ML20211P082
| ML20211P082 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 10/15/1997 |
| From: | Murphy M AFFILIATION NOT ASSIGNED |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| NUDOCS 9710200048 | |
| Download: ML20211P082 (165) | |
Text
LEBOEUF, LAMB, GREENE & MACRAE L. L. P.
A Lit *if t D L'ABtLif f PAR Nt It% Hip aNCLUDsNG PnOF ESUONAL Con *0seAtiows NEWYORK 1875 CON N ECTICUT AVE N U E, N.W.
LOS ANGELES WASHINGTON -
WASHINGTON, DC 2OO09-5728 NEWARK ALBANY PITTSBURGH L2028 986 8000 PORTLAND, OR TE LEX 440274 F ACSIDd14 E : 12021986 8102 SALT LAKE CITY DENVER SAN FRANC]CO HARRISBURG DRUSSELS HARTFORD WRITER'S DIRECT DI AL.
MOSCOW JAC KSONVILL E A L M AT Y N
LObON October 15, 1997
-o.. A a' fi?.'. : f."
via Hand Deliverv Nuclear Regulatory Commission Document. Control Desk Washington, D.C.
20555 Re:
Docket Nos. 50-458 and 50-459 Facility Operating License No. NPF-47 Gentlement and Ladies:
Enclosed are the Financial and Statistical Reports and Audited Financial Statements for Cajun Electric Power Cooperative, Inc., for the years 1994, 1995 and 1996.
This material is being provided at the request of Michael A.
Dusaniwskyj to assist in the review of the Application of Ralph R. Mabey, Chapter 11 Trustee for Cajun Electric Power Cooperative, Inc., to Transfer Cajun's thirty percent undivided ownership interest in River Bend Station, Unit 1, to Ente gy Gulf States, Inc.
If you have any questions about the enclosed material, please do not hesitate to contact the undersigned.
Respectfully submitted, i
%mA
/
Mary A. Murphy Attorney for Ralph R. Mabey, Chapter 11 Trustee for Cajun Electric Power Cooperative, Inc.
-t *; p n n o a %s a
9710200048 971015 ADOCK050004]8 PDR I
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l CAJUN ELECTRIC POWER COOPERATIVE, INC.
FINANCIAL AND STATISTICAL REPORTS j
Month Ended December 31,1994 Preliminary Unaudued Readts R
4 R
E It f
4 y
na-w
, n. -
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]
TABLE OF CONTENTS 4
.a PAGES i
FOOTNOTES TO FINANCI' L STATEMENTS A
1-2 COMPARATIVE BALANCE SHEET.
34 STATEMENT OF REVENUE AND EXPENSES
-.5 L
UTIIJTY PLANT
SUMMARY
6
?
SCHEDULE OF ENERGY RESOURCES / USAGE
_7 STATEMENT OF RIVER BEND OPERATIONS 8
[s}
SCHEDULE OF NONMEMBER SAI.ES BY COMPANY 9
SCHEDULE OF PURCHASED POWER
- 10
!.]
FUELANALYSIS 11
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N i
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FOOTNOTES TO FINANCIAL STATEMENTS December,1994
~
A) On December 21,1994, Cajun filed a Petition for Reorganization under Chapter 11 of the Federal Bankruptcy Code with the United States Bankruptcy Court, Middle District of L=ici=an he filing resulted from a conflict between the Louisiana Public Service Comminion (LPSC) and the Rural Utilities Service (RUS) over the proper wholesale rate to charge Cajun's members. Faced with conflicting demands between its state regulatory body and its federal lender, Cajun a
was forced to seek the protection of the Bankruptcy Court.
In accordance with Generally Accepted Accounting Principles, Cajun adopted the provisions of the American Institute of Certified Public Accountants Statement of Position (SOP) 90 7, Financini Reporting by Entities in Reorenni An Under the
}
Bankruptcy Code. In general, certain provisions of the Bankruptcy Code may relieve a debtor from its obligation to pay interest while in Chapter 11. Interest on secured claims is generally accrued and expensed only to the extent that the value
"} _
of the underlying collateral a=ade the principal amount of the secured claim.
Additionally, interest on unearnred claims is not accrued if the debtor is insolvent.
As a result, Cajun will raengniva interest expense in the financini statements while in Chapter 11 only to the extent it is ordered to pay interest by the. Bankruptcy Court. Accordingly, contractualinterest related to secured claims not recorded for accounting purposes totaled $9,%9,299 for the period ended December 31,1994 m-u B) Cajun's Retained Share of Cash and Investments at December 31,1994 is
$40,148,393.
C) In accordance with the Debt Restructure Agreement, Cajun's debt to the REA is
~
comprised of two notes payable. Note A bears interest at the rate of 0.72% per month (8.64% annual) with final maturity on December 31,2026 and calls for fixed annual payments of non-typical amounts. Note B bears interest at the rate of O.72% per month (8.64% annual) with final maturity on December 31, 2036.
Annual payments on Note B are required only if certain contingent events or circumstances occur.
D) Under the provisions of the River Bend Joint Ownership Participation and Operating Agreement (JOPOA), Cajun has elected not to participate in the g
funding of the Service Water Project, inlet feedwater nozzle repair or replacement, other excessive extended outage costs and turbine rotor repairs.
Through a
December 31,1994, Cajun has withheld payments to GSU for these activities J
totaling $42,491,618, which includes $8,605,561 of interest and penalty through December 20,1994. Rese withholdings are based on Cajun's best estimate of the costs and are not reflected in the Company's financial statements.
.J Page 1 of 11
- 1 December,1994 1,
Also, Cajun has elected to withhold payments to GSU for what it considers to be excessive River Bend costs.
hai==ia: in E-p=1-w 1992, Cajun began withholding certain River Bend costs which it determined to be excessive. After Cajun funded its total budgeted 1994 River Bend costs during the last week in
.a October 1994, Cajun ceased all further payments during the rammindar of 1994 except for safety related costs (nuclear insurance and da~=tamia= tion and decommissioning fees). A Provision for Excessive River Berd costs in the amount of $17,294,092 as of December 31, 1994, which inchidas penalty and interest through December 20, 1994, is based on a camhi==tian of GSU's billings and
",.y Cajun's best actimat*< and are reflected in the Company's financini statements as a charge to the appropriate cost category (O&M expense, fuel y d=ses, capital work orders, etc.).
c GSU has notified Cajun that under the terms of the River Bend JOPOA, it will
[
exercise its rights and sell Cajun's 30% share of the output of capacity and energy from River Bend and apply such proceeds to Cajun's e**=adia: balance of costs.
p
'Ibe net sales pmcccds (sales less -
~ '
costs), will be d=r e to the s
a Provision for hea==ive River Bend costs.
-- -~
7
'Ibe total net proceeds from the sale of Cajun's share of River Bend generatier. is 1
S4,872,891 as of December 31,1994. *1he net accrued balance in the Provisic a for Excessive Rrver Bend costs, net of GSU's sale of Cajun's 30% share of River Bend
! ?
energy, is $12,421,193 as of December 31,1994.
l h
l Total River Bend withholdings as of December 31,1994 are $54,912,811.
i E) Beginning on November 1,1994, Cajun began withholding GSU's generation from e
Big Cajun 2, Unit 3 (BC2,U3) due to GSU's notification that it would not be funding its 42% share of BC2,U3 costs. Effective December 19,1994, the court ordered Cajun to supply GSU with its share of BC2,U3 generation providing that GSU deposits in a court registry the sums due Cajun under the JOPOA from J
November 1,1994 and each month thereafter as sums become due. GSU has deposited the required amounts through December 31, 1994. The court order 3
further ='i=ila'ad that Cajun shall be permitted to withdraw funds in the court J
regisay when Cajun's financini obligations under the River Bend JOPOA are current. Cajun's net receivable from GSU is $7,746,999 as of Dae==har 31,1994 and does not inehida interest and penalty.
1 J
rrwarew Page 2 of11 mN/ror/nuha/oi-ne
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j LIABIIJTIES 12-31-94 12-31-93 Balanca Balance EQUTFIES AND MARGINS Me
& Donated Capital.
390 390 L
Patronage ital Assigned 35,988 35,988 1
Prior Year ficijt _ -
(1,791,681)
(1,515,181)
Current Dencit)
(32R 112)
(276.500)
Total Equit(ies and (Deficit)
~j (2.083.615)
(1.755.303) t j
NOTSUBJECTTO COMPROMISE LONG 'IERM DEBT REA Note A --
~
See Below 2,467,740 REA Note B a
See Below 1,393,957 Industrial Development Bonde 2: Below 1,800 i
Current Portion oflong-Term Debt See Eelow (450) j.]
Net Long-Term Debt-See Below 3,863,047 i
CURRENTIJABILITIES
- }
Accounts Payable-
-0 1,037 us Taxes Other than Income Taxes -
193 181 i
Inter **'
-0 37 q
Other 5,291 20,559 Current Portion oflongies-i Term Debt
-0 450 Total Currentliabiht i
i 5,484 22,264
.l ACCUMUIATED OPERATING PROVISIONS
}
Decommiuionm' gProvision 17,729 15,301 Fvmsive O&M Provision-River Bend See Below 3.522 4
{
Total Accumulated Operating Provisions _
17,729 18,823 t
DEFERRED CREDITS--
-0 6.686 4
]
Total Not Suldect to Compmmise 33.213 r
3.910.820 1 j SUBJECT'IO COMPROMISE (1994 Only) 3 i
REA Note A 2,659,586 N
REA Note B-1,513,985 NA i
l Industrial Development Bonds-1,350 NA Accounts Payable -
437 N
Interest 0-NA
)
Otherliabilities- --
9,93 N
i J
Excessive O & M Provision - River Bend.
12.421 N
i g
Total Subject to Compmmise..
4.196.827 N/A j
a Grand Total -
$M
$2.155.517 i!!
See Footnotes on Page 1.
1 k
i Page 4 of 11 Revised 01/19/95
1' CAJUN ELECTRIC POWER COOPERATIVE, INC.
SCHEDUIE OF ENERGY RESOURCES / USAGE Period Ended December 31,1994 Megawatt Hours (MWh's)
RESOURCES m
% Chg.
Prior
%Is Month his Year Ln=t Year Ytar Bi Ca'un 1:
3 Gross
.)
Less: Station Service 1,122 355,513 348,669 2
~l2 23.818 24.898 (4)_
Net Big Cajun 1 1,050 331,695 323,771 2
^
Big Cajun 2-MWh Gross 736,785 7,739,940 7,811,805 (1) less: Station Service 44.711
__469.560 471.324 Net Big Cajun 2 692,074 7,270,380 7,340,481 (1) t; River Bend:
MWh Gross 166,009 1,565,534 1,686,611 e,
less: Station Service 10.437 99.667 109.248 f
Net River Bend 155,572 1,465,867 1,577,363 Total Net Cadna Generation 848,6 %
9,067,942 9,241,615 (2)
{
Purchased Power 45,253 347,846 682,152 (49)
U Meter Error Correction l
(742) 17,078 (31,485) 154 Inadvertent Energy (547)
(477)
(154) 210 i
'IDTAL ENERGY RESOURCM 1 3,669 1d3 '31 2,32ME (5) j.h a
USAGE Member Sales Beauregard Electric Cooperative 40,923 507,247 475,864 7
Claiborne Electric Cooperative 29,004 350,864 353,483 (1)
Concordia Electric rative 11,331 158,869 157,468 1
Dixie Electric Membe Corp.
85,133 1,085,295 1,077,095 1
Jefferson Davis Electric U
NortheastIsicinna Powerb.
12,423 171,922 167,669 3
14,635 204,296 200,698 2
Pointe Cou South Lani= pee Elec. Membershi Corp.
14,267 185,552 174,093 7
iana Electric 27,524 387,689 374,491 4
Southwest IA Elec. Membe p Corp.
104,057 1,342,374 1,340,518 Teche Electric rative 13,237 165,413 171,403 Valley Electric Me rshi Co
-}
Washmgton-St. Tammany bec.b.
35,413 449,118 455,375 p.
48.547 580.035 571.888 1
Member Sales Excluding Bossier 436,494 5,588,674 5,520,045 1
Bossier Rural Elec. Membership Corp.
-0
-0 76.178 (100)
J Tou 1 Member Sales 436,494 5,588,674 5,596,223 Nonmember Seles 441.174 3.632.297 4.043.559 (10)
}
Total Sales 877,668 9,220,971 9,639,782 (4)
Ilne less 14.992 211.418 252346 (16) 1 TOTAL ENERGY USAGE ggdst 243,}$1 2,R2Mg (5) 5 Page 7 of 11 conDiv/Accag/TR/ January 13,1995
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CAJUN ELECTRIC POWER COOPERATIVE,INC,, --
RIVER BEND OPERATIONS - CAJUN'S 309EiOWNERSHir s
Period Ended De. cessber 31;1994 1x
'3 CURRENT MONTH THIS YEAR LASTYEAR Mills Mills -
Mills I21a1
/kWh 191a1 f.lGYh Total
/kWh 878,774 1
825,932 REVENUES Interest Income 74,875 1,303 5,158
- (1,065,404)
(1)
(7,087,560)
(4)
OtherIncome Gain / Loss Disp of Assets _
599273 Energy Sales
$fJ.(fLggl (4)
$,QgLig}
TOTAL REVENUES
$,,Zgli EXPENSES
- 4. 4 Power Production Nuclear Fuel
$ 1,317,884 9
$ 13,922,664
.9
$ 14,120,597 9
Operations & Maintenance 3,912, % 1 25 45,389,989 31 35,254,245 22 Adnunistrative & General 579,526 4
6,829,716
. 5, 7,018,917 4
Depreciation 3,177,543 20 38,120,127 ~' 26 38,115,259 24 Interest & Debt Expense 7,959,1 %
51 124,845,225
. 85 127,075,117 81 51,514 66,631 Penalties & Other Expenses -
29.846 1.446 27.061 Taxes TOTAL EXPENSES
$1 gig,ilf igg
$M Lif
$221.665.495 lig In accordance with the River Bend Joint Ownership Participation & Operating Agreement (JOPOA), as amended, the River Note:
Bend Sellback to gun States Utilities ended on June 15,1991.
Page 8 of 11 ConDiv/Acdg/DJJ/ January 13,1995 4
es
i CAJUN ELECIRIC POWER COOPERATIVE, INC.
SCHEDULE OF OFF-SYS'IEM SALES BY TYPE OF SALE Period Ended December 31,1994 l
'I1 mis Month Y-T-D 1994 Y-T-D 1993 Mills /ItWh
'Iltis Y-T-D Y-T-D l
MWh
$ Total M
$ Total M
$ Total Month M
E ECONOMY 18
$ 3,154 $
57,253 Alabama Electrie Arkansas Electric 61,753 1,072,391 87,586 1,595,941 34,261 677,444 17 18 20 21
-0 106 2,226 l
City of Lafayette
- 163,778 3,167,085 240,987 4,506,318 19 19 CGCO Central & South West Services.
1,260 18,130 10,035 222,695 21,613 422,256 14 22 20 EastTexas Electric 33,374 596,328 169,251 3,214,275 108,156 1,934,973 18 19 18 13 102,387 1,352,255 Florkla Power & Light
- 300 5,250 18 i Florida Power Corp.
GSU -
95,918 1,637,592 1,156,056 20,093,497 234,284 4,219,555 17 17 18
' 23 70 1,590 LEPA:
- 66 1,849 28
- LP&L
.- 3,767 71,925 1,550,873 26,026,672 19 17 MP&L
- 700 8,400 12 Oglethorpe 21 19
! 240 4,920 7,130 133,590 SMEPA Southern Companies 15,517 209,334 26,6 %
473,955 19,519 480,800 13 18 25 i 34 756 54 1,518 22 28 t
SWEPCO TVA 200 3,200 9,238 242,505 16,910 372,800 16 26 22 24 l Western Resources 400 9.400 SUB'IDTAL 208.022 3.536.975 L627.151 29.098.544 2.340.500 40.203.159 17 18 17 l
NON. FIRM SMEPA I 30,765 877,665 678,856 16,036,927 888,380 19,195,400 29 24 22 SMEPA11
- 110,272 2,390,559 416,495 9,580,928 22 23 l
SWEPCO 12,400 227,797 144,700 2,634,305 18 18
' 230.968 51.000 TVA (Reserve)
SUBTOTAL 43.165 1.105.462
. 933.828 21.292.759 1.304J75 28,827.328 26 23 22 FIRM
)
49 60
! 118,913 5,852,425 133,421 8,010,270 East Texas Electric SMEPA Unit Power Sales -
20,675 767,341 453,187 12,509,022 176,886 4,527,219 37 28 26 SWEPCO.
13.740 491.205
_165.000 5.898.750 87.877 3.141.603 36 36 36 r
SUBTOTAL 34.415 1.258.546
. 737.100 24.260.197 398 184 15.679.092 37 33 39 l
SUBTOTAL CAJUN SALES ZRj ( E $lat R 2 M 1228,9D, $2&nE M 9R
.intS.122, $84.709.579 21 23 21 RIVER BEND ENERGY
- i Southern Companies 155.572 2.333.580 334.218 5.013.270 15 15
'IDTAL OFF-SYS'IEM SALES ig,0.( $8.234.563 igm 2Z $21,tiMit 129.122, $1Mgt.EN, 19 22 21 Cajun's share of River Bend Ststion energy; sold by OSU om behaKof Cajes.
Page 9 of 11 ca oiv/Accig/ uuganumy 13,1995
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~ '. _ ' ' _. _ _ '. ~ ~ ~
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m CAJUN ELECTRIC POWER COOPERATIVE, INC.
SCHEDULE OF PURCHASED POWER Period Ended December 31,1994 i
t il Current Month Year-To-Date Mill Mills MWH
$ Amt MWH
$ Amt Hydroelectric Power SPA - Demand (kw)
$230,328
$2,763,936
- Energy 40.550 195.413 5
270.514 1.264.089 5
Total Hydroelectric 40.550 425.741 10 270.514 4.028.025 15 All Other Power C&SW Services 2,339 44,797 19 42,026 833,428 20 l
CLECO 20 566 28 2,328 56,334 24 ENRON 25 500 20 25 500 20 GSU 149 2,868 19 628 12,409 20 LP&L
- 1,374 68,199 50 20,% 3 490,382 23 Southern Companies 742 28,230 38 9,135 227,829 25 SWEPCO 54
%1 18 202 4,140 20 SWPS
-. 2.025 26.625 13 Total Other 4.703 146.121 31 77.332 1.651.647 21 Subtotal (incl. demand $'s) 45,253 571,862 M
347,846. 5,679,672 g
Inadvertent Energy (547) (477) Total d1106
$51L862 HL2ff, $5J12472
- November invoice of $29,695 was paid twice in December. Credit will be applied to future invoice.
Page 10 of 11 conoiv/Aatg/TR#anuary D,1995 i
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l CAJUN EIECTRIC POWER COOPERATIVE, INC.
FUELANALYSIS Peded Ended December 31,1994 I
Die *"- ^h Year-To-Date Net Mills /
Net Mills /
l P.lant Euti
.Unita Consumption h0Eh's 3 Amount (a)
]dyb Consumption MWh's 3 Amount (a) jdyh Cajun 2 Coal Tons (d) 458,553 692,074
$12,442,543 4,781,645 7,270,380
$128,982,534 Oil 1000 Gal.(d) 175 94.001 1,721 917.022 l
12,537,344 18.1 129,899,556 17.9 -
f Cajun 1
' Gas MCF.(b) 11,313 1,050 16,738 3,637,477 331,695 7,846,901 r
Oil 1000 Gal. -0 37 M 038 16,738 15.9 7,868,939 23.7 i
River Bend Nuclear (c) 151 572 1.317.884 8.5 L465.867
.13.922.664 9.5 l
Total 8d8,96
$LM212ff 16.3 2,gg,tg
$11Lf2LL72 16 7 i
t (a)
Includes actual consumption plus fuel bandling and transportation expenses.
l (b)
Estimated (c)
Cajun's 30% of total River Bend generation.
(d)
Ercludes coal and oil burned for GSU's portion of Unit 3 power purchased.
i Page 11 of 11 contw/Acetg/an.ga ary13,1995 i
c a
l CAJUN ELECTRIC POWER COOPERATIVE, INC.
FINANCIAL AND STATISTICAL REPORTS Month Ended December 31,1995 Revhed to ReRect 1995 Post Year-End Adiustments M
ConDiv/Acctg/UM/jil/ March 29,1996
TABLE OF CONTENTS I
i PAGES FOOTNOTES TO FINANCIAL STA'IEMENTL.
....... 1-2 4
i COMPARATIVE BALANCE SHEET 3-4 STATEMENT OF REVElGJE AND EXPENSES-
_5 UTILITY PLANT
SUMMARY
6 SCHEDULE OF ENERGY RESOURCES / USAGE -
7 STATEMENT OF RIVER BEND OPERA'HONS-
.8 SCHEDULE OF NONMEMBER SALES BY COMPANY
.9 SCHEDULE OF PURCHASED POWER 10 FUEL ANALYSIS-11 f
1 P
4 4
i i
k
FOOTNOTES A) On December 21,1994, Cajun filed a Petition for Reorganization under Chapter 11 of the Federal Bankruptcy Code with the United States Bankruptcy Court, p
Middle District of Louisiana. The filing resulted from a conflict between the Louisiana Public Service Comunsion (LPSC) and the Rural Utilities Service (RUS) over the proper wholesale rate to charge Cajun's members. Faced with confileting demands between its state regulatory body and its federal lender, Cajun i
was forced to seek the protection of the Bankruptcy Court.
In accorc'ance with Generally Accepted Accounting Principles, Cajun adopted the provisions of die American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. In general, certain provisions of the Bankruptcy Code ma; relieve a debtor from its obligation to pay interest while in Chapter 11. Interest on secured claims is generally accrued and expensed only to the extent that the value of tb underlying collateral exceeds the principal amount of the secured claim.
Additionally, interest c,n unsecurec claims is not accrued if the debtor is insolvent.
As a result, Cajun will recognize interest expense in the finan:ial statements while in Chapter 11 only to the extent it is ordered to pay interest by the Bankruptcy i
Court.
Accordingly, contractual interest not recorded for accounting purposes totaled $376,348,149 for secured claims and $1,254,346 for pre petition contracts for the period ended December 31,1995.
B) Cajun's Retained Share of Cash and Investments at December 31,1995 is
$52,773,061.
C) In accordance with the Debt Restructure Agreement, Cajun's debt to the RUS is comprised of two notes payable. Note A bears interest at the rate of 0.72% per month (8.64% annual) with final maturity on December 31,2026 and calls for fixed annual payments of non-typical amounts. Note B bears interest at the rate of 0.72% per month (8.64% annual) with final maturity on December 31, 2036.
Annual payments on Note B are required only if certain contingent events or circumstances occur.
D) Under the provisions of the River Bend Joint Ownership Participation and Operating Agreement (JOPOA), Cajun has elected not to participate in the funding of the Service Water Project, inlet feedwater nozzle repair or replacement, other excessive extended outage costs and turbine rotor repairs.
Through December 31,1995, Cajun has widiheld payments to Gulf States Utilities (GSU) for these activities totaling $47,587,706, which includes billed interest through j
December 31,1995. These withholdings are based on Cajun's best estimate of the i
costs and are not reflected in the Company's financial statements.
I Page 1 of 11
i 4
i Also, beginning in September 1992 Cajun elected to withhold payments to GSU
[
for what it considers to be excessive River Bend costs. During the last week in
)
October 1994, Cajun ceased all further payments during the remainder of 1994, j
1995, and 1996 except for safety related costs (nuclear insurance and l
decontamination and decommiuioning fees). Based on a combination of GSU's i
billings and Cajun's best estimates, a Provision for Excessive River Bend Costs in
}
the amount of $73,296,856 as of December 31,1995, which includes billed interest t
through December 20,1994 for pre-petition withholdings and is reflected in the Company's finamial statements as a charge to the appropriate cost category (O&M expense, fuel purchases, capital work orders, interest expense, etc.)
i Pursuant to the terms of the River Bend JOPOA, GSU exercised its option to sell j
Cajun's 30% share of the output of capacity and energy from River Bend and apply i
such proceeds to Cajun's outstnading halaa~ of costs. He net sales proceeds (sales less tran=miaion costs), are charged to the Provision for Excessive River j
Bend Costs, i
The total net proceeds from the sale of Cajun's share of River Bend generation is i
$39,902,684 as of December 31,1995. The net accrued balance in the Provision for Excessive River Bend Costs, net of GSU's sale of Cajun's 30% share of River i
Bend enerEy, is $33,394,172 as of December 31,1995.
Total River Bend withholdings as of December 31,1995 are $80,981,870, i
t E) Effective December 19, 1994, the court ordered Cajun to supply GSU with its share of BC2,U3 generation providing that GSU deposits in a court registry the-sums due Cajun under the JOPOA from November 1,1994 and each month'.
thereafter. GSU has deposited the required amounts through December 19953 i
The court order further stipulated that Cajun shall be permitted to withdraw funds j
in the court registry when Cajun's financial obligations under the River Bend JOPOA are current. Cajun's net receivable from GSU is $39,650,106 as of December 31,1995 and does not include interest.
i F) In 1995 Cajun recorded as a cumulative change in accounting principle the Am'mulated Postretirement Bene 6t Transition Obligation portion of past service h
costs related to postretirement benefits in accordance with SFAS 106, Employer's
[
Accounting for Postretirement Bene 6ts Other Dan Pensions. De accumulated i
transition obligation was $4.7 million.
s e
=cewirm Page 2 of 11 uwiucww>m
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LIABILITIES This Year last Year
% Chr.
EQUITIES AND MARGINS Memberships & Donated Capital................ $
390 390 Patronage Capital Assigned....................
35,988 35,988 Prior Year (Deficit)..........................
(2,119,993)
(1,791,681) 18 Current Year Margin (Deficit)..................
24,531 (328,312)
(107)
Total Equities and (Deficit)..................
(2,059,084)
(2,083,615)
(1) o NOT SUBJECT TO COMPROMISE ACCUMUIATED OPERATING PROVISIONS Decomminioning Provision....................
20,220 17,728 14 Post Retirement Benefiu......................
5,442 0
-Total Accumulated Operating Provisions........
25,662 17,728' 45 CURRENT LIABILITIES Accounts Payable............................
938 0
Taxes Other than Income Taxes.................
113 192 (41)
Oth er......................................
11,551 5,385 115 Total Current ljabilities......................
12,602 5,3 n 126 L
DEFFERED CREDITS.....................
1,082 0
l-Total Not Subject to Compromise 39,346 23,305 69 i
SUBJECT TO COMPROMISE RUS Note A 2,646,860 2,659.586 RUS Note B 1,513,985 1,51a,985 Industrial Development Bonds.................
~ 900 1,350 (33)
Accounts Payable............................
5,741 439 1,214 Other 13abihties............................
3,627 8,954 (59)
Excessive Cost Provision - River Bend............
33,394 12,421 169 Total Subjer.t to Compromise 4,204,507 4,196,735 Total....................................... $ 2,184,769 5 2,136,425 2
See Footnotes on Page 1.
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t CAJUN EIECTRIC POWER COOPERATIVE, INC.
STATEMENT OF REVENUE AND EXPENSES Period Ended December 31, 1995 (Thousand $'s)
Mills This This Last Titis Month Year Year Chg.
Year OPERATING REVENUE i-Sales of Power To Members...............
Sales of Power to Others................... $ 24,291
$ 290,020 5 299,889 (3) 48 8,215 88,776 79,665 11 20 Other Revenue.........................
126 1,047 807 30 To tal.................................
32,632 379,843 380,361 36 OPERATING EXPENSES Power Production Fuel.................................
12,651 151,304 151,691 15 Operations & Maintenance......
3,762 66,192 76 P d (14) 7 i
Purchased Power........................
548 8,224 i
.4' 45 16 Transmission.. pply Expenses..............
Other Power Su 66 592 491 21 2,234 -
36,628 35,536 3
4 Administrative & General..................
(26) 21,486 25,525 (16) 2 Depreciation & Amortizatio Taxes..................n...............
6,6%
76,306 75,451 1
7 657 8.285 8,644 (4) 1 To tal................................
26,588 369,017 379,892 (3) 35 OPERATING MARGIN (DEFICIT).....
6,044 10,826 469 2,210 1
i OTHER INCOME AND (EXPENSES)
Rental Income................
49 109 146 (25)
Interest Income..........................
884 7,675 3,895 97 1
Other Nonoperating Income..............
5,041 5,061 147 3,344 Gain / Loss-Disposition of Assets.............
592 191 (766)
(125)
Utigation Settlements.....................
0 5,512 0
1 To tal.................................
6,566 18,548 3,422 442 2
MARGIN (DEFICIT) BEFORE INT EXP..
12,610 29,374 3,891 655 3
e INTEREST & OTHER DEBT EXPENSE...
(1,133) 191 332,203 (100)
MARG BEFORE CUMULATIVE EFFECT.
13,743 29,183 (328,312)
(109) 3 i
CUM EFFECT OF CHG IN ACCT PRIN...
4,652 4,652 0
NET MARGIN (DEFICIT).............. $ 9,091 24.531
$ (328,312)
(107) 2 o
i See Footnotes on Page 1.
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Page 5 of 11 ConDiv/Acetg/UMn8-Mar-96 s
CAJUN ELECTRIC POWER COOPERATIVE, INC UTILITY PLANT COST
SUMMARY
BY IDCATION As Of C+=--t-i 31, 1995 i}'
'I1ds Year I== Year
% Chr.
Big Cajun No. 2, Unit 1 254,162,323 254,206,747 i
i Big Cajun No. 2, Unit 2 242,584,918 239,889,631 1
Big Cajun No. 2 Unit 3 289,784,983 290,203,003 j
Big Cajun No. 2, Cornmon - Units 1 & 2 80,397,922 80,264,393 l
Big Cajun No. 2. Common - All Units 148,174,389 145,345,623 2
Total Big Cajun 2 1,015,104,536 1,009,909,397 1
St. Louis Facility 31,897,943 31,935,934 River Bend 1,468,915,288 1,463,531,509 I
Big Cajun No.1 36,291,158 35,509,698 2
t Transmission Facilities 74,507,746 74,423,489 Headquaners i
11,881,408 11,829,287 Operations Center 14,106,273 13,772,710 2
Electric Plant-In-Service 2,652,704,350 2,640,912,024 Less: Accum. Depreciation & AsioniaGon
~
(846,827,772)
(772,345,164) 10 1,805,876,578 1,868,566,860 (3)
Construction Work-In-Piegras 11,998,399 11,541,689 4
i Nuclear Fuel @ Amortued Cost 28,8 %,075 37,635,602 (23)
Land Held For Future Use
_9,904,380 9,904,380 Utility Plant - Net L856.675.432 1 327.648.531 (4)
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CAJUN ELECTRIC POWER COOPERATIVE, INC.
SCHEDULE OF ENERGY RESOURCES / USAGF Period End:d Dee:mber 31 Megawatt Hours (MWN'1995 s)
RESOURCES i
Of
- ~ is Month This Year last Year CA n
Generation Big Cajun 1:
MWh Gross 5,919 613,219 355,513 72 less: Station Service 382 38,181 23,818 60 Net Big Cajun 1 5,537 575,038 331,695 73 Big Cajun 2:
4 MWh Gross Less: Station Service 774,503 7,680,527 7,739,940 (1) 43,956 470,500
_ 469,560 Net Big Cajuni 730,547 7,210,uzi 7,270,350 (1) l River Bead:
- I MWh Gross l
Leu: Station Service 177,508 2,541,515 1,565,534 62 12,173 162,181_
305,333 2,379,334 99,667 63 Net River Bend 1,465,867 62 Total Net Cajun Generation 901,419 10,164,399 9,067,942 12 4
Furchased Power 27,251 500,215 347,846 44 1
Meter Error Correction (719)
(3,984) 17,078 (123)
Inadvenent Energy 116 722 (477)
(251)
TOTAL ENERGY RESOURCES 928.067 _
10.661.352 9.432.389 13 USAGE M:mber Sales Beauregard Electric Cooperative 47,382 546,264 507,247 8
Claiborne Electric Cooperative 31,613 378,228 350,864 8
Concordia Electric Cooperative.
12,728 160,670 158,869 1
Dixie ElectricMembershi Corp.
103,569 1,181,107 1,085,295 9
Jtfferson Davis Electric Northeast Louisiana Power 14,298 182,686 171,922 6
-op.
16,029 214,909 204,296 5
Pointe Coupee Elec. Membership Corp.
15,519 194,339 185,552 5
South 1.ouisiana Electric Co-op 31,840 416,163 387,689 7
Southwest I.A Elec. Membership Corp, 128,727 1,444,700 1,342,374 8
Teche Electric Cooperative 15,674 177,041 165,413 7
ValleyElectric MembershipCorp.
39,037 476,682 449,118 6
Waslungton-St. Tammany Elec. Co-op.
60,444 632,726 580,035 9
Total Member Sales 516,860 6,005,515 5,588,674 7
Off-System Sales 393,781 4,453,672, 3,632,297 23 Total Sales 910,641 10,459,187 9,220,971 13 Line Loss 17,426 202,165 211,418 (4)
TOTAL ENERGY USAGE 928.067_
10.661.352 9.432.389 13 t
Page 7 of11 conoiv/Acas/DJnt-Jan-96 i
CAJUN ELECTRIC POWER COOFERATIVE. INC.
SCHEDULE OF OFF-SYSTEM SALES BY TYPE OF SALE Period Ended Decesster 31, 1995 His Meeth This Yeee Milla/
last Year Mistel MWh
$ Total kWh
_ MWh 3 Total
~kWh MWh 3 Total kWh Misset ECONOMY Abbema Electric
-S 0
1,419 3 32,812 23
-1 0
Arkanes Electric 3,145 53,731 17 35,138 610,190 17 87,586 1,595,941 18 Catex Visol 0
Chyof 12foye:te 28,964 548,087 19 33323 640,362 19 78 t,560 20 0
CLECO 43f57 816,322 19 152,437 2,734,179 18 163,778 3,167,0s5 89 0
C&SW 0
East Texas Electric 11,241 214,024 19 148,224 2,770,642 19 169,251 3,214275 19 3,525 65,725 19 10.035 222,695 22 Enron OSU 0
3,277 64A54 20 3tA80 587,501 18 233,970 4,211.543 18 I,I56,0%
20,093,497 17 0
LEPA MPAL 0
791 15,663 20 70 I,590 23 Noram "
0 0
3,767 71,925 i9 Rahbow 0
40,883 166,543 4
0 0
SMEPA 642 16A40 2D 0
0 76,868
- ,440,733 19 240 4,920 21 Southern Componies 995 11,215 11 114,574 2,231,389 19 26,696 473,955 18 SWEPCO 6
123 21 1,471 3fA82 22 34 756 22 TVA 0
Western Resources 0
5A25 120,613 21 9,238 242,505 26 SUBTOTAL 119,284 _ 2,23 t A03 19 853,245
___15,155.969 IS p.151 29,898,544 18 0
400 9,400 24 NON-FIRM SMEPA I 35,425 1,003,013 28 47tA95 12,673,571 27 678,856 16.036327 24 SMEPA 11 SWEPCO
- 0 0
l 24,800 600,146 24 286,400 6 321,221 24 144.100
'14 34,305 18 l
110,l.72 2,390,559 22 TVA (Reserw) 0 SUBTOTAL 60,225 I,683,159 27 758A95
_19,594,791 26
_ 933A28 'fIM 23 0
230 968 FIRM East Texas Electric MEAM 0
0 11.160 342,430 31 33,125 IA37,330 31 118,913 5A52,425 49 SMEPA Unit Power Seles M,925 1 M7,337 28 414,860 1 t,957,262 29 453,187 12,509,022 2s 0
SWEPCO
- 848
=05,316 478 t 5,013 5,007,540 334
_ 145,000 1 898,750 M
SusTOTAL 4a,93T t 7ss e8T M
_. 462,99s __ ts.se2,tIF 39
_ _737,see T24,264,197 33 TOTAL CAJUN SALES 228,446 5,619,244 25 2,974,338 52,752,892 25
_3,498,97#
74,65*,5 _00 23 RIVER BEND (RB) ENEROY
, Cityof tafayette f.
