ML20151X278
| ML20151X278 | |
| Person / Time | |
|---|---|
| Site: | Fermi  |
| Issue date: | 12/31/1987 |
| From: | Basel M, Towne R WOLVERINE POWER SUPPLY COOPERATIVE, INC. (FORMERLY |
| To: | |
| Shared Package | |
| ML20151X239 | List: |
| References | |
| NUDOCS 8805040100 | |
| Download: ML20151X278 (39) | |
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C O N i E N I $
iN i R O DU C i i O N i
f Member systems.
.1 olverine Power Supply Prescent & Generol Monager's Report.
2 Cooperative, Inc., with Finance & Administrative Services.
.4 headquarters in Boyne City, j
Michigon, is a non profit rurol electric m 11 Port ion A Timehne.
Power Producton,
.10 generation and transmission Transmisson. Eng:neenng & Operotons.
.12 Cooperative supplying wholesole Board of D4 rectors.
.14 electric energy to seven rural electric Fenoncio! H:ghbghts & Comporisons.
.16 distribution Cooperatives serving a Fmoncol Atatements.
.17 total Consumer-membership exceeding 130.000 ir) 35 Michigan E M P L O Y E i 5 counties. Wolverine owns and i
operates approximately 1,500 miles of Ned L. Anderson e Jemey Amold e Rchord C.
transmission line and more than 100 Arnod e Jimmy D Ashbough
- James C. Bedfuss
- Becky S Benz e Micheol D. Bigelow e Richard D substations.
B:getow e Shiriey J eme+t
- Arthur D. Binghom.
Wolverine also owns and/or Deon E. Bish( p
- Craig A Borr e Craig S Borton e operates 157 megawatts of coal fired Donald P Bowers
- Richord C Brodtey e Lomce R natural gas, diesel, and hydroelectric Brody e Richard F. Bnsse*te
- Deborah M Brode e generation. In addition, Wolverine is Rex A B'owneti e Lorry Buchonon
- David L Butler Ch Opproximately 15 percent owner,
- Wmom H Corson e Richord J Chondo e Rondo:1 i
R Cho^ey e Richard B Choppefl e Michoet P.
with The Detroit Edison Company, in Chose Ronald W. Comfort
- Elo+ne E Cooper e the 1,093 megawatt Fermi ll Nuclear l
WWom K Crowe
- Patnck M. Dorrigon e John J Power Plant near Monroe, Michigan.
DeGear e Frank M. Do! wick e Robert H. Droves. Jr.
However, Wolverine and Detroit
- Tereso L Elbs e Emest G Evans e Dennis P. Fottz e Ralph Fre burger
- Walter J. Gorco e John Edison reached on agreement colling Gmespie e James G. Groinger
- Robe t O. Gray e for the sale of Fermi 11 by Wolverine to Patnck M. Greenmon e Juhe A. Hoose e James B Detroit Edison in 1990. Wotverine also l
Hotcsco e Jimmie D Hansen e Kenne'h R. Horns maintains on approximate 15 e John Hort e Leo Hoppe
- Dovd M Howard e Gary megowoit ownership, with Consumers L Joaves
- Cham A. Johr son e Edwin J Kerser e Arche R. Klein e James A Kotrbo e Michoel G Power Company, in the 770 Kro rer e Terry C Ku:per e Po nmy S. LoBrecqs..
megawatt J. H. Campbell Unit lli cool-R> chord L Long
- Rooney R. Leoch e R: chard D fired generating fcCility located near Love e Leroy J Lowing
- C G Luce e Wmom R Lycn Grand Haven, Michigan.
- Borboro M Mo' thew e Robert J Mo'ts
- Mource L McBrde e Ryon K Meadows e James E Me'ed'th e Horold E MWer
- WMiom M Mmer
- Co't J Melbron e Richord C Mod'cw e Kimberty B Moi; tor e Mene i
R Moore
- Dono'd J. Nessen e James R. Nickel e Dennis L Ord wov e W. Ereen Penfold Wilham C Prce e Le ghton L Re be4
- Do's W. Rheo e Michoet l
K Robbns e Michoe!
G' nn C Roberge e e
j Robnson Gary D Rogers e Kenne'h L Roggow I
- Ronald P Rowe e John M Rorycki
- ke th T. Sarns
- Dovd W See'er
- Cro g ) Show e kenneth D Sug'er e Eugene E Snitgen e Dorrel R Somervine ANNUAL MEITING
- Rotert W. Stmwell e Bioine R St Pe+er e Jo'ry C oNenne Power Supply Sweet e Jo'ry R Taber e Michool W Terryn e Thomas Cooperchve's Sixth Annvol Meeting l
A Thecker e Jock R Thompson e Rex E Thompson of Members *ci be bed on Thu sday. April 21.1988 of 10 00 o m of the e ke th R Tissue
- Raymond G Towne e James N r
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Tucker e it codore E Underwood David K Grand Traverse Resort Vmoge. Grand Traverse VonPeeren e Donel VonS' mbrouck a Normon J Vilbge Mch gon e
Vogt e Jo res L Wo'sh. Jr e Bron L Womer a 1
RonrYd C. W est e Be'1 J We'smo e John L Wilson Chip L Wit'e
- Le gh W e Pe+er K Winter e WoocDury e WAs Zimmermon e Wdhom L Zudemo As o 1-9 99 r
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4 Mr Thomas Hanna. Manager kete of Memtes 32 509 g
N -. a N.e M m e.,4 000
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6Aes of Dstreuw Lre S.031 l'rcsp;a ! sic lis,cctric Gyperative, Inc.
2 tes? m so mm on OcoroSog Devenvo $2t 447.451 4831 M M 7
Amoun8s of Copeos Cross Re8# iced 4 Memtes $998.925 On e MI497M
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t$17) 133 MIS 3
Mr A urkley Travis Managee Neber of Memtes 25 SOS Ej CHieeftANo rven titcreic cOOPr e AM AS$0CMON tute of New Momte's $36 M*mt*$va e' Lr* 6 42
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M 0' O'*%" L#* 3 709 EjS Graen MI 4963?
IP '# $ ' '#S I22 0" P
Ocwow o.'<en. sii 657.t:a (6161276 9212 v
Mr PMm C Cole. Manager A,,,*
of Copeu Creow pesced to Mantes s84 820 71
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- a i-a~ees 9 N - er a M.-ee,,.....
