ML20235W635

Annual Rept 1986,Mississippi Power & Light Co

ML20235W635
Person / Time
Site:	Grand Gulf
Issue date:	12/31/1986
From:	MISSISSIPPI POWER & LIGHT CO.
To:
Shared Package
ML20235W492	List: AECM-87-0134, Forwards Sys Energy Resources,Inc,South Mississippi Electric Power Assoc & Mississippi Power & Light Co 1986 Annual Financial Repts ML20235W574 ML20235W593 ML20235W635
References
NUDOCS 8707230625
Download: ML20235W635 (59)

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About Mississippi Power & Light Comipany Contents: Mississippi Power & Light Company (MP&L) is a regulated electric utility Message To Stockholders.. .... 2-3 operating in 45 counties of western Mississippi. jj,,,,,,g, f3.,g,p,,,nr resri,sts MP&L serves about 333,000 customers in an area comprising 25,900 n,1,i Arareti,seps square miles with an estimated population of 1.3 million. As of December 31, Ikuk 76 Ituics Hnowial Reitua 1986, the company provided electric service in 140 niunicipalities. MP&L also provided transmission service to the South Mississippi Electric Power Associa-f""d'"'d' #"##""' tion (SMEPA), an association of rural electric cooperatives, and the Municipal Service.... ..,.... 4-9 Energy Agency of Mississippi (MEAM), eight municipally owned utilities. Peak Ikum,ut A,ut Eners ales s 16 ulain.v Amt Igil Afarrers The company is one of the principal operating subsidiaries of Middle South 9 Utilities, Inc., and its system is interconnected as a part of the Middle South O'F'*:"'"""# C#'"P" Utilities system, which ' supplies the electric energy requirements of more than [',urruction l.6 million customers in a 92,000-square-mile area of Arkansas, louisiana, or Mississippi, and Missouri. 0/vmtiv I6wmes Innovation. ..,.10- 15 ENERGY PLUs A copy of MP&L's 1986 annual report to the Securitics and Exchange IORUAf ONE Commission on Form 10-K (including financial statements and financial state-Gimmunie IAwivenent ment schedules) is available without charge to stockhoklers upon written Imtustrial cuumer Inuntnr Iwci,p Ncr Honx 1%gmnu request to. p,,,,, y,, , y y,, p MISSISSIPPI POWER & LIGHT COMPANY maer Ikaers G.A. Goff, Senior Vice President, E"!" L'"'a'id" lh 5"" F Chief Financial Officer, and Corporate Secretary Responsiveness.............. 16-19 Post Oflice Box 1640 - Llucation Jackson, Mississippi 39215-1640 Enny CONCERN /ilc/pi, Ha,uis isymm Telephone 601-969-2311 Emplare Imdr=<"' Gardrepers Iwymm REGISTRAR (for preferred stock): Marketing The Deposit Guaranty hational Bank - Mississippi River. .. 20-29 Post Oflice Box 1200 Alissiuuppi Ri,rr sites Emluation stoutv Jackson, Mississippi 39215-1200 O'**""i'i" 12mwmv Hisan,'Amt Ibmm,we TRANSFER AGENT (fbr preferred stock): f .30-56 Trustmark National Bank F,.nancial Section. Post Oflia: Box 291 M h""*ialihnew IVP"r' Of Ala"ve"""' O i"""' Oll"#'l#""' #"li' A""""*'"" f Jackson, Mississippi 39215-0291 Alanyrment's hnannal Ducunwn Amt Analvsb PREFERRED DIVIDEND PAYMENTS Ratanu sl>uts staenwns ofincome The company's 4th quarter 1986 distribution on all outstanding series ofits staunenu ofikmimd famies preferred stock was entirelv a return of capital and thercfbre was not tasable to 5'd"*"* T Cl'a*" I" h"d*idl li"I'i"" stockholders as dividend income ihr federal income tax purposes. In addition, [".",'s #h'"'"' * fy'""[."*g'[3 due primarily to the results of the operation of the company s rate phase-m 3,nf yp,,urars A>ut opiers plan as, discussed in Note ID, the company presently believes it is hkely that a substantial portion of the dividends on all outstanding shares ofits preferred stock paid in 1987 and 1988 will constitute a return of capital ihr federal income tas purposes with a corresponding adjustment to the tax basis of such outstanding shares. 1

Dear Stockholders:

The results of ENERGY PL,US More economic development have been overwhelming. During programs, such as the Mississippi 1986, more than 4,000 new manufac-River Sites Evaluation Study outlined turing jobs were created in western in this report, are planned for 1987. A, l recall that m this same space a Mississippi. We firmly believe our service area is s stockholders of M...ississippi Power & Light G, mpany, you One of the first steps MP&L ripe for economic growth, and one of wd propmed was an incentive program for our major objectives is to see that it new or expandin industries happens. year ago, I wrote,of the many price incentives the company. The offered obstacles we had just overcome and to manuf Bold Marketing Steps the challenges that lay ahead. exp nd. acturers locatin8.or We had been in the midst of a mg m M...ississippi sigmficantly Just as improving economic prolonged and contnwersial rate case, encouraged new emb>loyment op >r. development m our state was a tunicies. In only eig t months, t e construcuan and management audits, pmgram generated more than 1,000 priority in 1986, strengthening our system a reement cases, and a barrage new jobs, a capital investment of already successful marketing effbrts of publi y aired rumors concernmg $70.3 million and additional sales of was of equal importance. the possible bankruptcy or state 8,750,000 kilowatt-hours per month. In January, MP&L unveiled a takeover of the company. In April, MP&L hosted FORUM results-oriented marketing program Understandably, as we entered 1986, our theme at MP&L became ONE, an economic development designated as " Ten Hold Steps." symposium that brought together key This innovative program, which , Turna, Point., After overcoming state and k> cal leaders from business,' fbcused on 10 key areas, was desdrne i' many < the challenges that had industry and government in a to build customer satisfaction an demanded our concentration a. year concerted efibrt to add new emphasis increase sales, earlier we turned our attennon to to Minini pPs ecmomic develop-Target areas included: industrial what we do best-semng our ment. Wit mut any orchestration, incentives, homebuilders incentives, customers, devtloping our sem.cc cach of the four speakers pointed out pnxiuct image, cogeneration, multi-area, and selhng our product with a that a lack of educational commit-family housing, water heaters, renewed enthusiasm. ment in Mississi; i is inhibiting the commercial and industrial heating, Admittedly, serious obstacles std. l remain to be overcome. In particular, development of t e state and cited security lighting, commercial cooking education as the real key to better incentives, and new me,rketing thrusts the company must achieve a reversal jobs and economic deveh ment. fbr the '90s. of the, February 1987 opinion of the In 1986, we translate our The energy sales created by these Mississippi Supreme Court, which commitment to education into action programs are expected to increase overturned the Mississippi Pubhc by appointing an intemal committee MP&L's revenues by a present value Semce Commission's (M1 SC) to kok at the broad spectrum of of more than $5 mdlion. September 1985 rate order allow.ing education, covering academic levels In addition, programs were MP&L to recover its Grand Gutt I costs. We do not believe, however, from pre-school to post-aduate and initiated to involve every employee in real-world problems, suc as school our marketing efforts. n special that this decmon should take away dropouts and adult illiteracy. campaign was launched in November from MP&Ls many accomplishments The commiti e has bee'n active in that otTered employees cash incentives vc hok back at those establishing several educational fbr enrolling customers in our level accomplishments, it pleases me to P"{ nizing that education is an i$tr emplovce incentive report that the company was able to investment, not an expense, MP&L programs are planned fbr 1987. ~ move toyvard a desired turmng pomt was a leader in organizin the Council by focusmg upon semcc, mnovation and responsiveness. for the Support of Publi Higher Back to Basics Falucation. The council is comprised P h'iduals dedicated to improvmg ""' "'T "'#? 86 a year in I N"'" P"*'"'**h "^"d which Mi&L imtiated m.novatwe 5 Economic Development Thrusts indh In 1986, MP&L launched an Wwr education in Mississippi. strategies to benefit our customers and Dunng t gan the company unpnwe mr pnetaMty, but h um ebssive economic develo > ment a anw nw ed in many odm a6 a dme in uNch dw company through its ENERG PLUS campai n. We publicly I,romised our programs aimed at enhancing educa. returned to the basics of operatmg a E tion m our state, rangmg from spon-utthr. customers t,iat our company is going sorship of a high school academic When MP&L assumed the respon-to help bnng more than 14,000 new contest aired weekly on a hical televi-sibility for overseeing the design and j i o[ porttinities to Mississippi by,.e sion station to recruiting candidates construction of the Grand Gulf fbr high school equivalency Nuclear Stanon in the early 1970s, certificates. our objective was to buiki a plant that, once on line, eventually couki 2

be turned over to a separate Middle Having to lower our base rates by Operational Excellence South Utilities (MSU) subsidiary. some $41 million hurt us financially. That goal was reached in 1986. Even after allowing fi>r reductions As MP&l. k>oks to 1987, we are On December 20, System Energy brought about by the new income tax committed to a new level of opera-Resources, Inc. (SEIU), took over the law and lower interest rates and cut-tional excellence. We have developed operation and maintenance of the ting costs wherever possible, we still a detailed and precise set of standards Grand Gulf Nuclear Station. SEIU will are lookini, in 1987 at a rate of return to fbliow. With specific goals, we will bring about a concentration ofleader-in the 11 percent range, well below be able to keep score, measure our ship to provide the long-term safe, the 15.5 percent allowed under a efibrts, and, more importantly, reliable operanu. of Grand Gulf Unit MPSC order. The difference measure our results. 1, which was placed in commercial represents lower profits and delays our In the year ahead, we will spend operation in 1985. financial recovery. much of our time streamlining the The move is a good one fbr it is clear that the years ahead-entire company. We will continue MP&L With SEIU working solely on especially through 1988-will be etibrts to stafTat minimum levels to Grand Gulf, our company can crucial to us in terms of financing our achieve maximum etliciency, putting concentrate on doing what it does phase-in plan Ihr Grand Gulf L considerable emphasis upon the well - generating, transmitting, and On October 16,1985, the Grand quality of personnel rather than the distributing electricity. Gulf rate phase-in plan adopted by quantity. Our efrorts already have the MPSC in September 1985 was included limiting hiring to critical Financial Review appealed to the Mississippi Supreme positions and otTering a voluntary Court by the Mississippi attorney early retirement program. The ratio of l MP&L's continued progress general and the Mississippi Legal customers to employees at MP&L toward achieving its long-term finan-Services Coalition. On February 25, compares favorably with the rest of l cial objectives was recognized in 1986 1987, the Mississippi Supreme Court the utilite industrv. when three rating agencies upgraded reversed and remanded the rate case MP&L employees will concentra their credit ratings of our fixed-to the MPSC fbr further proceedings. on increased sales, improved produc-income securities. The company, SElu, and MSU have tivity and cost control. We'll be One of our biggest obstacles in requested the Mississippi Supreme taking bold new steps to meet the 1986 was the issuance of an interim Court to reconsider its decision. Ifit needs of our customers and produce order by the Mississippi Public Service does not, MP&L will appeal the results that will benefit you, our Commission (MPSC) that froze the order to the United States Supreme stockholders. company's recovery of the second Court. See Note 2 to the Financial We firmly believe that the vitality phase of the Grand Gulf Unit I rate Statements fbr a complete discussion of today's MP&L is positioning the phase-in plan. The commission of this matter and its possible material company for the most successful withdrew the order three days later and adverse consequences to the period in its history. Although there and allowed the Grand Gulf I second company. are still obstacles to overcome, parti-year phase-in rates to go into efTect. In 1987, MP&L's share of the cularly the Mississippi Supreme At the same time, MP&L filed a Grand Gulf I annual billing is ex-Court's February 1987 ruling, we are j temporary rate reduction rider which pected to be approximately S324 entering a new era of etrectiveness in l reduced revenue requirements in other million. Assuming the company is service, innovation and responsiveness. areas by an amount approumately allowed to continue collecting rates equivalent to the additmnal Grand approved by the MPSC in its Sincerely, Gulf I revenue, or about $41 million September 1985 order, present rates annually. This temporary reduction of will recover about $132.5 million. non-Grand Gulf I revenues antici-That will leave us with a S191.5 pared i iture cost reductions resulting million shortfall, which will be met by I ^ fg from recogmnon oflower tax rates cash from operations and external r~ j_ l ^ under the new income tax law, lower financing. l interest rates, and other matters. Donald C. Lutken l 'Ihe overall result of the Chairman and President September 1986 action was that Much 1987 MP&L will continue to Ibtlow its Grand Gulf I rate phase-in plan, adopted in Septemtier 1985, while total customer rates v.ill remain at present levels. I 3 1 l

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I customers, was an indicator of In October 1985, the MPSC's rate T he service of any electric utility continued economic recovery in order allowing MP&L recovery ofits is essential to the life of every western Mississippi. In 1986, sales to share of Grand Gulf I costs was indisidual in the communities served. retail customers amounted to 8.10 appealed to the Mississippi Supreme Through the use of new technology billion kilowatt-hours, a 3.11 percent Court by the Mississippi attorney j and capable people, MP&L has increase above the year belbre. general and the Mississippi legal prmided contmuous, dependable In addition, the average residential Services Coalition. Briefs were filed in semce to its customers for more than customer used 11,758 kihnvatt-hours 1986, and oral arguments were heard 60 years. in 1986, an increase of 3.01 percent. January 12, 1987 lksidential sales amounted to 3.34 On Februan-25,1987, the Peak Demand And Energy Sales billion kilowatt-hours. Mississippi Supreme Court rendered a i Commercial energy sales climbed decision reversing and remanding the Persistant high temperatures from 2.32 billion kilowatt-hours in rate case to the MPSC fbr further contributed to a record-setting peak in 1985 to 2.41 billion kih> watt-hours in proceedings. Ikversible error was { kilowatt usage in 1986. 1986, an increase of 4.06 percent. Ibund by the Supreme Court in the Demand on MP&L's system at MPSC's September 1985 order on the 5 p.m., July 30, m>med to Regulatory And Legal Matters grounds that the commission: (1) 2,132,000 kilowatts, displacing the adopted retail rates to pay Grand Gulf all-time high of 2,078,000 kilowatts Several significant developments in 1 expenses without first determining reached in 1980. The new peak the areas of regulatory and legal that the expenses were prudently con-represented a 14.7 percent increase matters occurred during 1986 and curred, (2) failed to join Middle over the one reached in 1985 and was early 1987. South Utilities (MSU) and SERI as i I equivalent to the torecast (br 1992. 'As scheduled, MP&L placed in parties to the rate proceeding, and (3) The peak represents the maximum effect October 1,1986, the second-should not have allowed intervention requirement Ibr electricity by year rate increase, totaling approx-in the proceeding by security holders customers ihr any one-hour period m, imatelv 541 million, in connection of MSU. a given year. MP'&L's peak occurs with t'he Grand Gulf I rate phase-in On March 10,198', MP&L filed during the summer months when plan approved by the Mississippi ihr a rehearing with the Mississippi electncity demand is pushed higher by Public Service Commission (MPSC) in Supreme Court, and MSU and SERI heavy air-conditioning usage. its Final Order on Rehearing in filed motions to intervene in the pro-In December 1986, the number of September 1985. ceeding. If a rehearing is not granted, customers mse to 332,807 for an Effective the same date, MP&L the company will appeal to the U.S. increase of 3,809 over those being was ordered to institute a temporary Supreme Court. MP&L also will J served at the end of 1985. Most of rate reduction rider lowering non-request that the Mississippi Supreme j the growth was in the residential and Grand Gulf I rates by approximately Court stay the February 25 opuuon, commercial areas. 541 million. This temporary rate pending the appeal to the U.S. Customers by classification were: reduction reflected anticipated cost Supreme Court. If this stay request is Residential-285,400 savings expected to occur in 1987 as a denied, MP&L will seek a stay from ) Commercial-41,308 result of changes in the tax laws, the U.S. Supreme Court. Industrial-3,461 lower cost of capital, and other cost Government & municipal-2,636 reductions associated with MP&L's Other public utilities-2 cost control ellbrts. The overall result Tbtal energy sales ihr the year was that the Grand Gulf I rate phase-amounted to 10.486 billion kilowatt-in plan adopted in September 1985 hours, an increase of 3.57 percent was preserved, while total customer when compared with 1985. This rates remained at present lesels. increase, due primarily to an increase In the September 1986 proceeding in sales to residential and commercial that led to the temporary rate reduc-y. tion rider, the MPSC initiated a

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~ \\ all aspects of the current rate struc-tures of MP&L and System Energy Resources, Inc. (SERI). Motions to dismiss the inquiry docket were over-ruled by the commission. 1.inenunn first Class MI Ahlinrn ofhitCennb in>talb a pla6 won-onounted transfbnner bank to 14 AlPel v a cornpsny of'nfmnwrd rniplowes. aannudure adled hmd to an npuuiny indusn, souh as the unendm ol'thu curw. who mwk as a raun w nunntain spiahti scma tinvrphout the wmpuWs 4.%ounty vn>ist ams 5 i

MP&L continues to collect rates approved by the MPSC in the Final Order on Rehearing. These rates are subject to rtfund to the extent that a y final judicial determination may result 4o'g in a schedule of rates less than what [9[y.QNMhc ' the MPSC allowed. g pM 'o In another Grand Gulf matter, the p". U.S. Court of Appeals fbr the District t%r, agh of Columbia in Washington affirmed a $[fv, June 1985 ruling by the Federal ' h-Energv Regulatory i'ommission WM.s. (FERC) that allocated Grand Gulf 1 ge M M, WMX/ costs to the thur operating companies , t 'f " of MSU. The decision, which was W ' @! ", pJiuSh" ' lWU s " g, ,w, 7 reached Januarv 6,1987, upheld the $$$i h%.d %4f / _1',. FERC's ruling that allocated 33 per-q> 4 cent of the cost of Grand Gulf 1 to 1 i ' ?;&? ,J ,. E. M P& l., e l4y .i. y' .;V~ g y'[ .i 3 n' i ~ g" .\\ y Time-and ant-utrina apnfment is wcd by a cirw durh a obstruction of a ll5 lU bhnidt substation i and aswaated i15 bbnsdt mmsmivion hne at If'lutticid The pnprt is scheduk-dpr wmplerwn in nud-l W Operating Revenues Total operating revenues were $673,948,000 in 1986, compared with $605,129,000 in 1985. This increase was mainly due to growth in sales to residential and commercial customers. A distribution of the company's 1986 revenue dollars was as tbliows: Amount in Percent of Thousands Revenue Fuel. S156,509 23.22 Purch tsed power-net of rate deferrals. 201,017 29.83 Total fuel and purchased power-net of rate deferrals. 357,526 53.05 Tases. 75,863 11.26 Payroll. 41,271 6 I? Depreciation. 34,672 5.15 Other income, expenses and deductions. 65,387 9.70 Cost of capital: Cost of debt. 45,369 6.73 Net income. 53,860 7.99* Total revenue.. $673,948 100.00

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In October, MP&L began process-On October 22, MP&L filed suit On February 17,1987, MP&L ing commercial and residennat against United Gas concerning the filed suit against United Gas seeking a customer refunds resulting from a way it determines what MP&L pays declaration by the court that MP&L $182.5 million legal settlement with ihr natural gas. MP&L contends that does not owe a $23.9 million bill United Gas Pipeline Co. Pursuant to United Gas should include the pur-submitted by United Gas under a this settlement, United Gas paid chase prices and volumes purchased take-or-pay provision in the gas con-MP&L S165 million on September by United Gas' subsidiaries and tract. The suit states that the gas 25,1985, and agreed to pay an addi-marketing affiliates in the company billed MP&L fbr natural gas tional $17.5 million by September 25, mathematical fbrmula it uses to deter-it did not use from October 22, 1987. mine MP&L's cost. This would result 1986, to January 1,1987. Two additional lawsuits have been in fuel cost savings fbr MP&L which filed by MP&L against United Gas. would be passed on to its customers. Cynthia Ksttrril, a chemist in All*c~L's i noinmmental Affixin ikpurtnu nt, nwniton enrinmmental anulitums at IVx Bnnen Staum Ekctric Starwn to cruurr annpluunce withfcdenalnruistate ryulatieru. l:"* f .y

