ML20155H099

Forwards Consolidated Financial Statements & Auditors Repts for 1984 & 1985

ML20155H099
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	05/07/1986
From:	Mueller R DAIRYLAND POWER COOPERATIVE
To:	Office of Nuclear Reactor Regulation
References
LAC-11580, NUDOCS 8605130142
Download: ML20155H099 (16)

Text

. _ - _ _ _ - _.

D DA/RYLAND hhh[ COOPERA7IVE

• PO BOX 89 2615 EAST AVE SO uCROSSE WISCN (608) 788 4000 ROBERT C MUELLER AS$sStant General Manager

& Cxtraer May 7,19k RE:

LAC-Il580 DOCKET No. 50-409 Director of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555 i

Gentlemen:

l l

DAIRYLAND POWER COOPERATIVE LA CROSSE BOILING WATER REACTOR (1).CBWR)

PROVISIONAL OPERATING LICENSE NO. DPR-45 l

FINANCIAL STATEMENTS AND AUDITORS' HEPORT

Reference:

1) 10 CFR 50.71.(h)

In accordance with the requirements of Reference 1, we are forwarding three (3) copies of the annual financial report and certified financial statements for Dairyland Power Cooperative for the years 1985 and 1984. We 2

will forward our 1985 Annual Report to you as soon as it is completed.

Sincerely, I

RCM:pw Enclosures James G. Keppler, Regional Administrator, NRC-DRO III c:

NRC Resident Inspector J. Stang, NRC Project Manager J. Parkyn, LACBWR 8605130142 860507 PDR ADOCK 05000409 00c I

PDR i

l- -

_m.

ARTHUR

~

l ANDERSEN Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of December 31.1985 and 1984 Together with if uditors' Report

..m EE u

ARTuun ANDERSEN & CO.

. Nit xx r A ro u s,.\\t t s s rsoTA

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To the Members and the Board of Direc* ors, Dairyland Power Cooperative:

l We have examined the consolidated balance sheets of E

DAIRYLAND POWER COOPERATIVE (a Wisconsin cooperative) AND L

SUBSIDIARY as of December 31, 1985 and 1984 and the related consolidated statements of revenues and expenses and patronage capital and changes in financial position for the years then 1

f ended.

Our examinations were made in accordance with generally E

I accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we

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considered necessary in the circumstances.

m E

In our opinion, the financial statements referred to E

above present fairly the financial position of Dairyland Power 3

Cooperative and Subsidiary as of December 31, 1985 and 1984 and l

the results of their operations and the changes in their financial y

f z-position for the years then ended, in conformity with generally p

E accepted accounting principles applied on a consistent basis,

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ARTHUR ANDERSEN & CO.

I March 11, 1986.

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u DAIRYLAND POWER COOPE CONSOLIDATED BALANCE (In Tho ASSETS 1985 1984 ELECTRIC PLANT (Notes 1, 2,

5 and 10):

Plant and equipment, at original cost

$489,773

$478,951 Less-Accumulated depreciation (182,866)

(167,589) 306,907 311,362 Construction work in progress 5,585 6,564 Nuclear fuel, at amortized cost 18,261 20,834 Total electric plant 330,753 338,760 OTHER ASSETS:

Investments (Note 1 and 12) 27,088 21,800 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (Note 4) 9,856 9,856 Pollution Control Bond proceeds on deposit with trustee 2,111 3,298 Deferred Charges 2,018 1,368 Total other assets 41,073 36,322 CURRENT ASSETS:

Cash and temporary cash investments 30,111 20,582 Accounts receivable-Energy sales 15,972 15,181 Other 919 851 Inventories, at average cost-Fossil fuels 32,850 46,555 Materials and supplies 8,942 7,971 Prepaid expenses 1,009 880 Total current assets 89,803 92,020

$461,629

$467,102

==

The accompanying notes are an integral i v

Tl f1VE AND SUBSIDIARY APERTOG CARD

'EETS--DECEMBER 31 Also Available On "d8)

