ML20237J752
| ML20237J752 | |
| Person / Time | |
|---|---|
| Site: | Catawba  |
| Issue date: | 12/31/1986 |
| From: | Bobo J, Clay G NORTH CAROLINA MUNICIPAL POWER AGENCIES |
| To: | |
| Shared Package | |
| ML20237J675 | List: |
| References | |
| NUDOCS 8708180320 | |
| Download: ML20237J752 (29) | |
Text
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North Carolina Municipal Power Agency Number 1 1
1 1986 Annual Report 4
L PR"2na!R8%a NCM PA 1
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. NCMPA.1 STATISTICAL HIGHLIGHTS 1986 1985 1984 i 3,190,842 3,020,916 2,894,769 i i.
Kilowatt hour sales (thousands)... ... ....... ... . .. ....
Peak Billing Demand (kilowatts)............ . .. ........... 653,210 610,358 .597,979 Operating Revenues ... ... . .. ....... .... . . .. ... .... . . $331,907,000 $206,195,000 $ 110,003,000 Excess of Revenues over Expenses.. .... ....... . .. . .. $ 6,075,000 $ 4,497,000 $ 2,399,000 Sales to Duke (Revenues) . ...... . .. .... . . .......... $ 194,9 8 6,000 $ 83,175,000 $ 33,000 Average Monthly Power Purchases by Cities-kW (thousands) .. . ........ .. .. .. . . ..... . .......... 265,904 251,743 241,231 Average Monthly Billings to Cities... .... . . . . . . . . $ 11,410,000 $ 10,252,000 $ 9,164,000 Contents NCAIPA 1 Statistical NORTH CAROLINA uisdiyhts. .. . 1 MUNICIPAL POWER AGENCY Alessagefrom the Chairman
- NUMBER 1 1986 and acn rai Atanager.. . . 3 North Carolina Municipal Power Agency Number 1 (NCMPA 1) was - Profi/c of Participants.. . 4 chartered in January 1976 under enabling legislation enacted by the 1975 North Carolina Otneral Assembly. It has 20 member munici- Organization aid palities,19 of which are participants in a joint project involving a 75 Afanagement.. 5 f
percent ownership interest in Unit 2 of Catawba Nuclear Station, i constructed and operated by Duke Power Company (Duke). 6-7 Board of Commissioners. .
Since July 1,1983, NCMPA 1 has been the all-requirements power 9 supplier for its participants, which formerly were wholesale custom- Fi"d"CC - * - 8 ers of Duke. Both NCMPA 1 and the North Carolina Eastern Munici-pal Power Agency are provided professional management staff and NCAIPA I LISI 0/NCli*dCd services by ElectriCities of North Carolina, Inc. Bonds- . 9 )
Operations and Construction . . 9-10 y I
All-Requirements Rates. ;
Load Afanagement.. Ii Afanagement Sta.[l/ Consultants /
Trustecs/ Paying Agents. 12 l
Auditors' Opinion.. 13 i
Financial Statements. 14-27 i
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At 12:01 a.m., August 19,1986, Catawba Nuclear Station Unit 2 was declared in commercial operation, joining its twin Unit 1 in providing elecricity to NCMPA 1 customers and thousands of other Carolinians.
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MESSAGE FR.OM THE CHAIRMAN AND GENERAL MANAGER At one minute after midnight, August 19, 1986, a milesfort. was achieved for the 19 municipal electric systems that are power supply participants of Nwth Carolina Municipal Power Agency Number 1 (NCMPA 1). At that instant, Catawba Nuclear Station Unit 2 entered commercial operation.
The start of commercial operation for the 1145-megawatt generating unit marked the fulfillment of a bold commitment made by these cities and towns a decade earlier-a commitment to join hands to
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give the public power community in the Piedmont region of North j Carolina its own power supply program. The foundation of that pro- l gram, of course, is the agency's 75 percent ownership interest in the second of the twin Catawba units built and operated by Duke Power Company (Duke).
Thus, it was with justifiable sense af recomplishment that NCMPA 1 participants marked the occasion as Cattwba Unit 2 began deliver.
ing electricity to the more than a qu'trter million people that we serve J"" 1 WW on a daily basis. The plant went into commercial operation about George W. Clay, Jr.
g As a whole, the Catawba station is expected to be the lowest cost nuclear station completed in the United States during the time frame of June 1984 through June 1988.
We are gratified, too, that in 1986-our third full year of opera-tion - we were able to complete the financing of the Catawba project i and retire the entire tax-exempt commercial paper program.
j Our power agency continued to progress on other fronts as well.
Work began on a computerized peak-predicting system that will help {,
our staff do an even better job of assisting participants with cost- I saving load management programs. Negotiations were completed with Duke Engineering Services on a Substation Operations and Maintenance Agreement under which a participant may elect to pur- J chase its delivery point facilities from Duke while the company con-tinues to operate the facilities. Through this arrangement, partici-pants will receive the benefits of ownership without having to I provide additional staff or maintenance equipment for she high volt-age transformers. A System Betterment Program launched by ElectriCities of North Carolina, Inc. will help NCMPA 1 participants fulfill their obligations to their customers and to the agency for years to come by assuring efTicient, reliable operation of their systems.
All in all,1986 was a landmark year for our power agency - a year that laid the groundwork for even greater service to our participants and their customers in the future.
O^%$' , t.
V JAMES T. Bono GEORGE W. CLAY, JR.
General Manager Chairman j l
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PROFILE OF PARTICIPANTS Flanked on its west by the Appalachian and Blue Ridge mountains W[f8f*
and on its east by the fertile Coastal Plain, the Piedmont region of rg et;sTomms
) North Carolina is home to more than half of the state's population. Aihemarie- 9.763 n stic... 162 L About 280,000 ofits residents are served with electricity by the 19 -
cities and towns that participate in the NCMPA 1 power supply $n"e$ll,'* " 22]l, premet -1.025 program,
- Gastonia 20.780 The power agency participants are a diverse group, ranging in popu- oramic raus.. :A98 liigh Point .. 28,062 l lation from 475 (Bostic) to 63,000 (High Point). Collectively, they occupy large portions of 14 of the 40 Piedmont counties. For the year S"n"j["""*"' 2.
ended June 30,1986, sales of power from NCMPA 1 participants to t.exington .. 15.0i9 their customers generated almost $182 million in electric revenues. (iyol"'on.-,
2g8 M "'- 7 380 i-These customers include segments of the furniture, textile and l tobacco industries for which Piedmont North Carolina is well known, I, ll as well as various other companies which have contributed to the IT"nI". "'
Pmeviiie . 1.100
-7A20 rapid diversification of the region's industrial base in recent years. Shelby Many of the Piedmont's more than 30 colleges, universities and tech- ma 122 m nical institutes are located in or near NCMPA 1 municipalities.
1 The NCMPA 1 participants and their average number of customers
. as of June 30,1986 are listed at right.
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l Catawba 9 1 Albemarle
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.Wh C 2 Hostic 11 lxxington
..t 3 Cherryville 121.mcointon
- f.[ 4 Cornehus 13 Maiden
<J.- 5 Drexel 14 Monroe 6 Gastonia 15 Morganton 7(k:
1 L.y ;g 7 Gramte I alls 16 Newton 4
%.y,O f(ll!gh Pomt 17 Pmeville i 9 iluntersville 18 Sh..ny 101 andis 19 statesville I
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E NCMPA 1 Board of Commissioners at one ofits monthly meetings in Charlotte. North Carolina. i ORGANIZATION AND MANAGEMENT Through their representatives on a In August,1986, for the first time Board of Commissioners, NCMPA 1 ever, NCMPA 1 and the state's,other participants guide the affairs of the power agency, North Carolina East-agency. The board consists of one ern Municipal Power Agency member appointed by each partici- (NCEMPA), held annual meetings in pant's governing body. Et.ch partici- conjunction with the annual meeting pam may also appoint as many as of Electricities. NCMPA 1 partici-two alternate commissioners. The pant High Point hosted the joint agency board elects its own officers treetings, which focused attention on I and at-large executive committee power agency concerns as well as l members. other topics related to the operation For 1986, the Board of Commission- Pf municipal electric systems and ers re-elected Shelby Mayor George '88f*8 .affecting public power W. Clay, Jr. as its chairman. Molly nationwide.