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1 1 Organizational Changes J. Stewart Frame, senior vice Financing president-personnel and admimstra-On July 28, Middle South Energy, tion, retired in June after 36 years of , MP&lls debt and preferred stock j a subsidiary of Middle South Utilities service to MP&L. ratings were upgraded by three ratmg ) that was established in 1974 as the 90 Frank S. York, Jr., senior vice agencies in May, indicatmg the com-p:rcent owner of the Grand Gulf president, chief financial oflicer and pany's improving financial condition. Nuclear Station, was re-named System corporate secretary, retired in January Momiy's Investor's Service raised Energy Resources, Inc. (SEIU). 1987 after 40 years of senice to the the company's first mortgage bonds SEIU assumed primary responsi, company. and secured pollution control issues to bility which had previously been Donald E. Mem, ers, senior vice BAAL from BAA2, unsecured pollu-undertaken by MP&L relating to the president-corporate operations, was tion control bonds to BAA2 from mana ment and operation of the elected in November as president and BAA3, and preferred stock to BAA2 Gran Gulf Nuclear Station. chief executive officer of MSU System from BAA3. About 200 employees are kicated Services, Inc. m, New Orleans. Meanwhile, MP&L's first mortgage at SERI's headquarter in Jackson with Thomas A. Dallas, senior vice bond and preferred stock ratings were approximately 1,000 stationed at president and assistant to the chair-upgraded to BBB-and BB+, respec-Grand Gulf. man, was named senior vice president-tively, by Standard and Poor's Corp. On December 20, the Nuclear administrative senices. Dutt and Phelps also raised the Regulatory Commission approved the G. A. " Pat" Goff, vice president-company's first mortpge bond and transfer of the responsibility to main. finance and accounting, was promoted preferred stock ratings to 11 and 12, tain and operate Grand Gulf from to senior vice president, chief financial respectively. MP&L to SEIU. flicer, and corporate secretary. These ratings are subject to further With the transfer, William George M. Lediow, director of review as a result of the Mississippi Cavanaugh III, president and chief administrative senices, was promoted Supreme Court's February 1987 order operating officer and director; Oliver to vice president-special pro;ccts. overturning the state Public Service Kingsley, vice president-nuclear opera. Commission's September 1985 order j tions; and Ted Cloninger vice allowing MP&L to recover its Grand president-nuclear engincen,ng support, Gulf I costs. resigned their positions with MP&L 'Ihere were two financings in and became SERI oflicers. 1986. Donald C. Lutken, MP&Ils chair. On July 8, pursuant to com-man of the board and chief executive petitive bids, MP&L sold $70 millior. officen assumed the additional titic of $ # N N",$YsI,',*,',,"["[,7, $',; oney of first mortpge bonds,9 5/8 percent senes, duc July 1, 2016. president. riuu,r ega ur ograrsou ni ihr pvr.want. On July 31, the company sold $35 million of $100 par value preferred stock, at a competitively determined dividend rate of 9 -m y. The net proceeds from these sales percent. fn~ n 'M were used by MP&L to finance a ) M; Grand Gulf I-related phase-in plan, to portion of the costs associated with its D* m redeem presiously issued secunties, to i p _,.a.... d.0 4. .gg finance its construction program, and b y Q M_.. _IW, p gd g fbr other corporate purposes. In addition, the company ggd redeemed two issues of prefe'rred z. .ggQ$N M i i g .. p p pj3 3 y/ " @M g. g. 37e'st stock. In Septemlyer, MP&L redeemed 9 gg g Q*T 3" ~ $100 par value preferred stock for 19,800 shares ofits 17 percent senes, c, 'y 4 3 ;~f- ~ sinking fund purposes at $100 per 4,;- 4 QD y y - y, w M gh y e - 'N 7, 4,,, ,( .f. share. In November, the company 6; t=(- ~ redeemed the remaining 180,200 m .,~... shares outstanding ofits 17 percent

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Also, in November, MP&L jmtro m ggpn-re y mm Q'"' repurchased the 100,000 shares W s [h *i,.. ';W ' <f outstanding ofits 14 % percent series, f v2 $100 par value preferred stock at m' $100 per share. g e s Expenses { 'r < gy[ '; 6 During the year, operating expenses were $576,007,000, an ,~ increase of 8.98 percent over 1985. s. This increase was due primarily to increased purchased power costs resulting from the company's purchased power agreements for energy from the Grand Gulf Nuclear Station Unit 1. Construction Expenditures for construction 4 during the year were $22.1 million, a g-decrease of 8.51 percent as compared y to 1985. Major transmission projects in 1986 included the completion of the design and survey work for the Freeport 500/230 kilovolt and the limica 230/115 kilovolt substations. 'W Sites for both substations were secured and clearing began on the Freeport site. PrelimL design and survey work began,n the Rex Brown to Pickens 230 kilovolt line conversion that is scheduled to be completed in 1989. Other major 1986 projects included transmission capacitor bank additions at South Jackson, Port Gibson and Fkmuod. Substation capacity additions were completed at "(% South Natchez, Clinton, Luckney and Meadville. Work continued on the Whitfield 115/13.8 kilovolt substation and associated 115 kikwolt transmission line with completion scheduled tbr mid-1987. lany AlIVI. empIq,us uvrk on entwalan.i darpenna pb aupn.nents to kap cust<nners supphed nuh ricctncst, on demand. Thus, the comjany places synchalenrpinuu on ernybrwr satitv. 9

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O i ! I nce the days oflow fuel costs Demonstrating leadership in the MP&L also stepped up its adver-(d and rapidly rising demand ihr state's economic development etli>rt is rising program in several national trade electricity were gone, electric utilities not new to MP&L. For nearly 60 publications. Full-page advertisements had to look tbr new ways to operate years, the company has actively were used to promote Mississippi as a their companies and market their worked to attract new jobs and strategic h> cation fbr manufacturing products to ensure profitability and payrolls ihr its customers. Company and distribution operations as well as customer satisfaction. MP&L has been records indicate that through the fbr senice-related businesses and a !cader in establishing some of the years, MP&L has played a direct role corporate headquarters. new directions companies are taking, in attracting more than 300 industries In summary, there were a total of particularly in the areas of economic and 65,000 jobs to its western 19 new industry locations and 62 development, marketing, and energv Mississippi service area. expansions of existing industry during education programs, ikfusing contentment with the year. previous accomplishments, however, These 81 new and expanded ENERGY PLUS MP&L pledged to intensify its long-industries provided a total of 4,144 standing commitment with ENERGY new manufacturing jobs at a total In 1986, MP&L r,oed up PLUS-the most comprehensive and capital investment of S152.9 million. activities in one of the mo t aggressive significant economic development MP&L estimates that the industries economic development programs ever effort in the company's historv. will produce a new electrical load of undertaken by an electric utility. This The measurable goal of ENERGY approximately 41.6 megawatts. program, named ENE' ' PLUS, was PLUS is not a small one. MP&L has Annual revenues to the company from created in November tw5 in response set its sights on the creation or attrac-this additional business should exceed to a survey conducted on behalf of tion of 14,000 new jobs over and approximately S8.55 million. the company which revealed th.- above projected employment growth MP&L industrial hication con-Mississippians feel the most imponant in western Mississippi by the end of sultants hosted 54 clients on 105 need facing the state is more and 1990. visits to western Mississippi in 1986. better paving jobs. A mainstay of this recruiting efibrt These representatives also spent a total A majonty of the respondents has been regular week-long domestic of 75 days traveling out of state to indicated that MP&L should take a prospecting trips, soliciting expansion make presentations to 238 companies. leadership role in helping to attract projects from the more industrialized This compares with a total of 47 days more industry to the state. regions of the country. In this et1brt, spent traveling out of state in 1985 thousands ofletters are mailed when 138 companies were called on. "" '"N" advising that one of the utility's (bur In November, the company made '/, 8" industrial location consultants' will be its second attempt at recnuting fbreign in the area to discuss expansion plans companics. Area development repre- , ~ UV 6@d southern market f with companies interested in a sentatives from MP&L and Middle kaD g# M,$ RaK South Utilities traveled to Europe to f~ Seventeen trips were taken in meet with leaders from 20 industries @ 1986, up considerably fium the 10 in Germany and Austria that already E~h j nips averaged annually in the past. have overseas investments. While no The number of advanced maihngs locations of fbreign businesses were

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., to industries in these regions increased made in 1986, seeds were planted ul:::ll- \\ from approximately 25,000 to more which could produce positive results than 75,000. MP&L also mailed pro-in the future. h!S motional literature about Mississippi A two-week trip to Sweden, e. - to selected non-manufacturing Denmark and Norway in 1985 yielded J businesses on an experimental basis, promising contacts with more than 30 with the hope of tapping into the companies considering manufacturing a lefh Annual contests firr the twst enege nun,rn,,, growth expectations ihr distribution, operations in the United States. psur, bumper stkker, aiul comic strip arr pa t rf service and related businesses that Representatwes of six of these the Afsssiserppi Natwou 1 Erwyn Educatum D'? cater to regional and national markets. companies have toured Mississippi to (NEElh pnynt. Al=nr: AfleE nus ruimed by the Additionally, MP&L, in conjunc-consider investments. U.S ikprrnwnt of Erryp as are of 17 wsnnen of

l,l4 g 4y the Natumal Anurdsfirr Levyp Insunwrion firr ses spmunhip of NEEl), whkh h desfrowd to purpur Development Center, developed ymth to nwet the challerye of the uvrid's unfullv special information packages to tatyet sharpiry rnegg artfurarmen-

high-powth industries which could have better than average profit poten-tial in western Mississippi. 1 11l

1 I FORUM ONE In an efibrt to expand industrial The incentives are in the form of a j and commercial job opportunities in credit per kilowatt-hour fbr new Building on its leadership role in the Mississippi Delta region, MP&L's energy use with the amount varying l the area of economic development, Department of Area Development and each year through 1993. The credit MP&L sponsored FORUM ONE, an Consumer Relations opened a full-will be determined by multiplying a economic development symposiuni time office in Greemille. specific amount per kilowatt hour which brought together approximately Dr. Garey R Perkins, an times the qualifying kilowatt hours ] ,~ 275 business, state and local leaders in economist with more than 10 years and subtractmg it from the bill. I April to discuss needs and plans for experience working with Mississippi' incentive rate plan addressed incentive In addition, a supplement to the the state's economic future. industrial, commercial, and agri-Speakers included Jim Bruce, cultural enterprises, was selected to rates in Enterprise Zones, areas director of management and economic operate the office. He was charged targeted for special consideration consulting for Imckwood Greene, one with working with public oflicials in because of specific economic needs. of the nation's largest design com-the recruitment of new industrial The plan allows incentive credits to panics; Dr. Richard A. Boyd, stete prospects. smaller or "B" customers, who are superintendent of education; The department also sponsored an othenvise required to meet the same Dr. Marvin Cetron, founder and presi-intensive three-day community qualifications as manufacturers in non-dent of Forecasting International; and - development semmar for selected Enterprise Zones. E. Douglas Kenna, a native community leaders interested in Since the package was approved, Mississippian and partner in the recruiting new businesses to their 28 industrial customers have applied G.L. Ohrstrom Group. community. The seminar, which will for the special rate incentives. The One recurring theme ran be conducted annually, was developed goal for the program was 10 mega-throughout the conference-the need in conjunction with the University of watts of new load. At vear end,21.5 fbr better education in Mississippi. Southern Mississippi's master's degree megawatts had been added with con-Improved educational standards would program in economic development. tracts for another 1,5 megawatts close not only serve to benefit future In addition, the department con-to completion. generations, but also would help the ducted a two-day community develop-The incentive program contributed state attract industry. Vocational-ment seminar for MP&L's marketing to 1,026 new jobs and a total capital technical training was tagged as an personnel and local and district investment of $70,3 million by par-incentive to industry searching for a managers. Participants were instructed ticipating manufacturers. trained work force, while good on ways to utilize their contacts with Incentive rates also played a major elementary and secondary public existing industries to develop leads for role in MP&L's exceptional industrial education was identified as a con-locatmg potential businesses. process heating sales in 1986. A total sideration for its employees' children. of 13,349 kilowatts of process heating These findings prompted MP&L Industrial Customer Incentive was installed in 1986. This represents to launch several education projects in Pricing a 33 percent increase over process

1986, heating sales in 1985, which had been In early 1986, MP&L initiated a the best year for process hearing Community Development program through which large and installations in the 1980s.

alternate large general service In 1983, MP&L added a customers of MP&L can qualify to Community Development Section to receive incentive prices on their its Area Development Department, monthly bills for load additions. which is charged with assisting local Existing manufacturing industries leaders in making their communities making significant expansions, and more competitive for industrial new, large manufactunng industries

growth, are eligib!c.

I Requests fbr assistance in establishing chambers of commerce 4 and industrial recruitment teams in 1986 were overwhelming. l Rpht: GulfStaws Gnnen of Clinton um tnefint of 28 customm to pahppr M171 's new inuturtnal custonur incentin yrkiry pnymm. The prwrmm. which ofin incentnr yrkesfirr had addi-l tiums, amtributed au 1,026 rwwjobs avul a tomi capitalimrstment of$70.3 millwn 1 partusjuring 7 manufacturrn in 1986. 12

N#' I a s b y ,( dg.,.. ', 'o.,, s f%' m.... m h 4 t khb I$ Ie o --; n',e-.- f x.,._ . n,. ames:i.f' _ fqty {. .. m : ' - ' g *"* ww n '...y. $'t m n ~ ~ ~ %s v,. S, g , 6 $g tg& ' '~ ' 4 g' t R ,/,. - s r4 . v -. 9 4 / wy ~ / ] ~ r, Q.. $tt9 / /(, . y v. g,o l J / 4., / .l M M e.- b U M" i s..~.. i, g Gg \\. 13

New Home Pmgrams five years or more with a combined recognized a major potential market income of $35,000. Those who from the stimulation of off pcak The new housing market is a registered at a total electric home were energy use. prowing, dynamic market th.u n quires chgible fbr a S1,000 furniture r emoraphic research was used to mnovatne approaches to ensme com-shopping spree. Prcgram objectives dr'

ts.aers by such categories as petitiveness. Several programs were were to get pcopic in the total electric age ne, or type of neighborhood.

offered in 1986 by MP&lls Marketing homes and to support homebuilders This.< iisticated marketing tool was Department to increase the number of who build total electric homes. adopuo by the Marketing Depart-new total electric, energy efficient MP&L finished the year with total ment f guidance in reaching certain homes. electric homes constituting 25.4 per-custon'..rs with specific promotional Early in the year, the Energy cent of all new single famdy homes progiams. Design Service was offered to builders being built. The company's total elec-A practical example of porting this and home buyers. This computerized tric share fbr multi-family homes was information to work is a new Seasonal service projects and compares what 81.6 percent in 1986. Credit Account promotion, which the future electricity and gas costs will be company plans to launch in earh-for a home beffire it is built. More Pmduct Image Program 1987. Seasonal Credit Account is a than 1,000 analyses were perfbrmed program in which a customer's ihr customers in 1986. By understanding customers and monthly bill woald be the adjusted Single and multi-family marketing their attitudes toward the company, averagc of their electric bills fbr the ~ cabrts were supported by'new significant strides were made in 1986 past 12 months. This will allow literature and vid presentations to improve the perception of MP&L's customers to par approximately the directed to customen builders, and product and the value it provides. same amount ca'ch month, avoidmg real estate agents. Although only a few utilities the highs and lows experienced during One video program developed for across the nation are attemptmg work the year. the real estate community was the in the area of product image, MP&L resuh of research done at the begin-ning of the year which indicated that real estate agents did not understand heat pumps and energy etlicient con-struction. This program was the cornerstone of a new education program that gat-the agents initial mfbrmation and hen requested con-tinual feedback from them as they encountered customer questions. Additionally, direct mail campaigns were used to increase business in the single family markets. In October, tbr example, informa-tion w.h mailed to a more than 20,000-customer target gn>up g encouraging them to visit the 26 total electric homes included in the Jackson-area Parade of Ilomes, an annual tour of newly constructed houses. This group, ages 25-49, inchided renters with incomes of $35,000 or more, and homeowners of f Alle-l unried cloup nitir laalleadcr< un 1086 to yp'*,~~, ^_ n' e-wiluener tiw laatwn or exturnwn of SI unaustries. ikunaa a usc map of tirc Arnatoi'm Ir.durtna' l' ark arr: oratei l-r? vnaskus Alawor 1hll Gd!s.ott arut jolm A. lYAnnso, ymulent qi Alvided Awu+rhal 1%In.t> Inc of Iston, l'a; asul t otandnue Youukra frutStnal G>nunstter ~ ClransEnn int] Neinn and All*C'i Indwtna! ,J W 3 laatwn Comultant 'lem Alalonn '~

An integral part of the Seasonal a reply card which could be returned Certificates for the awards, part of Credit Account promotion is the use to the company fbr a free booklet, DOE's " Technical Transfer 80's " pro-of data about customers that can help "How 'Ib Care For Your Water gram, were presented to the winners AIP&L target a specific message and Heater." by Secretan of Energy John S. incentive to customers. Separate letters outlining specific Herrington at a special presentation in ollers and services were sent to various Washington. Water Heaters customer groups to improve the effec-AIP&L was selected fbr its tiveness of the package. This promo-co-sponsonhip of joint projects-the in July, A1P&L launched an tion proved to t,e a great stimulus to Alississippi National Energy Education aggressive direct mail campaign aimed water heater sales. From August to Day (NEED) project and the Youth at increasing the number of residential November; 60 percent more electric Energy Symposium (YES) program. customers with electric water heaters. water heaters replacing gas were sold NFED is not a one-day event, but The campaign package, which was than during the same period in 1985. an energy education program lbr ) mailed to more than 238,000 Electric replacements also increased by schools and communities which spans customers during a three-week period, 2.5 percent during this period. the entire year. included a sticker with A1P&L's The NEED program is a coopera-senice number for placement on Energy Education Programs tive efibrt of students, teachers, existing water heaters, details about ~ business representatives, government special ofTers, and an opportunity to In November. A1P&L was named otlicials, utility executives, and person-request additional information. by the U.S. Dcpartment of Energy nel in the Alississippi Encip Exten-In addition, all customers received d)OF) as one of 17 winners of the sion Center at Alississippi State information concerning A1P&L's easy-National Awards fbr Energv University. Its goal is to prepare the payment plan and five-year uncondi-Innovation. state's youth to meet the challenge of tional warranty. They also were mailed the world's rapidly changing energy requirements. The YES rogram, a summer ggE,.1R.ESEW@WM 'llfsOs h E""$' Oa to 7 crerv aspect oflife and mcreases jg7 i g. r.,. 7 -f g g, students' understanding of encip- + 46.. M- .EN;,; -y%.g;W $ concepts. N

