ML20245E830
| ML20245E830 | |
| Person / Time | |
|---|---|
| Site: | Haddam Neck File:Connecticut Yankee Atomic Power Co icon.png |
| Issue date: | 04/24/1989 |
| From: | Pdeone L, Pedone L CONNECTICUT YANKEE ATOMIC POWER CO., NORTHEAST UTILITIES SERVICE CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8905020161 | |
| Download: ML20245E830 (72) | |
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1 i CONNECTICUT YANKEE AT O MIC POWER COMPANY B E R L I N, CONNECTICUT P O. BOX 270
- HARTFORD. CONNECTICUT 06141-0270 TEL EPHONE 203465-6000 April 24, 1989 l
RE: 10 CFR 50.71(b) l I
Director Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555
Dear Sir:
l l In accordance with paragraph 50.71(b) of 10CFR, Part 50, enclosed is one copy of the 1988 Annual Financial Report on Form 10-K of the Company, license holder, certified by Arthur Andersen & Company, certified public accountants.
Please acknowledge receipt by returning the duplicate copy of this letter in the stamped, self-addressed envelope enclosed for your convenience.
I Very truly yours,
&eonardPedone L
Supervisor, Accounting Research and Financial Reporting Northeast Utilities Service Co.
LP/jem/SRR121c Enclosure 0
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- y SECURITIES AND EXCHANGE COMMISSION WASHING 7DN, D. C. 20549-1004 FORM 10-K q
ANNUAL REPORT PURSUANT 'IO SECTION 13 OR 15 (d) OF ,
THE SECURITIES EXCHANGE ACT OF 1934 I For the Fiscal Year Ended December 31, 1988 l
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Commission Registrant; State of Incorporation; File Number I.R.S. Employer i Address; and Telephone Number Identification No.
1 33-17909 Connecticut Yankee Atomic Power Company i
06-0790937 (
(a Connecticut corporation) !
Selden Street Berlin, Connecticut 06037-1616 i I
Telephone (203) 665-5000 l
t Securities registered pursuant to Section 12(b) of.the Act: None !
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
I Yes X Mc _
State the aggregate market value of the voting stock held by nonaffiliated of the registrant.
Not applicable.
On March 1, 1989 there were outstanding 350,000 shares of the registrant's Common Stock, $100 par value.
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6 CQiNECTICITF YANKEE A'IOMIC POWER COMPANY
, 1988 Form 10-K Annual Report Table of Contents Page PART I Item 1. Business.............................................. 1 l The Company................................................. 1 r
Sponsor contracts........................................... 2 Power Contracts.......................................... 3 Capital Funds Agreements................................. 4 operations.................................................. 5 General.................................................. 5 Nuclear Puel............................................. 7 i Spent Puel and Waste Disposal............................ 8 High-Level Waste....................................... 9 Low-Level Waste....................................... 10 Decommissioning.......................................... 11 Insurance................................................ 12 Regulatory and Environmental Matters........................ 13 Rates.................................................... 13 Public Utility Regulation................................ 14 Nuclear Plant Licensing.................................. 15 Environmental Regulation................................. 16 General............................................... 16 Surface Water Quality Requirements.................... 17 l Air Quality Requirements............................... 18 i Hazardous Waste Regulations........................... 18 1
l Construction, Nuclear Puel Expenditures and Financing. . . . . . . 19 Existing Debt Arrangements.................................. 20 p
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Certain Contingencies Affecting Sponsors.................... 22 amployees................................................... 23 1
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Item 2. Properties............................................ 23 l Item 3. Legal Proceedings.....................................,
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1 Ite.n 4. Submission of Matters to a Vote of Security Holders (Fourth Quarter 1988)................ 24 t
PART II Item 5. Market for Registrant's Common Stock and Related Security Holder Matters....................... 25 Item 6. Selected Financial Data............................... 25 Item 7. Management's Discussion and Analysis of Financial Condition and Rerillts of Operations......... 26 Item 8. Financial Statementa and Supplementary Data........... 30 Item 9. Disagreements on Accounting and Financial Disclosure............................................ 46 PART III Item 10. Directors and Executive Officers of the Registrant................. . . . . . . . . . . . . . . . . . . . . . . . . . . 47 l Item 11. Executive compensation................................ 51 1 ,
