ML20151M698

New Orleans Public Svc Inc Annual Rept,1987

ML20151M698
Person / Time
Site:	Waterford
Issue date:	12/31/1987
From:	Cain J NEW ORLEANS PUBLIC SERVICE CO.
To:
Shared Package
ML20151M663	List: ML20151M689 ML20151M698 ML20151M718 W3P88-0987, Forwards Annual Repts for 1987 for Louisiana Power & Light, Inc,New Orleans Public Svc Co & Middle South Utils,Inc
References
NUDOCS 8804250111
Download: ML20151M698 (44)

Text

-.i y;j?if Q[.)

g:g%

E

.N 1

3't g

M"'n y

%y :?,p' t'.g" $

7dM T%. zur@ e..

3c f), I

_ !-@{,;

.jj 97 yLl -

,, : %.;.g,p%l-t

~

' -= x:

9 ; 'y; I(

w sw

/

4.,

44 f}l, M, '. gl= j-j,.,

z

., a '

., pg.: m-

. 1 ;; ph?7i

?

5,^

i n yli;b;[q k r Pt'llLit SERVICE INC,

dp, Yl x;.

&,;iM'%,

W.

6, 3 7,,lx

,'af,

^

~ '

t

.-~

y

.y

~a m

(

.ir f

p T/g

)

n

(.l) y.

=

&f^ *n

. %s, '

'f, l

5 I

+

( '- -

%;L %;.;:/

}

[si Os

% g x. f mmh:

3

[D x

3

_},

I :-

? (

4;gg

, So l

7 i

gn

.- s 7

5 7j 7

q

,4

?j 4vg

-M,

• f%;g H

%,.,-. y aa o

'p.

J

' ;}

i

(

' g/

t t

A f

4f fff,j

• %45 g

p:

4 ~

5 g

3

(

{

%3 4

x 1

I i

lj.,7 ge p.

800425il11 wn4)9 PIR ALnX F m

,,n.

I En [l

i,

+

x :

,_1 n ' W pg-

.[

. ;~ g.

+.,s f, f;,_,,,.y.-

+.

p-

.' i y

1 ;,,.

,k a,+

.,m.

y r.:.

p.

a. -.

r.*

4 y

w.

+ -

., y a,+..-..

~.. -. -..

e.

s

.i

..o1 i_nn..

y.. Ng3 gt

,?

.,C 3,;-

,.c

,g 3.9.

' c-T..

c

.,,. p'., ;,:.,,. 4.g' & ?l j - ~..

e

+

-+

f

. j s_

.._4' l'

4

.,y

, g.. ;..c f,.,

?

'+

. +, r ' f. gy w

'a A ',f

,7 e s.

. ' &. =.,, - -

9. g f.7...

ill '

y %..,'

f, 4 f-Q.

^

y t?[ u..

n..

m --

t s-

.3...T, pt 4'

,5 r

> 4.: -

~

.\\

.s

'q V*.

> c.e h

./. 4 t.3.

,g 4*

f..c 4

s

. s..,

. " ;,.. coj,.f.

,7

,., o.gj

.i

. 4...,

g:w.

a,.

~

.f

? g,. - ;.

3 -M ' I

$ ?. ? Y{g e '

p,: - g..*. ], - ! -..

-?-

w, 4 : 'f

('.' J j, -j +,Q ';, ? i ; '.'.Y 3.',

$ j,, -Q,g...

4 fy f.,.; q. a h> & [L j.~ 4 $" A L. ?. $ [ a', ; %

g.w\\ / - l.l,.. 4:

C,'.

P/

>. ;- q

,.,:L.4 g*

s; :..

q -.

.y

..n

.g. ; q <..

g;

.y.gc.

g.

u 4.;-

9

..).

. S,.

e.

p. ',6 p[.;

. ;Q..- * '-+ %. :1 '7, ;gg g 1,,

' }.,.g%g _+,

.N. g c g 4.R n '.. e_ ). ; y,. q : ; -

W.,.

D:

s. -

~

L z

YY g$ p g.-.s., c X.k ~

• a. 'h, : u ; 7..M 9: s

7. % :w : *?

):,.

b '

y.

J

• O.

y7 e

g ;. 9,, % ?.

.4 x.-

.;g~

.,,. J,. -

_.

s.

e..

• 3 A. ;'

%:p u-l y, '

., _ 3.

.'. ; '., 'yw.

,- 4 vp.

n

'. b.' $

' ~

f~, [i

.' (.

h,, y ~ )

l

..qy 4

-a h,... ?., '.f,...

.,.k :., ik,..f. f

h.. p hf_.Q h h.._ *m.,.'fs l.'_ l ;.k;. l. l. f.. ] ?: {

4

!f ff,:

~

s.

4 4

y

. %sAskW...%hs %S,$%'$-% g[*.rT:19%%eM

,.q.) c ': 4,a t.V $..;&A

• l c.

' ' ^

h,.%

p i J, t ;+,x%isp:.

Q..s.e,3 p&'... %y..,. p 2 q~;."j -g.. z. Q

• G.f.? ?? '

s...

O

~

., ~.;..

.p-n

.- ; -'. A -

't g, A

.g 9> 7 r

.~

.y.

x ;., p 9

-h,.

..g.#

m f,. t. L % y ? ;g;.:.m l 3 *k;;. f.

. "." V.(f s

.m 1

s 3k.

m.;

4 s-gf h

. Y'Q..; % ?l" Q g

,9

+,

..,,u vV

.L

- 4ff rQ l

~

q.wQ4.Y W % % v

.. m. 1,-n. :., igY9Qig..

.f e..g 7_...

. g

.m.... ;:,;.qe.9

.....s a. -. s

.,~

,.p,e.

4 4

4 :-

{ D!

Y N/4.

.. ~

Ir. [(.(,. {..

M h

n y ge t < r.% >,...

. v....

',[{ y.[ J

}

p f,'

y.

r e.

f, Q,,$ &&

> %Q& T

%~'

V;,

[

h

.ih kQ@,h

(([h

? - ['

W.

-gj V L.

i nka 0 5

• v V... (. Y.-4i. m ?,.'

C v w.' '. + >%G$p: fp?

-1 t

. y 5f W. y.

.,3 usan y v f.a t

e m

}

.=.L w.

.A,-R

$-h.

q ghs

.. dy:,. v; 3y enaEn e

$ $p g. %..%v

.nanna. M. '.

m.>;

, 4.

M.

~,*r..

.aananada 4,f.

.n.

~

g

.= m. f - -

"s a m m a n n a's

~

amugggggg4ppga... ' d.0,.... *1

. r-

,.ga %..A.f Im a m m a s s e a u.

A

• r4 e-4

'M@% g'3

• s s.z J

~

K

' y?'h annanaamak. '%.

3 Q. G ' y V k

.Y t;.

V.h.

'nanasames.

e'.

v...

!'tI L; 2

..g 9 a

'4

. i 5 y '

'? -$' 4 e s a m m a m a n a 9 ' t M '.. C' 1

OC

'. & ;v waamannan%. W d,s h.(<.W'4 e

. w O.V. :. Q r

R f

', q w%

m a -lmr #g s.

an s

.s, -

.a E

f... '

yQ,A f; pl ;g A'.e g.

.c

.e. y, w. g.c. e.

yN.,,q <) M qaasanLM. S.W# M -

~

W.

,agasamp m m.-

. ca

, n

-%o W s%

}., y.[ d ]a.' Q,;

,- T' x

• { ' t. ?..

' ' ':.. p; y. / f.

,f.

. f.

• y e f. * ;f;...y. 4.,1,~., %, ; W " N,. w.

x Annamaam8..( <,,

, ;. s %

. g;. :

= -

w g.~.4 ;

.f :.,.

.g gggy

_ s. y.,._.c-._

r

> 'y v.j ggyfN -

y

j.,

(,

. q ' k

's.,' g; '~ g ', f..

4

,_JanaEneF L.g

.gg g

_.>q g,*

e

- * '

• p ' R.;i..f M : (i g{#.

f ::

(

'*i t.ja ',

.7

.D-. / g4... -.' Q W..

$m'

_ 4 e.h.c jggjjjgAd. (:;4

#(..

e.;

s _______. %,,..

.g-.j

.,4...,.,

., 2 y,,,'.' M

,1 :

. L 'O,., h.

g y

,

• t'

? 5y,3 e p*

7

..y+

g -.

4...

,*.,4

' l y *, 4.*..

f

-e f,/ s[Q. y,1,.

p g,.

g.

h

,f x t

gv=,

s...*; p,.

l i

, +*

j h I

.s

', g.. '.'

2,.. J.,,, e..

.)

. '., +. f' g

.. ',[ r &

-g..

.., [

1.,7.,'.

. '1 g-k-

o y t ".

.Y$

' '.., l'.

j f

'?

,[

,; e Sp..;

8'

.g

.,K

- i..

. ;t

,.4-1por g, Q;-

e

?.

-H s;

,y i

', "y J't

• y y

'l G.

y d.

.4 a

g; j*.. <

... [.

f

, qg [ ~ } [:L =. y

, * ~ c p J.; _.,y[,y*

. [ [.

F *

.e

, y.

y,l c

,~

y W.

y

+

e g

~

~ '

c

.A.A 3 5'f. c Tagh4iimh.watiteWul.

.(f.k x ?w.tmetb?-

en uapesar :

.r....

e g: %q,,

u.

v.p

(

r

. 14,,

~

.f ;. g

m, r n

.., s, n+ n *, ~,,..

~

.c x

%u 1

e 4 -.:

y.%c i

k;

$e d '. s.g f

.. e j i, m m%ai

3 y - } r y.;c ;. %;,.a w*. w ::j p }.w y e:. n j

~

, 3. q n..

-_,(

a. _. -

y.m s, ;,

,.g y;

< ~

-,7..,..p.,...

-~

a

.a v

s.

~.,.x

~..

~

a y

a j

Wl e

s de > W$$]

uth area, encompawing various tct hnical. administratnr. and gg g 1.300 mmmunides with an aggregate corporate senices dut hencfit all of poptdation of fne mdhon the Mst'sptem companics in wmmon.

In large photo, two linemen work At the beart of Ihe 5v m are fise sptcm i ucis. hic ( 511). oc h surwidun; k '-

I t of Mi-d oper.iting companics uorking iogether.

and 1.lec;cc, Inc. ( L!), a subsidur) clut insulators atop a high mitage tran+

Arkansas hmer & tight Conpam ( AP&l ),

nurkets the con,mercial capabilitics' i

M k C npq's louisiana Ptmcr & la;,ht Co.upany espertise, and rev>urm af the 5ptem kcule e n (l Pa! A Missiwippi Powcr & Iight comp mies Compam (MP&l.L New Orleans Public lhe wmbined wmpanics of the Womn m t.lcrk Mm IM M awie s niu "c. ( NOPsl). and 5ntem l nergy Mst 'sptem are committed to priniding e

a r Mb bdW idorm. tion at Re,ourus Inc ( 51 RI). w hk h is the Middle N>uth region cwnomical.

h- ( onp@ Mmmion IM i

f

9. m h.c kg.QO

)

_,w ig c=

.a l

Dear I~cllow Sim kholders rederm all of its outstanding Rate Re-sister company. Inuisiana Ptm er &

1 and I:mplo) ceu can cry Mortgage ikmdv will lusc been light Onmpany(!.P&l ). located in Algiers significantly and adwrsely imp.xted (15th Ward of Orleans Parish) lhis par

\\\\ hile there w ere nuny accomplish-Itccause of this, the Company wuld pisal has been under study since 1985.

nnnts rc h/cd by New Ocicard Public he rendered insohent in a short period in connection with the municipali/ation J

Scruce Inc. in 19M', diese athinements of time, perlups as carly.is the second pnrposal. the O>uncil in Octolwr 198 -

J wcre mersludimed by the socre tin.uxial yturter of 1988.

rented an Offer of N-ttlement presented sctha(L suffered by the Company as a Although the Company has rnorded in July by the Gunpany and 1.P&l. in.in result of a l'chruary 4,19XS Rcwlution the $1.45 nullion prudrine disallowance attempt to s(ttle outstanding iwucs.

( Resolution) adopted by our rtyulator, against 198 carnings. it is sigoroudy includiag the municipali/ation and the Opuntil of the City of New Oricans (hallenging the legality of the Revilution prudence nutters 'Ihe propowd offer (Councu). ~Ihc Rev,lution required the in the courts 'lhe Company filed peti-contained a nunmer of concewions by O>mpany to u rite utI and not recos er tions in federal courts aWng that the both companics and an economic from its retail elect-ic customers $1.%

Council be prohibited f rom imposing doclopment pa(kage for the City of New

]

million of prnioudy dcferred Gr.ux! Gulf the disallowance. the Icdcral courts.

Orleans in I)cccmber 198', the Council 1 relatcd costs thus far. has e denied the Compan)\\

submitted a counter proposal. Af ter As a result of the Compan)% inabihty requests for immedule iniunctisc rehef studying the counter proposal, the to obtain unmediate injunctne rehef tlut to sta) the cifet't of the Revilution.

Company informed the Council that would stay the ettccticcncss of the althoug the Company is continuing to although it could not accept all of the h

i Counal% action. under the terms of the prew its case hcfore a federal ap, ;ah terms and conditions of the counter Resolution and generally accepted court. I urther. ths Company has filed an accountmg principles the Company has appeal and rcquested similar injun(tire 4/ 'L been rcquired to record the write-ott in rehef m starc murt %e are optimistic 19x rh rthy prodo(ing a nct low for that the courts will nentually rule in the 3 car of appn sinutcly 5 69 milhon our f.nor and h.nc the disallowance 7:

e q

and a dtliut to retained carnmgs of wt aside.

i approsinutely 5 4 6 milhon in addition to the pnadence dis-

'lhn is onh the wrond nct low in al'owan(c. a nujor uncertaint) facing the ( ompan)\\ M> car hntory 'the first the entiac Middle Ninth 5ystem is the 4

was espencne d in 1985 Itoth lowes htiganon twtore the 115 5upreme Court were due to the Council % refuvl to dut imohrs our sister company. Miwiv alkc the Compau) retowry ofits Grand sippi hmer & IJght Compan) (MP&l.).

V 4;

(,ulf 1 rclated costs and the Miwiwippi Attorno General's

'the uhinute (onwquent es of the otti(c and the Miwiwippi legal N nices 8

1 f

• {

Cou'icili action, diouki it renuin in

< oahtion In this nutter. Ihe Attorne) cltcct. are dut the ( empan)\\ abiht)

Goncral% of fic e is ( hallenging the es to aiht.un the requisite fulkls to mect its right of MP&l. to rc(mer its brand Gu f Q -)

8 continuing obligations to etfcct long 1 related tosts trom (ustomers A res-

__, 4 or short term estcrnal horn mings. to olunon of thm (ase couh' remov u;ot h ot.uin tuixls f rom its parent comp.iny -

ist the uincrt. tint) alu >ut the rows of all Middle South Ctihties, Inc ( MW ), to System merating wnqunn in o >nnation 3 d"*' E U" decim dhidends upon prefctred or nith Grand buli 1, President of the (hinpany i

common stot L. to meet future sinkmg Another iwuc sti'l in questm.i is the fund requirements upon pretc.Tcd sto(k.

proposal under wnsideration h) the l

or to satnt) p >ttntial ohhgation?. to

( nunt il to muniopJi/c the ( umpan)i clectrw pnipcrties and those ut our J

1

)

1

progusal, v>nw of the terms aixt lhe Gimpany and its dedicated standmg between the G>mpany and o>nditions mented fare er discuwions.

workforce achiesett nuny ottwr positise the Giuncil.

In April 1987, the G>uncil autho-and meaningful a(complishnwnts in 198' I lwpc tlut in next ) car's annual ri/cd a L!9A million increase in the that helped us furtlwr improw senice returt I can report to you that these Gimpany's electric rates as part of the to our utstomers whi.e. at the same nutters wcre successfully resohrd rate phase-in plan for Grand Gulf 1 time, ciuhting the Gimpany to act as agreed to in Marth 19861his increase a responsible corporate citizen.

was the second Grand Gulf 1-related 1hos,in sumnury. I must reiterate 1or the lloard.

Sincerely.

,ornue adpotnwnt granted to the the far reac hing cif(cts of the prudence March 22,1988 (nmpan) since the 1986 rate settic.

disallow;ince ordered by the Council in s

ment went intu etfcct, early 1988. resulting in a net low to M

l'nder the pnnisions of the rate our 1987 operations of appnninutely settienwnt, the G>mpany would he able 5 69 million, and the fact that this di+

to impicment another Graixt Gu'l I rate allowance has placed the G >mpany in a jantes M. Cain President increase in April 1988. Ilowner, this penlotn financial conditios Altinigh slicduled rate increase will he at a we are litiguing this nutter in the reduced inct if the (.ourwil's l'ebrtiary 6 courts. unfasurable decisions by the 1988 Resolution is allowed to stand.

courts coul.1 result in the Company I shngs to rt flcct the rate increase at becoming inwhent as carb as the luth the viulukd kwcl and the reduce.1 second <luarter of 1988.

karl w cre nude l'chrtury 9,1988 with I cannot <ncrstate the importance the Council of this prudence disallowance to our Aside from these regulatory and sunkholders. our emplo ces and the legal matters, much of our energies in ctatonwrs we sene.11rrefore, all of 198 were intenully directed at desci-our energies and resources in 1988 will oping a pn> gram to lurther impnnt he directed toward a rewlution of this employee nx> rale and work perfornunte and the ottwr iwtws currently out.

w hile, at the same time, pnniding our functioiully (unsolidated operations with 11%I.a strategic plan for the f uture.

'Ihe pn gram we adopted, 1%ie lhrough

~Iiamworkl' is aimcd at impnning our perfornunce and puhhc inuge. 'Ihn pnigram hn.ught together trann of enplogrs in>m acn>w the Gimpam who po&d their talents arx! creathity to nup out a plan to nxrt the clulicoges of the future and pnnide cwn truer senice to unionwrs the "l%le Ihn> ugh liamwurk" pngram and of her aspctis of the Gimpann pinning pnnews are oncred m detailin the nest sectiot of the annual report. I %pe Suu will take the time to rnicw it.