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Csice are among MP&l?s oldest gain enough support within the The first of these programs will be itizenship and community ser-Mississippi 1.cgislature to restore ade-the energy assembly program, a quate funding. MP&L Chairman and 45-minute live pr > gram to be traditions. When made aware of needs President Donald C. Lutken was developed for upper elementary and and interests in the communities it selected as the council's chairman. secondary students. serves, the comnany responds with In October; MP&L designated a Supported by a van full of props, energetic ideas that make a diflhence. representative to serve on a special such as a bike used to humanly committee charged by the state generate electricity, the program will Education superintendent of education with trace energv sources, explain electrical examining ways to strengthen math generation with an emphasis on When speakers at MP&lls cdocation in Mississippi. nuclear and fission, and highlight con-FORUM ONE said that MississippPs in November; MP&L sponsored a servation. One of the hands-on most pressing need was improvements Journalism Day at the Grand Gulf presentations will include a hair-mising in education, company oflicials took Nuclear Station fi>r more than 100 demonstration of the Van de Graaff the message to heart. college and high school students from generator which produces static Immediately fi>llowing that eco-pubhc and private schools in electricity. nomic development symposium in southwest and central Mississippi. Par-Another program, " Choices," April, a seven-member, MP&L com-ticipants took part in a news con-two, one-hour seminars presented to mittee was appointed and charged ference and met news media represen-ninth graders, will explain that choices with developing programs and support tatives who discussed their roles in made today will atrect students' to enhance educanon in the state. reporting energy issues. futures. The purpose of the pro In May, MP&L became the Additionally, MP&L continued to will be to encourage this group, gram which corporate sponsor of " Academic provide several scholarships to has an alarming dropout rate, to stay l Competition," a TV program aired students in the areas of math, science, in school. It will be administered by Saturday mornings in the Jackson wildlife and fisheries, and art. MP&L personnel on a pilot basis in area. The show, also sponsored by The company also established a the Jackson area in 1987. Mississippi College, features two, ti>ur-16-member educator advisory council, Also falling under the curriculum member high school teants competing comprised of educators from ele-umbrella will be the Screen News to be the hrst to answer questions mentary school through senior college, Digest Program in which national ven-asked by the emecc. Plans are to con-to review ideas fiir improving educa-dors will provide eight audiovisual tinue the program in 1987. tion. Prior to the first meeting of the offerings to stimulate interest in math-In August, the company led the advisory council, MP&L solicited or science-related topics in secondary way in organizing the Council for educational materials from national schools eight times a year. One of Support of Public Higher Education vendors supplying other utilities, and these presentations will deal with in Mississippi, a non-profit organiza-materials from the Edison Electric en rgy. tion comprised of concerned business Institute and the Atomic Industrial All of the programs will essentially people who recognize the role wrong Forum. Additional ideas were gathered be used on a test basis, with resiew public education plays in the growth by attending a regional and national and modification possible. j of the state. The council was created utility education meeting. j to promote awareness of the desperate Council members then studied the I situation of state universities and to materials and made suggestions on what would best meet the educational needs in the state. The company's committee then developed a set of recommendations fi>r a comptchensive education development program that will be l launched in 1987, providing some i resources to all levels from elementary to college. 1 I 116: htmannfm Jvn Hill Hyh Schoolarai Aladhon-Ruyhuul Hyh Mool compte to be the first to ansurr puertwv aki 'ry an emcce durup " Academic Gmptw," a telcrhwn stuiz jmpmm smrted in 1W6 by A11tl in wniunctum wsth Alusuuppi Glhy. ~ 17 ' l

1 yb l ,sw te,, ) Y"?" " ' ;1% Q j t - 4 #P $ y MP&L employees gave from their 1 q* W heart as well as the pocketb(x>k in yh }' 1986, sening on community luards, volunteering in schools, supporting local churches, and helping the less g fbrtunate. In addition to serving in traditional ways, the company and its employees participated in many other beneficial projects. 4 More than S21,000 in contribu. tions was raised through a workday ~ orchestrated by MP&L employees to help pay medical expenses for Wingfield High Schoot teacher Alan y Lowe, who was injured in an li,uc ninntccr Charles 1tr.wn, MIVI 's maruyer of bwhvt andJhrrcastup, annF Truid snuwt thefint atitomobile accident. Wingfield High place tmpipv of the IW61.ncaps CONC 1.RN Ibus. The cwns mssed 9.2M to hrly riderls and lumduapjwd School is MP&l:s adopted sehool curtamers who cannot pay thnr ckctnc bdh. under the local school district's Adopt-A-School piagram. Energy CONCERN / female employees and/or spouses of MP&L set a record in 1986 lbr Helpmg Hands Program MP&L employees, the event included United Way giving. Employee con-350 signed and limited-edition prints tributions and corporate gifts across MP&L's Energy CONCElW pro-from Patrician Galleries of Atlanta and the senice area totaled nearly gram, administered by The Sahation was attended by more than 130 $100,000, making the company and Army, provides help fbr elderly and persons its employees one of the largest single handicapped customers who have More than 2,900 grants totaling contributors in Mississippi. exhausted all other sources of funds nearly $165,000 were distributed to MP&L employees also won the and still cannot pay their electric bills, needy families through Energy coveted Minuteman flag thr their The Salvation Armv works with 180 CONCERN. In thur years of opera-record participation in the U.S. social senice agencies in western tion, the program has raised more Savings Bond campaign. A total of Mississippi to certify applicants. than $577,000 fbr distribu: ion to 50 4 percent of the company's In 1986, approximatch 10,000 needy citizens. employees signed up thr the payroll customers and 1,350 employees MP&L also offers a Helping savmgs program, surpassing the 38.7 donated more than $167,000 fbr Hands program to provide weatheriza-percent figure of a year earlier. Energy COSCERN. tion and conservat on assistance for in addition, MP&L sponsored the homes of needy customers. Energy CONCERN Run, which In 1986, more than $39,000 was nearly doubled its number of par-spent on weatherization projects fbr ticipants and contributions of a year 263 qualified homes through Helping earlier. Hands. During the four years of More than 500 people registered operation of Helping Hands, the dl ' in the five-mile and one-mile runs, company has provided weatherization i raising $3,239 thr Encryv CONCERN for 596 homes at a total cost of more through their entrance fees. Of the than $92,000 in materials. All labor is 404 runners en:ered in the five-mile contributed through community p event,375 fini.hed, compared with senice organizations. 200 in 1985. Another 109 entered Energy CONCERN and Helping the one-mile ftm run. The event, in Hands are two major divisions oi only its second year, was designated CONCERN, a 13-point program to part of the Mississippi liack Club's provide various types of assistance to g 1986 Grand PriF Series. Customers. Other CONCERN opera- .3 An additional S3,000 was raised tions in 1986 served about 80,000 for En' rgy CONCERN in October at MP&L customen with programs such e $",j",,"$,';'[,',',"',} ". );##j"y',,d y. the second annual art exhibition and as Timely Duc Date, Time Pay, auction in Vicksburg. Sponsored by Protected Customer, Medicai u h,, sica n,f_uon,,g mufsp s,3 p,a,,,, MP&L Women, a club open to Emergency and Emergency Pay Plan. su a lyh uh<=1 afuimlency ccrrifiate, or cLit drsw an (krolwr by urkny m slyft> nt the statr's 15 M'al-Mart tinres. I8

l f }^ (f 7 " r. ] In October, MP&L cmployees p (.Q 9 i assisted Wal-Mart and Middle South Utilities in a high school equivalency b h, 9 i certificate, or GED, drive by working _ b 'i I in shifts in the uate's 15 Wal Mart a stores. The dnvc was hehl in conjunc-N[ ' tion with the airing of the mtionally o'h" 4 0 ' m televised " Project Second Chance-D opouts in Amer;ca." k j MP&L cmployees shared the spirit s'. I 1 g of Christmas with more than 100 J l ~ j c persons bv donating $1,300 along with more than 20 boxes of food and 3 9,1 g' g 4 ls. '.. clothing to the Community Senice '7 3g %.h 4 4 M ~ 4, Program, which assists elderly citizens. w J ' 'b ' I.. J MP&L also reinstated its Matching hiucation Gfr Program, under which '" i d, . ?! Mh emplovecs contributed 55,515 to 4 4M 4' accreditcpl four-year colleges and / Y,i umversmes. ,v gg p, e~, 9 a m Gatekeepers Program g ~' ' l { MP&L agreed to become the first participant in Gatekeepers, a program to assist Misshsippi's elderly citizens, after being introduced to the program rt l.... ( .i f in November by the Mississippi (. 1 Council on Aging (MCOA). Gatekeepers is designed to train persons working in the community. 4 ~ such as utility meter readen, customer ~ service representatives, grocerv clerks, mail carriers, pharmacis,s, and others

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f i to spot ciderly persons who may need 8 special assistante. ..lCOA organized Gatekeepers to I' bring people working in the private } h sector, who come in contact with the t. elderly, into the aging services system. I MPS:L's meter readers and j ~ customer senice representathes will be F trained in 1987 to recognize potential I4 problems among elderly customers bg and mstructed to notifv counselors on ~ the Gatekeepers' Senice Line if problems are suspected. ) Nh nafamduur wuth cwtonwrs arul their rurds u a N prur.urv ofprtnr of Gattirepers, a pnprum ormns cd bv the Almuupp G.ancd ort Aptry tu rnun unrkers p in tha ymste sector to orcepnct potentud twblems amo*p the thirris AllVI. instomer smwr vrpursen-tarnes as d oneter readm hkr Jimmy Annth of' ' ~ Jaa kwn, nrrr thefint to mduntecrJbr the pnprum un IW6. e 19

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i l ' " ~ ' " ' ' " ' ' " " ' " ' ' ' " ' " ' " " " " () Waters. Few American legends barges on the Mississippi Ib"ver is MP&l -in partnership with Deposit Id Man IUver. li:hcr of more economical than by any other Guaranty National llank-will lead the can parallel the mighty Mississippi means, and some markets fbr the way in 1987 by unveiling a new IUver. It has been seen in movies, varied products can be reached only Mississippi River Sites Evaluation heralded in songs and chronicled in by the river. IUver sites are typically Study aimed at promoting additional books and magazines. remote, and certain industries that industrial development along the river The Mississippi was revered require sites buffered from in order to generate new jobs, expand centuries ago by the first Americans metropolitan areas find the river to be sales of electrical power, and improve and just kept rolling along through a ideal. the economic well-being of the area. key Civil War battle and into today's As MP&L continues to dedicate From DeSoto County to high technokigy cra. its resources to service, innovation and Wilkinson County, the 410-mile As it flows more than 2,300 miles responsiveness, it has a river ally that, stretch along the river, which makes fium Minnesota's frigid Lake Itasca to beyond its many contributions, up the western border of the state and the semi-tropical Gulf of Mexico, the promises to contribute even more in MP&I's service area, otters Mississippi IUver makes substantial the years ahead. A 350 percent innumerable opportunities to contributions to the economics of increase in inland waterborne com-industries interested in exploring new states along the way, merce has been projected over the investments along one of the state's 11etween its banks flows not only next half century, and the number of greatest resources. water fbr transportation, but for towboats and tugs, currently estimated processing, cooling and drinking. Each at 2,500, is continually increasing. Tiu Ariumig,i Rimrfk ni a parrfw sonre,f year, milhons of tons of corn, soy-rsg aid incomefor t/ww. ids, who liw of the beans, wheat, animal feed, fertilizers, fruits of the land.,,dfmm the pmincti<= ofan petroleum products, coal, and cotton I"f'rniw irdstrialk. AUWL rillstrk to are shipped on its waters. F*** #"*"# #"4"W h'"#"""' "W" rarr timnph its Aimmspps Riwr Sites Emluarum Study sintalfirr completum in 1987. a ,~;- ' ' ./. ~ .i ~ l.[,. ; ; F,. ;.., .. ( :.; D;.;j f k l.. .- j.. g d b /;d 4 g:$ ,7 c %y / f' - ;M.:;i.I .p.4,? g,g .4 , v (., 9-gg..i., ' ~ g 3 ~ f ~j f / ,s mv s" 16 w y, u 'M,L .ua L ' ~ g 7q. ,4 4.m... p 7

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1 Mimalamispi River Sites The river sites evaluation study three million tons of cargo pass ) Evaluation Study 1so designates target industry groups through the port, which has its own for each of the properties, identifying U.S. Customs Port of Entry. In October 1986, MP&L con. charretenstics m the areas that make Ef1brts are currently undenvay to tracted with Pilko & Associates of them ideal for selected industries. establish a Foreign Trade Zone in the Houston, Texas, to conduct detailed liased on the target identification area. Vicksburg, with its river port, evaluations of seven sites along the study, MP&L has planned a promo-and Jackson, with its municipal air-Mississippi IUver. tional program using direct mail and port, have filed with the U.S. Depart-Three of these sites-Newport, advertisements in trade journals. The ment of Commerce Foreign-Trade Scott and the bsedale Industrial message wdl be clear-the Mississippi Zone hard an application for a Complex--are undeveloped areas IUver has much to offer the new fbreign trade zone designation, covering thousands of acres served by businesses which MP&L seeks fbr the Oflicials in the two central Mississippi state. cities expect the designation, deferring MP&L with barge access, highway access, and existmg or potential rail or chmmatmg import / export duties, access. The remaining four properties Developed Port Sites to attract new industries and bolster are the state's developed Mississippi existmg ones. River ports at Greemille, Natchez, The Mississippi IUver Sites Evalua. The Vicksburg port consists of a bsedale and Vicksburg. tion Study concluded that the four slack water channel that is 9,500 fcer Initially, the consultants analyzed developed ports ofter a variety of long and 300 feet wide with a 12-fbot the three undeveloped areas to deter-features to potential industries. minimum depth. Vicksburg Harbor is mine characteristics that would appeal The Greenville Harbor Industrial connected to the Mississippi River by to potential industries. These included Park is located one mile muth of a 4,800-fbot long channel maintained transportation access, land availability, Greenville. The 11 miles of natural at 150 feet wide and 12 fcer deep. and environmental factors. slack water harbor on Lake Ferguson, Facilities at the port include a The group then identified poten-coupled with the port's excellent rail, 15-ton bridge cranc and a T-dock tial industrial development obstacles air and highway links, make the Port eqmpped with a 125-ton crane. Rail-caused b, economic, emironmental of Greenville an attractive location fbr served warehousing facilities are and/or physical factors. Areas covered growing industries. availabic. included labor availability, wildlife The industrial park is part of a One of,the most outstanding habitats, topography and drainage. multi-phase pmject set forth in a features of the port operations is the Once potential problems were comprehensive master plan invohing LASH program, which enables a barge determined, the firm developed plans an ultimate industrial complex of 945 to be scaled fbr international travel in fbr eliminating or mitigating the acres. The initial phase, completed in Vicksburg and transferred to New obstacles and named persons or 1965, consists of 115 acres of prime Orleans. 'Ien barge lines serve the port i groups responsible fbr implementa-industrial sites built well above past year-round without seasonal tion. Additionally, steps for marketing and projected flood stages. hmitations. I each of these sites were identified. Through its public terminal Pitko & Associates then prepared facilitics, the Port of Greenville 20-page data books on each of the prmides complete handling senices '7 three, larve-acreage, undeveloped sites. fbr shipment, both domestic and A **'"i l The txds are designed to provide import / export, shallow-draft ocean-information normally requested by a going vessels, barges, rail cars and SA 'a a=w > q client in the early stages of a site trucks. Facilities oller container search, including property description, handling, transfer, stowage and Ad ~ 'Si =j land characteristics, transponation storage. Modern warehousing d I access, available utilities, environmen-equipped with fully automatic climatic p tal permitting and area siting factors. control is another feature of the port. i3$ Mg Several pages of maps, charts and A second and separate import / < ~ ' ' ' 1 graphs also are included. export terminal facility exists with a Io addition, the consultants complete inner harbor equipped to p** piepared one-pabe data sheets for each handle barges and small ocean-gomg of the seven properties. The concise vessels. There are 33 acres available y format includes a site map, which with access to both the barge-ship g,g: j,.. shows size and boundaries; barge, inner harbor ar.d the main slack water f road and rail access; utilities; and channel on Lake Ferguson. f other significant information. The Port of Vicksbury, located approximately midway between e, w a., Memphis and New Orleans, is Av u operated by the Warren County Port Commission. Each yean more than um li.

i Undeveloped Sites The Mississippi IUver Sites Evalua-tion Study also concluded that the three undeveloped sites have con-R siderable potential. Their proximity to the river provides optimum barge & l p,y transport advantages and direct access t 4 to the 9,000 miles of U.S. inland waterways which connect them to the e. .,W 1n 3-Great Lakes and the GulfIntracoastal i Waterway. New' port Industrial Site is located + in DeSoto County in the northwestern corner of the state of Alississippi. The Mississippi River borders the 9,000-acre site for about eight miles along the western boundarv. mushnyf 's Jimr acwkpa yorts, which inchute Ihe n..: of Gorenvilk. vDir innumonhk rypriumlies to As oi,e of the few remaining areas i industnes intcmicd in expkwny new unrstments akup thc Mhsusiffi IUWr. 9f[q7}9 y3gg gg7(3gg g}gy y{ggjgg{ppj River frontage, Newport provides The Emmitte W. Haining loading problem. Regularly scheduled excellent rail access, electric and Industrial Center is the newest addi-LASH and SEABEE barge transport natural gas transmission lines and easy rion at the Vicksburg Port. The center senices give access to direct overseas access to major north-south and cast-is comprised of 70 acres, of which 55 destinations. west interstate highways. are available ranging in size from one The Port of Rosedale, located in Newport, located 20 miles south to 45 acres. Bolivar County, consists of more than of Memphis, ofTers a surplus of The Port of Natchez Industrial three miles of protected slack-water available labor, skilled in a variety of Park, comprised of 200 acres with 32 channel with a 9-foot minimum manufacturing occupations or currently available for sale, is hicated depth. disciplines. one mile south of Natchez on the Features of the Rosedale Port Centrally located between Mem- ~ Mississippi River. include rail access, electric and natural phis and Vicksburg, Scott Industrial Port facilities include a 400-fbot gas transmission lines on site, and easy Site fronts the Mississippi River for berthing area, a liquids loading access to major highways. more than one mile in Bolivar terminal, crancs up to 125-ton In addition, the port facilities

County, capacity, and 53,000 square feet of include climate-controlled ware-Industry locating at the 2,500-acre covered warehouse space. Draft at the housing, a 150-ton crawler crane, site has the advantage of rail adjacent port is maintained at 9 feet and a 5-cubic yard clam bucket, bulk com-to the site and highway access to the maximum width of 300 fcer.