%perture Card CAPITALIZATION AND LIABILITIES 1985 1984 CAPITALIZATION:

Member and patron equities-Membership fees 10 10 Patronage capital (Note 7) 69,670 69,257 Total member and patron equities 69,680 69,267 Long-term obligations, less current maturities (Note 5) 352,094 354,151 Total capitalization 421,774 423,418 DEFERRED CREDITS (Note 8) 14,032 14,412 COMMITMENTS AND CONTINGENT LIABILITIES (Note 9)

CURRENT LIABILITIES:

Current maturities of long-term obligations 7,712 9,134 Advances from member cooperatives (Note 6) 6,235 4,873 Accounts payable 4,769 4,304 Accumulated provision for disposal of nuclear fuel (Note 3) 95 4,328 Accrued liabilities-Payroll and vacation pay 1,970 2,249 Taxes 2,079 1,957 Interest 1,332 1,317 Other 1,631 1,110 Total current liabilities 25,823 29,272

$461,629

$467,102

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DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY

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s CONSOLIDATED STATEMENTS OF REVENUES AND 1

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EXPENSES AND PATRONAGE CAPITAL

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(In Thousands)

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1985 1984

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REVENUES AND EXPENSES i.

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OPERATING REVENUES:

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y Sales of electric energy

$159,085

$165,082

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,y Other 708 793 m-4 z.

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Total operating revenues 159,793 165,875 A.,

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OPERATING EXPENSES:

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Fuel 80,821 86,479 G.v

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Purchased and interchanged power, net 1,823 1,596 k'. -l g l fi

-,g Other operations 22,657 21,481

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Maintenance 9,603 8,546

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Depreciation and f,'i W -

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amortization (Notes 1 and 2) 16,169 15,752 T

Taxes 5,780 5,524 59

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Total operating expenses 136,853 139,378

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.,. ; u_,,.;. a Operating margin before interest G -),0.. :.

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and other deductions 22,940 26,497

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INTEREST AND OTHER DEDUCTIONS:

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Interest 24,655 24,400 s;

i-Allowance for borrowed funds used

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during construction (Note 1)

(1,040)

(805)

.), Q'. #.a Other 854 1,135

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i Total interest and other deductions 24,469 24,730 4.o

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..s, Operating margin (deficit)

(1,529) 1,767

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f' NONOPERATING MARGIN, principa1ly net

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investment income 4,911 4,720

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e : j' Net margin 3,382 6,487 s(p.~'y N7

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PATRONAGE CAPITAL

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$.9 PATRONAGE CAPITAL, beginning of year 69,257 65,329 h*y $.,:,)y

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RETIREMENT OF CAPITAL CREDITS (Note 7)

(2,969)

(2,559)

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PATRONAGE CAPITAL, end of year, including 1/;.

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margins assignable of $3,382 in 1985 QC E,3,_,

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72 and $6,487 in 1984

$ 69,670

$ 69,257 s.'.

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The accompanying notes are an integral gj?fc part of these consolidated statements a, b ;. $ e y 4

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CONSN IDATED STATEMENTS OF CHAN k-p FOR THE YFAPS FNDEI n

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SOURCES OF F"NDS:

Opecations-Net rargin Add noncash iters:

Depreciatlon and arer*17a*.on Arort12at10n Of n G c 1 +3 a r f !"1 Other r ands pros.ded fror or"ra*

<nc Petireront of capital cr"d1*:

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APFLICAT:ONS OF CUNDS:

Electric plan

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lear fw Increase

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APERTURE

- IVE AND SUB3IDIARY C Altli ES 3ES IN FINANCIAL POSITION Alm Available On i

DECEMBER 31 g

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a NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1)

Summarv of Significant Accounting Policies-Organization:

Dairyland power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of Wisconsin.

I The Cooperative provides wholesale electric service to member distribution cooperatives engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa, Illinois and Michigan.