795 IIS25 15 0
CLECO d
7350 150,913 19 East Texas Electric 7A45 173,167 16 13,066 196,261 15 0
LEPA Southern Companies 0
1,060 I4,840 14 0
t TVA 0
I,203,162 18,958,580 16 334,2 tit
!.0 3,270 15 0
0 995AII I4,218,022 14 Union Electric co.
157,490 _ 2,472,593 16 157,490 _ 2,472,593 16 O_
0 I,
TOTAL RIL ENEROY 165,335 2,595,760 16 2,379,334
% ;*23,134 IS 334,218
_5,913,27e 15 TOTAL OFF-SYSTEM SALES 393,781 3_ S.215Ae3 21 4.453A72 3 88.776.825 29
_3,632.297. SL664.77G, 22 Includes On Peak Capacity (Non-firm) and Operaths Reserw Capecity (Firm) charges esader Agreement B whe Includes sales neede onder contreet with Norem esclashe of Noram fornished fuel Page 9 of Il r twmm.4 vu,n.--
CAJUN ELECIRIC FOWER COOPERATIVE,INC.
4 FUEL ANALYSIS Period Ended December 31,1995 i
his Month Last l
1Ms Year Year Net Milb/
Net Mills /
Milb/
Plant fyd Units Consumption MWh's Total (s) kWit Consumstion M W h's Totalfa) kWh kW_g
{
l Cajun 2 Cool Tons (b)(c) 466,444 730,547 $ 13,088,524 17.9 4,473,485 7,210,GZ7 3 123,235,069 17.1 Oil 1000 Gal.(b) 127 72,007 0.1 1,1E7 961,744 0.1 i
BC 2 Total 730,547 13.160,531 18.0 7,210.027 124,196813 17.2 17.9 i
Cajun 1 Gas MCF.(d) 62,586 5,537 193,489 34.9 5,832,651 536,248 10,803,203 20.1 (Norem)Oas MCF.(e) 0 0
N/A N/A 409,467 31L790 N/A N/A l
i BC I Total (d)(c) 5,:i37 193,489 34.9 575,038 10,803,203 20.1 23.7 l
l River Bend Nuclear (f) 165,335 (702.716) (4.3) 2.379,334 166303,637 6.9 9.5 I
i Orced Toast 901.419 $ 12.651.304 14.0 18.164.399 3 1 31.3 03.6 53 I4.9 16.7 f
i r
(r.) Includes actusi consw9 tion plus fud handI1sg sel erampstelon egenses.
I (b) Euduses OSUi portion of IMt 1 Tons are ad)ned for nudewe contes.
(c) Year-to-date 1995 coal an_ _;jian agures Islede a rednesion for the March 31,1995 Byover espassiens of 238,54t e
$37,540for April and May,1995.
es ofMeseeenseel (d) Cajunigas(
_.v.lon announts for BCI, Uniss I and 2. MIRa%Wh rdee 1oCopa oudy.
I (t) These gas consumption amousea rdate to the see of genermion to Norsan tone Mg Copa I, Unit I for Jdy,1995. Moren Noramicost ofgesonka records.
y not receded (f) Cajun)30% of toad Nver Ikedgenerssion.
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s CAUJN EIECTRIC POWER COOPERATIVE, INC.
FINANCIAL AND STATIS11 CAL REPORT 3 Month Ended December 31,1996 1
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ConDw/Amg/UMhu#eauaryR IM
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' I TABLE OF CONTENTS 1
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PAGES
'3 FOOTNOTES TO FINANCIAL STATEMENTS..-.-............................................... 1
-,l COMPARATIVE BALANCE SHEET.
...................................................... 4 5 I
STATEMENT OF REVENUE AND EXPENSES....................................................... 6
- l UrrLITY PLANT S UMMARY-
...... 7 SCHEDULE OF ENERGY RESOURCES / USAGE.......
....................................s STATEMENT OF RIVER BEND OPERATIONS
......................................................, 9
]
SCHEDULE OF NONMEMBER SALES BY COMPANY.......
...................................10 SCHEDULE OF PURCHASED POWER.
...... 11 FUEL ANALYSIS -...-
....... 12 I
L
t FOOTNO'IES i
A) On December 21,1994, Cajun filed a Petition for Reorganization under Chapter 11 of the Federal Bankruptcy Code with the United States Bankruptcy Court,
'j Middle District of Iouisiana. The filing resulted from a conflict between the l.ouisiana Public Service Commi~ ion (LPSC) and the Rural Utilities Service (RUS) over the proper wholesale rate to charge Cajun's members. Faced with conflicting demands between its state regulatory body and its federal lender, Cajun was forced to seek the protection of the Bankruptcy Court.
in accordance with Generally Accepted Accounting Principles, Cajun adopted the provisions of the American lastitute of Certified Public Accountants Statement of f
Position 907, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. In general, certain provisions of the Bankruptcy Code may i
relieve a debtor from its obligation to pay interest while in Chapter 11. Interest on 4
secured claims is generally accrued and expensed only to the extent that the value of the underlying collateral exceeds the principal amount of the secured claim.
Additionally, interest on unsecured claims is not accrued if the debtor is insc,1 vent.
4 As a result. Cajun will recognize interest expense in the financial statements while in Chapter 11 only to the extent it is ordered to pay interest by the Bankruptcy Court. Accordingly, contractual interest not recorded for accounting purposes 4
totaled $777,371,111 for secured claims and $2,076,901 for pre petition contracts
- I for the period ended December 31,1996.
('
B) Cajun's Retained Share of Cash and Investments at December 31,1996 is
)
$65,585,537.
C) In accordance with the Debt Restructure Agreement, Cajun's debt to the RUS is comprised of two notes payable. Note A bears interest at the rate of 0.72% per
?
month (8.64% annual) with Gnal maturity on December 31,2026 and calls for fixed annual payments of non-typical amounts. Note B bears interest at the rate of 0.72% per month (8.64% annual) with final maturity on December 31, 2036.
Annual payments on Note B are required only if certain contingent events or i
circumstances occur.
{
D) In December 1996, Cajun adopted the provisions of the Statement of Financial Accounting Standards 121, " Accounting for the Impairment of Long Uved Assets and for 1.ong Lived Assets to be Disposed Of" and accordingly recognized as an
- impairment loss the net book value of the River Bend nuclear facility retroactive to January 1,1996. As a consequence of the impairment, Cajun can not recognize L
any depreciation expense related to River Bend in 1996; all other income and k
expense items related to the continuing operation of River Bend are reflected in the appropriate category on Cajun's income statement.
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Page 1 of 12
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On August 26,1996, the U.S. District Court for the Middle District of l_ouisiana approved a Settlement of various legal issues among Cajun's Trustee, the RUS, and Entergy. Under the terms of the Settlement, Cajun will dispose of River Bend i
by June 1,1997. In accordance with the terms of the River Bend Settlement, Cajun l
must fund up to $125 million (in 1995 dollars) to provide for the decommissioning of River Bend. De decommissioning liability is estimated to be $130 million at
- {
June 1,1997. This amount, net of the anticipated balance in the Decommissioning Trust Fund on June 1,1997, was accrued and expensed in August 1996. De net l3 decommissioning amount accrued was $109.3 million. As a consequence of the Settlement, all related assets and liabilities have been reclassified as current on Cajun's balance sheet as of August 26,1996.
i i
<l E) Under the provisions of the River Bend Joint Ownership Participation and Operating Agreement (JOPOA), Cajun has elected not to participate in the i
funding of the Service Water Project, inlet feedwater nozzle repair or replacement, l-other excessive extended outage costs and turbine rotor repairs.
Through December 31,1996, Cajun has withheld payments to Entergy for these activities i
totaling $52,189,878, which includes billed interest, pre-petition in the amount of
$8,605,561 and post petition in the amount of $9,459,649 through December 31 1996. These withholdings are based on Cajun's best estimate of the costs and are j
not reDected in the company's financial statements.
,J Also, beginning in September 1992 Cajun elected to withhold payments to Entergy R
for what it considers to be excessive River Bend costs. During the last week in October 1994, Cajun ceased all further payments during the remainder of 1994, l'
1995, and 1996 except for safety related costs (nuclear insurance and J-decontamination and decornmissioning fees).
Based on a combination of Entergy's billings and Cajun's best estimates, a Provision for Excessive River Bend i
Costs in the amount of $128,307,856 as of December 31, 1996, which includes billed interest through December 20,1994 for pre-petition withholdings and is b
reDected in the Comp==y's financial statements as a charge to the appropriate cost a
category (O&M expense, fuel purchases, capital work orders, interest expense, etc.)
i Pursuant to the terms of the River Bend JOPOA, Entergy exercised its option to sell Cajun's 30% share of the output of capacity and energy from River Bend and O
apply such proceeds to Cajun's outstanding balance of costs. The net sales d
proceeds (sales less transmission costs), are charged to the Prov:sion for Excessive River Bend Costs.
F he total net proceeds from the sale of Cajun's share of River Bend generation is q
$72,358,081 as of December 31,1996. De net accrued balance in the Provision M
for Excessive River Bend Costs, net of Entergy's sale of Cajun's 30% share of t
River Bend energy, is $55,949,775 as of December 31,1996.
]
Total River Bend withholdings as of December 31,1996 are $108,139,653.
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Page 2 of 12
F) Effective December 19,1994, the court ordered Cajun to supply Entergy with its share of BC2, U3 generation providing that Entergy deposits in a court registry the sums due Cajun under the JOPOA from November 1,1994 and each month thereafter. Entergy has deposited the required amounts through December 1996.
The court order further stipulated that Cajun shall be permitted to withdraw funds in the court registry whco Cajun's finadd obligations under the River Bend
{
JOPOA are current. Cajun's net receivable from Entergy is $71,096,386 as of December 31,1996 and does not include interest.
}
G) Certain reclassl6 cations have been made to the 1995 Financial Statements to
~
conform to the 1996 presentation.
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. I LIABILII'fES This Year 12st Year
% Chn.
EQUITIES AND MARGINS Memberships & Donated Capital................ S 390 390 Patronage Capital Assigned....................
35,988 35,988 Prior Year Deficit)..........................
Current Ye(ar Margin (Deficit)..................
(2,095,462)
(2,119,993)
(1)
(1,1%,704) 24,531 (4,978)
Total Equities and (Deficit)..................
(3,255,788)
(2.059.084) 58 NOT SUBJECT TO COMPROMISE ACCUMULATED OPERATING PROVISIONS Decommissioning Provision....................
2,666 20,219 (87)
Post Retirement Benefits......................
6,269 5,442 15 Total Accumulated Operating Provisions........
8,935 25,662 (65)
CURRENT LIABILITIES Accounts Payable............................
919 938 (2)
Taxes Other than income Taxes.................
79 113 (30)
O th e r......................................
15,752 11,551 36 Inventory - River Bend.......................
2,989 0
i Decommissioning - River Bend.................
129,552 0
2 Excess Cost Provision - River Bend..............
55,950 0
Total Current Liabilities......................
205,241 12,602 1,529
\\
DEFFERED CREDITS.....................
1,082 1,082 Total Not Subject to Compromise...........
215,258 39,346 447 I
SUBJECT TO COMPROMISE RUS Note A c
2,639,231 2,646,860 RUS Note B 1,513,985 1,513,985 Industrial Development Bonds..................
900 900 1
Accounts Payable............................
5,621 5,741 (2)
[
Other Uabihties.............................
619 638 (3)
Excessive Cost Provision - Rim Bend............
0 33,394 (100)
Inventory - River Bend.......................
0 2,989 (100) i
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Total Subject to Compromise 4,160,357 4,204,507 (1)
Total......................................
3 _1,1 19,827
$ 2.184.769 (49,.)
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Page 5 of 12 conow/Amvuwn-Jan-97 l
CAJUN ELECTRIC POWER COOPERATIVE, INC.
STATEMENT OF REVENUE AND EXPENSES Period Ended December 31, 1996 (Thousand $'s)
Mills This This Last This Month Year Year Chr.
Year OPERATING REVENUE Sales of Power To Members................. $ 21,238 $
299,586
$ 290.020 3
48 Sales of Power to Others...................
9,624 93,100 88,776 5
22 O t he r R even u e..........................
57 863 1.047 (18)
To t a l...............................
30,918 393,549 379.843 4
37 OPERATING EXPENSES I
Power Production F ue l.................................
13,495 158,710 151,3(M S
16 Operations & Maintenance...............
6,998 80.616 66,192 22 8
l Purcha sed Powe r.........................
1,147 17,669 8,224 115 22 Other Power Su 55 589 592 Transmission.. pply Expenses...............
3,449 39,925 36.628 9
4 Administrative & General..................
4,420 26,018 21,486 21 2
Depreciation & Amortization.......
3,457 40,350 76.306 (47) 4 Taxes..........................
528 8,678 8,285 5
1 Interest & Other Debt Expense.............
12 180 191 (6) 1 To t a l................................
33.562 372,735 369.207 1
35 OPERATING MARGIN (DEFICIT).....
(2,644) 20,814 10,636 2
OTHER INCOME AND (EXPENSES)
Re nt al Inco me.... ;.................
50 91 109 (16)
Interest Income.........................
1,094 10.5 %
7,675 38 1
s Other Nonoperating Income................
1,178 1,194 5,061 (76)
Gain /Imss-Disposition of Assets............
(187)
(758) 191 (4%)
Litigation Settlements.....................
0 0
5,512 (100)
To t a l.................................
2,134 11,124 18,548 (40) 1 Nat Margin (Deficit) Before River Bend Icpairment & Cumulative Effect..........
(509) 31,938 29,183 9
3 RB Impairment / Decommissioning Costs....
176 1,228,642 0
117 Margin (Deficit) Before Cumulative Effect (685)
(1,1%.704) 29,183 (4.201) (114)
Cum Effect of Change in Acets Principle...
0 0
4,652 (100)
}s N:;t Margin (Deficit).................... $ _(685) $ _ (1,1%,704) $
24.531 (4,978) (114)
See Footnotes on Page 1.
!L Page 6 of 12 ConDrv/AcaplJM/22-Jan-97
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CAJUN ELECTRIC POWER COOPERATIVE, INC UrlLITY PLANT COST
SUMMARY
BY LOCATION As Of D~= al=r 31, 1996 4
' Ibis Year I =* Year
% Chg, l
Big Cajun No. 2. Unit !
256,380,237 254,162,323 1
I Big Cajun No. 2, Unit 2 242,528,599 242,584,918 Big Cajun No. 2. Unit 3 287,151,417 289,784,983 (1)
Big Cajun No. 2, Common - Units 1 & 2 80,777,761 80,397,922 i
Big Cajun No. 2 Common - All Units 148,999,860 148,174,389 1
Total Big Cajun 2 1,015,837,E r4 1,015,104,536 St. Louis Facility 31,802,531 31,897,943 River Bend 0
1,468,915,288 (100)
Big Cajun No.1 36,765,897 36,291,158 1
Transmission Facilities 70,445,233 74,507,746 3
Headquarters 12,029,110 11,881,408 1
s Operations Center 14,224,291 14,106,273 1
Electdc Plant-In-Service 1,187,104,936 2,652,704,350 (55)
Less: Accum. Depreciation & Amortization (527,512,537)
(846,827,772)
(38) 659,592,399 1,805,876,578 (63)
Construction Work-in-Progress 14,566,749 11,998,399 21 Nuclear Fuel @ Amortized Cost 0
28,8 %,075 (100)
Lend Held For Future Use 9,904,380 9,904,380 Utility Plant - Net 484AfiL524 1.856.675.432 (63)
Note: Nuclear Fuel has been reclassed effective August 26,1996 as a current asset. See Footnote D.
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Page 7 of 12 ConDiv/Accig/LSH/22 Jan-97 i
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CAJUN ELECTRIC POWER COOPERATIVE, INC.
I SCHEDULE OF ENERGY RESOURCES / USAGE P riod Ended December 31, 1996 Megawatt Hours (MWH's)
)
RESOURCES This Month This Year Last Year C_h.g, h
Generation Big Cajun 1:
MWh Gross 0
301,420 613,219 (51)
Less: Station Service 0
18.525 38.181 (51)
Net Big Cajun 1 0
282,895 575,038 (51)
Big Cajun 2:
MWh Gross 717,525 8,056,688 7,680,527 5
Less: Station Service 43,342 478,613 470,500 2
Net Big Cajun 2 674,183 7,578,075 7,210,027 5
River Bend:
j MWh Gross 219,698 2,189,677 2,541,515 (14)
Less: Station Service 6,373 131,576 162,181 (19)
Net River Bend 213,325 2,058,101 2,379,334 (14)
Total Net Cajun Generation 887,508 9,919,071 10,164,399 (2)
Perchased Power 59,434 818,235 500,215 64 i
Meter Error Correction (968)
(16,608)
(3,984) 317 l
Iradvertent Energy 66 (32) 722 (104)
TOTAL ENERGY RESOURCES 946.040 10.720.666
,_10.661 352 1
USAGE Member Sales Beauregard Electric Cooperative 45,161 566,735 546,264 4
Claiborne Electric Cooperative 34,385 413,169 378,228 9
Concordia Electric Cooperatiw 12,454 161,265 160,670 Dixie Electric Membership Cor 95,949 1,210,709 1,181,107 3
Jefferson Davis Electric Corp. p.
14,342 188,923 182,686 3
Northeast Louisiana Pour Co-op.
15,918 222,434 214,909 4
Pointe Coupee Elec. Membership Corp, 15,986 209,055 194,339 8
South Louisiana Electr*c Co-op.
30,799 422,171 416,163 1
Southwest LA Elec. Me.nbership Corp.
118,091 1,499,056 1,444,700 4
Teche Electric Cooperative 14,386 179,664 177,041 1
Valley Electric Membership Corp.
38,786 489,783 476,682 3
Washington-S.t.Tammany Elec. Co-op.
56,043 660,512 632,726 4
Total Member Sales 492,300 6,223,476 * "'
6,005,515 4
4 Off-System Sales 437,318 4,300,250 4,453,672 (3)
Tctal Sales 929,618 10,523,726 10,459,187 1
Lire Loss 16,422 1 %,940 202,165 (3)
}
TOTAL ENERGY USAGE 946,040 10,720,666 10,661,352 1
I Page 8 of 12 ConDMAcetgDJ/22-Jan-97 b
x t
CAJUN ELECTRIC POWER COOPERATIVE, INC.
RIVER BEND OPERATIONS - CAJUN'S 30% OWNERSHIP 4
Period Ended December 31, 1996 THIS MONTH Tills YEAR LAST YEAR i
Mills Mills Mills 3 Total
/kWh 3 Total
/kWh 3 Total
/kWh River Bend Energy 3
3,978,511 19 33,316,457 16 3
36,023,134 15 iterest Income 97,189 1,111,951 1
1,036,491 TOTAL REVENUES 4,075,700 19 3
34,428,408 17 3
37,059.625 16 EXPENSES Power Production Nuclear Fuel 1,282,152 6
12,551,749 6
16,303,637 7
Operations & Maintenance 4,470,454 21 41,719,916 20 36,924,091 16 Administrative & General 465,862 2
6,548,723 3
5,671,821 2
Depreciation (See Note below) 303 3,640 36,291,770 15 i
Decommissioning 209,038 1
2,412,985 1
2,250,790 1
Interest & Debt Expense 5,994 92,869 1,289,303 1
Penalties & Other Expenses 5
280 1,251 Taxes 8,188 36,808 12,853 TOTAL EXPENSES 6,441,996 30 63,366,971 31 98,745,516 42 NET (DEFICIT) FROM RIVER BEND OPERATIONS
$ (2,366,296)
(28,938,563) 3 (61,685,891)
Note: Effective January 1,1996, Cajun ceased recognizing depreciation expense on River Bend assets. However, there were t
certain "Special Projects" department assets depreciated against the River Bend location during 1996. This practice was discontinued effective December 31,1996. Also, refer to Footnote D on page 1 of 12.
Page 9 of 12 ConDiv/AmstJM/23-Jan-97
~---
m I
g
/
N g
CAJUN ELECIRIC FOWER COOFERATIVE,INC.
SCHEDULE OF OFF-SYSTEM SAIRS BY TYPE OF SALE Period Emded Deeember 31. 1996 This Momeh 1his Year la--
me.Y_ea.r.
y MWh
. $ Teeni kWh.
MWh
$ Total kWh
- MWh
$ Tesel kWh Alsbema Electric 5
0 900 24.300
' 27 1.419 32.812 23 Aqu8s Power Corp.
0 1.700 40.500 24 0
Arkansas Elecaric 600 12.840 21 35.159 667.952 19 35.138 610.190 17 City of Laimyene 0
60 1.400 23 33.923 640.362 19 CLECO 30,621 589.471 19 259.822 5.155.352 20 152.437 2.734.179 18 C & SW 12.382 244.513 20 55.933 1.169.699 21 3.525 65.725 19 East Teams Electric 1.525 28,506 19 51.445 1.008.544 20 148.224 2.770.642 19 Electric t'C f ___
9.548 185.172 19 41.760 848.648 20 0
Enron 5.106 117.472 23 24.226 524.942 22 3.277 64.854 20 Esser 8y Power Marketin8. Inc.
0 802 16.098 20 0
GSU 36.698
. 653.873 18 271.937 5.2M.730 19 233.970 4.211.543 18 KOCH LEFA 0
1.652 34.248 21 0
0 7.910 151.120 19 791 15.663 20 LGAE Fwwer Marteeing 0
800 16.000 20 0
Louis Drey6ss 0
1.086 24.220 22 0
Noram 0
I.655 41.748 25 40.883 166.983 4
Pan Energy 103 1.906 19 38.635 875.773 23 Rainbow 0
0 106 2.120 20 842 16.840 20 SMEFA 0
0 76.868 I 440.733 19 Soest 525 8.400 16 21.923 461.070 23 Soediern t'_
2.375 52.963 22 82.615 2.066.884 25 114.574 2.231.389 19 0
-=
SWEPCO 0
142 3.700 26 1.471 31.882 22 TVA 0
1.075 30.650 29 5.825 120.613 21 Visol Gas & Electric G.
1.682__
45A 27 78
__ _ _ _1,560 20 SUBTUrAL 99.483
__IMI N_
19 9W,835_
18.495.532 20 8 9,245_
_ l5,155,969, 18 Power Marketin8 ee
- F 0
014.579)
_0 SUBTOTAL 99.483 1.995.114 19 983.025
_ 18.388.953 38 353.2 _45
_ 15,155,969 Is NON-FIRM SMEFA I 38.650 1.110.415 29 423.935 12.281.880 29 471.695 12.673.571 27 SWEPCO 24,800_
62_I_}2__
25 292.800 7 413 361 25 286,400,
_ _6,921,221 24 8
SUBTUTAL G.488 1.7.72.247 27 716.735
_ 19 A 4_4I_,
27 758,095, 19,594,791 26 FIRM C&SW 0
3.650 102.350 28 0
MEAM 11.160 350.331 31 131.760 4.181.977 32 33.125 1.037.330 31 SMEFA Unit Pbwer Sales 44.125 1.153,666 26 458.303 12.182.516 27 '
414.860 11.957.262 29 SWEPCO
- E775,
$13,773 89 28,676 5,239,941 183
_ _l5.013 5.007.540 334 SlJOTOTAL 61,060_
2.017.771 33 622M.
_2_1,7_e6,784 35
_ 462,998 18,982,131 39 TOTAL CAJUN sal 2S 223.993 5.645.132 25
_ 2,242,l_49_
A 783 M 27
__2,87.4,338 52,752,892 25 CIVER BEND G15) ENERGY 213_,325_
3.M8,5t l._
19
_2,085,141
_ _33,316,457, le
, 2,379,334 36,e23,134 15 TOTAL OFF-SYSTEM sal 2S 437_.3 3, 9.623.643 22 M_,2R S EM,MS, 22
_ 4.453.672
$ _ 88,776,425 20 rate 10 or 12 ConDiv/Accig/LJM/22-hn-97
F 1
e CAJUN ELECTRIC POWER COOPERATIVE, INC SCHEDULE OF PURCHASED POWER Period Ended December 31, 1996 This Month This Year Last Year Mills /
Mills /
Mins /
MWh 3 Total kWh MWh 3 Total kWh MWh 3 Total kWh Hydroelectric Power SPA -Demand (kw) 3 230,328
-3 2,765,210
- 3 2.763 S36
-Energy 39,270 189,580 5
256,433 1,123,401 4
298,908 1,356A98 5
Total Hydrock.Q t.
39,270 419,908 11 256,433 3,888/ill 15 298,908 4,120A34 14 All Other Power Arkansas 0
44,263 940,229 21 2,300 50,925 22 CASW Services 1,575 68,919 44 87,876 2,439,444 28 82,863 1,526,906 18 CLECO 225 11,625 52 2,143 70,266 33 1,590 32,683 21 ElectricClearinghouse 0
525 15,825 30 0
ENRON 0
54,109 1,346,148 25 11,067 327,647 30 Entergy Power Inc.
2,750 112,525 41 28,858 660,323 23 0
OSU 0
657 15,338 23 0
KN Markealng 0
3,075 103,458 34 0
KOCH Electric 900 27,000 30 900 27,000 30 0
Louis Dreyfus 0
600 14,250.
24 0
LPAL 4,025 187,475 47 246,918 5,587,262 23 81,404 1,682,407 21 NarAm 0
0 35 15,295 25 Pan Energy 0
7,823 190,043 24 0
Dr.Rodosta 0
4 0
Sonst 6,338 217,158 34 22,488 567,016 25 0
Southern Companies 4,351 102,351 24 60,488 1,776,929 29 13,931 331,352 24 SPS 0
400 8,250 21 0
SWEICO 230 679 18,396 27 586 11,888 20 SWPS 0
0 5.276 85,016 16 Total Other 20,164 727,283 36 561,802 13,780,179 25 201,307 4,103,230 20 Subtotal (incl demand 3's) 59,434 1,147,191 R
818,235 17,668,790 R
500,215 8,224/164 g
Inadvertent Evrgy 66 0
(32) 0 722 0
Total 59,500 3 1,147.191 M$
17Ji68,790 500,937 3 8,224.064 J
Page 11 of 12 c o.mena2-s -*
.c..
n CAJUN ELECTRIC POWER COOPERATIVE, INC.
FUEL ANALYSIS Period Ended Decensber31.1996 Last
., Month This Year Year Net Mills /
Net Mills /
Mills /
Plant Euci Units Consumphon MWh's Tan I(a) - IMh Consumpanon MWh's Total (a) kWh kWh Big Cajun 2 Coal Tons (b) 420,8 %
674,183
$ 12,066,099 17.9 4,798,731 7,578,075 S
135,915,893 17.9 17.1 Oil 1000 Gal.(b) 184 132.841 0.2 2,049 1.285.046 0.2 0.1 BC 2 Total 12,198.939 18.1 137.200,939 18.1 17.2 BC1 Gas MCF, 0
0 14,094 0.0 3,181,757 282,895 8,948,602 31.6 20.1 Oil 1000 Gal.(b) 0 0
0.0 63 9.027 0.0 0.0 I4.094 0.0 8.957.629 31.7 20.1 RiverBend Nuclear (c) 213.325 1.282.152 6.0 2.058.10!
12,551.749 6.1 6.9 Grand Total 887.588 $ 13A95.185 15.2 9.919A71 5
158.710.318 16.0 14.9 i
(t) Includes -: _, _ _ plus fuel handhas and ;. -, _ ;.;- expenses (b) Eucludes GSLTs pomon of Unit 3. Coal consumiphon is e for necessine consent.
i (2) Cajun's 30% ofsonal her Bend genershon.
i Page 120012 cewiuu 4.ww h
I
Audited Financial Statements Cajun Electric Power i
Cooperative, Inc.-
December 31,1996 l
EUERNST& YOUNG LLP
i Audited Financial Statements Cajun Electric Power Cooperative, Inc.
l December 31,1996 9
AUDITED FINANCIAL STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC.
DECEMBER 31, 1996 REPORT OF INDEPENDENT AUDIT 0RS....................................................
1 BALANCE SHEETS
.................................................................. 2 STATEMENTS OF REVENUE AND EXPENSES................................................
4 STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT).......................
STATEMENTS OF CASH FL0WS..........................................................
6 NOTES TO FINANCIAL STATEMENTS:
NOTE 1 - BMKRUPTC Y PROC E ED I NG.........................................
NOTE 2 - GU L F STAT E S UT I L I T I E S........................................
NOTE 3 - S IGNI F ICANT ACCOUNTING POL ICIES................................
NOTE 4 - UT i l l T Y P L AN T..................................................
NOTE 5 - INVESTMENTS IN ASSOCIATED ORGANIZATIONS AND RESTRICTED FUNDS NOTE 6 - LONG TERM DEBT AND LI ABILITIES SUBJECT TO COMPROMISE...........
NOTE 7 - SHORT-TE RM INVESTMENTS.........................................
8 - I N C OM E T AX E S..................................
NOTE
... 36 NOTE 9 - EMPLOYEE BENEF I T PLANS.........................................
NOTE 10 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES............
NOTE 11 - NUC L E AR I NSURANC E..........................................
NOT E 12 - RAT ES AND REGULAT I ON.......................................
NOTE 13 - OTHER C0]ITMENTS AND CONTINGENCIES.......................
3
\\\\
OERNST& YOUNG UP a m on m \\sw a~w~
?01 hwdras street New Orleans loun ana 70139 9%4 Report ofIndependent Auditors Mr. Ralph R. Mabey Chapter 11 Tnistee for Cajun Electric Power Cooperadve, Inc.
Bankruptcy Case No. 9411474 We have audited the accompanying balance sheets of Cajun Electric Power Cooperadve, Inc. (the Cooperative) as of Deceniber 31,1996 and 1995, and the related statements of revenue and expenses, changes in equity and margin (deficit), and cash flows for the pars then ended. 'Ihese financial statements are the responsibility of the Cooperadve's management. Our responsibility is to express an opinion on these financial statements based on our audits.
j 1
We conducted our audits in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounung principles used and significant estimates made by management, as well as evaluaung the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our Opinion, the financial statements referred to above present fairly, in all material respects, the financial posidon of Cajun Electric Power Cooperadve, Inc. at December 31,1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounung principles.
The accompanying financial statements have been prepared assuming die Cooperative will continue as a going concern. As discussed in Note I to the Financial Statements, on December 21,1994, the Cooperative filed a voluntary petition for reorganindon under Chapter 11 of the Bankruptcy Code. The Cooperadve is currently operaung under the supervision of a Court appointed trustee who will continue to operate the Cooperative und) a plan of reorganintion is formulated and approved by the Bankruptcy Court. Any potendal plan of reorganizadon will be subject to the approval of the Cooperative's creditors and will require connrmadon by the Bankniptcy Court and there can be no assurance thst any plan of reorganization will be approved or confirmed, or that the Cooperative will continue to operate, in some form, under the terms of such plan of reorganization, in addidon, in the event a plan of reorganizadon is approved by the Bankniptcy Court which provides that the Cooperadve, in some form, will continue to operate, continuation of the business after reorganization is dependent upon the success of future operadons and the Cooperative's ability to meet its obligadons as they become due. The outcome of these uncertainties raise substantial doubt about the Cooperative's ability to continue as a going concern. The financial statements do not include any adjustments to reflect tne possible future effects on the recoverability and classification of assets or the amounts and classificadon of liabilities that may result from die outcome of these uncertainties.
As discussed in Note 4 to the financial statements, in 1996, the Cooperative changed its method of accoundng for impairment of long lived assets and long lived assets to be disposed of. As discussed in Note 9 to the financial statements, in 1995, the Cooperative changed its method of accoundng for other postredrement benefits.
&+
LLP February 27,1997 t enst & 4 oung tte a a memtwr of Ernst & 1oung international. Ltd BALANCE SHEETS CAJUN ELECTRIC POWER COOPERATIVE, INC.
l (IN THOUSANDS)
December 31 1996 1995 M5fi5 l
hTit.lis nm E W *<4c 1..nt it se,1ce
$1,187,105
$2,652,704 tr o u c e;)ated d
'eciation and ix e tzetica 527.512 846.827 659.593 1,805,877
- ontt uction. irk in progress 14.567 11,998 mNr tai a amortized cost 28,896 Eintrie. ',..nt held for future use 9.904 9.904 684.064 1.856.675 OTPER PROPERTY AND INVESTMENTS No0 utility property 670 670 Restricted funds 38,203 93,199 liwestments it. associated orgaaizations 22,227 25,150 Decomissioning reserve funds 2,666 20,219 Other receivables 13.201 48.648 76.967 187.886 CURRENT ASSETS l
Cash and cash equivalents 36,980 26,742 Restricted funds 108,000 Accounts receivable electric customers:
Hembers 25,695 33,446 Nonmembers 5,888 6.281 Accounts receivable - other 74,013 3,666 fuel and supplies inventories 37,108 62,668 Prepayments 1,917 3,885 River Bend:
Carrying value of facility 1,114,510 l
Impairment allowance (1,114,510)
Nuclear fuel at amortized cost 20,981 Nuclear decommissioning reserve fund 20.223 3
Low level waste reserve fund 2,850 E
Materials and supplies 23.132 356,787 136,688 DEFERRED CHARGES 2,009 3,520
$1.119.827 52.184,769 I
2-
December 31 1996 1995 EQUITY AND LIABILITIES EQUITYANDNARGIN(DEFICIT)
Membi.c; hips 1
1 Patronege capital credits 35,988 35,988 Unallocated deficit (3,292.166)
(2,095,462)
Donated capital 389 389 (3.255.788)
(2.059.084)
CURRENT LIABILITIES Accounts payable 919 938 Taxes other than income tax 79 113 Other accrued expenses 18,741 11,552 Decommissioning - River Bend 129,552 Excessive cost - River Bend 55.950 205.241 12.603 OPERATING RESERVES Decommissioning 2,666 20,219 Post retirement benefits 6.269 5.442 8.935 25.661 DEFERRED CREDITS 1,082 1,082 LIABILITIES $UBJECT TO COMPRONISE 4,160,357 4,204,507 e
$ 1.119.827
$ 2.184,769 The accompanying notes are an inte9tal part of these financial statements.
3
STATEMENTS OF REVENUE AND EXPENSES CAJUN ELECTRIC POWER COOPERATIVE, INC.
(IN THOUSANDS)
Year Ended December 31 1996 1995 OPERATING REVENUE Sales of electric energy:
Members 299,586 S 290,020 Nonmembers 93,100 88,776 Other
__.2E1 1.047 393.549 379.843 OPERATING EXPENSES Power production:
Fuel 158,710 151,304 Operations and maintenance 80,616 66,192 Purchased power 17,669 0,224 Other power supply expenses 589 592 Transmission 39,925 36,628 Administrative and general 16,575 18,260 Depreciation and amortization 40,350 76,306 Taxes, other than income 8,678 8,285 Interest and other debt expense 180 191 363.292 365.93i OPERATING MARGIN BEFORE RIVER BEND INPAIRNENT AND SETTLENENT 30.257 13.861 RIVER BEND INPAIRNENT & SETTLENENT 1.228.642 OPERATINGMARGIN(DEFICIT)
(1.198.385)
_1.1451 OTHER INCONE AND EXPENSES Interest, rents and leases 5,719 5,868 Other income and patronage capital credits 1,194 5,060 Gain (Loss) on asset dispositions (757) 191 Litigation settlements 5.512 6.156 16.631 REORGANIZATION ITENS Professional fees (9,443)
(3,225)
Interest on accumulated cash 4.968 1.916 (4.475)
(1.309)
MARGIN (DEFICIT) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (1,196,704) 29,183 CUMULATIVE EFFECT OF CH'NGE IN ACCOUNTING PRINCIPLE 4.652 MARGIN (DEFICIT)
$(1.196.704) 5 24.531 The accompanying notes are an integral part of these financial statements.
4
STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT)
CAJUN ELECTRIC POWER COOPERATIVE, INC.
