ML20153H656
| ML20153H656 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 01/30/1968 |
| From: | Lovejoy C PACIFIC GAS & ELECTRIC CO., US ATOMIC ENERGY COMMISSION (AEC) |
| To: | |
| Shared Package | |
| ML20153H616 | List: |
| References | |
| FOIA-88-156 NUDOCS 8809090281 | |
| Download: ML20153H656 (6) | |
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UNITED STATES OF AMERICA ATOMIC ENERGY COMMISSION In the Matter of
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PACIFIC GAS AND ELECTRIC COMPANY
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Docket No. 50 275
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(Diablo Canyon Nuclear Power Plant) )
TESTIMONY OF CHARLES A.14VFJOY OFFICE OF THE CONTROLLER AEC I
My name is Charles A. Lovejoy.
I live at 9205 Wadsworth Drive, Bethesda, Maryland.
I as a graduate of Benjamin Franklin University with an MCS Degree in i
Accounting.
From 1933 to 1941 I filled a variety of accounting and auditing positions with the U. S. Government. I was Controller of the United Services Life Iasutance Company for two years before entering the military service in i
1943. After discharge from the Army, I served for seven years in various staff and supervisory positions in the audit and accounting divisioos of the Reconstruction Finance Corporation where my duties included financial
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analyses and review of the operations of borrowing institutions.
Since 1953, I have been a staff accountant in the office of the Controller i
of the Atomic Energy Commission. My duties include the preparation of financial analyses of firms applying for special nuclear material and facility licenses and construction permits.
I have appeared as the 1
l financial witness for the AEC staff in hearings on the applications for such licenses held ovee the past several years.
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2-I have reviewed the financial information presented in the.spplication and amendments thereto of the Pacific Gas and Electric Company for a permit to construct a nuclear reactor with a not electricci output,of 1,060 megawatts (3250 mwt) to be known as the Diablo Canyon Nuclear i
Power Plant and to be located at the applicant's Diablo Canyon site in San Luis Obispo County, California.
Based on this information, including 1966 and previous annual reports of the Company, it is my opinion that the Pacific Gas and Electric Company (PG6E) is financially qualified to design and construct the proposed nuclear facility.
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My opinion is based upon the following facts and consideratiens' i
1.
PC&E states that the estimated construction cost of the Diablo Canyon Nuclear Power Plant (exclusive of any fuel cost) is about
$188.5 million. This cost is made up as follows:
Production Plant:
Land and land rights 273,000 Structures and improvements 16,800,000 Reactor plant equipment 50,300,000 Turbogenerator units 44,200,000 Accessory electric equipment 5,530,000 Miscellaneous power plant equip.
1,890,000 Total direct cost (includes contingencies & startup)
$118,993,000 Engineering, superintendence and accounting (including design and inspection) 6,760,000 Construction plant, warehouse, etc.
1,790,000 Overhead construction cost 26,090,000
- Total capital cost
$153,633,000 Step up and terminal substation facilities 15,187,000 Transmission 19,593,000 Total plant construction costs
$188,413.000
l 1 l The Division of Construction has reviewed the details of the estimated total capital costs and has advised me that the cost estimate is reasonable, 2.
As stated on page 3 of amendment 5 to the application, the first core of the nuclear unit is estinated to contain 87,210 kilograms of i
uranium at levels of enrichment ranging from 2.2% to 3.2%.
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applicant plans not to lease this material from the Ccanission. We dollar value of the SNH, based upon the AEC published price schedule 1
currently' in effect, is $19,346,000; the cost of fabricating the fuel j
is estimated at $9,432,000; the total estimated cocc of the first core fuel to PG&E is $28,778,000. W e Division of Reactor Development and Technology has reviewed the fuel requirements for the first core of the proposed nuclear plant and finds them reasonable for a reactor of this type and power level, t,
3.
PG&E estimates that the fund taquirements of its construction progran (which inca.
.he nuclear plant) for the five year period 1967-71 (including sinking fund and bond maturity requirements) will amount to $1,666 million.
Such funds will be obtained from treasury funds t
on hand, unappropriated earnings and provisions for depreciation, short term bank loans and sale of equity and debt securities when and as required. As presently estimated, $996 million will be provided from taternal sources and $670 million free debt and equity securities.
Based on PC6E's record of unappropriated earnings and provisions for depreciation over the past five years and on the reasonable assumption
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4 of the continuation of the same rate of increase over the next five 9
years, it is my opinion that the applicant's expectation that these sources can supply the portion of the estimated annual construction requirements as indicated on page 3 of amendment 5 is a reasonable In view of the magnitude of FG&E's resources, the strength of one.
its financial position and the high regard held for its bond issues, it is reasonable to assume that the Company wi11 have little difficu'.ty f
in selling sufficient securities to provide the remaining funds needed to finance the planned construction program to meet expected customer i
demand.