1

)

i

4 3

$.t 1

)

4 q

l _ ',

~.

-w l

, g,-

Putting tranm or k !nto action, this j

group of technical people (licck the operation of u newly installed

,il u

1 e '

computer sy stem in the Company \\

a main office. Testing the computer are, from left to right, Dia Caronna (seated), i.eslie llutts and Ilurt j

trhmann.

i y

b t

9

)-

f.- i

%y

/ g yrFfjj; fj[,;

K p

.y m

.v I,'[. *, T,

,.<I

.,., <[

}

?l.

\\'

naw o

e~c t

w 1

1 1

b.5

\\

l [

l qj' q.

9 l

l

n m i mpi.,3ee.,,o m.,,..,a n, l

l Prcudent. lames ' I (,un

h,, A

' ' o, Q

~v

- t, g

s

, 4.~p P.Q,..

• 'w,. /

13'

"[

~~

1,

, - v,. %_ %y,t

+ 1 '.

g:7 y~

f

@P

.n

%fFl{Il % I~Ill

( 11A141-%IA OF TliF I tTt RI TilROIEdi

~

T F. n m y R K -

o *

\\N.

s _.

i in the foregoing pages of Ihe annual Ihey hAr been our osmtant goah mrr aco>unting pn>cedures. All of these are report, President Jirn Cain referred to the ) tars as we luw attenpted to pnwide

' aimed at pnniding inprtntd senice i

a new internal focus for New Oricam our customers with the highest quality to untomers aia dired result of team.

Public Senice Inc. and tlnse nwn and of senice powihte at rates whkh are work betwren various segments of the wumen w!wn omprise the wurkforce of imth fair and reavnuble. w1ut h new landionally consolidnxt Gimguny.

the I <nngun). As p>intred out, the under-is the devekyment of measurabic In our functionally convMidated lying theme of thh program is "Pride factors by whit h w e can objecthriv operatium, emplo)ec, of Public Senict 1hnsugh Teamwurk." a motto aimed at clurt mynntment in fhr hnud areas '

and LP&L wurk side-by side, sluring expanding the sense of pride in twing a of out o>nsolidated operations. Attaining onmmm g Jah and objectn es. This nwmher of the Company team and in our goah in these areas-Iiruncially turnuniom relationship h an example dockping a spirit of axperathenew 5t rong. Operatiotully Strong. $uperior of teamuurk in action. It is a model for not only betwten 8..dhidual emplo)tn Nuclear "crfornunce, increased Custo-succewfully achioing the spirit of and work gn>up, but througimut the nwt satisfaction and Inynntd Enyksyre spaenmide tcanmu + for which all of us Middle N >uth t 'tilities. Inc. System Storale - will lead to impnntment are strhing in the Shddle N>uth 5) stem.

as a winte.

in perfornunce and pubhc inuge.

1here are many more examp!cs of 1he Opmpanyi"Pride lhn> ugh Our new emplusis on "Pride the early success of "Pride 1hrough leanmurk* pnn; ram b an extension 1hniugh Teamwork" gwrlups takes us Teanmurk." Ilut the program really b of a nwnrment toward ~5ptenaide one step further. Iirst,it makes otr>une only in its infancy.11w Company is leanmurk" trgun in early 19C by Aiiddle awo(iated with the conelidated Qim-optimistic that its "Pride lhrough South Cluirnun and Chief becuthr p sny aware slut by wurking together as Teamwurk" program will result in orn Officer l~dwin ! uptwrger. During the a team, we can accomplish the goah more succewes in the coming 3rar.

omrse of the ) ear, rmplusium !tanmurk and objecthes of the new organization As part of the planning effort was nurtured and grew thn>ugtmut the nore readily.cnnin Llw face of adwrsity.

mentioned earlier in the Prrsident\\

Splem, with ca(h operating company it aho pnnides all of tn an opportunity letter. the Ccmpany sus identified the designing its own pn grams to supgort to commit oursch es to orn higher specinc thrusts for 19M 1hese am:

the diredion of the parent ampany.

p uk for the future.11w prinury obicone

• 14*/ein One Compmy -

1he "Pride lhrough Teanmurk" pm-of these goah in 19M h to twcome A Interna!4 tlut nram strengthening gram of Public senice and our 3bter CRE1TCo.lfPtXY - one strhing for the awarenew that we are onc aimguny,Inuisiana Pimvr & l.mha excellence in orn way powinte.

o>nwlidated G>npany thn> ugh Oimpany (LP& L), with w hom wr are 11r pirit of te mmurk lus nuni-continued steps to integrate our now functionally a mulidated, rtpresents fested itself thnsughout the consolidated personnel, operations, and i uge.

the framework of our plan for the future.

Conpany in the past year. l'or example, liternally, it meam taking pride The wurd "PillDl'" t.anslates in the O>mpanyi I:ncrgy Supp!).I'owil in the comolidated Company for into the programMeme l' mnul section, employen luse utihred their whi(h we wurk and supporting its t

Revonsshtlit) in IMit vring /.trel/cm e.

infrarnt testing et;mpownt and wrvnmel goah and objecthr< anong the t

It h our rtud nup for impnning our to awkt electric trammiwion perwnnel public.

onmpetithe position it is our guide for with detecting high unit age Im spe

. Iluild theIvn/c Trum - Dorky achioing curik-nce in orrything we and other potential heat.rciate proh-the st.df and sptems necewary to do -in pnniding senice to (ustomers, lems on transmiwinn lines. Ge terating meet the clullenges of the future; in meeting goah and objectiws. a:Kl in station perwnnel aho have g.artiopated builJ the rux cuary Company team nuking our Company an ou. twtter place

,in pn du(ing new programs directed to meet the cha!!cnges of the i

to uork.

towant impttning the etlic;cnq and future in the bes; way powihte.

Ilut sir igthening our omtgwtithe life of fowil fired generating units Opimtion Ativt<h - Getting pwition and strhing for excellence are Aco mnting pople are nu rently wurking the nmst out of the dollars we j

not new to Public 5enice and i PML on a new Customer Infornutior. System spend v> ths we can omtinue to to upgrade and impnne nNonwr l

,~

9 he a tough compctitor. The In sinv of the rtpilaton atxl Sn.uxial f;nctiotully consolidated Company to l

Company will implement a cost.

probicms cited in the President's Irtter stkussfully meet wiutocr clullenges the awurenew campaign wx! programs and our crodmg customer support in future nuy hold.

to identify and implement wup to recent Scars, the Company lus worked We are proud of the effort we put impros e productisity and cost diligently to put itwlfin a new light. \\tany fonvard in 198' to do clop this new and competitis eness.

of the goah set for 198 were achined exciting pn> gram. Now we kiok forward a /nfomwtionforlhtc/4ww -

as a result of the in depth planning we with anticipation to putting it to wurk.

'ihe Company h wurking on did and the dorhipm.-nt of a rtx 1 nup implementing and upgrading to take us into the future. We holine the sncral of its infornutiorul sptems plan desenbcd in the foregoing pages gists designed for budget control, us the direction and thrust we need as a decision nuking and internal communications. 'Ihc intt nt of these programs is to be able to tespond quickly a.J cffectively to changes in our businew emiron-i ment. :\\mong ihese programs i, the planned clungonrr to the on hne Customer Inibrnution 5ptem by carly IW(t

/bius on I/c Ct.3toma - 1)es chip Compan). wide attention to marketing and customer sonice in I

ordcr to gise the customer the l

senite he wants at a compchtisc price Nov nurketing aix! nistonrr senice pn grams are being plannul as part of this objective 1

)

s 1

9 O

i i

'lhe three hatwh symbolis one of the a

nuny identitics of the Company's "Pride

'lhrough Tramwork" program.

j 1

21 l

6

l L

iINANCIAl. CONDIIION outoime of(lullenges to the iederal wuuld has e no real ability to obtain sutE 1:ncrgy Regulatory Commiwion (l1 RC)

(icnt cash to redecm outstanding Rate

'Ihe Compan3% Quncial c>ndition orden 1 allocation of awt of capacity and Recmcry Stortgage ik>nds tlut could be a of car end 198' lus hern nutcrially energy fnim nit No. I ef the Grand trquired to be redcenwd by the G>nquny S

athcrwly affccted by the rev>lution of Gulf Steam 1:lectric Gcncrating Station as early as July 198M.

the Giuncil of the City of New Orleans (nuclear)(Grand Gulf 1) and the ongoing Additionally; should the Iksolution (Oamal) adopted on l~chnur) i,1988 threat of municipahration 'the ultinute stand as written, the Company will tuve (Resolution), whkh required the outoime of thne iwun o>uld alviluw a its future resenues under the Mttlement Company to write ott and not rcunct nuterial atherse etfcct on the Companyi Agr7 ment reduced by 5135 million plus from its retall ricctric customer

• 5135 future financial con.htion, liquidity, and the carrying dwp t&rn>n whkh o>uld he as much as an additional i165 milhon.

million of prniously dcferred Grand capital rev >urces

'the write off and redudion of future Gulf I related costs As a rc uit of revenues immediately and seriously the Compan>% inability to obtain injunctiw rchef tlut wuuld stay the Prudence impacts the Gimpany and precludes the Company from raising capital through clicctiwnew of the Councih adions the Company recogni/cd the w rite-of f as On (ktohcr 1', it M5, the Council traditional meanmther than thn> ugh a h>w in its 198* linantui statements initiated an inwstigation into all astwcts powihle sales of common stock to SIC thereby pniducing a net low for 198' of the Unmpan>N prudent e regarding its llowescr it is estrcmely unhkcly tlut of approsinutcl> 5 #9 mdlion and imohement with Grand Gulf 1. On

\\lW will nuke any additional funds chmnutmg the Companyi retained l'chruary 1,19XH. the Cnunal adopted a av61abic to the Company under these carnings and creating an atmmutated Resolution that required the Company circumstances d'ficit ef approsirmtcly 53 i milhon.

to write-off 5135 nilhon in Grand

'llw u;timate (unsequem n of the Gulf 1 related costs in addition to the Cnuntil% at tions slaadd thn renwn in 551.2 milhon of suth costs that the ITRC Alhication of Grand Gulf I Costs ettett, air tlut the Compan>N abiht) to Company lud agrced to ahv >rh in the rate obtam the requnite funds to mect its settlenwnt agreement reathed betwccn During 198* the iI RC reaffirnwd toatinuing ohhgations to ottcct long or the Company and the C>uncil on Ntartn its June 13,1985 allocation of Grand 4iort term cstenul borniwings to obtam 25.1956 (ktticrient Agreement)

Gulf I c.ipacity and energy, and the cost f unds f rom its parent company. Sliddle

'the action of the O >unal on thereof, to the Company Clullcnges to N>uth Utihties Inc (SIW), to declare Ichnury a.1988 has had an imn edute 11 RCN jurishdiotul authonty to aihicate disidends upon prcicrred or common adwrse etfcct on the Cumiun)\\ ability Grand bulf I capacity and enegs tuse sto(k. to mect future smking fund to obtain fune to meet its ongoing thus far been ut.succewful. Should requirements (qmn prefctred stoc k, or ohhgations The Lompan)\\ mrrent wtrently unrewhrd or future clullengn to satisfy potential obligations to rederm cash foircet intheatn that it will force clungo in Ii RCi alhication.

all of its outstandmg Rate Rconcr>

cred to obtain from esternal sourcn the Companyi carnmgs liquidn). and Mortgage bonds willluw twen signif-al pnninutcly 515 milhon h carly financial condition could he nutcrially 3

icantly and atherwly impacted and the to middle May to cononue to meet its adu rsely athaed.

Conquny could be rnxicred insohent in ongoing obligations Ilowner, it is nwist a short period of time, perhaps as early unhkcly tlut the Company wi;l be able to as the second quarter of 1988 Certain ettu t horro'. sings unlew the Gaincili Municipalliation of these consequeixn are thscu sed action is rewrwd if the Unmpan) is in more deuil below unahic to obtain fmwis to mect its wrrent W ith regard to uiunicipalization, the in addition. during 19s' the Com-obbganons it u ndd he nntered inmhrnt Counal has rnicwni an updated np rt pany fat ed odwr mntinued (hallengo as carly as the econd quarter of 19MM subnutted by their consuhants on Ocu her and mxcriaintin 1 hew induded the I sen if the Company were ahic to obtain 16.198', with whic h the h..npan)

~

fu wh to meet its ongoing ohhgations it

w strongly disagttes awerting that pnsible uw in Cnanctng a p>rtion of the arnear, on prtierrut snick dhidnh unt;l municipaliution lxilds the poter.tial for puential purtfuw. In light of the G uncirs at least 1990 and wuuld tw prtsluded pnniding significant sasings for electric own estinute of the total o>st to fn>m nuking any further dedaration or nistomer-of the Q>npmy 1he O>mpany, municipalite, this alk> cation of the tav payirent of dhidends on comnw>n stock on the hash of its own studies and on exempt honding autlu>rity constitutes a for a number of rars awuming that the 3

llw achiar ofitumu ky,.d and oigineering relathcly snull p,rtion of the required Gmpany h able to renuin schent in the consultants and their rniew of the external financing, lhe O)mpany cannot meantime. pee Note 5,"Preferred and report, behem that the o>ndusions of predict the ultinute hupact,if any, these Comnxm Stoc k" f"r intornution rtptding the rep >rt are based on legal, firuncial, hnancing limitatium nuy iuve on a the rights of preferred stockholders with and engineering assunctions tlut are potential municipalintion resa et to nonpayment of dhidends) unfounded, unpnnrn. or vi suhkst to a InJuly 1987, a comprehensht variety of future contingerwies, and that settlement pronosal was filn! with the the rep >rt h otherwiw w) internally Giuncil by the Gimpany and Inuhiana IJQL1DrIY AND CAPITAL RIXWRCI;S flau ct! tlut such condmiom should tx>t ITmtr & Ught O>npany(IP&l.) rtptding he rdad uput outstanding iwucs twtwren the O>uncil 11 e O)mgunyi prinury capital lhe Osuncillxid a public hearing and the O mp.in) arxl IP&l, induding requin ments for 1987 induded the on Octoirr 29.1987 on the munici-retail rates, pnntence, and munici-financing of 596.7 million of Grand Gulf palintion onenal. The Giuncili palintion ines In Octu'wr 1987, the I-retatal o m tw it nu nwrd thnugh rates o>nsultants, a citirem group, and the Council votnl unanmiomly to reks1 this arxl 5218 nullion in o>mtruction exgwn-Osmpany nude fornul prewntatiom at pnpnal but in Ikccmlwr 1987 offered ditures lhe O>mpanyi cash need, for this hearing that outkned their resperthe a uunter pn p n41(whkh did not atkirew 1987 wue prinurity satislint thn> ugh tlw pnitium as reported in the Ocn>her 16 the question of municipatintion). After iwuance in Sl'y of $75 nullion of Rate filings The uniccil b nimidering the studying thh cou, iter pnenal. the Reantry %1ortgage Ikinds lhe balance infornution obtzined at thew twarings Companies informed the Giutwil that i the G inpany's cash ncuh wur sati4 int and has indicated tlut it will lx>ld one or althou@ theyo>uld not acnpt allof the thniugh internally g-nerated funth.

nx>re adhtional hearings on this tratter terms and conditions of the counter lhe Company estimates that its at sime tinw in the future, pnenal wmv of the terms and ain-capital requirements mer the next three 1he recent action of the Onmcil in ditions m nted further discuwiorA

> cars in connection with deferrn! Grand ordering a 5135 million dhalkmance Gulf 1.rrlatal onts will tw $70.8 million tujuiring a writcailf aokl,if not torrwd, in 198M, 552.2 million in 1989, and lust the effect of ruluting the purcluse Diddends

$2K3 million in 1990.1he Gimpanyi price urxicr municipalinnion h) $135 comtruction pn> gram contemplates milhon As of December 31,198", as a result expenditures of appn>xinutely $31 Any acyaisition of the electric of the write 4stl of proiomly deferns!

nullion in 1988,?32.4 million in 1989, pnig.Iicwf the G>mpany by the City of G ra nd Gulf 1 rdated o nt s, the Compa nfs and $33 H mill;an in 1990 'the fore.

hw Orleam (City ) would presumably retainn! carnings were climinated and going estinutes are luscd upon the ltr acoimplistF d at least :n part ley the the O>mpany had an acnimulated defiat Ntt cment Agreement and awume tlut use of tavexempt finandng Recently of 533 '" million As a result, the Ompan) the Rmlution will ultinutely be roc sed crudnt fulcral kpstation tus significantly is currenth predutks! from dedaring anY lf ihh does not onur, allahnul estenul limited tbc :.nilability of tavexempt funher dni&wh on pnferrn! or o nunon firuncing requirements would rnalt.

finarxing for su(h an acquisition. The stock. Acairdingly, the CompanyiIkurd Giuned lus w>ught and rneistd per-of Dirntors determined tax :o dedare miwion trum the State of louisiana to the quanctly dnidctwl on preferrul stock i

hr,e a portion of the statch available tav oritinarily parable on April 1,1988 1he exempt homling authority set aside for Gimpany estirNtes that it will remain in i

H

'ihe Company wouki be nquired to With respat to powihle sales by the asailable cash resources or financing nxet a wgnitkwnt portwin of thoc niruire-O >mpany of additional slures of common capabilitics to pay in fall di smh luads nw ots from esternal w turces ihmner, stmk to NIC it is highly unhkcly that so tendered for ndonption, therchy in hght of the recent act on of flw O mncil NN' will make any additional funds rendcring the Company inv hent.

resulting in the w rite ott of presiously aniilabic to the Unmpany.

dcferred Grand Guti 1 rclated costs, the

'llr Conqvny is airrently authori/cd Company \\ accew to f unds fn>m external by the 5ctuntics and IMhange Com-RI.%CLT5 Ol' OPIMilON5 w >urm is esentially pre. luded at this miwion ($1 C) to (ifect short-term thuc, as sct torth below turnminy of up to 10 pen ent of capital-

'the Compaa) had a nct low of 5 49

'the Compam's goscrning instru.

i/ation auletinal, mhtett to the avadahihty milhon in 198", a decrease of 59 t million

.nents a m renth unade for the twuan(c of slwirt term (redit rew orces arwl c' rtaia fnun net income of 512 inilhon in 1986 I

of additiom! x nix nuntics in tir form other indenture limitations

'lhis decrease w as due primardy to the of Geix ral aral R.fi nding Niortgage Ibnds llowoct, by a January 19. t order w rite-off in 19s' of 5'2.9 million, after (in(ludmg RJ A Reuntry %>rtgag+:

of the si C, short-term f x wrowi7s ma) tax of disalhmed Gra.1d Gulf I related Ibnds) and pn ferred sim k.

not tc ellated without spaifk author.

costs that were pre imnly deferred and l'n.;ct the ( empan)\\ General and i/ation f rom the si C hecauw the the deferralin 19% of $15.9 million, Retreaing % >rtgage, the minimum Comlun)\\.omiaon sim k equity atter tat of Grand Gulf brelated costs tarumo cocerage requirevnts for (intludmg retained carmnge h icw than appheabic tc 1985 that famrably affected i raing mortgage honds (intluding Rate 30 t of the Company \\ total capitali/ation 19% carnmgs Nct income Mr 19% of Rnoscry Mortgage Ibnds)is 2 0 tinx; phn short tcrm indtbhdocsv As a res ik 5 4 2 million wn an intrease r 560 8 lund intenwt on a pro fornu basis of the write off of $1M mdhon of pre-nullion oser the 1985 net low lhh I urthct, the Compan)\\ General and Liv >u!) etcrred Grand Gulf 1 rclahd inco ase w as prinuni) :.ttrf autable to the Retuinhng Mortgage rest ricts the any ont costs the Companyi ratio of a tmon Et t that in 1985, the Company haj of mortgage tunth iwuahic thereunder stoc k cymt) to total gitali/ation at incurred 5 3 6 milhon of Grand Gulf h) application of certain property or lhember 31,198' has twrii reduced I relat(d tostv aftcr ta s. without acu m tmg testukpcixhng ulun the t>1r to 6' I L Under these circunotantes signifitant rate reinf and that $15 9 of lunth to be hsued. Yeufically, lunds the Company has no real ability to eth ct nahon. af ter tat of Grand Gulf I related i

are iwnahic tlk cunder based upon 'o L short term financings whether through costs appbcable to 19M5 wcre deterred ot ; nywrt) Akhtiotw or based tqun 501 loans from banks or thniugh the Wddic in 19% as mentioix-d alwnc.

of auumulated deterred Grand Gulf south etcm %>ncy hu>l At Duemtwr i k ctric operate.g nwoucs inacawd l related (ost1 At Deccmher 31,198' 31.19M the Company lud no out.