M. Darwin, Morganton City Council In September, the Board of Commis- I member, was elected vice chairman, sioners approved the concept of shar-and R. Duke Whisenant, Lexington ing ownership in an administrative city manager, was chosen secretary- building with NCEMPA and author-treasurer, ized the ElectriCities Building Com-Serving with the officers on the exec- mittee to complete plans and specifi-utive committee were the following cations for the proposed structure, at-large members: Morris Baker, The building would be constructed Drexel town manager; William M. n a 4.66-acre site m Raleigh, North Edwards, Cherryville City Council Carolina near the leased quarters member; Gary D. Hicks, Gastonia presenth occupied in Highwoods city manager; J. E. Hinkel, Monroe Industrial Park.
city manager; A. W. Htffman Jr., A new city liaison program was Granite Falls mayor; and Judith P. begun in which professional staff Mendenhall, High Point mayor. members were assigned to specific Management staff and services for p wer agency participants to serve as NCMPA 1 are provided by Electri- a front-line communications link.
Cities of North Carolina, Inc., a joint Program objectives are to assure that participants questions are answered municipal assistar ce agency. The staff dosely monitors the perform- quickly, accurately and fully and that ance of Duke with regard to the util- may have are con-any veyedc to neerns the staffthe)lfor resolution.
ity's fulfillment of obligations in the project. In addition, the staff carries out the agency's daily operations.
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BOARD OF COMMISSIONEILS l
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Raymond Allen William Edwards Marcus Midgett Morris llaker George Clay l
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Gary Miller Kelly Almond David lowe Duke Whisenant Molly Darwin Gary llicks 6
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Board of Commissioners 8 Raymond I. Allen A. W. HufTman, Jr. J. E. Hinkel City Alanager A!ayor City Atanager Albemarle Granite Falls Atonroe H. Max Gunter Jr lith P. Mendenhall Molly M. Darwin Alayur 31 tyor City Council Alember !
Bostic il gh Posnt Alorganton l
William M. Edwards Fath K. St:nhouse D. Kelly Almond Csty Council Alemtwr omrsissioner City Afanager Cherryville fluntersrdle Newton James L Dorton Gary E. Miller Joseph E. Baker, Jr.
- Alderman Director of Pubhc Utihties Town Afanager Ccmmrd Landts nneville Nannie Potts Klynt Ripple George W. Clay, Jr.
Commissioner Lexingtem Afayor Cornehus , Shelby David E. Lowe
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)g Morris Baker City Atanager Arthur E. Peterson
' 'W Town Atanager Lincolnton Csty Councti Atember Drexel Statesrtile Marcus C. Midgett Ronnie E. Ransom Town Couned Atemlwr
. . . . City Councd Alember Alaiden W - ciastonia Alternate Commissioners 1.2
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Klynt Ripple A.W. Iluffman, Jr.
Pauline T. Helms Linda K. Story J. Michael Moore Csty Council Alember Town Afanager Town Afanager Albemarle Granste I-alls Afarden Wayne Sheppard H. Lewis Price P. E. Bazemore Town Council Alemher Cny Afanager Cny Council Alember llostsc liigh Posnt Alonroe John E. McGinnis Drew Saunders Robert R. Collins City Council Alember Commisswner Coty Afanager Cherryville fluntersville Alorganton Vacant Charles Kenneth Barnes Wayne Dellinger Concord Alderman Alavor Landas Newton y
Cornehus Alton K. Patten James Wilson
. . Alderman Town Council Alember Ralph Brittain Landis hnnd/c Alderman Drexel liarold W. Bowen Stephen Royster Alayor Alderman Gary D. tilcks Lexington shelby Csty Afanager Gasioma R. Duke Whisenant Peter T. Connet City Afanager City Afanager )
Jack R. Clark Lexington statesrdle Commissumer
- Grunne f alls Jerry L Campbell Larry M. Cranford Csty Councol Alember I:hrtric Codity Director Lincolnton Statesalie 8 As of December 31,1986 2 A city or town may appoint as many as two Alternate Commissioners.
Arthur Peterson 7
'l JL12/31/86 FIMN'CE
$2,395,165,000 ' The favorable interest levels in 1986 enabled NCMPA 1 to complete
'its financing of the Catawba project with a bond issuance at the . )
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,'l - c gg " g+gg lowest cost since 1979.
km In August,. the agency issued Series; 1986 in the amount of f ; JM g fg 9 gg gg p)( 1 p$ $262,960,000 at a true interest cost of 7.496 percent. Proceeds of this issue were used to retire the entire tax-exempt commercial paper Q 6 mJ *. sj. f~ k, .. %
, . . d. (TECP) program as well as to complete the Catawba project financ-k{hhhjf-hi $ 1 Hy . ; gfpp ing. Since the bond issue was priced the same day as Catawba Unit 2 was declared in commercial operation, the size of the issue took into -
ig' 'a consideration the remaining expenditures for the project. Therefore, y .n ; d[f M gp)j the agency does not anticipate needing to issue any additional debt h' .
k% ' for the construction of the project.
The total funding requirement' for the NCMPA 1 project was
$2,399,755,000, of which $2,395,165,000 was outstanding on
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December 31,1986, and $4,590,000 had matured. The weighted N .Wk-k g Egg [OIi ydj ~ dgliDNM .. b b Mg d h average cost of the outstanding bonds as of December 31 was 8.54 percent. This reflects not only the agency's being able to issue the Series 1986 at lower interest rates, but also the effects of the ha Md'$19M kh Sb UP $msP$g pQd h, refunding issues in 1984 and 1985. A list of the previously issued bonds which have been refunded is included on the next page.
mi 3 p) g a2 h g; fpM,wh,m.h p g g {* The attractive interest rates in 1986 also afforded NCMPA 1 the p)(%m opportunity to retire the TECP with the August issue. The final W Gi TQfj , maturitiesof TECP were paid offin November. Until its retirement, h'% h g* h k the TECP continued to provide the agency with low cost funds and
- financial flexibility with the $196 million outstanding. The use of this -
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hbp)y?j financing vehicle saved the agency more than $20 million in interest j $ gy; Y h
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over the cost of bonds at the time the TECP was issued.
NCMPA l's investment portfolio continues to generate significant
% Ahk .k' e Jk@N@ earnings to offset the costs of construction and the daily operating N9 Oq ' **#[ " E } ' hp costs. In 1986, the agency's investment ofidle funds produced $58.9 Q$$ gM million which was available to meet construction expenditures or m
-,m.,. offset the cost of power to participants.
h,. I" During 1986, the . major segments of an internally designed and coded WM ogy automatic investment system were installed, greatly enhancing the
$ % @. - . f. W* , day-to-day management and reporting of the investment portfolio.
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The presence and involvement of the Local Government Commis-gg g e . . .^"" d WX sion of North Carolina continues to provide the state's two power 4%
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a1 new j@Q* agencies with an important credit enhancement unique to North Carolina. The commission, a division of the Department of the State Treasurer, is involved in all phases of the agencies' debt financings, A gg$$ igg MO monitors the financial conditions of the agencies and their partici-aWy%"M%[Jpjbg$gl E
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-}gyh pants, and has statutory authority to require cities served by power ,
dd gg y , QMWng agencies to set electric rates sufficient tc meet their obhgations to the h@$g/l}yN; f9 .gg gg hp) r
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agencies under the take-or-pay contract.