modity truck loading hopper, and state's interconnecting highway The Natchez-Adams County Port forklifts ranging in capacity from system. Greenville Municipal Airport is equipped to handle a variety of 8,000 to 20,000 pounds. is located within a 15 minute drive cargos including plywood, lumber, Another developed site, the from the site. structural steel, cotton, baled wood Rosedale Industrial Park, is located Adjacenc to the Port of Rosedale pulp, liquid petroleum products, grain less than a mile away from the port. is a 762-acre tract of cantiguous and machinery components. Skilled The 220-acre park, which has 143 property available for industrial pur-stevedores have the equipment and acres available as one large piece of poses. In conjunction with the port, experience needed to solve any onloff property, can be subdivided to suit this area has been dubbed the smaller uceds. Rosedale Industrial Complex. Of the The industrial park includes all 762 acres,143 are fully developed and utilities and municipal senices. lie within the existing Rosedale Industries can take advantage of all Industrial Park. port facilities. The Rosedale Industrial Complex has railroad frontage, and utilities can be extended easily into the unde-veloped portions. All facilities that are traditionary available in developed port sites are available to potential mdustries requiring larger tracts of land. 23

l l Communities Natchezians have profited from inspiration. Greenville is horne to their heritage by marketing tours of I con Koury, nationally recognized 30 antebellum homes in the Natchez sculptor, and Hodding Carter III, "!ilcssed arc mc among all the area. For more than 50 yean, home author, editor and former assistant j pop /cs...For in the brorn and rwrlastiite owners have opened their doors to Secretary of State under President florista rinrr is the ptvofofdestiny, and it is visitors from around the world during Jimmy Carter. pim. Afississippi. Afississippi. " the spring and fall. Ilut Greenville's cultural - llodding Carter, Jr., The River The guides don costumes of the community doesn't end here. Each period and graciously lead visitors year, Greenville's Symphony Orchestra thmugh numerous rooms of the great entertains the community with I along the Mississippi River must, mansions and quaint cottages. productions like "The Barber of ndeed, Mississ.ippians who Iw.e The city's carefbl preservation of Seville," "Alozart's Overture to the the past ha's brought IIollywood to Magic Flute," and " Cabaret." An as Greenville lournahst Hodding the city's doon,tep. "Ilucli Finn," active Little Theatre and local art Carter noted, consider themselves "The Autobiograplw of Miss Jane association, among the first in b!cssed. Through the years, the nver Pittman," "Freedorn Road," " Uncle Mississippi, round out the has brought to their commumties a ' Ibm's Cabin" and the ABC mini-community's cultural activities. richness that is unparalleled. series " North and South" were filmed This riker port city also stresses This richness comes from the n Natchez. the importance of education. The cuhure, the comnumity, the way of The arts contribute in this port Greenville Separate School District life, and has awarded them nationally city. Theatre, musicals, concerts and consists of 1I clementary schools and recognized authors and artists, high art shows are sponsored throughout five secondary schools. I'n addition, educational achievements and interna-the year by various civic orpnizations. five private and parochial schools are tional commerce and trade. Natchez has a special municipal located in Washington County. The cities of Greenville, lh>sedale, separate school district which offers Greenville also has a new multi-Natchez and Vicksburg provide public education to children through-million dollar vocational training residents with a flurry of actwity, a out the county. Five private and center that otters courses in all major wealth of opportunities and a heritage parochial scho' ls are hicated in the trades, with academic courses to com-l o that's second to none. Natchez area. College cour,es are plement the training. The city has a otrered at Natchez Junior College and branch of Mississippi Delta lunior Natchez branches of Alcorn State University College, which offers a nursing and the University of Southern program, graphic arts, electronics and Upon f.irst glance, it may appear Mississippi. other vocational courses. Delta State that time stands still in Natchez. University is within commuting The antebellum homes historic Greenville distance and offers various courses and l buildings and social events of the degrees. Delta State holds night classes commumtv seem to transport visitors Named Ihr Gen. Nathaniel at Greenville liigh School. back to a simpler time on the n,ver Greene, a close friend of George wheiy cotton was king and the Washington, Greenville traces its roots Vicksburg Mississippi Ibver was the nation s back to 18R The first site of the city mam transportation. was three miles south of the present Sitting on an imposing bluff Natchez, the county seat f.or locanon. In 1858, however, the overlooking the Mississippi IUver, overlookm;ounty, sits atop a high bluti. Mi i ippi River crawled out ofits Vicksburg is well-known as one of the Adams ( g the Mississippi IUver.,The bed and flooded Greenville. Five years city was named for the Natchez later, the city was burned to the ~ more historic cities of North America. Vicksburg's strategic kication on Indians who hved in the region. ? round by Icderal troops during the the river made the city the commer-Natchez has been a port since the Civil War The city was rebuilt on the cial center of a cottonl rowing region g days of its settlement. Southern highest elevation fictween Vicksburg and the link between northern and planters fbund the city charming and and Memphis. southern states. It was this location convement, providmg an actwc social Apparently, something about the that brought the city to the height of life and easy access to transport their river enriches and enliebtens the sons prosperitv prior to 1860 and com-crops to market. Trade and commo-and daughters of Greciwille, w here pletely destroyed it during the Civil dities were important to the city s there are more successful authors per War. carly economy, and prior to the C,..l capita than any other city in America. Not to be beaten, Vicksburg used wi War, more m,lhona,res lwed,n It is here that noted autimrs such as the river to bring industrialization and i i i Natchez tL.a anywhere else m the W liiam Alexander Perev, Shelbv scientific research to the citv. .Umted States. Foote, Walker Percy, Ellen Douglas Vicksburg is the home to the U.S. ~ , mday, tourism is king, but the and thiding Carter drew th"ir Armv Engineer District, the U.S. actne social life and the importance of Arm' Engineer Division, the v the nver as a transportation arterv Mississippi IUver Commission and the remam. 24

U.S. Army Engineer's Warenvays Engineering Study, a branch of Visitors and residents alike enjoy Experirnent Station. Due to the Mississippi State University, is hicated the outdoor sports of hunting and number of scientists and engincen at the Warenvays Experiment Station. fishing in the Vicksburg area. located associated with the river, and the fact This branch enables engineers to in the center of the Mississippi that many operators and engineers fbr obtain their master's or doctorate Flyway, one of North America's ibur the Grand Gulf Nuclear Station in degrees. migratory routes, Warren County { Port Gibson commute from Vicksburg also has numerous offers excellent waterfbwl and game Vicksburg, the city has one of the recreational activities, hunting. highest populations of people with liistorians are transported through Facilities a'so are available fbr doctorate degrees and engineers of any time when they visit the Vicksburg boating, skiing and swimming. non-university city its size. National Military Park. The 1,800 The Vicksburg public schools acres commemorate the Siege of Rosedale boast three students in the southeast Vicksburg and th Civil War with final five fbr Rhodes Scholarships, and 1,400 monuments and markers. "The City of Roses," became the in 1986, eight students from the Additionally, a national historic land-slogan fbr the city of th>sedale in public schools earned the National mark, the Old Court House Museum, 1932. With a population of 2,793, Merit Finalist Award. The average houses the largest collection of Civil Ihisedale serves as one of the two ACT score fbr fbr Vicksburg students War artifacts in the South. county seats fbr Bolivar County. going to college is 24.3, and 70 per-The Biedenharn Candy Company, Long befbre heavy industry made cent of the graduates from the two a museum of Coca-Cola memorabilia, lh>sedale its home, Bolivar County school systems are college-bound with is where the fin,t Coke was bottled. farmers were carning their own reputa-more than $1 million in scholarships. The Vicksburg Theatre Guild pro-tions fbr agricultural pr xiuctivity and A private school and two parochial doces five amateur productions each innovation. They were the first to schools also are located in the area. year. Baliet, vocal, instrumental and clear the rich Delta fbr crops. A branch of Hinds Junior Collge popular entertainment are perfbrmed Although cotton remained the is h>cated in Vicksburg. The by the Community Concert predominant crop, Bolivar County Vicksburg Center ihr Graduac Organization. became a leader in experimentation of new crops like rice, catfish and the nat vr crapes m the area. t'i&bmp stmtupk lwarion uushcs it one of thc busicst inlanut parts on the Alisn nppi Rircr. 3Q y;

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p y m m 7.mm u nem m m m m m g nw;w p w q been a major fbrce in the develop-ggv.,. ,s. ment of Rosedale. In 1838, Rosedale ( was the only boat landing in Bolivar County. The land was owned by Col.11favette Jones, one o ' ~ fs F Rosedale in honor of his plantation n i the land L.~. a..j.- ," N '. : 1 ; 4 a

y. ;. A home in Charlottesville, Va., built a

, #fj ggi fy/(($ N general store and the settlement JQ developed shortly thereafier. %s y k.J 4 Q s, g.q h In 1890, Charles Scott organized .~ i, P @f Mq f gFt y$ the lhwedale and Mississippi Central Om Ibilroad Co. Today, both water and ?" f~4 railroad transporta' tion remain as a g ~ f magnet to industry. The Great River Railroad, running from the Port of Rosedale south to Metcalf, near r Greenville, is partially responsible fbr o several industries located in fosedale. One of thwedale's most scenic 4 o attractions is the Great River Road i State Park, a 756-acre recicational site. Situated on the banks of the Mississippi River, it is the world's e x longest park. Included is a four-level l observation tower, a nature trail thr the handicapped and a lake fbr fishing and boating. ? l \\ 25 ' a

Economy Vicksbug is a prime example of While most ports along the the river's influence on manu-Mississippi hwe experiencui a drop in facturing. The state's largest port has tonnage m n cent years, Rosedale con-resulted in the location of 40 tinues to grew. According to Corps of Cradled along the banks of the industries in Warren County-28 in Engineen' figures, Rosedale's tonnage the port's industrial park-with 6,906 increased 26.3 percent in 1984, from Mississippi Ibver is a major part i jobs and an annual payroll of $142 232,000 tons to 293,000 tons,and of M,ssissippi s economy and culture. ruillion. The capital investment in the increased 19 percent in 1985, to The n,ver flows as a powerful county from these industries is 5420 315M0 tons. IWedale was the only source of energy and mcome for million. Mississippi port to show an increase thousands who h,ve off the fnnts of. Chemical companies and refmeries, each sear. Among all ports on the the land, and fiom the production of rnetal slitting, grain drsing, storage river,it had the second greatest an impressive industrial base. and a dozen other outlets pr wide incnuse in 1984 and the third greatest It serves as an almost irresistible jobs to Vicksburg's work force. in 1985, with a total increase of 51 lure to the thousands who come every Among the top emplovers are prcent for the twu vears. year as tourists, and leave as behevers Anderson Fully Co., Iriternational Rosedale port au'thorities attribute that this nver is truly the Father of Paper Co., Fo'rdice, and Vicksburg the growth to the fact that the port is Maten that, has sired fortunes and Chemical. only seven years old. Although figures opportumties since before the Um.ted Additionally, the U.S. Army are'not available for 1986 tonnage, States was a nation. Engineers District, U.S. Engine'er oflicials expect another increase The Mississippi also brought to Division, Minissippi River Commis-because of the opening of a fertilizer lif, a vast agncultural terntory. Ivr sion and U.; Waterways Experiment terminal during the year that allowed e thousands of years, the nver deposited Station con"oine to provide more than the port to begin iniporting fertilizer the nch to sotis which made arable 4,100 profet.ic.nal ad technical jobs products. land capab e of feeding the world, to the area. Bolivar County's coordinated Today, the nver contmually L ke Vichburg, the city of economic development efibrts, which ~ reptemshes vast underground aquifers, Greenville has benefited from the included te Rosedale port, received from which she serves up water to Father of Waters. The Port of national recognition recently when ungate cotton, beans and wheat. Greenville has resulted in 35 industries President Rea an personally presented These same aquifers flood fields of locating in Washington County, county officiaf*s an award for their rice, and fill lakes of catfish for dinner including 26 in the Greenville' Harbor etTective use of federal funds in public-tables around the world. Industrial Park, with a capital invest-private partnerships. The county was Certamly, the Mnsissippi Ib.ver ment of $229 million. The industriec one of 1I recipients and the only has, in the 20th century, become a have 2,010 emplovces and an annual county recogmzed for industrial life support for,ndustry - heavy and payroll of $34.6 niillion. development. i high-tech - and a transportanon link More than 65 towboats call The Port of Natchez contributes to the world. Greenville home, and 900 barges are directiv to the existence of seven lhe river's. fluence. felt for documented at the port. The towboat industlics with 1,470 emplovees, an m is miles in every direction. l}ut most and barge industry alone provides annual patroll of S46.4 million and sisible is its impact on Mississippi's approximately 2,500 employees with an investment of $110.4 million. f,our port citics - Natchez, Vicksburg, an annual pavroll of more than S28 A total of 2,767 Natchezians are l Greenville and Rosedale, ~ million. The overall economic impact involved in manufacturing. Employers as a result of water transpocration, of this work force include Interna-Industtial including secondary etrects, is $90 tional Paper, Manville Building million m payroll and 10,000 jobs. Materials, and J.M. Jones Lumber Co. There are 88. dustries located.in m Greenville manufacturers emplov the port counties whose existence is more than 5,000 people in 63 wholly or partiall,v dependent upon companies. the ports. These mdustnes have The Port of Rosedale, one of the approximately 11,000 employees, an fastest growing along the Mississippi annual payroll of more than $230 River, has resulted in the location of million and represent a total invest-six industries in Bolivar County with a ment in the areas of nearly $900 ca ital investment of more tha'n $35 milhon. milion in the past seven yean. The industries have nearly 700 employees and an annual patroll of more than S8 miilion. ^ """"Il""'"?' "f '" ^'"'t"PPi IW "*i'h twcumd prior to the dmlopment of a kur svrtern, depssted the rich top soih in the Alusissippi ikita The arra has sonu of the unrld's best wnditionsfbr the pnuluctwn ofcotton, sovbrans, rscc, wheat suuts, sornhum and other cmps. 26

Agriculture, Forestry and million. A large percentage of the Popular attractions include the Minerals state's lucrative catfish farming is pro-Vicksburg National Military Park and duced on the 2,359 acres of commer-the U.S. Army Corps of Engineers Through the years, the Mississippi cial fish farms in Bolivar County and Waterways Experiment Station. A is vaheed at about $8.7 million. pilgrimage also is held each March. River has deposited valuable minerals and fertile soil in the area ideal (br Home to Greenville, Washing on Preservation of Natchez' past is an agriculture and fbrestry. County ranks among the best counties added dimension to its economy. An Predominant crops and livestock in farm pnxinction ihr the state. The estimated S7 million is produced fbund along the river indude cotton, county ranks third in soybean and rice annually through events such as the wheat, sovbcans, rice, grain so hum, production, and fburth m cotton mternationally famous Spring cattle and' hogs. The fbrest lan in production. Pilgrimage, Antiques Forum, Craft this area averages 46 percent of each Adams County raises agricultural Show and Mardi Gras. Additionally, county's land area. Predominant tree products on 41 percent ofits 291,840 movies produced in the scenic area varieties include oak, gum and acres, accounting fbr $10 million over the past 10 years have brought evpress. Annually, the value of timber annually. Major crops include cotton, another $15 million to the city's h'arvest is S4.4 niillion in Warren wheat and soybeans. economv. ~ County, $1.7 million in Bolivar Natchez and Adams County also 'Iburism in Natchez and Vicksburg County anu S4.2 million in Adams are rich with minerals. Petroleu'm, is not all history. Ibth cities are Count'v. natural gas, lime, natural gas liquids finding success in luring convention Agriculture generates about $22 and gravel are flound below Natchez' business and related activities, ~ million in Warren County each year. brown loam sod. ~ Farmers plant an averagc of 51,200 Toum.ni acres of crops valued at $15.9 million. ik>livar County, which encom. Iburs of antebellum homes, visits passes Rosedale, devotes 80 percent of to Civil War battlefields and cruises on its land area to agneultural enterpnses, steamships have lured American and with pnxiuction totaling $102.2 international tourists to the areas along the Mississippi River. 'Iburism produces $35 million annually fbr the city of Vicksburg. i l l 27

1 History and Romance many trees and wood came down it, the tongue and imagination of the borne along'by the force of the French and was the one introduced to current. the world-Mec-iss-ss-bee, the Father A year later, those turgid waters of Waren. served as the burial place for deSoto. The Father of Waters still inspires T he first record of the ageless 11ut this river that bisects the awe. Through time, pco}7 e have 1 nation had residents before the wh,te mfused it with a special importance i Mississippi River was penned man came to use it for commerce and and romance. more than 400 years ago when as a strangic 1 old during occupations Thq nver that has floated dreams j 7 IIernando deSoto and his fellow and war. Albeit mostly destroyed by and defeat was first im x>rtant as a exploren became the first Europeans senlemenu of the white man, there commercial route for t e fur trapper. 1 to see the river. It was the s ring of 1541 and the *"'"5 "' day evidence of an Indian It then became a territorial imperative river was at its killest with the winter cuyure that found the river lands to to the Spanish, the French, the be ideal real estate. These vanished lintish, and ultimately to the fledgling l thaw fium its northern beginning. native Americans known only as the United States of Amen,ca. Its last The Spaniards stood on the banks of rnound buiklers built their importance as temtonal waters was i the river in the vicinity of what is known today as I)cSoto and Ttmica ".mm3 menu of canh aking the entire when this country was at war with nverside three thousand years ago. itself. counties in Mississippi. The monuments and the builders During the Civil War, the river ~ Gentleman of Elvas wrote: l as the remain enigmatic. provided the Confederacy with the An exphirer known onl> It was Later, other tribes came and ther vital link to sup > lies and manpower. nearly a halfleague wide, and if a man all had a name for this mighty strea'. For the Union forces, control of the m crc a n tI r More than 100 years after deSoto Mississippi would mean blocking the tel I he h-c me ni the nver, the French came. South from access to those supphes something else. It was a great depth, The name of the river given by the and men. and of very strong current. Its waters were alwa)Is turgid and continually Chippewas was the one that pleased Led: visumm etta_ . Nis[ u..........

Gen. U.S. Grant fina!!y got that lie wrote of this period under the control after his bombardment on name of Mark hain, river slang ihr Vicksburg. And after the fall of two fathoms deep, in Li/i on the Vicksburg, President Abraham Afississippi. lie begins his learned 1.incoln wrote, "The Father of Waters tribute to the river thus: "It is not a again goes unvexed to the sea." commonplaec river, but on the con-And unvexed by war it has gone trarv is in all ways remarkable." since. The independence and free-Relieved of the strategies of war; spiritedness that the river gave to the Mississippi could return to its pre- 'livain was given to his most well-Civil War days as an avenue fbr com-known characters, lluckleberry Finn merce and pleasme. and %m Sawyer. What reader of The river gave the countrv's most Twain lucky enough to stand on the beloved and enduring writer his pen banks of the Mississippi has not name, and he g.we the romance of the h>oked out over the chocolate waters river to generations of re.'ders. Samuel and not wanted to build a rafi and let Clemens, an adventurous young river-the river take them on an adventure town dreamer, fu!!illed his boyhood of a lifetime? longings when he became a The imagination soars at the Mississippi River steamboat pilot. Ile prospect. navigated its length time after time until the Civil War stopped non-military trat}ie. i a W;y y ^

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Deloitte Haskins+ Sells 39th Floor One Shell Square New Orleans, Louisiana 70139-3997 Opinion Of Independent Public Accountants To the Shareholder and the Board of Directon of Alississippi Power & Light Company: We have examined the balance sheets of Alississippi Power & Light Company as of December 31,1986 and 1985 and the related statements ofincome, retained earnings, and changes in financial position Ihr each of the three years in the period ended December 31,1986. Our examir.ations were made in accordance with generally accepted auditing stan-dards and, accordingly, included such tests of the accounting records and such other auditing procedures as we con-sidered necessary in the circumstances. As discussed in Note 2 of Notes to Financial Statements, on February 25,1987, the Alississippi Supreme Court reversed and remanded the September 1985 order of the Alississippi Public Senice Commission (AIPSC) granting perma-nent rate relief to the company with respect to its recovery of Grand Gulf I costs pursuant to a multi-year phase-in plan. The Supreme Court fbund reversible error in the AiPSC's rate order based, in part, on the assertion that the A1PSC approved retail rates to recover Grand Gulf I expenses without first determining that the expenses were prudently incurred. In connection with this rate phase-in plan, the company has collected S136 million as of December 31,1986, and has recorded a rate deferral of S364 million for fliture recovery. The company continues to collect the rates approve.1 by the AIPSC in its September 1985 order, which rates are subject to refund and such related rate deferral may not be collectible to the extent that a final judicial determination may result in a schedule of rates less than what the AIPSC allowed. The company is unable to predict the ultimate outcome of this matter, and no provision for any losses that may result from its resolution has been made in the financial statements. In our report dated February 25, 1986, our opinion on the 1985 financial statements was unqualified, however in view of the matter referred to above, our present opinion on the 1985 financial statements as expressed herein, is different from that expressed in our previous report. In our opinion, subject to the effects on the financial statements of such adjustments, if any, as might have been re-quired had the outcome of the uncertainty referred to in the preceding paragraph been known, the above-mentioned financial statements present fairly the financial position of the company at December 31,1986 and 1985 and the results ofits operations and the changes in its financial position fbr each of the three years in the period ended December 31, 1986, in conformity with generally accepted accounting principles applied on a consistent basis. ( February 13,1987, except for Notes 2 and 8 as to which the date is Alarch 16, 1987. 32

l Mississippi Power & Light Company l Management's Financial Discussion And Analysis I. Financial Condition The company's financial condition continued to In December 1986, the lloard of Directors of System ] improve during 1986 reflecting the rate relief granted by Energy Resources, Inc. (SERI), with the Middle South the Mississippi Public Senice Commission (MPSC) in . Utilities, Inc. (MSU) Iloard of Directors concurring, I September 1985. However in February 1987, the decided to continue the suspension of construction of MPSC's September 1985 order granting rate relief with Grand Gulf 2 and that a further decision would be made re i.ect to Grand Gulf I costs was reversed by the by 1990 on the future status of that unit, in light of Mississippi Supreme Court and remanded to the MPSC alternatives available at that time. In the future, the for further proceedings. (See Note 2 to the Financial company's financial condition could be materially and Statements for a discussion of the possible material and adversely affected if any allocation of Grand Gulf'2 costs adverse consequences to the company resulting from the is made to the company for which adequate and timely decision of the Mississippi Supreme Court in February rate reliefis not obtamed. 1937, if such decision is not reversed on appeal). Net income for 1986 was $53.9 million, an increase II. Liquidity And Capital Resoun:es of S2.9 million or 5.8 percent compared to 1985 net - The company's principal financing requirements

income, continued to relate to the deferred recovery of costs On September 16,1986,' the MPSC issued an Initial associated with Grand Gulf 1, as allowed by the MPSC in Order Establishmg Docket No. U-4900, the purposes of its September 1985 rate order. In the event a judicial which were, among other things, to review a number of determination of the appeal of that order results in a Grand Gulf 1 issues, to examine the company's actions schedule of rates less than what the MPSC has allowed, relating to the purchase by the company of c'apacity and the liquidity and financial condition of the company will energy from the Independence Station m Arkansas and to be materially and adversely affected. (See Note 2 to the inquire generally into the company's curtrnt rate struc-Financial Statements.)