1 NJrcer W New Memtes 47$
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MomteWe of tre 9 4 M-es of Ds*t% tion tre 1992 E
9987 km Soes 159 767.954 Ocorohng Devenus 592 426 053 M
Amoung of Coottol Cred+ Deveed to Mewes $408 222 44 M
N-. or Emoveen so 80
'N uc$ tern Mkhlgan Elect?ic Cooperathe d
P O Bon 248 Scotivme MI 49454
_E (616) TS? 4 724 Mr Jack W stickney Managet
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Nete of Memters 10 026 Nete of New Membe1221 MemtesVie of tre 7 7
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M>es of ostrtN%sm Lre 9 295 1947 6e ues 44 982 653 Oce ovg Go.enue 54 194 212 Amcunts of Cocwu Cross DeVoes to Memtes $60 000 I
N#te of impovees 23 5_
l OCE ANA E LECTRIC COOPE RATIVE P O Boa 232 j
Ma't MI 49420
__g 5616i 873 2155 M.,
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Mr Actiert F redent sen M anager a
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Nre-e ~ tas73n N-<. u N.. M-e, 24 q
M - esu o etre 7 M es of Dstrcue tre 1022
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Oce'o'.ng Dow 84 399 831 '
Amou g of Conv Ces4 DeVoes to Memtes 0 Z
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/c t E c T n it f L O & A Electric Cooperative cerve narive 490 0 a temee Acao ttoo A G.a-o R.et p C B 3, 373 Neaa,ao Mi 49337 Poet.au Mi ase 75
- 6'610$2 46$1
.$ 17 66477tS4 Mr Rotert Mance Mamager Mr Actert W Matnen, Ma*ager Nete of Me+tes 'S 9 9 s N ete W M ean 25626 man #
Nece o N. Memeci sst Net,onNo.Mmeisu v%
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vome-sv e o tre e e Um-sue on t4n. 7 e M.os a :>s cere 2 563 te M.s c Di.,c~ ion tr. 3 3 4 e
im.e u. i33 m an im.e 52. *sa Fi: m Oceovg Deven e 8to 825 78 7 Cwerovg Eeven e It 9 '96 set u
u W4 of Cocww C' eon coVoes to Memtes $243 709 N4 W Copio. C'eo4 Descos to Mmes $@ 02 e 14
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Melvin Bosel Raymond G Towne President General Manager c
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D ineteen Eighty Seven was o
- a substantici reduction in Fermi landmark year for Wolverine Il-related long-term debt.
Power Supply Cooperative, e o firm long term power supply Inc. We believe that many of the agreement with Detroit Edison with decisions that were made during the the option to continue operating all post year will ensure that the present generating facilities, to Cooperative continues to supply its continue purchasing wholesole member-syuems with a continued power from other utilities, and to high level of professional services and enter into further pooling l
on abundant supply of reliable ano arrangements.
i economical wholesale power for o payment of previously defaulted many years to come.
Fermi 11 related principal and The most significant achievement interest amounts to the Federal during the past year was the comple-Financing Bank.
tion and approval of the agreement
- monies for all quarterly principal allowing the Cooperative to sell its and interest payments until the ownership in the Fermi 11 Nuclear January 2,1990 safe dote.
Power Plant back to The Detroit Edison
- elimination cf risk and responsibili-Company. Approvals were obtained ties relating to continued for the January 2,1990 transaction participation in Fermi ll.
from the Rural Electrification
- a method by which Wolverine could l
Administration, the U. S. Department repoy its remaining Fermi ll debt of Justice, The Detroit Edison Com-through a combination of two I
pony, Wolverine and its member-proposed wholesale rote increases systems.
and increased kilowotthour sales.
This agreement, which culminated e strongly feel that this more than 22 months of negotiations agreement will result in the and drafting of documents, provides most viable long term j
o number of benefits to the alternative to the Cooperative's Fermi Cooperative. They include:
il problems. We connot express 2
4~y A
strongly enough the high degree of pecifically, we will further cooperation and diligence that was concentrate our efforts upon required by our employees, directors, increased engineering, lood c
member systems, and consulfonts to management, and economic successfully complete the Fermi !! so!e development assistance to our ogreement.
member systems. A continued owever, we do not mersly upgroding of the tronsmission system look upon this agreement as and additional emphasis on increos-one that relieves us of owner-Ing energy soles levels wlli olso be ship in Fermi 11. More importantly, we two of the top priorities in the coming look upon this historic agreement as year. Furthermore, we will continue to one that strengthens cur future power impeccobly molntoln, and operate i
supply direction, while providing a when economical, all of our power viable alternative to our Fermi 11 production facilities. These facilities, financlot and rate concerns.
olthough not always in operation, are Our disassoclotion from Fermi il will on integral part of our wholesale not be obilgation-free. As part of the power mix We also look far the Debt Restructuring Agreement which Advance and J. H. Campbell lli plants accompanies this transaction, the to continue os reliable and Cooperative will be require to seek economical sources of base-load two moderate wholesale rate generation, increases from the Michigan Public The Board of Directors has Service Commission. This rate Increase established a Codilloc Hoodquarters opplication has already been filed Feasibility Committee to explore the and, if granted in full, would increase various financing alternatives wholesale rates by approximately six ovalloble to the Cooperative for the mills per kilowatthour by 1990.
proposed future construction of a new However, our rates remained at office facility near Codillac. This very stable levels during the post Committee is presently gathering year. The cost of wholesale power to information and will be working the member-systems was reduced by closely with the entire boord on this 1.3 mills per kilowatthour whlie of the matter throughout the coming year, some time we Increased energy soles
-Inolly, we recognize the many to our member systems by S.9%.
-ochievements that were Continued sales increases wl!! assist in completed during the post five ensuring future financlol stability, years. But we also roolize that the This Fermi t; transaction brings the Cooperative must continue to be Cooperative to o transitional period innovative and adopt to the over in its young existence. With Fermi 11 changing environment in which rural behind us, we con now embark on electric cooperatives must operate.
many new programs and Ideos, while With our Fermi 11 concerns f;nolly continuing to improve upon already resolved, we are prepared for the established programs and services to challenges that lie cheod.
our member systems.
i r
N Melvin Basel Presidur >
O i
tuymnd.8 wnu Raymond G. Towne l
Executive Vice President & General Monager l
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WoHof J. Garcio f
MonoQOf becg formuWed 02. when comWed W
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[9 member-consumers. The Cooperative also 2
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worked with the MPSC during the post year on 3
3 cogeneration matters.
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Two closely related creas which c:50 E
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receNed signitcont ottention during the post year were insuronces and employee frmge beneht progroms A new general hobihty, property and Casualty, automobile and workers Compensoton pohCy hos been ploCed with the Chubb Group of losufonCe Componies. The Cooperative was one of the i
hrst electric vthhes to be unc'erwritten by that D
company and Chubb representotrves were 5
parhculorty impressed with the commitment to sototy provotent throughout system-wide operot ons.
E-The Boord of Directors opproved odophon n the Finance end AdministratNo Services og a new 401(k) savings pion opt on for att creo. the focus was on ne# ond improved employees. o!)owing for the piocement of servlCes and Concepts - oli of WhlCh wH3 pre-tox dollars in o tehrement sovings progrom.
result in improved effelencies for the Employee beottn 6nsurance premium levels otso Cooperchve and its membef-systems.
Increased siQNhContly this post year. Even However, no creo receNed more oftention though the CooperatNe's premium omounts than the Cooperohve's Fermi u related are determined on on experence-rated basis, hnoncing obngotions. The Fermi I sole orronge-these premiums have risen substonhouy ond p;
ment requires The Detroit Edison Company to monogement is considenno several hootth p
purchase the Cooperative's Fermi u ownership core optons.
i; on Janvory 2.1990 of a cost of opproximatetY Computenroton of occounhng and hnonce
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$550 million - leaving the Cooperotree witn a functons cont nues to lead tt e kst of improved rcnoining Fermi a debt of $200 million.
services in the deportment. General ledger.
With respect to the $200 million. the cosh d sbursements, employee payroll property Cooperchvo and the Dural Electrif cotion tones, onnual budgets, and several oddit onal AdrNnistrohon have entered lnto a Debt hnoncelo*co.ntra Wotad Oraos have been
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Restructunng Agreement. This Debt Restructur-streamuned through the use of the Ing Ag eement provides for the repoyment of Cooperchve's IBM System 36 and personal k
the $200 milton through a combinoton of a computers Further outomaton of occounhng
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proposed two step rate increase and increased funchons, such os continuing property records.
