit r ( Afffwr 1986 wcre in cricct for the entire )rar, acquisition of ANG. On September 1.

li'""MIM"8 0"T'oratton

" 'NU roultmg in inc reased carmngs and a 198*, an agreement w n signed for the return on imestment iha approac hed merger of AN'iinto Arkanus Wtem 1121 L llur ter Jr.

the return allow ed b) die conuniwinns Gas Company, a suhWur) of South""-

Altonter. //unter 6 //instw Due to regulatory thanges at the tcrn l'ncrgy Cr 1pany.

Xctr' II<ulri44 lliss'nui federal and state les els pipct:nc sup-Applications hase been fikd with phers elected to prmide for the tranv the Arkansas and Aliwouri public wnice Jerry L Slaukien pirtatrun of gas common!) referred to omimiwions the St C and the IcJeral (Annnent oft /clhmt finiicntarulOicI b"T"#"

• llI"# "I d

1. "U "*

a "open auew." which enabled ANG I nergy Regulatory Commiwiort in addi-little Rosk. Arkansos to nuke purduscs on the spit market.

t;on pursuant to law, notice of the pn>

'thn let the Company purduse inrr %

pned dispnition ha heen gnrn to the g,; 3gggyy pcrt ent ofits ulo volume at pntn I cdcral ~lrade Commiolon Frnenti -

17cc /trs&lena F

below the ont of gas purchased from its yptinal a anticipated from these agen-

.llcHamy.tlonsoncnts historic supphers roulung in a rnluen!

cin and tlw mergca ma) be completed Iht/wille. Artinsas ont to ilmastomer of almint M.4 mil-in the wrond quarter of IVMM hon licuuse of this and other competi-Af ter the initial slmt L of the dnoti.

I rnnt L W Ketvie

^"

"^ ' ""! W '"

tion in the enerp nurket, our customers ture. the emplinen all of whom hJs e t JJ/icer, Wrctary aml Imssurcr of tir guid ninc percent lcw for gn tiun in been awun-d of amtinued employnwnt, gy, y

19% lhese smngs wcre pawed dirett!)

are looking foru ard to the actual ule a" Nyu w i#c,Arkar e to custonwr sia the purdused gn they can hcgin operrions a Awociated adtustment dause appnnni bs both Natural Un Company, a dnision of L lhurt M6padden state contmiwions Arkanus % ntcrn Gn Comp.iny.

/ tut fini. lent aski' /#cf Of= rating i1//lur Aw s utedi larycr industrul cuv of#v Co n/=#ny. f&tirnt tomers also ovukt ointract for gn on I rnnt I. W Ken /ic

/ht/vt11/c, Arkans.n the spot nurket and lus e a pipchne Eur8'tu r 18CC l'W'le"'

Kenneth L Storey (ompany and Awsiated transport the

/ trsi, lent an./ Chief /Jn utte r )I#wr gas through their respectne pipt hno

/<n/ 6iant tu/=v.trarkets. Inc 1t) this ettort Awociated we ahic to Officen wrston, tifssoray nuintain all of its industrut wstomen

,1ctn 1. Maulden g,,jj,g, gy,,

through direct uln of transgurtation

/ Lu oter (y/h cr-and Jd not lo* am gas load Io alterna.

m,%w pm p.orpair Inslutile, Arhumn tnr sourcn of encrp dun.ig the it ar. J l rnot L W Kuute

[u lice oint rati to poor )cJiw lan nIn c 4 tcc /tru4/ent. ( hec / f1/vmting WG wotinunt the nurketing pri>

t #fftor, wirtarr at.41 Imtsim-gram inituted in 19e. sod Akled approv inutciv Mn customers e a resuh of I h c /4cu. lent. O/=rationt their o >nyt rting to natural gn inan ahornate heating sourt es Glen t Vet (to

.Umtant Irnouorr s

44

ywsae

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Q)RS @)M i

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Transfer Agents for Preferred Stock Union National Bank of Little Rock AP&L Observes 75th Anniversary thett AP&L has been an operating sub-j 1 Union National Plaza sidiary of a parent company, known Little Rock Arkansas 72201 Ilaney C. Couch, a self made busi-today as Niiddle South I'tilities. Inc.