Item 12. Security Ownership of certain Beneficial Owners and Management................................. 52 Item 13. Certain Relationships and Related Transactions. . . . . . . . 54 PART IV Item 14. Exhibits and Financial Statement Schedules...... ..... 55 1
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Ve PART I a, Item 1. Business THE COMPANY e
Connecticut Yankee Atomic Power Company (the " Company" or "CY") is a regulated utility company whose sole activity consists of the ownership and l
operation of a 587,000 Lilowatt, single-unit nuclear electric generating plant (the " Plant"). The Plant began commercial operation on January 1, 1968, and was among the firrt nuclear generating plants with a rated capacity exceeding 400,000 kilowatts placed in commercial operation in the United States. The Plant is located on a site of approximately 525 acres adjacent to the Connecticut River in Haddam, Connecticut. It utilizes a pressurized water nuclear reactor system supplied by Westinghouse Electric Corporation. The operating license from the Nuclear Regulatory Commission ("NRC") for the Plant expires on June 29, 2007. The Company's net investment in the Plant and nuclear fuel at December 31, 1988 was $282.3 million.
The Company was incorporated in 1962 as a Connecticut corporation. Its principal executive offices are located at Selden Street, Berlin, Connecticut 06037-1616 (telephone 203-665-5000).
The Company's common stock is held by ten New England electric utilities (the " Sponsors"). Under long-term power contracts, the Sponsors are required to purchase the entire electrical output of the Plant at a price designed to cover the Company's total operating expenses and provide a return on the Company's net unit investment. See " Sponsor Contracts." The Sponsors' stock ownership and power purchase percentages in the Company are as follows:
The Connecticut Light and Power company ..................... 34.5%
New England Power Company ................................... 15.0 Boston Edison Company ....................................... 9.5 The United Illuminating Company ............................. 9.5 Vestern Massachusetts Electric Company ...................... 9.5 Central Maine Power Company ................................. 6.0 Public Service Company of New Hampshire ..................... 5.0 Cambridge Electric Light Company ............................ 4.5 Montaup Electric Company .................................... 4.5 Central Vermont Public Service Corporation .................. 2.0 Total .................................................. 100.0%
The individual electric service areas of the Sponsors and their affiliates cover most of the area and population of Connecticut, Massachusetts and Rhode Island and major portions of New Hampshire, Maine and Vermont. Two of the Sponsors (New England Power Company and Montaup Electric Company) are principally engaged in the business of selling electricity to affiliated electric companies, while the remaining eight Sponsors derive the major portion of their income from sales of electricity at retail.
d The Sponsors are each parties to the New England Power Pool ("NEP00L")
Agreement. Under the NEP00L Agreement, the region's generation and transmission facilities are planned and operated as part of a regional New England bulk power system. The Plant and all other generating facilities of NEP00L participants are interconnected through the New England transmission
- grid and operated as a single system through the New England Power Exchange, a -
central dispatch facility.
The Company's fuel cost for the Plant is approximately 1 cent per
- kilowatthour. When the Plant is out of service, the Sponsors replace the electricity that the Plant would otherwise have generated by purchasing electricity from those available NEP00L facilities that have the lowest available marginal costs.
Northeast Utilities Service Company ("NUSC0") has overall responsibility for the operation and maintenance of the Plant and provides necessary technical support for the Plant. NUSCO is part of the Northeast Utilities public utility holding company system, which also includes two of the Sponsors, The Connecticut Light and Power Company ("CL&P") and Vestern Massachusetts Electric Company ("VMEC0"), having in the aggregate a 44.0%
ownership interest in the Company. NUSCO is also responsible for the three-urit Millstone nuclear power plant in Vaterford, Connecticut, consisting of a 659.5 MV Unit i vith a boiling water reactor system, which was placed in operation in 1970, an 868.3 MV Unit 2 and an 1156 MV Unit'3 utilizing pressurized water reactor systems, which were placed in operation in 1975 and 1986, respectively.