ture. The approximate $41 million rate increase scheduled In 1986, capital requirements of $217.6 million were to go into effect in October 1986 in connection with the incurred in order to finance the inventory and phase-in. Grand Gulf I rate phase-in plan was implemented. portions of the Grand Gulf I rate phase-in plan as Concurrently however, the company filed and the MPSC ordered by the MPSC. The company's obligation to accepted a temporary rate reduction rider which reduced SERI for Grand Gulf I costs is approximately 527 million non-Grand Gulf I revenues by an amount approximately per month. equivalent to the October 1986 Grand Gulf 1 increase. During 1986, the company had construction expendi-The temporary reduction of non-Grand GulfI revenues tures of approximately $22.1 million. This amount anticipated future cost reductions resulting from recogni-reflects a continuation of the cost' curtailment and cash tion oflower income tax rates under the Tax Reform Act conservation program implemented in mid-1985 which . of 1986, lower capital costs reflecting current market con-continued into early 1986 and deferred several produc-ditions and other expected cost reductions.The overall tion, transmission and substation construction projects. result was that the Grand Gulf I rate phase-in plan Construction expenditures (including AFUDC) in adopted in September 1985 was preserved, while total 1987,1988 and 1989 are projected to be S53.9 million, customer rates remained at present levels. $47.0 million and $54.9 million, respectively. Additional The company continues to collect the rates approved capital requirements of $191.5 million, $133.7 million by the MPSC in its September 1985 order, which rates and S71.8 million Ihr years 1987,1988 and 1989, respec-are. subject to refund to the extent a final judicial deter-tively, will result from inventory and phase-in costs of mination may result in a schedule of rates less than what Grand Gulf 1 (See Note 2 to the Financial Statements). the MPSC allowed. In this regard, the MPSC has During the period 1987-1989, an additional 562.2 notified the company that in view of the recent decision million will be required to fund maturing long-term debt of the Mississippi Supreme Court and the company's and to satisfy long-term debt and preferred stock sinking stated intent to pursue other appeals, the company will fund requirements. Approximately 56 percent,51 percent be required to furnish to the MPSC a refunding bond or and 69 percent of the above construct on and rate defer-similar security adequate to insure the prompt refund of ral expenditures are expected to be financed with all amounts collected, or to be collected, pursuant to the internally generated funds in 1987,1988 and 1989, --MPSC's September 1985 order until final judicial deter-respectively. The balance is presently anticipated to be mination of the appeal. For a further discussion of the ef-fect of a refund of Grand Gulf I amounts previously col-lected and/or the write-otrof previously recorded Grand Gulf I expense deferrals, see Note 2 to the Financial Statements. 33

financed through external sources, primarily from the sale allow the issuance of additional preferred stock was 1.71 of first mortgage bonds and common stock and, to a for 1986 compared to 1.76 and 1.60 fbr 1985 and 1984, lesser extent, through the sale of preferred stock and respectively. Additional preferred stock of $82 million short-term borrowings. could be issued at year-end assuming an annual preferred lleginning in the third quarter of 1985, the lloard of stock dividend rate of 10 percent. On January 13,1987, Directors determined not to declare or pay common the mmpany sold $35 million of 9.76 percent preferred stock dividends in view of the many tincertainties facing stock. After gising effect to this sale, the company's the company, including the necessity of financing the preferred stock coverage ratio decreased to 1.62 and Grand Gulf I rate phase-in plan as ordered by the MPSC, subsequent to this sale, based on the minimum coverage accounting changes in connection with phase-in plans as requirements and an assumed preferred stock disidend proposed by the Financial Accounting Standards Board rate of 10 percent, the company could issue an additional (FASB) and the resiew of Grand Gulf 2 options. (See 548 million of preferred stock ~ j Note 8 to the Financial Statements). The absence of Temporary investments at December 31, 1986 totaled common stock disidends has favorably affected the com-approximately S191.3 million, of which, $180.5 million pany's liquidity position. All preferred stock dividend re-resulted from the settlement of a gas contract dispute quirements have been met. with United Gas Pipeline Company (United). (See Note In mid-1986, the company obtained externally 1I to the Financial Statements). In October 1986, the generated ftmds through the sale of $70 million of fint MPSC issued an order apprming a distribution plan fbr mortgage bonds and $35 million of preferred stock. In the United proceeds, plus mterest, to the company's the third and fburth quarters of 1986, the company was customers. In January 1987, the company refunded able to redeem two high-dividend-rate series of preferred approximately $18 million to 12 former wholesale stock totaling S30 million. customers and by April 1,1987, will complete the initial The company has authority from the Securities and refimd to retail customers. The company is due an Exchange Commission to borrow a maximum of additional S17.5 million fiom United in September 1987 10 percent of capitalization (approximately 586.4 million as a final payment under the terms of the settlement at December 31, 1986) subject to the availability of agreement. short-term credit resources. The company has lines of On October 22,1986, President Reagan signed into credit with Mississippi banks available m the amount of law the Tu Reform Act of 1986 (act), portions of which S30.5 million, none of which was utilized during 1986. could have a significant impact on the utility industry. The balance of authorized borrowings can be obtained Provisions of this law will, among other things, diminish through the Middle South System Money Pool (Money the value ofinvestment tax credit carryfbrwards, lengthen Pool), subject to the availability of funds, which at any inc period over which utility property can be depreciated particular point in time, may be limited. The company tbr tax purposes, impose a new alternatwe mmimum tax made use of short-term borrowings from the Money Pool and reduce the marginal corporate income tax rate. during the months of April through Julv 1986, with a For the company, the above provisions of the act will maximum amount of $50.7 million utilized. There was have varying consequences. As a result of anticipated tax no short-term debt outstanding at December 31, 1986. net operating losses, these provisions are not expected to in light of the February 1987 decision of the Mississippi have a signficant effect on the company's results of Supreme Court, and pending final disposition of the operations or financial condition in the near future. appeal of that decision, the company's ability to obtain However, the company's future cash flow will be externally generated funds may be limited. (See Note 2 to impacted as the lower corporate income tax rates will the Financial Statements.) result in reduced charges to customers. While these The company's carnings coverage ratio of bond in-reduced collections will lower internal cash generation, terest requirements was 3.52 lbr 1986, compared to 3.61 cash flow is not expected to be so severely impacted as to fbr 1985 and 3.81 lbr 1984. Maintaining the required substantially increase the need fbr external financing. minimum of 2.0 times the annual mortgage interest The company's income tax adjustment rider provides requirement is necessary to issue additional bonds, other that any increase or decres in income tax expense than fbr refunding purposes. Assuming an annual interest caused by a change in federu or state income tax rates rate of 10 percent, at December 31,1986, unfunded will be flowed. to its retail customers. In response to the bondable property would support the company's issuance enactment of the act, beginning with January 1987 bill-of $27 million of'new first mortgage bonds (plus any first ings, the company's retail rates were reduced by approx-mortgage bonds fbr refunding purposes). In light of the imately $10 million annually, (1.8 percent) to recognize limited amount of unftmded bondable propeny, the company is studying plans fbr alternate fbrms of future debt financing. The preferred stock ratio, which must be a minimum of 1.50 times the company's annual interest charges and preferred stock dividend requirements to 34

the reduction in the federal income tax rates from 46 per-ment in the financial condition of the company and its cent to 40 percent fbr the calendar yerr 1987. During ability to resume the maintenance of equipment which 1988, it is presently anticipated that retail rates may be had been postponed in recent years. reduced by an additional $7 million annually to recognize Interrst Expense: the reduction m the federai xome tax rate from the 1986 interest expense increased 56.5 million or 16.7 1987 level of 40 percent to tis 1988 level of 34 percent. percent over 198 and $8.6 m. lion or 23.4 percent over d This income tax adjustment rider will remain efketive 1984. These mcreases reflect the costs of financmg the until the company's retail base rates have been revised to inventory and phase-in portions of Grand Gulf I costs. incorporate the currently effective incor,e tax rate. IV. Effect OfInflation III. Results Of Operetions The company is not including the "EtTect ofInflation Operating Revenues: on Operations" in this report. This information, which Operating revenues increased S68.8 million or 11.4 was previously included in a Note to the Financial percent over 1985 and 5142.0 million or 26.7 percent Statements, provided supplementary information con-over 1984. These increases in revenues were mainly the cerning the effect of changing prices on the company. In result ofincreases in rates allowed by the MPSC. In December 1986, the FASB, in Statement of Financial 1986, energy sales to Mississippi customers showed an Accounting Standards (SFAS) No. 89, rescinded the increase of 3.1 percent over 1985 and 4.9 percent over requirement to present this information. In the future, 1984, reflecting economic improvement and growth in should high levels ofinflation occur; the company's the company's senice area. operations could be negatively afketed if timely and Operating Expenses: adequate rate reliefis not received. Operating expenses increased $47.4 million or 9.0 percent over 1985 and 5118.7 million or 25.9 percent 5,. Summary over 1984. Purchased power; net of rate deferrals, Dunng 1986, the rate rilief and accounting treatment increased 548.8 million over 1985 and 5115.0 million aHowed m 1985 by the MPSC fbr Grand Gulf I costs have over 1984. These increases, primarily rer,ulting from the c ntinued to sustam the hnancial conditmn of the company. purchase of power from Grand Gulf'1, were mitigated by Under the Grand GulfI rate phase-m plan appro~cd by the decreases in thel expenses of S23.8 million and S38.1 MPSC m its September 198o order, certam Grand Gutt 1 costs million, comparin 1986 amounts with 1985 and 1984, contiryue to be deferred requiring substannal external h, nan-respectively. Toget er, the net increases in tiiel and cmg. The company s future financial condinon wdl depend purchased' power accounted fbr 52.8 percent of the "P"" mercase in operating expenses over 1985 levels and 64.8

• Obtaining a reversal of the February 2o.

1987 opinion of the Mmm,pp, Supreme Court and the i percent of the increase over 1984. Fuel and purchased power costs continue to be the company's major company's abihty to continue to collect Grand Gulf I expenses and in 1986 equalled approxiniately 53 percent rates dun,ng the appeal of that opinion; of operating revenue.

• UC '.mnpany s abihty to secure the necessarv in 1986, the company deferred S223.2 million ofits f"3"".ng in order to continue the Grand Gulf I rate Grand Gulf 1-related purEhased power costs as a part of phasegn plan; the Grand Gulf I rate phase-in plan ordered by the
• A sansfactory resolution of MPSC Docket No.

U4Wm MPSC. Hv deferring these amounts to the future when 7 revenues (vill be collected through increased rates billed to

• Future decisions concerning G, rand Gulf 2 and its customers, the impact of the rate phase-in plan on the regulatory treatment.

statement ofincome has been removed.110 wever; (See Notes 2 and 8 to the h,nanc,al S,tatements f,or a discus-i because the actual collection of revenues to recover the won of the possible material and adverse consequences to the deferred a.nounts will not occur until the future, the rate company m connection w th these matters). phase-in plan results in additional capital requirements. Maintenance expenses increased S7.8 million or 31.6 percent over the prior year and S8.7 million or 36.5 percent over 1984. These increases reflect the improve-35

Mississippi Power & Light Company Balance Sheets DECEMBER 31,1986 and 1985 ASSETS 1986 1985 In Thousands UTILITY PLANT: Electric... $1,133,199 S1,116,606 Construction work in progress.. 3,947 2,365 Electric plant acquisition adjustments. 1,135 1,317 Total... 1,138,281 1,120,288 Less accumulated depreciation. 369,758 _ 338,308 Utility plant-net., 768,523 781,980 O'IIIER PROPERTY AND INVESTMENTS: Investment in subsidiary company, at equity (Note 8).. 19,444 20,644 Other.. 702 742 Total. 20_,1_4_6 _ _21_,3_86 CURRENT ASSETS: 471 2,084 Cash and special deposits. Temporary investments - at cost which approximates market: Associated companies., 10,800 Other (Note 11). 180,497 201,451 Accounts receivable: Customer and other - less allowance for doubtful accounts-S816,000 in 1986 and S762,000 in 1985. 28,418 29,257 Associated companics. 2,074 1,785 Materials and supplies-at average cost: Fuel oil. 3,063 3,076 Other. 8,399 8,062 Power purchase advance payments.. 25,833 Rate deferral (Notes 1, 2 and 8). 24,397 23,936 Accumulated deferred income taxes (Note 3). 82,133 Gas contract settlement (Note 11). 17,500 Income taxes receivable. 38,133 Other.. 8,678 _ _ _ _ _ l.76 9 Total.. 322,430 _ _386,793 DEFERRED DEBITS: lbte deferral - net of recoveries (Notes 1, 2 and 8). 339,837 122,672 Gas contract settlement (Note 11). 17,500 Other.. __ __ _ 2,236 2,151_ Total. _ 342,073 142,323 TOTAL. S1,453,172 S1,332,482 See Notes to Financial Statements. 36

LIABILITIES 1986 1985 In Thousands CAPITALIZATION: Common stock, no par value (stated value 523 per share) authorized 15,000,000 shares; issued and outstanding 6,275,000 shares (Note 5). $ 144,325 S 144,325 Iktained earnings (Note 7). 147,099 106,837 Total common shareholder's equity. 291,424 251,162 Preferred stock (Note 5). Without sinking fund. 38,077 38,077 With sinking fund. 56,193 54,802 Long-term debt (Note 6). 468,156 401,065 Total. 853,850 745,106 OTHER NONCURRENT LIABILITIES (Note 1): Accumulated provision fbe property insurance 3,509 5,851 Accumulated provision for injuries and damages. _ _ 24_2 ___ 1,555 Total. . _ _ _ 3,751 __ _7,406 CURRENT LIABILITIES: Currently maturing long-term debt (Note 6). 10,100 10,100 Accounts payab'c: Associated companies. 35,857 43,084 Or her. 20,093 20,920 Gas contract settlement (Note 11). 197,997 168,651 Customer deposits. 15,989 14,806 Taxes accrued. 20,459 73,776 Interest accrued. 15,149 10,800 Preferred dividends declared. 2,290 2,721 Accumulated deferred income taxes (Note 3). 11,882 11,657 Other.. 4,5_09 _ _ _ _9,499 Total. _ 334,325 _366,014 DEFERRED CREDITS: Act mulated deferred income taxes-net (Note 3). 208,695 142,218 Ac alated deferred investment tax credits (Note 3). 45,960 47,421 G antract settlement (Note 11). 17,500 Otl. r.. 6,591 6,817 Total. 261,246 213,956 COMMITMENTS AND CONTINGENCIES (Notes 2 and 8): TOTAL. $1,453,172 S1,332,482 See Notes to Financial Statements. 37

Mississippi Power & Light Company ~ Statements Of Income 1986 1985 1984 FOR THE YEARS ENDED DECEMBER 31,1986,1985 and 1984 In Thousands OPERATING REVENUES (Notes 2 and 8). $673,948 5605,129 5531,927 n OPERATING EXPENSES: Operation: Fuel. 156,509 180,293 194,636 PurchascJ power. 424,172 295,149 86,032 Other. 75,307 75,183 66,963 Maintenance. 32,639 24,808 23,920 Depreciation. 34,672 34,392 30,939 27,135 23,944 21,208 Taxes other than income taxes. Income taxes (Note 3). (59,948) (31,871) 33,659 lbte deferral: g* lbte deferral-net of recovery (Notes 1,2 and 8). (223,155) (142,958) 1--. Income taxes (Note 3).. 108,676 69,621 Total operating expenses. 576,007 528,561 457,357 OPERATING INCOME. 97,941 76,568 74,570 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during consnuction.. 192 857 5,303 Gain on sale of gas pipeline system. 7,975 Other-net. 3,003 13,676 6,099 Income taxes (Note 3).. _(1,907) (9,301) (875) Total. 1,288 13,207 _ 10,527 INTEREST CH ARGES: Interest on long-term debt. 43,245 38,447 31,626 Other interest-net. 1,910 1,775 7,512 Allowance for borrowed funds used during construction.. 214 (1,360) (2,374) Total. 45,369 38,86_2_ 36,764 NET INCOME $ 53,8_60 5 50,913_ $ 48,333 Statements Of Retained Earnings FOR THE YEARS ENDED DECEMBER 31,1986,1985 and 1984 RETAINED EARNINGS, JANUARY l. S106,837 5 85,788 S 83,604 ADD: Net income. 53,860 50,913 48,333 Total. 160,697 136,701 131,937 DEDUC1': Dividends-cash: Preferred stock. 11,300 10,884 9,065 Common stock (Note 7).. 18,980 37,084 Premium paid on capital stock redemption (Note 5). _ 2,298 Total. 13,598 29.864 46,149 IGTAINED EARNINGS, DECEMBER 31 (Note 7). $147,099 S106,837 S 85,788 See Notes to Financial Statements. 33

Mississippi Power & Light Company Statements Of Changes In Financial Position FOR THE YEARS ENDED DECEMBER 31,1986,1985 and 1984 1986 1985 1984 FUNDS PROVIDED IW: Oper?.tions: Net income. S 53,860 S 50,913 S 48,333 Deprecation.. 34,672 34,392 30,939 Deferred income tates and investment tax credit adjustments-net.-....... 147,374 (12,272) 10,908 _ 857) (5,303) Allouancc fier equity funds used during construction. .___ 192) _ ( ( ' loral funds prodded by operation,s.. 235,714 72,176 ._ 84,87 Other: 192 857 5,303 Allowance for equitt funds used during construction. 86,118 Decrease in working capital

• Investment in subsidurv compam.