The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.

The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Telecommunications, Inc. (CTI).

All intercompany accounts and transactions between the Cooperative and CTI have been eliminated.

Depreciation:

Depreciation is provided based on the straight-line method at rates which are designed to amortize the original cost of properties over their estimated useful lives and include a provision for the cost of removal and decommissioning of the properties.

The provision for depreciation averaged 3.8% and 3.7% of depreciable plant balances for 1985 and 1984, respectively.

Amortization of Nuclear Fuel:

The cost of nuclear fuel is charged to fuel expense based on heat produced for the generation of elec-tricity.

The cost of disposal of spent fuel is recorded over the lives of individual assemblies.

Income Taxes:

The Cooperative is exempt from federal and state income taxes and, accordingly, no provision for l3.

such taxes is reflected in the accompanying l

consolidated financial statements.

I C '

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1)

Summary of Significant Accounting Policies (continued)-

Allowance for Funds Used During Construction:

Allowance for funds used during construction represents the cost of borrowed funds used for construction purposes and is capitalized as a component of electric plant.

The amount of such allowance is determined by applying a rate to the balance of nuclear fuel in stock and in fabrication and certain electric plant additions under con-struction.

The rates used varied from 9.7% to 11.0% and from S.0*5 to 9.S*5 in 1985 and 1984, respectively, depending on the source of funds.

Property Additions:

The cost of renewals and betterments of units of property (as distinguished from minor items of property) is charged to electric plant accounts.

The cost of units of property retired, sold, or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation.

No profit or loss is recognized in connection with ordinary retirements of property units.

Maintenance and repair costs and replacement and renewal of minor items of property are charged to operating expenses.

Investments:

Investments of the Cooperative consist primarily of commercial paper and government obligations.

All investments are recorded at the lower of aggregate cost or quoted market value.

The carrying value of the investments is adjusted for amortization of premiums and discounts which are amortized on a straight-line basis.

(2)

Nuclear Reactor-The Cooperative operates a nuclear generating facility under the terms of a cor4tinuing temporary provisional operating license.

The Cooglerative has applied to the Nucleat Regulatory Commisseton (NRC) for a permanent operating license.

The NRC'l3 consideration of construction permits and operating licepses, including the Cooperative's application for a ri' o pe r a t i ng license, has been delayed b

p

, I

i NOTES TO CONSOLIDATED FINANCIAL L

STATEMENTS y

(Continued)

I (2)

Nuclear Reactor (continued)-

b due to other regulatory priorities.

The Cooperative f

expects that the NRC will initiate hearings related to i.

obtaining a permanent operating license in 1986.

The provision for depreciation includes a factor to provide f

for the estimated costs of decommissioning the nuclear i

generating facility; however, the manner of decommission-E ing may not be determined for many years and the even-E tual cost of retiring a nuclear generating facility is k

uncertain at the present time.

The Cooperative continues I{

to review its decommissioning cost estimates and es.pects a

that any increases in such costs will be recovered y

through future rates.

The Cooperative has adopted a y

policy of funding decommissioning costs currently and the V

related investments are included in other investments in

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the consolidated balance sheets, while the decommissioning y

reserve is included in accumulated depreciation.

e (3)

Provision for Disposal of Nuclear Fuel-g Under the Nuclear Waste Policy Act of 1982 (Act), the g

United States Department of Energy (DOE) is responsible for the storage and disposal of spent nuclear fuel y

[

removed from nuclear reactors.

Under the provisions of the Act and a contract with DOE, the Cooperative made a payment in 1985 to the DOE for storage and disposal of nuclear fuel burned prior to April 7, 1983.

The Cooperative makes quarterly payments for nuclear fuel burned subsequent to April 7,

1983.

i (4)

Investment in National Rural Utilities L

Cooperative Finance Corporation-

!I The Cc perative has purchased approximately $9.9 million of unsecured subordinated capital term certificates issued

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-i by the National Rural Utilities Cooperative Finance J

Corporation (NRUCFC), which are recorded at cost.