$1.9 milhon or 1% in 198' and 511. I the ( nc gun) was prn hk.cd in un hsuing stanthog sluirt tern'lurrowings.

tiullii>n or i b in 19% as compared to additional lunds As sct tonh in Note 2. "Rate Wtteri 19% and 1985. respectisely 'the minor i nder the Compan)\\ attitles of tin ountifs Resolution. il not rtwrsed.

int rease in 19s' resulted f rom a $ 1' 9 int orporation, the minimum carmngs under ( crtain (irtunnt.um es. atul mdlion increaw in base rates retlnting requirement for iwuing preferred stmk awunung neuher w ancrs wcrc obtaun d greater current rcroscry of Grand Gulf is 13 times interest and prsfctred stmk nor other suistaton arrangements I related costs purmant to the O nqun)\\

dawicist requirenrntt ILoni on canungs negotiated. coukt gne the holders <.!

pluse in plan and a 52 6 mdhon int rease uncrages at Ihemtwr 31.198". the out tanthng lute Recown %)rtpge in em rys.orntws f rom affiliated utihties Con 3un) b aho prn toded from iwun:g Ibads the rigitt to rc< pure the ( omp n) partially ottset h) a $19 nulhon da rease atkhtional prett rred stot k to redccm their Imds wluch Iotaled in tut I (osts rcrou red thniugh the fuel 5115 milhon m aggreg.uc pnnupal adru< ment (lause. I lettric sales amount at Wrth itt 1958 I nder these

( kilow att hours) for 198' renuined cirt dmstaix es tIKrc h IkI awurante that relatisch sf ahle as o Hlqurni t. ) 19% Nlk's Llw t inmpany wtitik! hase sof thicnt 9

W

~

q 4

+

(

,u 1

l 1

1 l

l 11hc increase in c_lectric operating such onts Additiorul4 a decrease in income tnes inclu&d in op ating tornues during 19% w.s due principally

$ERl's rate of return from 16% to I4%

income &ctrased 57H.6 milli m % 1987 to a 552.8 million increase in h.tw rates reduced tlw Company's nxuthly Grand arxlincreawd 559.1 millkm in 1986 wixt L

' resulting from the Settk ment Agnrnwnt Gulf I bill thereby decreasing Grand Gulf compared to 19% and 1985, respecthrly.

l with the Omncil pan! ally oth t by a $326 I related etnts for i987. Ilowvwr, the lhe decrease in 1987 was attributable l

million duccase in tlw reonvryof fuel wnte off of 5135 million of previotnly to a decrease ;a lxok income twfore i

onts and a $10Amillion decreaw in deferred Grand Gulf I related costs has -

income tues and a reduolon of the l

Sales to affiliated utilities.

- significantly ruluced the anxmnt of such federal corprate in rate. In 1986, the Gas operating tornues decreawd owts tlut the Q>mpany will reunrr increase was due prinurity to an inarase

$11H million or 14% aryl $2.9 million thnsugh rates from its retail electric in book ino>me hefut e inconw tnes.

or 3%, respectiwh in 1987 and 1986, customers.

1btal interest clurged increasul _57.5

-l 1he 1987 decrease w.n mainly due to a I ucl arxl purchased pm er costs million or 70% in 1987 as mmpared to.

s 5116 million decreaw in the reonvry decreased 5216 million or 7% in 1987 1986.1his increase was due primarily to of gas ctnts lhe decrease in gas merathig but irnmsed 52H.7 milhon or 11% in an increase in interest exg nse aw>ciated rewnues during 1986 w as due prinurity 1986. lic 1987 decrease was a result of with the hsuaace of $75 million of Kate l

to a $2 2 million decrean in the reontry dnwawd purcluwd pmvr onts partially Reuntry $1ortyage ik>nds in Alay 1987 of gas onts and a 13% decreaw in offwt by an increase in fuel ont for i

gtnrrnmental sales.

generation In 19%, the increase was

[

In 1987, the O>mpany deferred for attributable to increases in pmtr SLMMARY future reontry ti. rough rates $96.7 purcinses from Grand Gulf I partially million o' Grand Gulf I n lated onts offset by decreases in the cost of pmtr The Company's Gnancial condition pursuant to its pluw in plan, a decrease plant gas and decreawd generation.

deteriorated significantly during 1987 as of 5196 milla m from 198(t 1his decrease lhe owt of gas purclused for resale a result of the Cnuncil's $135 million resuhed from the inclusion in 1986 decreased $144 million or 20% in 1987 disallowance of preth usly deferred of 529.5 mfaion of aferred Grand and $2 H million or 4% in 19%.1hese Grand Gulf 1-rebted onts. The abihty Gulf I related costs'applicabk to 19M5, decreaws resulted prinurily from an of ilw Q)mpany to exie in its present arx! the fact that in 198* the O>mpany increase in resale qas cints deferred, form will &pervi up>n the outetmw of

,]

deferral ice Grand Gulf I-related onts wish rtprewnt an increaw in the anu mnt litigation relating to this matter and because it was authoriini to reoart a of gas ont irwurrnt but not y t bilksi to various other factors (5ee Note 2,

• Rate larper porti m of tlww onts thrtogh'luw customers and from a decrease in the Alatters" and Note M, Gimmitments rates. aad thus Afer a le ser anxont of per unit ont of gas purchased for resale, and Contingencies.)

1

\\

~

3 in thh annual nport.1hc financial sprem of internal aco>unting umtrols IQPOHf OF, g'-

statenwnts are bawd on generally that is designed to pnnide reawmahle "MANAGEMENIW acupied acmunting principles, assurance, on a ant cffecthe basis, as to orsistently apphnt Firuncialinfornution the integrity, obicaisity, and reliability of included elsewtwre in this repirt is the financial awrds and as to the j

T1r nunagement of New Orleans mnsistent uitb the financial statements.

pn>tection of aswts Toh sWem trx hxtes s'ublic Senkr Inc. has prepartd and is 1b mett its responsibilities with mmmunication ihnugh written policies respmsible for the financial statements trsnect to firuncial infornution, and proculures, as well as an organita-and relatnl li..ancial infornution irwtuoks!

nunagement nuintains and enforces a tional structure tlut pnnkles for l

l 10 i

I

9

.y I

ue.

-em

.l f

'.4 i

appn priate disi ion of rtymsibility and div.uss auditing. intenul amtrol, and ami perfonn such tests and other the training of pervmnet. 'this aptem is fin.crial np>rting nutters 11w indepen-pnxulures as they deem necessary to also toted by a omiprehen4ve interned dent pubiie accountants and the latertul rsach and express an opinion on the audit progrant auditors luw free access to the audit fairness of the financial statements.

'Ihe Ikurd of Dirtrtors pursun its committee at any time.

Alanagement helines that these rnpomibility for rtported financial 1he inckpealent public acuiuntants p>licin and pnicedures prudde infornution thnxigh its audit committee pmide an objective awessment of tlw reasonable awurance that its tveratiom compo ed of outside directors. 'the aud:t degree to which nunagement nwets its

~ are carried out with a high stardard cf o>mmittee meets periotlically with respomibiHty for fairness of financial busirwss conduct.

nurugenwnt, tlw internal auditors, and

' reporting. 'Ihey regularly craluate the the independent public accountants to sptem of internal accounting contn>h 4

ment in Grand Gulf I been known. As in our opinion, salvu to the etTects f

i

+

diwuwd in Notes 2 assi 8 of No:es to on the 198? financial statenwnts of such s

Financial strtements, the O)uncil con-adjustments, if any, as might haw been Al'I)IIDRN' 091NION dutkd its imrstigation and ordered the required had the outidine of the Company to write off $135 million of uncertainty referred to la the prunting New Orleam Ibblic Senice Inc.:

proioudy deferred Grand Gulf I related paragraph been knamn, the ahme-costs Accordingly, our ptrsent opinion mentionnt financial statenwnts prnent l

We luw exan%-t tlw tulame sheets on ihe 1986 finru;ial statements, as fairly llw fuurdd pistion of tlw Company of New Oricam ibblic N r ice Inc. as of expreswd twrein, h different from that at December 31,1987 and 19d6 and the i

lPcember 31,198' arxl 1986 ami the expreswd in ott? prnious nport.

roults of its operations ass! its ca41 thmw (g

related statenwnts of incinw, of retained As further discuwed in Notes 2 and for each of the three >rars in the perial cantings and of cadi ihms li>r each of 8 of Notes to Iinandal statements. the endett ikccmher 31,1987, in udo:mity the three yean in the perim! ended O >npanyi ability to umtintw in existerxr with generally accepted acomunting December 31,1987. Our examinatiom in its present form nr.y be dependent principles applied on a comhtent basis l

were nude in accord.ince w ith generally up >n its abihty to anrss external w uram acupad auditing standards and, of fu.xh to nwct itu bhgations and sustain acuirdingly,induded xxh tests of the its operatkim. Ilown er, the Gimpany's

,' @,% (Mf1 acaiunting rooinh arsi moh other liquidity and accew to external sourcn auditing procedures as we considered of furxh h signiticantly and adwrsely New Or! cans, Inuidana necewary in tlw cinumvances.

impadat 'lhe firuncial statements do not

.\\ larch 10,1988. exupt for Note 5,as to In nur report dated l'chntary 2',

ineltule any udlustments relating to the whsch thc state h 5! arch 22.1988 IW/, our opinion on the 1986 financial recoverability and clawilication of g*

stateme us was quahtin' as bcing sid>

reconk-d avrt amounts or the amounts f

ject to tlw effect of such adptnwnts, if and dawilicatk n of liabihtin that miph.

any, as might h.tw been required had be necewaty should the Osm any tw the outcume of the umrrtainty o>rxtrn-unable to omtinue in existtnce in its ing tlw pralemt imotiganon by the present torrt Onuncil of the City of New Oricam (Council),into the G>mpany's imuhr-I

1,.-

4 l

.Q

!;NY&

at s

r:

p. y%

N-g;IIfb[$$*};dd L,,

m w.

.u c

i ikxcintw.r 31-1987 1986 (In 'Ilu xiunds)

ASSETS lTlli XY l'l ANT:

l ic(tric

$ 409,823 5495.619 Natural gas 92.567 8X.6 6 (ununn tian work in progrew 5,253 2.052

' loc al 507hi3 isN3 47 Irw acwmulated depreciation 2 49c197 24"H2O l'*they plant - nct 258,146 21x.52' Oll!! R PM)PI RlY ANI)IN\\TNIMENT; Imestment in sulwidian company - at equity (Note 8J) 11.378 11.3 8 l

(TRRI NT AMiilN (ah md special delmits 1,351 1.966 limporary imestments - at cost, which approsin arcs market l

Awici.ited (ompanics ( Note 6 )

'tM) l Other 400 19xi

~listal cash and t ash equivalents (Note !!)

1,751

.566 Au ounts receivable - customcr and of her (Icw allow ance for doubtf ul.iccounts of S I.350A M N! in 19M' atx!

51.3tM)(MR) in 1986) 26,139 2

,5-'

locome cases receisable (Notes 1i and 3)

-1.998 Accumulared dcrcrreti income tases ( Note 4 )

4,262 2.s 33 Materials 2nd tupplies - at rrrage (ost

',222

".686 Prepa>nknts and ather 2,502 i9g _

lotal 41,N"6 52.(a r 1)I I I RR11) 1)l'IllTS

!)cfcrred (,raal(iutt 1 rclated wsts (Notes Iii. 2. and Mit)___

108,129 1 in. it ry

()t her 5.116 1.% )

l

' int al _

113.245 1 1'.%9 l

I l

l TO l st.

5 42 4h45 5 4(d).iMI w N c = in t owx ul ummas i1

b 4

m

-i n

5 v.

1 7 1986 s

(In 11xnNnds)

-CAPITALIZATION AND LIABILITIES CAPITAljZA110N:

i g-

- Osmnmn stock, 810 par talue, autlwrimi 101XX)1xX) shares;

$ 81J59

$ 8 f.359 iwwd and outganding H 435,900 shares (Note 5)

(33,678) 21.216'

' Retained earnings (Note 7) 50,681 105,575 Total conmwn sharcfmider's ei uity-l 20,117 20,1 !?

Preferred stock,without sinking fund (Note 5).

11.481 13.2 6M Preferred stock, with sinking fund (Note 5) 208.402 133.415 iung term debt (Note 6) 290,681 272.455 lbtal i

01111 R NONCL'RRINT llAllllllllX -

11,273 _

10,490 -

Accumblated prinbion for pioperty insurance 3,346 2.213 Accumulated pnnision for injuries and danuges l'#53

(

Obligations under capital leasts 16A72 12,703 lbtal Cl:RRINT 1.lAlllljTll.N 5,(XX)

Notes payable (Note 1) 6,(xx!

Currendy maturing long term debt (Note 6)

Auwents paphle:

21.431 21,799 Awiciated companics 20,413 19,011 Other 12,042 11,459 Cuatomer deposits 7.588 7,702 Tases aarued 4,889 3,526 i

internt acertwd.

6,690 6,759 Disidends declared (Note 5) 2.418 6,180 l

Deferred clearie fuct and resale gas costs 2,295 1,367 Other

'7,766 8x804,

I lbtal i

DI IT'IRI D CREDl15.

19,440 64,103 Acaimulated deferred ino>me taxes (Note 3) 13,637 13,874 l

l Acnime'ated deferred imrument tax crnlits (Note 3) 4,835 7,168 l'nanvrtim! pension c.spense (Notes ID and 9) 1 814 1.475 t

l Ca. tuner ath anen for construction and other 39,726 wi.nfo i

'Ibtal i

l CONIDIT\\lLND AND CONTINGl.NCIE5(Notes 2 aixt H) 54 24.M5 5 460,4x 1 r

TOTAf l

sLT b ElO 10 I$11.14K125 b431L-ffWFWA l

l

?

i.

f l

I i

l l

i,.

t 13 1

.m

l'or tlw ) rats cr'ded Deermher 31, 1987 1986 1985 (In *Ihouunds)

STATDIENTS OF INCO3tE (1.OSS)

~

l OPERATING RINENt'15(Note til)

Ilectric

$328,(160 5426,095 5315,03 g

(

j,

. Natural gas _

87,927 102.700 105.593 lbtal 415,967 4 2M.?95 420.627 OPERATING ENPEN$15 l'uct for clettric generation and purchawd wnver I

(Note HE) 2'0.735 292.361 263.657 Gas purcluwd for resale 57,800 72A13-75,224 Other operation c.speitses 70,580 70, t 4 6 68,0I1' Maintenance 18,460 1H,i 14 1H,162 14,805 14.o54 14,518 Depreciation 22,023 22,312 20,293 Taxes other tiun income ines income taxes (Note 3)

(22,329)

(34,527)

(26305)

Rate deferrals (Notes 1G. 2, and 8lD; ikforred Grand Gulf I.related costs (96,720)

( 1 -46A09)

Write off of presious!) deferred Grand Gulf 1.related cows 135,000 Income taxes (Note 3)

(23,460) 67.3 is Intal 4 46,M9 6 3 6.440 433.590 OPI RATING INCOMI: (l.Oss)

(30.927) 52.355 (12.963)

OTIli'R INCOMI: ( Di DI UEIONS t Allowathe for equity funds uwd during umstruction (Note Il~)

115 Miwc!!ancous inconr and deductions - net 124 619 9,tN 6 Inmme taxes (Note 3)

(49)

(285)

(4.386)

'lotal 190 334 4,708 4

INTERINT Cl!ARGlX Inttrest on inng term debt 16,119 9.632 8318 l

1 Other intereM - net (Note 6)-

2,256 1.133 2,328 Allowance for horrimed funds uwd during construction (Note IF)

(13M)

(57)

(80 Ltal_

18,237

_ 10.'OM 10.562 NIT INCOME (1.0%)

$ (48.9745 7 41.981 5( l H.81' )

i

)

4 STATDIENTS OF RETAINED liARNINGS (DEFICIT) -

RETAINI D I AltNINGS i DI:llCIT), January I

$ 21,216 5(16.95I) 5 10, t il ADD. Net hicon,- (loo)

(4N 974) 41.981 (1HH17)-

weal (27,758) 25.030 (Minil DI Di'CT:

Dnidends (Note 5);

t

}

, Pnferred uot1 2,907 3.814 2,288 Osmnum suxi 2,9 M 5.99' Capital stod es;wne 29 lio!