SPONSOR CONTRACTS The Company entered into Fower Contracts and Capi:al Funds Agreements with the Sponsors in 1964. The original Power Contracts have subsequently been supplemented and the term has been extended, as described below. The Company's rights under the original Power Contracts, the Additional Power Contracts and the 1987 Supplementary Power Contracts referred to below and the Capital Funds Agreements have been pledged as additional security for certain of the Company's indebtedness. See " Existing Debt Arrangements." The Company has agreed with its lenders and the holders of certain of its long-term indebtedness to certain limitations on the ability of the Company to effect cancellations, terminations, and amendments of the Sponsor Contracts. i 1
The Sponsors have contracted separately with each other and with other New England utilities for the transmission of their shares of the electricity generated by the Plant.
Summaries of certain provisions of the original Power Contracts, the l Additional Power Contracts, the 1987 Supplementary Power Contracts and the j Capital Funds Agreements are provided below. Such summaries are not complete descriptions of all the provisions of those agreements, and are qualified in ,
their entirety by reference to the copies of these agreements which are I exhibits to this Annual Report on Form 10-K.
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Power Contracts The company has a separate Power Contract with each Sponsor. Each Power
- Contract is identical except for the name of the Sponsor and each Sponsor's entitlement percentage of the Plant's energy and capacity. Each Power i Contract, as supplemented, entitles and obligates the Sponsor to purchase a l percentage of the Plant's capacity and net electrical output which is eo.ual to
= the Sponsor's stock ownership percentage. See "The Company." l The Power Contracts, as supplemented, provide that, with respect to each month, the Sponsor vill pay in arrears its percentage of the following costs:
(1) the Company's total operating expenses (including depreciation) as determined in accordance with accounting rules prescribed by the Federal 1 Energy Regulatory Commission ("FERC"), and'(ii) a return on investment which is computed by applying a return percentage to the Company's net investment in the Plant and in nuclear fuel. The return percentage is a composite of a fixed return on the common equity component of the Company's capitalization
(" ROE") and the actual effective interest costs of the Company's long-term l
debt. Sponsors are also obligated to pay, even if the Power Contracts terminate, the decommissioning costs of the Plant and the accumulated costs of j spent fuel disposal. See " Operations--Spent Fuel and Vaste Disposal" and i
" Operations--Decommissioning." i The original Power Contracts expire on January 1, 1998. In 1984, the Company entered into an Additional Power Contract with each Sponsor extending the Power Contract arrangement for an additional terr, which will expire on 1 the later of the termination of the Company's obligations under the NRC license for the Plant or when all required decommissioning payments have been made.
The original Power Contracts have been supplemented a number of times to provide for payments at levels above those originally required. The 1987 Supplementary Power Contracts were effective as of June 1, 1987 (except for the reduction of the Company's ROE to 12 percent, which was effective May 6, 1988) and superseded all prior supplements. See " Regulatory and Environmental Matters--Rates."
The obligations of the Sponsors and the Company under the Power Contracts are subject to all applicable state and federal laws and orders and other duly authorized action of governmental authority. See " Rates" and " Regulatory and Environmental Matters--Public Utility Regulation."
On September 27, 1988, the Vermont Supreme Court issued a decision invalidating contracts under which four Vermont municipalities and two Vermont electric cooperatives had contracted with Massachusetts Municipal Wholesale Electric Company ("MHVEC") for shares of the power generating potential from the Seabrook nuclear project. The court held that the contracts impermissible
' delegated the management responsibilities of the Vermont purchasers by '
transferring control over their spending power and restricting their ability I to incur other debts.