1,200 Gas contract settlement'(Note Il'), 11,846 186,151 Power purchase adsance payments. 25,833 57,305 Alncellaneous-net.. . _ 1,440 Total funds pnnided excludmg financing _ 1,620 transactions, 274,785 402,60~ 9 linancing transactions: 10,005 Common stoc k. Preferred stoc k........ 35,000 15,000 lirst mortgage bonds. 70,000 30,000 35,(X)0 Other long-term debt. 14,493 4,390 Short-term secuntics-net. 22,000 11,500 Total funds pnnidcd by financing transactions. 127,000 54,498 65,890 Total timds provided. 5401,785 _.S457,105 _ 5157,510 FUNDS APPLIED 'IO: Utihty plant additions: Construction expenditures (indudes allouance for funds u ed dunng construction). S 22,128 5 24,187 S 50,776 Rate deferral. 244,752 153,323 lluc deferral recmen. (27,125) (6215) Rate deferral-net (Notes I and 21. 217,627 146,608 Other: Dnidends dedared on preferred stak.-......... 11,300 10,884 9,065 Dnidends dedared on common stock (Note 7). 18,980 37,084 Spesul cash mvestments (Note i1)..... I1,846 168,651 17,500 Deferred rettivabic-gas contract wttlement (Note 11). 31,985 51,153 Power purchase advance parnwnts. Insrease in working capital' 97,056 7,315 Im tstment in suluiurv compant. 735 1,635 11,728 4,151 Aliw ellaneous-net.. Total other funds apphed. 131,930 252,886 106,252 Financing transactions: Redemption of preferred stock...... 30,000 Retirement of other long-term dcbt.. 100 12,624 482 Short-term secunties mt t.. 29,800 Total funds applied to financing transactions. 30,100 33,424 482 Total funds apphed. 5401,785 $457,105 5157,510 ' DETAIL OF INCREASE (DECREASE) IN SELECTED WORKING CAPITAL ITEAf S: Cash and special deposits. ($ 1,613) (5 1,971) $ 3.412 Accounts retcivable........... (550) 8,091 (2,731) Alaienals and sup) hes and other current assets. (174) < 3,282 ) 5,446 Accounts payabl 8,054 (39,690, 12.223 Customer deposits.. (1,183) (1,059, (934 Tases accrued. 53,317 (54,866) (432) Income t.nes r, ten able.. 38,133 I nt erest anrued............... (4,349) 3,713 (4,961) Pretened dnidends declared.. 431 9,376 (3,543 r Other current habihties 4,990 (6,430 . (1,165) Net.. S 97,056 ts 86,118i S ,315

• Workmg capital csdudes short-term sctunties, current matuntics of'long-term debt, and the current portion undudmg deterred income rascu of the rate d(ferral, the pimer purchase abance payments and the gas sontract settlement.

See Notes to Financial Statements. 39

Notes To Financial Statements E. Postretirement Benefits . The mupany has p >stretirement benefit plans cover-FOR THE YEARS ENDED DECEMBER 31,1986,1985 and 1984 up substantially all ofits employees. See Note 10 for a discussion of the company's fim' ding pohcies. F. Inconte Taxes

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING Ihe company joins its parent in filing a consolidated POLICIES federal ir ome tax return. Income taxes are allocated to A. System Of Accounts the company in proportion to its contribution to the The accounts of the company are maintained in consolidated taxable income. accordance with the system of accounts prescribed by the Deferred income taxes are provided fbr differences Federal Energy Regulatory Commission (FERC). between book and taxable income to the extent permitted by the regulatory bodies fbr raremaking B. Revenues purposes. Investment t x credits allocated to the The company records revenues as bided to its rmnpany are e enep and anmnized based upon the customers on a cycle billing basis. Revenue is not accrued

• verage usef il life of the related property. The amortiza-for energy delivered but not billed at the end of the fiscal epns the year foHowing the defenal non period. The rates of the company inch'de fliel adjustment clauses under which fuel costs :bove or below the base G. Allowance For Funds Used During Construction In accordance wi h the regulatory system of accounts, levels aumved in the various rate schedules are permitted t

to be billed or required to be credited to customers. the company capitalizes, as an appropriate cost of utility P #" #",)aHowana Er funds ud dwing construction I C. Utili'Y Plant And Depreciation (AFUDC. Under this utiktv industry b,eer is charged and ractice, construc-Urility plant is stated at on..nal cost. T.he costs of. tion work in pn gress on th'e balance's addm, ons to utiht plant mclut e contracted work, direct the statement of income is credited for the approximate labor and materia s, allocable overheads and an allowance composite interest cost of borrowed funds and fbr a for the composite costs of fiinds used during construc-reasonable return on the equity flinds used during tion. The costs of units of property retired are removed construction. This procedure is intended to remove the from utility plant, and such costs plus removal costs, less drect of the cost of financing the construction program sahage, are charged to accumulated depreciation. from the statement ofincome and results in treatmg the Mamtenance and repairs of property and replacement and AFUDC charges in the same manner as construction renewal ofitems determinec to be less than umts of labor and material costs. As non-cash items, these credits p operty are charged to operating expenses. Substantially to the statement ofincome have no effect on current of the unhry plant is subject to the hen of the cash earnings. After the property is placed in senice, the a company s first mortgage bond mdenture. AFUDC charged to construction costs is recoverable from Deprecianon is copputed on the straight-line bas.is at customers in rates charged ihr utility senice. The efTec-rates based on the esumated service lives of the vanous tive composite AFUDC rates were 7.25 percent,11.34 classes of property. Depreciation provided in 1986,1985 percent and 8.70 percent for 1986,1985 and 1984, and 1984 amounted to approumately 3.3 percent on respectively. average depreciable property. H. Other Noncurrent Liabilities D. Rate Deferrals I" Nb.*.he cmn any mntinued the Supendon of In September 1985, the Mississippi Public Senice current provmons an contmued to amortize the Commission (MPSC) approved a rate moderation or anunmlated provisions fbr uninsured pro rry risks and phase-in plan for the company which reduces the b** f"':njunes and damages as orderec by the MPSC immediate effect on ratepavers of the inclusion of Grand m I3nor to 85, these anumulated provisions Gulf I costs in rates. Under this plan, certain costs are were established throu h charges to operating expenses deferred in the early years of commercial operation of on an accma bas an the expenq wen ahowed fbr Grand Gulf I and collected in the later years. Hv ratemaking purposes. The amornzanon of the deferring costs to the future when they 'will be collected or until such time as the accumulated pn>v@ons are numulated pn> mons wiu continue thnm June W88 through increased rates billed to customers, the impact of m the rate phase-in plan on the statement ofincome has exhausted by current charges, whichever is earher. been removed. Because the actual collection of revenue l to recover the deferred costs will not occur until the l future, the company records a deferred asser (" Rate

2. RATE AND REGULATORY MATTERS deferral-net of recoveries") and credits purchased power The company is a party to certain agreements and expense with the amount of the deferral and at the same proceedings concerning System Energv Resources, Inc.

time, incurs additional capital requirements to finance the (SER1, fbrmerly Middle South Energy, Inc.) and the deferral. The carning charges associated with the Grand Gulf Nuclear Station,90 percent of which is financing of the deferral are being recovered currently owned by SERI. (See Note 8 with respect to these from customers. (See Notes 2 and 8). matten.) In September 1985, the MPSC issued a Final Order on Rehearing (Final Order on Rehearing) in MPSC 40

Docket No. U-4620, which allows the company an The company continues to collect the rates approved overall annual increase in base rate revenues relating to by the MPSC in the Final Order on Ikhearing, which Grand Gulf I of approximately S326.5 million over the rates are subject to refund to the extent that a final base rates appnwed by the MPSC in a June 1985 rate judicial determination may result in a schedule of rates order in the same docket. The Final Order on 1khearing less than what the MPSC allowed. In this regard, the addressed only the company's request for revenues MPSC, in a letter dated March 2,1987, notified the associated with its 33 percent al6 cation of Grand Gulf company that in view of the recent decision of the 1-related costs and expenses and implemented a rate Mississippi Supreme Court and the company's stated phase-in plan which allows the company to collect the intent to pursue other appeals, the existmg arrangement entire amount of additional revenues relating to Grand ihr any refunds that may result from a final judicial deter-Gulf 1, a portion of which would be collected on a cur-mination is no longer satisfactory to the MPSC, and a rent basis and the balance of which would be collected modification must be made fbr the protection of the par-oa a defirred basis over a period of time. Under the rate ties involved. The letter required the company to furnish phase-in plan ordered by the MPSC, the company was to the MPSC no later than March 13,1987, "a refund-authorized to begin collecting the additional resenues ing Imnd or similar security satisfactory to the commis-relating to Grand Gulf 1 begmning September 20,198n, sion ihr the protection of the ratepaych" in accordance with periodic increases thereafter as pnwided Ihr in the with Mississippi law. The letter further stated that the Final Order on Ikhearing. Pursuant to the Final Order bond or similar security should be adequate to ensure the on Ikhearing, the second increase under the rate phase in prompt refund of all amounts collected, or to be plan occurred on October 1,1986. collected, pursuant to the Final Order on Rehearing, In October 1985, the Mississippi attorney general and until final judicial determination of the appeal. The the Mississippi Legal Services Coalition appealed the Final MPSC's March 2,1987, letter does not specifically Order on Ikhearing to the Mississippi Supreme Court. indicate, and the company does not know, the amount On Februarv 25, 1987, the Mississippi Supreme Court of any bond or similar security the MPSC may require. rendered a decision reversing and remanding the rate case The company filed a response with the MPSC on March to the MPSC fbr further proceedings not inconsistent

13. The MPSC, indicating that the corporate bond filed with the court's opinion. The Mississippi Supreme Court by the company in response to the MPSC's March 2 found reversible error in the Final Order on Ikhearing on letter was not sathfactorv, entered an order on March 13, the grounds that the MPSC: (1) adopted retail rates to which cancelled the company's rights to collect Grand pay Grand Gulf I expenses without hnt determining that Gulf I revenues effective at Noon March 16. The the espenses were prudently incurred, (2) failed to join Mississippi Supreme Court, however, entered an order on Middle South Utilities, Inc. (MSU) and SERI, as parties March 16 declaring the MPSC's March 13 order void, on to the rate proceeding, and (3) should not have allowed the basis that it exceeded the jurisdiction of the MPSC.

intervention in the proceeding by security holders of In support ofits motion to stay issuance of mandate MSU. On March 10, 1987, the company filed a petition filed with the Mississippi Supreme Court, the company for rehearing with the Mississippi Supreme Court, if a asserts that the rate phase-in plan approved in the Final rehearing is not granted, the company intends to appeal Order on Ikhearing, which requires the company to defer to the United States Supreme Court on an expedited the current recovery of a substantial portion ofits Grand basis. Gulf I costs, has the collateral effect of acting as a securi-On March 10, 1987, the company also filed with the ty arrangement fbr the protection of the company's Mississippi Supreme Court a motion to stay issuance of customen in the event of a refund. However, if the mandate, requesting that the court stay the issuance of a Mississippi Supreme Court or the United States Supreme mandate implementing its decision during the pendency Court grants a stay, either court could require additional of the appeal to the United States Supreme Court in the security, perhaps in the fbrm of a surety bond, to ensmr I c ent the court denies the company's petition ihr rehear-the payment of any refund that may result from a final ing. In the alternative, the company requested a 30-day judicial determination of the appeal. The amount of any stay from the Mississippi Supreme Court to give it the bond or similar security that may be required by either opportunity to request a stay fium the United States court is unknown. If the Mississippi Supreme Court Supreme Court. If the rehearing and stays are denied, the required a bond or similar security that the company l company will seek a stay fium the United States Supreme could not obtain, the company would applv to the Court pending disposition ofits appeal to that court. United States Supreme Court ihr a stay, induding a stay MSU and SERI also filed, on March 10, 1987, of such requirement. If, however, the United States motions to intervene in the Mississippi Supreme Court in Supreme Court required a bond or similar security that this matter In their motions to intenene, SERI and the company could not obtain, the company would not MSU ask the court to allow them to intervene in the be able to obtain a stay of the mandate of the Mississippi case so that they can file a petition ihr reheaing with Supreme Court's order. respect to the parts of the court's decision that pre-judicially afTect them. 41

It is not possible to predict what will be the ultimate Station and the appropriate regulatory treatment of the outcome of the company's Grand Gulf I rate phase-in associated costs; to examine the prudency of the com-plan and related appeals and proceedings or their effects pany's actions relating to its purchase of capacity and upon the company. However, in the near term, if a stay energy from the Independence Station in Arkansas and of the mandate of'the February 25 opinion of the the appropriate regulatory treatment ofits associated Alississippi Supreme Court is not obtained, and the Final costs; and to inquire generally into the appropriateness of Order on Rehearing of the MPSC is determined to be no the company's current rate structure, including but not longer in effect, the company's carnings, liquidity and limited to its overall revenue requirements, operating ex-financial condition and ability to meet its obligations penses and cost of capital. (including its ability to eficct financing necessary to meet On September 16, 1986, the MPSCs without pn>- such obligations) would be severely impaired and the viding the company with notice or an opportumty fbr company could be rendered insohent ifit were required hearing, issued an interim order (Interim Order) in to refund Grand Gulf I amounts billed to customers, Docket No. U-4900 freezing the current recovery por-which on February 28,1987, were appnnimately $160 tions of the company's total Grand Gulf I-related costs at million, and/or to write-off previously recorded Grand a level of approximately $99 million on an annual basis Gulf I expense deferrals, which on February 28,1987, (thereby precluding the company from recoscring from its were approximately 5395 million, and/or to cease further retail customers on a current basis commencing on and Grand Gulf I collections and deferrals of costs associated after October 1,1986, approximately an additional 541 with the rate phase-in plan. The company will take all million on an annua! basis in accordance with the Final steps necessary to attempt to obtain a rehearing of the Order on Rehearing), and pnwiding that no increase in February 25 opinion before the Mississippi Supreme the company's current cash recovery of Grand Gulf Court, and failing that, a stay from the Mississippi 1-related costs shall be allowed during the course of Supreme Court or the United States Supreme Court. Docket No. U-4900 or until further order of the MPSC. For the long teon, if a stay is granted and if the On September 19, 1986, the MPSC entered an order ultimate judicial resolution is adverse to the company's vacating and withdrawing interim order (Withdrawal interest, the results outlined in the previous paragraph Order), which vacated and withdrew the Interim Order. could occur at the time of such resolution. The com-As a result of the Withdrawal Order, the Final Order on pany, based on the opinion of counsel, is of the belief Ikhearing remains in full force and effect, and on that the Mississippi Supreme Court's February 25 opi-October 1,1986, the company began collecting the addi-nion should be reversed by the United States Supreme tional revenues authorized in the rate phase-in plan Court on the basis of constitutional grounds, and that approved in the Final Order on Ikhearing. Concurrently, the company should ultimately prevail in the United with the issuance of the Withdrawal Order, on September States Supreme Court, if that court accepts the appeal of 19, 1986, the company filed with the MPSC a notice of

he February 25 opinion and decides the appeal on the temporarv rate reduction rider, etrective October 1,1986, merits of the constitutional issues. However, even if the which reduced the company's non-Grand Gulf I-related company ultimately prevails on appeal to the United base rates previously appnwed by the MPSC cfrective States Supreme Court, if a stay is not obtained during the June 28,1985. The temporary rate reduction rider will appeal, and if the company is not able to continue to remain in effect until the rates effective June 28,1985, collect current Grand Gulf I revenues and/or defer Grand are superceded, or until the MPSC completes its iuquirv Gulf I expenses as provided in the Final Order on in Docket No. U-4900, or until further order of the Ikhearing during the appeal, it is likely that because of MPSC. The temporary rate reduction rider reduced non-the length of time involved in such an appeal, the com-Grand Gulf I base rates to the extent that the rate reduc-pany's earnings, liquidity and financial condition and tion substantially otrsets the October 1 increase under the ability to meet its obligations would have been severely rate phase-in plan. The company expects, howevet that impaired, and the company would have tren rendered this temporary reduction in base rates will be partially otT-insolvent during the pendency of the appeal.

set by an anticipated reduction in certain of its costs. The On September 16, 1986, the MPSC issued an Initial company and SEIU filed motions to dismiss Docket No. Order establishing Docket No. U-4900 (Initial Order) U-4900, and on January 28, 1987, the MPSC denied the directing the opening of a multi-phase docket designed to motions to dismiss. obtain a comprehensive review of all aspects of the com-In connection with Phase 11 of Docket No. U-4900, I pany's current rate requirements and the current rate which deals with an MPSC audit of SElu, on Februarv i structure of its atliliate and co-certificate holder, SEld. 3,1987, the MPSC directed the company and SERI to The purposes of establishing the docket, as set forth by show cause why the Grand Gulf Nuclear Station's 1974 the MPSC in its Initial Order are, among other things, to certificate of public convenience and necessity should not obtain FERC review and/or modification of various be cancelled tbr failure to abide by the directives of the aspects of the company's Grand Gulf I expenses MPSC concerning an audit of SEid. The company and established by the FERC induding the alk> cation of SERI believe that they have been responsive to and Grand Gulf I costs; to examine the prudency of the cooperative with the MPSC Public Utilities StatTand have actions of the company and/or SERI relating to the construction and operation of the Grand Gulf Nuclear 42

pn> posed reasonable procedures to comply with the the Grand Gulf certificate on jurisdictional and constitu-MPSC's information requests. The company and SEIU tional grounds. SERI and the company cannot predict have filed separate motions to dismiss the show-cause what action, if any, will be taken by the MPSC regarding order. These filings asked the MPSC to dismiss the show-the Grand Gulf certificate. The matter is pending. cause proceedings on jurisdictional, constitutional and On February 12, 1987, the MPSC issued a Schedul-other grounds. On March 3,1987, the MPSC allowed ing Order in Phase VH of this docket ordering the com-South Mississippi Electric Power Association (SMEPA), pany to file testimony supporting the company's " current which ou ns 10 percent of the Grand Gulf Nuclear Sta-revenue requirements and any adjustments thereto con-tion to intervene in the show-cause proceeding, set sidered by the company to be necessary and proper." The l March 16,1987, as the date by which SMEPA should order fitrther estabhshed a schedule fbr filing testimony file a response to the show-cause order, and announced by the company, the MPSC and interrenors, if any, and that it would rule April 7,1987, on the responses to the for public hearings in late May 1987, show-cause order that had been filed by the company On March 16, 1987, the company filed a motion ask-and SERI and would be filed by SMEPA. If the MPSC ing the MPSC to withdraw the Scheduling Order or, in were ultimately to take action cancelling the Grand Gulf the alternative, to clarify the order to indicate that pnw certificate, SERI and the company would have the right ccedings under it were an investigation of the company's to appeal such order to state court and, under Mississippi present rate level and structure and not a rate case. The law, would have the right to stay the order pending the matter is pending. appeal, upon posting adequate security, thereby ensuring that Grand Gulf I could continue to operate during the appeal pn> cess. In addition, in the event of such action by the MPSC, SEIU and the company could file suit in federal court seeking to enjoin the MPSC from cancelling

3. INCOME TAXES Income tax expense (credit) consists of the fbliowing:

1986 1985 1984 In Thpusands Current: Federal. ($ 96,617) $53,043 S20,659 State. _(122) _ 6,280 2.967 _ 6,739) 59,323 _ 23,6_26 9 Total. ( Deferred-net: Rate deferral-net of recoveries (Notes 1 and 2).. 105,985 71,398 Gas contract settlement (Note 11). 81,096 (82,133) Federal reduction due to tax loss carryfbrward. (35,767) State reduction due to tax hiss carryfbrward. (15,387) Unbilled revenue. 750 (2,909, Engineering and design costs-dclayed generating stations & proposed FERC audit adjustments (Note 12). 5,361 (5,544) Liberalized depreciation. 8,612 5,129 7,001 l Other. 1,757 362 1,354 Total. 152,407 (13,697) 8,355 Investment tax credit adjustments-net. _(5,033) _1_,425 _ 2,553 Recorded income tax expense. $ 50,635 $47,011 534,534 Charged to operating expenses. $ 48,728 S37,750 533,659 Charged to other income and deductions. 1,907 9,301 875 Recorded income tax expense. 50,635 47,051 34,534 Income taxes applied against the debt component of AFUDC 2,184 Total income taxes. S 50,635 S47,051 536,718 43

.c (.f ; Total income taxes differ from the amounts computed by applying the statutory federal income tax rate to income befbre taxes. The reasons for the differences are as fbil<mt 1986 1985 1984 in Thousands % of % of % of Pre-Tax Pre-Tax Pre-Tax Amount Income . Amount Income . Amount. Income Computed at statutory rate. 548,067 46.0 S45,064 46.0 $38,119 46.0 Increases (reductions) in tax resu! ring from: Depreciation. 2,678 2.6 (597) (0.6) 746 0.9 AFUDC (88; (0.1) (394) (0.4) (3,531) (4.3) State income taxes-net. 2,761 2.6 2,687 2.7 2,076 2.5 Ot her-net. (2,783) (2.7) 291 0.3 2.876)_. (3.5) ( Recorded income tax expense. 50,635 48.4 47,051 48.0 34,534 41.6 Income taxes applied against the debt component of AFUDC 2,184 1.6 Total income taxes.. $50,635 48.4 S47,051 48.0 S36,718 43.2 The income tax benefit of the portion of the 1986 federal and state net operating losses that are carried thrward has been recorded as a reduction of deferred income taxes. The federal income tax benefit of S35,767,000 and the state income tax benc6r of $15,387,000 are available to offset taxable income in fiiture years and, if not utili/cd, will expire in the years 2(,01 and 1991, respectively. Unused investment tax credits at December 31,1986, amounted to S8.5 mill;on befbre any reductions resulting from the Tax Refbrm Act of 1986. These credits may be applied against federal income tax liabilities in future years. If not used, they will expire in 1992 through 2001. Cumulative income tax timing differences thr which deferred income taxes have not been pmvided are $66.0 million, $72.8 million, and $51.3 million in 1986,1985 and 1984, respectably. See hianagement's Financial Discussion and Analysis tbr a discussion of the Tax Refbrm Act of 1986 and its expected impact on the company.