5,920 3.H 14 8 285 RET AINI D I ARNINGs (D111 CIT), ikcr.nber 31 ( Note ?)

$ (33.678) 5 21.216 5(16.95I),

tu Nan to iuumut unum II

c.

5

?

j t,

j s

VIAll3ff N S,

t}Y (.AMi(,

i~

v FLAM.

'~

s,p i

t f

f

~ j 1987 1986 1985 for the years endet! December 31, (In Thatunds)

OPl.lMTING ACIl%Trif&

Net inconw (kns) _

$(48,974) '

S 41,981 5(18,817).

Adju.tmcots to reconcile net income to net cash p.nided by k

operating acthitiew 14,805 14,656 14,548 1Apreciatien (46,0H2) 45,962 (7,90!)

Deferred incons taxes (Note 3)

(238)

(267) 881 Investnrnt tax credits - net (Note 3)

Rate defarals (Notes 16. 2, and Hil) 38,280 (146,409)

(253)

(57)

(84)

AlkW.moc for furxis used during cind.truction (Note 1F) i dunges in:

6,436 1,881 (5,011)

Recch ables 1,03i (5,564) 11,308 Accounts payable (3,762) 1,554 (7,651) l Deferreti electric fuel and resale gas c<nt:

1,249 1,933 (520) t Taacs arxl interest accrued l

1,409 (235) 841 Other attrent awets and liabilities (29,495) hm er purchaw advance pa)ments (Note HE) 13,884 63,80i hm cr purchaw advance repagnents (Note HE)

(2.333) 476 6,692 l'tunx>rtired pension exlwnse (Note 9)

(2,063)

(l.619) 4.085 t

i; Other (40,492)

(31.826) 32.680 Net cash pnnidal(um!) by operating acthities INYl3 TING Arl1YI11th 720 (44I) inctnwnt in subsidiary (Note NJ)

(21,815)

(13,655)

(14,814) i l

Omsttuction expenditurew _

253 57 84 Alkmunes for fuixis u,cd during construction (Note 1F)

(21,562)

(12.M 8)

(15.171)

Net ca4 used in imesting acthities l

4 IINANCING ACTi\\TfilA i

Pniceeds from iwuance of:

25.00()

)'

first mortgage lxmds 75,000 j

Rate reonery nwirtgage lx>nds 25,000 (6,000) l Gmmon stock r

Retirement of first mortgage bonds (1,800)

(10) l 3

Redemption of preferrett stock (5,000) 5,000 (16,100) 4 J

Chzages in short term fxirnming*

(2,9M)

\\

Dhideixts paid on comnxm stock

( 2,9*7)

(1030)

(3.108)

Dhideixts paid on preferred stock _

Net cadi pnnidal by financing transactions 56,239 26.9 ao 5,*92 Net increaw (decrease) in cadi and cash equhulents (5 815)

(17,764) 23,301 7,566 25.340 2.029 Cadi aral ca41 equhulents at beginning of year

$ 1,751 5

7,566 s25.339 Cadi and cash equivalents at etx! of car (Note !I) 3 M'PPilMLNTAL I)lM:lOM RI.5 OI-C,bli E LOW INIUR\\t! TION.

Ca4i paid ( recched) during the 3sar for:

$ 14,90M 5

H,3" 5 9,2 4H i

interest

$ (4,418) 5 (15.542) 5 (6.897) income tases i

M'PPIDil:NlAL M:lllDL'll' Of NONCA$li lN\\l% TING AND IINANCING ACTI\\1TlE5-I 5 3,3*0 Capitalleaw thhgations remrded w sm to hnnur wanwna t

15

j 2 7 s

3; y

.?

4 e iMM?OM

-- 7 y

5 U,

t h,

{"

p nutcriah, alkicable oscrheads and an th ferred income taxes are prinidcd

> ja

~

}g,

.i alk nvam e for tir comp nite ont of furxh for thtlercrxrs lx tween luok and taxable

]

h--

}

usu! during oinstruttmn ( AIDQ the income to the estent permitted by the q

y ItU N M(k ' ' y 3

ants of units of property retired a e Companyi regulatory fv.dics for r

.ew n.miwed Inim utiht) plant, ard v.. a o nts ratenuking purpncs. Imestmetit ta s plus renw n21 o nts less sahuge are (turgul crcJits allocated to the Compan) are A. SyMem of Atrounts ut amtmubtnl(kprtuatiort Slamuuamt deferred and amorti/cd based unon the and npaits of property and replacenwnt ascrage e,ctul hfe of 6e rebtM prorcty 1hc acu>unts of the Gunpany are of items dcter:nined to he Icw tiun unit s in a manner consistent with ratcauking nuintainct!in anonbnce with tlx system of property are charged to operating t rratinent.

of account s prew nixtl by the (nuncil of expenws Prinopath allof tlx uuhtyplant tie Oty of Nov Orkam(Onuxil), which is sul9ed to the iicns of the Gimpan)\\

system of atcounts conforms to tlw separate nwirtgages and de(ds of tnnt.

I. Allowance for runds Used During Uniform 5) sten! of A(o unts as prewrdet!

I)cpreciation h computed en the Construction by the l'ederal1:ncrgy Regulatory straight.line lusis at rates hawd on O >mmiwion (I I RQ the estinuted wnice Ines of the

'In the extent t!ut the Company is various cbsses of pn p(rty. Ihpreciation not pernutted hv as r vitatory body to pnnidcd on ascrage (kpreciahic pn pcrty reo ner in otrient rates the carning onts

11. Res enues in 19C.19% and 19M anwsunted to of funds owd for construction, the approxinutcly 3 (Vi% 311%, and 31 %

( omp.urf tupitahin as an appn priate o e.t

'lhe Gimpany records clc(tric and respectively.

of utsu) plant A11X; which is cakubtal gas n,enues as billed Io its customers and rtwnled as pn nided f3 the regulatory on a at le bilhng ha:is Roume for etwrp system of accounts Under this utility ddiscred but twit billed at the cod of the D. Postrctirement Itenefits induury practio, const ruction work in thcal period h not accrutd.

progrns on the balance sheet h durged 1he rate xhedules of the Company lhe Con pany has postrctirement widt..ux! tir ino int statenrot i.s crediint indude elettric tuel ad ostment and city pbns o nering substantiaD) all en@ nces for, the appnninute compnite interest i

gate gas ont adpo: ment danses under

'lhc Conpan)% poli;) h to fund [wnsion cost of horrowed funds arxl for a wnith the cost of fuel for generation.

(osts in accordant c with guidthncs reasonahic return on the equn) funth pun lused pmer. and gas pun basett for estahinhed by the I mplo)ce Kctirement used for construction 'Ihis pnitedure i resale ahine or holow the kwh allow cd Inuime wurity Act of 19 t the costs interak11 to renu nc from the income in the writ us rate s haluks are pernutted of pntrctirement wcitare iracfit plans statement the effeti of the ont of to be hilled or required io be credited to are funded as inuirred.

fauncing the (onstn ction ptogrant It cosmnwrx 'the Company dcfers fod and effatiscly rnults in treating the All)C pun lused gas o nts ir, exam of the base dtpn the same nunmt as ointn ution rates tatil these onts are rcticcted in E. Income Taws labor and nutcrial costs in tlut enh is bdlings to ontomers p stunt to the luct capaahm! rattwr tiun expensed As non.

and gas cost adnntment dauws 11r Osmpan) Joms its parent. $htkile cash items thew (rcthts to the inonnc N euth l *ihtics. loc. ( MW ), in lihng a statement base no effect on current coh einsohdated !cdcrat income tax n tt r!..

carnings Af ter the pnpcrty n placed in inconw taxn arc athwatul to the wnice. tir A11X : durgn! to o >nstruction C, Utility n'lant and Depreciation Gimpany in proportion to its ointnlunon costs is rconcrahle from customers to the consohdar d taxable inmnw.

through d(pauation pn nisions int hxkil e

l'tiht) plant h stattd at onginal ont.

Im umc taxes rutis ahic im hxic ntinutui in rates (harged (or titiht) wnice lhe

'lhe ont of atkhtions to utihty plant an,.>unts due under the tas alloution

< ompnite All)C ratn for the Compan) indixln contrJc!cd work, dirctt labor, agr eement.

16

z t

war 9xt,7.0%, aad MM, for 1987,19N(s ctotomers fly afening thoe onts to

11. Other Noncurrent 1. labilities and 1985, resjwctiwly.

the future when they will be colltrtn!

~ hrough increased rates bilkxl to It is the gw>licy of the Q)mpany to The Osnpanyi g x>lig is to continue t

to capitallie A11X' on proitcts during customers, the impact of the una prtnide for uninsured property risks and periods of internpted unistnxtion when awx iated with the phase:in plan on the for clainw for injuries and danuges such interruption is tem 1x>rary, the inconw statenv:nt lus lxrn renwned.

through charges to operating expenses

[

contintution can be justifini as twing ik cause the actual milntion of rewnues on an accrual basis. Such expenses tu e reav nuble urxkt the circundtanns. and to recowr the deferred amount will not been allowed for ratenuking purpoe.

it n pn>bable such etnts will be occur until the future, the Company reonerabic through rates.

records a aferred awet reprewnting the amount of the deferral and, at the same

1. Statements of Cash f lows time, incurs additional capital G, Rate Dt ferrals requirements to finance tha deferrallhe During 1987, the Iiruncial recording of deferred costs as awets is A(u iunting Standards lioant ( I ASil) issued 1hc unirxillud prointaly appnnrd gsn erned by specific requirements as set SIAS No 95,"Statement oiCash flowx" a r.uc phase-in plan for the Company in forth in the new accounting standart!,

lhe Company lus adopted SI AS Nu 95 order to rnluce the imnuxliate effect on Statement ofIinancial Aconmting and replaced the Statements of Changes ratclu)ersof theindusionin ratesof the Standards ($1 A5) Nu 92,"Regulatn!

in Financial Ptnition with Statemenn of unts of capacity and encryy from l' nit thierprises - Acmunting for Pluse.in Cash Ilows in the currrnt and prior 3rars' Nu I of the Grand Gulf Steam Ilectric Plant"(See Note 2, "Rate Statters" for financial s;atemenh prewnted herein.

Genenting Station (nuclear) (Grand a di cuwion of recent action by the For purgwnes of the Statenwnts of Gulf 1 ). of which 9tn iumunt b) %)s. tem Oxux il disalhiwing the recmtry of 5135 Cash Ilows, the Comguny considers all I.ncrgy Resources Inc. (St RI). L'nder :his million of pre iotoly deferral Grand highly liquid debt instruments with a plan certain onb are defernd in the Gulf I rrlated onts arxl Note H,"Oxn-nuturity of three months or icw to be earh years of mmnwrcial operation and mitnwnn and Contingencies - New cash equivalents.

collected in the Liter )can from Accounting Standards")

~

.le r

z i ;,..

. y ( <y

(.

.t k,_

f[

3

./,

o ests to be do rrni arxl pluwd into rates consistent with the pnnwons of the l

and for curren reonery of certain Companyi tariffs the net eticct of all of 5

portions of sud ontr.and of awunwd the fortgoinglxing an est :uted increase

/,

-t-O carrying durpeu n the an> mots deferred in rtvenues for the first year of

• ~'

1he kttlement Agreement pnnided, approxinutely 526 million (2) for bills On Ntarch 25.1986. ilw Company among ottwr things that ( I ) for bills rena rtd on and after April 9.198',1986, acctptalin writing a \\larth 20,1986 rendered on arxl during the first 3rar 1989, and 1990. the Company us to be witk arnt oiler ( witk ment Agrrenwnt) after April 9.1986, the Company was allowed to ira rcaw in luse rates by (iix hidmg varhuis owxbtkww as diomd allowed to increase its base rates by 560 adththuul annunn of $29 i million 522.1 twlow ) from the Comuil regarding the milhon annually Imt um requind to ceaw million. 523 4 million.and 52 4 H million.

Companyi 514 I?,1985 application for durgmg a temporary In t surtturge respectiwl), on an annual basis and ( 3 )

an clutric rate increase. 'Ihc settlement authorised on Mart b 6.1984 by the for bills roxleral on and af ter April 9 of Agreement pnnuled for a portion of the O nuwil and to "unfrecie" it fuel a nt 3 cars subsequent to 1990,ihe Unmpany Gungunyiivm fuel Grarul Gulf I relatul adjuvment n ducing same to a rate wm to tw entilkd to hwreaw in haw 17 L

+.>

rates by 64, of 5139 nullion unipiunded Agrcenwnt tlw parties thereto agreed rev>lution (Rev>lution) tlut required the annually until it> Grand Gulf I related that the legal rights of tlw City of New Gimpany to write off and not renner i cmts wrre being fully reunered on a Orleans (City ), the Council, and the from its retail electric mstonwrs, 5135 mrrent lusis arxl the amounts prniously G>mpany thereirt as the case nuy he, million of its prnimnly deferred Grand dcferred had been fully reanered reganting ( I) potential municipalization Gulf 1 related costs in add' tion to the l'naler the terms of the kttlement of the O>mpany (see Note M, "Q)mmit-551.2 million of such ants tlut the Agreement, the Company agreed, anxmg ments and Q>ntingencies - Potential Company had proiously absortwd in Ihe other thmgs, to absorh, and did ahvirh, Stunicipaliation"), ( 2 ) imntigation into Scttlement Agreement.

5512 million of Grand Gulf 1-rtlated uras the prudence of the Company's imuhr-

'the Rev>lution alws calls for a

.lut it lud proiously incurred aixt nwnt in Grand Gulf 1 (discuswd below),

reduction in the rate increases wlwduled expense 1. As a result of Ihis settlement, and (3) pending litigation unxrrning the to he implemented on April 9,1988 and

$29.5 million o!the 5807 million of O >mpanyi u'ntractual arrangements with each subsequent year.1hc foll<ning is a unreuncred Grand Gulf 1 related costs 5ERI, were not affccul.

unmpariv>n of the rate inctntws pnnidul (imiuding carrying clurges) tlut lud twen On Ichnury 1,198M, the Coun(il, for in the kttict'wra Agreement with the esgwnwd during 1985 were deferred in in cinwhaling its prudence inquiry rate increases pr nidcd for in the N1 arch 1986 and credited agaimt Orst regarding Grand Gulf 1, adopted a Rev >lution, a>mnwn(ing in 1988; quarter imgrating expenses.1he 529 % million was to be troncred <ntt f uture periods llad this ovnt ocmrred in 19tN, net inconee for that 3rar would I.lfcctist Rate increava Rate Increaws lute in(reawd 5159 million, reducing April 9 Per kttieraent Agreement Per Rev>lutian the nct low of 5 IM H million to a net Ims (I" hlilli"R4 of 52.9 million 1988 522.1 516 6 On April 2,1987,on the application I989 -

52 L 4 517.3 1990 521.H SIM 1 of the Gimpany and in accordance with Thereafter.

6't, of 5 69 m of 5 620'

)

the ternw of the Settlement Agreement, conp>unded aruiually' compinmded annually' the O>uncil adopted a nwolution further

• In cath cawc unul Gund (.ulf 1-relate 1 e osh are bdng felly rnuvt red on a wrrent hm arsi implementing the $ctilenx11t Agreement the arrutna prniously dcfcrred (under the Rcwlunon. *S the addition.d 5 l M mdhon by appnning tariffs titut by the Company dMiowarx e) h.ne tren fully renncred pnniding a scheduled incrr aw in haw rates for electric wnice of $29zi milhon On l'chnury 9.1988, the Company bclinn tlut the Council's action is in annually for bills rendered on n.1 after filed petitions in federal courts asking violation of feileral law, the Settlement i

Apnl 9,198'. l'urther, in acconlan ce tlut the Ontncil tw prohibital from Agreement, and ITRC Orders with the Wettlemens Agreement, the inening this dnallowance. 'lhe federal On l'chnury 4198M, the Onmcil revdution al.o pnnided that carrsing courts, thus far. luve denied the O>m-filed a suit in state court wcking. among clurges on the deferrnl a nts he acuued pany h requests for immediate injunctise other things a judgment that wuuld at a 1 i 7% rate hcginning April 9,1987 relief to stay the eflect of the Rev>letion, declare the Rev>lution disallowing 'he On Alay 21,1987 in order to rt1ka the althinrgh the Company is continuing to 5135 milhon and the r(lated reduction exTect of lower tax rates in il *: Tax prew its case before a fulcral appeals of ilw s(twduled rate increaws valid and Reform Ad of '986, the Giuncil adopted court l'urther, the Gimpany tus Gled an enfonrabic. The Company plans to a further rev>lution appnning n-iwd appeal, and requested similar injunctise oppose this suit sigorinnly tarith filed by the O>mpany tlut relief, in a state court. The Company rn!ntrd the Companyi haw rates by approxmutely $2.3 million, effective July 1,198*

l'nder the terms of the Scttlement IM l

Q 1he action of the G>uncil has had lx>rnmings or financine, w hkh would deferxling against the O>uncirs acti uts an inmxvhate effect on the Ginpany's lust a significant adscrse impact on the Niornner, the Company beliors tlut the

~ bility to obtain funds arxl pom rious Gimpany's ability to meet its obligations actions of the O)uncil are in siolation of a

f ontwquences to the financial ctnxlition in the ornt slut the action of the the I(sicral limer Act,ITRC orders with of the O>npany and its ability to unntinue O)uncil is ex>t roerxxl within a period respect to the alh> cation of Grand Gulf to exist in its preens fornt l'nlew the of 90 days after February -i,1988. the 1.related costs, and thieral law as Remlution is tornxi, the Oxnpany will, Gimpany could be required, under interpreted by the t'nited States Supreme in all probability, ixit le ahic to obtain its Stortgage and Ikrd of Trust datest Court and will ultinutely be w declared -

the funds necessary to meet its ongoing as of Alay 1,1987, as supplemented by the ceurts.

obligations. In siew of the fact that the

( Alortgage), to set in nw> tion a procew Onnpany tus not yet twen able to (including the appointment of an itxle-obtrin a stay of tne Remlution, the,

pendent arbiter to awcw the financial Q>mpany was reqdred by the terms of impact of the Remlution upon the the Remlution arxl by gerxs 21}y accepted O>npany) tlut u>u;d result in the accounting principles to s site oli 5135 Company being rrquired to redcetn all million of the balance of the proiously Ik>nds outstanding under the alortgage deferred Grand Gulf I-related awit and

( S t 15 million in aggregate principal reficct t!us write <>if, net of irxwne tnes, amount as of starch 10,1988) pnperty as a low in 1987. Additiorully, should tendered for nxiemptiott 1he O>mpany the Remlution stand as written, the tus no real ability to obtain the funds Company wuuld tuse its future tornues racessary to nwet this obligation, arxl urxler dw kttlement AgrtxTnen reducet!

the Conpany could therchy be rendertxl by 5135 million plus tlw rarrying durges inwhrnt.

thercort which could anw>unt to an On February 9,19 8, the Qinpany addstional 5165 milliort 1he write-off fikst with the Council rnised rate tarith cauwxl the O>mpany's retainal earnings.

designed to produce $22.1 million of which as of December 31,1987 wuuld additional base rovnue, effecthe April luw anw>unted to $39.2 million before 9,1988, impk menting the third rar of 3

the write <>tf. to hetume a defkit of $33.7 the phase.in plan audxiri/cd in the milliott As a result, the total comnym kttlenxmt Agrtement.1he Gimpam' alo equity of the O>mpany was nxtuced to submitted an alternative filing of rnised 3

17.00 of total capital or 153% on a pro rate tarifh tlut complies with the fornu hasiuuna.idering the 5 60 million Resolution 1he alterruthe filing wsuld of Rate Rennery 31ortgage lk>nds iwurd increase the elecric rates clurged ly; the

)

in January 1988. I'nder applicable Ginpanv by $ 166 million instead of $22.1 rtgulatory, durter, and indenture millioit in the ovnt the Rcwlutba has restrictions, unlew the Remlution is not born irrxicted urwnforceable 1,y April

,i i

rorrxx!, the end nNdt a niki be to ruxler 9,1988, tlw alternative filing uotdd the Ownpany unable to effect f urther hetume effecthe.