(IN THOUSANDS)
Year Ended December 31, 1996 and 1995 i
Patronage Unallocated Member-Capital Margin Donated l
shits _
Credits (Deficiti Capital Total BALANCE JANUARY 1, 1995 5
1 535,988 5(2,119.993) 5389 5(2,083,615)
Net margin for the year 24.531 24.531 l
BALANCE DECEM8ER 31, 1995 1
35,988 (2,095,462) 389 (2,059,084)
Net deficit for the year (1.196.704)
(1.196.704)
BALANCE DECEMBER 31, 1996 5
1 M
5(3.292.166)
M 5(1.255.788)
The accompanyin9 notes are an integral part of these financial statements.
l,.
STATEMENTS OF CASH FLOWS CAJUN ELECTRIC POWER COOPERATIVE, INC.
(IN THOUSANDS)
Year Ended December 31 i
1996 1995 CASH FLOWS FRON OPERATING ACTIVITIES Cash received from sales of power 401,365
$ 376,615 Other cash receipts 3,786 2,505 Cash payments for fuel and fuel stock (156,522)
(168.106) 1 Operation and maintenance expenses paid (70,656)
(52,244)
Purchased power and transmission expenses paid (52,462)
(38,309) 4 Administrative and general expenses paid (19,238)
(21,793)
Taxes paid (16,030)
(15,531)
Interest, other income and litigation settlement 5.336 9.830 NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE RE0RGANIZATION ITENS 95,579 92,967 OPERATING CASH FLOWS FRON REORGANIZATION ITENS Interest received on cash accumulated as a result of the Chapter 11 proceeding 4,960 1,916 Professional fees paid for services rendered in connection with Chapter 11 proceeding (9.443)
(3.225)
NET CASH USED BY RE0RGANIZATION ITENS (4.475)
(1.309)
NET CASH PROVIDED BY OPERATING ACTIVITIES 91,104 91,658 CASH FLOWS FRON INVESTING ACTIVITIES Capital expenditures and nuclear fuel purchased (17,446)
(20,150)
Transfer to excess funds account (55.792)
(86.147)
NET CASH USED BY INVESTING ACTIVITIES (73,238)
(106,297)
CASH FLOWS FRON FINANCING ACTIVITIES Repayment of long term debt (7.628)
(12.624)
(DECREASE)INCREASEINCASHANDCASHEQUIVALENTS 10,238 (27,263)
Cash and cash equivalents at beginning of year 26.742 54.005 CASH AND CASH EQUIVALENTS AT END OF YEAR 5
36,980 5 26.742 RECONCILIATION 0F NET NARGIN (DEFICIT) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net margin (deficit) 5(1,196,704)
$ 24,531 ADJUSTMENTS TO RECONCILE NET MARGIN (DEFICIT)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 37,937 74,055 Amortization of nuclear fuel 9,941 15,511 River Bend impairment and asset dispositions 1,2?o,061 424 Increase in accounts receivable and investments in associated organizations (23,835)
(41,093)
(Increase Decrease in fuel and prepayments 5,907 (16,534)
Increase )n accounts payable and accrued expenses i
28.797 34.764 NET CASH PROVIDED BY OPERATING ACTIVITIES 5
91.104 5 91,653 The accompanying notes are an integral part of these financial statements. __
NOTES TO FINANCIAL STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC.
DECEMBER 31, 1996 NOTE 1 - BANKRUPTCY PROCEEDING Bankruptcy Filing:
On December 21,1994 (the Petition Date), Cajun Electric Power Cooperative, Inc. (the Cooperative) filed a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code and began operating as debtor-in-possession under the supervision of the United States Bankruptcy Court for the Middle District of Louisiana (Bankruptcy Court).
The need to file for Chapter 11 protection resulted from a conflict between the Louisiana Public Service Commission (LPSC) and the Rural Utilities Service (RUS), formerly the Rural Electrification Administration, over the proper wholesale rate to charge the Cooperative's member distribution cooperatives (Members).
On December 14, 1994, the LPSC ordered the Cooperative to lower its wholesale Member rate, effective December 21, 1994, from 54.5 mills per kilowatt hour to 48.B mills per kilowatt-hour reducing revenues by approximately 530.2 million on an annual basis.
On December 20, 1994, the RUS ordered the Cooperative not to reduce its wholesale Member rate as required by the LPSC order, alleging that the LPSC order was implicitly preempted.
Reduction of the Cooperative's wholesale rate without the consent of the RUS is an event of default under the terms of the' Cooperative's 1990 Debt Restructure Agreement (DRA)(see Note 6). On December 21, 1994, the Cooperative complied with the order of the LPSC, filed a new tariff reflecting the lower rate as ordered by the LPSC, and filed for relief under the United States Bankruptcy Code.
The Hon. Frank J. Polozola, United States District Judge for the Middle District of Louisiana, withdrew the automatic reference of the Cooperative's Chapter 11 case shortly after the case was filed.
On August 9,
- 1996, Judge Polozola referred all matters related to plans of reorganization and disclosure statements to the Bankruptcy Court.
The Honorable Gerald Schiff, United States Bankruptcy Judge, is presiding over consideration of the Competing Plans, which are described below.
7 t
I
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 1 - Continued Appointment of Trustee Within the first few months following the Petition Date, three parties in interest, Central Louisiana Electric Company (CLECO), Teche Electric Cooperative, Inc. (Teche), and RUS, filed a motion reque sting appointment of a trustee in the Cooperative's Chapter 11 case. Hearings on the appointment of a Chapter 11 trustee were held in June of 1995.
On August 1, 1995, the Court ordered the appointment of a trustee.
The United Statts Trustee proposed Ralph Mabey as trustee and on August 23, 1995, the United States District Court for the Middle District of Louisiana (the Court) entered an order approving the appointment of Mr.
Mabey as Trustee.
Mr. Mabey qualified as Trustee on August 30, 1995.
The Court's order requiring appointment of a trustee was appealed by a number of parties to the United States Court of Appeals for the Fifth Circuit (Fifth Circuit).
The Fifth Circuit ultimately affirmed the Court's appointment of a trustee and on October 7, 1996, the United States Supreme Court denied a writ of certiorari appealing the Fifth Circuit's decision.
Cash Collateral Proceedings:
In February 1995, the Bankruptcy Court approved the Cooperative's use of cash in the ordinary course of business to pay usual and necessary operating expenses based on its 1995 budget.
Pursuant to that Stipulation and Order, the Cooperative must notify and receive the consent of RUS of any increases in the budget relating to budgeted capital projects and other budgeted capital expenses.
If any proposed unbudgeted capital expenditure exceeds $100,000 on a single project or an aggregate of $300,000 on multiple projects in a calendar quarter, the Cooperative also must obtain RUS approval.
The Cooperative is authorized to make emergency capital expenditures, but must notify RUS as soon as possible. On the first day of each conth, the Cooperative is required to deposit in a segregated account all funds in excess of $35 million as of the last day of the prior month.
No distribution can be made from this segregated account except on order of the Bankruptcy Court after notice and a hearing. The Members Committee has asserted that the Members own the excess funds in the segregated account.
This assertion may be addressed in Adversary Proceeding (Adv. Pro.) No. 96-1073 commenced by the Trustee, described below.
The Bankruptcy Court has issued cash collateral orders for 1996 and 1997 with the same terms and conditions as the original Order.
The initial order authorizing use of cash collateral also fixed May 9,1995 as the date by which parties had to assert challenges to the extent, validity, or priority __
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 1. Continued of liens.
The Cooperative, the Creditors Committee, the Members Committee, and Entergy-GSU (GSU) all timely filed challenges to parties asserting security interests in the cash collateral.
In addition, on August 20, 1996, the Creditors Committee filed an objection to the claims of RUS including challenges to some of the security interests asserted by RUS.
The Court has not yr' acted on these issues.
The River Bend Settlement, described in Note 2, provides for the Trustee to transfer
$125 million in 1995 dollars into a " decommissioning trust" to satisfy the Cooperative's obligations with respect to the future decommissioning of River Bend.
Some of these funds will come from the Cooperative's existing decommissioning trust fund, but a substantial majority of these funds will likely be paid from funds which RUS asserts constitutes its cash collateral.
The Creditors Committee has asserted that the cash held by the estate in the cash collateral account is not collateral of RUS and is unencumbered.
Both RUS and the Members Committee agreed that cash collateral in which both assert an interest could be used to fund the decommissioning trust and that both would relinquish rights they otherwise have to those funds upon the transfer of the cash into the decommissioning trust fund.
The Creditors Committee asserts that it has not agreed to relinquish rights in cash that would be transferred to the decommissioning trust fund and has appealed the Court's decision to the Fifth Circuit.
No stay of the order pending appeal has been sought or obtained by the Creditors Committee and, as a consequence, the appeal may be irrelevant upon the confirmation of any of the Competing Plans.
Excess Funds Account:
The excess funds account is an escrow account created pursuant to cash collateral stipulations between the Cooperative or the Trustee and RUS into which funds in excess of $35 million have been deposited during the Cooperative's case.
RUS asserts a security interest in the excess funds account as does the Members Committee.
The excess funds account balance is $143 million as of December 31, 1996. The Members Comittee has asserted that the Members are entitled to the funds in the excess funds account, and have asserted that their claims be satisfied in the form of cash payments to Members or in the form of immediate rate relief.
The Creditors Committee has also asserted that cash in this account is unencumbered by RUS liens and that the rights of Members in the. excess funds t.ccount, if any, are subordinate to the claims of the Creditors Committee.
The
.g.
Not:s_to Financial Statements cajun Electric Power Cooperative, Inc.
Note 1 - Continued Trustee has filed Adv. Pro. No. 96-1073 to enjoin the Members Comittee's attempts to seek a further reduction of the Cooperative's rates based on the postpetition suspension of the Cooperative's debt service payments to RUS.
It is expected that issues relating to rights in the excess funds account will be determined in that proceeding, the confirmation proceedings or in proceedings relating to objections to RUS's claims.
Rate Jurisdiction Litigation (Preemption Case):
On December 21, 1994, the same day that it filed for protection under Chapter 11, the Cooperative filed the Rate Jurisdiction Litigation against the LPSC and RUS seeking a determination of which entity has jurisdiction over the Cooperative's rates.
RUS initially sought a temporary restraining order to prever,t the Cooperative from lowering its rates as required by the LPSC.
In January 1995, the Court denied the request.
On April 20, 1995, the Court heard cross-motions for summary judgment.
On July 7, 1995, the Court ruled that the Rural Electrification Act (REA) does not preempt the LPSC from exercising rate jurisdiction over the Cooperative, that the preemption regulations promulgated by RUS 'mder the REA are invalid, and that there is no conflict which raises a preemption issue on the facts in this case.
The Court also abstained from determining whether the rate set by the LPSC is discriminatory, permitting the appeal of the LPSC order to proceed in state court. The Court's order on the matter was then ar, pealed to the Fifth Circuit by RUS.
The issues have been briefed by both parties before the Fifth Circuit and oral argument was held before the Fifth Circuit in June 1996. No ruling has yet been issued by the Fifth Circuit.
Proposed Acquisition of Techo by CLEC0:
Prior to The Cooperative's Chapter 11 filing, CLECO agreed to purchase Teche, one of the Members.
Teche's members and board of directors agreed to the sale.
The transaction was not completed because the Cooperative filed a motion to enforce the automatic ctay, prohibitin( the sale.
Ultimately, the Cooperative, CLECO and Teche reached an-agreement to postpone a hearing on the motion.
In resma to requests from Teche, CLICO, and staff members of the LPSC, the Trustee has met with CLECO to negotiate the terms aH conditions of a power sales agreement with CLECO to replace the Teche All-Rep %ments Contract.
The Trustee's view is that any such agreement must enhance the value of all of the Cooperative's _
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 1 - Continued assets, not create a detriment for the Cooperative's reuining Member cooperatives or the Cooperative's creditors, and be approved by the RUS.
As of this date no agreement has been reached.
Mesters Couaittee's Complaint to Nullify All-Requirements Contracts:
On July 15, 1996, the Members Committee filed its complaint for Declaratory Judgment against the Trustee (Adv. Pro. No. 96-1052) (the Members Complaint) seeking a declaration that the All-Requirements Contracts entered into between the Cooperative and its twelve member distribution cooperatives (1) are a nullity and cannot be enforced against the Members, (2) cannot be assumed and assigned by the Trustee without the consent of the Members and the LP40, and (3) that the Trustee's Plan constitutes an impermissible modification of the All-Requirements Contracts.
The issues raised by the Members Complaint and their significance to the Cooperative's bankruptcy case and confirmation of the Competing Plans are described in detail in the Supplemental Disclosure Statements filed in ecnnection with the Members / Southwest Electric Power Company (SWEPCO)/GS] Plan and with the Trustee's Plan.
Both parties filed motions for summary judgment.
Both motions for summary judgment were heard by the Bankruptcy Court on December 12, 1996.
The Bankruptcy Cnurt has taken this matter under advisement and has not yet issued a ruling.
A decision by the Bankruptcy Court granting the Member's motion for summary judgment would have a
}
aaterial adverse effect upon the Cooperative.
Bidding Procedures: On January 22, 1996, the Court approved the Trustee's motion to establish procedures for submission of proposals to purchase the Cooperative's assets.
The approved procedures contemplated submission of proposals by prospective purchasers by March 8,1996, and then the review of the proposals and comparison of these proposals with a potential stand-alone reorganization of the Cooperative.
The procedures could also be revised based on potential settlements with parties.
The
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Trurtee's financial advisor issued a Request for Proposals based on the approved procedures, and on March 8, 1996, the Trustee received twelve proposals.
The Trustee selected as the lead proposal a bid by NRG Energy, Inc. (NRG) and Zeigler Coel Holding Company (Zeigler) to create a new limited liability company (Louisiana G:nerating) to puichase certain non-nuclear assets of the Cooperative for ~ 51.09 billion.
The Trustee's Plan of Reorganization (Trustee's Plan) incorporates the _
Notes to Financial Statements
-Cajun. Electric Power Cooperative, Inc.
Note 1 - Continued proposal of NRG and Zeigler which was joined by Southern Energy, Inc. (Southern), on
-July 2, 1996.
Trustee's Plant On January 6.- 1997, the Trustee's Plan was amGded to provide for tro options.
Under the consensual approach, a Member could agree to enter into a n:w wholesale power agreement directly with Louisiana Generating.
If all. Members did so, then the Cooperative would cease to exist after the Effective Date.
The nonconsensual plan provides - that a reorganized Cooperative assume the existing Member All-Requirements Contracts and purchase power directly from Louisiana Generating on behalf of the Members as well as provide certain services for the Members. With the concurrence of RUS, the Trustee': Plan provides that the initial j
wholesale rate as well as the assumed purchase p. ice of the Cooperative's. non-nuclear assets would be reduced as Members agree to the consensual path.-
As a consequence, the purchase price has been reduced to $1.052 billion and is subject to further' possible reduction to $1.012 billion to the extent Members agree to enter-into a new wholesale power contract with Louisiana Generating.
Additionally, the purchase price may be increased or decreased ty $700,000 for-each basis point change in the interest rate yield to maturity of ten-year U.S. Treasury securities to the extent the yield is above 6.56% or below 6.26% as of the last business day immediately prior to the date of closing.
Competing Plans:
Ccapeting plans were filed by the Unofficial Members Committee /SWEPCO/GSU as well as the Creditor's Committee /Enron.
On July 2,1996, the initial Southern Plan and disclosure statement were filed. On October 1, 1996, the Southern Plan was withdrawn and Southern became a participant in the Trustee's Plan.
Each of the competing plans have been amended several-times since their initial filing. Both the Member /SWEPCO/GSU Plan as well as tha-Enron Plan have been amended increasing the proposed purchase price to $780 million and $773 million,
. respectiveb.
The Enron Plan offers a second option including a cash ps.yment of
$525 million plus what is purported to be an additional $506 million in future debt service, equity interests and cash flows.
. Regulatory Approvals:
In accordance with provisions of the Bankruptcy Code - the rates contemplated under each of the Competing Plans are subject to. approvals by _
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 1 - Continued governmental regulatory comissions with jurisdiction over the rates proposed under the Competing Plan.
C:nfirmation Process:
The purpose of the confirmation hearing is to determine if any of the Competing Plans has been accepted by a requisite number of claims and interests and whether the other requirements for confirmation of any or all of the Competing Plans have been satisfied.
To be confirmed, a Competing Plan must be approved by the Court pursuant to Section 1129 of the Bankruptcy Code after a
confirmation hearing.
Only one Competing Plan can be confirmed.
If more than one Co peting Plan is eligible for confirmation, the Court will decide at the confirmation hearing which Competing Plan to confirm, taking into consideration the preference of creditors and interest holde-s.
I To the extent that confirmation of a Competing Plan requires the establishment of hypothetical amounts for the value of assets or claims and funds available to pay claims, the Court will make those rulings.
i in connection with confirmation of any of the Competing Plans, the Court must determine that confirmation of a Competing Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Cooperative or any successor to the Cooperative under the Competing Plan, unless such liquidation or reorganization is proposed in the Competing Plan.
Confirmation hearings commenced on December 16, 1956.
On January 7, 1997, upon motion by one of the Cooperative's Members, bankruptcy counsel for the unofficial me:bers committee was disqualified for a conflict of interest by the Bankruptcy Court.
As a consequence, the Court postponed the continuation of the confirmation hearings until April 21, 1997.
A confirmed plan leaves the holders of claims with new rights as set forth in the confirmed plan.
Therefore, in the event of a default after confirmation, a holder of a claim may pursue itz remedies under the plan.
Some rights may remain with l
holders of claims after the provisions of the cenfirmed plan have been carried out.
The automatic _ stay of Bankruptcy Code Section 362(a) as to actions. against the Cooperative remains in effect until the effective date of the plan.
Thereafter, all Notes to Financial Statements cajun Electric Power Cooperative, Inc.
Note 1 - Continued parties in interest will be enjoined pursuant to the plan, the Order confirming the plan, and Sections ll41(d)(1) and 524(a) of the Bankruptcy Code, from taking _any action inconsistent with the plan.
Accounting Policies:
Under the Bankruptcy Code, as of the petition date, all actions of creditors to collect pre-petition indebtedness are stayed.
As a result, no party which has a security or adverse interest in the debtor's property may take any action against the debtor or the property of the debtor regardless of the location of the property or who is in possession of the debtor's property until the stay is modified.
Additionally, under the Bankruptcy Code, the Cooperative may reject executory contracts and unexpired leases with the approval of the Bankruptcy Court.
If an executory contract or lease is rejected, that rejection is deemed to f
be a breach of the contract or lease by the debtor, with damages, if any, being treated as a pre-petition, unsecured claim. Substantially all of the liabilities of the Cooperative as of the petition date are subject to compromise under a plan of reorganization which may be filed and approved in accordance with the Bankruptcy Code.
l l
In accordance with Generally Accepted Accounting Principles, the Cooperative has adopted the provisions of the American Institute of Certified Public Accountants Statement of Position (SOP) 90-7, " Financial Reporting by Entities in Reorganization Under the Bankruptcy Code".
In general, certain provisions of the Bankruptcy Code
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may relieve a debtor from its obligation to pay interest while in Chapter 11.
Interest on secured claims is generally accrued and expensed only to the extent that the value of the underlying collateral exceeds the allowed amount of the secured claim.
Additionally, interest on unsecured claims is not accrued if the debtor is insolvent.
If a plan of reorganization for the Cooperative is confirmed by the Bankruptcy Court, the ability of the Cooperative to continue as a going concern will be dependent upon the terms of the plan, and, if contemplated by the plan, the Cooperative's ability to continue in business and meet any obligations under the plan as they become due.
The accompanying financial statements have been prepared l
Notes to Financial Statements cajun Electric Power Cooperative, Inco Note 1 - Continued on a going concern basis which assumes continued operations and the realization of assets and liquidation of liabilities in the ordinary course of business.
As a result of the reorganization proceeding, the Cooperative may have to sell assets and settle liabilities for amounts other than those reflected in the financial statements.
Also, a plan of reorganization could materially change the amounts currently recorded in the financial statements and would likely include the resolution of significant litigation and regulatory disputes.
The accompanying financial statements do not give effect to any adjustments to the carrying value of assets or amounts and classification of liabilities that may be necessary as a consequence of the Chapter 11 proceeding since it cannot be determined when a plan will be confirmed by the Bankruptcy Court.
The appropriateness of the continued use of the going concern basis is dependent upon several things, including confirmntion of a plan of reorganization whereby the Cooperative may continue in some form as an operating entity, the success of future operations, and the ability to generate sufficient cash to meet the obligations under the plan as they become due.
The Cooperative is in default under the terms of the DRA as well as all of its other long-term loan agreements and obligations.
All of the debt of the Cooperative, other than post-petition liabilities, is classified as Liabilities Subject to Compromise in the accompanying balance sheets.
NOTE 2 - GULF STATES UTILITIES GSU:
The Cooperative is party to a number of agreements with GSU.
The two are parties to the River Bend J0P0A and the Joint Ownership Participation and Operating Agreement for Big Cajun II, Unit 3 (the Big Cajun II, Unit 3 J0POA), which govern the rights and obligations to the ownership and operation of the two generating facilities. They are also the parties to the Power Interconnection Agreement, which provides for the transmission of power generated by the Cooperative, including purchased power, over GSU's transmission system.
On June 5,
- 1992, Entergy Corporation (Entergy) and GSU entered into an agreement to combine the two companies subject to various regulatory approvals.
The merger of Entergy and GSU was consummated on December 31, 1993.
Entergy Operations, Inc., a wholly-owned subsidiary of Entergy, is the operator of River Bend.
Not:s to Financial Statements Cajun Electric Power Cooperative. Inc.
Note 2 - Continued River Bend Settlement:
There is substantial litigation between the Cooperative and GSU, although much of it was suspended by the Trustee after his appointment.
The litigatio1 disputes between these two parties are described below.
In late April 1996, the Trustee, GSU and RUS executed a settlement term sheet for the River Bend Settlement which contemplates resolution of issues involving River Bend as well as all other specified claims and disputes between the Cooperative and GSU and between RUS and GSU.
On August 26, 1996, the Court approved the Trustee's motion for approval of the River Bend Settlement.
The Members Comittee supported the motion for approval of the River Bend Settlement, but was concerned that the right of Members to assert that amounts used to fund the deco.amissioning trust described below were funds of the Members.
This issue was resolved by the Members Comittee agreeing that the River Bend Settlement was sufficiently important to the resolution of the Cooperative's Chapter 11 case that it would relinquish rights to funds to be transferred into the decomissioning trust.
The Creditors Comittee, while stating that it ultimately supported the River Bend Settlement in the context of a plan of reorganization, opposed the motion on grounds, among others, that the motion constituted a igh r_9Jul plan and could only be approved in the context of plan confirmation.
The Court overruled the Creditors Comittee's objection and the Creditors Comittee has appealed the Order approving the River Bend Settlement to the Fif th Circuit, but has not sought nor obtained a stay of the Order pending appeal.
As approved, the only remaining condition to consumation of the River Bend Settlement is the approval of certain regulatory bodies.
Under the Order, the River Bend Settlement can be consumated independently from confirmation of a plan of reorganization.
The River Bend Settlement provides that unless extended by mutual agreement, the Cooperative will dispose of River Bend by June 1, 1997 under one of the three settlement options available to the RUS. As a result, all remaining River Bend assets and associated liabilities, including the Unit 3 receivable from GSU, are classified as current assets or liabilities as of December 31, 1996.
The terms of the River Bend Settlement are generally as follows:
l l
Notes to Financial Statements cajun Electric Power Cooperative. Inc.
Note 2 - Continued The Cooperative is to pay $125,000,000 in 1995 dollars into a decomissioning trust fund to be used for decomissioning costs (as defined in the settlement term sheet signed by the parties) related to its River Bend Interest.
Under the terms of the Settlement, this payment will absolve the Cooperative of any further obligation with respect to costs necessary to decomission the River Bend facility.
Based or the terms of the Settlement Agreement, in 1996 the Cooperative accrued the additional decomissioning cost. Upon completion of the decomissioning of River Bend, surplus funds, if any, in the trust fund will be remitted to RUS.
Under the terms of the River Bend Settlement, at the option of RUS, (1) the Cooperative's River Bend Interest and related fuel and spare parts will be sold to a purchaser, with the purchaser succeeding to prospective obligations related to the Cooperative's River Bend Interest, or (2) the Cooperative's River Bend Interest and related fuel and spare parts will be transferred to RUS and RUS will succeed to prospective obligations related to the Cooperative's River Bend Interest.
In the event RUS exercises neither option, the Cooperative's River Bead Interest and related fuel and spare parts will be transferred to GSU with no payment to the Cooperative's estate or to RUS, but GSU will succeed to prospective obligations related to the Cooperative's Rivar Bend interest.
RUS agrees to permit the transfer of the Cooperative's River Bend Interest frae and clear of its lien if it is transferred to a party other than itself, and, in any event, the Cooperative will have no further obligation related to the Cooperative's River Bend Interest.
The Cooperative's share 'of any cash proceeds from litigation initiated against a contractor for alleged design defects of the River Bend turbine generator will be paid to RUS and any in-kind or other non-cash consideration will be payable to the new owner of the Cooperative's River Bend Interest.
On December 10, 1996, GSU and the contractor executed a settlement agreement which included a Confidentiality Agreement limiting the circumstances under which GSU may reveal the terms of the agreement to parties other than RUS.
Additionally, RUS may disclose to any prospective transferee of the Cooperative's River Bend Interest, under the terms of the River Bend Settlement, the terms of the agreement relating to the performance of _ _ _ _ _
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 2 - Continued work, the engagement of services and the sale of materials in connection with the future operation or maintenance of the River Bend nuclear facility.
Under existing Federal Energy Regulatory Commission (FERC) decisions (which are subject to appeals), the claim due GSU from the Cooperative for transmission services under certain transmission dockets and associated litigation totals
$55,000,000.
No liability has been recorded by the Cooperative related to this ratter.
Under the River Bend Settlement, GSU agrees to waive its right to collect this sum.
Existing transmission agreements between the Cooperative and GSU and others will be terminated.
The Cooperative or its transferee will receive transmission services under Entergy's Network Service Tariff or Entergy's Transmission Service Tariff as of the later of a date twelve months after May 1,1996, the date of the River Bend Settlement, or its closing date.
The Cooperative or its transferee will retain ownership of the Cooperative switchyards and through bus facilities.
The Cooperative will transfer to GSU (and the RUS will release its liens on) two high voltage (500 kV) transmission lines provided that Entergy's Network Service Tariff and Transmission Service Tariff make continued ownership of the lines by the Cooperative unnecessary te provide current or future service.
Pursuant to the River Bend Settlement, all claims and disputes between the Cooperative and GSU and between GSU and RUS, and certain claims and disputes between the Cooperative and RUS vrill be dismissed, released, and satisfied.
These include all claims for the River Bend litigation, the fraud and breach of contract case, thc service water litigation, the nullity case, all pending cases before any regulnory agency or on appeal from any regulatory agency (such as the transmission cases before FERC including the CTOC Litigation, the CSTS Litigation, the Entergy Open Access Tariff, the merger appeals before FERC, the SEC, and the NRC, ary other tatters related to River Bend pending before any regulatory agency), the antitrust case, any claims of equitable subordination of RUS's rights, and any other claims or disputes between the parties, but do not include claims which may be. independently held by others not a party to the Settlement.
The injunction in the Service Water _._
Not:s to Financial Statements Cajun Electric Power Cooperative. -Inc.
Note 2 - Contihded Litigation is to continue in place until the closing of the River Bend Settlement and then-all funds paid or to be paid into the Registry of the Court and all accumulated interett will be paid to GSU.
In addition to the $108 million reserved in 1996 for the River Bend Settlement which is related t'o the required decomissit.ning cost payment, the Cooperative has certain l
recorded assets and liabilities which may be written off or comprised as a result of the River Bend Settlement.
As of December 31, 1996, the net carrying amount of these assets and liabilities is approximately $56 million.
The ultimate gain or loss related to these assets and liabilities is not determinable at this time and the amount will differ from the $56 million net carrying amount based on River Bend operating activity between December 31, 1996 and the date the River Bend Settlement is consumated, in the event the River Bend Settlemer - cannot be consumated prior to the effective date of any confirmed plan of reorganization for the Cooperative, each party to the River Bend Settlement will be returned to its position prior to the River Bend Settlement.
In addition, because each of the Competing Plans includes the River Bend Settlement as one of its conditions precedent, no plan may become effective if the River Bend Settlement is not consumated.
Motion to Reject River Bend Joint Ownership Participation and Operating Agreement (J0P0A):
On December 28, 1994, the Cooperative filed a motion to reject the River Bend J0POA as an ext utory contract.
GSU has opposed this motion and RUS and the United States Nuclear Regulatory Comission (NRC) have jointly filed a pleading indicating that they do hot oppose rejection, provided that the Cooperative complies with regulatory requirements involving the NRC.
The motion to reject has not been heard.
River Bend Litigation:
In 1989, the Cooperative filed a lawsuit against GSU in the United States District Court for the Middle District of Locisiana alleging fraud in l
the induceunt to enter into the transaction resulting in its 30% co-ownership of an undivided interest in River Bend (River Bend Interest) and also alleging misrepresentation, mismanagement, breach of fiduciary duty, and breach of contract (GSU owns the remaining 70% undivided interest in River Bend).
Pursuant to this - _
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 2 - Continued litigation, the Cooperative seeks rescission of the River Bend J0P0A and recovery of its investment in River Bend, which totals approximately $1.6 billion.
GSU counterclaimed in the same lawsuit for (a) recission of the Big Cajun II, Unit 3 J0P0A and (b) termination of transmission arrangements between the two parties.
In addition, the counterclaim requests monetary damages for alleged breaches of fiduciary duty and contract by the Cooperative, in August 1993, the Court bifurcated the proceedings between the fraud and breach of contract issues to permit the fraud issues to be tried by the Court and the breach of contract issues to be tried by a jury.
In April 1994, trial before Judge Polozola began on the fraud issues; that trial concluded with closing argument in March of 1995.
On October 24, 1995, Judge Polozola issued his two-page preliminary ruling on the fraud issues.
In that ruling, he rejected the fraud claims brought by the Cooperative; however, he instructed the Clerk of Court not to enter a final judgment at that time.
Final judgment must await the issuance of Judge Polozola's l
reasoned decision.
On November 23, 1996, the Trustee, as a precautionary measure, I
filed an appeal of Judge Polozola's two-page ruling, although Judge Polozola had directed the Clerk of Court not to enter the ruling as i final judgment. The appeal is currently held in abeyance until a final order is entered.
Trial on the breach of contract issues before a jury was set to begin in July 1996 but has been postponed as a consequence of the River Bend Settlement.
Service Water 1.itigation:
In September 1991, the Cooperative elected not to participate in the funding of the service water project, the inlet feedwater nozzle repair, turbine rotor repairs, and certain extended outage costs.
On November 27, 1991, the Cooperative filed a complaint requesting a ruling with respect to its rights under the River Bend J0POA.
This litigation is referred to as the " Service Water Litigation".
In September 1992, the Cooperative began withholding payments to GSU for certain costs associated with River Bend that it deemed to be excessive.
In October 1994, the Cooperative ceased making payments under the River Bend J0P0A other than for safety-related costs such as nuclear insurance as well as decommissioning and decontamination.
The liability for Excessive Cost - River Bend, net of amounts Notes to Financial Statements-Cajun Electric Power Cooperative, Inc.
Note 2 - Continued applicable to the sale of River Bend energy _ as described below, of $56 million are based on GSU's billings to the Cooperative.
On November 1,1994, GSU notified the Cooperative that it would begin selling the Cooperative's 30% share of the output of capacity and energy from River Bend and apply the proceeds'to the Cooperative's unpaid portion of River Bend costs.
At the same time, GSU asserted a right of " compensation" under Louisiana law by offsetting its obligations to fund Big Cajun II, Unit 3 operations against the Cooperative's obligations relating to River Band.
The Cooperative then attempted to sell GSU's output from Big Cajun II. Unit 3 and apply the proceeds against GSU's obligations related thereto.
GSU filed a motion in the Service Water Litigation to enjoin the Cooperative from withholding output from Big Cafun II, Ur.it 3.
In December of 1994, the Court granted GSU's request for injunction,.prnioed that GSU deposit an amount equal to its share of Big Cajun II, Unit 3 costs withheld into the registry of the District Court in lieu of bond.
The Cooperative appealed the Court's injunction order to the Fifth Circuit. Following oral argument, the Fifth Circuit affirmed the Court's injunction in September 1995.
The-net proceeds (sales net of associated transmission costs) from the sale of the Cooperative's share of River Bend generation for 1996 and-1995 were $32.4 million and $35 million, respectively. This amount was recognized as nonmember revenue with a corresponding reduction of the Provision for Excessive River Bend Costs.
As of. December 31, 1996, there was $71 million in the Registry of the Court representing the Cooperative's net receivable from Entergy for Big Cajun II, Unit 3 operations (excluding interest).
Under the terms of the River Bend Settlement, these funds will be released to GSU.
Nullity Action:
In November of 1992, Southwest Louisiana Electric Membership Corporation (SLEMCO) and Dixie Electric Membership Corporation (DEMCO) filed an action in the District Court seeking to have the River Bend J0P0A declared a nullity because it was not approved by LPSC.
In January 1993, the Cooperative intervened.
Motions have been filed by the parties, - but the proceeding was stayed by Judge Polozola pending a ruling on the River Bend fraud suit.
No further matters are scheduled.
This action may be resolved as part of the River Bend Settlement with GSU, although independent causes of action held by DEMCO and SLEMCO, if any, may not be-resolved; GSU contends that any such independent causes of action ar,e resolved by the River Bend Settlement. L
Notes to Financial Statements cajun Electric Power Cooperativa Inc.
Note 2 - Continued i
l CTOC Litigation:
In July of 1987, the Cooperative filed a complaint at the FERC against GSU alleging overbilling and improper cost allocations for certain charges related to the integrated transmission system under Service ScNdule CTOC of the Power Interconnection Agreement between the Cooperative and GSU.
In June 1988, GSU k
recalculated its CTOC credits and filed those recalculated credits with FERC which resulted in increased amounts payable by the Cooperative to GSU for transmission
(
both prospectively and retroactively to 1981.
The two matters were consolidated and, in May 1989, an administrative law judge (ALJ) issued an opinion that would j
have required the Cooperative to pay GSU $25 million for additional charges for the period from 1981 through 1991.
In April 1992, the FERC affirmed portions and reversed portions of the ALJ's opinion.
Both the Cooperative and GSU sought rehearing on various issues.
GSU appealed certain issues to the Fifth Circuit, which, in November 1994, reversed the FERC decision on the appealed issues and remanded the matter to the FERC for further consideration.
In April 1995, an ALJ issued an initial decision which would require payment by the Cooperative of an estimated $26 million to GSU.
In August 1995, the FERC affirmed the ALJ's decision and the Cooperative, through the Trustee, on September 1,1995 timely filed a motion for rehearing, alleging, among other things, that the surcharge mechanism approved by the FERC (by which GSU tould implement a postpetition surcharge on transmission charges to the Cooperative to recover its alleged prapetition undercharges) violated the automatic stay imposed by the Bankruptcy Code.
The Trustee was substituted in as a party in that litigation. The FERC then denied the motion to rehear the matter, but modified the
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August 1995 order removing the direction that GSU recover the pre-petition claim against the Cooperative through a surcharge on post-petition rates, deferring that decision to the Bankruptcy Court.
In October 1995, the Trustee filed a petition for review in the United States Court
(
of Appeals for the District of Columbia (D.C. Circuit Court of Appeals).
In October 1995, GSU filed a petition for review in the United States Court of Appeals for the
{
Fifth Circuit.
FERC, as a respondent in each case, moved to transfer the Trustee's appeal to the Fifth Circuit.