4 energy sotes to the Cooperotive member-inventones, consohdo'ed noon budgets. ond Y
systems A ruling on this onheipoted rate constructon ono rehrement work orders, will be 1
increase is presently pendog before the automoted in future years and should unow for 7
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Michigon Public Service Commission. The even g eater eff ciencies throughout the j
Cooperchve was odcsed by its independent department.
J occountants tnot occounhng treatment of the Eftorts will contnve throughout the coming
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$200 mituon omount would be consistent with year in working with the Rural Electr;fcoton Statement of Financiol Accounhng Stondords Administrahon - specibcony relohng to o new i
h
($FAS) No.15. "Accounhng by Debtors and insured and gvoronteed loon packogo totokng j
Cred, tors for Troubled Debt Restructurings" and neorty $27 milhon Loon mon es from this E
SFAS No 90. "Reguloted Enterprises Account-porticulor loon ore critcol in the Cooperchve's ing for Abondonments and Dischowances of ongoing transmission oeportment construchon Piont Costs.
projects in odd. hon. the Finance and Also. os a resu t of the Fermi u ownership Aoministrohve Servces deportment, along with r
sow, a sigNfcont omount of t me and the Cooperotwo's other derortments will be resources were devoted toworcs working with compiehng tne Financo! Forecast and the the MPSC on ro'e-renoted motters Po.er Reqwrements Study in-house wtsch New 6nterruptible duol fuel hechng and should reouce the cost of o# side servces in g
woter hechng rotes were fed and opproved these oreos Also, o new economk: development rote is F
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N S eL Richard L Long granting franchises to the Cooperative and to General Counsel our member Tri-County Ek,ctric Cooperat ve, Inc. even though suits were filed ogainst the p"pw township. The Cooperative hos obtained the pj '
necessary franchise, as hos Tri-County, without the cases proceeding to trial.
The Cooperative hos undertaken a review of
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j oil substation properties. Where there t
appears to have been encroachments by on i
od}oining property owner or by a property owner using the property for a rirht-of-way without authority, oppropriate oction has been s 3 1
token.
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The Cooperative has entered into on
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Interconnection Agreement with the City of Lowell which will provide another interchange
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of power, os Lowell is o rnember of the k
Municipal and Cooperative Pool.
Counsel and stoff have completed a thorough review of all insuronce policles and have changed the Cooperative's general liability corrier to the Chubb insurance Company.
As hos been reported elsewhere, the Cooperative had a mo}or fire at the Tower
" "hls !s my first Annual Report as General Generating Plant. As a result, counsel hos been a
Counsel of Wolverine Power Supply involvd in handling the insurance claims and Cooperative, Inc., since joining in deo:ing with alleged code violations which Wolverine in July,1987.
were mode against the Cooperative by the Certainty the b!ggest occomplishment of the State Fire Marshall's office.
post year hos been the completion and signing Monogement and counsel negotioted one-of oil of the ogreements relating to the so!e of year extensions on the CSX Railrood Contract the Cooperative's Intere:f in the Fermi 11 Nuclear for cool transportation and the Shell Mining Powe, Plant. The sole will take pioce in January Company Cool Contract, both of which of 1990. Much of my time, os well os the 'ime granted price concessions.
of many other people, was spent in the post The Cooperative is in the process of having few months negotiating these documents and the legal descriptions of all r3ol estate porcels in completing the transaction. The Cooperctive ploced on a computer system. Also, in connec-con now look forward to more stable power hon with the Fermi il settlement, all real es' ate costs and a secure financial situot;sn.
tittes are being searched so that oil such situotion.
records are up to date.
In the post few months, in odd: tion to the Major ob}ectives for the next year include Fermi ll work, time and resources have been attempts to purchase more joint ownership in directed to land ocquisition, obtolning the Consumers Power Company transmission a
franchises, resoMng substotion property system. The Cooperative will olso be encroochments, drafting contracts, reviewing undertaking a complete review of oll ond procuring insurance policies, negotiating corporote 'x>licies, including the implemento-omendments to the CSX Rail Transportation tion of two new proposed po!icles relating to Controet and the Shell Mjning Company cool providing incentives for new or increased contract, and various other corporate duties.
electric loods and reloting to purchasing Thanks to the efforts of Richard Love, Lee practices. The Cooperative is again attempting Reibel, and Brion Warner, the Cooperative was to complete o contract with Michigon Gas able to obtain oil of the oosements for the Utilities Company and the gas transmission line Carson City prison transmission line rights-of way company and producer so os to be able to without having to file a condemnotion suit.
provide lower cost gas to the Burnips A!so, the Cooperative hos been able to resolve Generating Stoton and to o!!ow tne plant to o dispute with a township over the issue of operate, if it proves economicol.
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.nn s i ev h4 It 's. (! et;.di Ref (W 1 The DetroM No thern Cost estimates increased Norlhem Wotverine and Fermi H costs Ei/ison Com-Michloon Elec-for Fermi 11 rcoulations Michigon Elec-Detroit Edison escolate to i t i pony reveals tric reach $1 push construc-tric reoch agree- $3.4 billion. plon for o six-Cooperative
- billion, tion costs to $2 Cooperative ment copping year $226 ond Wolverine billion.
and Wolverine .the I minion Fermi 11 Electric Electric Cooperative's l Nucleor Power Cooperative Cooperative investment Plant. Jointty pur-merge to form costs in Fermi chose a 20 Wolverine H. percent Power Supply ownership in Cooperative, l Fermi H for op-Inc. proxirnotey i S220 million. l L 1 l l l 1 i l I 6 t l e 8 l
,,g,,s m sD u Deco e 's 5 0 THE WALL STREE Detroit Edi WO}V6pgge FC m\\C 'ro w w* son Co. q erine 6 hh ktS .I Power'sFermi' Sta 2 o f g hh}L {d ( 6 By e W At.t 51 ster? Jocrw4t Kr ff DETROIT-Detroit Edison itcporter . a agreed to buy Wolverine Power " * '#,p n ""' g, e, it ggkh hl t operative Ine nuclear powe/s 13.6% stake in the Ferm the sale is completed in 1990 D 1 son will own the whole plant,
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INSWg g sissuE o t Ed)- , in Boyne City, will purc h, c'W # #,,, D g - Detroit Edison Co. 3L i electricity from Detroit Eoison, an e gL s. g says it has obtained final appd .'i"f troit Etison Mil assume about M pf; to purchase Wolverine Power Sup- % s * < *** **" " " '%e j of Wolverine's Fermi 2 relat ply Coope e/o share of million troit Edison which "*",,,,.e e.neres the Fermi 11 nuclear 5 9 U n N e' $ g, g. M% when the sale is completed thwill .'$. 7y" ',,,,,,,. Wolverine's, energy, supplies about 607. of e-mon $ @"*$L finalizes pact s. e coop- . transacuon rtquires reg-e $3 c'*btsn wolver *a"$. 9 o
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, $ o'A*y b,,t3y w3o, E $ fe mi 2 sepad wntten st* mwt. "5 'The P ant ncir yo,. er/.y ---~~ sectnc rates l B-85. - c 9-85 g.*' ~ 40-87 44 37. 42-87 won 5 fine and The U. S. Agreement on-A Term Sheet Wolvorine's The U. S. Wolverine, Detroit Edison Nuclear nounced is sigried by seven Department of Detroit Edison sign on ogree-Regulatory ollowing Wolverine, member-Justa op-ond the REA m:nt rsquiring Ccmmission Wolverine to Detroit Edison sptoms op-proves the execute oil i son to put ollows Edison sell its entire and the REA prove the sole sole documents Edi l chose portions to operate Fer-shore in Fermi outlining the of the arrangemet t. outhorizing the l of tho ml 11 of up to II to Detroit Intent of the Cooperative's sole of the
- Cooperative's 20 percert of Edison on parties in con-Fermi 11 Cooperative's Fumi ll owner-copocity.