4. LINE5 OF CREDIT AND SHORT-TERhI In light of the February 1987 decision of the BORROWINGS hiississippi Supreme Court, and pending final disposition The company has received authorization from the of the appeal of that decision, the company's ability to Securities and Exchange Commission (SEC) under the "htatn necess ry externally gener ted timds may be I"*.

d. (See Note 2.)

te Public Utility Holding Company Act of 1935 to have .ne short-term borr mings and applicable interest outstanding [at any one time, sfiort-term borrowings rates (deternuned by dw(idmp mterest expense by the aggregating not more than 10 percent of the company's capitalization, which was approximately $86.4 million at average mount borrowed) for the company were as December 31,1986. At December 31,' 1986, the company had S30.5 million in lines of credit with 1986 1985 1984 Mississippi banks. None of the bank lines of credit were In Thousands utilized during 1986. The company also participates with certain other companies of the Middle South System in a Maximum borrowing.. 550,700 S22,000 S46,000 money pool arrangement whereby compam.es with Average borrowing: available timds can lend those funds to other partici-Bank loans. - - S 4,003 paring companies in the system having shoit-term Associated companies. S 4,629 5 2,692 $ 7,918 borrowing needs. The availability of money pool timds at Average interest rate any particular point in time may be limited. The during tbc period: company may borrow from these sources subject only to Bank loans. - 12.269; its maximum authorized level of short-term borrowings. Associated companies. 6.84'i 8.489 10.89% 44

5. PREFERRED AND COMMON STOCK Redemption Number of Prefirred stock at December 31,1986 and 1985 W'" -- - - - Date Shares per Year consisted of the fo!!owing:

9.00% Jtdy 1,1991 70,000 and each Shares Cuntnt July 1 Atufuval Sharts Outstuidi3; Call Price therEafter at 12/31/86 _1986_ _ _1983 Per Share throt.gh 1995 12.00 % March 1,1988 5,000 Without sinking ftmd: and each d.36% Series.. 60,000 59,920 59,920 S103.86 4.56% Series.. 44,476 43,888 43,888 107.00 March I 192% Series.. 100,000 100,000 100,000 102.88 thereafter 7.44% Serie3.. 100,000 100,000 100,000 104.67 through 2007 9.16% Series.. 75,000 75,000 _75,000 104.06 16.16 % November 1,1989 7,500 Total. 379,476 378,808 378,808 and each November 1 thereafter With sinking fimd:' through 2008 L 9.00% Series. 350,000 350,000 - 109.00 ( 12.00 % Series. 100,000 100,000 100,000 117.00 In addition, fbr the 12.00% and the 16.16% series, the Iq 14.7F M Series.. - - 100,000 company has the non-cumulative option to redeem an 16.16% Series.. 150,000 150,000 150,000 116.16 additional like amount of said shares cach year com- ~ 17.00% Series. - 200,000 mencing in the fin,t year of redemption fid each series. 3 Total. 600,00n 600,000 550fX)0 "= - ~ On September 1,1986, the company redeemed 19,800 Unissued. _725,000 shares ofits 17.00% series fbr sinking fund purposes at a / price of $100 per share. On November 1,1986, the Total. .1,704,476 company redeemed the remaining 180,200 shares In Thousands outstanding ofits 17.00% series at a price of $112.75 per sha c Witi otit sinkh1 fund: ( n November 1,1986, the company redeemed the per share. 537,881 537,881 14.< < senes at a pnce of, $100 per share. Premium.. 196 _ _196 Nurnber of Shares Sold Total. 538,077 538,077 1986 1985 1984 With sinking fund: Stated at f,100 Common stock shares 435,000 per share. 560,000 S55,000 Preferred stock shares 350,000 150,000 Discount.. (3,807)__(198) Total. 556,193 554,802 On Januarv 13, 1987, the company sold 350,000 shares of 9.76% preferred stock at a price of $100 per share. 'These series are to be retired m. full through the opera-tion of sinking timds in accordance with the fbilowing schedule. 7 i 45

6. LONG-TERM DEllT County, Arkansas, Pcllution Control Revenue ik nds which reach their next fixed rate dates on a three-vear long-term debt at December 31,1986 and 1985 rotating basis on July 1,1987 and July 1,1988. The consisted of the followi g:

company has requested authority from the SEC to waive its optional redemption rights on July 1,1987 and July 1986 _1_985 1 1988 with respect to these boads in order to fix a First Mortgage ikinds: .In Thousands long-term interest rate on the bonds and to economically 41/8% Series due 1988. t 15,000 S 15,000 pri<:e the lunds. The holders of the bonds have the right 11 1/4% Series due 1988 45,000 45,000 to have their bonds repurchased by the company on the 151/8% Series due 1990. 30,000 30,000 above fixed rate dates. The intent of the company is to 121/4% Series due 1992. 30,000 30,000 remarket these bonds on July 1,1987 and July 1,1988. 4 5/8% Series duc 1995. 20,000 20,000 51/8% Series due 1996... 25,000 25,000 " Sinking fimd requirements may be satis'ied by certifi-6 3/8% Series duc 1996. 10,000 10,000 cation of property additions at the rate of 167 percent of 9 5/8% Series due 1999., 20,000 20,000 such requirements. 91/4% Series duc 2000. 17,500 17,500

7. RETAINED EARNINGS 7 3/4% Series duc 2002.

15,000 15,000 7 3/4% Series duc 2003. 30,000 30,000 The indenture provisions relating to the company's 81/4% Series due 2003. 20,000 20,000 long-term debt provide for re trictions on the payment of 9 7/8% Series due 2004. 25,000 25,000 cash dividends on comrnon stock. As of December 31, 10 7/8% Series duc 2005. 25,000 25,000 1986, S73,159,000 of retained earnings were free from 141/2% Series due 2014 35,000 35,000 such restrictions. 9 5/8% Series duc 2016. j0,000 In light of the uncertainties continuing to face the Total First Mortgage Bonds 432,500 362,500 Middle South System, as well as the need to conserve e a resouxes in new of these uncertainties, the Pollution Control Revenue Ronds: company and the other system operating companies have 71/4% to 81/2% due not dalared hi&na on that common su>d unce the 1987 to 1995. 1,500 1,600 saond quaner of 1985. MSU has also been unable to 71/2% duc 2004. 9,400 9,400 dalare a conunon uock dividend smee that time. 81/2% due 2004. 8,575 8,575 Renunprion of t anupany s and M s anmnon und 7 7/10% to 11 1/2% due dWena depend upon, among other things, the further 2012 to 20 P _. 30,000 30,000 resolunon or moderat on of these uncertau.oes and on-Total Pollution Control tinued improvement in the financial condition of the Revenue Bonds. 49,475 49,575 Middle South System. (See Note 2 lbr a discussion of the Unamortized Premium February 25,1987, decision of the Mississippi Supreme on Debt. 725 786 Court and its possible effects on the company's fmancial Unamortized Discount condition). on Debt. (4,444) (1 696)

8. COMMITMENTS AND CONTINGENCIES Total Imng-term Debt.

478,256 411,165 Less-Amount Due Within A. Capital _ Requirements and Financing One Year

• _10,100 10,100

-~ long-term Debt Excluding The company's most significant commitments and Amount Due Within contingencies refate to: One Year. 5468,156 S401,065 (1) obtaining a reversal of the February 1987 decision rendered by the Mississippi Supreme Court and the company's ability to continue to collect Grand At December 31,1986, the sinking fund requirements Gulf I rates during the appeal of that decision and maturities fbr long term debt ihr years 1987 through (See Note 2); 1991 were as fbliows (2) the financing of the costs associated with the Sinking Fund" Maturities phase-in plan included in rate relief obtained for Year In Thousands Grand Gulf 1; '~ (3) the resolution of the September 16,1986 Initial Order of the MPSC Establishing Docket No. 1987 S2,148 $10.100 U-4900 (See Note 2); 1988 1,987 70'150 (4) the tinure natus of Grand Gulf 2 and the possible 1989 1,987 150 allocation to the company of costs associated with 1990 1,987 30'150 that unit (See Grand Gulf 2), 1991 i,9g7 O

• The 1987 and 1988 figures each include S10.000 of the remaining series of 1982 and 1982-A Independence 46

.The company's obliption for payments to SEIU for ~ of convenience and necessity for the Grand Gulf Station .] Grand Gulf 1-rrlated charges is approximately $27 million were to make the continued operation of Grand Gulf I 8 per month. Deferred purchased power costs in connec-impractical. Given the substantial amount of these obliga-tion with the company's rate phase-in plan were $223.2 tions, SERI, with its financial resources currently limited, i J million in 1986. The company estimates that it will incur would not be able to meet these obligations, if total capital requirements of approximately $397.0 accelerated. Under SEPJ's financing agreements, MSU, million during the period 1987-1989 in connection with and not the system operating companies, would be the deferral or phase-in ofits Grand GulfI costs pur-responsible to pay.SERI's accelerated obliptions. MSU suant to the September 1985 MPSC order discussed in with its financial resources cuntntly limited,-including Note 2. limitations on its ability to borrow funds or issue addi-The company's construction program contemplates tional shares ofits common stock, would not be in a expenditures (including AFUDC) of approximately position to satisfy SERI's accelerated obligations and/or $53.9 million in 1987, $47.0 million in 1988 and pmvide the company with desired common stock equity. $54.9 million in 1989. In addition, insolvency of one or more Middle South-The company estimates that approximately $316.7 System con panies could impair the ability to obtain million ofits capital requirements associated with the financing in the, capital markets for other Middle South deferral or phase-in plan and the above contemplated System compames. 1- - construction expenditures will be extemally financed - Also, certain of System Fuels, Inc 's (SFI) financing l during the period 1987-1989. This estimate excludes agreements and leases may require payments by the com-l external financing requirements for the reftmding of pany and the other system operating companics, MSU or l maturing long-term - ht, the redemption of preferred SERI in the cvent SFI's obliptions under such stock and sinking fund requirements on preferred stock. documents are accelerated as a result of the insolvency of The company's nbility m ebrain necessary externally a system operating company and SFI is unable to meet generated funds may be limited in light of the Mississippi these c!aligations or otherwise satisfy these obligations ' Supreme Court's reversal of the September 1985 MPSC through the sale of the collateral securing such Grand Gulf I rate order obligations. B. Grand Gulf 1 Rate Order D. Unit Power Sale = Agirement On September 16,1985, the MPSC issued a Final and New System Agreement Order on Rehearing which allows the company to recover On April 30,1982, the system operating companies all ofits Grand Gulf I related costs either cunently, tendered for filing with the FERC a new system agree-deferred (inventoried) or h di h h il rates. ment which provides for the coordinated planning, con- . The deferred and phased p ase - n t roug retam portions of these costs will be struction and operation ofits generation and transmission recovered from ratepayers in the later ycars of commercial facilities. operation of the unit. On June 18,1982, SEIU tendered for filing with the On February 25,198'7, the Mississippi Supame FERC, as an initial rate schedule, the unit power sales Court trversed the Fh! Order on Rehearing and agreement (UPSA) under which SERI would sell from its l remanded the Grand Gulf I rate proceeding to the 90 percent sharv of the Grand Gulf Nuclear Station, MPSC. The compq, SERI and MSU have filed peti-certain percentage allocations of capacity and energy to tions for rehearing wah the Mississippi Supreme Court, the company, LP&L and NOPSL and if a rehearing is not granted, the company will appeal The UPSA as approved by the FERC in its June 13, to the United States Supreme Court. 1985, decision, obligates the system operating companies See Note 2 for further information reprding this to purchase fmm SEIU, at SERI's full cost of senice, all order. of SERI's 90 percent share of the capacity and energy from Grand Gulf 1 in accordance with the following C Potential Debt Acceleration and Related Matters percentage allocations: the company-33 percent; As noted above, the company's September 16,1985, Arkansas Power & Light Company (AP&L)-36 percent; retail rate order related to its allocated share of Grand Louisiana Power & Light Company (LP&L)-14 percent; Gulf 1-related costs was rewrsed on appeal by the end New Orleans Public Senice, Inc. (NOPSI)-17 Mississippi Supreme Court and remanded to the MPSC percen:. !n connection with payments by the company on February 25,1987. The Council of the City of New to SERI for Grand Gulf 1-related charges, the company's Orleans is conducting a prudence investigation of obliption for such payments is approximately $27 million NOPSI's involvement in Grand Gulf I which could result per month. The June 13 decision a'so granted SERI a 16 in non-ncovery by NOPSI of any Grand Gulf I costs percent rate of return on common equ ty, and adopted a fbund by the council to be imprudently incurred. 16 r rcent ' rate of return on common equity under the Insolvency of any system operatmg company woold UPSA. Various parties, including the company and cause accelera'tk e of'SERI's indebtedness uder cenain AP&L, filed appeals of the FERC rulings and some par-agreements unless waiven were obtained under these ties filed motions for a stay with the United States Court agreements. Acceleration of such indebtedness of SERI could also occur if e. proceeding relating to the certificate 47

of Appeals fbr the District of Columbia Circuit. On advances only if the other system operating companies January 6,1987, the Court of Appeals aflirmed the June had been unable to meet their contractual obligations. 13 decision. In its opinion, the Court of Appeals held, However, the FERC's June 13 decision allocating a por-among other things, that the allocation of Grand Gulf 1 tian of Grand Gulf I capacity and energy to AP&L capacity and costs was within the FERC's jurisdiction; supersedes the reallocation agreement insofar as it relates that state commissions may not interfere with the FERC's to Grand Gulf 1. plenary power to alk>cate Grand Gulf I capacity and costs; and that the FERC's June 13 decision "was both F. Grand Gulf _2 rational and within the Commission's range of discretion to remedy unduly discriminatory rates." Va.ious parties As of December 31,1986, SEIU had invested have filed requests fbr rehearing with the Court of A - approximately $908 million in Grand Gulf ? (including P peals and petitions for ceniorari to the United States approximateiv S390 million of AFUDC), which was Supreme Court. approximate 34 percent complete based on the On September 17, 1986, the Louisiana Public Senice estimated ma'n-hours needed to complete the unit. From Conunission (LPSC) filed a complaint with the FERC late 1979 until September 1985, only a limited amount against SEIU alleging that the 16 percent return on of construction was perfbrmed on Grand Gulf 2. Effective common equity under the UPSA authorized by the September 18, 1985, construction activities on Grand June 13 decision has become an unjust and unreasonable Gulf 2 were suspended fbliowing an order of the MPSC. rate. The complaint is seeking the reduction of such rate Since that time, SEIU has continued the suspension of "to a just and reasonable level based on current condi-construction on Grand Gulf 2 and has limited expen-tions" Various parties have intervened in this proceeding. ditures to only those activities which are absolutelv On January 27,1987, the FERC denied SERI's motion necessarv for itemobilization and suspension. to dismiss the complaint and ordered heanngs be held on In November 1986, a special group fbrmed bv the justness and reasonableness of such rate. Any change management, which included Middle South System of-ordered by the FERC would be prospective only. The ficials and outside consultants, completed a co'mprehen-matter is pendm, g. sive, vear-long study that analyzed in-depth, the various On September 25,1986, the LPSC sent to the FERC altern' arises regarding Grand Gulf 2 and the complex thr filing a complaint agamst MSU-System Senices, Inc. issues concerning its future status. After considering the (SSI), similar to the complaint discussed above, seeking a various alternatives, SEIU's lloard of Directors, with the reduction in the FERC approved 16 percent rate of MSU lloard of Directors concurring, decided in return on common equity under the new system agree-December 1986, to continue the suspension of construc-ment. Various parties have intervened in this proceeding. tion of Grand Gulf 2 and that a further decision would On January 27,1987, the FERC consolidated this pn>- be made by 1990 on the future status of that unit, in cceding with that of the above mentioned proceeding light of alt'rnatives available at that time. e investigating SElU's return on common equity. The During the period of continued suspension, SERI's matter is pendmg. expenditures on Grand Gulf 2, as well as the increate in its investment in the unit, will be limited. In addition. E. Availability and Reallocation Agreements SElU does not intend to make an application to the The system operating companies are severally FERC during the period of suspension with respect to obligated to SERI under the availability agreement in recoverv through rates ofits investment in Grand Gulf 2. accordance with stated percentages (the company 31.3 Furthermore, SERI will consider, among other things, percent, AP&L 17.1 percent, LP&l 26.9 percent, whether certain equipment or facilities should continue NOPSI 24.7 percent) to make payments or subordinated to be carried at their full cost. Any determination that advances adequate to cour all of the operating expenses, the value of SERI's ir estment should be reduced and mcluding depreciation, of SElU. The system operating the amount of any such reduction written off could companies, including the company, in November 1981 adversely affect the company and various other companies entered into a reallocation agreement which would have in the Middle South System. allocated the cajucity and energy available to SERI (and In connection with the ulumate decision regarding the related costs) from the Grand Gulf Nuclear Station to the future of Grand Gulf 2, SERI will, at an appropriate the company, LP&L and NOPSI. These companies thus time, make a determination as to the appropriate recovery had agreed to assun e all the responsibilities and obhga-of its investment. Any action by SERI to seek recoverv of tions of AP&L with respect to the Grand Gulf Nuclear Grand Gulf 2 costs vuuld likelv involve a filing with the Station under the availability agreement and the power FERC requesting such recoven', over a period of years, purchase advance payment agreement with AF&L relin-through charges to the system operating wmparies, and quishing its rights to capacity and energy from the Grand related filings by the system operating companies befbre Gulf Nuclear Station. Each of the system operating com-state or local regulatory authorities to recognize the panies, including AP&L, however, would have remained FERC-allowed charges in retail rates. Such proceedings primarily liable to SERI and its assignees for payments of could be pratracted and strongly contested on various advances under these agreements. AP&L would hav: been obligated to make its share of the payments or 48