Following the transfer of the Trustee's petition for review-to the Fifth Circuit in August 1996, these matters remain pending. [
o
-Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 2 - Continued Because the FERC modified its order removing the direction that GSU recover its
(_
prepetition claim against the Cooperative through a surcharge on post-petition rates, on September 26, 1995, GSU filed a motion to annul the automatic stay to (1) validate the FERC CTOC Proceedings, and (2) to permit it to recoup its alleged prepetition undercharges through the postpetition surcharge mechanism.
The Trustee opposed GSU's motion to annul the stay and the scheduled December 13, 1995 hearing on the matter has been continued indefinitely.
GSU contends that, to the extent the i
automatic stay was applicable, it has been terminated pursuant to section 362(e) of the Bankruptcy Code.
I L
CSTS Litigation:
In August of 1989, the Cooperative filed a complaint at the FERC
{
against GSU alleging the GSU failed to provide certain transmission service and additional delivery points.
The Cooperative further alleged that the transmission service and additional delivery points are necessary to allow one of the Cooperative's Members to supply power to two large industrial customers which could not be served by the Member's own transmission lines.
In 1989, FERC rejected the Cc7 perative's claims.
An appeal of this order was taken, and the D.C. Circuit Court-of Appeals remanded the matter back to FERC, finding that the FERC had erred in the
(
taking of evidence on the matter.
In June of 1992, an ALJ issued a ruling in favor of GSU, which was affirmed by the FERC on March 21, 1994.
The Cooperative's request for rehearing was riented by FERC in August of 1994.
The Cooperative then filed a petition for review with the D.C. Co:rt of Appeals; GSU and the LPSC intervened in November of 1994.
Following oral argument on the petition for review in September 1995, the D.C.
Circuit, on October 6, 1995, denied the Cooperative's claims, upholding FERC's interpretation of Schedule CSTS to the Power Interconnection
[
Agreement.
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Entergy Open Access Tariff:
In 1991, as part of a request to file market-based rates, Entergy filed what was represented to be an open access transmission tariff which allegedly allows third parties to access Entergy's transmission grid.
This filing resulted in interventions by numerous parties including the Cooperative.
The k
FERC approved the tariff with modifications but set no issues for hearing.
The Cooperative and others appealed the FERC's decision to the D.C. Circuit Court of Appeals.
On July 12, 1994,
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the D.C. Circuit Court of Appeals reversed the. FERC'~s
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Notes t3 Financial Statements Cajun Electric Power Cooperative. Inc.
Note 2 - Continued approval of Entergy's open access tariff on-several grounds and remanded the case to the FERC for further proceedings.
While the FERC was considering the case on remand, Entergy submitted a letter to the FERC stating that Entergy intended to file amended tariffs which would comply with both the D.C. Circuit Court of Appeal's remand of the FERC's decision and which would satisfy the FERC's recently announced policy on transmission service comparability.
Entergy filed its tariff on October 31, 1994.
The Cooperative as well as other parties intervened at the FERC.
On January 6,1995, FERC issued an order rejecting certain portions of Entergy's proposal and setting the remainder for hearing.
Entergy filed revised tariffs on June 1, 1995.
On September 1, 1995, Entergy offered a partial settlement to the Cooperative as well as the other interveners in this proceeding.
The Cooperative and other parties filed suggested modifications.
On December 13, 1995, Entergy again filed revised open access tariffs, adopting additional provisions from the FERC Notice of Proposed Rulemaking on open access. A second offer of partial settlement was distributed on January 3 and 4,1996. A FERC hearing was commenced on January 31, 1996 on rate issues.
An additional hearing on market power issues was commenced on February 21, 1996.
The ALJ issued an initial decision on May 21, 1996, approving the rates with modifications.
That case is pending before the FERC for decision.
On July 9,1996, Entergy filed another open access tariff, which remains pending.
Pursuant to the River Bend Settlement, the Cooperative or the transferee of its non-River Bend assets will be entitled to transmission services under Entergy's open access tariff and Entergy and GSU will not oppose such entitlement.
By agreement with GSU, the Cooperative may continue to participate in regulatory proceedings involving the approval of the terms of Entergy's open access tariff as described bel ow.
Equitable Subordination:
On January 27, 1995, GSU filed a complaint against RUS seeking equitable subordinatica of RUS's claims against the Cooperative because of RUS's alleged misconduct in-forcing the Cooperative to participate in the River Bend project.
A completely separate and independent claim of GSU suggests that by the -
Notes to Financial statements Cajun Electric Power Cooperative, Inc.
Note 2 - Continued terms of the acts of transfer of the River BewJ Interest to the Cooperative and the terms and conditions of the security documents required by the RUS, the RUS, under state law, had expressly subordinated its otherwise secured debt position to the rights of-GSU to be made whole under the River Bend J0POA and all of the associated obligations under an alleged " package deal" of arrangements involving River Bend and Big Cajun 2. Unit 3.
RUS filed a motion to dismiss which was scheduled for hearing on September 15.-1995.
The Court notified the parties that it intended to consider the motion without oral argument.
Although the Cooperative was not a party to the
-action, the Trustee, on -September 14, 1995, filed with the Court a statement regarding the motion to dismiss which notified the _ Court that (1) the Trustee had l-not yet determined whether or not to intervene in the action, (2) the cause of action asserted by GSU may, in fact, be a cause of action belonging to the estate for the benefit of all creditors, and (3) if the Court determined to dismiss the action, dismissal should be without prejudice to the Trustee filing a similar action if he determines that equitable subordination is appropriately asserted against RUS for the benefit of all _ creditors.
Under the River Bend Settlement, described in detail below, which has been approved by the Court and could be consummated prior to confirmation of a Plan, judgment will be entered-in favor of RUS in this action and the Trustee, on behalf of the Cooperative and its estate, will release RUS of potential equitable subordination and lender liability causes of action.
Equitable subordination claims, if any, held by other parties in interest which are separate and distinct from claims heid by the Cooperative and its-estate, will _not_ be released as part of the settlement.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES Gen:ral:
The Cooperative is a rural electric generation and transmission cooperative which is wholly-owned by 12 member distribution cooperatives.
The Metabers provide electricity to approximately 300,000 metered customers representing nearly 1,000,000 people residing.throughout 80% of the land area of Louisiana.
The Cooperative and its Members - have entered into wholesale all requirements power contracts which require the Members to purchase all of their electric energy requirements from the Cooperative generally through 2026.
In 1996 and 1995, Southwest Louisiana Electric Membership Corporation, Dixie Electric Membership
Notes to Financial Statements Cajun Electric Power Cooperative. Inc.
Note 3 - Continued Corporation, and Washington-St. Tammany Electric Cowrative, Inc. accounted for 24%,19% and 11% of megawatt hours sold to Members.
The Cooperative is subject to certain rules and regulations promulgated for rural electric borrowers by the RUS and is also subject to the jurisdiction of the LPSC (see Note 12).
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
System of Accounts:
The f.ooperative maintains its accounting records in accordance tsith the FERC chart of accounts as modified and adopted by the RUS.
Electric Plant In Service:
Electric plant in service is stated on the basis of cost, net of amounts applicable to a joint owner.
Depreciation is computed using the straight-line method over the expected useful lives of the related component The net book value of units of property replaced or retired, including assets.
costs of rer.1 oval net of any salvage value, is charged to operations.
Nuclear Fuel:
The cost of nuclear fuel, including capitalized interest, is amortized to fuel expense on the basis of the actual number of units of thermal energy produced, multiplied by a unit cost which reflects the total thermal units expected to be produced over the life of the fuel (see Note 4).
Construction Work In Progress: Construction work in progress is stated on one basis of cost, net of the amounts applicable to a joint owner, and includes interest during construction on major projects.
Investments:
The Cooperative has investments in The National Rural Utilities Cooperative Finace Corporation (CFC) and the National Bank for Cooperatives (CoBank) which are in the form of capital term certificates and Class "E"
- stock, respectively.
In the accompanying financial statements, these investments are carried at cost and include undistributed patronage capital credits from these organizations.
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 3 - Continued Fuel and Supplies Inventories:
Fuel and supplies inventories are stated on the basis of cost utilizing the weighted average cost method of inventory valuation.
Deferred Charges:
The balance in deferred charges consists primarily of expenditures for preliminary surveys and investigations and capitalized software.
Deferred Credits:
Deferred credits involve amounts related to disputed charges involving a coal transportation contract.
Patronage Capital Credits:
The Cooperative is organized and operates on a not-for-
)
profit basis.
Patronage capital credits represent that portion of the Cooperative's net margins which have been allocated to Member cooperatives.
As provided in the Cooperative's bylaws, all amounts received from the furnishing of electric energy in excess of the sum of operating costs and expenses and amounts required to offset any current year losses are assigned to Members' patronage capital credit accounts on a patronage basis or, at the discretion of the Board of Directors, may be offset against losses of any prior fiscal year. All other amounts received from operations in excess of costs and expenses may be used to offset losses incurred during the current or any prior fiscal year and, to the extent not needed therefore, are allocated to Members on a patronage basis.
In accordance with the Cooperative's bylaws, the net deficits have not been allocated to the Member cooperatives. During the course of the Bankruptcy proceeding, disputes have arisen to the legal effect of patronage capital. These matters have not been resolved as of this date.
During 1996, the Cooperative completed its 1995 corporate income tax return.
The return, as originally filed, indicated net member taxable income of approximately
$91 million.
By letter dated September 13, 1996, this amount was allocated to the r
Members as a patronage capital credit. On October 2, 1996, tne Cooperative filed an amended return which included a deduction for post-petition interest expens reducing member taxable income to approximately 58 million.
On February 27, 1997,
{
the Cooperative notified the Members of the revised 1995 allocation of tax margin as reflected in the amended return.
Deconmissioning:
Decommissioning reserves represent cumulative. accrual s for decommissioning expense.
The annual charge for decommissioning expense is the -_-
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 3 - Continued required addition to the decommissioning trust funds such that the balance of the funds (contributions plus net earnings) will be sufficient to satisfy estimated decommissioning costs at the end of the expected useful lives of the Cooperative 5 facilities (see Note 10).
Income Taxes:
The Cooperative uses the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) 109.
Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities.
f Fair Values of Financial Instruments:
The carrying amounts reported in the balance sheet for cash and cash equivalents, decommissioning reserve funds, and restricted funds approximate their fair value.
It was not practical for the Management of the
{
Cooperative to estimate the fair value of the Cooperative's long-term debt because of the lack of a quoted market price, the fact the Cooperative is under the j
protection of the Bankruptcy Court, and an inability to estimate fair value without incurring excessive costs.
Statement of Cash Flows:
The Cooperative utilizes the direct methed of reporting cash flows.
Cash Equivalents:
The Cooperative considers all highly liquid investments with a f
maturity of three months or less when purchased to be cash equivalents.
Reclassifications:
Certain reclassifications have been made to the 1995 financial s%atements to conform to'the 1996 presentation.
(
l f {
Notes to Financial Statements - Continued Cajun Electric Power Cooperative.-Inc.
NOTE 4 - UTILITY PLANT Electric plant in service at December 31 consisted of the following (in thousands):
1996 1s95 Production:
~~~~
Nuclear
$1,468,915 Coal 1,026,602 1,026,317 Gas-34,492 34,037 Transmission 105,604 104,462 General 20.407 18.973 51.187.105 52.652.704 Net Megawatt Cooperative Ownershio Generatina Unit Ratino Fuel Percentaae Meaawatts
- River Bend 936 Nuclear 30%
281 Big Cajun 2. Unit 1 580 Coal 100%
580 Big Cajun 2, Unit 2 575 Coal 100%
575 Big Cajun 2. Unit 3 575 Coal 58%
334 Big Cajun 1 Unit 1 110 Gas 100%
110 Big Cajun 1. Unit 2 110 Gas 100%
110
- As a consequence of the River Bend Settlement, River Bend is not included in Utility Plant as of December 31, 1996.
River Bend and Big Cajun 2 Unit 3 are jointly owned by the Cooperative and GSU (see Note 2).
Construction work in progress consists of improvements and additions to existing plants.
The estimated cost to complete these projects at December 31, 1996 was approximately 58 million.
Notes ts Financial Statements Cajun Electric Power Cooperative, Inc.
Note 4 - Continued Nuclear fuel represents the Cooperative's 30% share of River Bend fuel and as of December 31 consisted of the following (in thousands):
_191L 1995 Nuclear fuel in process 451 5 12,304 Nuclear fuel in reactor 51,319-91,489 Spent nuclear fuel 119.778
{
65.711 171,548 169,522 i
Less accumulated amortization of nuclear fuel 150.567 140.626 Net nuclear fuel M
M Nuclear fuel in process at December 31, 1996 represents the accumulated cost, I
including capitalized interest, of fuel required for the seventh reload which is scheduled vor the fall of 1997.
The fuel is in various stages of conversion, enrichment or fabrication.
Spent nuclear fuel consists of the original cost of nuclear fuel assemblies, in the process of cooling, which were removed-from the reactor during each of the five previous fuel cycles.
Land relating to an abandoned lignite project has been retained as a possible site for a future generating facility and its cost, $9.5 million, is included in electric plant held for future use, t
The net change in accumulated depreciation and amortization for the years ended December 31 was (in thousands):
1996 1995 Charged to operating expenses 5 37,937
$74,055 Charged to fuel inventories and other assets 1.124 1.118 39,061 75,173
-Less asset impairment, 4
-disposals and other adjustments 358.376 691 5f319.315) 574.482 lh July 1992, as part of its rate examination, the LPSC began investigating the prudence of the Cooperative's decision to invest in the River Bend nuclear plant.
As a result of its investigation, in June 1994, the LPSC in an Order:,(1) declared the River Bend investment imprudent; (2) declared the River Bend asset to be excess f
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 4 - Continued uneconomic capacity and disallowed it under the used and useful principle, but allowed the Cooperative to recover avoided costs for River Bend electricity; (3) disallowed under the retroactive ratemaking rule the Cooperative's accumulated past losses; and (4) directed its consultants to update the test year and recommend to the LPSC rates consistent with these findings.
The Cooperative appealed this Order to the 19th Judicial District Court.
In December 1994, pursuant to their prudence finding, the LPSC ordered the Cooperative to lower its rates by $30.2 million to 48.8 mills effective December 21, 1994 (see Note 12).
This Order also adopted the Cooperative's proposed rate design changes.
As a consequence of the LPSC rate order, the sum of the undiscounted cash flows from River Bend operations is less than the carrying amount of the assets.
The Cooperative has appealed this Order to the 19th Judicial District Court.
The River Bend Settlement makes these appeals irrelevant (see Note 2).
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, t
" Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
This Statement, which is effective for fiscal years beginning after December 15, 1995, prescribes the accounting for impaired long-lived assets.
The Cooperative adopted, as required, the provisions of SFAS 121 effective January 1, 1996 and has recognized as an impairment loss the carrying amount of $1.1 billion j
related to the River Bend nuclear facility.
While the River Bend Settlement (see Hote 2) provides as one of the three options available to RUS that it may sell the facility. The Cooperative has no evidence of a positive fair market value for River Bend.
Consequently, an impairment loss is being recognized for the entire carrying amount of the facility.
As a result, all River Bend assets and associated liabilities including the Unit 3 receivable from GSU, are classified as current assets or liabilities as of December 1996.
For the year ended December 31, 1996, the results of operations for River Bend, excluding the impairment and settlement provision, were as follows (in millions):
Operating Revenue Operating Expenses 5 33 Net Operating Deficit
_[51)
}j,},0) 0 Notes to Financial statements - Continueo Cajun Electric Power Cooperative, Inc.
NOTE S - INVESTMENTS IN ASSOCIATED ORGANIZATIONS AND RESTRICTE Investments in associated organizations at December 31 consisted of the following (in thousands):
1996 1995 CFC CoBank
$ 7,692 5 7,692 Other 13,127 16,050 1.408 1.408
$22.227 525,150 On February 1,1995, the Bankruptcy Court issued an order enabling CoBank to deposit into an interest-bearing CoBank account amounts attributable to the return of E stock which otherwise would have been paid to the Cooperative.
The Bankruptcy Court ruled that the prevention of the dissipat'on of cash collateral in this matter did not constitute a viohtion of the automatic stay provision of the Bankruptcy Code.
Subsequently, the Bankruptcy Court approved two similar stipulations regarding the CoBank escrow account on May 19, 1995 and January 8, 1996.
At December 31, the Cooperative had a receivable from CoBank of approximately $13 million and $9 million for 1996 and 1995, respectively, which was included in other receivables.
Restricted funds at December 31 included the following (in thousands):
_1996..
1995 IRB Escrow Account 5
186 5
227 LPSC Rate Order Escrow Excess Funds 86 142,764 87,058 Director and Officer's Loss Reserve Director and Officer's Trust 3,000 3,000 167 178 River Bend Low Level Waste 2.736 5146,203 593,199 Restricted funds includes in excess funds which the Bankruptcy Court ordered to be segregated from the Cooperative's general funds (see Note 1).
Included in current.
Not s to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 5 - Continued assets at December 31, 1996 are restricted funds of approximately $108 million which represents the estimated payment required to satisfy the unfunded River Bend decomissioning reserve (see Note 2)
The Ccoperative manages the investment of the excess fund account in accordance with the investment guidelines adopted by the Cooperative and co1 firmed by order of the Bankruptcy Court.
The excess fund account is primarily invested in U.S. Treasury and U.S. Agency securities, the highest rated comercial
- paper, and U.S.
government repurchase agreements backed by U.S.
government securities and have maturities of one year or less when purchased.
Fair value of these investments approximates cost.
NOTE 6 - LONG-TERM DEBT AND LIABILITIES SUBJECT TO COMPROMISE On December 21, 1990, the Cooperative consummated a DRA effective May 31, 1990, with the United States of America acting through the RUS.
Under the terms of the DRA, the Cooperative executed and delivered to the RUS two notes which restructured all of the Cooperative's debt to or guaranteed by the RUS: Note A, in the original face amount of $2,147,994,670, which matures on December 31, 2026, and Note B, in the original face amount of $1,037,007,550, which has a final maturity date of December 31, 2036.
Both Notes A and B bear interest on the unpaid principal balance at a nominal rate of 8.64%, with an assumed effective annual rate of 8.99%.
Prior to December 21, 1994, accrued but unpaid interest on Notes A or B was added to principal on a monthly basis.
The DRA provides that Note A may not be prepaid uithout _the express written consent of the RUS.
Note B may be prepaid without premium or penalty.
Liabilities subject to compromise (in thousands), including long-term debt were as follows:
1996 1995 Long-term Debt
$4,154,116
$4,161,745 Excessive O&M Provision - River Bend (See Note 2) 33,394 Accounts Payable and Other Accrued Expenses 6.241 9.368 54,160,357 54,204,507 ____
Notes to Financial Statements Cajun Electric Power Cooperative, Inco Note 6 - Continued-Long-term debt, which is included in liabilities subject to compromise, consisted of the following (in thousands):
1996 1995 Note A to the RUS, due in varying annual installments through 2026, interest at 8.64% compounded monthly.
52,639,231
$2,646,860
' Note B to the RUS, varying annual payments based upon several contingent. factors, final maturity December 31, 2036, interest at 8.64%-
compounded monthly.
1,513,985 1,513,985 Industrial Development Revenue
' Bonds, series 1982, interest i
at two-thirds of prime rate (5.50% at December 31,1996),
due in installments through 1997.
900 900
$4.154.116 54.161.7M I
On February 3, 1995, the Bankruptcy Court authorized the Cooperative to enter into a compromise settlement and receive apprcximately $9.5 million related to litigation involving price-fixing of electrical contracts during the construction of Big Cajun
-2, Unit 3.
On March 6, 1995, the District Court ordered the Cooperative to distribute to - RUS approximately $5.5 million settlement proceeds.
The Order also
-stipulated that the Cooperative pay approximately $4 million to-GSU, the co-owner of
=
the - f acil_ity.
On April 25, 1995, the_ Bankruptcy Court ordered the distribution to RUS of certain proceeds r. elated to a nonmember power sales contract. As of December 31,._1995, the amount distributed to RUS related to these contracts totaled approximately $7.2 million.
RUS ' has applied these-1995 distributions - to the principal balance of Note A, and, as a consequence, the' Cooperative reduced Note A
.by $12.7 million.
In 1996,_the Cooperative distributed $7.6 million to the RUS and reduced the principal balance of Note A accordingly.
Both the Bankruptcy Court and the District Court entered their orders on these matters without prejudice,
__ essentially allowing any party in interest the right to challenge the validity, priority or extent of any claim or lien of RUS.. _ - - _ - - _.. __
Notes to Financial statements Cajun Electric Power Cooperative. Inc.
7 Note 6 - Continued Interest and other debt expense for the years ended December 31 consisted of the following (in thousands):
1996 1995 Interest charged to operating expense 5 51 5 40 Other debt expense
__122
_,151 Total interest and other debt expense W
W in accordance with SOP 90-7, the Cooperative will recognize interest expense in the financial statements while in Chapter 11 only to the extent that the value of the underlying collateral exceeds the principal amount of the secured claim.
The Cooperative believes there is insufficient collateral to enable the RUS to recover the principal portion of these obligations.
Accordingly, the Cooperative ceased accruing interest on these obligations effective December 21, 1994.
Contractual interest related to secured 'and unsecured claims not recognized for accounting purposes totaled 5402 million and 5377 million in 1996 and 1995, respectively.
Substantially all of the Cooperative's assets are pledged to secure the Cooperative's debt to the RUS by the Supplement to the Supplemental Mortgage and Security Agreement (the RUS mortgage) executed November 28, 1990 between the Cooperative, the RUS and CoBank in order to facilitate the DRA.
Both the RUS mortgage and the DRA contain certain restrictive covenants including limitations on indebtedness, capital additions, distributions to Members and an agreement not to lower the Cooperative's wholesale electric rate for the term of the DRA.
At December 31, 1996, the Cooperative we.s in default under the DRA as well as the RUS mortgage. Certain office facilities in Baton Rouge are separately pledged to secure the Industrial Development Revenue Bonds (IRBs).
The IRB Trust complied with an order received from the Bankruptcy Court and paid the debt service on the IRBs which was due January 1,1935.
The Cooperative had funded this debt service payment to the IRB Trust prior to its Chapter 11 filing.
Although a residual balance remains
[
in the Trust, it is insufficient to fund the remaining IRB debt service payments.
The Cooperative has not been granted approval of the Court to continue funding the
{
Trust.
Therefore, any future debt service payments will be funded only as a result of court order.
As a consequence of cross-default provisions, the Cooperative is also in default under the terms of the IRBs as well. :
Notes t3 Financial Statements cajun Electric Power Cooperative, Inc.
Note 6 - Continued CoBank is secured by the RUS Mortgage for two letters of credit amounting to approximately $22 million as of December 31, 1996, supporting potential indemnity payments under sale-leaseback transactions completed in 1983.
Dur'ng 1993, CoBank renewed the letters of credit for an additional five-year period.
NOTE 7 - SHORT-TERM INVESTMENTS At December 31, 1996 and 1995, the Cooperative's cash was invested in United States Treasury securities, United States government agencies securities, commercial paper and short-term obligations issued by financial institutions.
On December 27, 1994, the Bankruptcy Court issued an order approving the Cooperative's investment guidelines and continuation of the investment program.
On September 6, 1995, the Trustee filed a motion with the Bankruptcy Court seeking the Court's approval of the l
continuation of the investment program and instructed the Cooperative's management to continue the investment program pursuant to the Bankruptcy Court's initial order.
On December 14, 1995, the Bankruptcy Court issued an order granting the Trustee's motion for approval and continuation of the investment program.
All investments conform with the guidelines established by the RUS.
Maturities are selected to correspond with cash flow requirements and are generally for periods of less than three months and are considered to be cash equivalents.
NOTE 8 - INCOME TAXES At December 31, the composition of the Cooperative's deferred tax assets and liabilities (tax effected at a rate of 20%) were as follows (in millions):
1996 1995 Deferred Tax Assets:
Operating loss Carryforwards S 447
$ 412 Long-term Debt Basis Difference 303 303 General Business Credit Carryforwards 166
_ 166 916 881 Deferred Tax Liability:
Depreciation Temporary Differences (113)
(310)
Net Deferred Tax Asset 803 571 Less: Deferred Tax Asset Valuation Allowance (803)
(571)
Net Deferred Tax Asset / Liability 5
0 5
0 i i
Notes to Financial Statements Cajun Electric Power Cooperative, Inc.
Note 8 - Continued At December 31, 1996, the Cooperative's operating loss and credit carryforwards were as follows (in millions):
Nonmember Nonmember Member Year Het Member AMT Net AMT General Of Operating Operating Operating Operating Business Exoiration loss loss Loss loss
. Credit 1999 2000
$ 9 2001 27 2002 128 2003 2
2004
$ 15 2005 232
$101 2006 2007 95 94 2008 124 124 2009 92 91 2010 88 87 2011 146 144 2012 157 156 No Expiration
$1.287 51.286 1.E.12 M
l.12.7.
1.l E 1.l.5.5 There are numerous and highly complex tax issues associated with the Cooperative's restructuring under Chapter 11, such s resoluttor, of the River Bend litigation, the abandonment of assets, forgiveness of debt, and the potential sale of assets.
The Cooperative plans to seek private letter rulings or a closing agreement from the Internal Revenue Service on many of these issues.
The -impact of the resolution of these tax issues cannot be determined at this time.
NOTE 9 - EMPLOYEE BENEFIT PLANS All of the Cooperative's employees participate in the National Rural Electric Cooperatives Association (NRECA) Retiremert and Security Program once they have met ainimum service requirements.
The Cooperative makes annual contributions to the plan equal to the amounts accrued for pension expense.
In this master multiple-employer defined benefit plan, which is available to all member cooperatives of the NRECA, the accumulated benefits and plan assets are not determined 'or allocated _. _ _....
]
Notes to Financial Statements cajun Elon ric Power Cooperative. Inc.
Note 9 - Continued separately by individual employer.
The Cooperative made contributions to the plan totaling $595,347 and $843,173 in 1996 and 1995, respectively.
The Cooperative also maintains a defined contribution pension plan which constitutes a cash or deferred arrangement under section 401(k) of the Internal Revenue Code of 1986 (as amended).
Once minimum ser'.* ice requirements are met, all e? the employees of the Cooperative are eligible to participate in the plan.
Under the terms of the plan, which is administered by the NRECA, the Cooperative matches 50% of employee contributions up to a maximum of 4% of each participating employee's base compensation.
The Cooperative made contributions to the plan totaling $341 thousand I
and $316 thousand in 1996 and 1995, respectively.
l l
In December 1990, the Financial Accounting Standards Board issued SFAS No. 106,
" Employers' Accounting for Postretirement Benefits Other Than Pensions", which recuires the accrual of benefits other than retirement income provided to retired workers.
The Cooperative makes available to those salaried employees who retire on or after age 62 and who also have at least 10 years of service, postretirement medical insurance benefits.
Retirees are required to contribute toward the cost of benefits.
The Ccoperative funds the cest of benefits in excess of retiree contributions.
The Cooperative adopted SfAS No.106 in January 1995 and elected to expense the accumulated postretirement benefit transition obligation (APBO) of $4.7 million.
The postretirement benefit obligation was determined based upon an acturrial valuation.
The net periodic postretirement cost was comprised of the following (in thuusands):
1996 1995 Service cost
$438
$377 Interest cost Net periodic postretirement cost
_}19
_4_D iglJ,,1Q ~ ~
Notes to Financial Statements Cajun Electric Power Cooperative, Inc. Note 9 Continued Reconciliation of Funded Status of APB0 (in thousands) at December 31: 1996 1995 Fully eligible active employees 5 681 5 591 Other active employees 4,832 4,195 Current retirees 756 __656 Total 6,269 5,442 Fair value of assets APB0 ir, excess of fair value of assets ljdg2 M The assumed health care cost trend rate for 1996 and 1995 used to measure the expected cost of benefits was 11.5% and 13% with an assumed health carc cost trend rate of 5.5% and 6.5% expected to be achieved in 12 and 13 years, respectively. The assumed weighted average discount rate was 7.25% and 8.25% for 1996 and 1995. Effect of a one percentage-point increase in health care cost trend at December 31, 1996: Service cost 5 114,727 Interest cost 105.902 Total 5 220.629 increase in APB0 $1.301.563 ( A Voluntary Employee Benefits Association Trust was established by the Cooperative in 1992 to pay medical and dental claims. Since the assets in this Trust are used to pay the claims of both active and retired employees, and the claims have not been segregated and restricted to pay for postretirement benefits, the Trust cannot be considered as plan assets for purposes of SFAS 106. NOTE 10 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES GSU has executed a contract with the Department of Energy (DOE) whereby the DOE will furnish disposal service for the spent nuclear 'uel from River Bend. Currently, the cost amounts to one-tenth of one cent per kilowatt hour of sales to ultimate The DOE spent nuclear fuel fee is subject to change in accordance with consumers. the provisicns of the Nuclear Waste Policy Act of 1982.,
~ Notes to Financia) Statements Cajun Electric Power Cooperative, Inc. Note 10 - Continued On December 2, 198B, the Cooperative established an external grantor trust, the River Bend Decommissioning Trust Fund, and began to make annual contributions to accumulate an amount which would be sufficient, based on certain estimates and assumptions, to pay for its share of the cost to decommission the River Bend nuclear facility at the end of its estimated useful life. Annual contributions to the trust are approximately $1.4 million. The Cooperative has based its contribution to the trust on a site specific engineering study commissioned by GSV. As of December 31, 1996, the balance in the River Bend Decommissioning Trust Fund was $20 million. Under the terms of the River Bend Settlement (see Hote 2), before the disposition of River Bend can occur, the Cooperative must place sufficient funds in a trust account l which will fully fund the total projected current dollar cost to decommission River Bend. This amount, $125 million in 1995 dollars, will be partially funded by the transfer of the balance in the Cooperative's current decommissioning trust as of June 1, 1997, with the remainder being funded by cash collateral of the estate (see Notes 1 and 2). The Cooperative's total decommissioning obligation as of June 1, 1997, is estimated to be $130 million. This amount, net of the anticipated balance in the Cooperative's Decommissioning Trust Fund as of June 1, 1997, has been accrued and expensed in 1996 and is included in the River Bend impairment and settlement caption in the accompanying Statements of Revenue and Expenses. The Cooperative is required by the State of Louisiana Department of Environmental Quality (DEQ) to provi6e assurance that it has the ability to fund the actions which will be necessary to rehabilitate its Big Cajun 2 ash and wastewater impoundment areas which, as disposal sites, are subject to DEQ review and supervision. The total liability for funding the solid waste disposal site rehabilitation is currently estimated to be approximately $4 million, of which GSV is responsible for approximately $500,000. On July 1,1989, the Cooperative creat'd the Solid Waste Disposal Trust and deposited $1.06 million with the trustee in satisfaction of its DEQ funding requirements. The annual contributions to the trust are approximately $116,000. The actual payments for site rehabilitation are not scheduled to occur until the end of the estimated useful life of the Big Cajun 2 coal-fired facility. The balance in the Solid Waste Disposal Trust at December 31, 1996 was $2.7 million..
~ Notts to Financial Statenerts cajun Electric Power Cooperative, Inc. Note 10 - Continued The Energy Policy Act of 1992 establishes a Fund to pay for the decontamination and decomissioning of three nuclear enrichment facilities operated by the DOE. Electric utilities that have purchased enrichment services in prior years from the DOE are to be charged a special assessment for a portion of the Fund not to exceed $150 million each year, adjusted for inflation. The special assessments are based on a formula that takes into account the total amount of enrichment services purchased from the DOE by electric utilities in previous years. The Cooperative i paid a special assessment of $534,906 in 1996 and $257,850 in 1995. l NOTE 11 - NUCLEAR INSURANCE The ownership of an undivided interest in River Bend subjects the Cooperative to certain risks. The Cooperative is insured, as described below, for public liability and property damage. The Price-Anderson Act (the Act) was renewed by Congress in 1988 and was extended through August 1, 2002. Public liability under the Act for any nuclear incident is currently limited to $8.9 billion. The Cooperative and GSU are insured for this exposure by private insurance as well as by a secondary financial program. Changes to the Act related to the secondary financial program may require the Cooperative to become subject to a possible retroactive assessment of which the Cooperative's share would not exceed $19.5 million per incident with a maximum of $3 million per incident payable in any one year for losses at any licensed nuclear facility. There is a total of $2.750,000,000 of property damage insurance through nuclear insurance conglomerates covering both GSU and the Cooperative. The Cooperative is no longer participating as a member of Nuclear Electric Insurance Limited (NEIL) and as such is no longer subject to possible assessments under the NEIL program. Although the Cooperative and GSU continue to attempt to increase insurance coverage as it becomes available, the Cooperative can give no assurance as to the adequacy of its coverage in the event of a major accident. Total available property damage insurance is substantially less than the potential insurable value of River Bend. in 1991, the NRC promulgated a rule providing that, in the event of an accident at _ _ _ _ _ _ _ - _.
Notes to Financial Statements Cajun Electric Power Cooperative, Inca Note 11 - Continued River Bend in which the estimated costs of stabilizing and decontaminating the site exceed $100 million, insurance proceeds must first be dedicated to this purpose. Proceeds not required for such stabilization and decontamination may then be used to repair or replace the damaged unit. l The Cooperative has joined GSU in obtaining a Nuclear Workers' Liability policy l which covers liability for the claims of workers employed at River Bend after January 1, 1988 for noncatastrophic nuclear-related injury such as prolonged exposure to low level radiation. Any claims by workers employed at River Bend prior to January 1, 1988 will continue to be covered under the NJClear Workers' liability policy if the claim is made by December 31. 1997. Under the Nuclear Workers' Liability policy, the Cooperative is subject to a maximum potential retrospective premium assessment of approximately $1.0 million. It is possible that liabilities related to the release or escape of a hazardous substance from River Bend may be greater than the coverage on policies currently carried and, consequently, existing insurance may not be sufficient to meet all possible liabilities or losses. The Cooperative cannot provide assurance that it will be able to maintain coverage at present levels. Any liability or loss in excess of that covered under existing policies could have a material adverse effect upon the Looperative. NOTE 12 - RATES AND REGULATION New Dockets Initiated by LPSC and Litigation with LPSC: In January 1996, the LPSC established (or reactivated) two dockets to investigate further the rates charged by the Cooperative (the Rate Docket) and to investigate the legality, enforceability, and potential nullity of the All-Requirements Contracts between the Cooperative and the Members (the Contract Docket). The Trustee believes that the initiation of these dockets-violated the automatic stay under Section 362 of the Bankruptcy Code and impermissibly interfered with the administration of the bankruptcy case.The Trustee filed a complaint and motion requesting injunctive relief. A March 1996 hearing to consider imposition of an injunction was continued to permit the LPSC to evaluate the bids submitted to the Trustee for the purchase of the Corperative's Notes to Financial Statements Cajun Electric Power C9 operative, Inc. Note 12 - Continued assets and to evaluate the Trustee's April 8, 1996 selection of a lead proposal under the Court-approved bidding procedures. On April 17, 1996, the LPSC voted to suspend these two dockets. However, at that same meeting, the LPSC voted to open a new docket (the Amended Docket) to investigate the following:
- 1.
- valuation of the rates resulting from proposals currently being considered by the Trustee as compared to the rates which may be in effect if the Cot?erative continues operations in its current forn;
- 2. The prudence of the Members entering into power sales contracts to acquire energy from the reorganized Cooperative at the proposed rates;
- 3. Whether the proposed arrangement contained in the bids currently being considered by the Trustee are in the public interest, which would include an evaluation of whether the asset transfer and issuance of securities to a particular bidder would comport with the public interest; and
- 4. Other relevant issees.