January 2, nection with ownership. ownersh p in
- ship in Costs reoch 1990 of a cost the sole of the Fermi ll.
!omounts equal $4 2 billion. of $550 million. Cooperative's l fo Wolvvin@'s The ogree-ownership in
- quarterly Fermi ment ofso calls Fermi 11.
' Il debt for Edison to
- poyments to make the i the Rural Elec-Cooperative's I rincotion quarterly prin-t l Administration, cipal and in-l terest I
payments until I the soie date. In addition the ogreement orlows the Cooperative to purchase in-( Creosing L omounts of i energy ond copocity from Edrson through 2025. 9
/ P O W E R.- P' R O.D U 'C T L0 N James R. Nckel other utilities for the majority of its wholesoie Manager power needs. Nearly hvo thirds of the m Cooperative's requirements for the year were purchased - ond tnese purchases were comple'ed of the lowest overoll overage Cost p3 in several years. Purchased power costs b d overaged 26.0 mills per kilowotthour in 1987 - {. o 1.83 mill reduction from the previous year's level. f. ~ Additionally, o number of other areas were "'i oddressed during the post year. Discussions - Q q.,, continued with the Michigan Public Pcuer i-Agency, regarding power pcoling and use of the Energy Control Center for Joint dispatching / / power pooling purposes. System wice efforts were also continued to fully utilize all of the computer and communicotbns functions of the J Energy Control facility. Preparation for anofyses was also begun of the CooperotNe's largest fully-owned generating focility - the Advance Steam Plant " "he sole ci ttte Coo 9erative's ownership located near Boyne City. These studies are h Fermi 11 will urWoubtedly have o presently scheduled to begin in 1988 and significord impact upon oil phases of relate to the possible future retrofithng/ the Cooperative. However, no single creo replacement of Units i and 2 of Advance. stCnds to benefit s!gninconfly rice in future Annual boiler inspections were otso scheduled years than the production deportment - ond in at Advance, while o turbine and generator particular, the Cooperative's future supply of overhout was scheduled of the Burnips plant. wholeso;e powcr. Ucensing efforts, recently mandated by the As part of the Fermi 11 sole arrangement, o Federal Energy Regulatory Commission, also long term power supply ogreement was neared completion of the Cooperottve's Tower negotioted between the Cooperative and The and Kleber Hydroelectric Facilities. This project Detroit Edison Company.1his ogreement required coordination with several state and provioes o numoet of ber,efits to the federal agencies, as core was exercised in Cooperative. including: ensuring that the crea's noturol rescurces wore e assurances for on adequate supply of firm not disturbed. The Cooperative has a proud and interruptible energy and copoci.i history of working in harmony with these through 2025. ogencies and in mainto!ning the environment
- the ability to purchase from other utilities if in which it serves.
economically oppropriate. The Cooperative also entered into o new
- continued membership in the Municipal and long-term cool soles agreement with one of the Cooperative Pooi, which is operated through country's leoding suppliers. This ogreement, the Cooperative's Energy Control Center in which provides considerable savings over the Codilloc, and the obility to enter into further next several years, provides for the annual pooling orrongements with other utilities.
purchase of nearly 100.000 tons of low sulfur
- the obi!ity to continue operating all existing West Virginia and Kentucky cool.
generating facilities and to replace any The post year otso sow the Cooperative present facilite with those of like size, type, experience o substantial loss of one of its and fuel. generating facilities. An October 8 fire and
- a more moderate cost for future bu!k power explosion at the Tower Diesel Plant resulted in os opposed to continued porticipation in opproximately $500,000 In domoges. Repair Fermi 11.
efforts continued of the focility through the The power suppry ogreement provides the winter, The fire not only caused significant Cooperottve with both flexibi!ity and the struchiral domoge but resutted in o loss of ossurance for on odequate supply of relioble electrical capacity of the diesel plant and of power fur many years to come. the Tower and Kleber hydroelectrle focilities for During 1987, the Cooperative ogoln found it several weeks. benefk:iol b rety upon purchased Dower from 10
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T R A N S M i S S I O N, E N G 1 N E~ E R I N G O P E R A T rO N S Richard B Choppell hop will odd to the voltage levels and rellobility of the extreme southern portions of the transmis-slon system. It is anticipated that this facility will be energized in 1989, Department personnel continue to be involved in a number of regular molntenance ond operations projects, including: rneter reading and substotion checks, oil circuit E recloser testing and repair, transmission pole numbering, lesting and changeout, oil circuit breaker testing and molntenance, and a host -[ of other tasks. In porticular, the Cooperative's oli circuit breaker testing progrom hos progressed very well and has already provided numerous benefits. Environmental concems, primarily those related to poly-chlorinated biphenyls, received continued attention from the Cooperative's environmental personnel. During the post year, nearly 11,000 gollons of PCB contaminated oil ~ 9 "* Construction, operations and materlois from the system. In addition, molntenance fosks topped the list retrofilling of PCB contaminated electrical of priorities for department personnel devices, such as regulators, transformers and during the post year - os efforts were directed circuit breakers, will be completed entirely by towards on even further improvement !n on Cooperative personnel during the next three already high degree of system reliability and years lower line losses throughout the Cooperative's Ri ht-of-way purchases, clearing and 1,500 mile tronsmission network, molntenance a:so received a great deal of In on effort to occommodate lood ottention this post year, Extensive efforts in the increases, improve voltoge levels, reduce line right-of way ocquisition crea were put forth in losses and increose system rellobility, a number assisting Tri-County Electric Cooperative and its of new transm.ssion facilities were constructed service to the Montcalm Correctional Focility or upgraded du'ing the post year. New near Corson City, substotions were designed, constructed, and Service to the prison focllities wih require the energized of Fife Lake, Howard City and constructk>n of a distribution substotion and Advance. A new oil circuit brooker station was appret@ W Mes of 69 W troWen o'so constructed and ploced in service at g, Copemish. Additionalty, several new sections of Troubleshooting efforts relating to the Beaver 69 and 138 kV transmission line, designed b,' Island i cable were also necessary this post the Cooperative's in-house engineering statt, year os problems again crose with the older of was pbced in service. the two neony 30 mile-long underwater Efforts were also initiated this post year in transmission cables serving the Island. The site the reloy testing and molntenonce oreos. In of the faults was located, but odverse weather fact, o comprehensive testingh 9 placement conditions hompered renoirs. program was begun and is progrosdng very Department training efforts continued to well. The installotion and Improved expand and diversify this post year. In add; tion molntenonce procedures on these relays will to the regular monthly safety meetings further improve system rellobility, while conducted by the Cooperotive, o number of providing even more extensive dato on system speclot training workshops were ottended/ ogr m co' "ved to grow oM now As s been purchased and planning. a g deslQn, and engineering has started for the 50 cW po@om Nm more M M MVA Interconnection of Brodley with Consumers Power Company. This focility, the ninth such oph Me wes@g M W direct tronsmission tie with Consumers Power. 12