(

1he Gimpany behnrs tlut all ofits attions and decisium with respect to Grand Gulf I were prudent and that the Otmpany will ultinutely tw succewful in 19

AF c

income tn expense (benefit) consists of the fulltming-1987 1986 1o85 (In~Ilwsou ndo Current; j

lederal 5

5MO 5(12.589) 5( 16.2 i l )

1.3 a 2 State 580 (l2.589)

(l4.899)

'liital IMcrred - net:

Rate deferrah (23,160) 6".319 Reduction due to tn low carr) forward (22,550)

(20.053)

Dcferred fuel ctsts 1,5G6

(~l6) 3.520 l nbilled rnenue (798)

I,266 (921)

Pension expenw 932 (l8')

(2,824)

Adjustnwnt of prior >cari ta pnnisions (659)

(356)

(5.103)

Pnnision for estinuted lowes 54 (i,683)

(l.890)

Alternatisc minimum in (1,139)

Other

.>4 3i4 (683)

Total __

(46.082)

-a5 % 2

("Mil )

(2 48)

(26-)

x81 imestnwnt tax credit adjustments - nct

$( 4 5,740) 5 M.l(Ki

$< 21919 )

Recorded inconw ta expense (benefit)

(3 urged to operations

$(45 "M9)

$ 32,821 5(26,305)

Charpd to other income 49 2HS 43M6 Etal inconw ines 5(45,740)

$ 4 4.106 s(21,919)

Ti>tal income tnes differ from the inconw before ines The reasons for the anw>unts computed by applying the differcnces arc as follows (dollars in statutor) federal income in rJte to thouunds) 1987 1986 19H5 t of

', of

't of PrcJin Prc/I'n Pre-Ta x Anw >unt inw Anw iunt income Anw iunt inw Computed at statuton rate

$(37,MM6) 40.0%

$31.5 to 16 0",

5( 18.~39 )

46 01, increases ( reductions) in in resulting from impact of thange in in rate on write-off of rate deferrah (M,100) 8.5 Adjustnwnt of prior 3 cars'In pnnisions (2't) 0.3 (355)

(o 5)

( I,91 o )

s.-

thiftrence betuten lu ek depreciation atxl in straight-line dcpreciation 123 (0.2)

(495)

(0 6)

(1.215) 30 Other - net 39' (0.a)

58a) ioH)

,,6 )

ol

'liitJl ints >nw incs

_ M 45.740) 18.2 %

$ 4.llt ki 46 1"-

>( 21,919 )

5 4 H".

20

f 4

The tax elTect _of the portion of the million,526.9 million, and $22A million deferred income tan for all tempirary 1986 atxt 1987 faleral net operating loss as of the end of 1987,1986, and 1985, differenen that are reported in one >rar tlur is carried fonurd lus been ren>rded respecthrl).

for financial reporting purposes and 4 as a reduction of deferred income taxes.

1De alternathe minimum tax ( AhlT) different )rar for tax purposes.1his will lhis loss of 598 6 million is auitabic to credit at Dstember 31,1987 is $1.1 require tlw recognition of deferred tax of fwt taxable inconw in future >vars and, million.1he AhlT credit can tw carried fulanco for certain items not proioudy if not utilized, will expire in the years forward indefinitely and will reduce the reflected in the financial statements, such 2001 and 2002.1:nused imtstment tax Company's income tax liability in the as a deferrut tax liability trlating to A11X'_

credits at December 31,1987 amounted future. In Den mber 198', the FA511 issun!

It is expected that reductions 10

- to 52.5 million after the 35% reduction SFAS No. 96, "Accounting for Income deferrtx! taxes resulting from the lowrr required by the Tax Reform Act of 19%.

Tne< which is effective for 3rars twgin-corporate federal tax ratn will be

- Ihese avdits may be applied against ning after December 15,1988. L'nder reflectal u liabilitin to ontoracts siswe l

. fuleral income tax liabilities in future the liability method adopted by $1-AS Na the Q>mpan)% rtyulator nuy require any l

3rars. If not uwd, t!xy will expire in 3rars 96, deferred tax balances will be based such sasings to be pawett on to the 1992 through 2002.

on uncted tax laws at tax rates that are rategulvrs. The impact of SI AS No. 96 Cumulathe income tax timing expected to be in efTect wtwn ibe tem-on the financial pwition or resuhs of ditTerences for which deferrnt income porary differtwes rort c. SFAs. No. 96 operations of the G>mpany has r:ot pt taxes hase not been pnnided are 525.5 expatvis the requirenwnt to record been determined '

L 1

g LINES OF G DITi..

o,mpany subject to certain limitations T1w nimpany lus recchrd authort.

AND RETED L-ointained in the agreement.1he ration from the Scourities and I:xchange l. MRROMNGS., -

o,npann awrage bornmings under this G >mmiwion (sl:C) under the Isihuc t tility F

crnlit : greement were $10.2 million and flo! ding Gimpany Act of 1935 to haw SOA million during 198" and 1986, outstanding at any one time unwoired At December 31,1987 and 1986 respectiwly. At the end of 1986, subject Murt term hornmings aggregating not the Q>mpany had a $10 million line of to the limitations of the rtwhing credit more than 10% of the Gingany's credit with a New Orleans hank. This agreenwnt,5163 million renuirwd capitalization as delitwd. At the end of j

line of credit is dured w ith louisiana available for Imrnming. The crnlit 1987,529.1 million in aggregate l

limer & IJght Q>mpany (IP&l.). As of agreement expired in August 198" unwnited turnmings renuined available Sta1 h 10,1988, IP&l. lud fully utiliicd 1he Company has participated with under the 10% lurnming limitation.

this Murni line of crnlit.1herefore. none certain other o>mpaniewf the Sinid:e Ihmact. a Jantury 1988 order of the of this line w as anilable to tlw Company South 5) stem in a nuncy pool arrange-

$1 C lus nundated Ihat short term 3

i at tlut date. Furthernure, unless the ment whereby t!'ow companies with turrowings ma) not be etTected without Osuncil's Resolution is ro crsal. the anilable funds nuke short term haans to sgwritic authorisation from the stE if Gimpanyi abihty to effect future certain other osmpanies in the Shdt!!c the Compan>% common stm L equit) bornmings under this line of credit is N uth System lusing Q u >rt term lurn ming (includmg retainn! carnings ) is less than highly unlikely requirenwnts the Ginpany tus txrn able 30% of ilw G>mpann total capitalization in 1986, the Q<npany whtainni a to Imrrow thn>ugS tin nwinc) pool ni plus 4mrt term indebtednew or if unh rouhing credit agreement with other available smirces sub cet only to its turnmings would rtvilt in the Gimgunyi i

f Imrnmings waarnt by a scuirity.nterest mnimum a"timriecd loci of short term onmnmn sta k nrit) (inchKhng retained in or tien on accounts rc< ch able of the turnmings and the availabihty of funds carnings) being bckm 30 L of the l

I

.~

Company's total capitalization plus term txirnmings and the applicable anwiunt turnmn!) for the Company utve short term indebtedness 'the Company interest rates (determined by dividing as follows:

is mrrently precluded from cffecting applicable interest expenw by the awrage 1987 1986 1985 short term horrtmings (whether from (In ' thousands) bank loarts or through noney pool Staximum tornming

$42,700 59,700 519,300 Imrnmings) as a result of the write-off Year-end bornming 55,000 f

of pn iously deferred Grand Gulf Awrage bornming: related costs and the reduction of the llank loans

$ 1,989 5 1,850 Awiciated companies

$ 2,156 51,003 5 8,793 Company's ratio of comnnn stock equity 0:hcr

$10,214 5 419 to total capitalization to 17#t. Further, Awrage interest rate during there is no assurance tb2t Alw will the period:

Bad lon 7.8%

9.8%

pnwide any additional funds to the Assoelated companies 6.7%

6.5%

8.2%

Company under these circumstances.

Other 9.6%

9.0%

Certain other limitations on the Average interest rate at issuance of short term indebtedness are end of period:

llank loans included in the Company's Stortgage.

Asweiated companies The secured and unsemred short-Other 9.0%

Cah sinking fund requirements for PREFERRED AND preferrW stock outstanding at Deumivr COMMON STOCK 31,1987 for the 3ean 1988 through IV)2 are as ibilows (in thouunds) 1988, 0 ;

1989, 5750,19)O, $750 1991, 5754 and Preferred stock at Decernber 31, 1992,5750. In addition each rar the 3

198' and 1986 umsisted of the ibikming; Company lus the non cumulative option to redeem additional shares of preferred simk outstanding in accordance with its Shares Authorized articles of incorporation.

and Outstanding Amounts Current During the second quarter of 1986, Cumulath e, at December 31, at December 31-Call Price th Company chminated all arrearages

$100 Par Value 198' 1986 198' 1986 IW ' hare tlut lud existed with respect to preferrn!

(In Thouunds)

Without sinking fund:

st ick dni&nds and lus remained wrrent J

475% krics

",798

",798 5 7 '80 5 ",780 5105 00 with resgua to payment of ;ts quarterly i

60jMM) 60jMM) 6JMM) 6J MM) 104.58 i

60JM M.i 60.tM M) 6JMM) 6fMM) 102.59 pdra stod ifnidends through the j

Premium 337 W

quanaly pa3rnent nude inJantury 1988

)

lbtal 19' 798 1998 520.117 520.1l' Ihmner, as a result of the w rite-oif of prnionly deferred Grand Gulf 1.related costs the Cnmpanyi retained earnings i16,993 134,995 511A99 'l3.500 5111.5M Iwuance Fspense

~

~

wcre climiruted and the Company had lbtal 116.993 131.999 511.4M 1 513.2 4H an accumulated deficit of $33 ~ million lherefore, the Cumpany is currently 22

prectuad from declaring any furtlwr entilkd to cler the rer dning directors.

54,453, tun 1he G>npany cannot declare dhidends on preferrnt or conunon stock.

l'urther, the Gwpany would be pre-dhi& nds on its common stock until Accordingly, the Company's Ikunt of cluad from m Aking further sinking arrearages in preferred stock dividend Directors determined not to declare the fund payments on its preferred stock payments assi pnferrni st<wi anking fmst

(

. quarterly dhidend Out would ordinarily until arrearages in preferred stock payments hast been clinuuted 1he he payable on April 1,1988. Further, disideixls lust been p. tid.

Onuncil's Resolution,if rot rorrsed,will the Conpany estinutes tlut it will renuin 11w Q>npany has determirxtl slut, have the effect, under the Q)mpany's in attrars on preferred stock dividends prinurity as a result of the operation of articles of ino>rporation and debt instru-I until at leau 1990, assumlng tlut the the pluse in plan prtniasi for in the ments, of precluding further declaration Company is ahic to renuin x>hrnt in Settlement Agreement with the Council, and payment of dhideixh on cominon the meantime. If and wlwn dhideixh all dhia rv h on all outstanding slures of stock for a number of }rars.

payable on any outstanding slures of tlw the Company's preferred stock that wrre G)mpany's preferred - xk slull be in paid in 1986 and 1987 amstitute a return arrears in an amount equal to four of capital for faleral incunw tax purpte quarterly dhidends, and tlwreafter until The Gimpany also Ixtiests tlut a all dhi&-nds in arrears on any such substantial portion of any prsferral stock

. preferred stock shall have been paid, the dhidends paid in 1988 and proxinul imiders of the Company's $1, preferred subsequent years nuy alm constitute a stock, mting separately as a single class, return of capital.

shall be entitled to elect the snullest in 1987,tlw Q>npany paid $3 millkm number of directors necessary to in o>mmon stock dhidends to \\lt. Prior canstitute a nujurity of the fullImard to these dhidends, comnon stock of directors, atxt the holder of the dhidend had not been declanxi since Gimpany's common stock,.\\lst', slull be June 1985, As of Deu mber 31,1987,

$5,997,txW) of comnon stexk dhidends tlut were Aclared in 1985 lud not been paid. Il<m eser, on I'chruary 1,1988, the Gimpany paid $ 1,54 Oxx) of its unpaid n>mnmn stock disidend &clarations, tlwreby rnlucing the anmunt of dhia,wh tlut were declared but rmt paid to 23

. ~..

..mw Inng term debt at December 31,198' atxl 1986 owwisted of the following-19h'

,198(y

( In ' thousands )

First Mortgage ikinds.

4%% Series due !98' 5

6,t H)O 5 % Series due 1991 5 15J N W) 15,000 4}ib Scries due 1992 83MN) 8Jxh) 5% Series due 1996 23,250 23,250 11 % krics duc 1996*

2ijHM 253)00 L% kries due 1997 123HN) 12Jxo 10 % Scrics due 2001 353NIO 35JMN) 9%% Series duc 2008 153xM 15J00 lbtal l'irst Mortgage Ikinds--

1 R 250 139.250 Other:

Rate Reoncry Mortgage Ik>nds, 10.95% initial Scrics due 199" N""

lbtal Other M2 165

( nanvrtized premium and discount on long term dcht - net lbtal inng-Term Debt 2"84"2 I3940 lrv. Amount due within one scar 82"dA"2 8IhiO Inng Term Debt licluding Amount Due % ithin One Year

• In.luly 19Wi, the Company sold $25 nullion prnxtpal anuiunt of internwttute tcrm sctunst in i at an annual interest rate of I I L t in N ptember 25, 19%. the Cumpany tullateralucti these securut notes by depositing fir 4 :nongage funds in ttut anwunt with the trustcc for w h notes cifectncly nuking uh.w des of equal rank with the outvanding first nwirtgage honds of the Comgun) in Nay 198', the G>mpany sold 5'S At December 31,198', the sinking term dcht for the years 1988 thniugh million of an initial wrics of Rate Rco nery fund requirements and nutunt es !br long-1992 w cre as followv Mortgage ik>nds issued under a General and Refunding Mortgage. The proceed.

from the bond sale were used to finance N"k'"M I""d '

M "' " "' iC'

'd#

a portion of tk ferrn!(irand (iulf I-relatal costs that were to be reonerni through 1988 51,083 19H9 I.08 $

nTenues pursunt to the Scttlement 1083 Agreement between the Gimpany and 1993 933 515jpH) he G>uncil ( ke Note 2, "Rate Matters.")

1992 853 8 t W10

" s uing rund nyuirenwnis nuy he sauecd by (cruth anon of property addaiom ai the rate of n

inJanuary 1988, the Company sold 16'- of w h rt quirenwna

$ 10 milhon aggregate principal annunt of Rate Rconery Mottgage lkinds These a wt forth in Note 2. "Rate Matters" Roonen Mortgage lkindy 5115 milhon bonds were sold in three series with 51. I the Giuncil has disallowed the reonen in aggregate principa' amount as of million bearing interest at 13 20 t. 529. i of $135 miltion of proiously deferred Mart h 10,1988) the right to require million at 13 60% and 59.2 million at

(> rand (iulf I relatul o>sts that, if not the Company to rederm their twmth if.9trL 1he 13 20".. x rics 13 60 L h ncs rnersed by the Courts could, under

('nder these tiraunstantes. ilw Company and 13 9trb krics base nuturity dates of (crtain (irnindtances and assunung has no real abihty to obtain sutticient lebruary 1,1991, f(brtury 1,1993. and neither w,isers are obtainni nor other cash or fuun(ing to pay in f ull all such lehrtury 1,1995. respectisely satisfatton arr.mgtments negouated_

twinds so tendered for redemption gise the holdcrs doutstarxhng Rate 14

On Ichruaryl,1988, the Qiuncil

~ off 5135 million of the balance of its ikccmher 31,1987,as a result of the adoptcJ a Rev>1ution Llut required the presiously deferred Grand Gulf 1 related wTite-otTof $135 million ofits prt%>usly Company to write off, and not recuser costs and tellected that write-off after deferred Grand Gulf I related c wts the from its retail electric customers, $135 income taxes, as a k,ss in 1987. (See Q)mpanyi retained earnings wrre million of its presiously deferred Grand Note 2,"Rate Matteri) eliminated and the Q>mpany lud an Gulf I nlated costs in add, tion -o the lhe indentures irlating to the acmmutated deficit of $33.7 million. As

$51.2 million of such udts that the Companyi long term debt and prmisions a result, the Company is currently Gampany lud agreed to pernunently of the articles ofino>rporation rebting precluded from declaring any further absorb in the Settlement Agreement. As to the Gimpany's preferrni stock proside disidendu>n preferral or o>mmon stock-the Rev>lution was not immediately for restrictions on the payment of cssh sta)rd or rewrsed, the Company wrote dhidends on common stock. As of I,

a N'

of the municipalization of the Osmpanyi gising effect to the 5135 million write-off.