4 e a Although the Company presently has no contractual relationships with Vermont municipalities or cooperatives, one of the Company's Sponsors, Central Vermont Public Service Corporation, is a Vermont investor-owned public utility which owns 2% of the Company's stock and has a 2% entitlement to the Company's capacity and generation and, like the Company's other Sponsors, has agreed under its Power Contract to reimburse the Company its pro rata share of the Company's operating expenses and to make contributions under its Capital Funds Agreement (see below) to the capital of the Compeny under certain circumstances.
- Although the Company has received no inquiries and is unavare of any pending or threatened claims with regard to the validity of its contracts with the Sponsors, management is currently reviewing the potential impact of the recent court decision. On the basis of the analysis done to date, management believes that the Company's contracts differ favorably in several significant respects from those invalidated by the Vermont Supreme Court. First, the signatories to these contracts with the Company are the stockholders of the Company and are represented on its board of directors. Second, these contracts do rot limit the ability of the signatories to incur other debt.
Third, unlike the Seabrook situation, these contracts relate to a generating facility that has been completed and placed in service. ,
However, there d:, no assurance that, if challenged, these contracts would be upheld. Accordingly, the Company is considering options for clarifying these issues.
Capital Funds Agreements The Company has a separate Capital Funds Agteement with each sponsor. )
Each Capital Funds Agreement is identical except for the name of the Sponsor and each Sponsor's ownership percentage. Each Sponsor is obligated under the terms of its Capital Funds Agreement with the Company to provide its percentage ownership share of certain capital requirements of the Plant, either through common stock purchases or through loans or advances to the Company. The obligation of each Sponsor to purchase such shares and to make such loans and advances is currently limited to the Sponsor's stock percentage of $32 million, which is the amount remaining of the original commitment of
$70 million. To the extent that any amount so invested is returned or repaid to the Sponsor, the Sponsor's obligation to make such stock purchases and to make such loans or advances is reinstated.
The obligation of each Sponsor to purchase stock or to make loans or advances under its Capital Funds Agreement is limited by certain of the contractual terms and is subject to the condition that all necessary regulatory approvals shall have been obtained and continue in effect with respect to both the action to be taken by the Company and the action to be taken by the Sponsor. No assurance can be given that the Company or Sponsors vill be able to obtain such regulatory approvals, if requested. !
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OPERATIONS General
', Nuclear electric generating plants typically have been relatively expensive to build but have lov fuel costs. At December 31, 1988, the Company's investment in the Plant, without deduction for accumulated depreciation, was $404 per kilowatt. The investment in the Plant remains o
relatively low despite extensive modifications made since the Plant was placed in commercial operation on January 1, 1968. These modifications, which have ;
been made to meet NRC requirements and to maintain and improve the reliability and performance of the Plant, have increased the cost of the Plant from $94.6 million at commercial operation on January 1, 1968 to $314.7 million at December 31, 1988.
The Plant generated approximately 3.3 billion kilowatthours of electricity in 1988. From its commercial operation date of January 1, 1968 to December 31, 1988, the Plant has generated over 83 billion kilowatthours, making it one of the most productive nuclear units in the United States. The Plant's actual capacity factor during this period was 74.4%. The capacity factor for each of the last seven years is shown in the following table:
All U.S.
CY's Nuclear Plants' Year Capacity Factor Capacity Factor (1) 1982 ............................. 89.0% 58.0%
1983 ............................. 74.2 58.4 1984 ............................. 65.9 58.1 1985 ............................. 90.9 61.7 1986 ............................. 42.3 59.0 1987 ............................. 49.8 60.5 1988 ............................. 64.6 65.1 Average .......................... 68.1 60.1 (1) The capacity factor for all U.S. nuclear plants is based on figures supplied by the NRC and reflects those U.S. plants in operation in these ,
years.
Nuclear electric generating plants must be taken out of service periodically to replace a portion of the nuclear fuel and to perform necessary maintenance and plant modifications. These scheduled refueling outages for the Plant are required approximately once every 14 months and have had an average duration of approximately 12.3 weeks over the Plant's twenty-year life.