The Trustee believes that the Ameiided Docket similarly impermissibly interferes with the Court's jurisdiction over the administratien of the Cooperative's bankruptcy case and, accordingly, the Trustee filed an amended complaint seeking a declaration that the Rate Docket, the Contract Docket, and the Amended Docket were preempted by the Bankruptcy Court's jurisdiction over the Cooperative's bankruptcy case. Following a July 18, 1996 hearing on the Trustee's motion for summary judgment on his amended complaint, the Court granted the Trustee's motion for summary judgment with.*espect to the Contract Docket and the Amended Docket, but granted the LPSC's cross motion for summary judgment with respect to the Rate Docket. The Court's ruling allows the Rate Docket to move forward, including the Rule to Show Cause issued by the LPSC on or about July 1,1996 in pursuit of the Rate Docket, which required the Cooperative to show cause why its rates should not be reduced to 43.8 mills. The Court's ruling also allowed the LPSC, as a party in interest in the Cooperative's bankruptcy case, to evaluate the Competing Plans. The LPSC has moved for clarification of the Court's decision, and resolution of that motion is still pending. -
Notes to Financial Statements cajun Electric Power Cooperative, Inc. Note 12 - Continued A hearing before an LPSC ALJ to consider the Rule to Show Cause and the LPSC's request that the Cooperative's rates be reduced to 43.8 mills was held on September 17 and 18, 1996. At the hearing, based upon the testimony of its expert, the LPSC modified the amount of its requested rate reduction to 45.1 mills. The ALJ issued a Recomendation on October 7,1996, concluiing that the Cooperative's rates should be reduced by approximately $22 million. The Trustee filed exceptions to the ALJ's Recomendation, describing what the Trustee felt were errors in both fact and law. On October 16, 1996, the Comission, at its regular monthly Open Session considered the ALJ's Recomendation. The Comission also heard argument from its counsel and counsel for both the Trustee and the Members regarding the ALJ's Recommendation, and then unanimously accepted the Recomendation with certain modifications. Specifically, the Comission reduced the Cooperative's rates by approxir.ately $22 million and, in addition, required that the increment of the Cooperative rates which is attributable to interest expense, approximately $48 million, be collected in a separate escrow account, subject to refund, depending upon the outcome of the reorganization process. The Comission further ordered that the Trustee obtain an order from the Bankruptcy Court within sixty days resolving the issue of the Cooperative's obligation to pay interest as a result of the reorganization process. At its November 13, 1996 Open Session, the LPSC ordered the Cooperative to further reduce its rates by an additional $7.75 million. This amcunt was the result of oaissions made by the LPSC staff which were discovered too late to include in the previous rate reduction order. At this same meeting, the LPSC ordered that the sixty-day " window" for obtaining an order from the Bankruptcy Court resolving the issue of the Cooperative's obligation to pay interest be deleted. On Nt,vember 21, 1996, the Trustee filed with the 19th Judicial District Court a Petition for Appeal and Judicial Review of the LPSC rate reduction order. The Trustee asserted that the LPSC arbitrarily and capriciously rejected a number of known and measurable adjustments which the Cooperative made to the test year data. A hearing has been scheduled for March 17, 1997. -
Notes to Financial Statements cajun Electric Power Cooperative, Inc. Note 12 Continued The Members Comittee has intervened in the Rate Docket and, as an intervener, on August 31, 1996 filed with the LPSC a Petition to Further Reduce Rates, seeking an additional reduction of the Cooperative's rates to 35.6 mills. The Members Comittee's petition is based, in part, upon its contention that the Cooperative, by operation of bankruptcy law, is not permitted to and has not paid debt service to the RUS during the pendency of the Chapter 11 case. Because debt service is not being paid, the Members Comittee argues that these amounts cannot be included in the Cooperative's rates. The Members Comittee advanced its position at the September 17 and 18, 1996 rate hearing. In response to the Members Comittee's Petition to Further Reduce Rates, the Trustee has filed Adv. Pro. No. 96 1073 in the Bankruptcy Court to enjoin the LPSC from establi hing rates for the Cooperative t based on the postpetition suspension of its debt service obligations. A hearing on the Trustee's motion for injunction was held on September 30, 1996. On October 16, 1996, the Bankruptcy Court issued an order denying the Trustee's request for an injunction. At its December 18, 1996 Open Session, the LPSC received a report from its Special Counsel regarding bids for.the Cooperative's assets. As a result, the LPSC adopted an Order finding that the Trustee's original reorganization plan is inconsistent eith the public interest because it unfairly penalizes ratepayers. Furthermore, the LPSC found that an acceptable plan must include rates not substantially in excess of those that can be assessed in cost-based regulation. On January 21, 1997, the Trustee filed a Motion for Rehearing with the LPSC. The LPSC has begun an investigation into the prudence of the continued purchase and transportation of coal by' the Cooperative. The LPSC is directing the Cooperative to shoe cause why it should not be required to reform or reject its coal and transportation contracts, why its coal purchasing practices have not been imprudent and why any excessive cost of coal acquired at above market prices should not be refunded to the Members. A hearing is scheduled before the LPSC on this Rule to Shoe Cause on March 31, 1997. If the Cooperative should fail to show cause in this hearing or the Trustee fails to obtain an injunction, the coal and transportation contracts may be declared imprudent and the Cooperative may be required to refund all excessive or imprudently incurred cost. Such an event could. result in a significant adverse impact upon the Cooperative. On February 10, 1997, the Trustee.
f____ Notes to Financial Statements Cajun Electric Power Cooperative, Inc. k Note 12 - Continued k filed a Complaint for Injunctive and Declaratory Relief with the Bankruptcy Court to prevent the LPSC from proceeding in this matter. On February 24, 1997, the Bankruptcy Court granted the Trustee's request, in October 1993, the LPSC engaged consultants to conduct a management audit of th Cooperative. An initial meeting was held in March 1994. The Cooperative responded to several data requests and the LPSC's consultants interviewed 38 Cooperative personnel and four Board members, with additional interviews occurring throughout 1994 concluding in April 1995. The audit was released in January 1996 and the consultants' findings were generally very favorable. The audit's overall assessment t?as that the Cooperative "is generally very well managed, both operationally and organizational 1y. The management of The Cooperative has been aggressive, innovative, and successful in reducing costs consistent with performance, safety and employe? concerns." On April 25, 1936, the management audit reconnendations. the Cooperative submitted responses to The LPSC has taken no subsequent action on this matter. ( None of the audit's recommendations which were quantified by the consultants would result in a material impact upon the Cooperative's financial statements. ( Class Action Rate Litigation: On September 20, 1989, a class action petition was filed in the Tenth Judicial District State Court in Natchitoches Parish, Louisiana naming the Cooperative's Members as defendants. The plaintiffs in this action seek a refund of all rate increases enacted by the Cooperative's Members from 1978 until the respective Member voted to be subject to the jurisdiction of the LPSC or was placed under the jurisdiction of the t.PSC by action of the State Supreme Court. October 17, 1989, the case was moved to the federal courts. On On June 23, 1990, motions were filed by the Cooperative's Members to name the Cooperative as a third- { party defendant in the case. On July 15, 1991, the United States District Court in New Orleans entered an order retaining jurisdiction in the case and granting the motions of the Cooperative's Members to join the Cooperative as a third party defendant in the case. On August 28, 1992, the District Court abstained from this matter in favor of proceedings at the LPSC. k { f
Notes to Financial Statements Cajun Electric Fower Cooperative. Inc. Note 12 - Continued Tne LPSC currently has a docket associated with this matter. Docket U 19943 is an examination of the Members' rates during the period of non-regulation, 1978 throup 1989. The first hearings on this docket occurred in the first quarter of 1994 and continued through May 1995. These hearings dealt with the question of the standards used by the LPSC in evaluating the Members' rates and rate increases during that period. On August 19, 1994, the LPSC adopted the standards recomended by its Special Counsel. Based on those standards, Special Counsel issued a report in August 1995 recomending that 23 of the 29 rate increases implemented during the period of non regulation be found presumptively not unreasonable and be eliminated from further review. Special Counsel recommended that the remaining six rate increases be further reviewed for reasonableness. The LPSC has not yet acted on this recommendation. The timing or outcome of this matter is uncertain and no provision for any liability that may result has been made in the financial statements. An unfavorable outcome could have a matcrial adverse impact upon the Cooperative. NOTE 13 - COAL AND TRANSPORTATION COMMITHENTS Purchases under the terms of contracts for the acquisition and related transportation of coal during 1996 and 1995 were approximately $123 million and $126 aillion, respectively. Certain purchases are subject to various price escalators and deflators, minimum quantity takes and periodic price reopeners at then current market prices. Management is of the opinion that these contracts will properly meet anticipated coal supply needs. The transportation contracts begin to expire in 1999 while the coal contracts are for the useful life of the coal-fired generating facility, provided the present supplier is willing to meet or better offers from other suppliers at scheduled periodic price reopeners. The Cooperative's coal and transportation contracts, as executory contracts, may be rejected in the Chapter 11 bankruptcy proceeding. ! 1 J
Audited Financial Statements Cajun Electric Power Cooperative, Inc. December 31,1995 1 2ERNST& YOUNG LLP l l 'd
i { ( I { Audited Financial Statements l Cajun Electric Power Cooperative, Inc. December 31,1995 i } \\ l
AUDITED FINANCIAL STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC. DECEMBER 31, 1995 REPORT OF INDEPENDENT AUDIT 0RS.................................................... 1 BALANCE SHEETS .................................................................. 2 STATEMENTS OF REVENUE AND EXPENSES................................................ 4 STATEMENTS OF CHANGES IN EQUITY AND MARGIN(DEFICIT).............................. 5 STATEMENTS OF CASH FLCWS.......................................................... 6 l NOTES TO FINANCIAL STATEMENTS: NOTE 1 - BANKRUPTC Y PROC E ED I NG........................................ NOTE 2 - SIGNI FICANT ACCOUNTING POL IC IES.................................. 3 - U T I L I T Y P LANT................................... NOTE . 18 NOTE 4 INVESTMENTS IN ASSOCIATED ORGANIZATIONS AND RESTRICTED FUNDS...... 2 NOTE S - LONG-TERM DEBT AND LIABILITIES SUBJECT TO COMPROMISE.......... NOTE 6 - SHORT-TE RM I NV E STM ENTS....................................... NOTE 7 I N C OM E T AX E S..................................................... NOTE 8 - EMPLOYEE BENEF I T PLANS......................................... NOTE 9 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES.............. NOT E 10 - NUC L EAR I NSURANC E........................................... NOTE 11 - GULF STATES UTILITIES COMPANY................................... NOT E 12 - RAT E S AND REGUL AT I ON......................................... l NOTE 13 - OTHER COMMITMENTS AND CONTINGENCIES.........................
OERNsr& YOUNG LLP o ecw ssen souare o n-w w = 701 Pwdra street New Orleans Louisiana 70i39 9869 Report ofIndependent Auditors Mr. Ralph R. Mabey Chapter 11 Trustee for Cajun Electric Power Cooperative, Inc. Bankruptcy Case No. 94-11474 We have audited the accompanying balance sheets of Cajun Electric Power Cooperative,Inc. i l (the Cooperative) as of December 31.1995 and 1994, and the related statements of revenue and expenses, changes in equity and margin (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Cooperative's management. Our responsibility is to express an opinion on these fmancial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards and the stan-dards for financial audits contained in Government Auditing Standards, issued by tae Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materia misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the fir. uncial statements referred to above present fairly, in all material respects, the fm' ancial position of Cajun Electric Power Cooperative,Inc. at December 31,1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Cooperative will con-tinue as a going concern. As discussed in Note 1 to the Financial Statements, on December 21, 1994, the Cooperative filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. The Cooperative is currently operating under the supervision of a Court appointed trustee who will continue to operate tl e Cooperative until a plan of reorganization is formulated and approved by the Bankrupt,cy Court. Any potential plan of reorganization will be subject to the approval of the Cooperative's creditors and will require confirmation by the Bankruptcy Court and there can be no assurance that any plan of reorganization will be approved or confirmed, or that the Cooperative will continue to operate, in some form, under the terms of such plan of reorganization. In addition, in the event a plan of reorganization is approved by the Bankruptcy Court which provides that the Cooperative, in some form, will continue to operate, continuation of the business after reorganization is dependent upon the success of future opera-tions and the Cooperative's ability to mect its obligations as they become due. The ouuome of these uncertainties raise substantial doubt about the Cooxrative s ability to continue as a going concern. The financial statements do not include any acjustments to reflect the possible future l t effects on the recoverability and classification of assets or the amounts and classification of lia-bilities that may re.c'ilt from the outcome of these uncertainties. As discussed in Note 8 to the financial statements, in 1995, the Company changed its method of accounting for other postretirement benefits. Q+ (LLP February 14,1995 Ernst & 't oung up is a rnernber of Ernst & Young international, Ltd.
BALANCE SHEETS CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) g! December 31 1995 1994 ASSETS UTILITY PLANT Electric plant in service $2,652,704 $2.640,912 i Less accumulated depreciation and amortization 846.827 772.345 1,805,877 1,868,567 i Construction work in progress 11,998 11,542 Nuclear fuel at amortized cost 28,896 37,636 Electric plant held for future use 9.904 9.904 1 1.856.675 1.927.649 i OTHER PROPERTY AND INVESTMENTS i Nonutility property 670 670 Restricted funds 93,199 6,735 Investments in associated organizations 25,150 27,944 Decommissionin9 reserve funds 20,219 17,729 Other receivables 48.648 9.035 187.886 62.I13 CURRENT ASSETS l Cash and cash equivalents 26,742 54,005 Accounts receivable - electric customers: Members 33,446 30,789 Nonmembers 6,281 6.441 Accounts receivable - other 3,666 1,889 Fuel and supplies inventories 62,668 48,479 Prepayments 3.885 986 136.688 142.589 I DEFERRED CHARGES 3,520 4,074 I $2.184,769 $2.136,425 I I g December 31 1995 1994 EQUITY AND LIABILITIES EQUITY AND NARGIN (DEFICIT) Memberships 5 1 1 Patronage capital credits 35,988 35,988 Unallocated deficit Donated capital (2,095,462) (2,119,993) 382 389 (2.059.084) (2.083.615) CURRENT LIABILITIES Accounts payable 938 Taxes other than income tax 113 193 Other accrued expenses 11.552 5.291 12.603 5.484 OPERATING RESERVES Decommissioning 20,219 17,729 Post retirement benefits 5.442 25.661 17.729 DEFERRED CREDITS 1,082 LIABILITIES SUBJECT TO COMPROMISE 4,204,507 4,196,827 $ 2.184.769 $ 2.136.425 The accompanying notes are an integral part of these financial statements.
STATEMENTS OF REVENUE AND EXPENSES CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) Year Ended December 31 1995 1994 OPERATING REVENUE Sales of electric energy: Members $ 290,020 $ 299,888 Nonmembers 88,776 79,665 Other 1.047 807 , 379.843 380.360 OPERATING EXPENSES Power production: Fuel 151,304 151,691 Operations and maintenance 66,192 76,874 Purchased power 8,224 5,680 l Other power supply expenses 592 491 Transmission 36,628 35,536 Administrative and general 21,485 25,525 Depreciation and amortization 76,306 75,451 Taxes, cther than income 8.28!i 8.644 _ 369.016 379.892 OPERATING MARGIN 10,827 468 OTHER INCONE AND EXPENSES Interest, rents and leases 7,784 4,041 Other income and patronage capital credits 5,060 5,432 Gain (Loss) on asset dispositions 191 (766) Litigation settlements 5.512 18.547 8.707 NARGIN BEFORE INTEREST AND OTHER DE8T EXPENSE AND CUNULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 29,374 9,175 INTEREST AND OTHER DEST EXPENSE 191 337.487 NARGIN BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 29,183 (328,312) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4.652 NARGIN(DEFICIT) $ 24.531 $(328.312) The accompanying notes are an integral part of these financial statements..
STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT) CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) Year Ended December 31, 1995 and 1994 Patronage Unallocat:d Member-Capital Margin Donated shios Credits (Deficit) Capital Total BALANCE JANUARY 1. 1994 1 $35,988 $(1,791,681 1389 $(1,755,303) Net deficit Tor the year (328.312) (328.312) BALANCE der'cMBER 31, 1994 1 35,988 (2,119,993) 389 (2,083,615) Net margin for the year 24.531 24.531 BALANCE DECENBER 31, 1995 1 $35.988 $(2.095,462) M $(2.059,084) The accompanying notas are an integral part of these financial statements. - _ _ _ _ - _ _ __
STATEMENTS OF CASH FLOWS CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) Year Ended December 31 1995 1994 CASH FLOWS FRON OPERATING ACTIVITIES Cash received from sales of power $ 376,615 5 367,867 Payments from joint owner of Big Cajun 2. Unit 3 24,892 Other cash receipts 2,505 4,253 Cash payments for fuel and fuel stock (168,106) (163,811) Operation and maintenance expenses paid (52,244) (74,221) Purchased power and transmission expenses paid (38,309) (37,975) Administrative and general expenses paid (25,018) (31,267) Taxes paid (15,531) (15,998) Interest and other income received 6,234 4,007 Litigation settlement 5,512 Interest paid (24.868) NET CASH PROVIDED BY OPERATING ACTIVITIES 91,658 52,879 CASH FLOWS FRON INVESTING ACTIVITIES Capital expenditures (13,378) (15,054) Nuclear fuel purchased (6,772) (10,557) CoBank retirement of C stock 12,247 Transfer to excess funds account (86,147) Directors and officers liability trust (1.000) NET CASH USED BY INVESTING ACTIVITIES (106,297) (14,364) CASH FLOWS FRON FINANCING ACTIVITIES Repayment of long term debt (12.624) (450) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (27,263) 38,065 Cash and cash equivalents at beginning of year 54.005 15.940 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26,742 5 54,005 RECONCILIATION OF NET MARGIN (DEFICIT) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net margin (deficit) $ 24,531 5(328,312) ADJUSTMENTS TO RECONCILE NET MARGIN (DEFICIT) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 74,055 73,253 Amortization of nuclear fuel 15,511 12,459 Interest expense accrued to long-term debt 311,874 Net loss on asset dispositions 424 2,271 Increase in accounts receivable and investments in associated organizations (41,093) (11,148) Increase in fuel and prepayments (16,534) (2,579) Increase (Decrease) in accounts payable and accrued expenses 34.764 (4.939) NET CASH PROVIDED BY OPERATING ACTIVITIES 5 91.658 5 52,879 4 The accompanying notes are an integral part of these financial statements. _. _.. _ _. _ _. _....... 2
( NOTES TO FINANCIAL STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC. DECEMBER 31, 1995 NOTE 1 - BANKRUPTCY PROCEEDING Bankruptcy Filing: On December 21, 1994, Cajun Electric Power Cooperative. Inc. (the Cooperative) filed a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code and began operating as debtor in possession under the { supervision of the United States Bankruptcy Court for the Middle District of Louisiana (Bankruptcy Court). The need to file for Chapter 11 protection resulted from a conflict between the Louisiana Public Service Commission (LPSC) and the Rurt.1 Utilities Service (RUS), formerly the Rural Electrification Administration, over the proper wholesale rate to charge the Cooperative's member distribution cooperatives (Members). On December 14, 1994, the LPSC ordered the Cooperative to lower its wholesale Member rate, effective December 21,1994, from 54.5 mills per kilowatt-hour to 48.8 mills per kilowatt-hour reducing revenues by "approximately 530.2 million on an annual basis (see Note 12). On December 20, 1994, the RUS ordered the Cooperative not to reduce its wholesale Hember rate as required by the LPSC order, alleging that the LPSC order was implicitly preempted. Reduction of the Cooperative's wholesale rate without the consent of the RUS is an event of default under the terms of the Cooperative's 1990 Debt Restructure Agreement (DRA)(see Note 5). On December 21. 1994, the Cooperative complied with the order of the LPSC, filed a new tariff reflecting the lower rate as ordered by the LPSC, and filed for relief under the United States Bankruptcy Code. Trustee: On April 17, 1995 Central Louisiana Electric Company (CLECO) filed a motion with the United States District Court for the Middle District of Louisiana (District Court) for the appointment of a Chapter 11 trustee alleging that the inherent conflict present in the structure of the Cooperative, the fact that nine of the Cooperative's twelve Members are on the Members Comittee, the fact that the. _ _ - _...
Notes to Financial Statements - Continued Cajun Elcctric Power C: operative, Inc. L Note 1 - Continued [ Cooperative's appeal of the LPSC rate order has b' ' challenged by some Members, and that the Cooperative has rcfused to deal with w as a consequence of its retail strategy are sufficient grounds that it is in 'e best interest of the creditors that a trustee be appointed. On April 19,1995,.he RUS filed a similar motion to appoint a trustee. On May 4, 1995, one of the Cooperative's Members which had agreed to sell its assets to CLECO, also filed a motion for the appointment of a trustee, or, in ~ he alternative, for an examiner. GSU filed pleadings supporting t the appointment of a trustee. On August 1,1995, the District Court ordered the appointment of a trustee in the Cooperative's Chapter 11 proceeding. The Cooperative, the LPSC, the Unsecured Creditors Committee, the Members Committee, Burlington Northern, American Commercial Terminals and Western Fuels filed an appeal with the United States Fifth Circuit Court of Appeals (Fifth Circuit) and sought a stay of the District Court's order pending appeal. The Fifth Circuit denied the stay but granted an expedited hearing of the appeal of the Trustee order. The appointment of the Cooperative's Trustee, Ralph R. Mabey, became effective upon hi: qualification on August 30, 1995. On November 20, 1995, a three-judge panel of the Fifth Circuit, by a 2-1 majority, issued a ruling to vacate the order of the District Court appointing a trwtee and remand the case to the District Court for further proceedings. The Fifth Circuit held that the District Court had abused its discretion in the appointment of the trustee in citing that the rationale for the appointment arose as a result of the conflict present in the inherent structure of the Cooperative wherein the member-owners want law rates and the creditors desire higher rates. The Fifth Circuit held that the inherent conflict present in the structure of the Cooperative was an insufficient reason to justify the appointment of a trustee. Further, the Fifth Circuit noted that, should it hold that such conflicts constitute cause for the appointment of a trustee, a per se rule would be created in which a trustee would be required in any bankruptcy case involving a cooperative. On December 13, 1995, the date that the mandate vacating the District Court's order appointing a Chapter 11 trustee was to be issued, the Fifth Circuit directed that the issuance of the mandate be stayed pending further ruling. Also on December 14, the RUS filed suggestions for rehearin'J by the entire Fifth Circuit (en banc). Additionally, CLECO and Teche filed a petition for rehearing as well as a suggestion for rehearing en banc. On December 22, 1995, the District Court ordered that the Trustee shall continue to perform all duties assigned to him as the Chapter 11 Trustee for the Cooperative including the preparation and submission of a Chapter 11 plan within 120 days of the date of the order. On January 8, 1996, attorneys for 8-
[_ Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 1 - Continued the debtor filed an emergency motion with the Fifth Circuit seeking the immediate issuance of a mandate which would remove the Trustee and enable the Cooperative to return to debtor-in-possession status once again. On January 25, 1996, the Fifth Circuit granted the petitions for rehearing of the RUS and CLECO and reversed its decision of November 20, 1995 holding that the conflict of interest within the Members of the Cooperative's Board of Directors was such that the District Court was correct in ordering a trustee for the Cooperative. This action by the Fifth Circuit affirms the appointment of the Trustee by the District Court. Sales Solicitation Process: On January 5,1996, the Trustee filed a motion with the District Cnurt seeking to establish procedures for submitting proposals to purchase the assets of the Doperative. The motion stated that the Trustee believes that a plan of reo*ganizatson which "right-sized" the Cooperative would immediately increase the value '.,f the Bankruptcy Estate because a portion of the Cooperative's excess capacity may be worth more to a third party and because the Cooperative's requirements for energy during peak periods can possibly te met most economically through the purchase of power on the open wholesale power market. Alternatively, a sale of all of the Cooperative's assets may return the most value to the Estate because several potential purchasers may have access to substantial power generation, transmission and marketing resources that exceed the Cooperative's existing capabilities. Such an entity may be able to reconfigure the assets of the Cooperative which, in conjunction with other resources, may enable the entity to dispatch power to the Cooperative's customers at a lower cost than the Cooperative were able to achieve even if it were "right-sized". Further, such an entity may be able to enhance the marketing of the Cooperative's excess capacity and may be able to effect significant savings in general and administrative and operations and maintenance expense, in order to ensure that the Bankruptcy Estate realizes full value through the sales solicitation process described above, the motion does not require a potential purchaser to assume the burden of the Cooperative's undivided ownership interest in the River Bend nuclear facility and its related obligations. Any potential bidder, however, will be afforded the opportunity to purchase the Cooperative's interest in River Bend should they so desire. Further, the motion states that the Trustee plans to file a plan of reorganization which achieves the full value of the Estate by .g. l
l Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 1 - Continued either rejecting,
- selling, abandoning or having declared as a nullity the Cooperative's interest in the River Bend nuclear facility and related obligations including any damage claims or offsets that may arise out of this action.
The motion provides that the Trustee will seek a consensual plan of reorganization to the extent possible by the April 22, 1996 deadline imposed by the District Court. in order to meet the court-imposed deadline, the Trustee has instructed his investment advisor and the management of the Cooperative to continue to identify and contact existing.as well as new candidates in order to notify them of the proposed timetable and provide access to information so that these entities may prepare and submit formal proposals. The Trustee has requested that his investment advisors investigate the current as well as alternative rate paths and evaluate the various positions of the parties in an effort to determine the value of the Estate. Additionally, the Trustee's investment advisors are to advise the Trustee on the conduct of the sales process and assist in settlement negotiations. Also, the Trustee has instructed his investment advisors and the management of the Cooperative to develop a Base Case Plan Term Sheet describing the Cooperative's right-sizing plan and the value that such a plan would generate for the Estate. This Term Sheet may be provided to prospective purchasers in order to establish a base line value which proposals must meaningfully exceed in order to be considered. In the event that no party generates a proposal which sufficiently exceeds the Base Case Plan Term Sheet, the Trustee may embody the Tera f' or a modified version of the Term Sheet in his plan of reorganization, in which case the Cooperative would continue, in some form, as an operating entity. The motion permits the issuance of a forr l request for proposals on or about January 26, a deadline for receipt of proposals on or about March 8, and the filing of a plan of reorganization on or before April 22, 1996, the date which the District { Court established as the date for the filing of a reorganization plan by the Cooperative's Trustee. On January 22, 1996, the District Court granted the Trustee's motion to establish procedures for submission of proposals to purchase all or a portion of the assets of the Cooperative. The request for proposals was issued on February 12, 1996 with instruction that all proposals must be. received on or before March 8, 1996.
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc. l Note 1 - Continued l g Rate Authority: On December 20, 1994, the RUS ordered P.e Cooperative to maintain E its current rates stating that the LPSC's rate reduction order " seriously I compromises important federal interests,... conflicts with the purposes of the Rural Electrification Act, and therefore is implicitly preempted by federal law." On December 21, 1994, the Cooperative filed with the LPSC its revised rate schedules as ordered, then filed for protection under Chapter 11 of the United States Bankruptcy Code. On the same day, stating that it was being subjected to conflicting jurisdictional assertions over its rates by the LPSC and the RUS, the Cooperative also. filed a.aotion with the Bankruptcy Court asking for a preliminary injunction enjoining either RUS or the LPSC from taking any action. instituting any proceeding, or attempting in any way to impose upon the Cooperative its rate-making authority and regulation until a final hearing and determination is made on which entity, the LPSC or RUS, has the authority to regulate the rates of the Cooperative. On December 23, 1994, the District Court withdrew the reference of the bankruptcy case from the Bankruptcy Court. Certain issues not heard by the District Court will be referred to and heard by the Bankruptcy Court. On January 18, 1995, a comittee composed of seven Members of the Cooperative (Members Comittee) moved to intervene in the complaint of the Cooperative seeking a declaratory judgment whether the LPSC or the RUS has authority to regulate the wholesale Member rates of the Cooperative. The Members Comittee asserted that its Members serve a majority of the retail patrons of the Cooperative's Members and represent a substantial proportion of the industrial and comercial load served by the Cooperative. The Members Comittee sought a declaration that the RUS does not have the authority to preempt the LPSC. The Members Comittee is currently composed of ten of the Cooperative's Members. On January 25, 1995, the RUS sought a temporary restraining order in the District Court against the Cooperative preventing the Cooperative from lowering its Member rates as ordered by the LPSC. On January 31, 1995 the request by the RUS for a temporary restraining order was denied in the District Court. On July 7,1995, the District Court held that the Rural Electrification Act (RE Act) does not expressly or impliedly preempt the LPSC from setting the rates of the Cooperative and that the regulations that the RUS promulgated pursuant to the RE Act are invalid.
- Further, the Court held that there was no conflict preemption under the facts of the case..
Notes to Financial Statements - Continu:d Cajun Electric Power Cooperative, Inc. b Note 1 - Continued b The Court also abstained from determining if the rate set by the LPSC was discriminatory. The RUS has appealed this decision to the Fifth Circuit Court of Appeals. Briefs have been submitted by both the LPSC and the RUS. The timing or outcome of this matter is uncertain. On January 24, 1995, the Cooperative filed an appeal of the LPSC rate order with the 19th Judicial District Court for the state of Louisiana. On January 30, 1995, three of the Cooperative's Members filed a motion with the 19th Judicial District Court to dismiss the Cooperative's appeal alleging, among other things, that the vote to appeal the LPSC decision by the Cooperative's Board of Directors was an illegal act on behalf of the Cooperative and that the appeal was not properly authorized by the Cooperative's Board of Directors. On January 30, 1995, these same Members filed a petition in the 19th Judicial District Court to appeal the LPSC's order alleging that the rate of 48.8 mills per kilowatt hour was determined in an arbitrary and capricious manner which ignored evidence that the Cooperative's Member wholesale rate should be lower. The Court has taken no action on this matter. Cash Balances: On February 13, 1995, the Bankruptcy Court issued an order giving the Cooperative permission to use cash, in the ordinary course of business, to pay all usual and necessary operating expenses based on the Cooperative's 1995 budget. ~ Additionally, the Order noted that the Cooperative must notify the RUS of its intention to make any changes to budgeted capital projects or capital expenditures and prohibits any changes unless RUS consents or the Bankruptcy Court, after a notice and hearing, orders otherwise. The Cooperative has the right under the Order to make unbudgeted capital expenditures without notifying the RUS if the amount of an unbudgeted expenditure does not exceed $100,000 for any single item nor $300,000 in the aggregate for any calendar quarter, in the event that unbudgeted capital projects or expenditures exceed these thresholds, the approval of the RUS is required before any expenditures may be made. Additionally, the Cooperative has the right under the Order to make or incur any capital expenditure for an unbudgeted item in the event of an emergency in which case the RUS must be notified of the emergency and the related expenditures. The Order also provided that as of February 14, 1995, and on the first day of each b month thereafter, the Cooperative shall place in an escrow account any funds in -
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 1 - Continued excess of $35 million. No distribution may be made from this account to any party except upon a Bankruptcy Court order issued after a notice and hearing. The excess funds are to be invested in accordance with the investment guidelines of the Cooperative which were approved by the Bankruptcy Court on December 27, 1994. In addition, the Order established May 9, 1995 as the date by which any oarty in interest must notify the Secured Creditors of any challenge to the validity, extent, or priority claimed by the Secured Creditors in the bankruptcy proceeding. Any party in interest not acting by this date is deemed to have waived any such challenge. On January 29, 1996, the Bankruptcy Court approved a 1996 cash collateral order enabling the Cooperative '.o operate based on its 1996 budget until May 31, 1996. At that time, the Bankruptcy Court will reexamine the cash needs of the Cooperative l t,ased on the structure of the plan of reorganization to be filed by the Trustee on or before April 22, 1996 and may reconsider whether certain expenditures were made in the ordinary course of business. Similar restrictions to those in the 1995 cash collateral order, as well as the funding of the escrow account with excess funds, tere adopted as part of the 1996 cash collateral order. Accounting Policies: Under the Bankruptcy Code, as of the petition date, all actions of creditors to collect pre-petition indebtedness are stayed. As a result, no party which has a security or adverse interest in the debtor's property may take any action against the debtor or the property of the debtor regardless of the location of the property or who is in possession of the debtor's property until the stay is modified. Additionally, under the Bankruptcy Code, the Cooperative may reject executory contracts and unexpired leases with the approval of the Bankruptcy Court. If an executory contract or lease is rejected, that rejection is deemed to be a breach of the contract or lease by the Debtor, with damages, if any, being treated as a pre-petition, unsecured claim. Substantially all of the liabilities of the Cooperative as of the petition date are subject to compromise under a plan of reorganization which may be filed and approved in accordance with the Bankruptcy Code. In accordance with Generally Accepted Accounting Principles, the Cooperative has adopted the provisions of the American Institute of Certified Public Accountants C _ __ _.