8CONTINGENGES -

WMEN W electric properties and operations

'the O>mpany estimates slut it would (see lbtential Alunicipalization"),

incur total capital requirements of (4 ) the fhuncing of cmts asmelatal with approxi tutely 5151.3 million during the Grand Gulf I that are not reantralin -

period 1988199C in conrution with A. General rates (see "Capital Requirements and the deferral of Grand Gulf I related Financing"),( 5) the future status of Unit costs not recostred in rates in addition, At December 31,1987, the No. 2 of the Grand Gulf Neam Electric the G>mpanyi construction program G>npan)4 most significant o>mmitments Generating $tation ( nuclear) (Grand ointemplates expenditures (including and contingencies related to (1) the Gulf 2) and the powihle alk> cation m AfDC) of approxinutely $31 million in ultinute outcome of litigation related to the G>mpany of u>sts awociated with 1988, 532.4 million in 1989, and 533 8 the G>mpanyiimuhement with Grand that unit (see ~ Grand Gulf 2") and million in 1990 he foregoing estinutes

{

Gulf 1 (see Note 2. "Rate Alatters") and (6) the outcome of challenges to the are txtui upon the kttlement Agreernent the potential exposure of the Q>mpany FERC allocation of capacity and energy and assu ne that the Remlution will to denunds from hukkn of Rate Reuntry from Grand Gulf 1, which could have a ultinutely be rocrui. If this does not alortgage ikinds for the nundator) significant impact on the Gimp tny (see oenir, additiorul exterrul financing redempiion of their lx>nds (see Note 6, Tnit limer Sales Agreement").

rniuirements wotild result.

"Inng Term Dcht"), ( 2) the outcome of Miwiwippi Ibwer & Ught O>mpany's (MP&l.) appeal of the Misesippi Myreme H. Capital Requirements and C Potential Deh( Acteleration, Giurt's reseNI of the Miwiwippi Public l'inancing Bankruptcy, and Middle South Sersice Gnumiwions ( MPSC) order System VlablHty granting permanent rate relief to Mp&l.

The Companyi ohhgation for with respect to its renntry of Grand payments to M RI for Grand Gulf 1 In addition to action recently taken Gulf 1 related costs to the Cnited States canacity and ency is approxinutel) by the Onmal disallowing the reanery Supreme O>urt (see "Ibtential Debt 513 million Iwr tuonth ikferred of 5135 million of pr(susly deferred Act eleration, Itinkruptcy, and Middle purttuel pimer costs in connection Grand Gulf I-related costs, as dmussed N>uth $ stem Viability"), ( 3 ) the with the Companyi phase in plan were in Note 2,"Rate Matters," MP&l. is 3

outcome of the Omnal\\ consideration 5%7 million for the 3rar 198" twfore aim faced with (fullenges to its Grand 25 i

,, - - ~,

.,,--,---e

,,,-,-r-w.,

na r,.

,.,,,,,,,v,,~.-n_,n,

-m.,,.,

.,..-r~,-

Gulf 1 related cost rtuntry.

unless ( I) waiwrs wrre obtained ( 2) 5ptem o>mpanies to file a petition for Specifically, on February 25,1987, the debt was restructured, or (3) other reorpnimion under Cupter 11. Many MP&lk rate order was rtwrxd on appeal arrangenwnts u>uld be negotiated. In of thee future e ents are bc>und the

( February 198' Decision) and remanded addition, in the absence of such waisvrs, control of the Middle South 5ptent to the MP5C for reo>nsideration. Sub-debt restructuring. or other r egotiated 1he effects of a bankruptcy sequently, MP&L tiled an appeal of the arrangements, acceleration of such proceeding imuhing one or more Middle February 1987 Decision with the UX indebtninew could occur if a Sptem N>uth Sptem companies and the extent Supreme Court and on October 5,1987 operating company wrre renderal of jurixlidion of the 51 C under the Public the Court decided to hear full argument insolvent as a result of a redudion in 1 tility lloiding Company Act and of othet of MP&li appeal. Oral argument was rctes. Giwn the substantial amount of federal and state regulatory lulicunrr held on Tehruary 22.1988. The case serfs indebtednen,it would not be able the bankrupt entity or entities and over is expected to be decidal by the emi of to meet thew obliptiom,if acceleratal.

any odwr Middle N >uth Sptem conpanies June 1988. Without adequate rates to l'nder SERI s finarwing agreements. the not in hankruptg cannot be predicted.

reunrr Grand Gulf I charges, the Sptem operating companies wuuki not in any ornt, sturity lx>klers and crolit(n Company and MP&L could suffer such be respomible to pay serfs accelerated of the company or companio imuhrd liquidity constraints that they wuuld, obligatiom if SERI could not meet them.

in bankruptcy proceedings could be in a short period of time, he unable to MM', with its finarxial rew orces (urrently significantly affeded by such purnlings meet their amtractual obliptions to limited, wuuld tut, at this time, he in a lhe proceedings o>uld last for years, and SERI with respect to the Grand Gulf position to satisfy 5ERI s obligations, if there are many uncertainties as to how Station and could be rendered inw>hrnt.

accekrated pnnisiem of the law would he applied.

Certain of Sptem Fuck, Inels (5FI)

Iri the ornt of any of the fomgoing Rights and rennlics obecurity imiders financing agreements and leases nuy adwrse dewkyments, the continuing and c: editors nuy be alternt, denini, or require payments by the Conpany and siability of the Middle Noth Sprem utmld limited under such laws lhe obligatiom the other Sprem operating companies, be placal in jeopardy, and it could be of the Sptem operating conpanies mK!cr MC, or 5ERI,in the ornt slTs obiiptions dittim!t to asuid a bankruptg filing by the Availability Agreement and dw as-under such agreements are accelerated one or nwire of tlw affected Middle N mth signnwnts thereof could also be litigated as a result of the imoheney of a 5ptem Sprem companies. In this connection, and powibly reduced or climinated, (ke operating company and 5fI h unable to MML MP&I, and SERI fuw each retair n!

"Asailability and Reallocation Agreements" meet thee obliptiom or otherwise to independent spedal a sunwl experienced twlow for a diwuwion of the 5ptem satisfy these obliptiom thamgh the sale in bankruptg nutters and n.ne been operating companici regwt tive oblip-of the collateral sturing such obliptiom studying the relief and protection tlut tions to nuke payments or otherwise In addition,inwohrng of a Sptem might be available to them under Gupter support SERI under the Availability company wuuld affect the terms of 1 i of the l'nited States !!ankruptg Oxle.

Agreement and the Reallocation tiruncing (including an increase in the

%hile no decisium with regard to bank-Agreenwnt.) W re o>ukt be tu assurance cost of financing) or could preclude ruptcy filings have >ct been nude, it tlut any unl tto wuuk!!w ahic to rtwer financing for other Niddle South 5ptem must be recognited,in light of the risks the full amount of their daims and companics disuwn! heirin, that future ewnts, scairities and sttwk with inferior rights failure of any 5ptem operating either singly or in o>mbirution, nuy could be substituted for those with o>mpany to nuintain its current rate result in such adwrw dungo in Imsinew j

strudure or to meet its contractual cirmmstance or such a decrease in obligations to STRI in re3wct of the Grand hquidity as to make it prudent for one Gulf 5tation o>uld, under certain agree-or more of the affected Middle N>uth ments relating to 51 RIN indebtednew (Imt only upon further action by the requisite percentage of Si R1 s ueditors).

1 Iead to acceleration of MKh ifKlelMninew 1

i l

26

)

priorities further,inklers of equity anw og other tlings, tlut mtmki ulWik n disallowance requinng a write off o>uld, l

wcurities nuy not tw abk to reonrr any holds the puential for pnxturing if not rntrwd,luw the effect of substantial annum on their imtstment.

significant snings for electric uismnwrs reducing the purchaw price under Alorcowr, it is uncertain whether tlw in the City owr the 15->rar p riod antrul municipalintion by $135 nulliott Any tunkrupt entity or entities could he by the rqwrt ( 1988-2002) and that acquisition of the electric properties successfully reorganized in their prtxnt (although the nutter was not free from of the Company by the City would form, w hether tlw current relationships doubt) in conjunction with such prestmuhly tw accomplislwd, at least in betwren arxl anw>ng surious Sliddle Noth municipaliation the '1wtter siew"is part, by the uw of tax-exempt financing.

Sprem omtpanies would be significantly tlut the City would not he required to Recently enacted federal legislation has alterut, or whether the \\ liddle N >uth 5p-assume the Company's obligations with significantly limited the availability of respect to i s ITRC-alk>cated slure of tax-exempt financing for stwh an acquisi.

tem wuuld continue to exist in its pres-t ent form after tunkruptcy of one or nure Grand Gulf I related onst of capacity tion.1he Oxmcil has mught and recchul Aliddle N>uth $ptem companies.

and energy. Abo, on October 16,1987, gwrmission from the State of Inuisianu the Company filed a critical analpis of to luw a portion of the statei available a similar report retxtered wwral nonths tax-exempt homling authority set aside D, Potential Alunicipalliation earli-r by the Council's consultants.

for pwsible use in firuncing a portion of AdditionalN on that d.ite, a gmup of the potential purthase of the ekctrie 11w Gimpany holds indetermhute kical citizens fikt! a rtp>rt niumnwnding properties of the Osm[uny. In light of tlw permits to pn nide ekctric aml gas wnice that the Council go forward with munici-0)uncili own estinute of the total cost in tlw City.1hc ordisunces under which palintion. The O>uncil held a public

.o municipali/c, this alk> cation of the the Gimpany operates state, amung hearing on Octolwr 29,1987 on the state's tax-exempt tundmg authority other things, that the City tus a con-municigulintion propn.d. The Omncili constitutes a relatiwly snull portion of tinuing option to purtluw tlw Conpanyi consultants the ati/ern group, and the the required external financing 1hc pnperties Ompany nude fornul presentations at 0 mpany cannot predict the ultinute lhe Council is considering the this hearing tlut outlined their respectne impact, if any, these financing hmitations acquisition by the City of the electric pwitions as reported in the October 16 nuy luw on a p >tential nunkipalintkn utility properties of the umipany, and filings, The Council is tunsidering the on Alanh 7,1985. the O>uncil establishht idorm:. tion obtained at these heatings a public pmer autlmrity for the purpose, and hn indicated that it will imld one E. Unit Power Sales Agreement any og ottwrs of acquiring and operating or mort additional hearings on this electric power utilities in the City On nuttee at mme time in the future.

The l' nit Ptmtr Sales Agreement October 16,1987, the 0,uncil recciwd

% Company, hawd on the adsice (I'P5A ), as appnned by the i ERC onJune an updated report from in adsiwrs with of it-swn esperts hetints that the 13,1985 (June 1985 Dechion), obligates ropect to tlw p>tential municipatintion cone!, on, expressed in the updated the 5ptem operating osmpanies to of the Compgs electrie utility fatilitks np: 1 should not tw relied up>n as a purchase fn>m $1 RI, at STRih full ant of f

The updated npirt, whith did not los for a municipatintion decidon, and senice, all of SERii 90% slure of the purpirt to nuke a pilk/ rea nimeixtuion further helinn tlut any attotipt by the capacity and energy from Grand Gulf I for or against munichu.intion, aswrted.

City to municipalize the (nm;unyi in accordance with the folkming ekttric utiht) faalities would result in penrntage alkicatkns tlw Onnpany.17%

extensiw litigation tlut o>uld take nuny Arkansas l'tmer & light Ornpun ( AP&l.),

) tars to rewhr.1he recent action of the 36% 1.P&I, in; and. lP&l,33% On

\\

O>uncil in orCering a 5135 million January 6.198", the t Wd Stato Oxirt of Appeals for the District of Columbia Cinuit ( D C. Ciratit ) allirmed the 11 RCi June 1985 Ihision After subwquently i

1 i

l'

granting rehearing of twu iwucs raised South system companin) and by order of Orleans, state of louisiana, seeking a in theJanuary 6,1987 decision, the D.C.

dated January 29,1988 (January 1988 declaratory judgnwnt and a pernunent Circuit, on June 24,1987, rorrwd, la Order), the i ERC denied such requests.

injunction, alleging that the G>mpany's part, theJune 1985 Decision and l'etitions for roior of the Nntmher 1987 obligation under certain Grand Gulf trmanded theJune 1985 Dechion to the andJ.uutary 1988 Orders were filed with station-related agreements are unen-FERC (June 1987 Remand) for rcom-the D C. Circuit by various parties.

forceable until the Company obtains a sideration ofits decision to equalite the it is not possible at this time to Certificate of Public Comrnience and capacitycosts of all Aliddle South Sptem predict the ultinute outcome of this Necessity from the Council. During oral nuclear plants aml for an explanation of nutter, including the possible realkicathm, argunwnts, the City mluntanly withdrew the criteria used to determine what if any, of Grand Gulf I related o>sts or the request for injtmdiw relief and einstitutes "undue diwrimination" umler the effect thereof upon the Company or limited the Cityi suit to a request for the Federal Power Act and why theJune the other 5ptem operating companies declaratory judgment. 'Ihe Gnpany SISE 1985 Decision is not unduly discrim-or SERI. including possihic refunds, if any and SERI haw fik-d pleadings denying inatory in roersing. in part, the June Any nxxhfication of the alk> cation the Cityi o>n entions and are awcrting 1985 Decision, the D C Circuit did not established by theJune 1985 Decision, special defcases under state and federal change that part of its January 6,1987 as aHirmed by the RRCs Nntmher 1987 law and intend to take all necessary and decision upholding the FERCs authority Order, o>uld gir rise to additiorul appropriate defensiw actkm. 'Ihe to roiew and nwxlify the alkscation of litigation, disputes, and challenges in the parties haw mutually agreed to file a pnwr from Grand Gulf 1. Wri sus parties atlected jurislictions, and in the ovnt of motion for dismiwal of the suit without filed petitions for certiorari with the the Companyi recening a material prejudice.

I!nited $tates Supreme Court seeking incrc ase in alhacation, o old pmibly gis e roiew of the principle underlying tlut holders of outstanding Rate Rectnvry porthm of the D C. Circuit's dechion that Mortgage ik>nds the right to require the F. Availability and Reallocation a31rnwd the ERCS jurixixtion to alkcate Company to redeem their Innds.

Agtcements Grand Gulf 1 related o)sts On Decem-Specifically, the option of the holder to her I i,1987, the t'nited States Suprenw put ba(k Rate Reuntry Stortgage Iknxis lhe %ptem operating ampanies are Court denied without comment the e ariws if, in the opinion of an iakpemlent wwrally obligatal, nv inthi), to Si RJ umkr i

petitions, thereb leasing in place that arbiter, a nuterially increased sture of the Asuitabihty Agreement, as amended f

part of theJanuary6,19r decision Grand Gulf I related o nsts is impm.ed to date, to nuke payments or sth nhnated upholding the FERCs jurisdiction to upon the G>mrany and h twa retketed aibunces adequate to oner all the alhicate Grand Gulf 1 related emts in retail rates within 450 d.ns ( 15 nunths) tverating expenso including dtpre-On Nowmher 30,1987, the ITRC of such imposition.

ciation and interest (turges. of Si RI. 'Ihe isu ed an order (Nn ember 19r Order)

In addition, the $ptem operating Company's percentage slure of these in respon e to theJune 198' Remand oinpaaies h.nr initiated a sttah. airrently chhgations is 2 6.7% SERI lus, with reallirming and reinstating theJune 1985 scheduled to he o>mpleted in the near the consent of the Spiem operating Decision, thus nuintaining :he proious future. to determine w hether a more o>npanies assigird its rights to payments alk> cation of Grand Gulf I capanty and equitable method of alh>cating costs.

and athances from the 5ptem operating energy among the 5ptem operating includ ng those relating to Grand Gulf 1, companies under the Availability companies. In issuing the Nntmher 19r wuuld be appnpriate in the future.