1 , @@WlQ9.@.Q ;p%%%%5%W yi:M %d 1%(M y;and ourn Seniorf bneman-Leigh _ Ins,.pection;a;t one o,the,CooperatgU Jy rey j dmeitp n,QM,iW J TTheaker c6m' let egular 1,9 j?/NA.6:h' ' than-1 e ectrical s' bstations. ~ 'Y. QQi@hyg u U f fs-. [ [ N syfl / v 2 w : # 'A DC MiaMN h s. r lh ? ' ',u :- hh 7,9 :;
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B O'A R D, O-F D 1 R E &T OR S Melvin Bosel Cort Fortelko President. Prescue Isle Senior Vice President. O & A ' ' ' ' c ;,' :; :. f ' ' ) . *' - l *
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) ty {' Howord Corson Donoid Hormen Secretary. Top O' Mchigan Treasurer. Western Mchigan .l.*f'l $,. ' ;-;,5.)"5 _} '$) y e: t' y. b;$' .}q. Q
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. _p\\. ~'.f ~., %. ' 'J ,. l[ l .. - * \\ Fred Fortz, Jr. Thoddeus Gowel Top O' Mchigan Presque Isle '7. -.. ; ' :{ g. 4,.s < .c- .A 4 ' ' j; F Ne, j$* ~M r, q. g. _ _ ~ 4- .g 9 Wlnord Hoenke Robert Hosenbonk Trif.,ounN Western Mchgon , ~. - -, 3 (wg i o i +4 r$ q 4 .< ~ie .a 14
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'F I N A N Cl A L H I G H L i G H T S C OM P A R I S O NS increase % increase 1987 1984 (Decrease) (Decreose) Assets S 873.308.955 s 920.890.000 s (47.581.045) (5.17) Operating Revenues 47,774.568 47.982,767 (208.199) (.43) Operating Expenses 46.701,802 46.460,814 240.988 .52 Non Operating Morg!ns 570.841 627.834 (56.993) (9.08) Net Morgins 1.643.607 2.149.787 (506.180) (23.55) System Peck Demand (mW) 223 215 8 3.72 Energy Sales (mWh) 1.125.202 1.097,983 27.219 2.48 To Member Systems 1,104.237 1.062.820 41.417 3.90 To Others 20.965 35.163 (14.198) (40.38) Members Revenue per kWh sold (mills /kWh) 42.34 43.64 (1.30) Purchased Power Costs (mills /kWh) 26.00 27.83 (1.83) Total Cost of Electrk: Service per kWh Sold 41.51 42.31 (.80) Advance Plant Fuel Cost (mills /kWh) 23 46 24.36 (.90) Purchased Cool (s/ ton) 51.69 51.02 .67 Full Time Employees 116 117 TREASURER'S REPORT 42.34 mills per kilowatthour during the The Financlot Report includes the past year. However, wholesale power Bolonce Sheets and Statements of costs are expected to increase in Revenue of the Cooperative as 1988. A two-step wholesale rate audited by Coopers 8c Lybrand. These increase, required as part of the statements reflect that for calendor Fermi 11 sole agreement, has been year 1987 the Cooperative's revenues filed with the Michigan Public Service were $47,774,568 - a reduction of Commission. $208,199 or.43% from the previous Finally, the Fermi 11 sole agreement year. This reduction is primarily that the Cooperative has entered into attributoble to reduced wholesale with The Detroit Edison Company and power costs from the Cooperative to the Rural Electrification Administration its member systems. Furthermore, provided a method for the operoflons produced a margin of Cooperative to meet its financing S i,072,766, while non-operating obligations to the Rural Electrification margins totaled S570,841. Administration / Federal Financing The Cooporative experienced Bank. The signing of this agreement megawatthour sales to its member-nos allowed the Cooperative to sell a systems of 1,104,237, on increase of portion of its ownership in Fermi Il 41,417 mWh or 3.9% during the past amounting to $117,300,730 in 1987. year. Each of the Cooperative's With capitalized interest of member-systems contributed to this $70,706,843, the Cooperative realized growth in energy sales. Member o reduction of its assets in the amount wholesole power costs averaged of $47,581,045 In 1987. Donald Harmon 16 Treasurer
w J e r m I MICHIGAN 46, NEWAYGO WOLVERINE POWER SUPPLY COOPERATIVE, INC.- BOYNE CITY, MICHIGAN Report.on Examination of Financial Statements 'for the years ended December 31,1987 and 1986 bONTENTS A Pages -Report of Independent Accountants 18-19 Financial Statements: Balance Sheets 20-21 Statements of Revenue 22-23 ' Statements of Changes in Financial. Position. 24-25 - Statements of Patronage Capital and Other Equities .26 Notes to Financial Statements 27-34 9 17
+ s ~"~~ Cooaers- &Lyqand . To the Board of Directors and Merr.bers of Wolverine Power Supply. Cooperative, Inc.: We have examined the balance sheets of Wolverine Power Supply Cooperative, Inc. as of December 31,1987 and 1986,.and the related statements of revenue, changes in financial position and patronage capital and other equities for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circum-stances. As more fully described in Note D to the financial statements, construction delays and cost overruns at the Ferml 11 Nuclear Power Plant (Fermi II), in which the Cooperative has an undivided ownership Interest, has adversely offected the - Cooperative's financial condition. On December 14,1987, the Cooperative entered into an agreement with The Detroit Edison Company (Detroit Edison) to sell its remain-ing ownership interest in Fermi ll to Detroit Edison on or about January 2,1990. Under the agreement, the selling price is equal to the Cooperative's Fermi ll indebtedness less $200 million. Detroit Edison is obligated to assume responsibility for.the. Cooperative's Fermi 11 debt with the Federal Financing Bank (FFB), less S200 million - for which the Cooperative will remoln liable. With respect to the remaining S200 million indebtedness not being assumed by Detroit Edison, the Cooperative and the Rural Electrification Administration (guarantor of the FFB debt) have entered in-to a Debt Restructuring Agreement which will requ're the Cooperative to make an-nual debt service payments of $8,148,000, plus additional amounts based on load growth. On January 13,1988, the Cooperative filed its application with the Michigan Public Service Commission (the "Commission") requesting authority to implement rate increases necessary to meet Its future restructured debt obilgations and any applicable prepayment penalties. The ability of the Cooperative to continue operating at the leve! of net margins required to meet its fuiore obilgations is depen-dent on many factors, the most significant of which are: the ultimate sole of the Cooperative's remolning ownership interest in Fermill to Detroit Edison, the assump-tion by Detroit Edison of the Cooperative's Fermi ll FFB indebtedness less $200 million, and the approval by the Commission of rate increast,s sufficient for the Cooperative to repay its future restructured debt obligations. The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern and, accordingly, do not purport to give effect to adjustments, 18-
w if any, that may be appropriate should the Cooperative be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities in other.than the normal course of business and at amounts different from those in the accompanying financial statements; in our opinion, subject to the effects on the financial statements of such adjustments, if any, as might have been required had the outcome of the uncertainties referred to in the preceding paragraphs been known, the financloi statements referred to above present fairly the financial position of Wolverine Power Supply Cooperative, Inc. as of Decemb'er 31,1987 and 1986, and the results of its operations and changes in its financloi position for the years then ended, in conformity with generally ac- 'cepted accounting principles applied on a consistent basis. A f hw South Bend, Indiana February 19,1988 19