Bonds Outstanding 12/31/86.. . $2,395,165,000
- Matured Bonds. 4.590.000 Total Funding Requirement.. . . $2.399 */55.000 1
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NCMPA NUMBER 1 LIST OF REFUNDED BONDS i i
Series _ Par Aynt. Coupon Maturity Call Date Call Price 1980 $ 100,000,000 . Entire Series Pay olT as mature 198! 79,000,000 11 4 % 1/1/2020 1/1/1992 1026 % q 1981 1,250,000 10 4 % 1/1/1996 1/1/1991 103 % 4 1981 2,435,000 10.4 % 1/1/1997 1/1/1991 103 %
1981 2,690,000 10 6 % 1/1/1998 1/1/1991 103 %
1981 9,875,000 10%% 1/1/2001 1/1/1991 103 % {
1981A 17,500,000 14 4 % 1/1/2001 1/1/1991 103 % 4 1981A 25,000,000 !! % 1/1/2015 1/1/1991 PAR l 1981A 157,500,000 14%% 1/1/2020 1/1/1991 103 % i 1982 14700,000 11 % 1/1/2003 1/1/1993 103 % j 1982 160,300,000 116 % 1/1/2020 1/1/1993 103 %
1983 10,000,000 104 % 1/1/2003 1/1/1993 103 %
1983 157,700,000 104 % 1/1/2020 1/1/1993 103 %
1984 7,890,000 104 % 1/1/1999 1/1/1994 103 %
1984 35,725,000 106 % 1/1/2004 1/1/1994 103 % i I984 252,090,000 10%% 1/1/2020 1/1/1994 103 % )
OPERATIONS AND CONSTRUCTION I i
l OPERATIONS NCMPA 1 has a 75 percent owner- Under the agency's contract with ment with the agency by which the ship interest in Catawba Nuclear Sta- Duke, the utility company built the municipality agreed to purchase all tion Unit 2, which began commercial Catawba station and is responsible ofits electric power and energy from operation on August 19,1986. The for its fueling and operation. Duke the agency, over and above NCMPA agency's ownership interest in this also is contractually obligated to pro- l's ownership entitlement and project is approximately 860 mega. vide NCMPA 1 with additional (sup- excluding any power and energy watts of capacity. piemental) power to meet the needs made available by the Southeastern f its participants. Power Administration (SEPA), the Under two reliability exchange agree-ments with Duke, the agency's own- Each of the 19 participants executed regi nal marketing agent for ;
federal hydroelectric power. Those q ership resources are essentially dis- a Project Power Sales Agreement tributed in equal amounts over each agreements are in the form of with the agency. In these agreements, take-and-pay.
of the four units of the Catawba and the municipalities agreed to pay for McGuire nuclear stations. 100 percent of the cost of the agency's project. These are "take-or-Through the McGuire Reliability pay agreements and form the secu-Exchange, the agency was able to l rity f r the agency s bonds.
begin full operation on July 1,1983, by receiving 215 megawatts of pro- Each of the participants also signed a i ject power from McGuire. Supplemental Power Sales Agree- l l
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- "' i"' a f uxd utage n septem- achieved the major milestone ofini-PROJECT POWER ber 1 due to a phase-to-phase fault tial criticality on May 8. Initial criti- 1 SUPPLY within, the main electric generator, requiring majo,r repairs. The unit cality occurs in the initial start-up of the chain reaction (the splitting of The four generating units from which returned to service November 17. As the atoms continuing on a self-sus-NCMPA 1 receives project power are a result ,of the forced outage, Unit 2 'aining basis) within the reactor was available for serv ce 41 percent .
in commercial operation. They are: of the time and had a 35 percent McGuire Nuclear Station - capacity factor from the start of com- On May 15,1986, the NRC issued a McGuire Units I and 2 are nuclear- mercial operations through the end full power operating license for fueled generating units located on of 1986. Catawba 2. After approximately ,
Iake Norman in North Carolina,17 three and one-half months of power l
'l go'te"g,$ nips"ijyj%iS"Unin CONSTRUCTION escaiation testing, unit 2 began com-mercial operation on August 19, beginning commercial operation in December 1981 and Unit 2 in March Each un.it of the Catawba Nuclear 1986, approximately four months 1984. Each McGuire unit's maxi. Station contains a Westinghouse ahead of Duke's revised schedule.
mum net lependable capability rat- pressurized reactor system providing ing of 1180 megawatts was changed steam to a General Electric turbine to 1150, based on the initial operat- generator. The nuclear steam supply ing experience of both units, system is substantially similar in LOAD FORECAST McGuire Unit 1 began a refueling P"*'er rating and general design to An essential element of agency opera-outage in May 1986. The need for the system employed in nine other tions is the annual load forecast. It is additional refueling activities Westinghouse units with construc- required by agency contracts and sup-extended the August 5 completion tion permits and 14 others with oper- p ris ,all-requirements rate setting, As a ating licenses, including the two hudgeting ces $or exa npl , el date result until of thisearly September.
extension, the um ,t was McGuire um,ts.
tric needs detailed in the forecast am available for service 96 percent of the used to determine 10-year cost projec.
time in 1986 and had a 51 percent In January 1986, the commercial tions used in the Official Statement capacity factor. operation date for Catawba Unit 2 provided to investors of an agency was revised by Duke to December bond issue.
McGuire Unit 2 began a refueh.ng 1986, a six-month improvement over Each year, long- and short-term pro- i outage m March that also went the previously announced scheduled jections of each participant's needs as l beyond the scheduled completion
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date of June 1987. On February 24, well as NCMPA l's requirements for date (May 16) due to the need for demand and energy are calculated.
additional work on the turbine-gen. 1986, the Nuclear Regulatory Com- These forecasts not only aid agency crator system.13ecause the outage mission (NRC) issued an operating functions, but also assist Duke in gen-was extended to the end of June, license permitting fuel loading and cration-level plannins;.
Unit 2 was available for service 64 low power testing of the unit. Unit 2 percent of the time in 1986 and had a 62 percent capacity factor. .-
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Catawba Nuclear Station - This sta- .
tion is located en Lake Wylie in York ..
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County, South Carolina,19 miles '
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southwest of Charlotte. Construction l~
of the station began in May 1974 with ' Unit i beginning commercial .' ' ~ -
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operation on June 29,1985, and 1 -
Unit 2 on August 19,1986. f.7 y ?QD ' '
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Catawba Unit 1 began a refueling i.Q , ;"
ou! age on August 9,1986, which had .m to be extended from October until 4.. " ~
the middle of November due to addi- .
. e tional equipment repair and testing ' # '
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requirements. As a result of this out-age, Unit I was available for service 4 - ~
. ~ s 59 percent of the time and had a '
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c ,4 capacity factor of 52 percent. .g . s 6
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n on ugust 19 ataw a n 10
, ALL-REQUIREMENTS RATES l "/ Aside from a staall amount of power received from the Southeastern Power Administration (SEPA), the 19 NCMPA I participants receive all remaining electric power requirements through the agency. The costs of power received from the agency are recovered through the
) all-requirements rates paid to NCMPA 1. These costs include project
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ownership, operation and maintenance and finance obligations; administration and general expenses; supplemental power purchases, s 9 and other special obligations. The power received from SEPA con-
- sists of capacity and energy allocations from federal hydroelectric m
. generating units.
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The agency's all-requirements rates also support the rate stabilization
.. . fund. This fund consists of deposits made in years when costs are
, comparatively lower so that withdrawals can be made in later years, j -
thereby providing the agency with flexibility to stabilize its rates. The l -
1 NCMPA 1 Board of Commissioners approves any changes in the all-requirements rates.
From October 1,1985 through October 31,1986, All-Requirements Bulk Power Service Schedule RS-4 was in effect. The only all-require-ments rate change during 1986 took pla:e on November I when rate 88
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schedule RS-5 went into effect. This included a 6.7 percent effective k increase that allows the demand rate to more closely reflect the incre-
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. . . mental cost of supplemental power. Distribution charges paid by Night view of the McGuire Nuclear Station participants with leased facilities were updated to include adjust-ments for the new SEPA power allocations and the most recent load forecast.
LOAD MANAGEMENT ,
Many NCMPA 1 participants perform various mea- 'a sures to reduce their peak electrical demand. ~
.Through the installation of systems that automati- /. .
2 cally turn off residential water heaters and air condi- , '3j . -
tioners and municipal pumps and motors during !
peak load periods, the agency and its participants YJ p$
7 have reduced their annual power costs in excess of .
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$1.5 million.
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(; e' Power agency staff assists participants by recom- ene ,
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mending the appropriate times during the month that 7 % -
the participants must activate their load management systems to realize reduced power costs. During 1986,
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staff recommended that load be controlled for a total -
of 107 hours0.00124 days <br />0.0297 hours <br />1.76918e-4 weeks <br />4.07135e-5 months <br /> during 49 days and was accurate in its prediction of the combined system peak hour in 11 of - *
- the 12 months. .g [ [ f .
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An automated peak-predicting system is currently '
being installed by the agency. This computerized load forecasting system will aid the staffin predicting
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peak periods ana will automatically transmit data ."" , ' ,
and strategies to the participants' personal L ad management program for NCMPA 3 a coordinated in Raleigh by staff members Steve R. Shelton (left) and Ronald E. Gunter.
computers.
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CONSULTANTS MANAGEMENT STAFF North Carolina Counsel Poyner & Spruill Rocky Mount, North Carolina ,
Washington, D.C. Counsel Spiegel & McDiarmid
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Washington, D.C.