Notes to Financial Statements - Continued Cajun Electric Power Cooperatiee, Inc. Note 1 - Continued Statement of Position (50P) 90-7, " Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", in general, certain provisions of the Bank up'cy Code may relieve a debtor from its obligation to pay interest while in Chapter 11. Interest on secured claims is generally accrued and expensed only to the extent that the value of the underlying collateral exceeds the allowed amount of the secured claim. Additionally, interest on unsecured claims is not accrued if the debtor is insolvent. If a plan of reorganization for the Cooperative is approved by the Bankruptcy Court, the ability of the Cooperative to continue as a going concern will be dependent upon the terms of the plan, and, if contemplated by the plan, the Cooperative's ability to continue in business and meet any obligations under the plan as they become due. The accompanying financial statements have been prepared on a going concern basis which assumes continued operations and the realization of assets and liquidation of l liabilities in the ordinary course of business. As a result of the reorganization proceeding, the Cooperative may have to sell assets and settle liabilities for amounts other than those reflected in the financial statements. Also, a plan of reorganization could materially change the amounts currently recorded in the financial statements and would likely include the resolution of significant litigation and regulatory disputes. The accompanying financial statements do not give effect to any adjustments to the carrying value of assets or amounts and classification of liabilities that may be necessary as a consequence of the Chapter 11 proceeding since it cannot be determined when a plan will be approved by the District Court. The appropriateness of the continued use of the going concern basis is dependent upon several things, including confirmation of a plan of reorganization tshereby the Cooperative may contir ue in some form as an operating entity, the success of future operations, and the ability to generate sufficient cash to meet the obligations under the plan as they become due. Other: On December 28, 1994, the Cooperative filed a motion in the bankruptcy case to reject the River Bend Joint Ownership Participating and Operating Agreement (River Bend J0P0A) as an executory contract (see Note 11). Gulf States Utilities (GSU) has opposed the motion. No timetable for discovery or trial has been established. _
Notes to Financial Statements - Continu:d Cajun Electric Power Cooperative, Inc. [ Note 1 - Continced On January 27, 1995, GSU filed a motion in the District Court seeking equitable subordination of the claims of RUS to the claims of GSU. In this action. GSU k alleges that, as a consequence of RUS' actions in dealing with the Cooperative on the River Bend issue, the claims of RUS should not be secured by a first lien on the { assets of the Cooperative, but should be subordinated to the claims of GSU and other creditors. On March 7, 1995, the RUS filed a motion to dismiss the GSU's complaint regarding equitable subordination. The District Court has yet to rule on this matter. Prior to the appointment of the Trustee, the Cooperative engaged an investment advisor to prepare and distribute to interested parties a sales memorandum. The Cooperative also established a data room which was made available to potential purchasers. Subsequent to the appointment of the Trustee, this process continued with visits by several interested parties to the data room and meetings between these parties, the Trustee, and the management of the Cooperative. This process will continue with the Trustee's investment advisors. The Cooperative is in default under the terms of the DRA as well as all of its loan agreements and obligations. All of the debt of the Cooperative, other than post-petition payables, is classified as Liabilities Subject to Compromise in the accompanying balance sheets. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES General: 'e Cooperative is a rural electric generation and transmission cooperative sich is wholly owned by 12 memb:r distribution cooperatives. The { Members provide electricity to approximately 300,000 metered customers representing nearly 1,000,000 people residing throughout 80% of the land area of Louisiana. The ( Cooperative and -its Members have entered into wholesale all requirements power contracts which require the Members to purchase all of their electric energy requirements from the Cooperative generally through 2026. A majority of the Cooperative's sales are to three of its Members. Southwest Louisiana Electric Membership Corporation, Dixie Electric Membership Corporation, and Washington-St. Notes to Financial Statements - Continu:d Cajun Electric Power Cooperative, Inc. Note 2 - Continued [ Tammany Electric Cooperative, Inc. accounted for 24,1%,19.7%.:nd 10.5% of megawatt hours sold to Members in 1995. The Cooperative is subject to certain rules and 3 regulations promulgated for rural electric horrowers by the RUS and is also subject y to the jurisdiction of the LPSC (see Note 12). Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. System of Accounts: The Cooperative maintains its accounting records in accordance with the Federal Energy Regulatory Ccmmission (FERC) chart of accounts as modified and adopted by the RUS. Electric Plant In Service: Elect-ic plant in service is stated on the basis of cost, net of amounts applicable to a joint owner. Depreciation is computed using the straight-line method over the expected useful lives of the related component assets. The net book value of units of property replaced or retired, including costs of removal net of any salvage value, is charged to operations. ( Nuclear Fuel: The cost of nuclear fuel, including capitalized interest, is amortized to fuel expense on the basis of the actual number of units of thermal { energy produced, multiplied by a unit cost which reflects the total thermal units expected to be produced over the life of the fuel (see Note 9). [ Construction Work In Progress: Construction work in progress is stated on the basis of cost, net of the amounts applicable to a joint owner, and includes interest durina construction on major projects, investments: Tne Cooperative hay investments in The National Rural Utilities Cooperative Finance Corporation (CFC) and the National Bank for Cooperatives (CoBank) which are in the form of capital term certificates and Class "E" stock, respectively. In the accompanying financial statements, these investments are carried at cost and include undistributed patronage capital credits from these { organizationt.. '
) Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc.- l l Mote 2 - Continued Fuel and Sucplies Inventories: Fuel and supplies inventories are stated on the i basis of cost utilizing the weighted average cost method of inventory valuation. Deferred Charges: The balance in deferred charges consists primarily of expenditures for preliminary surveys and investigations and capitalized software. Deferred Credits: Deferred credits involve amounts related to disputed charges involving a coal transportation contract. Patronage Capital Credits: The Cooperative is organized and operates on a not-for-profit basis. Patronage capital credits represent that portion of the Cooperative's net margins which have been allocated to Member cooperatives. As provided in the Cooperative's bylaws, all amounts received from the furnishing of electric energy in excess of the sum of operating costs and expenses and amounts required to offset any current year losses are assigned to Members' patronage capital credit accounts on a patronage basis or, at the discretion of the Board of Directors, may be offset against losses of any prior fiscal year. All other amounts received from operations in excess of costs and expenses may be used to offset losses incurred during the current or any prior fiscal year and, to the extent not needed therefore, are allocated to Members on a patronage basis. In accordance with the Cooperative's bylaws, the net deficits have not been allocated to the Member cooperatives. As a consequence of the Cooperative's Chapter 11 proceeding, the net margin for 1995, which results from the nonaccrual of interest expense in accordance with S0P 90-7, tas not allocated -to the Member Cooperatives but will be held in abeyance pending the outcome of the Cooperative's reorganization under the Bankruptcy Code. Decommiissioning: Decommissioning reserves represent cumulative accruals for decommissioning expense. The annual charge for decommissioning expense is the required addition to the decommissioning trust funds such that the balance of the funds (contributions plus net earnings) will be sufficient to satisfy estimated decommissioning costs at the end of the expected useful lives of the Cooperative's facilities (see Note 9). Income Taxes: The Cooperative uses the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) 109. __
N2tes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 2 - Continued Under the liability method, deferred tax assets and liabilities are determined based on differences between financial repu'.ing and tax bases of assets and liabilities. Fair Values of Financial Instruraents: The carrying amounts reported in the balance sheet for cash and cash equivalents, decommissioning reserve funds, and restricted funds approximate their fair value. I Statement of Cash Flows: The Cooperative utilizes the direct method of reporting cash flows. Cash Equivalents: The Cooperative considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. l-Reclassifications: Certain reclassifications have been made to the 1994 financial statements to conform to the 1995 presentation. l NOTE 3 - UTILITY PLANT Electric plant in service at December 31 c.onsisted of the following (in thousands): 1995 1994 I Production: Nuclear $1,468,915 $1,463,532 Coal 1,026,317 1,021,210 I Gas 34,037 33,264 Transmission 104,462 104,221 General 18.973 18,685 I $2.652.704 $2.640.912 I Net Megawatt Cooperative Ownershin Generatino Unit Ratina Fuel Percentaae Meaawatts River Bend 936 Nuclear 30% 281 Big Cajun 2, Unit 1 575 Coal 100% 575 Big Cajun 2, Unit 2 575 Coal 100% 575 Big Cajun 2, Unit 3 540 Coal 58% 313 Big Cajun 1, Unit 1 110 Gas 100% 110 Big Cajun 1, Unit 2 110 Gas 100% 110 1
Notes to Financial Statements - C:ntinued Cajun Electric Power Cooperative, Inc. Note 3 - Continued Big Cajun 2 Units 1 and 2 were retrofitted to increase their capacity from 540 MW to 575 MW in 1995 and 1994, respectively. Units 1 and 2 are scheduled to be recertifieo in the summer of 1996. Big Cajun 1, Units 1 and 2 were recertified from 105 MW each to 110 MW in 1995. River Bend and Big Cajun 2, Unit 3 are jointly owned by the Cooperative and GSU { (see Note 11). Construction work in progress consists of improvements and additions to existing plants. The estimated cost to complete these projects at December 31, 1995 was approximately $10 million. Nuclear fuel represents the Cooperative's 30% share of River Bend fuel and as of December 31 consisted of the following (in thousands): 1995 1994 Nuclear fuel in process 5 12,304 $ 5,533 Nuclear fuel in reactor 91,489 91,489 [ Spent nuclear fuel 65.729 65.729 169,522 162,751 Less accumulated amortiration [ of nuclear fuel 140.626 125.115 t Net nuclear fuel 5 28.896 5 37.636 Nuclear fuel in process at December 31, 1995 represents the accumulated cost, ( including capitalized interest, of fuel required for the sixth reload which began in January 1996. The fuel is in various stages of -conversion, enrichment or fabrication. Spent nuclear fuel consists of the original cost of nuclear fuel [ assemblies, in the process of cooling, which were removed from the reactor during each of the five previous fuel cycles. ( Land relating to an abandoned lignite project has bet:n retained as a possible site for a future generating facility and its cost, 59.5 million, is included in electric plant held for future use. I,
(. __ -______- _-_ _____-_-_ -_ - _ ___ - - - - - - Notes to Financial Statements - C:ntinued Cajun Electric Power Cooperative, Inc. L Note 3 - Continued [ The net change in accumulated depreciation and amortization for the years ended December 31 was (in thousands): 1995 1994 Charged to operating expenses $74,055 $73,253 Charged to fuel inventories and other assets 1.118 1.061 75,173 74,314 Less asset disposals and other adjustments 691 3.035 $74,482 571.279 In March 1995, the financial Accounting Standards Board (FAS8) issued SFAS No.121, ( " Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This statement, which is effective for fiscal years beginning after December 15, 1995, requires the recognition in current period income of an impairment loss if the sum of undiscounted expected future cash flows (excluding interest charges) is less than the carrying amount of the asset. An impairment loss { recognized under SFAS 121 is measured by the excess of the carrying value of the asset over the fair value of the asset (the amount at which the asset could be [ bought or sold in a current transaction between willing parties). In June 1994, the LPSC issued an order which held that the Cooperative's investment in the River Bend nuclear facility was imprudent (see Note 12). Accordingly, the [ wholesale rate which the LPSC order established does not allow for the recovery of any portion of the capital cost of River Bend. In the event that the Cooperative is { not able to divest itself of River Bend during 1996, either through its bankruptcy proceeding or through fitigation, a write off of some portion of the carrying amount of River Bend may be required. The carrying amount of the assets related to River Bend are approximately $1.1 billion. f There are no other significant assets that management expects to be affected by the j adoption of SFAS 121. It is not possible to determine the impact of the adoption of SFAS 121 at this time. { '. O. f m
I Notes to Financial Statements - Continu d Cajun Elcctric Power Cu p;rative, Inc. l NOTE 4 - INVESTMENTS IN ASSOCIATED ORGANIZATIONS AND RESTRICTED FUNDS Investments in associated organizations at December 31 consisted of the following (in thousands): 1995 1994 CFC $ 7,692 5 7,692 I CoBank 16,050 18,844 Other 1.408 1,408 525,150 $27,944 On February 1, 1995, the Bankruptcy Court issued an order enabling CoBank to deposit into an interest-bearing CoBank account amounts attributable to the return of E stock which would have otherwise havt been paid to the Cooperative. The Bankruptcy I Court ruled that the prevention of the dissipation of cash collateral in this matter did not constitute a violation of the automatic stay provision of the Bar.kruptcy = Code. Subsequently, the Bankruptcy Court approved two similar stipulations regarding ti.: CoBank escrow account on May 19, 1995 and January 8, 1996. At I December 31, the Cooperative had a receivable from CoBank of approximately 59 million and $1.3 million for 1995 and 1994, respectively, which was included in j other receivables. Restricted funds at December 31, included the following (in thousands): 1995 1994 IRB Escrow Account 5 227 5 689 Excess Funds 87,058 Director and Officer's-Loss Reserve 3,000 l Director and Officer's Trust 178 3,196 l River Bend Low Level Waste 2.736 2.850 593.199 56,735 Restricted funds includes approximately 587 million in excess funds which the Bankruptcy Court ordered to be segregated from the Cooperative's general funds (see Note 1). The Cooperative manages the investment of the excess fund account in accordance with the investment guidelines adopted by the Cooperative and confirmed by order of the Bankruptcy Court. Notes to Financial Statements - Continued Cajun Elcetric Power Cooperative, Inc, NOTE 5 - LONG-TERM DEBT AND LIABILITIES SUBJECT TO COMPROMISE On December 21, 1990, the Cooperative consummated a DRA effective May 31, 1990, with the United States of America acting through the RUS. Under the terms of the DRA, the Cooperative executed and delivered to the RUS two notes which restructured all of the Cooperative's debt to or guaranteed by the RUS: Note A, in the original face amount of $2,147,994,670, which matures on December 31, 2026, and Note B, in the original face amount of $1,037,007,550, which has a final maturity date of December 31, 2036. Both Notes A and B bear interest on the unpaid principal balance at a nc.1iinal rate of 8.64%, with an assumed effective annual rate of 8.99%. Prior to December 21, 1994, accrued but unpaid interest on Notes A or B was added to principal on a monthly basis (see Note 1). The DRA provides that Note A may not be prepaid without the express written consent of the RUS. Note B may be prepaid without prsmium or penalty. l Liabilities subject to compror.ise (in thousands), including long-term debt were as follows: l 1995 1994 Long-term Debt $4,161,745 $4,174,921 Excessive 0&M Provision - River Bend (See Note 11) 33,394 12,421 Accounts Payable and Other Accrued Expenses 9.368 L485 $4.204.507 $4,196,827 Long-term debt, which is included in liabilities subject to compromise, consisted of the following (in thottsands): 1995 1994 Note A to the RUS, due in varying ar.nual installments through 2026, interest at 8.64% compounded monthly. $2,646,860 $2,659,586 _
Notes to Financial Statements - Centinu:d Cajun Electric Power Cooperative. Inc. Note 5 - Continued b 1995 1994 Note B to the RUS, varying-annual payments based upon several contingent factors, final maturity December 31, 2036, interest at 8.64% compounded monthly. $1,513,985 $1,513,985 Industrial Development Revenue Bonds, series 1982, interest ( at two-thirds of prime rate (5.67% at December 31,1995), due in 2 annual installments from 1995 through 1997, 900 1.350 $4.161.745 54.174.921 On February 3, 1995, the Bankruptcy Court authorized the Cooperative to enter into a ( compromise settlement and receive approximately $9.5 million related to litigation involving price-fixing of electrical contracts during the construction of Big Cajun 2, Unit 3. On March 6, 1995, the District Court ordered the Cooperative to [ distribute to RUS approximately $5.5 million settlement proceeds. The Order clso stipulated that the Cooperative pay approximately $4 million to G5U, the co-owner of { the facility. On April 25, 1995, the Bankruptcy Court ordered the distribution to RUS of certain proceeds related to a nonmember power sales contract. As of December 31, 1995, the amount distributed to RUS related to these contracts totaled approximately $7.2 million. RUS has' applied these distributions to the principal ( balance of Note A, and, as a consequence, the Cooperative reduced Note A by $12.7 million. Both the Bankruptcy Court and the District Court entered their orders on these matters without prejudice, essentially allowing any party in interest the right to challenge the validity, priority or extent of any claim or lien of RUS. Interest and other debt expense for the years ended December 31 consisted of the following (in thousands): 1995 1994 [ Interest charged to operating expense $ 40 $337,256 Other debt expense 15.1 231 Total interest and other debt expense 191 337,487 Capitalized interest on nuclear fuel 0 555 m $338.042 F l
Notes to Financial Statements - C:ntinu:d Cajun Electric Power Cooperativa, Inc. Note 5 - Continued For the year ended December 31, 1994, the Cooperative paid $24.9 million in-interest. In accordance with S0P 90-7, the Cooperative will recognize interest expense in the financial statements while in Chapter 11 only to the extent that the value of the underlying collateral exceeds the principal amount of the secured claim. The Cooperative believes there is insufficient collateral to enable the RUS to recover the principal portion of these obligations. Accordingly, ti,e Cooperative ceased accruing ir.terest on these obligations effective December 21, 1994. Contractual interest related to secured and unsecured claims not recognized for accounting purposes totaled $377 million and $10 million in 1995 and 1994, respectively. Substantially all of the Cooperative's assets are pledged to secure the ( Cooperative
- s debt to -the RUS by the Supplement to the Supplemental Mortgage and Security Agreement (the RUS mortgage) executed November 28, 1990 between the j
Cooperative, the RUS and CoBank in order to facilitate the DRA. Both the PUS mortgage and the DRA contain certain restrictive covenants including limitations on indebtedness, capital additions, distributions to Members and an agreement not to lower the Cooperative's wholesale electric rate for the term of the DRA. At December 31, 1995, the Cooperative was in default under the DRA as well as the RUS { mortgage. Certain office facilities in Baton Rouge are separately pledged to secure the Industrial Development Revenue Bonds (IRBs). The IRB Trust complied with an h order received from the Bankruptcy Court and paid the debt service on the IRBs which was due January 1,1995. The Cooperative had funded this debt service payment to the IRB Trust prior to its Chapter 11 filing. Although a residual balance remains in the Trust, it is insufficient to fund the remaining IRB debt service payments. - The Cooperative has not been granted approval of the Court to continue funding the Trust. Therefore, any future debt service payments will be funded only as a result of court order. As a consequence of cross-default provisions, the Cooperative-is k-also in default under the terms of the IRBs as well. CoBank is secured by the RUS Mortgage for two letters of credit amounting to approximately $25 million supporting potential indemnity payments under sale-leaseback transactions completed in 1983. During 1993, CoBank renewed the letters of credit for an additional five-year period. L
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 5 - Continued it was not practical for the Management of the Cooperative to estimate the fair value of the Cooperative's long-term debt because of the lack of a quoted market price, the fact the Cooperative is under the protection of the Bankruptcy Court, and an inability to estimate fair value without incurring excessiva costs. NOTE 6 - SHORT-TERM INVESTMENTS At December 31, 1995 and 1994, the Cooperative's cash was invested in United States Treasury securities, United States government agencies securities, commercial paper and short-term obligations issued by financial institutions. On December 27, 1994, the Bankruptcy Court issued an order approving the Cooperative's investment guidelines and continuation of the investment program. On September 6, 1995, the Trustee filed a motion with the Bankruptcy Court seeking the Court's approval of the continuation of the investment program and instructed the Cooperative's management to continue the investment program pursuant to the Bankruptcy Court's initial order. On December 14, 1995, the Bankruptcy Court issued an order granting the Trustee's motion for approval and continuation of the investment program. All investments conform with the guidelines established by the RUS. Maturities are selected to correspond with cash flow requirements and are generally for periods of less than { three months and are considered to be cash equivalents. NOTE 7 - INCOME TAXES At December 31, the composition of the Cooperative's deferred tax assets and liabilities (tax effected at a rate of 207,) were as follows (in millions): 1995 1994 Deferred Tax Assets: Operating Loss Carryforwards $ 412 $ 384 Long-term Debt Basis Difference 303 303 General Business Credit Carryforwards __ 165 _ 155 881 853 Deferred Tax Liability: Depreciation Temporary Differences ._Q12) 1112) Net Deferred Tax Asset 571 534 7 Less: Deferred Tax Asset Valuation Allowance 1111) _.014 ) { Net Deferred Tax Asset / Liability 0 5 0 {
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 7 - Continued At December 31, 1995, the Cooperative's operating loss and credit carryforwards were as follows (in millions): Nonmember Nonmember Member Year Net hember AMT Net AMT General Of Operating Operating Operating Operating Business Exoiration loss Loss Loss Loss Credit ( 1999 $ 9 2000 2001 27 128 2002 2003 2 2004 $ 15 2005 232 $101 2006 2007 95 94 2008 124 124 [ 2009 93 94 2010 90 90 2011 181 181 / No Expiration 51.231 51.231 L }Eg M 1934 $1.231 g b There are numerous and highly complex tax issues associated with the Cooperative's restructuring under Chapter 11, such as resolution of the River Bend litigation, the ( abandonment of assets, forgiveness of debt, and the potential sale of assets. The Cooperative plans to seek private letter rulings from the Internal Revenue Service { on many of these issues. The impact of the resolution of these tax issues cannot be determined at this time. NOTE 8 - EMPLOYEE BENEFIT PLANS All of the Cooperative's employees participate in the National Rural Electric Cooperatives Association (NRECA) Retirement and Security Program once they have met minimum service requirements. The Cooperative makes annual contributions to the plan equal to the amounts accrued for pension expense. In this master multiple-employer defined benefit plan, which is available to all member cooperatives of the NRECA, the accumulated benefits and plan assets are not determined or allocated 7.
Notes to Financial Statements - Ccntinued Cajun Electric Power Cooperative, Inc. Note 8 - Continued separately by individual employer. The Cooperative made contributions to the plan totaliqg 5843,173 and $407,924 in 1995 and 1994 respectively. The Cooperative's 1995 payment represents payments for January through April. A moratorium has been placed on payments for the remainder of the year. The Cooperative also r.iaintains a defined contribution pension plan which constitutes a cash or deferred arrangement under section 401(k) of the Internal Revenue Code of 1986 (as amended). Once minimum service requirement are met, all of the employees of the Cooperative are eligible to participate in the plan. Under the terms of the plan, which is administered by the NRECA, the Cooperative matches 50% of employee contributions up to a maximum of 4% of each participating employee's base compensation. In December 1990, the Financial Accounting Standards Board issued SFAS No. 106, " Employers' Accounting for Postretirement Benefits Other Than Pensions", which requires the accrual of benefits other than retirement income provided to retired workers. The Cooperative makes available to those salaried employees who retire on or after age 62 and who also have at least 10 years of service, postretirement medical insurance benefits. Retirees are required to contribute toward the cost of I benefits. The Cooperative funds the cost of benefits in excess of retiree contributions. The Cooperative adopted SFAS No. 106 in January 1995 and elected to expense the accumulated postretirement benefit transition obligation (APB0) of $4.7 million and recognize a net periodic postretirement benefit cost of approximately $790,000. The postretirement benefit' obligation was determined based upon an actuarial valuation concluded in early 1995. The service cost component and interest cost component of the net periodic postretirement benefit obligation for 1995 was approximately $377,000 and $413,000, respectively. _.
- - - - - - - - - - - - - - ~ Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc. ( Note 8 - Continued Reconciliation of Funded Status of APB0 (in thousands) at December 31, 1995: Active employees fully eligible for benefits $ 591 Other active employees Current retirees 4,195 Total 656 Fair value of assets 5,442 f APB0 in excess of fair value of assets M ( The assumed health care cost trend rate for 1995 used to measure the expected cost of benefits was 13% with an ultimate assumed health care cost trend rate of 6.5% which is expected to be achieved in 13 years. The assumed weighted average discount ) rate was 8.25%. Effect of a one percentage-point increase in health care cost trend at December 31, 1995: Service cost $ 108,589 Interest cost Total 102.169 5 210,758 Increase in APB0 $1,129,827 { A Voluntary Employee Benefits Association trust was established by the Cooperative in 1992 to pay medical and dental claims. Since the assets in this Trust are used to pay the claims of both active and retired employees, and the claims have not been segregated and restricted to pay for postretirement benefits, the Trust cannot be considered as plan assets for purposes of SFAS 106. In 1994 and prior years, the Cooperative expensed the cost of postretirement benefits as they were paid. The general reduction in interest rates in 1995 may require the Cooperative to wlect a lower assumption for a weighted average discount rate to use in the 1996 actuarial valuation study of postretirement benefits. A decline in the discount rate, all other assumptions being equal, will result in an larger postretirement benefit obligation and a corresponding increase in the net periodic postretirement benefit cost. The quantification of this increase cannot presently be determined in the absence of a study. , l A
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. NOTE 9 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES GSU has executed a contract with the Department of Energy (DOE) whereby the DOE will furnish disposal service for the spent nuclear fuel from River Bend. Currently, the cost amounts to one-tenth of one cent per kilowatt hour of sales to ultimate The DOE spent nuclear fuel fee is subject to change in accordance with consumers. the provisions of the Nuclear Waste Policy Act of 1982. The Nuclear Regulatory Comission (NRC) in 1988 issued final regulations setting forth the technical and financial criteria for decomissioning licensed nuclear facilities. The regulations require electric utilities either to certify that a minimum dollar amount will be available to decomission the facility or to submit a decomissioning funding plan. In addition, these regulations require that financial assurance be provided by either prepayment, an external sinking fund, or by a surety, insurance, or other form of guarantee. In response to these regulations, on December 2,1988, the Cooperative established an external granto-trust, the River Bend Decomissioning Trust Fund, and intends to make annua' 'ntributions to accumulate an amount which will be sufficient, based on current estimates and assumptions, to pay for its share of the cost of decommissioning at the end of the estimated useful life of River Bend. Annual contributions to the trust are approximately $1.4 million. The Cooperative has based its contribution to the trust on a site-specific engineering study commissioned by GSU. This study estimated the total cost of decomissioning River Bend to be 5206,000,000 (1992 dollars) of which the Cooperative's share is approximately 561.8 million (1992 dollars). GSU commissioned another study which was completed in 1991 which indicated that the total decomissioning cost estimate had increased to approximately 5398,000,000 (1992 dollars). GSU has not yet accepted this study. At the time GSU accepts this or other revised studies, the Cooperative will reevaluate the funding of the Trust. As of December 31, 1995, the balance in the River Bend Decommissioning Trust Fund was $17.9 million. The Cooperative is required by the State of Louisiana Department of Environmental Quality (DEQ) to provide assurance that it has the ability to fund the actions which will be necessary to rehabilitate its Big Cajun 2 ash and wastewater impoundment __
Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc. Note 9 - Continued areas which, as disposal sites, are subject to DEQ review and supervision. The total liability for funding the solid waste disposal site rehabilitation is currently estimated to be approximately $4 million, of which GSU is responsible for approximately 5500,000. On July 1, 1939, the Cooperative created the Solid Waste Disposal Trust and deposited $1.06 million with the trustee in satisfaction of its DEQ funding requirements. The annual contributions to the trust are approximately $116,000. The actual payments for site rehabilitation are not scheduled to occur until the end of the estimated useful life of the Big Cajun 2 coal-fired facility. The balance in the Solid Waste Disposal Trust at December 31, 1995 was $2.4 million. On June 15, 1994 the FASB began studying the accounting for nuclear decommissioning liabilities for the purpose of determining if and when the obligation for decommissioning costs should be recognized in the financial statements. in September 1995, the scope of the project was expanded to include liabilities related to closure and removal costs for long-lived assets. On February 7,1996, the FASB issued an Exposure Draft on Accounting for Certain Liabilities Related to Closure or Removal of Long-Lived Assets. In the event that this project results in a statement of financial accounting standards which would require the Cooperative to recognize a liability for its portion of the total nuclear decommissioning costs, the Cooperative would have to record an amount that would be material to equity and margin because the decommissioning costs are not currently recoverable through wholesale rates charged to Members. The Energy Policy Act of 1992 (the Act) establishes a Fund to pay for the decontamination and decommissioning of three nuclear enrichment facilities operated by the DOE. Electric' utilities that have purchased enrichment services in prior years from the 00E are to be charged a special assessment for a portion of the Fund not to exceed $150 million each year, adjusted for inflation. The special assessments are based on a formula that takes into account the total amount of enrichment services purchased from the 00E by electric utilities in previous years. The Cooperative paid a special assessment of $257,850 in 1996 and $257,898 in 1994. The net present value of its remaining liability for the 14-year period is approximately $2.8 million. The Cooperative intends to recognize these costs in the period in which cash payments are required. - _ _ _
Not:s to Financial statements - C ntinued Cajun Electric Power Cooperative. Inc. NOTE 10 - NUCLEAR INSURANCE The ownership of an undivided interest in River Bend subjects the Cooperative to certain risks. The Cooperative is insured, as described below, for public liability and property damage. The Price-Anderson Act (the Act) was renewed by Congress in 1988 and was extended through August 1, 2002. Public liability under the Act for any nuclear incident is currently limited to $8.9 billion. The Cooperative and GSU are insured for this exposure by private insurance as well as by a secondary financial program. Changes l to the Act related to the secondary financial program may require the Cooperative to become subject to a possible retroactive assessment of which the Cooperative's share I would not exceed $19.5' million per incident with a maximt ; of $3 million per incident payable in any one year for losses at any licensed nuclear facility. t The Cooperative and GSU jointly maintain $500 million of property damage insurance through private insurance and $1.4 billion in excess of the $500 million through l NEIL II as member insureds. The Cooperative is subject to a maximum assessment of $4.6 million in any one policy year as a condition of being a member insured of NEIL 11. There is additional property insurance carried in the amount of $850 million which is excess over the above listed $1.9 billion. Of this amount, the Cooperative has $255 million of property insurance, through private insurance and GSU has $595 aillion through NEIL III. Although the Cooperative and GSU continue to attempt to increase insurance coverag; i as it becomes available, the Cooperative can give no assurance as to the adequacy of its coverage in the event of a major accident. Total available property damage insurance is substantially less than the potential insurable value of River Bend. In 1991, the NRC promulgated a rule providing that, in the event of an accident at River Bend in which the estimated costs of stabilizing and decontaminati x the site exceed $100 million, insurance proceeds must first be dedicated to this purpose. Proceeds not required for such stabilization and decontamination may then be used to repair or replace the damaged unit. Notes to Financial Statements - Ccntinued Cajun Electric Power Cooperative. Inc. Note 10 - Continued The Cooperative has joined GSU in obtaining a Nuclear Workers' Liability policy which covers liability for the claims of workers employed at River Bend after January 1, 1988 for noncatastrophic nuclear-related injury such as prolonged exposure to low-level radiation. Any claims by workers employed at River Bend prior to January 1,1988 will continue to be covered under the Nuclear Workers' Liability policy if the claim is made by December 31,- 1997. Under the Nuclear Workers' I Liability policy, the Cooperative is subject to a maximum potential retrospective premium assessment of approximately $1.0 million. It is possible that liabilities related to the release or escape of a hazardous substance from River Bend may be greater than the coverage on policies currently carried and, consequently, existing insurance may not be sufficient to meet all possible liabilities or losses. The Cooperative cannot provide assurance that it will be able to maintain coverage at present levels. Any liability or loss in excess of that covered under existing policies could have a material adverse effect upon the Cooperative. NOTE 11 - GULF STATES UTILITIES COMPANY River Bend Litigation: In August 1979, the Coope ative and GSU entered into a contractual agreement for the joint ownership of River Bend (River Bend J0P0A) (see Note 3). The Cooperative has a 30% undivided interest in River Bend and is responsible for 30% of River Bend's costs of construction, capital additions and operations. On June 5, 1992, Entergy Corporation (Entergy) and GSU entered into an agreement to combine the two companies subject to various regulatory approvals. The merger of Entergy and GSU was consummated on December 31, 1993. Entergy Operations, Inc., a wholly-owned subsidiary of Entergy, is the operator of River Bend. The Cooperatim filed suit on June 26, 1989 against GSU in District Court in Baton Rouge alleging fraud in the inducement to enter into the River Bend J0P0A as well as misrepresentation, mismanagement, breach of fiduciary duty and breach of contract. The Cooperative seeks the annulment of the River Bend J0POA and the recovery of its investment in River Bend (approximately $1.6 billion) as well as damages resulting from the Cooperative's participation in the River Bend project. The Cooperative is J
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 11 - Continued I 1 seeking further damages associated with excessive operating costs of the facility which arose dus to GSU's alleged mismanagement. i On December 14, 1992, the Cooperative filed a motion with the District Court seeking { a separate trial of the fraud and construction issues of the case. On January 14, 1993, GSU filed a response with the Court consenting to the Cooperative's request. j In August 1993, the Court issued an order granting the Motion of the Cooperative to bifurcate the fraud and breach of contract issur3 for trial ordering that the Court would try the fraud issue first, without a jury; and if necessary, the second phase of the trial regarding the breach of contract issues would be conducted at a later date. On October 24, 1995, the District Court ruled that the Cooperative failed to prove that GSU fraudulently induced it to execute the River Bend J0P0A and that there was error as to the principal cause of the document. Additionally, the District Court found that the Cooperative's action was barred as a consequence of not being brought I before the Court within the five-year prescriptive period for such claims under Louisiana law. The District Court ordered the Clerk of Court to withhold entering the final judgment until the District Court filed detailed reasons into the record and issued the appropriate order as required by the Federal rules of Civil Procedure. On November 22, 1995, the Trustee, as a precautionary measure filed an appeal with the Fifth Circuit Court of Appeals, notwithstanding the District Court's instructions to the Clerk not to enter a final judgment. On January 22, 1996, on Motion of the Trustee, the Fifth Circuit stayed the appeal pending issuance by the District Court of its detailed reasons for judgment. In January 1996, the District I Court decreed that the ' start of the breach of contract portion of the case would be delayed for a sixty-day period in order to give the parties time to discuss a negotiated settlement to this litigation. The date for the start of the breach trial has not been set by the Court; consequently, the timing or outcome of this matter is uncertain. Big Cajun 2. Unit 3 Litigation: In November 1980, the Cooperative and GSU-entered into a contractual agreement for the joint ownership of Big Cajun 2, Unit 3, and-I certain common facilities at Big Cajun 2 (see Note 3). The Cooperative retained a 58% undivided ownership interest in Unit 3 and an 86% undivided ownership interest _______
-~ -Notes to Financial Statements - C ntinued Cajun Electric Power Cooperativa, Inc. Note 11 - Continued in the common facilities. The Cooperative is the operator of the Big Cajun 2 -facilities. On November 7,- 1990, GSU filed an amended counterclaim with the Court requesting that the Big Cajun 2 Unit 3 J0P0A be rescinded and -asked for an appropriate l monetary judgment sufficient to place the Cooperative and GSU in the same position as if the Big Cajun 2, Unit 3 J0P0A was never consummated. Additionally, GSU's counterclaim asserts that its present transmission arrangements with the Cooperative should be terminated by the Court. Further, GSU asserts that in any event it is entitled to monetary damages resulting from an alleged breach of contract and fiduciary duty by the Cooperative. On March 31, 1992, the Court appointed a mediator to engage in and coordinate settlement discussions between the parties which commenced in July 1992. Settlement discussions between the Cooperative and GSU are continuing. On February 23, 1995, the Cooperative received approximately 59.5-million in settlement of a suit regarding price fixing for electrical work done during the construction of Big Cajun 2, Unit - 3 of which 42% related to GSU's ownership interest. The Cooperative's share of the settlement is included - as litigation settlenents in the Statement of Revenue and Expenses. On March 6, 1995, the District Court ordered the Cooperative to pay RUS and GSU 58% ar.d 42%, respectively of the settlement amount. b River tend Service Water Litigation: In September 1991, the Cooperative commenced { exercising its contractual rights under the River Bend J0P0A and elected not to participate in the fun' ding of the Service Water Project (SWP), the inlet feedwater-nozzle repair, turbine rotor repairs, and extended outage costs associated with the SWP. Consequently, as of December 31, 1995, the Cooperative has not paid approximately 534.1 million related to these activities, plus $13.4 million of (. accumulated interest. GSU asserts that the Cooperative is in default of the River Bend J0POA and disputes the Cooperative's right to not pay such amounts. The amounts not paid are based on the Cooperative's best estimate of the related costs to date and are not reflected in the accompanying financial statements. On November 27, 1991, the Cooperative filed a complaint which it amended in December 1992, for Declaratory and Injunctive Relief with the District Court seeking a declaration and -
Notes to Financial Statements - Cantinued Cajun Electric Power Cooperative Inc. L Note 11 - Continued interpretation of the Cooperative's rights as related to this issue under the River Bend J0P0A. While the timing or outcome of this matter is uncertain, legal counsel has advised the Cooperative that it is within its rights under the River Bend J0POA to withhold these payments. In September 1992, the Cooperative began withholding payments to GSU for certain River Bend costs which it determined to be excessive. During October 1994, the Cooperative ceased all further payments to GSU for River Bend costs for the remainder of 1994 and 1995, except for safety related costs such as nuclea-insurance and deconnissioning and decontamination payments. Provisions for Excessive River Bend Costs, net of amounts applicable to the sale of River Bend energy as described below, of $33.3 million and $12.4 million as of December 31, 1995 and 1994, respectively, as reflected in the Company's financial statements, are based on GSU's billings to the Cooperative. The 1994 Provision for Excessive River Bend Costs includes interest of $847,000 through December 20, 1994 which is applicable to excessive River Bend costs (see Note 5). The timing or outcome of this matter is uncertain. On November 1, 1994, Entergy, responding on behalf of GSU, informed the Cooperative that GSU would begin exercising its rights under the terms of the River Bend J0P0A as a non-defaulting co-owner and sell the Cooperative's 30% share of the output of capacity and energy from River Bend and apply the proceeds to the River Bend costs { not funded by the Cooperative. The net proceeds (sales net of associated transmission costs) from the sale of the Cooperative's share of River Bend generation for 1995 and 1994 were $39.9 million and $4.9 million, respectively. This amount was recognized as nonmember revenue with a corresponding reduction of the Provision for Excessive River Bend Costs. Big Cajun 2 Cost: Entergy, asserting a right of compensation under Louisiana law, [ also informed the Cooperative that funds which were due to be paid to the Cooperative for current operating costs associated with Big Cajun 2, Unit 3, would instead be applied to the deficiency in River Bend funding. In response, on November E, 1994, the Cooperative informed Entergy that it would exercise its rights under the Big Cajun 2, Unit 3 J0P0A as a non-defaulting co-owne and sell GSU's 42% share of the output of capacity and energy from Big Cajun 2 Unit 3 and.