4.
The Company is soundly financed and has plentiful resources at its command. As of December 31, 1966, cash and not receivables totaled
$104.2 million. Gross revenues for the year were $920.7 million.
The relationship between long-term debt and capital stock is sound (the debt being 51.7% of total capitalization) and the Company is not overcapitalized on a book value basis, as evidenced by the ratio of net plant to capitalization of 1.03.
The Company's current Dan and Bradstreet credit rating is the highect (Adl) and Moody's Investors Service rates the Company's first mortgage bonds.s (high) Aa.
The Companf enjoys a high level of earnings. Utility operating revenues have steadily increased over the past 5 years from $729.4 sillion in 1962 to $918.2 million in 1966 or over 26%. The earnings, af ter taxes, have increased from $110.7 v.1111on to $149.0 million or l
34.6% over the same period. The volume of electricity and gas sales l
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. to customers is also steadily rising; sales of electricity increasing from 26.3 billion kwh in 1962 to 34.9 billion kwh in 1966 or 33%, and sales of gas increasing from 415.6 billion cubic feet in 1962 to 597.4 billion cubic feet in 1966 or 44%. PG6E is thus operating from the er.tellent position of an increasing volume and an increasing net 6
profit. If present demand continues or increases, it is reasonable to assume that che above level of earnings will continue or corre-spondingly increase.
5.
The pertinent financial ratios computed from the financial data contained in the 1966 and 1965 Annual Reports indicate a strong financial position and compare favorably in the main with those of the electric utilities industry as a whole. A copy of my financial j
analysis, reflecting these ratios and other pertinent data is attached as Appendix A.
In brief, the ratio of the long tare debt I
of $1,603.5 million to net utility plant of $3,209.0 million is
.50; the ratio of net plant to capitalisation is 1.03; the proprie-tary ratio is 43% of the total assets of $3,458 million; the ratio of operating expenses, including income taxes, of $717 million to operating revenues of $918.2 million is.78; the rate of earnings on the total investment in PG6E is 5.8% and on the stockholders' investment is 10.0%; the number of times the interest on the bonded I
debt was earned is 3.41 and PG&E's retained estnings as of December 31,-
1966, totaled $392.1 million.
APPENDIX A PACIFIC GAS AND ELECTRIC COMPANY Docket No. 50-275 Financial Analysis (dollars in millions)
Calendar Year Ended Dec. 31 1966 _
1965 1964 Long-term debt
$ 1,603.5
$ 1,466.4
$ 1,407.9 Utility plant (net) 3,209.0 3,034.2 2,850.5 Ratio - debt to fixed plant
.50 48 49 Utility plant (net) 3,209.0 3,034.2 2,850.5 Capitalisation 3,100.6 2,900.0 2,788.2
, Ratio of r.at plant to capita 11:stion 1.03 1.05 1.02 Stockho13ers' equity 1,497.3 1,433.6 1,380.3 i
Total assets 3,458.0 3,277.9 3, 09 0.4 Proprietary ratio 43 44 45 Net income 149.0 14 0.3 125.8 Stockholders' equity 1,497.3 1,433.6 1,380.3 Ree of earnings on stockholders' 10.0%
9.8%
9.1%
investment Net income before interest 199.5 184.9 169.8 Liebt11 ties and capital 3,458.0 3,277.9 3,09 0.4 Rate of earnings on total investment 5.8%
5.6%
5.4% -
Net income before interest 199.5 184.9 169.8 Interest on long-term debt 58.3 53.3 49.7 No. of times fixed charges earned 3.4 3.5 3.4 operating expenses (I'ncl. taxus) 717.0 665.1 644.3 Operating revenues 918.2 851.4 815.0 Operating ratio
.78
.78 79 Utility plant (gross) 4,191.7 3,957.2 3,697.6 Operating revenues 918.2 851.4 815.0 Ratio of plant investment to revenues 4.57 4.65 4.54 Retained earnings 392.1 328.3 275.0 Earnings per share of Common
$2.23
$2.08
$1.87 j
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Capitalization as of 12/31/66:
_ Amount
% of Total First mortgage bonds
$1,603.5 51.7%
Preferred stock 350.2 11.3 Coasson stock 1,147.1 37.0 Total 53,100.8 M
Moody's Bond Ratingst First Mortgage As Dun and Bradstreet Credit Rating AaA1 1
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