Bond Counsel Wood Dawson Smith & .._,,,,= 1:
"5"' it Hellman -d New York, New York l
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Engineering Consultant ,-
R. W. Beck and Associates g ,r+-
Orlando, Florida Lp-.
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< .l Bond Fund Trustee JAhlES T. BOBO, General Manager (right)
Chemical Bank New York, New York Construction Fund Trustee gh' ' s ' 'M Wachovia Bank and Trust M"pp.P 77h .- .
y Company, N.A. '
Winston-Salem, North Carolma ,~ .-- .
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PAYING AGENTS
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Chemical Bank .
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Continental Illinois National -
, a Bank and Trust Company of FRED hl MILLS, Jr. WILLI Ah! G. WEh1110FF Director-Government Affairs Director - Engineering Chicago Chicago, Illinois Wachovia Bank and Trust Company, N.A.
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Winston-Salem, North Carolina ,
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WILLI Ah! II. BAIT J ACE S. CillLDS Director-Finance and Director- Communications Administration 12
Auditors' Opinion OToucheRoss April 10,1987 ,
Board of Commissioners North Carolina Municipal Power Agency Number 1 Raleigh, North Carolina
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We have examined the balance sheets of North Carolina Municipal Power Agency Number 1 as of December 31,1986 and 1935, and the related statements of revenues and expenses and changes in fund balance and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the -
circumstances. ,
In our opinion, the financial statements referred to above present fairly the financial position of North Carolina Municipal Power Agency Number I at December 31,1986 and 1985, and the results ofits operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
Our examinations were made for the turpose of forming an opinion on the basic financial statements taken as a whole. The information on pages 25 through 27 is presented for purposes of edditional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the examination of the basic financial statements and, in our opinion, the information is fairly stated in all material respects in relation * ' the basic financial statements taken as a whole, f
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Certified Public Accountants Research Triangle Park, North Carolina 0
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Balance Sheets North Carolina Municipal Power Agency Number 1 ,
($000s)
AESETS December 31.
1986 1985 ELECTRIC UTILITY PLANT (Notes B, C, and F):
Electric plant in service, net of accumulated depreciation of ,
$38,873 and $10,424... . . . . . . . . . . . . . . . . . . . ... $ 1,440,472 $ 708,850 Construction work in progress . . . . . . . . . . _ . . . . . . . . . . 7,617 700,915 Nuclear fuel, net of accumulated amortization of $26,054 and
$8,826.. . . . . ..... . . . . . . . .. .. . . . . . 107,691 104,064 1,555,780 1,513,829 NON-UTILITY PROPERTY AND EQUIPMENT (Note B).. .. . . . . . . 1,223 1,350 SPECIAL FUNDS INVESYED (Notes D and F):
Construction fund.. . . . .. . . .. ... . . . . . . . . . . 126,317 330,230 Bond fund .. .. . . . . . . . . . . . . . .. . . . . . . . 316,776 275,913 Reserve and contingency fund . .. . ... . .. . . . . . 21,639 21,322-Decommissioning fund., . . . . . . . . . . . 6,974 4,278 Special reserve fund.. .. . . . . .. ... . . . . . . . . . . . . . . . . . . . . . 1,033 1,153 Commercial paper account.. ... . . . .. . .. . . . . . 33,699 472,739 666,595 CURRENT ASSETS:
Funds invested (Notes D and F):
Revenue fund . . . .. . .. . . . . . . 151,722 53,791 Operating fund ..... . . . . . . . . . . . . . .. 38,353 13,775 Supplemental fund . . .. ... . . . . . . . 44,285 28,783 234,360 96,349 Participant accounts receivable.. . . .. .
I1,660 11,087 Operating accounts receivable.. . . .. . . . . . . . 8,519 10,797 Prepaid expenses.. . . . . .. .. . .. . . . . 27,396 11,799 281,935 130,032 DEFERRED COSTS:
Unamortized debt issuance costs (Note B).. . . .. 47,502 44,219 Net costs to be recovered from future billings to participants (Note E). .. . . .. . . . . . . .
34,675 34.949
$2,393,854 $2.390,974 See notes to financial statements.
14
l l
l l
LIABILITIES AND FUND BALANCE December 31, 1986 1985 LONG-TERM DEBT:
Bonds, net of unamortized discount (Notes C and F)... . . .. $2,246,354 $2,008,557 Notes payable (Note H).. ... . . .. . . . . . . . . . . . . . . . . 823 1,097 2,247,177 2,009,654 SPECIAL FUNDS LIABILITIES:
Construction payables.. . . .. . . . . . . . . . . . . . . . . . . 71 523 Current maturities of bonds (Note F)... .. . . . . . . . . . . . . 4,840 4,590 Accrued interest on bonds... ..... . . . . . . . . . . . . . . . . 93,634 60,086 Bond anticipation notes (Note G).... .. . . . . . . .. .. 100,000 Accrued interest on bond anticipation notes... . . . . . . . .. 3,250 Tax-exempt commercial paper (Note 1).. .. . . . . . . . . . . . 196,000 Accrued interest on commercial paper.. . . . . . . . . . . 1.693 98,545 366,142 CURRENT LIABILITIES:
Current maturities of notes payable (Note H).. .. . . . . 274 254 Accounts payable. . . . . . . . . . . 23,330 196 Accrued taxes. . . . . . . . . . . . . . .. . . . . . . . . . 4,702 977 28,306 1,427 COMMITMENTS AND CONTINGENCIES (Notes C, J, and K)
FUND B ALANCE ., . . . . . . . . . . . 19,826 13,751 l
l l
$2,393.85_4 $2,390,974 15
- Statements of Revenues and~ Expenses !
and Changes in Fund Balance North Carolina Municipal Power Agency Number 1
- ($000s)
Year Ended December 31, 1986 _1985 OPERATING REVENUES:
Sales of electricity to participants. .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $136,921 $123,020 ;
Sales of electricity to utilities . ... ... . .. . . . .. ...... .. ... .... . . . . ...... .... 194,986 83,175 331,907. 206,195 OPERATING EXPENSES:
Operation and maintenance ..... .. . .. ... . . ..... .. . . ........ . .. ... . . 38,094- 15,090 N u clea r fu el . . .... .. .. .. . . . . . .. . . . . . . . .. .... .. . . . ... . . . . . . . . . . . . . . 19,623 10,490 a Interconnection services:
! Pu rchased power... . ... .......... ........... . . . . . . . . . . . . . . . . . . . . . . . . . . I17,977 108,450 Transmission and distribution.. . . . . . . . . . . .. . . . . . . . . . . 14,416 13,309 .
'Other...................................................... . . . . . . . . . . . . . 238 315 l '
132,631 .122,074 Administrative and gene ral . .. ....... .. . ... . ... ... . ...... .... ..... ............ . ... 11,660 5,087 .l Gross receipts tax (Note B).... ... .. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,349- 3,899 ;
Propert y tax ( No t e B) .. . ... . . .. .. . . . . . . . ...... . . . ... .. ... .. .. . . ...... .. . . . . . . 3,620 l Depreciation..... . . . . ...... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,643 10,512-238,620 167,152 N ET OPER ATING INCOME . ....... ...... ....... . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,287 39,043 INTEREST CHARGES (CREDITS):
Interest expense.. ... .., ... . . ... . . . .. . . . .. .. ... .. . . . . . . . 186,491 175,899 i Amortization of debt discount and issuance costs.. . . . . . . . . . . . . . . . . . . . . . . 1,738 3,700
- I n ve st m e n t inco m e.. ... . ... . . . .. ... . . . . . . ...... .. . . . . ... . . . . . . . . . . . . . . . . . (58,868) (58,777)
Net interest capitalized (Note C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42.423) (81,731) ,!
86,938 39,091 '
(DEFERRED REVENUES) NET COSTS TO BE RECOVERED FROM FUTURE ,
BILLINGS TO PARTICIPANTS (Note E) . . . . . . . ...... ... . . .... ... . . . . . (274) 44,299 t EXCESS OF REVENUES OVER EXPENSES l BEFORE EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,075 44,251 EXTRAORDINARY ITEM:
Loss on bond refundings (Note F) . ... . .. . . .. . .... .. . . . . . . . . . . . . . . . (39,754)
EXCESS OF REVENUES OVER EXPENSES............ . .. . . .. . . . . . . . . . . . . . . 6,075 4,497 FUND BALANCE, beginning of year.... . . . . . . . . . . . . . . . . . . . . . . . . . . .... 13,751 9,254 FUND BALANCE, end of year.. .... . . ..... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,826 $ 13,751 See notes to financial statements, i i
i 16
4 Statements of Changes in Financial Position North Carolina Municipal Power Agency Number 1
($000s).