Agreement to the bokkrs ofits king term Ortk r, tbc l'I RC found that the alh> cation On Starch 23.1984. the City fil.d debt. Payments or advances under the in theJune 198% Decision was not unduly suit against the Company Alst', am! Si RI discriminatory Requests for rehearing of in the Cisil Distrkt Court for the Parish the FERCs Nncmher 19r Order wrre filed lpurious parties (ether than Sliddk-28

Availability Agreement are only requirnt and SI'RLs access to otlwr funds). The complete the unit.

to be nude to the extent SERES receipts Company cannot predict wheti er any in September 1985, following an from all sources, including the IJPSA such claims or denunds, if nude, could order of the SIPSC, SERI suspended appnncd by the IIRC (of which the lx satisticti lhe nuking of any sixh claints construction aethities at Grand Gulf 2 Conpanyh wrrent slure is l'L), are km or demands, if upheld, could also, subject and ceased accuing All)C on the than the amount requirnt under the to certain conditium, allow the lastders unit. Since tlut time, $ERI has limited Availability Agrrenrnt. Since mmmerci.d of outstanding Rate Recosery Stortgage expenditures to only tinse acthities that operation of Grand Gulf 1, payments ik> nth to require the Company to rnktm are almlutely ixu%ary for denxhilization under the l'PSA (which are based on their Iknwh.

and susirnsiort in Ihrmher 19H6, SERii Grand Gulf I's full mst of sersice, lhe S> stem operating companies in ikurd of Directors (with the AISU Ikurd including a return on equity) haw lxen Atnember 1981 cntered into a Reallo-of Directors onrurring) adoptn! the note than sullicient to anvr the anwonts cution Agreement that would haw recommendation of a special group of owing under the Availability Agreement alkicated the opacity and encryy available Aliikile South Sptem of ficia h and outside (whxMko int untr a return on equity).

to SERI from the Grand Gulf Station to consultants that suspension of construc-Acmrdingly, no payments lust estr turn the Company,IP&l, and SIP &L 'Ibese tion he continued and tlut a further nude under the Amilahihty Agreement.

companics lud agreed to awume all the decision he nude by 1990 on the future l

If, as a result of an atherse decision responsibilities and obligations of AP&L status of Grand Gulf 2 in light of in the SIP &L Supreme Court litigation with respect to the Grand Gulf Station alternathrs anilable at that time. As a discuwed ahmt or other darkpments, under the Availability Agreement with result of stWs ik urd d Dirraoruksiding a Sptem ogwrating oimpany other tlun AP&L relinquishing its rights with respect to continue suspension of construction, the Company becomes unable in wlmte to the Grand Gulf Station. Each of the 5ERI does not intend to nuke an or in part to mntinue nuking payments 5ptem operating conpanics, including appliation in the IIRC during the period to SLR1 under the (*PSA, and $1 RI wcre AP& t, indisidually would luw renuined of su pension with re3xo to the rmntry unahic to prowre fumb from other prinurity liable to SERI amt its awignees through rates of $1 RIK imrstment in murces sufruient to uner any potential for payments or advances under the Grand Gulf 2, shortfalllytween the ammmt owing Anilabihty Agreemet.. and awignments During the peri 4x! of mntinued umkT the Amilabihty Agreement and the and athunas tlxm4. AP&l.was obligatal su pension, $1 REs expenditures on Gram, amount of continuing payments under to nuke its share of the pa>ments or Gulf 2 will he limital and it will continue i

the L:15A plus other funds then available adunces only if the other Sptem not to accrue AfDC on its imrstment in to $1 R1, the Gmpany nuy trconr sulyect operating mmpanies had twen unable to the unit. During the suspension gwriod, to (laims or denunds by SERI or its nrct their corJ ractual oblig;:tions

$LRI will continue to culuate various anhtors for paynwnts or athunm,umict ihmrwr, the ITRCsJune 1985 Decision alterrutives for the future of Grand Gulf the Anilability Agreenwnt or the supercedes the Reathication Agreement 2 and will also mntinue to as ess wtwther awignments thereof. The amoun:,if any, insofar as it relates to Grand Gulf 1.

certain equipment or facihties shouki mutinue to be carried at t!wir full ont.

wish the Gimguny would become liable Any determirution tlut the ukw of 51 Rlb to pay or athunce mvr and alue an unts it currently pan under the l'15A fer G. Grand Gulf 2 imestment should tw reduced and the capacity and energy from Grand Gulf I amount of any such reduction written wuuld 6cperxl on a variety of factors Asof Decen her 31,198',51 RI had off muld athrrsely affect wrious l

(e pecially the degree of any su(h sinrtfall imested apprtninutely 5890 million in mmpanies in tlw Slitkile South 5ptem Grand Gulf 2 (irwinding approxinutel) l 5392 million in AIDC), which w as appnninutely 3 A mmplete tused on j

the estm.ated nun hours needed to i

1 l

29

l 1

including the Company SERI beliews, respect to rtwgnition in retail rates of beginning after December 15,1987 and lxmrwr, that it is jtotifict! in carrying i 1 RC-appnnut rates, before state or local requires tlut amounts pirsiously deferred Grand Gulf 2 at its full value becauw the nyut tory authoritim muld te pnitnktal under plans that do not meet the pn petty mrrently comprising Grand Gulf arx! stnogty unrestal on tarkxts gmmxlx ruguirenwnts of the sta; ment be written 2 is of the same design as that of Grand inchxling impruderwr, if costs associated off, $FAS No. 92 has transition rules Gulf I and is being progwrly maintained with Gratxt Gulf 2 were alkicated to the designal to allow any affected company and is therefore suitable for its intended Company and it was uruble to reonrr to delay appliation of the new statement purpose. Certain Iwues relating to the thew msts from mstonrrs, the Gimguny's and to continue deferral of ants under value of $ Errs imrstment in Grand Gulf thuncial ctnxlition o>uld be nuterially its existing phase-in plan, pnnided tlut 2 also exist in wnnection with an audit and adwrsely affected.

both of the folkming mnditions are met:

by the FERC of 5ERI and the Grand Gulf (1) the osmpany tus filed a rate Statiort application to haw the plan amended so M hile SERI beliews tlut all of its II. New Accounting Standards as to meet the requirements of the imrstment to date in Grand Gulf 2 has statenxat or it intends to do so as soon tren prudent, in connection with any the accounting t candards relating as practicable and (2) it is reasonably subset [uent decisions as to the salue of specifically to public utihties and certain possible tlut the regulator will clunge Grand Gulf 2 or the ultinute decision other regulated enterpriso are set forth t!v ternw of the phase-in plan so that it regarding tir future of Grand Gulf 2, $ERI by the FAsilin SFAs No 'I, as anwndot will nret t.c requittments of the will, at an appropriate time, nuke a by 5FAs No. 90,"Regulated Enterpriso statement.

determination as to the appnpriate

- Accounting for Alundonments and The Company beliews that its reontry of its imestmert. Any action by Disalkmunen of Plant Osts,"iwued in pluw-in plan for tir rtuner) of deferred STRI to seek reuncry of Grand Gulf 2 December 19% arx! St As No. 92, tirand Gulf I rel.ated onts satisfies the onts wuuld likely imuhr a filing with "Regulatal Cnterprises - Acmunting for requirements of SFA5 No. 92 'Ihe the thRr' reyucsting stwh reuntry, o cer thaeln Plans."iwued in Augtot 19M7 O)mpany cannot predict w hat ellect,if a period of rars, throuph charges to ti e SFAs No. 90 did not affect the Gimpany any, the outmme of the litigation relating 3

$3 stem osv. rating companin and related 5FAs No. 92 requires the folkming to the Giuncifs Resolution will haw on lihr p by the system operating companies auxhtiens for deferral of costs relating to the Company's phaw in plan tIrforr state or local regulatory authoritin a newly completed plant: (1) the onts to remgni/c the IIRC-alkmrd charges are deferred pursuant to a fornul plan in retail rates. In siew of the omtnnrrsies tlut lus Im. agrred to by the regulator.

I. SisU stureholder Utigation owr tir Grarx! Gulf Station, including

( 2 ) the pl4n s[wcific s w hen reonrry of the adwtse reaction of various rate costs win occur, (3) the costs deferred in 1985,51sU. certain otirr Sliddle regulatory bixtin to alh> cation of c sts are wireded for recowry within ten soudi onnpanies irrhxhng tir Q n11gurw, the regulatory uncertaintin. including

>vars of the date when deferrals begitt and indhiduals u ere defend.ints in a rate nuking attendant to a delay in the and (4 ) the pertentage increase in rates purported claw action suit. lhe initial decision as to the future of Grand Gulf 2, for och future 3rar is no greater than compLtint was filed in Augue 1985 by I

there c n he no awurance that the full the percentage increase in rates for caci an AlsU shareholder (purporting to ant of Grand Gulf 2 will be rtuhrred inmiedinely precedmg g ar.1he new or as to the timing of any reontry. As statement is effective for fiscal >rars in the cax with Gand Gulf 1, such proctulings before the IIRC and, with t

- -~

represent a cbw tlut purchawd SlSU and impact on the Gimpany's firuncial tions under these agr ements. At ummon stat) and was folkmed by four auxhtion canimt tw predicted.

December 31,1987, the total liun similar complaints fikd by MSU commitment under these arrangements slurcholders in August and Rptemtwr anw>unted to $105 mittion of which 597 1985.11w five actions were consolidated J. System fuels, Ine.

millkm was outstanding at tlut date. Also, in the U.S. District G>urt for the Eastern SITS parent companies, including the Distnct of Inuisiana.1hc cons)lidated, lhe O>mpany has a 13% interest in Q>mpany, have nude sinnbr untnants amended, and supplenwntal conplaint SFI,a jointly ownni subsidiaq of the O>m-and agreemer.ts in omnection with long-alkged siolations of the disclosure pany,IPal, AP&l ami MP&l, SM operatu term leases by SM of oil storage and retjuirements of the kuarities Exclunge on a non profit basis for the purpose of lumiling fae lities and coalimpper cars.

Act of 193 i and the Securitics Act of planning and implementing programs for At December 31,1987, the aggregate 1933, o)mnon law fraud, and osmmon it ' procurement of fuel supplies for all discounted salue of these lease law nusnprewntation in conncakm with of the Sptem operating companies and arrangenwnts wus $73.5 million.

the firuncial condition of AISU amt pra)n!

SERI. Its o>sts are primarily reontred for compensatory and punithe danugeN through ciurges for fuel delivered.

kgal costs and fees, and other pnper lhe parent companics of S!I lud K. Transit Divestiture Obligation rehef against 315U, surkius other Sprem agreed to nuke loans to St i to finance its comparues, inchaling the O>mpany, fuct su; ply businew under a loan OnJune 30,1983, the Onnpan>wid eertain otrarrs (and fornwr otticers) and agreenwnt dated January 1,198 6. as its transit operations to a political directors of Alst ', the G>mpanyi outside amended Jamsary 1,1987, widch pnnidcd suhdhision of the State of 11ntistana In auditors, ami certain undcrwriterus A13U for SF1 to horrow up to $51 million from accordance with the sale agreenwnt, tlw common stak. In April 1986,515U and its parent companics through Ib; ember O>mpany is obligated to reimburse the the other defendants, includmg the 31,198"'. This loan af,rcenwnt uvs not purtiuser, the Regkmal Transit Authority.

Onupiny, fik d a notion to disnnw or, in amemkd in 1988 and. conwspwntly, no 513 million plus a 9% upward ad;ustnwnt the alternatise, a motion for summary future loans nuy be nude to Sil by the factor per annum for future insurance judgment. On Jantury 12.1987, the parent companies at this tinw. Auif premiums or wrlfare lwnctit payments thstrid nort entertil a judgnrnt granting ikecmtwr 31,1987, the O>mpany had for all retired and disahkxl transit or tkR1xlants' motion for sumnury judgnrnt hutrd $11811 6 million under the atune transit related enpk)3ttud the Osnpany and dismiwing the suit. On febnury 6.

and prnious loan,q,rt enwnts. Notes 198"', the plaintiffs in the ainsolidated nuture in 1992. 2002, atxl 2tm8 under action fikd a Notice of Appealin ab t LS.

pnnisions of these loan agreenwnts.

O>urt of Appeals for the l'it'th Circtm.

In oinnection with certain of Sil's Oral argument wm twld on Nos emtwr 5, bornming arrangements, Sili parent I

1987 1hc defendants are vigorously o>npanics inchaling the O>mpany, haw opgning the appeal of the Distrid Gort s oncrunted and agreed, sescrally in decision. In tlw esent the dismiwal is accordarwr with their respectiw slurcs restrul on appeal, tlw cs enttul outconw of amnership of $1 li comnon stat, slut j

they will take any ami all aakm narwary to kup Si i in a w sund financial o nwlirion ami to place Si l in a position to dtwit'rge, and to cause ii to disciurge its obliga-s t

i f

v-_

L' and their respecthe dependents and of the outstanding stock of the Company pow er plant use during ihe peru n!

sunisurs. As of December 31,1987, tir and (P&l, would own all of the comnxin 197319'5.1hc Chil District Court for balance for such premiunts and payments -

stock of the new company. Mhile the Parish of Orleam, State of Inuisiatu, w2s 56M million.

functional comolidatioa in ternw of approwd tlw settlement on August 18.

Gmpany nurugement and perwanel, has 1987, w hich will result in the refund of already twen achieved in a number af approximately 573 million to electric L Consolidation with IF&L areas, kgal consummation of the cmtomers wnrd by the Company in tlut consolidation is not expected to be time franw. Ily court order, the fund 3 in tir internt ofincreamt emnonue achiemi in the near future, wrre guid into escruw by the gas suppik r etlicieng, the Couquny and IP&l. lure and the responsibility for distribution to dorloped a long term plan to oximlidate tlw clainunts is tlut of the rtpresentathes the tuu companies and their o[wrations.

31. C.as Contract Settlement of the claw of ratepayers entirkd to Urxler the prvposed arrarrgenwnt, subject refunds.1herefort, the Conpany's books to the receipt of necessary regulatory and A settlement lus tren negotiated do not retlect an awet or liability related other appnnuls, the two conpanies would betwen the Conguny amt a gas supplier to such refund 1hc Chil Distrid Court \\

tw comolidated into a new company to m long standing litigation stemning fnim jtngment is final and no longer subjed be called Louisiaru limtr & IJght the gas supplier's failure to dethrt to appeal.1he refund is expected to be O)mpany Alst!, wiuch currently owns all obligated quantities of natural gas for made during 1988.

i e

nunagement of the plans' awcts. In in addition. lw clunge in the awet

- 9 BENEFITS addition, an irxkposient adtury pdornis atuation mettyni, at January 1, le87

,.E the necessary actuarial valuations for the darea,n! 198 pension am h) indhidual company plans appnninutely $1,'thttxNL lir decrease Total pemion cost (credit) of the in 1986 expense cmupared to 1985 The companies of the Sikkile South Company for 198',1986, and 1985 was resulted prinutily from inchnion of i

$ntem h.nr urWts postretirement irtwtit 5(2.1Notxt), 54",(M xt arx! $2.509.oott a 1,560,(WM in 1985 for a special early i

plans covering substantially all of their resercthrly 1he O>mpany adoptal SFAs retirenwn: program thr.t was offered for 1

employees. 'Ihe pemion plans are No. 87,"Emphr)eri Acontnting for a limited perim! and v m not available in noncontributory and pnnide pemion Itmions" offedhrJanuan 1,1987 19861hc Company's total 1987 pemion httwfits that are based on the emph nres' Adoption of sfAN No M7 reduced 198' tmt (c rnlit ), induding amounts capital-credited senice and awrage compen-remion ont by appnninutely s'txuxkt tied. in(haled the folkming nimponents.

sation. general'y during the last five years (in 1hoosando l

lufore retirement. The polig of the i

Company is to fund pemion om in vnice cost - benefits carned dunng the period

,g

{

Interest mst on proiccted benefit obligation accordance usth cont;ibution guideh.nes

( M,'II ^[E Adual return on plan awets established by the Emploire Retirement Net amortizatio,i and deferral _

8 IY Inconw $ccurity Act of 19%

Net pemion credit pemion plans are administered by a j

trmtee who is rt3x)nsible for pension payments to retiren Variom imrstment nunagers luw respomshility for 32

)

. s

?;

1he assets of the plan consist 1he fund x1stasus of the Companys January I,1986 was $69,900 000 (of prinunty of osmmon and prefernsi stotb.

pension plan at Decemtwr 31,1987 is as which $1,661,000 was nomrsted),

insurance o>ntracts and an interest in a follows compared with net assets assilable for money nurket fund.

pension benefits of $ 10812H,0tM).1he assunwd rate of return used in

( In llun,indO determining the actuarial present sulue Actuarial present salue of accumulated pension of accumulated plan benefits at that date plan benefits:

$ 76,320 w as 9.0 1 uwtal 2.197

'the Conpany also pnnides certain Nomrstal 8 M523 Accumulatal benefit obligation health care and life insttrance twncfits for retirrd enplo tw. Substantially all 5 91,24i Projected twncfit obligation enWuw may betume eligible for tioe

! IH. I I 3 Plan aswts at fair value bendts if they reach retirenwnt age while Plan assets in excess of projectal benefit 26.H72 still unrking for the Company. Ihc3e obligation 1.172 henefits and similar benefits for aethe t'nreorgnimi prior *ersice o>st (27,796) t'nn cognins! transition asset (3.83 0 emploires are pnnided through varka.s L'nrecognlied net (gain) loss 5 (3.586) means including payments of premiunn Accrued pendon asset (liahitity) to insurarte o>npanies and/or accruals lhe wrighted astrage discount rate for sellinsurarxr policies managed by and rate of increaw in future compen-insurance o>mpanies. T1x cost of sation uwd in determining the aduarial pnniding tinwe lwncfits for retints is present value of the projectett benefit not wparabic from the cost of prmiding obligation wrre 9 0% and $Rt,.

twncfits for actist emplogrs.1hc total rt quthtly. The eyweted long term rate ant of pnniding thew twnefits and the of return on plan aswts was H.5%.

numtwr of active empkr3ces and retirees Transition aswts are being amortimi mer for the last three fiscal y'ars were as a 15 rar perkxt.1he actuarial prewnt follows 3

salue of acnimulated plan berwfits at 1987 1986 1985 Total ont of health care and life insurance (in tinnands)

$5,910

$5,188 52.171*

Number of acthe empitntrs 1,412 Ia28 1,455 Numtwr of retiretw N00

'75 087

• Rcfktts a group hfe,murarke refund of 513 nullkn r

l I

h3

The Congsany bup ekctricity from, adsiv>ry senices from AIMJ 5ptem expenws include clurgo fn>m affiliates and sells electricity to, the other Senists, Inc.

for fuel cost, purchawd power, and operating subsidiaries of 515U, including Operating rtwnues include rtwnues technical and adsiwry wnices totalling

$lR1, under rate schedules filed with the from sales to affiliates amounting to $31

$225 million in 1987, $255 2 million in IIRC in addition. the Gunpany jurtim million in 1987,$0.5 rilion in 1986, 1986, and $170.-l million in 1985.

fuel from $FI and recciws technical and and $11.1 million in 1985, Operating l

• 'I s

Bt SINEM As an operating public utility, the information about the Gimpany's 1 SW1EV Company supplies cledrie and natural operations is as follow s (in thouunds):

N gas senices in the Gry, kgment 1987 1986 1985 rlectric Gas Electric Gas I:lectric Gas