Notes to Financial Statements - Continu:d Cajun Electric Power Cooperative, Inc. Note 11 - Continued apply the proceeds to satisfy the deficiency in the funding of GSU's share of Unit 3 GSU countered by filing a motion with the Court for a preliminary injunction costs. obligating the Cooperative, among other things, to provide GSU with its share of Big Cajun 2 Unit 3 output. Effective December 19, 1994, the Court ordered the Cooperative to supply GSU with its share of Big Cajun 2, Unit 3 output providing that GSU deposits -into the registry of the Court the amounts due the Cooperative under the Big Cajun 2. Unit 3 J0P0A from November 1, 1994 and each month thereafter as the payments become due. GSU deposited the required amounts through December 31, 1995. The Court further stipulated that the Cooperative shall be permitted to withdraw the funds in the court registry when the Cooperative's financial obligations under the River Bend J0P0A are current. The Cooperative's net receivable, included in restricted funds, from GSU for Unit 3 costs, which was deposited in the registry of the court, was $39.6 million and $7.7 million for 1995 and 1994, respectively. Transmission Issues: On July 17, 1987, the Cooperative filed a complaint at the FERC against GSU alleging overbilling and improper cost allocations for certain transmission service charges. On June ?0, 1988, GSU filed new contract provisions with the FERC which would increase the amount the Cooperative would be required to pay GSU for transmission cost prospectively and retroactive back to 1981. The. two proceedings were consolidated by the FERC. On May 11, 1989, the FERC Administrative Law Judge (ALJ) issued an opinion which could have required the Cooperative to pay GSU approximttely $25 million for transmission charges for the period 1981 through 1991. On April 10, 1992, the FERC issued an Initial Decision, which affirmed in { part the opinion of the ALJ.nd stipulated certain additional adjustments. Both the Cooperative and GSU filed Requests for Rehearing in May 1992. On November 3, 1992, g GSU filed with the 5th Circuit Court of Appeals a Request for Review of the FERC's L Initial Decision. On August 25, 1993, the Court of Appeals issued a ruling reversing the Commission ard remanding this matter back to the Commission for ( further consideration. The Court of Appeals subsequently denied the Cooperative's Request for Rehearin;;. On November 17, 1993, GSU filed a proposed rate schedule { change with FERC purportedly impementing its interpretation of the Court's remand and requested an expedited ruling. In an unpublished letter order dated January 13, 1994, the Commission rejected the filing. _____]
Notes to Financial Statements - Continued Cajun Elcetric Power Cooperative, Inc. Note 11 - Continued On November 21, 1994, the Court of Appeals issued an order directing FERC to respond to GSU's argument and also advise the Court when FERC intends to act on the remand order. On March I and 2,1995, hearings were held at the FERC. The ALJ issued a decision on April 26, 1995 ordering the Cooperative to pay GSU approximately $16.8 million plus interest from June 1988. On August 3, 1995, the FERC issued a decision upholding the ALJ's order. On Septen.oer 1, 1995 the Cooperative filed a request for rehearing with the FERC and also filed a Notice of Substitution of Party indicating that the Cooperative was no longer acting as debtor-in-possession and that the Trustee is now acting on behalf of the Cooperative in this matter. GSU also filed a request for rehearing. On October 2,1995, the FERC issued an Order denying GSU's request for a rehearing and granted in part and denied in part the Trustee's request for a rehearing of the FERC's August 3, 1995 Order. The FERC's Order of October 2, 1995, denied a rehearing on the CTOC credits and removed the direction in the August 3, 1995, FERC Order which allowed GSU to recover the pre-petition debt of the Cooperative related to the CTOC issues through a surcharge on post-petition rates concluding that the issue of pre-petition debt is more properly dealt with under the jurisdiction of the Bankruptcy Court. On September 26, 1995, GSU filed with the Bankruptcy Court a motion to annul the automatic stay and to validate FERC ( proceedings, which, if granted, would have the effect of converting GSU's claim for CTOC credits into an administrative priority claim. The Trustee opposed GSU's { motion and the matter is pending before the District Court. On October 12, 1995, the Trustee filed a Petition for Review in the Court of Appeals for the District of Columbia circuit regarding that portion of the October 2, 1995 FERC Order which denied a rehearing on the issue of CT0C credits. On November 10, 1995, GSU filed a Petition for Review in the Fifth Circuit Court of Appeals and also filed a motion to transfer the Trustee's Petition from the District of Columbia Circuit to the Fifth Circuit. Oral arguments on this matter are scheduled for May 14, 1996. On November 30, 1995, GSU tendered to FERC its compliance filing to implement the orders that are the subject of the Petition for Review. On December 5, 1995, the Trustee filed a Protest and Motion to Reject GSU's filing. On January 4, 1996, the Trustee filed a Motion fnr leave to file a reply brief on this issue. The timing or outcome of this matter is uncertain; accordingly, no provision for any liability that may result has been made in the financial statements...
-~ Notes to Financial Statements - Continu:d Cajun Eltetric Power Cooperative, Inc. Note 11 - Continued On August 7, 1989, the Cooperative filed a complaint at the FERC against GSU alleging that GSU failed to provide certain transmission service and additional delivery points. The Cooperative further alleged that the transmission service and additional delivery points are necessary to allow one of the Members to supply power to two large industrial customers which could not be served by the Member's own transmission lines. In 1989, FERC found that the contract did not require that GSU provide the Cooperative or the Member with the transmission service or delivery points requested. FERC's 1989 ruling was appealed to the United States Court of Appeals. The Court remanded the matter back to FERC holding that the 1980 transmission service schedule was ambiguous and that the FERC erred in the manner in which evidence was taken on this issue. On June 24, 1992, the ALJ issued a finding in favor of GSU on this matter which was affirmed by the FERC on March 21, 1994. On April 20, 1994, a Joint Request for Rehearing by the Cooperative and the RUS was filed with FERC. On August 3,1994, the FERC denied the Request for Rehearing. On August 12, 1994, the Cooperative filed a Peticion for Review with the Court of Appeals. On November 10, 1994, the Court of Appeals granted the motions of GSU and the LPSC to intervene in the matter. Oral arguments were held before the Court of Appeals on September 12, 1995. On October 6, 1995, the Court rendered a decision which denied the Cooperative's Petition for Review of FERC's interpretation of Service Schedule CSTS and its effect on the Cooperative's dispute with GSU regarding ( transmiseion service to the delivery points in question. No further action will be taken on this matter. [ In 1991, Entergy filed what was represented to be an open access transmission tariff which purportedly allows third parties to access Entergy's transmission grid. This filing resulted in intervention by numerous parties including the Cooperative. The FERC approved the tariff with modifications but set no issues for hearing. The Cooperative and others appealed the FERC's decision to the D.C. Circuit Court of Appeals. On July 12, 1994, the D.C. Circuit Court of Appeals reversed the FERC's approval of Entergy's open access tariff on several grounds and remanded the case to the FERC for further proceedings. While the FERC was considering the case on remand, Entergy submitted a letter to the FERC stating that Entergy intended to file amended tariffs which would comply with both the D.C. Circuit Court of Appeal's [ remand of the FERC's decision and which would satisfy the FERC's recently announced policy on transmission service comparability. Entergy filed its tariffs on October [ F
Notes to Financial Statements - Ccntinued Cajun Elcctric Power Cooperative, Inc. Note 11 - Continued 31, 1994. The Cooperative as well as other parties intervened at the FERC. On January 6,1995, the FERC issuad an order rejecting certain portions of Entergy's proposal and setting the remainder for he ring. Entergy filed revised tariffs on June 1, 1995. On September 1,1995 Entergy offered a partial settlement to the Cooperative as well as the other interveners in this proceeding. The Cooperative and other parties filed suggested modifications. The Cooperative filed testimony in this matter as well as filing a notice of substitution of parties naming the Trustee as the party in interest since the Cooperative was no longer debtor-in-possession. On December 13, 1995, Entergy again filed revised open access tariffs, adopting additional provisions from the FERC Notice of Proposed Rulemaking on open access. A secoN offer of partial settlement was distributed on January 3 and 4,1996. A FERC hearing was held on January 31, 1996 on rate issues. An additional hearing on market power issues was held on February 21, 1996. The FERC has yet to establish a schedule for the filing of briefs as a result of these hearings. Settlement discussions bet.;een the Cooperative and Entergy are continuing. The timing or outcome of this matter is uncertain. On January 10, 1995, GSU filed with FERC a proposed amendment to their Power Interconnection Agreement (PIA) with the Cooperative. This amendment would allow GSU, in the event that the Cooperative failed to pay any sum due for services under { any transmission service schedule, to suspend service and to cancel or terminate GSU's transmission arrangements with the Cooperative. On February 6, 1995, the Cooperative filed an intervention requesting that the GSU filing either be rejected or set for hearing. On March 10, 1995, the FERC issued an " Order Accepting Filing" which accepted GSU's proposed modifications to the PIA which permitted GSU to file with the FERC a request to terminate service under such Service Schedules and terminate or suspend service to the l,ooperative if it fails to pay any amount due for service. On April 10, 1995, Cajun filed its request for a rehearing before the FERC which was granted. No date for the rehearing has been scheduled. l 1
Notes to Financial Statements continued . Cajun Electric Power-Cooperative, Inc. Note 11'- Continued On January 31, 1996, a Motion to Intervene was filed with the FERC, submitted on-behalf of the Cooperative's Trustee regarding the submittal by Entergy of a revised Exhibit A to Service Schedule CSTS to the PIA. (- -General: As part of the bankruptcy proceedings, the Cooperative filed a motion to reject the River Bend J0POA with GSU (see Note 1). GSU has filed pleadings with the { Court objecting to the Cooperative's motion.to reject the River Bend J0POA. The 1-rejection of the River Bend J0P0A may result in substantial claims for damages being asserted.against the Bankruptcy Estate by GSU. An unfavorable outcome of the litigation related to the SWP, the inlet feedwater b nozzle repair or replacement, turbine rotor repairs, other excessive River Bend costs, or' the proceedings at the FERC as discussed in the above pa agraphs could (1 have a material adverse impact upon the Cooperative. NOTE 12 - RATES AND REGULATION (- LPSC 1989 Rate Proceeding: The Cooperative has been regulated by the LPSC since 1989. At the time the LPSC asserted jurisdiction over the Cooperative it also {. initiated an examination of the Cooperative's rates, LPSC Docket U-17735. In May 1990, the LPSC ordered the Cooperative to reduce its base. rate by 4 mills, replacing a fuel credit of approximately the same amount which the Cooperative had been {- flowing -through its fuel adjustment. In July 1990, the LPSC approved the DRA between the Cooperative and the RUS and approved the Cooperative's existing wholesale rates, but added the condition that " annual average rates of 54.5 mills will-be the maximum rates to be charged through December 31, 1991. whaect to the h_ other-provisions of this Order and any prospective ratema' ag adjustments which result.from any ratemaking investigations of-Cajun." [ In early February 1992, the LPSC approved the Cooperative's request to reduce the 4 mill credit to a -1 mill credit through a phase-out during 1992. This base rate increase was intended to offset a decrease in fuel costs and keep rates stable. The LPSC's approval was subject to certain conditions, including a continuation of the 54.5 mill rate cap. b 40 [; I
Notes to Financial Statements - Centinu:d Cajun Electric Power Cooperative, Inc. Note 12 - Continued In July 1992, as part of its rate examination, the LPSC began investigating the prudence of the Cooperative's decision to invest in the River Bend nuclear plant. As a result of its investigation, in June 1994, the LPSC in an Order: (1) declared the River Bend investment imprudent; (2) declared the River Bend asset to be excess uneconomic capacity and disallowed it under the used and useful principle, but allowed the Cooperative to recover avoided costs for River Bend electricity; (3) disallowed ur..ier the retroactive ratemaking rule the Cooperative's accumulated past losses; and (4) directed its consultants to update the test fear and recommend to the LPSC rates consistent with these findings. The Cooperative has appealed this Order to the 19th Judicial District Court. The timing or outcome of this matter is uncertain. In December 1994, pursuant to their prudence finding, the LPSC ordered the Cooperative to lower its rates by $30.2 million to 48.8 mills effective December 21, 1994 (see Note 1). This Order also adopted the Cooperative's proposed rate design changes. The Cooperative has appealed this Order to the 19th Judicial District Court. The timing or outcome of this matter is uncertain. LPSC 1996 Rate Proceeding: On January 24, 1996, the LPSC voted to begin another rate proceeding in the current rate examination docket (U-17735) to determine a reasonable rate for the Cooperative. The stated purpose of this examination is to make potential bidders aware that the LPSC is exercising its jurisdiction. { Additionally, the LPSC voted to open a new docket to examine the wholesale _ power contracts between the Cooperative and its Members out of concern that the contracts may be null and void if the contracts are transferred in a sale of the Cooperative's assets. Further, Special Counsel to the LPSC feels there may be an issue of whether the contracts were voided when the Cooperative's Trustee displaced the Cooperative's Board of Directors. The timing or outcome of these matters is uncertain. The LPSC has indicated its intent to hold these dockets in abeyance. LPSC Management Audit: In October 1993, the LPSC engaged consultants to conduct a management audit of the Cooperative. An initial meeting was held in March 1994. The Cooperative responded to several data requests and the LPSC's consultants interviewed 38 Cooperative personnel and four Board members, with additional interviews occurring throughout 1994 concluding in April 1995. The audit was l
Notes to Financial Statements - C:ntinusd Cajun Electric Power Cooperative, Inc. Note 12 - Continued released in January 1596 and the consultants' findings were generally very favorable. The Judit's overall assessment was that the Cooperative "is generally very well managed, both operationally and organizationally. The management of Cajun has been aggressive, innovative, and successful in reducing costs consistent with performance, safety, and employee concerns." The Cooperative is examining the audit's recommendations and will take appropriate action as necessary. None of the audit's recommendations which were quantified by the consultants would result in a material impact upon the Cooperative's financial statements. F l NOTE 13 - OTHER COMMITMENTS AND CONTINGENCIES I In addition to the commitments and contingencies described in Notes 1, 5, 9, 10 and 12, the Cooperative has the following contingencies and commitments: Coal and Transportation Commitments: Purchases under the terms of contracts for the acquisition and related transportation of coal during 1995 and 1994 were approximately $126 million and $121 million, respectively. Certain purchases are subject to various price escalators and deflators, minimum quantity takes and periodic price reopeners at then current market prices. Management is of the opinion that these contracts will properly meet anticipated coal supply needs. The I transportation contracts begin to expire in 1999 while the coal contracts are for the useful life of the coal-fired generating facility, provided the present supplier is willing to meet or better offers from other suppliers at scheduled periodic price reopeners. The Cooperative's coal and transportation contracts, as executory contracts, may be rejected in the Chapter 11 bankruptcy proceeding. I Litigation: On September 20, 1989, a class action petition was filed in the Tentb Judicial District State Court in Natchitoches Parish, Louisiana naming the Cooperative's Members as defendants. The plaintiffs in this action seek a refund of all rate increases enacted by the Cooperative's Members from 1978 until the respective Member voted to be subject to the jurisdiction of the LPSC or was placed under the jurisdiction of the LPSC by action of the State Supreme Court. On October 17, 1989, the case was moved to the federal courts. On June 23, 1990, t -
Notes to Financial Statements - Continu:d Cajun Electric Power Cooperative, Inc. Note 13 - Continued [ motions were filed by the Cooperative's Members to name the Cooperative as a third party defendant in the case. On July 15, 1991, the United States District Court in New Orleans entered an order retaining jurisdiction in the case and granting the motions of the Cooperative's Members to join the Cooperative as a third-party defendant in the case. On August 28, 1992, the District Court abstained from this matter in favor of proceedings at the LPSC. [ The LPSC currently has a docket associated with this matter. Docket U-19943 is an examination of the Members' rates during the period of non regulation,1978 through 1989. The first hearings on this docket occurred in the first quarter of 1994 and continued through May 1995. These hearings dealt with the question of the standards used by the LPSC in evaluating the Members' rates and rate increases during that period. On August 19, 1994, the LPSC adopted the standards recommended by its Special Counsel. Based on those standards, Special Counsel issued a report in August 1995 recommending that 23 of the 29 rate increases implemented during the { period of non-regulation be found presumptively not unreasonable and be eliminated from further review. Special Counsel recommended that the remaining six rate increases be further reviewed for reasonableness. The LPSC has not yet acted on this recommendation. The timing or outcome of this matter is uncertain and no provision for any liability that may result has been made in the financial ( statements. An unfavorable outcome could have a material adverse impact upon the Cooperative. [ [ [ [ ( ( 1 i
E Audited Financial Statements ,g Cajun Electric Power Cooperative, Inc. December 31, im EERNST& YOUNG LLP
[ [ [ Audited Financial Statements [ Cajun Electric Power Cooperative, Inc. December 31,1994 ( ( [ [ { ( f (.
t { l ( AllDITED FINANCIAL STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC. DECEMBER 31, 1994 REPORT OF INDEPENDENT AUDIT 0RS.................................................... 1 BALANCE SHEETS .................................................................. 2 STATEMENTS OF REVENUE AND EXPENSES................................................ 4 STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT).............................. 5 STATEMENTS OF CASH FL0WS.......................................................... 6 NOTES TO FINANCIAL STATEMENTS: NOTE 1 - BANKRU PTC Y PROC E ED I NG.............................................. 7 NOTE 2 - SIGNIFICANT ACCOUNTING POLIC I ES................................... 11 NOTE 3 - U T I L I T Y P L ANT..................................................... 13 NOTE 4 - INVESTMENTS IN ASSOCI ATED ORGANIZATIONS.......................... 15 NOTE 5 - L O N G - T E RM D E B T.................................................... 1 5 NOTE 6 - SHORT-TERM INVESTMENTS............................................ 18 NOTE 7 - I N C OM E T AX E S...................................................... 13 NOTE 8 - EllPLOY E E B EN E F IT P LAN........................................... .19 NOTE 9 - RELATED PARTY TRANSACTIONS........................................ 20 NOTE 10 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES................... 20 NOT E 11 - NUC L EAR I NSURANC E................................................. 2 2 NOTE 12 - GULF STATES UTILITIES COMPANY..................................... 24 NOT E 13 - RAT E S AND R E GU L AT I ON.............................................. 2 9 NOTE 14 - COPEITHENTS AND CONTINGENC I ES..................................... 31 \\ d
L MERNST& YOUNG LLP c , owne su s,- an-~ w 8u.w roi mdm sme NPW Mt*Jf% toumana 701R4869 r L p Report ofIndependent Auditas L ne Board of Directors ( Cajun Electric Power Cooperative, Inc. We have audited the accompanying balance sheets of Cajun Electric Power Cooperative, Inc. (the Cooperative) as of December 31,1994 and 1993, and the related statements of revenue and expenses, changes in equity and margin ( (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Cooperative's management. Our rigonsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. nose standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Anancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cajun Electric Power Cooperative, Inc. at December 31,1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Cooperative will continue as a going concern. As discussed in Note 1 to the Financial Statements, on December 21,1994, the Cooperative filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Management anticipates that it will continue to operate the Cooperative as a debtor in possession until a plan of reorganization is formulated. Any potential plan of reorganization will be subject to the approval of the Cooperative's creditors and will require confirmation by the Bankruptcy Court and there can be no assurance that any plan of reorganization will be approved or confirmed. In addition,in the event a plan of reorganization is approved by the Bankruptcy Court, continuation of the business after reorganization is dependent upon the success of future operations and the Cooperative's @ifity to meet its obligations as they become due. As discussed in Note 12 to the financial statements, the Cooperative is involved in significant litigation with Gulf States Utilities Company (GSU) as well as ( proceedings with the Federal Energy Regulatory Commission (FERC) involving certain transmission charges asserted by GSU. An unfavorable outcome of this litigation or the proceedings at the FERC or the uncertainties inherent in the bankruptcy process raise substantial doubt about the Cooperative's ability to contint:c as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. As discussed in Note 13 to the financial statements, the Louisiana Public Service Commission (LPSC) has declared that the Cooperative's investment in the River Bend plant was imprudent and has disallowed recovery ofits cost through the Coopera ive's rates. he Cooperative has appealed these decisions. As discussed in Note 14 to the financial statements, the Cooperative is involved in certain class action litigation and related LPSC hearings. He r [ uhimate outcome of these matters cannot presently be determined. hwd+ LLP March 3.1995
BALANCE SHEETS CAJUN ELECTRIC POWER COOPERATIVE, INC. l (IN THOUSANDS) I December 31 g! 1994 1993 E! ASSETS UTILITY PLANT Electric plant in service $2,640,912 S2,633,779 Less accumulated depreciation and amortization 772.345 701.066 1,868,567 1,932,713 Construction work in progress 11,542 8,446 Nuclear fuel at amortized cost 37,636 38,651 Electric plant held for future use 9.904 9.99.1 1.927.649 1.989.714 I OTHER PROPERTY AND INVESTMENTS Nonutility property 670 675 l Restricted funds held by trustees 6,735 5,375 Investments in associated organizations 27,944 36,492 Decommissioning reserve funds 17.729 15.301 53.078 57.843 CURRENT ASSETS Cash and cash equivalents 54,005 15,940 Accounts receivable - electric customers: Members 30,789 28,845 Nonmembers 6,441 8,412 Accounts receivable - other 10,924 3,804 Fuel and supplies inventories 48,479 46,365 Prepayments 986 989 151.624 104.355 DEFERRED CHARGES 4,074 3,605 $2.136.425 $2.155,517 I I ] December 31 1994 1993 EQUITY AND LIABILITIES EQUITY AND MARGIN (DEFICIT) ] Memberships 5 1 5 1 Patronage capital credits 35,988 35,988 Unallocated deficit (2,119.993) (1,791,681) I Donated capital 389 389 (2.083.615) (1.755.303) l !.0NG-TERM DEBT, LESS CURRENT PORTION 3,863,047 CURRENT LIABILITIES I Accounts payable 1,037 Taxes other than income tax 193 101 } Other accrued expenses 5,291 20,596 I Current pcrtion of long-term debt 450 5.484 22.264 I l OPERATING RESERVES Decommissioning 17,729 15,301 l Excessive River Bend O&M 3.522 17.729 18.823 DEFERRED CREDITS 6,686 LIABILITIES SUBJECT TO COMPROMISE 4,196,827 l I $ 2.136.425 $ 2.155,517 I The accompanying notes are an integral part of these financial statements. 4 5 l
STATEMENTS OF REVENUE AND EXPENSES CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) Year Ended December 31 1994 1993 OPERATING REVENUE Sales of electric energy: Members $ 299,888 $ 304,336 Nonmembers 79,665 85,309 Other 807 926 380.360 390.571 OPERATING EXPENSES Power production: Fuel 151,691 144,527 Operations and maintenance 76,874 61,087 Purchased power 5,680 12,081 i Other power supply expenses 491 552 i Transmission 35,536 36,523 Administrative and general 25,525 26,532 Depreciation and amortization 75,451 75,738 Taxes, other than income 8.644 6.623 379.892 363.663 OPERATING NARGIN 468 26,908 OTHER INCONE AND EXPENSES Interest, rents and leases 4,041 3,204 Other income 147 23,168 Loss on asset dispositions (766) (7,786) Litigation settlements 601 3.422 19.187 NARGIN BEFORE INTEREST AND OTHER DEBT EXPENSE 3,890 46,095 INTEREST AND OTHER DEBT EXPENSE 332.202 322.595 NET DEFICIT $(328.312) $(276,500) The accodipanying notes are an integral part of these financial statements. 4 n
r STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT) CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) L Year Ended December 31, 1994 and 1993 L Patronage Member-Capital Unallocated Donated shios Credits Deficit Caoital Total BALANCE JANUARY 1, 1993 1 $35,988 $(1,515,181) $389 $(1,478,803) Net deficit for the year (276.500) (276.500) BALANCE DECEMBER 31. 1993 1 35,988 (1,791,681) 389 (1,755,303) Net deficit for the year (328.312) (328.312) BALANCE DECEMBER 31, 1994 5 1 $35.988 $(2.119.993)
- Hjj,
$f2.083.615) [ [ The accompanying notes are an integral part of these financial statements.
I STATEMENTS OF CASH FLOWS g CAJUN ELECTRIC POWER COOPERATIVE, INC. (IN THOUSANDS) Year Ended December 31 I 1994 1993 CASH FLOWS FRON OPERATING ACTIVITIES Cash reciived from sales of power 5 367,867 $ 392,138 Payments from joint owner of Big Cajun 2. Unit 3 24,892 32,102 I Other cash receipts 4,253 3,412 Cash payments for fuel and fuel stock (163,811) (151,603) Operation and maintenance expenses paid (74,221) (66,952) Purchased power and transmission expenses paid (37,975) (45,603) i Administrative and general expenses paid (31,267) (32,154) Taxes paid (15,998) (9,796) J Interest and other income received 4,007 4,407 ,3 Interest paid (24.868) (103.792) NET CASH PROVIDED BY OFERATING ACTIVITIES 52,879 22,159 CASH FLOWS FRON INVESTING ACTIVITIES l Capital expenditures (15,054) (5,652) lE Nuclear fuel purchased (10,557) (3,221) CoBank retirement of C stock 12,247 12,259 m Proceeds from termination of power contract 12,756 Directors and Officers Liability Trust (1.000) (2.000) NET CASH PROVIDED (USED) BY INVESTING I ACTIVITIES (14,364) 14,142 CASH FLOWS FRON FINANCING ACTIVITIES Repayment of long-term debt (450) (31.920) INCREASE IN CASH AND CASH EQUIVALENTS 38,065 4,381 Cash and cash equivalents at beginning of year 15.940 11.559 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 54.005 15.940 RECONCILIATION OF NET DEFICIT TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net deficit $(328,312) $(276,500) ADJUSTNENTSTORECONC5LENETDEFICIT TO CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 73,253 73,395 I Amortization of nuclear fuel 12,459 12,901 Interest expense accrued to long-term debt 311,874 223,798 Net loss on asset dispositions 2,271 8,127 I Gain on RUS adjustment of Note B (10,379) Gain on termination of power contract (12,756) Decrease in accounts raceivable and investments in associated organizations (11,148) 469 I Decrease (Increase) in fuel and prepayments (2,579) 75 Increase in accounts payable and accrued expenses (4.939) 3.029 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 52.879 $ 22,159 The accompanying notes are an integral part of these financial statements. .I ~'-
I l NOTES TO FINANCIAL STATEMENTS g CAJUN ELECTRIC POWER COOPERATIVE, INC. l DECEMBER 31, 1994 I NOTE 1 - BANKRUPTCY PROCEEDING I On December 21, 1994, Cajun Electric Power Cooperative, Inc. (the Cooperative) filed I a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code and is currently operating as debtor-in-possession under the supervision of the United States Bankruptcy Court for the Middle District of Louisiana. The immediate nerd to file for Chapter 11 protection resulted from a conflict between the Louisiana Public Service Commission (LPSC) and the Rural Utilities Service (RUS), formerly the Rural Electrification Administration, over the proper wholesale rate to j charge the Cooperative's member distribution cooperatives (Members). On December 14, 1994, the LPSC ordered the Cooperative to lower its wholesale Member rate, effective December 21,1994, from 54.5 mills per kilowatt-hour to 48.8 mills per g kilowatt-hour reducing revenues by approximately 530 million on an annual basis (see u Note 13). On December 20, 1994, the RUS ordered the Cooperative not to reduce its wholesale Member rate as required by the LPSC order, alleging that the LPSC order was implicitly preempted. Reduction of the Cooperative's wholesale rate without the consent of the RUS is an event of default under the terms of the Cooperative's 1990 l Debt Restructure Agreeinent (DRA)(see Note 5). On December 21, 1994, the Cooperative complied with the order of the LPSC, filed a new tariff reflecting the lower rate as g ordered by the LPSC, and filed for relief under the United States Bankruptcy Code. On December 21, 1994, the Cooperative filed a complaint for declaratory judgment in 8 the United States District Court for the Middle District of Louisiana against both the LPSC and the RUS regarding the issue of which entity, the LPSC or the RUS, has jurisdiction over the wholesale member rates of the Cooperative. As of this date, the Court has taken no action on this matter. I L, Notes to Financial Statements - Continued r Cajun Electric Power Cooperative. Inc. L Note 1 - Continued On December 23, 1994, the United States District Court for the Middle District of Louisiana withdrew the reference of the bankruptcy case from the Bankruptcy Court. Certain issues not heard by the United States District Court will be heard by the Bankruptcy Court. On December 28, 1994 the Cooperative filed a motion in the bankruptcy case to reject ( the River Bend Joint Ownership Participating and Operating Agreement (River Bend J0P0A) as an executory contract (see Note 12). Gulf States Utilities (GSU) has opposed the motion. No timetable for discovery or trial has been established. On January 18, 1995, a committee composed of seven Members of the Cooperative (Members Comittee) moved to intervene in the complaint of the Cooperative seeking a declaratory judgment whether the LPSC or the RUS has authority to regulate the b wholesale Member rates of the Cooperative. The Members Comittee asserts that its Members serve a majority of the retail patrons of the Cooperative's Members and { represent a substantial proportion of the industrial and comercial load served by the Cooperative. The Members Comittee seeks a declaration that the RUS does not ~ have the authority to preempt the LPSC. On January 24, 1995, the Cooperative filed an appeal of the LPSC rate order with the 19th Judicial District Court for the state of Louisiana. On January 30, 1995, three of the Cocoerative's Members filed a motion with the 19th Judicial District Court to ( dismiss the Cooperative's appeal alleging, among other things, that the vote to appeal the LPSC decision by the Cooperative's Board of Directors was an illegal act on behalf of the Cooperative and that the appeal was not properly authorized by the Cooperative's Board of Directors. On January 30, 1995, these same Members filed a petition in the 19th Judicial District Court to appeal the LPSC's order alleging that the rate of 48.8 mills per kilowatt-hour was determined in an arbitrary and capricious manner which ignored evidence that the Cooperative's Member wholesale rate should be lower. On January 25, 1995, the RUS sought a temporary restraining order in the United States District Court against the Cooparative preventing the Cooperative from lowering its Member rates as ordered by the LPSC. On January 31, 1995 the request,
L Notes 89 Financial Statements - Continued [ Cajun Electric Power Cooperative, Inc. L Note 1 - Continued I by the RUS for a temporary restraining order was denied in the United States District Court. L On February 13, 1995, the Bankruptcy Court issued an order giving the Cooperative permission to use cash, in the ordinary course of business, to pay all usual and necessary operating expenses based on the Cooperative's 1995 budget. Additionally, the Order noted that the Cooperative must notify the RUS of its intention to make any changes to budgeted capital projects or capital expenditures and prohibits any changes unless RUS consents or the Court, after a notice and hearing, orders otherwise. The Cooperative has the right under the Order tv make unbudgeted capital expenditures without notifying the RUS if the amount of an unbudgeted expenditure does not exceed $100,000 for any single item nor 5300,000 in the aggregate for any calendar quarter. In the event that unbudgeted capital projects or expenditures exceed these thresholds, the approval of the RUS is required before any expenditures may be made. Additionally, the Cooperative has the right under the Order to make or incur any capital cxpenditure for an unbudgeted item in the event of an emergency in which case the RUS must be notified of the emergency and the related expenditures. The Order also provides that as of February 14,19M, and on the first day of each month thereafter, the Cooperative shall place in an escrow account any funds in excess of $35 million. No distribution may be made from this account to any party except upon a Court order issued after a notice and hearing. The excess funds are [ to be invested in accordance with the investment guidelines of the Cooperative which were approved by the Court on December 27, 1994. In addition, the Order establishes ( May 9, 1995 as the date by which any party in interest must notify the Secured Creditors of any challenge to the validity, extent, or priority claimed by the { Secured Croditors in the bankruptcy proceeding. Any party in interest not acting by this date will be deemed to have waived any such challenge. Under the Bankruptcy Code, as of the petition date, essentially all actions of creditors to collect pre-petition indebtedness are stayed. As a result, no party which has a security or adverse interest in the debtor's property may take any action against the debtor or the property of the debtor regardless of the location of the property or who is in possession of the debtor's property until the stay is modi fied. Additionally, under the Bankruptcy Code, the Cooperative may reject -9
Notes to Financial Statements - Continued [ Cajun Elec%ric Power Cooperative, Inc. Note 1 - Continued L executory contracts with the approval of the Bankruptcy Court. Substantially all of { the liabilities of the Cooperative as of the petition date are subject to compromise under a plan of reorganization which may be filed and approved in accordance with the Bankruptcy Code. In accordance with Generally Accepted Accounting Principles, the Cooperative has ( adopted the provisions of the American Institute of Certified Public Accountants Statement of F.sition (SOP) 90-7, Financial Reporting by Entities in Reorganization ( Under the Bankruptcy Code, in general, certain provisions of the Bankruptcy Code may relieve a debtor from its obligation to pay interest while in Chapter 11. Interest on secured claims is generally accrued and expensed only to the extent that the value of the underlying collateral exceeds the principal amount of the secured claim. Additionally, interest on unsecured claims is not accrued if the debtor is insolvent. If a plan of reorganization for the Cooperative is approved by the Bankruptcy Court, the M '14 / of the Cooperative to continue as a going concern will be dependent upon the terms of the plan, and if contemplated by the plan, the Cooperative's ability to ccntinue in business and meet any obligations under the plan as they become due. The accompanying financial statements have been prepared on a going concern basis which assumes continued operations and the realization of assets and liquidation of liabilities in the ordinary course of business. As a result of the reorganization proceeding, the Cooperative may have to sell assets and settle liabilities for amounts other than those reflected in the financial statements. Also, a plan of reorganization could materially change the amounts currently recorded in the financial statements. ' The accompanying financial statements do not give effect to any adjustments to the carrying value of assets or amounts and classification of liabilities that may be necessary as a consequence of the Chapter 11 proceeding. The appropriateness of the continued use of the going concern basis is dependent upon several things, including confirmation of a plan of reorgan k ' ion, the success of future operations, and the ability to generate sufficient coh to meet the obligations under the plan as they become due. The Cooperative is in default under the terms of the DRA as well as, all cf its loan agreements and obligations. All of the debt of the Cooperative, other than post-.
Notes to Financial Statemen%s - Continued Cajun Electric Power Coopera%ive, Inc. Note 1 - Continued petition payables, is classified as liabilities subject to compromise in the accompanying balance sheet as of December 31, 1994. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES General: The Cooperative is a rural electric generation and transmission cooperative which is wholly-owned by 12 member distribution cooperatives. The Members provide electricity to approximately 300,000 metered customers representing nearly 1,000,000 people residing throughout 80% of the land area of Louisiana. The Cooperative and its Members have entered into wholesale all requirehents power contracts which require the Members to purchase all of their electiic energy requirements from the Cooperative generally through 2026. The Cooperative is l subject to certain rules and regulations promulgated for rural electric borrowers by the RUS and is also subject to the jurisdiction of the LPSC (see Note 13). l System of Accounts: The Cooperative maintains its accounting records in accordance esith the Federal Energy Regulatory Commission (FERC) chart of accounts as modified and adopted by the RUS. Electric Plant In Service: Electric plant in service is stated on the basis of cost. Depreciation is computed using the straight-line method over the expected useful lives of the related component assets. The net book value of units of property replaced or retired, including costs of removal net of any salvage value, is charged to operations. Nuclear Fuel: The 'ost of nuclear fuel, including capitalized interest, is c amortized to fuel expense on the basis of the actual number of units of thermal energy prcduced, multiplied by a unit cost which reflects the total thermal units expected to be produced over the life of the fuel (see Note 10). Construction Work In Progress: Construction work in progress is stated on the basis of cost, net of the amounts applicable to a joint owner, and includes interest during construction on major projects..
Notes to Financial Statements - Continued Cajun Electric P:wer Cooperative, Inc. Note 2 - Continued Investments: The Cooperative has investments in The National Rural Utilities j Cooperative Finance Corporation (CFC) and the National Bank for Cooperatives (CoBank) which are in the form of capital term certificates and Class "C" and "E" stock, respectively. In the accompanying financial statements, these investments are carried at cost and include undistributed patronage capital credits from these organizations. I Fuel and Supplies Inventories: Fuel and supplies inventories are stated on the basis of cost utilizing the weighted average cost method of inventory valuation. I Deferred Charges: The balance in deferred charges consists primarily of I expenditures for preliminary surveys and investigations and capitalized software. Patronage Capital Credits: The Cooperative is organized and operates on a not-for-profit basis. Patro.1 age capital credits represent that portion of the Cooperative's net margins which have been allocated to Member cooperatives. As provided in the Cooperative's bylaws, all amounts received from the furnishing of electric energy in excess of the sum of operating costs and expenses and amounts required to offset any current year losses are assigned to Members' patronage capital credit accounts on a patronage basis or, at the discretion of the Board of Directors, may be offset against losses of any prior fiscal year. All other amounts received from operations I in excess of costs and expenses may be used to offset losses incurred during the current or any prior fiscal year and, to the extent not needed therefore, are l allocated to Members on a petronage basis. In accordance with the Cooperative's bylaws, the net deficits have not been allocated to the Member cooperatives. 5 Decomissioning: Decomissioning reserves represent cumulative accruals for I decomissioning expense. The annual charge for decomissioning expense is the required addition to the decomissioning trust funds such that the balance of the funds (contributions plus net earnings) will be sufficient to satisfy estimated I decomissioning costs at the end of the expected useful lives of the Cooperative's facilities (see Note 10). Deferred Credits: Deferred credits represent advar.ce payments by the Members for their electric energy requirements. I - _ _ _ _ _ _ _ _.