Year Ended December 31, 1986 198s
- SOURCE OF FUNDS:
Operations:
Excess of revenues over expenses before extraordinary item ....... . .. . $ 6,075 $ 44,251 Depreciation and amortization .... .. ... . ....... .. ... . . .. .... .... . .. .... . 30,381 14,212 Amortization of nuclear fuel......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,623 10,490
. Deferred revenues (net costs to be recovered from future billings to partici pa nt s..... .. .. .. . . . .. . . . ... . . . .. . .. . . . ...... ....... . .. . . . . . . . . . . . . . 274 (44,299)
Funds provided by operations before extraordinary item ... . .. . . . . . . . . 56,353 24,654 Extraordinary item........... . ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,754)
Proceeds from sale of bonds....... ......... . ..... .. .... . . . .. ............. . . .. . . .. 262,960 .1,363,450 Decrease (increase) in special funds invested.. ... ... . . .. .................. .. . 193,856 (163,026)
Proceeds from notes payable .......... . ... ...... . .. ... . ..... . . ... ............... 1,510 Decrease in development costs... ........................... ..... ........ ..... ... .... . 20 l . .
513,169 1,186,854 APPLICATION OF FUNDS:
' Bond s re funded .. . . .. ... . .. . . . ...... .. ... . . .. . .. . . . .. .. .. . . . . . . . . ... . . . ... . 758,655 Decrease (increase) in special funds liabilities.. . ..... ... ........ . .. ... ... . . 267,597 (89,971)
Additions to electric utility plant ...... ... . . .. . .......... . . .. ...... .. ..... .. ... 90,023 231,682 Net additions to unamortized debt discount and issuance costs... .......... 25,344 99,553 Provision for retirement of bonds.... . . . .. . . .......... . ... . . ... . . ... .. ... ... 4,840 4,590 Provision for retirement of notes payable . . . . .. .. ....... .. .. . . . ... . .. . 274 413
- Additions to non-utility property and equipment ..... .......... ... . . . . .... 67 1,438 Provision for retirement of bond anticipation notes... . . . .... ... . 100,000 j
- l. ..
l 388,145 1,106,360 INCREASE IN WORKING CAPITAL.. . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,024 $ 80,494 CHANGES IN COMPONENTS OF WORKING CAPITAL:
Increase (decrease)in current assets:
Funds invested... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$138,011 $ 48,357 Participant accounts receivable ... ... .. ...... ... . . . . . . . . . . . . . . . . . . . . 573 1,242 Operating accounts receivable . ... ... ... .. .... .. . . . . . . . . . . . . . . . (2,278) 10,797 Prepaid expenses . .. . .. .. .... ... . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,597 11,700 151,903 72,096 (Increase) decrease in current liabilities:
Current maturities of notes payable.. .. . . .. . . . . . . . . . . (20) (254)
Accounts payable... ... . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,134) 9,538 A cc ru ed t a x e s . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,725) (886)
(26,879) 8,398 !
INCREASE IN WORKING CAPITAL.... . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,024 $ 80.494 See notes to financial statements.
l 17
Notes to Financial Statements North Carolina Municipal Power Agency Number 1 Years Ended December 31,1986 and 1985 =
A. General Matters North Carolina Municipal Power Agency Number 1 (agency)is a joint agency organized and existing pursuant to Chapter 159B of the General Statutes of North Carolina to enabic municipalities owning electric distribution -
systems, through the organization of the agency, to finance, construct, own, operate, and maintain electric ,
generation and transmission facilities. The agency has twenty members, nineteen (participants) which receive power from the agency and one which receives power from Duke Power Company (Duke).
The agency has entered into several agreements with Duke which govern the purchase, ownership, construc-tion, operation, ar.d maintenance of the of the project:
The Purchase, Construction, and Ownership Agreement provides, among other things, for the agency to - m purchase a 75% undivided ownership interest in Unit 2 of the Catawba Nuclear Station (station) and a 37.5% undivided ownership interest in certain support facilities of the station. However, by virtue of various provisions in the Interconnection Agreement and the Operation and Fuel Agreement, the agency (1) bears the costs of acquisition, construction, operation, and maintenance of 37.5% of Unit I and 37.5% of Unit 2, and (2) has the same proportionate right to the output of and bears the risks associated with the lack of operation of such units. The agency's share of costs associated with Unit I and the support facilities was transferred from construction work in progress to electric plant in service after Unit I began commercial operation in 1985. The agency's share of costs associated with Unit 2 was transferred after Unit 2 began commercial operation on August 19,1986.
The Interconnection Agreement provides for the interconnection between Duke's electric power system and the agency's project and for the exchange of power between Unit I and Unit 2 of th'e station and between the Catawba units and Duke's McGuire Nuclear Station. The agreement also provides for the purchase and sale of capacity and energy, and the transmission of energy to the agency's participants.
The Operation and Fuel Agreement provides for Duke to operate, maintain, and fuel the station; to make renewals, replacements, and capital additions as approved by the agency; and for the ultimate decommis-sioning of the station at the end ofits usefullife.
The agency's acquisition ofits ownership interest is being financed by the issuance of electric revenue bonds pursuant to Resolution No. R-16-78, as amended, (resolution) of the Board of Commissioners of the agency.
The resolution established special funds to hold proceeds from debt issuance, such proceeds to be used for costs of acquisition and construction of the project, and to establish certain reserves. The resolution also established special funds in which project revenues are deposited and from which project operating costs, debt service, and e other specified payments relating to the project are made.
The agency has entered into a Project Power Sales Agreement and a Supplemental Power Sales Agreement with each participant, These agreements provide for each participant to purchase from the agency its all requirements bulk power supply, in excess of power allotments from Southeastern Power Administration (5 EPA), which includes its total share of project output (as defined by the Project Power Sales Agreement). The
- agency is obligated to provide all electric power required by each participant at the respective delivery points.
Each participant is obligated to pay its share of the operating and debt service costs of the project. ,
The agency's participants receive their total electric power, exclusive of power allotments from SEPA, from the agency. Such power is provided by project output together with supplemental purchases of power from Duke. Pursuant to two " Reliability Exchanges" contained in the Interconnection Agreement, project output is provided in essentially equal amounts from Catawba Unit 2 and three other nuclear units (Catawba Unit 1, ,
.. e McGuire Unit 1, and McGuire Unit 2) in operation on the Duke system, all of which are of similar size and capacity. The reliability exchanges are intended to make more reliable the supply of capacity and energy to the agency in the amount to which the agency is entitled pursuant to its ownership interest in Catawba Unit 2, and to mitigate potential adverse economic effects on the agency and the participants from unscheduled outages of Catawba Unit 2. Correspondingly, the agency bears risks resulting from unscheduled outages of any Catawba or McGuire Unit.
B. Significant Accounting Policies Basis ofAccounting The accounts of the agency are maintained in accordance with the Uniform System of Accounts of the Federal Energy Regulatory Commission, and are in conformity with generally accepted account-ing principles (GAAP).
Electric Plant in Service All direct and indirect expenditures associated with the development and construc-tion of the agency's ownership interest in Catawba, including interest expense net of investment income on funds not yet expended, have been recorded at original cost and are being depreciated on a stmight-line basis over the average composite life of each unit's assets.
Construction Work in Progress All direct and indirect expenditures related to modifications identified prior to commercial operation and to capital additions, including interest expense net of investment income on funds 18
Notes to Financial Statements North Carolina Municipal Power Agency Number 1 Years Ended December 31,1986 and 1985 B. Significant Accounting Policies (Continued) not yet expended, are capittdized as construction work in progress until such time as they are completed and transferred to Electric Plant in Service. Depreciation expense will be recognized on these items when they are transferred.
Nuclear Fuel All direct and indirect expenditures related to the purchase and construction of nuclear fuel cores, including interest expense net ofinvestment income on funds not yet expended, are capitalized until such time as the cores are piaced in the reactor. At that time, they are amortized and charged to fuel expense on the I
units of production method. Amortization of nuclear fuel costs includes estimated disposal costs of $2.395,000 and $1,664,04 for the years ended December 31,1986 and 1985, respectively.