The Plant's lover capacity tactors in 1986, 1987 and 1988 resulted from a scheduled refueling and maintenance outage that commenced on January 4, 1986
' and was completed on May 10, 1986, a subsequent unscheduled three-week outage from July 11, 1986 to August 2, 1986, during which additional maintenance work vas performed, an extended refueling and maintenance outage which commenced on
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July 18, 1987 and was completed on April 9, 1988 and a maintenance outage which commenced on April 30, 1988 and ended on May 31, 1988. During these outages, the following maintenance was performed:
o all of the fuel assemblies were remove,d from the reactor and ,
inspected and three damaged fuel assemblies were replaced in addition to spent fuel o maintenance was performed on valves in a system that cools the reactor during shutdowns, on the steam generators, and on the main turbine generator o maintenance was performed on the reactor coolant pump seals o the charging pumps were repaired o some steam generator tubes were plugged o the reactor vessel was inspected, certain vibration damage to support asse > lies which hold the thermal shield in place was repaired, anu modifications intended to limit vibration in the future vere effected at a cost of $10.6 million o modifications were made to piping in the Plant's emergency core cooling system and instrumentation in the reactor protection system o two new low-pressure turbines (costing approximately $20 l million) were installed to increase reliability and efficiency l
o a new control room process computer was installed I
o an inspection and maintenance program for the Plant'a four steam generators was completed.
The Plant's 1989 refueling and maintenance outage is currently scheduled to commence on September 9, 1989 and last for eight weeks. During the outage, the Company expects to inspect the steam generators and the thermal shield.
Recently, a steam generator tube ruptured at a nuclear electric generating plant located in Virginia. The rupture appears to have resulted from the failure of a plug which had been installed in the tube. The Plant has plugs of a similar type, and an investigation has been undertaken to determine the nature and extent of any problem that might be associated with these plugs.
See " Regulatory and Environmental Matters--Nuclear Plant Licensing" for a discussion of recent NRC Systematic Assessment of Licensee Performance ratings of thr Plant.
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1 Nuclear Fuel As part of each scheduled refueling and maintenance outage, one-third of the reactor's fuel assemblies are replaced with fresh fuel. Generally the supply of fuel for nuclear generating units involves the mining and milling of uranium ore to uranium concentrate, the conversion of uranium concentrate to uranium hexafluoride, enrichment of that material and fabrication of the
-enriched uranium hexafluoride into usable fuel assemblies.
To the extent indicated below, the Company has contracts for uranium ;
concentrates, conversion, enrichment and fabrication for the Plant, which, I with current inventory, cover the Plant's requirements (100 percent unless otherwise noted) through the following years:
Conversion Uranium to Concentrates Hexafluoride Enrichment Fabrication 1995(1) 1989(2) 1990(3) 1993(4) l (1) Uranium concentrates requirements are 100 percent covered through 1995 and 25 to 50 percent covered for 1996 and 1997. ,
(2) Conversion services requirements are 25 to 50 percent covered through l 1997. Contracts are presently under negotiation to provide 100 percent l coverage through 1995.
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(3) After 1990, enrichment requirements are 70 percent covered for the life of ]
the Plant under one Utility Services Enrichment Contract ("USEC") with the '
DOE providing enrichment services for the Plant and the three Hillstone units. The Company has covered the remaining 30% through another source i until and including 1990. l (4) The contract provides an option to purchase additional services that can l cover fabrication requirements through 1998. l The Company expects that uranium concentrates and related services not covered by existing contracts vill be available, although their availability might require that suppliers develop additional capacity.
In December 1984, three domestic uranium mining companies filed a five count suit against the DOE in the U.S. District Court for the District of Colorado. The second of the five counts sought to declare the DOE's Utility Services Enrichment Contracts ("USECs") with electric utilities null and void.