In

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October 1985, the certificates' annual interest rate was 1

,{

changed to 4% from the previous rate of 3%.

The

's certificates mature from 2057 to 2080.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5)

Long-Term Oblications-Long-term obligations at December 31 consist of the following (in thousands):

1985 1984 REA Obligations, 2%

$ 82,076

$ 86,968 REA Obligations, 5%

34,519 35,077 FFB Obligations, 7.6% to 16.7%

200,142 195,459 NRUCFC Obligations, 8% to 9.5%

7,106 9,106 City of Alma, Wisconsin, Pollution Control Bonds:

4.8% to 6.125%

12,185 12,450 Adjustable rate (6.25% at December 31, 1985) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds adjustable rate (6.25% at December 31, 1985) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7%, due in varying amounts to 1995 5,718 6,165 359,806 363,285 Less-Current maturities (7,712)

(9,134)

Total long-term obligations

$352,094

$354,151 Long-term obligations to the REA are payable in equal quarterly principal and interest installments through 2015.

Principal repayments on the long-term obligation to the Federal Financing Bank (FFB) extend through 2018.

hg Principal and interest payments on the NRUCFC obligations are payable quarterly throuo" 1999.

The Pollution Control Bonds are payable in increasing annual amounts through 2008.

The adjustable rate Pollution Control and Industrial Development Revenue Bonds mature in 2015 unless previously called for redemption.

Bank letters of credit aggregating $19,000,000 and terminating in February 1991 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date.

Accordingly, the entire principal amount of these bonds is classified as long-term debt..

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1" CONSOLIDATED V.'.'

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STATEMENTS 3 *.

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Long-Term obligations (continued)-

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Substantially all of the Cooperative's assets are pledged

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as collateral for these obligations.

The Cooperative has t,

i.9 maintained certain financial ratios related to earnings c: ~.f y,/.*

b and liquidity in accordance with the covenants of its

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4' -

loan agreements.

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Maturities of the Cooperative *s long-term obligations are

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'.3 E9 as follows (in thousands):

3.5 $; 1 '.s W+.c :

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Year Amount w.

w

h. : w.;

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f 4

p.

?/4 1987 8,510

9. J '. n. i e

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1988 8,924 W

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4. J +

{p 1989 9,204 4 :,.,

3, 1990 9,345 J[4g..,

Q Thereafter 316,111

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%y yy.b

$;,5

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$352,094 1e

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Lines of Credit-

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.M To provide interim financing, the Cooperative has arranged

.- C ' -g lines of credit aggregating approximately $35.5 million, S. z'*>.[ '.'

Q@F principally through NRUCFC.

Sorrowings are at the prime d ' C.I.I.' -

L interest rate and were not significant in either 1985 or N-

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d' 1984.

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f The Cooperative also allows member cooperatives to prepay

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their power bills and pays interest on these prepayments 9, ) ';.7 f.M based on current short-term bctrowing rates.

Interest Q-N M14

[%g?j income earned by the Cooperative on prepayments in excess

a;7, ;. 3 ".

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-1 of its working capital requirements has been netted with Qt.T;.

the related interest expense on member cooperative E.

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-;f advances and reflected as nonoperating margins in the

$jps/a..;:

%.1 accompanying consolidated statements of revenues and F 4 j 4. 3 %..

7,5 expenses.

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p Compensating balance requirements or fees relating to the V} !,'. ^,i h

lines of credit are not significant.

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(7)

Retirement of Capital Credits-r /.N.'a.- E, e tw

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X;4 The Cooperative's Board of Directors has adopted a policy I')..k # W "j.

of retiring capital credits allocated to patron members 4%(l[ '[

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i on a "first-in, first-out" basis so that at all times the T. '.,k L

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[Q 17.{h % ' J (l,.17 Cooperative will not retain as patronage capital any f

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NOTES TO

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CONSOLIDATED FINANCIAL i

STATEMENTS

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(Continued)

N (7)

Retirement of Capital Credits (continued)-

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capital contributed or deposited more than 20 years prior

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to the current year.