Non-Utility Property andEquipment All direct and indirect expenditures related to purchasing and installing an in-house computer, jointly owned with North Carolina Eastern Municipal Power Agency (NCEMPA), are capitalized and are being depreciated over four years. Also included is the land, jointly owned with NCEMPA, to be used as the site for administrative offices for both agencies and Electricities of North Carolina, Inc.
(ElectriCities).
Unamortized DebtIssuance Costs Unamortized debt issuance costs, shown net of accumulated amortization, are deferred and were amortized on a straight-line basis over the term of the related debt through December 31, 1985. GAAP allows the amortization of these costs on an interest method basis. During 1986, the agency ]
changed from the straight-line to the interest method of amortizing these costs. The impact of the change in any 6 prior period was immaterial. l Taxes income of the agency is exempt from Federal income tax under Section 115 of the Internal Revenue Code. Chapter 159B of the General Statutes of North Carolina exempts the agency from property and franchise i or other privilege taxes. In lieu of North Carolina property taxes, the agency will pay an amount which would -
otherwise be assessed on the non-utility property and equipment of the agency. South Carolina does not require the payment of property taxes on generating units until they begin commercial operation. Property taxes were ,
due on Catawba Unit 1 in 1986, while Unit 2 will be taxed beginning in 1987. In lieu of a franchise or privilege tax, the agency paid to North Carolina an amount equal to 3.22% of the gross receipts from sales of electricity to participants.
l Reclassifications Certain reclassifications have been made to the prior year's financial statements to conform to classifications used in the current year.
1 C. Construction Program The agency has commitments to Duke in connection with modifications identified prior to commercial operation and capital additions at the station. Current estimates are the agency's portion of these costs will be approximately $16,500,000.
Interest costs of $74,037,000 and $135,336,000 were capitalized as part of the cost of power plants under construction during 1986 and 1985, respectively. The capitalized interest costs were offset by $31,614,000 and ;,
$53,605,000 in interest earned on related unexpended bond proceeds for 1986 and 1985, respectively.
D. Investments -
The resolution authorizes the agency to invest in (1) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (U.S.),(2) obligations of any agency of the U.S. or corporation wholly owned by the U.S., (3) direct and general obligations of the State of North Carolina or any political subdivision thereof whose securities are rated "A", (4) repurchase agreements with the Bond Fund Trustee or Construction Fund Trustee or any government bond dealer reporting to the Federal Reserve Bank of New York which mature within nine months from the date they were entered into and are collateralized by previously described obligations, and (5) bank time deposits evidenced by certificates of deposit, and banker's acceptances. Bank time deposits may only be in banks with capital stock, surplus, and undivided profits of $20,000,000 or $50,000,000 for North Carolina banks and out-of-state banks, respectively, and the agency's investments deposited in st.ch banks cannot exceed 50% and 25%, respectively, of such bank's e capital stock, surplus, and undivided profits.
The resolution permits the agency to establish official depositories with any bank or trust company qualified under the laws of North Carolina to receive deposits of public moneys and having capital stock, surplus, and undivided profits in excess of $20,000,000. At December 31,1986 and 1985, the agency had $22,000 and
$33,000, respectively, so deposited.
Investments included in the funds invested categories are stated at amortized cost, which approximates market value, plus accrued interest. ,
19
North Carolina Municipal Power Agency Number 1 Notes to Financial Statements Years Ended December 31,1986 and 1985 D. Investments (Continued)
The agency's investments are categorized in the following table to give an indication of the level of risk assumed by the agency at year-end. Category 1 includes investments that are insured or registered or for which the securities are held by the agency or its agent in the agency's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the broker or dealer, or by its trust department or agent in the agency's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the broker or dealer, or by its safekeeping department or agent in the agency's name. (In thousands of dollars).
Category Carrying Market 1 2 3 Amount Value Repurchase Agreements . . .. .. .. .. . . . . . ..... $ 117,932 $ $ $ 117,932 $ 117,932 U.S. Government Securities.. . . . .. ... . .. 243,632 100 23,124 266,856 277,224 U.S. Government Agencies. .. .. . ... .. . 263,075 25,095 288,170 311,203 Bankers' Acceptances . .. . . . . . . . ... .. .
23,838 23,838 23,829
$624,639 $100 $72,057 696,796 $730,188 Cash.. . .. . . .. . . . . . . . . . . .. . .. .. . . . . . .. . 22 Accrued Interest.. . .. . .. . . . .. .. . . . .. . . . 10,281 Total Funds Invested... . . . . . . . . . . . . . . . . . . . . . $707,099 Consisting of:
Special Funds Invested. .. . . .. .. . . .. . . . . . . . $472,739 Current Assets.. . . . . . . . . . . . . . . . . . . . .. . . . 234,360
$707,09?
The repurchase agreements are the only collateralized investments. In accordance with the provisions of the resolution, the collateral is segregated and held by the trustee for the agency.
E. Net Costs to be Recovered from Future Billings to Participants Rates for power billings to participants are designed to cover the agency's " costs" as defined by (1) the resolution, (2) the Project Power Sales Agreements, and (3) the Supplemental Power Sales Agreements. The agency's rates are structured to systematically provide for the debt requirements, operating funds, and reserves as specified by the resolution and the power sales agreements. Recognition of" expenses"(defined according to GAAP) which are not included as " costs" is deferred to such period as it is intended that such " expenses" be covered by rates. Recognition of those " revenues," which under the resolution and the power sales agreements are collected to cover " costs" that are not " expenses" is deferred to such period as it is intended that such
" revenues" cover " expenses."
20
Notes to Financial Statements North Carolina Municipal Power Agency Number 1 l
Years Ended December 31,1986 and 1985 E, Net Costs to be Recovered from Future Billings to Participants (Continued)
All rates must be approved by the board. Rates are designed on an annual basis and are reviewed quarterly. If determined to be inadequate, rates may be revised.
Net costs to be recovered from future billings to participants includes the following (in thousands of dollars):
Year Ended Inception to December 31, December 31, 1986 1985 1986 1985 GAAP ITEMS NOT INCLUDED IN BILLINGS TO PARTICIPANTS:
Interest costs not capitalizable... . . . . . . . . $109,093 $44,174 $157,677 $48,584 Loss on bond refundings . ... . . . . . . . . . 39,754 39,754 39,754 Depreciation.. . . . .. . . . . .. .. . . . . 28,643 10,51? 39,155 10,512 137,736 94,440 236,586 98,850 BOND RESOLUTION REQUIREMENTS INCLUDED IN BILLINGS TO PARTICIPANTS:
Special funds deposits.. . . . . . . . . . . . . .... . . $ 81,657 $43,707 $138,441 $56,784 Debt service.. . . . . . . . . . . . . . . . . . . . . . . 52,120 4,749 56,869 4,749 Investment income not available for operating purposes . . . . 8,179 2,290 11,152 2,973 Reserve and contingency fund valuation. . .. . .. . . . (3,946) (605) (4,551) (605) 138,010 50,141 201,911 63,901 (Deferred revenues) net costs to be recovered from future billings to participants. .. . . . . . . . .. $ (274)$44.299 $ 34,575 $34,949 F. Bonds The agency has been authorized to issue Catawba Electric Revenue Bonds (bonds) in accordance with the terms, conditions, and limitations of the resolution. The total to be issued is to be sufficient to pay the costs of acquisition and construction of the project, as defined, and/or for other purposes set forth in the resolution. It is currently estimated that these costs will require the issuance of up to $2,399,755,000 of bonds. Future refund-ings may afTect the amount of bonds to be issued. On August 5,1986, the Local Government Commission of the State of North Carolina (LGC) approved the issuance of such bonds up to a maximum principal amount of
$2,490,000,000; additional LGC approval must be obtained for the issuance of bonds in excess of this amount.
At December 31,1985, the agency had outstanding $2,136,795,000 of bonds with an unamortized discount of
$ 123,648,000. On January 1,1986, the agency made principal payments of $4,590,000 for maturing bonds.