l, ~ MICHIGAN 46, NEWAYGO WOLVERINE POWER SUPPLY COOPERATIVE, INC. . BALANCE SHEETS, as of December 31,1987 'ond 1986 1987 1986 ASSETS ' Electric plant, at cost (Notes A, B, G and I): S 106,541,699 in service S 111,629,042 . Construction work in progress 3,883,197 7.075,091 115,512,239 ~ i 13,616,790 Less, Accumulated depreciation and amortization 40,962,141 37,840,948 Net electric plant 74,550,098 -75,775,842 investment in Fermi 11 (construction work in progress), at net realizable value (Notes A, D and G) 774,471,457 779,323,718 Other assets and investments: Investments in associated - organizations (Note C)- 4,303,543 4,486,238 Note receivable 244,100 254,030 Total other assets and investmenis 4.547,643 4,740,318 Current assets: ' Cash and cash investm.ents General funds 5,811,254 7,188,790 Cash Construction funds 93.845 894,155 Accounts receivable 5,507,829 5,374,427 Receivoole from Detroit Ed.ison (Note D) -~ 40,371,302 Materials and supplies (Note A) 7,539,176 6,503,844 Other current and accrued assets 760,966 695.399 . Total current assets 19,713.070 61,027,917 Deferred charges 26.687 22,205 Total assets S 873,308,955 S 920,890,000 The accompanying notes are o part of the financial statements. 20 i
... v 4 .4' Y 19872 1986 EQUITIES AND UABluTIES Eo,uitles: i,400 i,400 Memberships Patronage capitol 13,884,250 12,811,484 Other equities 2,212.445 1,641,604 Total equities 16,098,095 14,454,488 Long-term debt (Notes D and G): Fermi ll 764,822,943 771,248,722' Other 74,500,972 76,732,297 Total long-term debt 839,323,915 847,981,019 Commitments and contingencies (Notes D and I) f Current llobilities: Current rnaturities of long term debt (Note G): Fermi ll 7,405,000 7,284,000 Other 2,212,000 2,433,000 ~ Short term borrowings - REA (Note D) 39,769.673 Accounts payable purchased power 3,776,357 4,061,040 Accounts payable other 1.048,351 666,905 Refunds payable to members (Note F) .893,293 1,341,668 .Toxes and wages payable 1,812,854 2,028,467 . Accrued vocation and sick leave 569,465 562.480 Accrued interest 169,625 607.260 Total current liabilities 17.886,945 58.454,493 ' Total equit;es and liabilities S 873.308,955 $ 920,890,000 l 21 m
t STATEMENTS OF REVENUE for the years ended December 31,1987 and 1986 1987 Percent of' i l1 Operating. l Amount Revenues Operating revenues S 47.774,568 100.0 Operating expenses: Purchased power 23,343,065 48.9 - Power generoflon: Operation 8,412,810 17.6 Maintenance 895.924 1.9 Transmission expense: Operation 973,764 2.0 - Molntenance 772,668 1.6 Distribution expense: Operoflon 249,843 .5 Molntenance 265,468 .6 Administrative and general: Operation 2.121,965 4.4 McIntencnce ' 138,347 .3 Depreciation and amortization (Note B) 3,287,107 6.9 4 Taxes 2,026,602 '4.2 .Other Total operating expenses 42.487,563 88.9 Operating margins before fixed charges 5,287,005 11.1 Fixed charges: Interest on debt (Note A) 4,214.239 8.8 -Operating margins atter fixed cho.ges 1,072,766 2.3 Capital credits 14,525 Net operating margins 1.087,291 2.3 Non-operating margins: Interest income 556,316 1.2 Net margins S 1.643,607 3.5 The accompanying notes are a part of the financial statements. 22 4 ...J
1986 Percent of Operating increase Amount Revenues (Decrease) S 47,982,767 100.0 S (208,199) 23,7i3.390 49.4 (370,325) 8,768,548 18.3 (355,738) 615,675 1.3 280,249 862,996 1.8 110,768 545,091 1.2 227,577 159,053 .3 90,790 95,592 .2 169,876 2,136,012 4.5 (14,047) 67,711 .1 70,636 s 2.995,131 6.2 291,976 2,058,700 4.3 (32,098) 3,446 (3,446) 42,021,345 87.6 466,218 5.961.422 12.4 (674,417) 4,439,469 9.2 (225,230) 1,521,953 3.2 (449,487) 4.522 10,003 1,526,475 3.2 (439,18') 623.312 1.3 (66,996) 2,149,787 4.5 (506,180) 23
F STATEMENTS OF CHANGES IN FINANCIAL POSITION for the years ended December 31,1987 and 1986 1987 1986 Funds were provided by: Net margins S 1,643,607 S '2,149,787 items not affecting funds: Depreciation and amortization 3,396,259 3,088,714 Capital credits assigned from CFC ' (14,525) (4,451) Proceeds from Detroit Edison - 117.300,730 43,685,742-Advances from CFC, REA and FFB 6,524,000 Receipts and current portion of - note receivable 9,980 920 Capital credits refunded from CFC 197,220, 50,704 Decrease in working capital 747,299 Total S 123,280,570 $ 55,495,416 Funds were used for: Extension and replacement of electric plant. S 2,170,515 S 8,314,835 Fermi 11 related debt and costs '112.448,469 35,512,687 Payments and current maturities of long term debt - 8,657,104 8,421,044 .379,792 Termination of deferred compensation plan Purchase of CFC capital term certificates 24,600 increase in other deferred charges 4,482 Increase in working capital 2,842,458 Total S 123,280.570 $ 55,495.416 \\ The accompanying notes are a part of the financial statements. 24
(- Changes in Composition of Working Capital 1987 1986 Increase (Decrease) Current assets: Cash and cash investm'3nts - General funds - S (1,377,536) S (1,580,267) Cash Construction funds (800,310) 665,956-133,402 (236,020) Accounts receivable (40,371,302) 39,199,313 Receivable from Detroit Edison Materlois and supplies 1,035,332 (1,464,207) Other current and accrued assets 65,567 8,041 increase (decrease) in 36,592,816 current assets (4 t,314,847) ~ Current liabilities: Current maturities of long term debt 200,000 (1,296,000) Short term borrowings REA (39,769,673) 39,769,673 Acco'unts payable - purchased power (284,683) (108,372) 9 Accounts payable other 381,446 453,278 Advances payable to members (3,596,500) Refunds payabie to members (448,375) (1,737,179) ) Taxes and wages payable (215,613) (143,538) Accrued vocation and sick leave 6,985 5,458 Accrued interest (437,635) 403,538 Increase (decrease) in current liabilities (G,567,548) 33,750,358 Increase (decrease) in working capital S (747,299) S 2,842,458 25
STATEMENTS OF PATRONAGE CAPITAL AND OTHER EQUITIES for the years ended Docember 31,1987 and 1986 s: 6 PATRONAGE CAPITAL >i987 1986 Balonce, beginning of year S 12,811.484 S 11,289.531 Operating margins assignable 1,072.766 1.524,953 Balance, end of year S 13,884,250 S _ 12,811,484 Assignable S 1,072,766 S-1,521,953 Assigned to date ~ 12,811,484 11,289,531 Total S 13,884,250 12,811,484 OTHER EQUITIES 1987 1986 Balance, beginning of year S i,641,604 1,013,770 0 Non-operating margins 556,316 623,312 Coplial credits 14,525 4,522 ( ' Balorice, end of year S 2,212,445 S 1,641,604 } The accompanying notes are o port of the financial statements. 26