Accordingly, the 1965 and 1964 M

E capital credits were retired in 1985 and 1984, respec-

-M tively.

Implementation of this policy is subject to

-g 1

annual review and approval by the Board of Directors and q

l the REA, and no cash retirements ara to be made which

-M would impair the financial condition of the Cooperative N

l (8) or violate any terms of its agreemerts.

M Shared Transmission Agreement-l The Cooperative has entered into a shared transmission n

3 agreement with the Southern Minnesota Municipal Power M

d Agency (SMMPA).

The agreement provides SMMPA use of the g

transmission system owned by the Cooperative to deliver 7_

power and energy requirements to SMMPA members in the l

Cooperative's electric service area for a period of 50

-b g

years.

In 1983 the Cooperative received a payment of

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$13.7 million for the use of its transmission system for

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the term of the agreement.

This payment is reflected as E

a deferred credit in the accompanying consolidated E

balance sheets and is being amortized over the term of

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the agreement.

The Cooperative may be entitled to g.

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further payments depending on the investment in and joint M

E use of the system.

-M

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(9)

Commitments and Contingencies-

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Litigation:

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The Cooperative has been named a defendant in

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mg several lawsuits and claims, primarily related to W

g, construction and operation of its electric plant.

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Although the outcome of these matters cannot be Q

determined at the present time, management and

-a legal counsel believe these actions can be Y

E successfully defended or resolved without a M

EB material adverse effect on the financial position Ei!!!

of the Cooperative.

iiiB (10) Construction-m M

The Cooperative's 1986 estimated construction program is 6

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$17.6 million.

Financing of construction is expected to be provided by borrowings from the FFB, proceeds from the issuance of Pollution Control Bonds, short-term lines of credit with the NRUCFC, advances from member cooperatives and funds generated internally.

- M M

NOTES TO CONSOLIDATED w

FINANCIAL

]

STATEMENTS

-P (Continued)

I A

E (11) Pension Plan-E M7 E

pension benefits for substantially all employees are provided through participation in the National Rural M

=

E Electric Cooperative Association Retirement and Security 9

i Program.

Pension cost for this defined benefit pen-1 L

sion program was approximately $1,528,000 in 1985 and Q

E

$1,707,000 in 1984.

These contributions are deter-m f

mined in accordance with the provisions of the program M

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and are based on the gross salaries, as defir.ed, of each 2

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participant.

Information from the plan's administrator g

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is not available to permit the Cooperative to determine its share, if any, of unfunded vested benefits of the q

program.

As of December 31, 1981, the last available Ik actuarial valuation, net assets of the plan available

(

for benefits exceeded the actuarial present value of E

accumulated plan benefits.

2 L

(12) Fiber Optics Venture-E 5

E p

The Cooperative's wholly owned subsidiary, CTI, is a 20%

Q

(

partner in Norlight, a venture with four other utilities q

s (or their affiliates) to construct and operate a fiber M

[f optics network in the Upper Midwest.

CTI's investment in W

d this venture approximated $1.25 million at December 31, 2

1985 and, based upon present construction and financing i

plans, CTI may be called upon under the terms of the partnership agreement to invest up to an additional $3.4 4

million in this venture.

As of December 31, 1985, the M

A Cooperative had a receivable from Norlight of

-=$

approximately $117,000.

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The Wisconsin public Service Commission (the Commission)

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is investigating certain issues regarding the participa-M y

F tion of certain of the other partners in this venture and Q

a has issued a cease and desist order which effectively q

4 prevents construction of the fiber optics network until h

the issues are resolved to the Commission's satisfaction.

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The participants in this venture expect to resolve these C

issues in time to allow for construction of the system to 2

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be completed by the end of 1986.

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