During 1986, an additional $262,960,000 was issued (Series 1986), bringing the total outstanding bonds at December 31,1986 to $2,395,16f M as follows (in thousands of dollars):
Series 1978 5.3% to 6.45% maturing annually from 1987 to 2000.. .. .. . . . .. . $ 74,470 6.6% maturing in 2003 with annual sinking fund requirements beginning in 2001. . . . . . 25,870 6.7% maturing in 2008 with annual sinking fund requirements beginning in 2004. -. 55,935 6.875% maturing in 2020 with annual sinking fund requirements beginning in 2009. . . 240,290 396,565 Series 1979 5.8% to 6.9% maturing annually from 1987 to 2000.. . . . . . . . . . 26,045 7.1% maturing in 2004 with annual sinking fund requirements beginning in 2001... . 12,905 7.375% maturing in 2020 with annual sinking fund requirements beginning in 2005. . . . 109,895 148,845 Geries 1981 9.4% to 10% maturing annually from 1991 to 1995. . . . .. . . . .. 4,750 8.5% maturing in 2017 with annual sinking fund requirements beginning in 2011. . 25,000 29,750 Series 1982 7.5% maturing annually from 2018 with annual sinking fund requirements beginning in 2009.. 25,000 21
Notes to Financial Statements North Carolina Municipal Power Agency Number 1 Years Ended December 31,1986 and 1985 F. Bonds (Continued)
Series 1983 8% to 9.25% maturing annually from 1991 to 1996.. . .. . . . . . . . . . . . ... .. . . . . . . . . . . . . $ 7,300 7% maturing in 2018 with annual sinking fund requirements beginning in 2009. . . . . . . 25,000 32,300 Series 1984 8.5% to 10.2% maturing annual!y from 1991 to 1998.... . . . . . ... . . . . . . . . . . . 36,295 10% maturing in 2014 with annual sinking fund requirements beginning in 2011. ... . . . ... 50,000 7.5% maturing in 2019 with annual sinking fund requirements beginning in 2017.. .. . . .
50,000 j 36,295 Series 1985 7.25% to 9.1% maturing annually from 1991 to 2000.. .. . . . . . .. . . . . . 52,445 9.375% maturing in 2005 with annual sinking fund requirements beginning,in 2001. . . . . . . . . . 40,000 9% maturing in 2013 with annual sinking fund requirements beginning in 2005. . . . ..... 136,760 9.5% maturing in 2019 with annual sinking fund requirements beginning in 2014.. . . . . . . . . . 170,795 7% maturing in 2020 with annual sinking fund requirements beginning in 2019. . . . ... .
50,000 450,000 Series 1985A 7.3% to 9.2% maturing annually from 1991 to 2000... .. . . . . . . . . . . . . . . . .. 8,510 9.375% maturing in 2005 with annual sinking fund requirements beginning in 2001. . . . . . . . . 21,005 9% maturing in 2014 with annual sinking fund requirements beginning in 2006.. .. . . . 95,270 9.625% maturing in 2019 with annual sinking fund requirements beginning in 2015.. ... . . . I13,360 39,545 7% maturing in 2020... .. . . . . . . . . . .. . . . . .. . . . . . . . . . . . . . . . .
277,690 Series 1985B 7.4% to 8.75% maturing annually from 1991 to 2002.. .. . .. . . _ . . . . . . . . . . . . . . . . . . . 109,865 8.75% maturing in 2005 with annual sinking fund requirements beginning in 2003. .. .. .
61,935 8.5% maturing in 2017 with annual sinking fund requirements beginning in 2006.. .. . . . . . . 338,345 A 25,615 6% maturing in 2020 with annual sinking fund requirements beginning in 2018... . .. . .
635,760 Series 1986 6% to 7.5% maturing annually from 1991 to 2000.. .. ... . . . . . .. . .. . . . . . . . . . 37,465 7.5% maturing in 2006 with annual sinking fund requirements beginning in 2000. . . . . . 38,915 7% maturing in 2018 with annual sinking fund requirements beginning in 2006. . . ... . .
148,305 5% maturing in 2020 with annual sinking fund requirements beginning in 2018. .. . .
38,275 262,960 2,395,165 4,840 Less: Current maturities of bonds . . . .. .. . . . . . . . . . . . . . . . . . . . .
143,971 Unamortized discount.. . . . . .. ... .. . . .. . .. . . . . . . . . . . ..
$2,246,354 In 1985, certain proceeds of the Series 1985A and 1985B Bonds were used to establish a trust for refunding portions of the Series 1981,1981 A,1982,1983, and 1984 Bonds, totalling $95,250,000; $25,000,000;
$ 175,000,000; $167,000,000; and $295,000,000, respectively. Under both Refunding Trust Agreements, obliga-tions of or guaranteed by the United States have been placed in irrevocable Refunding Trust Funds maintained by the Bond Fund Trustee. The government obligations in the Refunding Trust Funds, along with the interest earnings on such obligations, will be sufficient to pay all interest on the refunded bonds when due and to redeem all refunded bonds at various dates prior to their original maturities, in amounts ranging from par to a maximum redemption price of 103%. The monies on deposit in each Refunding Trust Fund, including the mterest earnings thereon, are pledged solely for the benefit of the holders of the refur.. led bonds. Since establishment of each Refunding Trust Funct, the refunded bonds are no longer considered outstanding obliga-tions of the agency.
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Notes to Financial Statements.
North Carolina Municipal Power Agency Number 1 Years Ended December 31,1986 and 1985 F. Bonds (Continued) .
Under GAAP, the agency is required to recognize a loss on refundings, aggregating $93,300,000 for both termdings. Of this amount, $53,546,000 has been capitalized as construction work in progress. The remaining S N 54,000 has been recorded as an extraordinary item in 1985, is included in net costs to be recovered from Sture billings to participants, and is to be recovered through the principal payments of debt service on the Series 1985A and 1985B Bonds. As a result of the refundings, the agency will benefit from reduced debt service costs over the lives of the Series 1985A and 1985B Bonds.
Interest on the bonds is payable semi-annually. The bonds are subject to redemption prior to maturity at the l option of the agency, on or after the following dates at a maximum of 103% of the respective principal amounts:
{
' Series 1978. ... . .. . . . . . . . . . . . . . . . . . .. ..... January 1,1989 Series 1979.. .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1,1990 l Series 1981. . . . .......... ... . . . . . . . . . . . . . . . . . . . . . January 1,1991 .
Series 1982 and 1983... .. . .. . .. . . . . . . . . . . . January 1,1993 Series 1984. .. . . . . . . . . . .. . . . . . . . . . . . . . January 1,1994 Series 198 5 . . . ..... . . . .. _.. . ... . . . . . . . . . . . . . . January 1,1995 Series 19 8 5 A,198 5 B, and 1986. . .. ... . .. ....... ,... .. . .. . January 1,1996 l The bonds are special obligations of the agency, payable solely from and secured solely by (1) project nvenues <
l (as defined by the resolution) after payment of project operating expenses (as defined by the resolution) and (2) i other monies and securities pledged for payment thereof by the resolution.
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The resolution requires the agency to deposit into special funds all proceeds of bonds issued and all project revenues (as defined by the resolution) generated as a result of the Project Power Sales Agreements and Interconnection Agreement. The purpose of the individual funds is specifically defined in the resolution.
Maturities of outstanding bonds through 1991 and thereafter are as follows (in thousands of dollars):
l i 1987... ..... . ... .. . . . . . . . . . . . $ 4,840 1988.... . . . . . . . ..... . . . . . . . . . 5.,100 1989.......... . .. .. . . .. . . 5,385 1990.. . . . . . . . . . . .. ... . . . . . . . . 5,690 19 91..._.. . .. .. . . . . .. . . . . . . . . . . . . . . . . 21,020 Thereafter.. . . . . . .. . ....,.. .. .. . . . . 2,353,130
$2,395,165 G. Bond Anticipation Notes Bond anticipation notes in the aggregate principal amount of $100,000,000.matuied January 1,1986 and were retired from the proceeds of the Series 1985 Bonds.
H. Notes Payable In 1985, the agency, together with NCEMPA, borrowed $1,600,000 to finance the acquisition of a computer jointly owned by the agency and NCEMPA. The agency's obligation to repay this borrowing, which is currently not collateralized, is limited to $800,000, plus accrued interest thereon at a rate of 7.85% per annum, and is being repaid in equal monthly installments, including interest, of $20,000 through April 1989.