l i grounds, including imprudence. If costs associated with L System Fuels, Inc. i Grand Gulf 2 were alk>cated to the company and it was The company has a 19 percent interest in SFI, a unabic to recover these costs from its customers, the jointly owned subsidiary of the fbur operating comnanies company's financial condition could be materially and (the company, AP&L, LP&L and NOPSI) of MSU. SFI l advusely affected. operates on a non-profit basis fbr the purpose of planning i and implementing rograms fbr the procurement of fuel l G. New Accountmg Standard supplies fbr all of t e operatmg comparues and SERI; its In December 1986, the Financial Accounting costs are primarily recovered through charges for fuel Standards Board (FASB) issued Statement of Financial delivered. Accounting Standards (SFAS) Nq 90, "l<cgulati The parent companies of SFI have made loans to SFI Entcprises-Accounting for Abaienments and to finance its fuel supply bu3iness under a loan agreement hiowances of Plant Costs", as an amendment of SFAS dated January 1,1984, as amended Januaiy 1,1987, No '1, an accounting pronouncement relating specifi-which pr wides fbr SFI to borrow up to 551 million cally to public utihties. The FASB had prniously from its parent companies through December 31,1987. indicated that the new standard wouki also include As of December 31,1986, the company had loaned re isions in accounting tbr the phase-in of rates associated 51.65 million te SFI pursuant to this loan agreement and with the costs of new generating plants. While SFAS the company's share of the unused loan commitment was No. 90 did not address the accounting for rate phase-in 56 million. ' Notes under this agreement mature. plans, the FASB has resumed deliberations on the December 31,1992. In addition, the company had appropnate accounting fbr rate phase-in plans. The loaned SFl S17.79 mi' lion under presious loan agree-company's MPSC-ordered rate phase-in plan fbr recovery ments. Notes mature in 2002 and 2008 under the prmi-ofits share of the costs of Grand Gulf 1 meets the sions of the previous loan agreements. current requirements of SFAS No. 71. In connection with certain of SFI's bonowing arrangements, SFI's parent companies, including the H. Shairholder Litigation company, have covenanted and agreed severally in accor-MSU, certain other Middle South System compames, dance with their respective shares of ownership of SFI's including the company, and individuals were defendants common stock, that they will take any and all action in a purported class action suit. The initial complaint was necessary to keep SFI in'a sound financial condition and filed in August 1985 by an MSU shareholder (purportmg to place'SFI in a posmon to discharge, and to cause SFI to represent a class that purchased MSU common stock) to discharpe its obliptions under these arrangements. At followed by fbur similar complaints filed by MSU share-January 1,1987, the total loan commitment under these holders in August and September 1985. The five actions arrangements amounted to S160 million of which 5131 were consolidated in the U. S. District Court fbr the million was outstanding at that date. Also, SFI's parent Eastern District of Louisiana. The consolidated, amended con panics, including the company, have made similar and supplemental complaint alleged violations of the covenants and agreements in connection with long-term dischisure requirements of the Securities Exchange Act of leases by SFI of eil storage and handling facilities and coal l 1934 and the Securities Act of1933, common law fraud hopper' cars. At December 31,1986, the aggrepte dis-and common law neghgent misrepresentation m connec-counted value of these arrangements was $76.1 million. tion with the financial condition of MSU and prayed fbr SFI has contracted with a joint venture for a supply compensatory and punitive damages, lept costs and fees of coal from a mine in Wyoming. SFI's parent com-and other proper relief against MSU, various other system panics, including the com'pany, each acting in accordance companies, including the company, and certam oflicers with their share of the ownership of SFI's common (and former officers) and directors of MSU, the com-stock, joined in, ratified. confirmed and adopted the con-pany's outside auditors and certain undenvriters of MSU tract and the obliptions of SFI thereunder. See Note 9 common stock. MSU and the other defendants have fbr a discussion of the coal mine. asserted all available defenses thereto and believe that MSU's disclosure of its financial condition was in com-

9. RELATED PARTY TRANSACTIONS pliance with applicable SEC requirements. In April 1986, MSU and the other defendants, including the company, A. Jom.tly Owned Facilities tiled a motion to dismiss or in the alternauve, a motion The company owns 25 percent of the Independence fbr summary judgment. On January 12,1987, the Steam Electric Station (ISES), a two-unit, coal-fired District Court entered a judgment grantmg defendants' generating station located near Newark, Arkansas. AP&L motions fbr summarv judgment and dismissed the suit.

owns 31.5 pcrcent of the station nd operates the On February 6,1987, the plamtiffs in the consolidated facility. The company records its investment in and action filed a Notice of Appeal in the U. E Court of expenses associated with this station to the extent ofits Appeals fbr the Fifth Circat. The defendants intend to ownership and participation. The company's investment sigorously oppose the appeal of the District Court's deci-in ISES at December 31,1986, net of accumulated sion. In the event the dismissal is reversed on appeal. the depreciation was $202.0 million. eventual outcome and impact on the Middle South Sytem's financial condition cannot be predicted. 49

The company and AP&L have entered into a unit plan to an administrative services only arrangement with AP&L's capacity and energy from ISES Um,'t 2 tbr a five-power purchase agreement (br the co the insurance company which had previously provided medical insurance coverage. The funding policy of other year term which began in December 1984. postrctirement benefit plans remained unchanged from The company owns 25 percent of coal mining equip-previous years. ment and facilities at the North Antelope Coal Mine Pension plans are administered by a trustee who is { which is located near Wright, Wyoming. The low-responsible for pension payments to retit cs. Various i sulphur coal produce.1 at this mine is dedicated to ISES investment managers have responsibility fbr management i and the mine's estimated reserves are presently expected of the plans' assets. In addition, an independent actuary j to provide fbr at least tHrty years of the projected performs the necessary actuarial..iluations fbr the requirements ofISES.The company records its invest-mdividual company plans. ment in the equipment and facilities of the mine to the The company's total pension cost Ihr the last three extent of its ownership interest. The company's years was as fbilows: investment in the coal mine facilities at December 31, 1986, net of accumulated depreciation was $13.6 million. In Thousands

11. Other Affiliated Transactions 1986..

$4,895 1985. 6,375* The company buys from and/or sells electricity to the other operating subsidiaries: of MSU (including S$RI) 1984-4,875 under rate schedules filed with the FERC. In addition, the company purchases boiler fuel from SFl and receives

• Includes S1,230 pertaining to the special early technical anii advisory services from SSI.

retirement program otrered m 1985. In Thousands A comparison of the actuarial present values of accumulated pension plan bersfits and plan net assets for _1986 -1984 the defined benefit plan is presented be.ow. This com-1985 on was determined in accordance with the provisions REVENUES: of SFAS No. 36 which require the use of certain assump-Power soki to the tions which are different from those used by the com-MSU System.. 580,925 $97,584 572,179 pany's actuary in determining an appropriat'e level of fun-PURCHASED POWER ding tbr the company. EXPENSES: Power purchased liom the January 1, MSU System (excluding 1986 198G GGNS 1). 86,233 73,995 8,141 Inffhousands Power purchased from Actuarial present value of SEIU (GGNS 1).. 316,713 181,933 1,051 accumulated pension plan benefits: Vested. $44,685 S38.510 Power purchased from Nonvested 3,323 2,974 SERI (GGNS 1) (Deferred). (223,155) (142,958) Total. $48,008 541,484 FUEL EXPENSE: Net assets available Fuel purchasesi from SFl. 33,610 32,748 46,173 lbr pension benefits. $89,143 569,867 OTHER: Technical & advisory The assumed rate of return used in determining the services purchased actuarial present value of accumulated plan benefits was from SSI. 12,003 10,939 9,h95 9 percent. In 1985, the FAS11 issued SFAS No. 87 entitled

10. POSTRETIREMENT BENEFITS

. E.mployers, Accounting for Pensions,, The company The companies of the Middle South System have will adopt the new pension accounting and disclosure various postretirement benefit plans covering substantially standards in 1987. However, it is not expected that the all of their employees. The pension plan is noncon-new standards will have a material impact on the com-tributory and provides pension benefits that are based on pany's financial position or results of operations. the employees credited service and average compensa-The company provides certain health care and life tion, generally during the lut five years before retire-insurance benefits fbr retired employees. Substantially all ment. The pohey of the company has been to fund pen-employees may become eligible for these benefits if they sion costs accrued, but during 1986, in order to conserve reach retirement age while still employed by the cash, pension costs were ihnded in accordance with con-company. These and other similar benefits thr active tribution guidelines established by the Employment emp:oyees are provided through payments of premiums Retirement Income Security Act of 1974. Also in 1986, and fees to insurance companies. The company the company changed fium a fully insured group medical recognizes these benefit costs by charging expenses or 50

] other accounts as appropriate. The cost of provid;ng the suit, the company contends that United billed the these benefits fbr renrecs is not separable from the cost company for natural gas that it did not use during the ~of providing benefits fbr active employees. The total cost period from October 22,1986 to January 1,1987 . of pnniding these benefits and the average number of ^g active employees and retirees fbr the last three' fiscal years

12. QUARTERLY RESULTS (UNAUDITED) were as follows:

1986-1985 1984 Unaudited operating results by quarters follow: . Total cost of health care and life insurance _ Quarter Ended. (in thousands). m $2,572 $2,423 S1,630 March June September December Number of active In Thousands employees.. 2,431 2,275 2,153 Number of retirees..... 375 320 296 1986 Operating $146,167 $149,163

11. LITIGATION AGAINST GAS SUPPLIER revenues

$218,687 $159,931' A.1985 Settlement Agreement With Gas Supplier Operating income 22,459 20,788 34,254 20,440' Two lawsuits between the company and United Gas Pipeline Company (United) arising froin the company's EC' ncome 12,434 10,110 22,841 8,475* claim that United breached the terms of a gas sales agree-ment were settled by the execution of a settlement agree-I *. ment between the parties on September 25,1985. Pur-suant to this settlement agreement, United paid the com. Operating revenues $143,350 S142,513 5178,984 $ 140,282 " pany $165 milli m in September 1985 and agreed to pay an additional S? 7.5 milhon by September 1987. Upon Operating income 16,976 15,666 33,425 10,501 " receipt, the 1965 funds and subsequently, the interest carned on those funds were invested in United States Net income 9,100 7,633 25,831 8,349 " Government Repurchase Agreements. On August 1,1986, the company made a filing with the MPSC proposing a plan for the distribution of thesc 'Founh quarter 1986 operating revenues reflect an funds. On October 6,1986, the MPSC entered an order increase of approximately $5.0 million in connection with which established a distribution plan ihr the funds to the the reversal of provisions made in 1985 fbr adjustments company's customers.' Under the distribution plan, the resulting from issues raised during the FERC's normal settlement proceeds are alh>cated between the company's periodic review of company operations. This increase in wholesale and retail customers, with the retail pornon'of revenues increased operatmg and net income by approxi-the settlement proceeds distributed to the company's mately $3.2 million. Operating and net income were retail customers in two distributions, the first to be com-reduced by approximately S3.6 million due to the pleted by April 1,1987, and on econd after the $17.5 recogmtion of engmeetmg and design costs associated i million payment is received aw. United in September "ith indefinitely delayed future fossil generating facilities. 1987. On January 16,1987, in accordance with the " Fourth quarter 1985 operating revenues reflect a reduc-distribution plan discussed above, the company reftmded tion of approximately 57.7 milhon in connection with approximarch' 518 million to 12 former wholesale the recognition of provisions for estimated adjustments ~ customers of'the company. resulting from issues raised during the FERC's normal periodic review of company operations. These provisions B. Additional Litigation Against Gas Supplier reduced operating and net income by approximately $5.5 Two additional lawsuits filed by the company against million. In addition, operating and net income were United in October 1986 and February 1987 are pending. reduced by $5.7 million due to the recognition of On October 22,1986, the company filed a lawsuit engineering and design costs and estimated liabilities against Ud.ed in connection with United's pricing associated with indefinitely delayed future fossil generating calculations. In the suit filed in U. S. District Court, the facilities and investments m the system's fuel procurement company contended that United should include the pur-program. Net income was increas'ed in this quarter by ap-chase prices and volumes purchased by United's sub-proximately S4.1 million in connection with the sale of a sidiaries and marketing afhliates in the mathematical for-gas pipeline system. mula it uses to determine the company's cost. This would result in fuel cost savings for the company which The business of the company is subject to seasonal would be passed on to its customers. fluctuations with peak periods occurring during the On February 17,1987, the company filed suit against summer months. Accordingly, earnings information for United seeking a declaration by the court that the com-any three-month period should not be considered as a 4 pany does not owe $23.9 million to United in connec-basis for estimating the results of operations for a full tion with a take-or-pay provision in the gas contract. In year. 51

l Mississippi Power & Light Company Record of Progress 1981 1986 SELECTED FINANCIAL DATA (000's OMI'ITED) ELECTRIC OPERATING REVENUES: Iksidential Commercial Industrial Governmental & municipal. Cooperatives & municipalities. Total from energy sales (Miss. area) Sales to other public utilities. Total from energv sales Miscellaneous revenues Deferred fuel adjustment revenues 1 J Total electric operating revenue NET INCOME TOTAL ELECTRIC UTILITT PLANT: Production. Transmission Distribution General & orlur. Total utility plant completed. Plant held for fbture use Construction work in progress Electric plant acquisition adjustments. Total utiiity plant TOTAL ASSETS. LONG-TERM DEllT PREFERRED STOCKS WITH SINKING FUND OTifER DATA: ELECTRIC ENERGY SALES (MKWH): Iksidential Commercial Industrial Governmental & municipal. Cooperatives & municipalities. Total energy sales (Miss. area). Sales to other public utilities. Total electric energy sales ELECTRIC CUSTOMERS (END OF PERIOD): Resider.tial Commerical Industrial Governmental & municipal. Cooperatives & municipalities. Total customers (Miss. area) Other public utilities Total electric customers. ENERGY SOURCE AND DISPOSITION: 1 otal encration. Purchased and net interchange .I Total. 1.un. Company use, losses and unaccounted ihr Total energy sold. NET INPUT (MISS. AREA)-MKWH PEAK LOAD (MISS. AREA)-KW LOAD FACTOR (MISS. AREA)-PERCENT NET PLANT CAPAlllLITY-KW CIRCUIT MILES OF ELECTRIC LINES I See Note 1 (11)-Summary of significant accounting policies. 52

1986 1985 1984 1983 1982 -1981 ' S 246,150 - S 207,738 5 186,296 'S. 185,917 5 173,349 S 168,387 178,240 152,007' 134,276, 129,863 12!,164 115,147 -125,133 113,044. 106,924 108,365' 105,164 110,138 22,947 19,480 17,694 19,593 19,261 19,838 4,189 7,996 9,559 16,975: 572,470 492,269 449,379 451,734 428,497 '430,485' 90d11 104,384 73,218 51,171 94,563 93,237-662,881 596,653 522,597 502,905 523.060 523,722 10,302 6,100 10,422 9,788 -10,560 7,826 .765 2,376 (1,092) 7,410 _(7,137) _295 $ 673,948 5 605,129 5 531,927 5 520,103 S 526,483 531,843 53,860 50,913 5 48,333 5 43,495 5 35,120 5 36,031. l $ 572,828 S 572,646 S 572,938 482,177 5 356,298. S 355,771 248,675 247,476 218,383 215,575 210,926 179,778 281,036 267,162 256,146 242,433 .235,114 225,152 26,721 25,383 40,233 36,592 22,293 20,646 1,129,260 1,1I2,667 1,087,700 976,777 824,631 781,347 3,939 3,939 3,939 3,939 3,939 3,316 3,947 2,365 16,643 83,590 174,744 135,605 1,135 1,317 1,498 1,680 1,861 2,043 ) ' $1,138,281 51,120,288 - $1,109,780 $ 1,065,986 5 1,005,175 S 922,311 I . $1,453,172 ' $1,332,482 S 938,220 862.249 5 794,288 - S 728,477 'S 468,156 - S 401,065 S 369,200 5 340,506 S 288,835 S 284,349 56,193 54,802 S 55,000. S 40,000 5 30,000 S 20,000 3,336,542 3,191,980 3,051,947 2,935,883 2,953,836 2,943,959 2,412,868 2,318,724 2,172,115 2,026,136 1,988,978 1,938,341 2,009,932 2,018,793 2,085,639 2,043,737 2,011,579 2,196,968 337,557 .i23,269 315,885 343,789 362,072 387,503 94,295 178,081 210,368 418,447 8,096,899 7,852,766 7,719,881 7,527,626 7,526,833 7,885,218 2,389,355 2,272,493 1,605,347 980,031 2,314,418 2,419,177 10,486,254 10,125,259 9,325,228 8,507,657 9,841,251 10,304,395 285,400 282,043 276,586 272,281 268,556 266,975 41,308 41,016 40,290 39,403 38,651 38,427 3,461 3,411 3,387 3,246 3,194 3,351 2,636 2,526 2,448 2,363 2.,309 2,221 12 2 2 2 2 2 2 332,807 328,998 322.~13 317,300 312,717 310,988 l 6,826,689 ' 6,471,405 6,724,724 5,445,661 7,071,398 7,483,624 4,372,089 4,435,969 3,294,151 3,914,796 3,497,887 3,513,268 11,198,778 10,907,374 10,018,875 9,360,457 10,569,285 10,996,892 712,524 782,115 693,647 852.800 728,034 692,497 10,486,254 10,125,259 9,325.228 8,507,657 9,841,251 10,304,395 8,809,423 8,634,881 8,413,528 8,380,426 8,254,866 8,577,858 i 2,132,000 1,858,000 1,758,000 1,894,000 1,765,000 1,912,000 47 53 54 50 53 51 3,136,000 3,136,000 3,183,000 2,972,000 2,763,000 2,763,000 20,016 19,871 19,578 19,387 19,262 19,120 53 l

r Board of Directors And Officers Officers Board of Directors Donald C. Lutken, Chairman of the Board and David C. Eramlette, III, Partner; Adams, Forman, President Truly, Ward, Smith and Bramlette. Natchez Thomas A. Dallas, Senior Vice President, Frank R. Day, Chairman of the lloard and Chief Administrative Senices Executive Oflicer; Trustmark National Bank, George A. " Pat" Goff, Senior Vice President, Chief Jackson Financial Officer, and Corporate Secretary Norman B. Gillis, Jr., Attorney-at-Law; McComb Frank F. Gallaher, Vice President and Chief Engineer Dr. J. Harvey Johnston, Jr., Physician; Jackson John D. Holland, Vice President, Governmental Aflairs Robert E. Kennington, II, Chairman of the lloard George M. Ledlow, Vice President, Special Projects and Chief Executive Officer; Grenada Sunburst James L. Moore, Vice President, Corporate System Corporation, Grenada Communications Edwin Lupberger, Chairman of the Board and C. Hiram Walters, Vice President, Customer Senices President; Middle South Utilities, Inc., New Orleans I James R. Martin, Treasurer and Assistant Secretary Donald C. Lutken, Chairman of the Board and Allan H. Mapp, Assistant Treasurer and Assistant President; Mississippi Power & Light Company, Secretary Jackson Richard D. McRae, Sr., Chairman of the lloard and Chief Executive Officer; Mcibe's, Inc., Jackson LeRoy P. Percy, Planter; Greenville Division Managers E. B. Robinson, Jr., Chairman of the lloard and Chief Executive Officer; Deposit Guaranty National llank, 1 l John R. Craft, North Central, Greenville Jackson Bob L. Marsh, Central, Jackson Dr. Walter Washington, President; Alcorn State James S. Pilgrim, Western, Vicksburg University, Lomun Graham H. Tempel, Southern, Brookhaven Robert M. Williams, Jr., Partner; Reeves-Williams T. Ray Tomlinson, Northern, Senatobia Builders, Southaven Plant Managers Malcolm A. Allred, Baxter Wilson, Vicksburg L. Otis Dewcase, Natchez, Natchez A. T. Johns <m, Rex Brown, Jackson Alan J. Sebren, Gerald Andrus, Greenville Rex M. Shannon, Delta, Cleveland 54

o!!t-L offhm arr: 1xatnil-rI Ganyr M laflow, Thomas.4. Ikilas, !kmahl C. Lutirn, Ganpr A. " Pat" Ggl, and John 11 Ho!!arul and tstaoutny 1-r) Janus L. Alcunr. Emnk I'. Galbaher, C. Ilamm \\\\'altm, Janws R Alartin, arui A!!an H Alapp. 55

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