Notes to Financial Statements - Continued Cajun Elcctric Pow:r Cooperative, Inc. Note 2 - Continued Income Taxes: The Cooperative has adopted Statement of Financial Accounting b Standards (SFAS) 109 which utilizes the liability method in accounting for income ] taxes. Under the liability method, deferred tax assets and liabilities are J determined based on differences between financial reporting and tax bases of assets and liabilities. I o Fair Values of Financial Instruments: The carrying amounts reported in the balance l sheet for cash and cash equivalents and decommissioning reserve funds approximate their fair value. I Statement of Cash Flows: The Cooperative utilize:; the direct method of reporting cash flows. Cash Equivalents: The Cooperative considers all highly liquid iny, cments with a maturity of three months or less when purchased to be cash equivalents. l Recir.ssifications: Certain reclassifications have been made to the 1993 financial statements to conform to the 1994 presentation. NOTE 3 - UTILITY PLANT l Electric plant in service at December 31 consisted of the following -(in thousands): 1994 1993 Production: { Nuclear $1,463,532 $1,458,197 Coal 1,021,210 1,022,942 I Gas 33,264 33,245 t Transmission 104,221 101,040 l General 18.685 18.355 $2.640.912 $2,633.779 I L Notes to Financial Statements - Continued { Cajun Electric Power Cooporative, Inc. Note 3 - Continued Net Megawatt Coooerative Ownershio { Generatina Unit Ratino Fuel Percentaae Mecawatts River Bend 936 Nuclear 30% 281 Big Cajun 2, Ur.it 1 540 Coal 100% 540 [ Big Cajun 2, Unit 2 540 Coal 100% 540 Big Cajun 2 Unit 3 540 Coal 58% 313 Big Cajun 1, Unit 1 105 Gas 100% 105 { Big Cajun 1. Unit 2 105 Gas 100% 105 { River Bend and Big Cajun 2, Unit 3 are jointly owned by the Cooperative and GSU (see Note 12). Construction work in progress consists of improvements and additions { to existing plants. The estimated cost to complete these projects at December 31, 1994 was approximately $14 million. Nuclear fuel represents the Cooperative's 30% share of River Bend fuel and as of December 31 consisted of the following (in thousands): [ 1994 1993 [ Nuclear fuel in process $ 5,533 $ 13,045 Nuclear fuel in reactor 91,489 72,534 Spent nuclear fuel 65.729 65.728 162,751 151,307 [ Less accumulated amortization of nuclear fuel 125.115 112.656 Net nuclear fuel 5 37.636 5 38.651 [ Nuclear fuel in process at December 31, 1994 re: presents the accumulated cost, b including capitalized interest, of fuel required for the sixth reload. The fuel is in various stages of conversion, enrichment or fabrication. Spent nuclear fuel [ consists of the original cost of nuclear fuel assemblies, in the process of cooling, which were removed from the reactor during each of the five previous fuel cycles. [ Land relating to an abandoned lignite project has been retained as a possible site for a future generating facility and its cost, 59.5 million, is included in electric plant held for future use. (
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 3 - Continued The net change in accumulated depreciation and amortization for the years ended December 31 was (in thousands): 1994 1993 Charged to operating expenses $73,253 $73,395 Charged to fuel inventories and other assets 1.061 1.164 74,314 74,559 Less asset disposals and other adjustments 3.035 2.033 ( $71.279 $72.526 [ NOTE 4 - INVESTMENTS IN ASSOCIATED ORGANIZATIONS { Investments in associated organizations at December 31 consisted of the following (in thousands): { 1994 1993 CFC $ 7,692 $ 7,692 CoBank 18,844 27,392 Other _ldO8 1.408 527.944 536.492 l NOTE 5 - LONG-TERM DEBT Oa December 21, 1990, the Cooperative consummated the DRA effective May 31, 1990, I with the United States of America acting through the RUS. Under the terms of the DRA, the Cooperative e,xecuted and delivered to the RUS two notes which restructured all of the Cooperative's debt to or guaranteed by the RUS: Note A, in the original face amount of $2,147,994,670, which matures on December 31, 2026, and Note B, in the original face amount of $1,037,007,550, which has a final maturity date of December 31, 2036. Both Notes A and B bear interest on the unpaid principal balance at a nominal rate of 8.64%, with an assumed effective annual rate of 8.99%. Prior to December 21, 1994, accrued but unprid interest on Notes A or B was added to principal on a monthly basis (see Note 1). The DRA provides that Note A may not be prepaid without the express written consent of the RUS. Note B may be prepaid without premium or penalty..
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 5 - Continued Long-term debt at December 31, consisted of the following (in thousands): 1994 1t93 Note A to the RUS, due in varying annual installments [ through 2026, interest at 8.64% compounded monthly. 52,659,586 $2,467,740 [ Note 8 to the RUS, varying annual payments based upon se'.'eral contingent factors, final maturity December 31, [ 2036, interest at 8.64% compounded monthly. 1,513,985 1,393,957 [ Industrial Development Revenue Bonds, series 1982, interest at two thirds of prime rate (4% at December 31,1994),due [ in 5 annual installments from 1994 through 1997. 1,350 1,800 ( Less current portion of long-term debt. 450 54,174,921 53,863,047 [ Liabilities subject to compromise (in thousands), including long term debt at [ December 31, 1994, are as follows: Long-term Debt $4,174,921 [ Excessive O&M Provision - River Bend 12,421 Accounts Payable and Other Accrued Expenses 9,485 54,196,827 [ { Interest and other debt expense incurred on long-term debt for the years ended December 31 consisted of the following (in thousands): { 1994 ._,,19 9 3 Interest charged to operating expense $331,971 5322,348 Other debt expense 231 247 ( Total interest and other debt expense 332,202 322,595 Capitalized interest on nuclear fuel 555 892 { 5332,757 5323,487 f
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 5 - Continued For the years ended December 31, 1994 and 1993, the Cooperative paid $24.9 million and $103.8 million in interest, respectively. I In accordaner with S0P 90-7, the Cooperative will recognize interest expense in the financial statements while in Chapter 11 only to the extent it is ordered to pay interest by the Bankruptcy Court. Contractual interest on Notes A and B for 1994 was $347 million. The Cooperative believes there is insufficient collateral to enable the RUS to recover the principal portion of these obligations. Accordingly, the Cooperative ceased accruing interest on these obligations effective December 21, 1994. Contractual interest related to secured claims not recognized for accounting purposes totaled $10 million in 1994. Substantially all of the Cooperative's assets are pledged to secure the Cooperative's debt to the RUS by the Supplement to the Supplemental Mortgage cnd Security Agreement (the RUS mortgage) executed November 28, 1990 between the Cooperative, the RUS and CoBank in order to facilitate the DRA. Both the RUS mortgage and the DRA contain certain restrictive covenants including limitations on indebtedness, capital additions, distributions to Members and an agreement not to g lower the Cooperative's wholesale electric rate for the term of the DRA. At December 31, 1994, the Cooperative was in default under the DRA as well as the RUS mortgage. Certain office facilities in Baton Rouge are separately pledged to secure the Industrial Development Revenue Bonds. As a consequence of cross-default provisions, the Cooperative is also in default under the terms of the Industrial Development Revenue Bonds as well. CoBank is secured by' the RUS Mortgage for two letters of credit amounting to approximately $27 million supporting potential indemnity payments under sale-leaseback transactions completed in 1983. During 1993, CoBank renewed the letters of credit for an additional five-year period. It was not practical for the Management of the Cooperative to estimate the fair value of the Cooperative's long-term debt because of the lack of a quoted market price, the fact the Cooperative is under the protection of the Bankruptcy Court, and )I an inability to estimate fair value without incurring excessive costs. Notes to Financial Statements - Continued [ Cajun Electric Power CooperaSive, Inc. NOTE 6 - SHORT-TERM INVESTMENTS I At December 31, 1994, the Cooperative's cash was invested in United States Treasury securities, United States g'svernment agencies securities, commercial paper and { short-term obligations issued by financial institutions. All investments conform with the guidelines established by the RUS. Haturities are selected to correspond b with cash flow requirements and are generally for periods of less than three months and are considered to be cash equivalents. [ NOTE 7 - INCOME TAXES [ Effective January 1,1993, the Cooperative adopted the provisions of Statement of Financial eccount'ng Standards No.109, Accounting for income Taxes. The adoption of this statement had no effect on the Cooperative's financial statements. The Cooperative had no current or deferred income tax provision for the years ended [ December 31, 1994 and 1993, { At December 31, 1994, the composition of the Cooperative's deferred tax assets and liabilities (tax effected at a rate of 20%) were as follows (in millions): Deferred Tax Assets: Operating loss Carryforwards $ 384 Long term Debt Basis Difference 303 [ General Business Credit Carryforwards __1g 853 [ Deferred Tax Liability: Depreciation lymporary Differences _(112) Net Deferred Tax Asset 534 [ Less: Deferred Tax Asset Valuation Allowance _(114) Net Deferred Tax Asset / Liability 5 0 ( [ [ I
No%es to Financial Statements - Continued ] Cajun Electric Power Cooperative, Inc. Note 7 - Continued At December 31, 1994, the Cooperative's operating loss and credit carryforwards were as follows (in millions): I Nonmember Nonmember Member " ear Net Member AMT Net AMT General I Of Operating Operating Operating Operating Business-Exoiration loss Loss Loss Loss Credit 1999 $ 9 I 2000 27 2001 128 2002 2 2004 $ 15 2005 232 $101 2007 95 94 2008 124 124 2009 93 94 2010 90 90 No Expiration $1.272 $1.272 Ed2 lb272 119.1 LL.I.Z.1 EL.1 l l NOTE 8 - EMPLOYEE BENEFIT PLAN i All of the Cooperative's employees participate in the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program once they have met minimum service requirements. The Cooperative makes annual contributions to the 'I plan equal to the amounts acc. rued for pension expense. In this master multiple-employer defined benefit plan, which is available to all member cooperatives of the NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. The Cooperative made contributions to the plan l totaling $407,924 in 1994. No contributions were required in 1993. The Cooperative also maintains a defined contribution pension plan which constitutes a cash or deferred arrangement under section 401(k) of the Interns 1 Revenue Code of 1986 (as amended). Once minimum service requirements are met, all of the employees I of the Cooperative are eligible to participate in the plan. Under the terms of the plan, which is administered by the NRECA, the Cooperative matches 50% of employee contributions up to a maximum of 4% of each participating employee's base compensation. Notes to Financial Statements - Continued [ Cajun Elcctric Power Cooperative. Inc. Note 8 - Continued i In December 1990, the Financial Accounting Standards Board issued SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, which requires the accrual of benefits other than retirement income provided to retired workers. The Cooperative makes available to those salaried employees who retire on or after age 62 and who also have at least 10 years of service, postratirement medical insurance benefits. The Cooperative adopted SFAS No.106 in January 1995 and will expense the transition obligation of $4.6 million and an ongoing annual expense of approximately $790,000. These amounts were determined based upon a study concluded in 1994. In 1994 and prior years, tne Cooperative expensed the cost of postretirement benefits t.s they were paid. NOTE 9 - RELATED PARTY TRANSACTIONS On June 30, 1993, one of the Cooperative *s Members consummated a transaction with an investor owned utility (I00) whereby the 10V acquired the assets and assumed the liabilities of this Member. Accordingly, the wholesale power contract with this Member was terminated and a series of wholesale power contracts with the 10V were [ executed. Upon closing, the IOU paid $15.1 millien to the RUS on behalf of the Cooperative. This amount was applied against the Cooperative's 1993 Note A debt { service obligation. Of this amount, $12.8 million was recognized as other income and $2.3 million represented the collection of an outstanding receivable from the former Member. Additionally, to reflect the loss of this Member and the future contribution the Member would have made toward the Cooperative's Note B debt service obligations, and to protect the remaining Members from any adverse consequence as a result of this transaction, the PUS agreed to reduce the Note B June 30, 1993 balance by $10.3 million and, as the new wholesale power contracts with che IOU expire, the RUS will further reduce the Cooperative's Note B obligation by.765 peraent of the Note B balance at that time. [ NOTE 10 - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES GSU has executed a contract with the Department of Energy (DOE) whereby the 00E will furnish disposal service for the spent nuclear fuel from River Bend. Currently, the cost amounts to one-tenth of one cent per kilowatt hour of sales to ultimate Notes to Financial Statements - Continued Cajun Electric Pow;r Co: perative, Inc. l Note 10 - Continued l consumers. The DOE spent nuclear fuel fee is subject to change in accordance with the provisions of the Nuclear Waste Policy Act of 1982. I The Nuclear Regulatory Comission (NRC) in 1988 issued final regulations setting forth the technice.1 and financial criteria for decomissioning licensed nuclear I facilities. The regulations require electric utilities either to certify that a minimum dollar amount will be available to decomission the facility or to submit a l decomissioning funding plan. In addition, these regulations require that financial assurance be provided by either prepayment, an external sinking fund, or by a surety, insurance, or other form of guarantee. In response to these regulations, on December 2,1988, the Cooperative established an external grantor trust, the River j Bend Decomissioning Trust Fund, and intends to make annual contributions to
- E accumulate an amount which will be sufficient, based on current estimates and assumptions, to pay for its share of the cost of decomissioning at the end of the estimated useful life of River Bend.
Annual contributions to the trust are approximately $1.4 million. The Cooperative has based its entribution to the trust on a site-specific engineering study comissioned by GSU. This study estimated the total cost of decomissioning River Bend to be $206,000,000 (1992 dollars) of which the Cooperative's share is approximately $61.8 million (1992 dollars). GSU comissioned another study which was completed in 1991 which indicated that the total decomissioning cost estimate had increased to approximately $398,000,000 I (1992 dollars). GSU has not yet accepted this study. At the time GSU accepts this or other revised studies, the Cooperative will adjust its annual trust contributions accordingly. As of December 31, 1994, the balance in the River Bend Decomissioning Trust Fund was $15.6 million. I The Cooperative is required by the State of Louisiana Department of Environmental Quality (DEQ) to provide assurance that it has the ability to fund the actions which will De necessary to rehabilitate its Big Cajun 2 ash and wastewater impoundment areas which, as disposal sites, are subject to DEQ review and supervision. The I total liability for funding the solid waste disposal site rehabilitation is currently estimated to be approximately $4 million, of which GSU is responsible for approximately $500,000. On July 1,1989, the Cooperative created the Solid War.e Disposal Trust and deposited $1.06 million with the trustee in satisfaction of its DEQ funding requirements. The annual contributions to the trust are approximately Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. 1 Note 10 - Continued l $116,000. The actual payments for site rehabilitation are not scheduled to occur until the end of the estimated useful life of the Big Cajun 2 coal-fired facility. The balance in the Solid Waste Disposal Trust at December 31, 1994 was $2.2 million. The Energy Policy Act of 1992 (the Act) establishes a Fund to pay for the decontamination and decommissioning of three nuclear enrichment facilities operated by the DOE. Electric utilities that have purchased enrichment services in prior years from the DOE are to be charged a special assessment for a portion of the Fund not to exceed $150 million each year, adjusted for inflation. The special assessments are based on a formula that takes into account the total amount of enrichment services purchased from the DOE by electric utilities in previous years. The Cooperative paid a special assessment of $257,898 in 1994 and $239,850 in 1993. The net present value of its remaining liability for the 15 year period is approximately $3.2 million. The Cooperative intends to recognize these costs in the l period in which cash payments are required. g NOTE 11 - NUCLEAR INSURANCE I The ownership of an undivided interest in River Bend subjects the Cooperative to certain risks. The Cooperative is insured, as described below, for public liability and property damage. The Price-Anderson Act (the Act) was renewed by Congress in 1988 and was extended l through August 1, 2002. Public liability under the Act for any nuclear incident is currently limited to $8.9 billion. The Cooperative and GSU are insured for this exposure by private insurance as well as by a secondary financial program. Changes to the Act related to the secondary financial program may require the Cooperative to I become subject to a possible retroactive assessment of which the Cooperative's share would not exceed $23.8 million per incident with a maximum of $3 million per incident payable in any one year for 'osses at any licensed nuclear facility. The Cooperative and GSU jointly maintain $500 million of property damage insurance through private insurance and $1.4 billion in excess of the $500 million through NEIL 11 as member insureds. The Cooperative is subject to a maximum assessment of l
Notes to Financial Statements - Continued Cajun Electric Powar Cooperative, Inc. Note 11 - Continued 54.4 million in any one policy year as a condition of being a member insured of NEIL II. There is additional property insurance carried in the amount of $850 million which is excess over the above listed $1.9 billion. Of this amount, the Cooperative has $255 million of property insurance, through private insurance and GSV has $595 million through NEIL III. Although the Cooperative and GSU r.ontinue to attempt to increase insurance coverage as it becomes available, the Cooperative can give no assurance as to the adequacy of its coverage in the event of a major accident. Total available property damage insurance is substantially less than the potential insurable value of River Bend. in 1991, the NRC promulgated a rule providing that, in the event of an accident at River Bend in which the estimated costs of stabilizing and decontaminating the site exceed $100 million, insurance proceeds must first be dedicated to this purpose. Proceeds not required for such stabilization and decontamination may then be used to repair or replace the damaged unit. The Cooperative has joined GSU in obtaining a Nuclear Workers' Liability policy which covers liability for the claims of werkers l employed at River Bend after January 1,1988 for noncatastro9 hic nuclear related l injury such as prolonged exposure to low-level radiation. Any claims by workers employed at River Bend prior to January 1,1988 will continue to be covered under the Nuclear Workers' Liability policy if the claim is made by December 31, 1997. Under the Nuclear Workers' Liability policy, the Cooperative is subject to a maximum potential retrospective premium assessment of approximately $1.0 million. It is possible that liabilities related to the release or escape of a hazardous substance from River Bend may be greater than the coverage on policies currently carried and, consequently, existing insurance may not be sufficient to meet all possible liabilities or losses.' The Cooperative cannot provide assurance that it will be able to maintain coverage at present levels. Any liability or loss in excess of that covered under existing policies could have a material adverse effect upon the Cooperative..
H Notes to Financial Statements - Continued [ Cajun Electric Power Cooperative, Inc. r L NOTE 12 - GULF STATES UTILITIES COMPANY In August 1979, the Cooperative and GSU entered into a contractual agreement for the joint ownership of River Bend (see Note 3). The Cooperative has a 30% undivided interest in River Bend and is responsible for 30% of River Bend's costs of construction, capital additions and operations. On June 5,
- 1992, Entergy Corporation (Enterg.y) and GSU entered into an agreement to combine the two companies subject to various regulatory approvals.
The merger of Entergy and GSU was consummated on December 31, 1993. Entergy Operations, Inc., a wholly-owned subsidiary of Entergy, is the operator of River Bend. In November 1980, the Cooperative and GSU entered into a contractual agreement for the joint ownership of Big Cajun 2, Unit 3, and certain common facilities at Big Cajun 2 (see Note 3). The Cooperative retained a 58% undivided ownership interest in Unit 3 and an 86% undivided ownership interest in the common facilities. The Cooperative is the operator of the Big Cajun 2 facilities. The Cooperative filed suit on June 26, 1989 against GSU in United States District l Court in Baton Rouge alleging fraud in the inducement to enter inte the River Bend J0P0A as well as misrepresentation, mismanagement, breach of fiduciary duty and breach of contract. The Cooperative seeks the annulment of the River Bend J0P0A and the recovery of its investment in River Bend (approximately $1.6 billion) as well as I damages resulting from the Cooperative's participation in the River Bend project. The Cooperative is seeking further damages associated with excessive operating costs of the facility which arose due to GSU's alleged mismanagement. On November 7, 1990,GSUfiledanameI1dedcounterclaimwiththeCourtrequestingthattheBigCajun 2, Unit 3 J0POA be rescinded and asked for an appropriate monetary judgment l sufficient to place the Cooperative and GSU in the same position as if the Big Cajun 2, Unit 3 J0POA was never consummated. Additionally, GSU's counterclaim asserts I that its present transmission arrangements with the Cooperative should be terminated by the Court. Further, GSU asserts that in any event it is entitled to monetary damages resulting from an alleged breach of contract and fiduciary duty by the Cooperative. On March 31, 1992, the Court appointed a mediator to engage in and coordinate settlement discussions between the parties which commenced in July 1992 On December 14, 1992, the Cooperative filed a motion with the Court seeking a.
Notes to Financial Statements - Continued a Cajun Electric Power Cooperative, Inc. Note 1r - Continued separate trial of the fraud and construction issues of the case. On January 14, 1993, GSU filed a response with the Court consenting to the Cooperative's request. In August 1993, the Court issued an order granting the Motion of the Cooperative to bifurcate the fraud and breach of contract issues for trial. The Court will try the fraud issue first, without a jury; and if necessary, the second phase of the trial regarding the breach of contract issues will be conducted at a later date. The fraud trial began on April 12, 1994, and will conclude with closing arguments which will begin on March 6, 1995. T" timing or outcome of this matter is uncertain. In September 1991, the Cooperative commenced exercising its contractual rights under the River Bend J0P0A and elected not to participate in the funding of the Service Water Project (SWP), the inlet feedwater nozzle repair, turbine rotor repairs, and extended outage costs associated with the SWP. Consequently, as of December 31, 1994, the Cooperative has not paid approximately $33.9 million related to these activities, plus $8.7 million of accumulated interest. GSU asserts that the Cooperative is in default of the River Bend J0POA and disputes the Cooperative's right to not pay such amounts. The amounts not paid are based on the Cooperative's l best estimate of the related costs to date and are not reflected in ths accompanying financial statements. On November 27, 1991, the Cooperative filed a complaint which it amended in December 1992, for Declaratory and Injunctive Relief with the United States District Court, Middle District of Louisiana seeking a declaration and interpretation of the Cooperative's rights as related to this issue under the River Bend J0POA. While the timing or outcome of this matter is uncertain, legal counsel has advised the Cooperative that it is within its rights under the River Bend J0P0A to withhold these payments. In September 1992, the Cooperative began withholding payments to GSU for certain River Bend costs which it determined to be excessive. During October 1994, the Cooperative ceased all further payments to GSU for River Bend costs for the remainder of 1994 and 1995, except for safety related costs such as nuclear insurance and decommissioning and decontamination payments. Provisions for Excessive River Bend Costs in the net amounts of $12.4 million and $3.5 million as of December 31,1994 and 1993, respectively, as reflected in the Company's financial statements, are based on a combination of GSU's billings and the Cooperative's best estimates. The 1994 Provision for Excessive River Bend Costs includes interest of Notes-to Financial Statements - Continued Cajun Electric Power Cosperative, Inc. Elote 12 - Continued $847,377 through December 20, 1994 which is applicable to excessive River Bend costs (se;r' ate 5). The timing or outcome of this matter is uncertain. L ' Oh November 1,1994, Entergy, responding on behalf of GSU, informed the Cooperative that GSU would begin exercising its rights under tt i terms of the River Bend J0POA as a non defaulting ca-owner and sell the Cooperative's 30% share of the output of capacity and energy from River Bend r.nd-apply the proceeds to the River Bend costs not funded by the Cooperative. The net proceeds (sales net of associated [ transmission costs) from the sale of the Cooperative's share of River Bend generation was $4.9 million as of December 31, 1994 and u s recognized as nonmember e { revenue with a corresponding reduction of the Provision for Excessive River Bend Costs. -Entergy: asserting. a right of compnsation under Louisiana law, also informed the Cooperative that funds which were due to be paid to the Cooperative for current h operating costs associated with Big Cajun 2. Unit 3, would instead be applied to the deficiency in P.iver Bend funding. In response, on November 2, 1994, the Cooperative { ir. formed Entergy that it would exercise its rights under the Big Cajun 2, Unit-3 J0POA - as-a non-defaulting m-owner and sell GSU's 42% share of the output of capatity and energy from Big Cajun 2 Unit 3 and apply the proceeds to satisfy the deficiency in the funding of GSU's share of Unit 3 costs. GSU countered by filing a motion with the Court for a preliminary injunction obligating the Cooperative, among other - things, -' to provide GSU _with its share of Big - Cajun 2, Unit 3 output. Effective Dec6mber 19, 1994, the Court ordered the Cooperative to supply GSU with its sharc of Big Cajun 2, Unit 3 output providing that GSU deposits into the registry of the Court'the amounts due the Cooperative under the Bi5 Cajun 2, Unit 3 { J0POA-from November 1,1994 and each month thereafter as the payments become due. GSU deposited the required amour.s through December 31, 1994.- The Court further - stipulated that the Cooperative shall be permitted.to vithdraw the funds in the court registry when the Cooperative's financial obligations under the River Bend -J0POA are current. The Cooperative's net receivable from GSU for Unit 3 costs was $7.7 millin as of December 31, 1994. I
Notes go Financial Statemen8s - Continued Cajun Elec%ric Power Cooperative, Inc. Note 12 - Continued On December 21, 1994, the Cooperative filed a Petition for Reorganization under Chapter 11 of the Federal Bankruptcy Code with the United States Bankruptcy Court, Middle District of Louisiana (see Note 1). As part of the Bankruptcy proceedings, the Cooperative filed a motion to reject the River Bend J0P0A with GSU. GSU has I filed pleadings with the Court objecting to the Cooperative's motion to reject the River Bend J0P0A. The timing or outcome of this metter is uncertain (see Note 1). 43 On July 17, 1987, the Cooperative filed a complaint at the FERC against GSU alleging de' overbilling and improper cost allocations for certain transmission service charges. On May 11,1989, the FERC Administrative Law Judge (ALJ) issued an opinion which could have required the Cooperative to pay GSU approximately $25 million for I transmission charges for the period 1981 through 1991. On April 10, 1992, the FERC issued an Initial Decision, which affirmed in part the opinion of the ALJ and stipulated certain adoitional adjustments. Both the Cooperative and GSU filed Requests for Rehearing in May,1992. On November 3,1992, GSU filed with the 5th Circuit Court of Appeals a Request for Review of the FERC's Initial Decision. On August 25, 1993, the Court of Appeals issued a ruling reversing the Commission and remanding this matter back to the Commission for further consideration. The Court of Arceals subsequently denied the Cooperative's Request for Rehearing. On November 17, 1993, GSU filed a proposed rate schedule change with FERC purportedly I implementing its interpretation of the Court's remand and requested an expedited ruling. In an unpublished letter order dated January 13, 1994, the Commission rejected the filing. On November 21, 1994, the Court of Appeals issued an order directing FERC to respond to GSU's argument and also advise the Court when FERC intends to act on the remand order. On December 8,1994 the FERC issued an Order l w ablishing an expedited procedural schedule. Under the schedule, hearings will begin on March 1,1995 and a decision of '.ne ALJ is to be rendered by April 28, 1995. The FERC anticipates is uing an Opinir. on the remanded proceeding in July, 1995. As of September 30, 1994, GSU alleges the Cooperative has underpaid total transmission charges of approximately $156 million, including interest. The timing I or outcome of this matter is uncertain. Accordingly, no provision for any liability that may result has been made in the financial statements. I _.
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 12 - Continued On August 7, 1989, the Cooperative filed a complaint at the FEP.C against GSU alleging that GSU failed to provide certain transmission service and additional delivery points. The Cooperative further a'leged that the transmission service and ~ additional ulivery points are nt:essary to allow one of the Members to supply power a to two large industrial custome 's which could not be served by the Member's own transmission lines, in 1989, FI(C found that the contract did not require that GSU provide the Cooperative or the Member with the transmission service or delivery l points requested. FERC's 1989 ruling was appealed to the United States Court of Appeals. The Court remanded the matter back to FERC holding that the 1980 I transmission service schedule was ambiguous and that the FERC erred in the manner in which evidence was taken on this issue. On June 24, 1992, tne ALJ issued a finding in favor of GSU on this matter. On April 20, 1994, a Joint Request for Reher. ring by the Cooperative and the RUS was filed with FERC. On August 3, 1994, the FERC denied the Request for Rehearing. On August 12, 1994, the Cooperative filed a Petition for Review with the Court of Appeals. On November 10, 1994, the Court of Appeais j granted the motions of GSU and the LPSC to intervene in the matter. No schedule has been set in these proceedings. The timing or outcome of this matter is uncertain. I In 1991 Entergy filed what was represented to be an open access transmission tariff which purportedly allows third parties to access Entergy's transmission grid. This I filing resulted in intervention by numerous parties including the Coopseative. The FERC approved ti.e tariff with modifications but set no issues for hearing. The Cooperative and others appesled the FERC's decision to the D.C. Circuit Court of Appeals. On July 12, 1994, the O.C. Circuit Court of Appeals reversed the FERC's approval of Entergy's open access taciff on several grounds and remanded the case to the FERC for further ' proceedings. While the FERC was considering the case on retrand,. Entergy submitted a letter to the FERC stating that Entergy intended to file I amended tariffs which would comply with both the D.C. Circuit Court of Appeal's remand of the FERC's decision and which would satisfy the FERC's recently announced policy on transmission service comparability. Entergy filed its tariffs on October
- 31. 1994.
The Cooperative as well as other parties intervened with the FERC. On January 6, 1995, the FERC issued an order rejecting certain portions of Entergy's proposal and setting the remainder for hearing. The timing or outcome of this matter is uncertain. I I 1
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 12 - Continued l On January 10, 1995, GSU filed with FERC a proposed amendment to their Power Interconnection Agreement with the Cooperative. This amendment would allow GSU, in l the eve.'t that the Cooperative failed to pay any sum due for services under any I transmission service schedule, to suspend service and to cancel or terminate GSU's transmission arrangements with the Cooperative. On February 6,
- 1995, the Cooperative filed an intervention requesting that the GSU filing either be rejected or set for hearing.
The FERC has not yet acted in this matter. The timing or outcome of this matter is uncertain. An unfavorable outcome of the litigation related to the SWP, the inlet feedwater nozzle repair or replacement, turbine rotor repairs, other excessive River Bend costs, or the proceediegs at the FERC as discussed in the above paragraphs could have a material adverse impact upon the Cooperative. 5 NOTE 13 - RAiES AND REG"LATION The Cooperative has been regulated by the LPSC since 1989. At the time the LPSC I asserted jurisdiction over the Cooperative it also initiated an examint. tion of the Cooperative's rates, LPSC Docket U-17735. In May, 1990, the LPSC ordered the Cooperative to reduce its base rate by 4 mills, replacing a fuel crcdit of approximately the same amount which the Cooperative had been flowing through its fuel adjustment. In July, 1990, the LPSC approved the DRA between the Cooperative g and the RUS and approved the Cooperative's existing wholesale rates, but added the M condition that " annual average rates of 54.5 mills will be the maximum rates to be charged t.' rough December 31, 1991, subject to the other provisions of this Order and any prospective ratemaking adjustments which result from any ratemaking investigations of Cajun." In early February,1992, the LPSC ap?rou.d the Cooperative's request to reduce the 4 mill credit to a 1 mill credit thrd a phase-out during 1992. This base rate increase was intended to offset a decrease in fuel costs and keep rates stable. The LPSC's approval was subject to certain conditions, including a continuation of the 'I 54.5 mill rate cap. I.
Notes to Financial Statements - Continued Cajun Electric Power Co! perative Ir.c. Note 13 - Continued in July, 1992, as part of its rate examination, the LPSC began' investigating the prudence of the Cooperative's decision to invest-in the River Bend nuclear plant. As a result-of its investigation, in June,1994, the LPSC in an Order: (1) declared the River Bend investment imprudent; (2) declared the River Bend asset to be excess l uneconomic capacity and disallowed it under the used and useful principle, but allowed the Cooperative to recover avoided costs for River Bend electricity; (3) i disallowed under the retroactive ratemaking rule the cooperative's accumulated past losses; and (4) directed its consultants to update the test year and recommend to the LPSC rates consistent with these findings. The Cooperative has appealed thi, Order to the 19th Judicial District Court. The timing or outcome of this matter is l uncertain. In December 1994, pursuant to their prudence finding, the LPSC ordered the Cooperative to lower its rates by $30.2 million to 48.8 mills effective December 21, 1994. This Order also adopted the Cooperative's proposed rate design changes. The Cooperative has appealed this Order to the 19th Judicial District Court. The timing or outcome of this matter is uncertain. On December 20, 1994, the RUS or~dered the Cooperative to maintain its current rates statirg that the LPSC's rate reduction order " seriously compromises important l federal interests,... conflicts with the purposes of tne Rural Electrification Act, and therefore is implicitly preempted by feoeral-law." On December 21, 1994, the Cooperative filed with the LPSC its revised rate schedules as ordered, then filed for protection under Chapter 11 of the United States Bankruptcy Code. On the same day, stating that it was being subjected to conflicting jurisdictional assertions over its rates by the LPSC and the RUS, the Cooperative also filed a motion _ with the Bankruptcy Court asking for a preliminary injunction enjoining either RUS or the LPSC from taking any action, instituting any proceeding, or attempting in any way to impose upon the Cooperative its rate making authority and regulation until a final hearing and determination is made on which entity, the LPSC or RUS, has the authority to regulate the rates of the Cooperative. The Court has not yet acted on this motion.......
Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc. Note 13 - Continued In October,1993, the LPSC hired consultants to conduct a management audit of the Cooperative. An initial meeting was held in March, 1994 The Cooperative responded to several data requests and the LPSC's consultants interviewed 38 Cooperative personnel and four Board members, with the last set of intarviews nccurring in August, 1994. Additional interviews are expected. This audit is expected to be concluded with an issuance of findings and recommendations in 1995. l NOTE 14 - COMMITMENTS AND CONTINGENCIES Gulf States Utilities Company: As discussed more fully in Note 12, the Cooperative is involved in significant litigation and regulatory proceedings with GSU. Coal and Transportation Consnitments: Purchases under the terns of contracts for the acquisition and related transportation of coal during 1994 and 1993 were approximately $121 million and $113 million respectively. Certain purchases are subject to various price escalators and deflators, minimum quantity takes and periodic price reopeners at then current market prices. Management is of the opinion that these contracts will properly meet anticipated coal supply needs. The I transportation contracts begin to expire in 1999 while the coal contracts are for the useful life of the coal-fired generating facility, provided the present supplier I is willing to meet or better offe s from other suppliers at scheduled periodic price reopeners. Litigation: On September 20, 1989, a class action petition was filed in the Tenth Judicial District State Court in Natchitoches Parish, Louisiana naming the Cooperative's Members as defendants. The plaintiffs in this action seek a refund of all rate increases enacted by the Cooperative's Members from 1978 ur.til the I respective Member voted to be subject to the jurisdiction of the LPSC or was placed under the jurisdiction of the LPSC by action of the State Supreme Court. On October 17, 1989, the case was moved to the federal courts. On June 23, 1990, motions were filed by the Cooperative's Members to name the Cooperative as a third party defenda'.t in the case. On July 15, 1991, the United States District Court in New Orleans entered an order retaining jurisdiction in the case and granting the motions of the Cooperative's Members to enjoin the Cooperative as a third party I I..
Notes to Financial Statements - Continued Cajun Electric Power Coop;rative, Inc. Note 14 - Continued defendant in the case. On August 28, 1992, the District Court abstained from this matter in favor of proceedings at the LPSC. The LPSC currently has a docket associated with this matter. Docket U-19943 is an examination of the cooperatives' rates during the period of non-regulation, 1978 through 1989. The first hearings on this docket occurred in the first quarter of 1994. These hearings are to deal with the question of the standards to be used by the LPSC in evaluating the cooperatives' rates and rate increases during that l period. The timing or outcome of this matter is uncertain and no provision for any l liability that may result has been made in the financial staternents. An unfavorable outcome could have a material adverse impact upon the Cooperative. il I I I I I I .,2 ,}}