~

Operating rtwnues

$328,M O $87,927 $326,095

$102, 00 $315,034 $105,593 ikvenue from sales to unaffiliated cu4omcrs_

324,962 87,927 325.639 102."t M) 303,978 105,593 Operating income (loss) lxfort-ina>me taxes (7M05)* (1,111) 84,365" 812 (48,822) 2.455 e_hx rating incora (km)

(31,385)*

458 50.889 "

1,46'

( 13,7'I )

808

. Net utility plant 2N,924 53,222 197,9'8 50,550 200,316 69.279 Ikpreciation expenw 12,079 2,726 I ttH2 2.772 11,860 2.688 G>nstruction expenditures--

19,115 5d29 9,585 4.070 1I,186 1628

• Operating intunr (kns) htfox imume tnes and oltrating inwne (hm) rtht the untect!d $1 M nuthon 6 r 5*2.9 nullsn after tau of prs %m4y dderred Graat Gulf 1-rrlated awtv "Indudes the dderral d Grand Gulf I-triated cents applicabic to 19% the erfest of wish incrrawd operating enoinw lxfore inowne inn and operating inconw ly $29 5 raillion and $15.9 millka regrttncly 4

I a

J i

m y

,t

'V h

l l,

lbudited operating results for the four quartcrs of 1987 and 1986 follow,

+

I"

. Quarter Operating Operating Net Ended Rewnues Inmme(low)

- Inconw ( Ims)

(In 'lhouumis)

'a9871 i

Starch 5 99,828

$11,616

$ 8,318 June 96,792 8,173 3,573 septernber 122,902 15,230 10,008

- December (1) 96,445 (65,946)

(70,873) l 1986:

51 arch (2)

$109,i 15 525486

$23 M5 6 June 98.589 7,949 5485 kpternher 1 l 8,166 12d'8 9389 December (3) 102,925 6,212 2,953 (1 )t grrating kns arsi net kns for the quarter crded thtmber 3 I,19M' reflet1 tir writc4dT < 4

$135 nullum (or 5?2 9 milliott after :as) (prt%mly deferred Grand Gulf 1-related onts ss orderM tw the Ommit (2) tyrtating imunr and nrt inowrr for tir quarter ended. tarth 31,19Wi rt ficct the after ta s

one tinw inpao of deferring Grand Gulf I relatt d onts apphtable to 19M,:lw cfku of which F

itsreasd operating inovne and net inome in 819 9 niillkwt.

l (3)11r quarter ended thembcr 3 l,1986 rrficos a duTca c in operarhy trxume and m1 l

irkune of $21 nulhon, after tat due to the pnnwon for tstinuted Ames for tir nunpan)'s dure of certain onts awdated with irstelinite h dela)ed future f mil fuct generaung j

facihtics Ihc businew of the Onnpany is subpt to sea onal ikK1tutitww with Nvk i

periods ocatring during the utnwer numths for electric and during the winter nv>nths for gas. Accordingly, carnings i

infornutkx1 for any intcrim period slunild l

not be onwidered as a has for ntinuting i

the remits of ogwrations for a full rar.

3 i

Y I

f 5

S i

?

4 i

i I

t 1

5 1

+

35

~._ - _ _ _-

.. ~.... --. ~

i J

I 1987 19 &i Selected I'Ituncial Data (0illars in Alilliins)

Tbtal l'tibty Plant 5 507.6

$ iv> 3 Total Awts(1)

$ 424.6 5 460.5 Capitalliathm:

long. Term Debt (EwhAling Current \\laturitics)

$ 208A 5 133.4 Preferred Nmi with Nnking l'und 11.5

' 3.3 Prtferrn! Nock without Nnking iund 20.1 20.I Conunon l~quity (I) 50.7 1oi 6 lbtal 5 290.7 s 2'2.-i j

intal Operating kwnun (Euluding Intertk urtnxntal)

$ 416.0 5 428 M l

Operating irxunw (lam)(1)( 2)

$ (30.9) s 52.4 Inconw (Im ) fn>m Omtinuing Operations ( I ) ( 2)

$ (49.0) s 4to p

Net inconw (Inw)( 1)( 2)

$ (49.0) s 42n Empknees - Year I nd (3) 1,411 1,42i 3

i l'.lectric Operations Opt rating hesenun (l'xclud ng Interdepartnwntal)

(Ikdlars in %hilions) i RNdential-

$ 116.9

$ I1M I F

j Conurwrcial 134.2 131 9 1

Induurial 20.1 22.9 Canernnwn and Munkipal 43 9

13. t

}

Other 12.9 9H Tbtal

$ 32M.0

$ U6 I j

Nilo ( Excluding intertk urtnwnsal) ( \\bilions t4 KV 11).

l Residential 1,Mto 1.904 a

Qimnwrdal 1,9M3 1.990 l

l Induurial 4li 4iM i

Canvrnnwnt and \\lunicipal MI6 80e Other 309 198 1

T,,,21 5.362 5Ai4 I

Custonwrs - h at i nd (1h RNnds).

Knidential_

174.2 l'60 i

( nnunctdal I79 IM 2 I0 IO Ir.Juvrial_

1.6 16 l

(anernnwnt and Munkipal 7,tal l'}' 7 I*'N

]

1 Rnidentiel Cuvonwr Data Autage Annual t v- ( Kilowatt.t h ors) 10.515 to 'iH i

Ascrage Anniut Restnue [wr Kihnratt lh>ur 6.358 6 2tk NOP51 Plcm Input (Mdhons of KWil).

Net Gerwration 2,913 2.26' i

Ibrcluwd Power arw! Interslunge in 2.M3 4 3iH i

y 1

Total 4,74'

s. oo J

j Peak Denund (MW)

I'I32 I IHi Getxrating Capabiht) ( MW) 1,077 1.0" l

( I ) 198' refletts the unic ut! < 4 l'19 mdNn ahrt tas, it preuoud) deterred Grand (.ulf I u lated up.ts j

(2 ) 19% itsludn 815 9 nulhon ut derttred tirarxl f.ulf I rtiated o e.ts attrt tas. a;3 u abic to 19M 4

l

( 3 ) MW t A Wnpan) W ski its trafWE t jXTart:Wh ten jufW 40. 1974%

i

.I 1

.s

{d i

i

.t i

i

{

i 1985 1986 1963 19N2 1981 1980 1979 19?8 19?'

y I

$ 476 6

$ 663 9

$ 4%0 4 GH0H s i366

$i2 4 0 S i l2.0

$39 4.5

$3MO.3 i

5 3469

$359.N

$3 4% 2 53 4H 0

$3 45.3

$331.0

$30% M -

$2928

$2M9 8 l

5 111.4 5114 4

$ 114.5

$ 120.9 5126.5 5126.5

$ 126.5 5126 6

$ 111,7

[

13 3 13 3 14 6 146 14 6 146 4

20.I 20.I 20.I 20.I 20.I 20 I 20 1 20.I 20.I 67.4 69 %

69 4 6* 2 69.*

72 %

"M ?

"M M 7' 6

[

$ 245 2

$ 21'. 4 52 tM 6

$ 222.-4 52409

$244'

$22% 3 5225 5

$ 209.4 S 420 6 5448.1

$4234

$ 6 %* *

$ 6.4M 9 53 4M.5 5329 6

$260.1 1238 4

$ (13 0) 5 23.3 5 130

$136

$ 16.1 5 14.1 5 17.3

$ 17.M

$ 1*.2

$ (INN)

$ 18 4

$ 54 5 7.7 8 9.1

$ 60

$ 9.3

$ 10.1

$ 101 8 (IMM)

$ 18 4 5 H.e

$ 9.0

$ 10 %

6.7

$ 10 0

$ 10 6

$ 10.5 l

I,492 1,912 1,522 2,7N6 2E"M 2313 2,94%

2.H9%

2,Mi t t

i

$ 10'.9 5109 2 5 9".M l lo?. I 5106 M

$ 8 6.3 5 732 5 65 M 8 64.2 120.5 1230 1043 llPAl 109 0 N2H 7%6 66.4 6 6.M 25.1 3% 4 36.4 10 8 4 l.1 34M 316 2? O 26 2 42 5 84.6 il !

43 3 39 6 29.5 29.3 21.$

20.M 19 0 99 46 8 4H O 3H 2 37 6 10 0 2l

$ 315 0 5422.1 5 2M'. 4

$ 4 0.1 5340.5 5269 6

$244 4 S i tA L"

$1?N 1 6

[

I 1.833 1,'22 1.643 1,*00 1,*06 1.6H5 1,Mi$

1,61M 1,5M7 l

1.939 1.H %

1.654 1.631 1.622 1.571 Iff 1,537 1,492 696 6'O

'28 756 H23 881 v." 3 M75 843 HO9 7N6 762

"%6

• 23 673 627 624 602 444 118 91 6KM M91 9tP)

I,226

%9 488 5.410

% I51 4.N"M 9 54l 5."6%

%." 19 i M28

%.214 5.012 178 0

!?9.9 1*'81 l '"

• l'62 l*4 M l

• 4.4 l*24 I?O M j

IM 4 18 4 I M. 3 1H 1 l'.9 l' M 17 M l

I ?.6 t.0 1.1 1.2 1.0 1.1 1.1 12 1.3 1.2 16 16 16 16 16 16 15 16 1.5 199 0 201 0 199.2 19M 4 l'x> M 194 3 194 M 1940 195.1 r

!O,2b 8 9b e 9.2 IN 9.hAl 9,I $ $

I.I,b 9,II 49

%I,437 9,3 ]*

ssw 6 3.<

Sw 6.w 63 im i.

.0.

4 0.<

i 2.*03 2.N20 2.1 %

3.650 4,198 4,186

-ID)3 3 6(>6 3.%H?

l'

4. !OH 2645 4.016

2. lH 5 1.912 IM4 2.049 1.H9' l.*6%

l

% Nil

%. 46%

5.171

% H4%

6.110 60'O 6.142

%.561

% 4%2 3,33%

1,092 1,1(We 1,03%

ljWi l jPJ i 9MI 96*

965 1.0'7 1.O" I 2 *O 1.25*

1.2 %'

l.2 %'

I,2%'

l.25' l.2 %'

3'

/

r C., y.M*2h 4

S,.

s, g' $/h)

'.s., gem 3m'lYN

'c M

.u-s 198?

19 %

G.n Operations Operaung Restnues (l'%tluding Intt rdtpar tnwntal)

(IMlars in \\tillains)-

Residential _

I

'M M 85'~

t umniert ial I04 39 I Indus"al

'2

~'

I42 NI

(,incrnruerit arxt \\lanicipal Other I3 I'

3 gg,l

$ N?.9 5 l'il

• Sales (l.%t hAhng IntcrtkpartmentJ1) (litlhons of ( ubi( l et t ).

Rcsalential 10.0 9%

L:ommertial 5?

$ f' irxtust rial _

23 I9 (W ncrnment ain.! \\tunicipal 35 8I Total I95 19 I

( ustotta rs - icar I ixt ('llw nisands)

Residential 3 5I I I53 '

( nnun crt ial I'I 2 IO 5 liktusliial 0.3 04 0%

0%

(W nrrnnx nt arxl \\lunicipal 3,,t al D2I IM I

+

8 nnual l sc ( lla suun(!s e if ( uhls I ct t 1 I' $ -

I'I IN

.htfagc L

.bcrage Annual Ro cfiue lx r th naviki ( ubic I cet I4M S i ~~

Ltural (.as l'urt hawd (llillions of ( ubic ! cct )

Ior Rcule I93 I95 Ior iuct in ( nnqurn's Ilet trit ( corrating Nations 31.5 269 lotal 50.M iii_

\\tasimum J e llour Rcule Ik nund ( \\ bili.>ns of (.uhic I cet i I~9 39M w

r 8

1985 1984 1983 1982 1981 1980-1979 1978 19-'

l 5 932 56'0 5 68.4 5 48.?

5 4 4.M 5 37.2 5 37.1 5 32.4 5 277 18 6 21.6 24.1 22,8 17.5 13.2 133 l16 99 90 12.2 13.9 16.5 15 4 14.?

22.3 13.M 12 5 23.3 23.4 2'.2 23 %

18.N 12.1 12.7 11.1 96 13 22 13 1.2 1.9 1.?

0.'

03 06 5105 6 512h 6' 51.4h l 5120 ?

5 984 5 'M 9 5 8h 4 5 59.4 5h:3 9.5 11.3 10.9 10 6 '

11.3 11.6 12.7 13 3 121 36 40 12 4.f t6 4.7 53 56 "A

1.9 2.6 2.=

2.9 4.2 h3 96 7?

7.9 4?

eN 4'

l."

il 50 55 b

19 9 22 9 llA Al b li 2 E"

u i

1%5 199 5 160 M 162 4 163.3 163 9 1644 165.1 IM.3 IO N 11.1 11.3 11.6 11 6 11 6 11.?

11.?

1 1.*

0. 4 0i 01 04 03 05 0.9

0. 5 0.5 l

04

0. $

0%

U$

05 0%

04 06 0%

1w42 l' t.%

l'30 1749 l'i 9 l'69 17'.I I?' 9 l'H O,__

b G162 "0 89 6'63 65 4M 69.49 0.3M

46 m 92 8 01 f

5 5 %'

5 591 5 6 2H

$ $ 52 5 394 5 323 5 2.91 5 242 52'5 22.1 22.1 23 8 22."

29 6 28 3 34H 33 5 342 28 5 m3 23 7 46 6 4h" 141 3iH 14 2 16 6 50 6

$2 4 4' i 59 4

• 2 I

• 24 6M 6 4

49 H 2%8 139 238 22%

23%

232 26' l'1 193 Transfer Agent and Registrar Trustee 1rtsstec (lor l'rtierred Nock )

(lor Iirst Mortpge ikals)

( Rate Rcoarry Ntortpge ik als) i llank of Montreal Trust Company 1he (haw Mantuttan llank. NA Itink of Montreal Trmt Conpan3 Tuu u all Nrcer Corpotste Trust Tuu Wall Nrvet l

Nny Wrk, New York 10005 Adminivrame Dnision New Wrk. New Wrk 10005 I New Wtk I'lua. Iith lloor New Wrk. Nov %rk 10081 f

b 1

i l

b

$9 l

. ~ -

l i

DIRECTORS DR. IlENRY F. IIR\\ DIX lil' JO51:Pil J. KRI RS.J R JOllN 11. N\\tAllPAGIM Private Ph>Mcian Outrnun and Guirnun and k cretar)

JAMl5 %1. C\\lN Chicf Excoithr Otticer Dorvwan N1arine,Inc, Pre 4 dent of the Conpany J. J. Krchs & Nins, Inc.

CllARI.ES C lEAMER, SR.

Presi&nt EDWIN IL PliERGER Vice lhwident for louidaru INawer & light Ginpany Guirnun ark! Presiamt Fiscal AtTairs REY.JAA!ES C CiR1TR. AJ3

$ liddle South l'tilities, Inc.

Dillard l'nh ersity President GERAID D MclLNDONa JAcg M. gyA1T in>ula Onhrrsity Executhe Vice Prnident Retired Quirnun and IIROOKE II. Dt:NCAN g of tlw Company Chicf Exnuthr O!TKer i

President Ewcuthe Vice Proident Inuisiana limtr & light Company

+

The foster Conpany, Inc.

Inuisiana ihmrr & IJght Company l

41cmbers of Audit Committec

• Retirvd cirnthe 5/1178' l

OITICERS l

J AMf5 M. CAIN RICllARD L Mt RIOWSKI 11 E V. M At.~RIN' President Scnior Vice Prn. dent -

Vice Prnident -

IX)N AID lillN1TR Administration & Planning hmil Operations Executhr Vice Prniamt TilO\\1bJ WRIGitTt 111. W. HANDAlli R DRAKE Kill 11 Gnnip Vice Prnident Vice President -

(

Eweuthe Vice Prr*ident G. E DI Il RY, Ill Anounting & Treamry,

(

D. L ANwTIL Vice President -

and As* tant Treamrcr Senior Vice President -

Marketing ROllLRTJ AllAD10

(

l nergy Suppl) hmil R. J DL ~NN Controller JOllN J. CORDARO Vice Prnident -

JAMES C AIACK

$cnior Vice Prni&mt -

Administrative N nico Assistant Cuntroller External Affairs llEROJ IDWARib,Jh.

T. W. IlOA11tlGliTS

$. G Cl NNINGilAM,jR Vice President -

Awi tant Controller Senior Vice Prnident -

Dnision Manager just Pil CAPAROITA,JR6 Marketing & Ratn RICllARD C. GlTllRIE Awistant Controller NtAl Col M l. til TtSTI.11 Ykr Proident -

R N. GARRETT,JR.

Senior Vice Presi&mt -

Public Altairs Awistant Controller Fncrgv Delhery W J IANNI A,111 3 y,oggiygg37g j

M.11. M(trl ClllE Vice President -

Aw stant Treasurer Rnior Vice Prnadent -

System Engineering g

Acouanting & iinunce, Tilo\\tAS O IIND2 Awistant Secretary and 1reawrer Vice Prni&mt -

Regulatory OnunscL CARYJ Dt1)f_WiFR and Ncretary A "idd"I N " CIdfi illected effectne 10'12 M' JLiccted Ruetary effecthe U20 H?

3 Retired ef fnth e IO ' t, H' 4 Resigned clicctnr F 1< MM

'Roigned as Awistant Controller ctfedhe 10 'l:8'

• 1 In.ted cliccthe 10< l M' 1

40

e 1

l i

s This 1987 Annual Rgwart is prqurtxt for tlw informatkm of st<wilx>klers emplopt% and <xter internted perwww The Ownpany's 1987 annual Rqx>rt to the Securities and F.schange Q)mminion on form 10-K (including financial Matenrnt siwduks) h avaitalk i

to any wockhokler wit}w sut (harpe.

Nocibokkrs can obtain a opy by

%Titing t(k Imtstor Relatk>rw Iklurtnrnt New Oricam Public N nice Inc.

PO. }kix (dWM4 1 360 New Oricam,IA 0174 Tckpiminc- ( MI) 3t:3-hW6

f(G#T4((

jf j f ] 8..

U.s. PosTAGI' U g*;g] fi;iji)g PAID

?l;; ;;;;;;

Permit No.19 New Orleans, IA.

P.O. Ikis 603 to New Orleans, Inuisiana *0160 Addrew Correction Requested

-