o r NOTES TO FINANCIAL STATEMENTS for the years ended December 31,1987 and 1986 NOTE A: ACCOUNTING POUCIES. The following is a summary of tho'occounting policles adopted by the Cooperative which have a s!gnificant effect on the financlo! statements. The policies conform to generally accepted accounting principles and have been consistently applied. Inventory Voluotion - Materials and supplies are stated at overage unit cost, which is not In excess of market. Fermi 11 Costs - The Cooperative has capitalized all costs incurred in connection l with Fermi ll, including interest costs on Fermi 11 related debt (see Note D). Total In'erest costs of $70,706,843 c,id $76,385.572 were capitalized during the years ended December 31,1987 and 1986, respectively. Fermi ll Is under on agreement for sale and Is presented separately in the balance sheets. The carrying amount at December 31, 1987 includes approximately $200 million of estimated loss on disposal, which Is being deferied in accordance with Statement of Financial Accounting Standards No. 90 (see Note D). Correspondingly, all Ferml 11 costs at December 31,1986 have been reclassified from electric plant to conform to the 1987 presentation. Federal income Taxes - The Cooperative is exempt from federal income taxes i under Section 501(c)(12) of the Internal Revenue Code. Therefore, no provision for federal income foxes has been made. NOTE B: ELECTRIC PLANT. Electric plant in service consisted of the following at December 31,1987 and 1986: ll 1987 1986 intangible plant S 628,005 S 628,005 Production plant 38,525.430 38,381,277 Transmission plant 52,911,901 51,049,680 Distribution plant 13,836,555 12.841.428 General plant 5.727,151 3,641,309 Total S_, 111.629,042 0 106.541,699 c 27 L___________________..__.__._.__________.._______________________
NOTES TO FINANCIAL STATEMENTS, Continued for the years ended December 31,1987 and 1986 NOTE B: ELECTRIC Pl. ANT, Concluded. Provision has hen made for depreciation of production, transmissio' n and distribution plants at straight-line composite annual rates of 3.10%,- 2.75% and 2.88% respectively. General plant annual depreciation rates have been applied on a straight-line basis and are as follows: Percent Structures and improvements 2 Transportation equipment 14 17 Power operated equipment 10-11 Communicotions equipment -8 Office furniture and fixtures 6-10 Tools and shop equipment 6 Laboratory equipment 6 Other general plant 5-10 Depreciation and amortization of electric plant in savice was charged as follows for the years ended December 31,1987 and 1986: 1987 1986 Charged to: Depreciation and amortization S 3,287,107 2,995,131 Fuel handling expense 12,208 11,255 Clearing accounts 96,944 82,328 Total 3,396,259 3,088.714 NOTE C: INVESTMENTS IN ASSOCIATED ORGANIZATIONS. Investment) In associated organizations consisted of the following at December 31, 1987 and 1986: 1987 1986 National Rural Utilities Cooperative Finance Corporation: Capital term certificates S 2,880,695 S 2,880,695 Patronage capital credits 1,408.187 1,590,882 Other 14,661 14,661 Total S 4.303,543 4.486.238 I 28 I
t . NOTES-TO FINANCIAL STATEMENTS, Continued / for the years' ended December 31,1987 and 1986 NOTE D: FERMI 11. Fermi 11 costs consisted of the following at December 31,1987 and 1986: 1987 1986 Direct ccst of construction S 723,739,629 S 727,405,947 Nuclear fuel, net 35,0A6,860 42,121,305 Indirect costs 10,296,764 7,124,752 Materials and supplies .2.222,451 2.671.714 Test sales held in escrow 3.125,752 Total S 774,471,457 -S 779,323,718 By a Participation Agreement dated February 8,1977; the Cooperative and The Detroit Edison Company ("Detroit Edison") are joint owners, as tenants in common, of a 1,093 megawatt nuclear generating unit known as Enrico Fermi Nuclear Power Plant Unit No.11 ("Fermi 11"), located in Frenchtown Township, Monroe County, Michigan. Under the Participation Agreement, the Cooperative agreed to purchase o twenty percent (20%) undivided interest in Fermi 11 and receive a twenty percent (20%) entitlement to the plant's capacity and net energy output. When the Cooperative entered int; the Participation Agreement in 1977, it was anticipated that Fermi 11 would be completed in 1980 of a cost of less than S i billion. To date, Fermi ll's cost has risen to more than S4.5 bi; lion. The plant achieved commercial operation on January 23,1988. The construction delays and cost overruns have adversely affected the Cooperative's financial condition and caused the Cooperative and Detroit Edison to enter into a number of amendments to the initial Participation Agreement. The most relevant of these amendments is the Seventh Amendment dated December 14,1987, which calls for the sole of the Cooperative's entire Fermi 11 ownership interest os originally I outlined in a Term Sheet signed by the Cooperative, Detroit Edison and the Rural Electrification Admir Istration (REA) on August 7,1987. 29
NOTES TO FINANCIAL STATEMENTS, Continued for the, years ended December 31,1987 and 1986 NOTE D: FERMI II, Continued. The terms of the Seventh Amendment, which have been formally approved by the Cooperative and its member-distribution cooperatives, Detroit Edison and REA include the following: Detroit Edison will purchase the Cooperative's remaining Fermi 11 ownership interest on or about January 2,1990, at which time title will pass to Detroit Edison. The amount which Detroit Edison will pay the Cooperative will be equal to the Cooperative's total unomortized Fermi 11 debt on January 2,1990, less $200 million, and any additional Ferml 11 related costs not f'nanced. It is anticipated. that the selling price will approximate $550 ml;iion and Detroit Edison will assume responsibility for payment to the Federal Financing Bank (FFB) relative to such amount. Detroit Edison will provide the Cooperative with funds necessary to meet its quarterly Fermi 11 related principal and Interest obligotions to FFB through December 31,1989 (including the third and fourth quarter 1986 payments and first, second and third quarter 1987 payments - all of which were in arrears and were paid by REA as Guarantor of FFB debt. In December 1987, Detroit Edison provided the Cooperative fends to repay all FFB debt in arrears). The Cooperative will convert, when requested by Detroit Edison, its Fermi Il related short and intermediate term FFB debt into long term debt, and the Cooperative will be responsible for any prepayment penalties associated with such debt conversion. The Cooperative has entered into o Power Supply Agreement with Detroit Edison requiring the purchase of major portions of capaci'y and energy requirements, on a firm and Interrupt;ble basis, from Detroit Edison through December 31,2025. The Cooperative and Detroit Edison have agreed to seek all regulatory approvals necessary to implement the Seventh Amendment. 30
NOTES TO FINANCIAL STATEMENTS, Continued for the years ended December 31,1987 and 1986 NOTE D: FERMI II, Continued. With respect to the Cooperative's remaining $200 million in Fermi 11 Indebtedness not being ossumed by Detroit Edison, the Ce ' perative and REA have entered into a Debt Restructuring Agreement which is incurporated into the Seventh Amendment. On January 5,1988, the Cooperative filed its application with the Michigan Public Service Commission (the "Commission") seeking authority to enter into sold Debt Restructuring Agreement with REA. Consistent with the Debt Restructuring Agreement, this remaining $200 million of debt will be separated into two notes: a $100 million Fixed Obligation Note and a $100 million Load Growth Note. Each note shall bear interest at a rate of 7.5% per annum commencing on the date of sale. On January 13, 1988, the Cooperative filed its application with the Commission requesting authority to implement rote increases necessary to meet the S 100 million Fixed Obligation Note, it was determined that o $100 million debt repayable over 36 years at 7.5% interest per year resulted in cri annuol debt service payment of $8,148,000. The Cooperative and REA then determined that the annual required payments of $8,148,000 could be met through the equivalent of a six mills per kWh rate increase effective January 1,1990. ~ The proposed rate lncrease was requested to become effective in two steps - three mills per kWh In 1988 and on additional three mills per kWh in 1989. This two-step proposal reflects the Cooperative's desire to avoid sudden and disruptive rote increases to its member-distribution cooperatives. With respect to the $100 million load Growth Note, ooyments thereon are based upon the Cooperativo's load growth as defined in the Debt Restructuring Agreement. The formula for repayment of the $100 million Load Growth Note is based upon a 1.1 growth multiplier derived by calculating the average load growth of the three preceding yects. In any Instance, the Cooperative's annual payment pursuont to the $ 100 million Load Growth Note will not be less than the annual payment for the prior year. In addition, portions of the $100 million Lood Growth Note which are not repaid by December 31,2025 will be discharged by REA. ,.,a - % 4 3i