First Commercial Bank nessman who became known as the OnJanuary 1.1981. AP&l.com-Post Office Box 1471 "master builder" because of his contri-plcted a long-planned expansion by Uttle Rock Arkanus 72203 butions toward the development of consolidating with the Arkansasalissouri f

Arkansas. and a group of associates Pow er Company, also a \\ liddle South Registrar of Preferred Stock organiicd the Arkansas Powu Company operating company. s(nir.g parts of First Commercial Bank on November 20.1913. 'the next year southeast %1iw>uri and northeast Post Otlice Box 1471 they incorporated the firm as the Arkan-Arkansas Uttle Rock Arkansas 72203 sas I.ight & Power Company.

Rather than build a small power Certified Public Accountants plant in each community sencd. Couch ;

Deloitte liaskins & Sells decided to build one large generating h

111 Center Street facility and sene the surrounding area Little Rock Arkansas 72201 by interconnected transmission lines

~ Helping tUl[kka since 194 lie acquired the system at Arka-Executive Offices delphia. bought a small plant operated We've been consistently on the util-Arkanus Power & Light Company in an old chair factory at Stahent in-ity industr)'s leading edge technolog-4 25 W. Capitol stalled new generators and constructed ically construction of one of the first little Rock Arkanus 72201 a 22 mile transmission line of 22.000 modern hydro electric dams in the (501)377-4000 volts to connect the two towns.

1920x creation by our engineers of a With that. the pattern was wt to more economical pow cr line that made i

Aw)ciated Natural Gas Company merge the many small m. dependent sening runote mral customers practical.

401 West Park Street electric sp. cms into the interconnected design and interconnection of extra Blythesille, Arkansad 2315

{

network that is todav's.\\ liddle 5outh high soltage transmission lines in the (501) ?62 3660 Utilitles 5) stent l'XA; introduction of load management the generating units in the old (hair ly use of remotely controlled air condi-Annual Meeting factory. turned-pow cr plant consisted of tioning and irrigation sw itches; and early Third Wednesday of Ntay one 75 kilowatt unit and a 5'.5 kilowatt advocaq of fuel diversification through

)

unit, a monumental contrast to /.rkansas our move from total reliance on unstabic l

Nuclear One, the modern steam electric sources of oil and gas to nuclear and 1he Middle South Utilities 5wtem's I

~

station w hich has one unit generating coal 1987 Annual Report to the 5ccuritics l

l 836.000 kilowatts and another generat.

I ollowing ilan cy Coucit w ho and Exchange Commission on Form ing 8583M N) kilowatts.

served until 19 41. AP&I has had only six 10-K. which includes the report of the in the 1920s sewn companies presidentv Colter llamilton Moses.

Company, is available to any stockholder 1

competed to build pcm cr sptems to 1911 52; lubert l3tes Ritchie.1952-upon request, without charge.

wrve AP&lls general area. Mr. Couc h 1960. May-October 1962; Paul O'Neal Stockholders can obtain a copy bv and Sidney A Mitchell. head of 1.lectric Canaday.19(o62. Reeses INtes Ritchie, writing to Ik>nd & 5 hare, reached an agreement 1962

6. Arch P. Pettit.19'6 '9. and Shirley A !!unter that led to a merger of the seven into Jerry 1. \\laulden.19 9 to present l

As istant Secretary Arkansas Power & light Comp.iny. in-l Arkanus Power i 1.ight Company corporated on October 2.1926 Since Post O!! ice Ikn 551 Little Rock Arkansas 72203 I

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Arkansas Power & Light Company Post Office Box 551 Little Rock, Arkansas 72203

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