In 1985, the agency, together with NCEMPA, borrowed $1,420,000 to finance the acquisition of real estate jointly owned with NCEMPA, which is proposed to be the site of administrative offices for the two agencies and ElectriCities. The agency's obligation to repay this borrowing, which is currently not collateralized, is limited to
$710,000, plus accrued interest thereon at the rate of 8.15% per annum, and is being repaid in equal monthly installments, including interest, of $10,000 through April 1989 with a payment of $410,000 in May 1989.
At December 31,1986 and 1985, the outstanding balance of ther,e notes is $1,097,000 and $1,351,000, respectively.
I. Tax-Exempt Commercial Paper Tax-exempt commercial paper was refunded at maturity from proceeds of the Series 1986 Bonds.
J. Commitments The agency has a contractual agreement with ElectriCities whereby Electricities provides, at cost, general management ser> ices to the agency. This agreement is for three years continuing through December 31,1989, and shall be automatically renewed for successive three-year periods unless terminated by one year's notice by either party prior to the end of any contract term.
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Notes to Financial Statements North Carolina Municipal Power Agency Number 1 Years Ended December 31,1986 and 1985 J. Commitments (Continued)
For the years ended December 31,1986 and 1985, the agency paid ElectriCities $1,903,000 and $1,932,000, respectively, of which $166,000 and $212,000, respectively, has been capitalized as construction work in progress.
K. Contingencies The Price-Anderson Act, which expires in August 1987, unless extended, limits the public liability for a nuclear incident at a nuclear generating unit to $700,000,000, which amount is to be covered by private insurance and agreements of indemnity with the Nuclear Regulatory Commission. Such private insurance and agreements of indemnity are carried by Duke on behalf of all co-owners of the station. The terms of this coverage require the owners of ali licensed facilities to provide up to $5,000,000 per year per unit owned in the event of any nuclear incident involving any licensed facility in the nation with a maximum of $10,000,000 per year per unit owned in the event of more than one incident. If any such payments are required, the agency would be liable for 37.5% of those payments applicable to the station.
Property damage insurance coverage presently available for the station has a maximum benefit limited to
$ 1,135,000,000. Such available coverage has been obtained.
On September 1,1986, Catawba Unit 2 entered an eleven-week forced outage due to damage suffered by the main generator. The manufacturer has investigated and reported its fmdings on the possible causes of the damage. Duke is reviewing that report while awaiting the results of an independent study which it commis-sioned. Depending upon the fmal resolution concerning causes of the failure, the agency could be liable for 37.5% of the net costs associated with the damage. The magnitude of those costs cann'ot be determined at this time because the manufacturer has not indicated the amount to be billed pending resolution of responsibility and it is uncertain what, if any, portion of the damage will be covered by insurance. In the opinion of agency management, the resolution of this issue is not anticipated to have a material affect on the financial statements.
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Schedules of Revenues and Expenses Per Bond Resolution and Other Agreements ;
. North Carolina Municipal Power Agency Number 1
-($000s)
Year Ended Year Ended i Lecember 31,1986 December 31.1985 l'roject Supplemental Total Project Supplemental Total REVENUES: '
Sales of electricity to participants ... . . .. .. .. . $ 3,574 $133,347 $ 136,921 $(3,120) $126,135 $123,015 Sales of electricity t o utilities... .. ...... .......... .. .. 194,986 194,986 83,175 83,175 Investment revenue available for operations . . .... .. . .. 10,954 3,121 14,075 770 2,112 2,882 Other revenues ... ... .... ... ... 5 5 209,514 136,468 345,982 80,825 128,252 209,077 EXPENSES:
Operation and maintenance... 38,094 38,094 15,090 15,090 Nuclear fuel.... .. . . . . . . . .. 19,623 19,623 10,490 10,490 Interconnection services:
Purchased power... . . . . . . . 7,911 110,066 117,977 3,854 104,596 108,450 Transmission and distribution.. . . . . . . . 14,416 14,416 13,309 13,309 l Other.. .. . ... .. .. . . . . . . . 238 238 315 315 7,911 124,720 132,631 3,854 118,220 122,074 Administrative and general-Duke.... .. . . . . . . . . . . . . . . . . 9,626 9,626 2,873 2,873 Administrative and general-agency. . .. .. . . . . . . .. 948 992 1,940 926 1.288 2,214 Miscellaneous agency ex pense... ....... . 94 94 3,999 3,899 (100)
Gross receipts tax.. . . . . . . . . . I15 4,234 4,349 Property tax.. . ... ...... . . . . . 3,620 3,620 4,590 248 4,838 Debt sen ice.. ... ... .. .. 51,866 353 52,219 (605) (605)
Resene and contingency fund valuation ... .. . . . . . (3,946) (3,946)
Special funds deposits:
Decommissioning fund . ... 2,224 2,224 1,769 1,769 Revenue fund .. ..... . . .. 1,396 1,396 349 349 Rate stabilization fund.. ... 72,269 72,269 40,919 40,919 Resen'e und contingency fund . . . . . .. . 5,768 5,768 670 670 209.514 130.393 339.907 80,825 123,755 204,580 EXCESS OF REVENUES OVER EXPENSES .. . . . . . . . . . . . .. . $ $ 6,075 $_ 6,075 $ $ 4,497 $ 4,497 l
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Schedule of Changes in Assets of Funds Invested For the Years Ended December 31,1986 and 1985 North Carolina Municipal Power Agency Number 1
($000s) Funds Invested Iktad and Power January 1, Note Billing Investment 1985 Proceeds Receipts Income Disbursements Construction fund:
$ 19,032 $ 197,742 $ $ 7,627 $(118,702)
Construction account... . .. . .
84,233 162,943 12,746 Construction interest account... ..
Construction revolving account..... 104 7 I1,211 520 (6,500)
Note interest 1983 account.. ..
114,580 360,685' 20,900 (125,202)
Bond fund:
69,319 (21,255) 235 (138,436)
Interest account... ... . . . . .. .
171,151 40.700 20,687 Reserve account . . . . . . . . . . . .
Principal account . . . . . . . . . . . . . .
186 240,470 19,445 21,108 (138,436)
Reserve and cc .mgency fund.. . ... . 17,084 4,070 1,955 (9)
Decommissioning fund.. . . .. .. 2,270 289 Special rer,erve fund.. . . . . . .. .
1,136 f16 Commercial paper account . . .... 128,029 9,407 (10,456)
Revenue fund:
3,337 22,606 365 18,814 Revenue account. . .. ..
10,484 2,291 Rate stabilization account . .
13,821 22,606 2,656 18,814 Operating fund:
Working capital account. .. 2,468 349 (26,947)
Fuel account. . . . . . .
2,468 349 (26,947) 31,703 1,510 99,314 1,997 (72,788)
Supplemental fund.. . . . .
$551,561 $385.710 $121,920 $58,777 $(355,024) 26
Dec n r 31, ote i g Investment Dec 31, l Transfers 1985 Proceeds Receipts Income Disbursements Transfers 1986 1
$ 57,913 , $163,612 $170,353 $ $ 5,702 $(348,333) $ 63,244 $ 54,578 (97,288) 162,634 46,881 10,179 (148,057) 71,637 (10) 101 6 (5) 102 (1,348) 3,883 11 (3,250) (644)
(40,733) 330,230 217,234 15,898 (351,583) (85,462) 126,317 148,262 58,125 1,231 (146,294) 181,367 94,429 (19,400) 213,138 20,504 21,651 (37,853) 217,440 4,464 4,650 156 (4,590) 4,691 4,90_7, 133,326 275,913 20,504 23,038 (150,884) 148,205 316,776 -
(1,778) 21,322 2,050 2,257 (1,053) (2,937) 21,639 1,719 4,278 491 2,205 6,974 (99) 1,153 89 1,033 (209)
(93,281) 33,699 4,068 (8,113) (29,654)
(40,089) 5,033 22,492 420 87,099 (79,184) 35,860 35,983 48,758 8,179 58,925 115,862 (4,106) 53,791 22,492 8,599 87,099 (20,259) 151,722 30,720 6,590 1,397 (50,326) 60,079 17,740 7,185 7,185 13,428 20,613 37,905 13,775 1,397 (50,326) 73,507 38,353 (32,953) 28,783 113,941 3,031 (16,074) (85,396) 44,285
$ $762,944 $239,788 $ 136,433 $58,868 $(490,934) $ $707,099 27
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s North Carolina Municipal Power Agency Number 1 3100 Smoketree Court, Suite 600 P.O. Box 29513 Raleigh, North Carolina 27626-0513
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