a NOTES TO FINANCIAL STATEMENTS, Continued for the years ended December 31,1987 and 1986 NOlE D: FERMI II, Concluded. Until the January 2,1990 closing date, funds generated from the rate increases will be placed in a Rote Increase Escrow Fund to be used only to pay prepayment penalties incurred prior to January 2,1990. If offer meeting the above obligation there are still funds remaining in the Rote lecrease Escrow Fund, such funds shall be used to reduce non-Fermi 11 related debt. The transoction is being accounted for ;n accordance with Staternent of Financial . Accounting Stondords (SFAS) No.15. "Accounting by Debtort and Creditors for Troubled Debt Restructurirgs" and SFAS No. 71, "Accountirg for the Effects of Certain Types of Regulation," as amended by SFAS No. 90, "r(egulated Enterprises - Accounting for Abandonments and Disollowances of Plant Costs," whereby the remaining Fermi ll-related deferred charges offer the sole to f.)etroit Edison of approxi-motely $200 million will be amortized to expense over the term of the Debt Restructur-Ing Agreement in amounts approximating principal repeyments on the $200 million debt. NOTE E: LINE OF CREDIT. The Cooperative has availaole on unsecured lineof-c' edit with the National Rural Utilities Cooperative Finance Corporation (cec), whereby advances of $12,000,000 for general operations are available until April 1988, subject to CFC approval for ocyonces requested. Interest on advances is determined monthly by CFC. NOTE F: REFUNDS PAYABLE TO MEMBERS. Refunds payable to members are determined under a Michigan statute,1982 PA 304, whereby estimated power cost for a twe9e-month period is billed by the Cooperative to its member distribution cooperatives each month. Following the close of the twelve-month period, a reconciliatior, of actual power cost to estimated power cost determines the under or over-co'Jection with the appropriate amount being collected from or refunded to the 'nember distribution cooperatives. At December 31,1987 and 1986, the Coopero$ve had over collected $893,293 and S i,341,668, respectively, which is refundab;e to its member-distribution cooperatives. 1 32
r NOTES TO FINANCIAL STATEMENTS, Continued i for the years ended December 31,1987 and 1986 ( NOTI: G: LONG TERM DEBT. Substantially all ossets ate pledged as collotsmi for long-te m debt. Long term debt consisted of the following at December Si,1987 and i986: .987 1986 Fermi 11 Other ieimi11 Other CFC $ 1.222.368 $ 1.226.808 REA 50.640.790 52.509.443 FFB 772.227.0 3 24.849.t,14 778.532.722 25.128.956 4 l Total 772.227.943 76.712.972 778.532.722 78.865.297 Les'. Current n.vtanties 7.405.u00 2.212.000 7.284.000 2.133.000 Long term debt S 764.822.943 $ 74.500.972 $ 771.248.722 s76.732.297 a National Rural Utilities Cooperative Finance Corporation (CFC) note, bearing Interest at 10.5% por annum. The note is payable in quarterly instal!ments to the year 2019. Rural Electrificotton Administration (REA) mortgoge notes, bearing interest at 2% and 5% per annum. The notes are payohle in quarterly Installments to the year 2018. Federal Financing Sonk (FFB) notes, guaranteed by REA and bearing interest at 7.205% 10.877% por annum at December 31,1987. The rota of interest is redetermined by FFB of each ct.onge of maturity date. Advances mude under FFB notes issued prior to October i 1983 have a seven year deferment before the repayment of principal is required. The final principot payment of o!! loans is established when the notes are issued. At the time of each odvor ce, the Cooperative con select an initial maturity date for that advance of not less than two years or rnors than seven years. Extensions of the initial maturity daie are availcble, however, not to be less than two yects in length. The tetal period of the initial maturity date and edensions connot exceea a maximum of seven years. After the maximun. seven year maturity, the advances are to be repold according
- o FFB guidelines.
$ n?I s :- a r 33
o4
- I NOTES Td FINANCIAL STATEMENTS, Concluded.
for tne years ended December 31,1987 and 1986 NOTE G: LONG TERM DEBT, Concluded. Maturity dates of all Fermi 11 related advances issued offer October i,1983 were determinad by. REA based on the project's estimated commerclol operation date. All advances ur' der these notes are to be repold according to FFB guidelines. All notes issued prior to October 1,1933 ora 34 year mortgage notes and all notes issued offer October i,1983 cra 30 year mortgage notes. Unadvanced loan funds of S1,785.000 and $5,762,75c are available to the Cooperative on toon commitments from REA and FFB, respectively, at December 31,1987, Annual matur; ties of long term debt for those notes being repaid, excluding FFB notes in deferment at December 31,1987, for the next five years are os follows: 1988 - $9,617,000; 1989 $10,739,600; 1990 Sii,388,200; 1994 - $11,406,900 and 1992 ~ $ 11,427.600. NOTE H: RETIREMENT PLAN. Retirement plan benefits for substantialiy all employees are provided thr' ugh partici-o ~ potion in a retirement ano security program and scvlngs plan for employees of the - National Rural Electric Cooperative Association (NRECA) and its member systems. The retirement and security program provides benefits to employees based oa years of service and the highest five years of compensation for the lost ten years of . employment. Contributions tc, the retirement and security progrom, which are determined by the NRECA, were $67,302 in 1987 and Si93,200 in 1986. The 1987 contribution was substantially less than the '!986 contribution due to the NRECA declaring on 18 month moratorium on contributions for the period July 1,1987 through December Si,1988 as a result of the retirement and security program being overfunded. Contributions to the savings plan, which are based on a f percentage of employees' compensation, were S140,614 in 1987 and Si31.100 ln 1986. NOTE 1: COMMITMENT: AND CONTINGENCfES. The Cooperative leases its Boyne City office and certain other warehouses and equipment. Minimum onr.ual rental commitments under these opeiating leases are os follows: 1988 $53.000; 1989 - S48,000; 1990 S36,000; 1991 $2,500 and 1992 - $ 1,100. Rental expense under all operating leases aggregated $42,908 and Si9,109 for the years ended December 31,1987 and 1986, respectively. The Cooperative is a defendant in vo.eus legal proceedings crising in the norrNI course of business. In the opinion of mor.,.2gement, based on the advice of legal counsel, the ultimate resolution of these proceedings will not hcVe a materici effect on the Cooperative's results of operation or financial position. 34 c.
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