The mining companies contend that the present enrichment policies of the DOE are detrimental to the viability of the domestic uranium mining industry. The
, DOE supplies 70 percent of the enrichment requirements of the Northeast Utilities system companies, including the Company, for the ;hree Millstone units and~the Plant under one DOE USEC.
In September 1985, the Court ruled in favor of the mining companies on the second count and found the USECs null and void. The Court found that the DOE
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i violated the Atomic Energy Act of 1954 by failing to submit the new contract criteria to Congress for 45 days of review prior to their adoption. The DOE filed an appeal in the U.S. Court of Appeals for the Tenth Circuit. In July 1987, the Court of appeals issued an order remanding the case to the District Court to determine whether the mining companies had standing to bring the , ;
lawsuit. The DOE has taken the position with its customers, including the 1 Company, that the USECs are still valid, binding and enforceable.
In June'1986, the District Court, ruling on count four of the lawsuit,
- I issued an injunction ordering the DOE to restrict its enrichment of nuclear materials of foreign origin through December 31, 1986 and to cease enrichment !
of foreign nuclear materials thereafter. The. DOE appealed this decision to I the U.S. Court of Appeals for the Tenth Circuit. In July 1987, the Court of l Appeals affirmed the decision of the District Court. The Court of Appeals .J stated that while the DOE could determine how much restriction of the enrichment of foreign nuclear materials is required to assure viability of the domestic uranium industry, it could not decide to impose no restrictions when j the industry.is not viable. On June 15, 1988, the Supreme Court reversed the Court of Appeals, holding that so long as DOE properly determined that no amount of restriction would assure the viability of the uranium industry, the Atomic Energy Act does not require DOE to impose restrictions that are j calculated to serve an unattainable goal. The Supreme Court remanded the case j to the District Court for a trial to determine, inter alia, whether DOE did in i fact properly determine that no amount of restriction would assure the l viability of the industry and what it means to " assure viability." )
1 In October 1987, the United States and Canada agreed in principle on a l Free Trade Agreement which took effect on January 1, 1989 and eliminates a number of existing trade restrictions between the two countries, including the legislative restriction on the enrichment of Canadian uranium which was the j subject of the uranium litigation. As a result, the District Court in the l uranium litigation would not have been able to order a restriction on the l enrichment of Canadian uranium, the only foreign uranium which the Company has l contracted to purchase. On January 27, 1989, accordingly, the mining i companies filed a motion to dismiss the litigation without prejudice, which I has been granted by the District Court, effectively ending the lawsuit subject '
to the right of the mining companies to refile the suit at their discretion at some time in the future. Based on the dismissal of the lawsuit and the enactment of the Free Trade Agreement, the company expects to be able to continue to obtain enrichment of Canadian uranium through its USEC with the DOE.
The Company intends to propose a change in the cladding material for the .)
nuclear fuel core for the Plant from stainless steel to zirconium alloy. This !
change, expected to commence in 1992 and be complete in 1996, vill reduce nuclear fuel costs.
Spent Puel and Vaste Disposal ,
Costs associated with nuclear plant operations include amounts for disposal of nuclear vastes, including spent fuel, and for the ultimate decommissioning of the plants. The Company disposes of nuclear vastes through arrangements with independent contractors and is not itself engaged in the '
transport and disposal of nuclear vastes.
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Iligh-1.evel Vaste Under the Nuclear Vaste Policy Act of 1982 (the "Act"), the DOE is required to design, license, construct and operate a permanent repository for
. high-level radioactive vastes and spent nuclear fuel. The Act requires'the DOE to provide, beginning in 1998, for the disposal'of spent nuclear fuel and high-level radioactive vaste fram commercial nuclear power plants through
, contracts with the owners and generators of such vaste. The Company entered ,
into such a contract with the DOE as of June 30, 1983 vith respect to the l Plant. l The DOE has established disposal fees to be paid to the U.S. government by electric utilities owning or operating nuclear generating units to fund the DOE's activities under the Act. The fee was set at 1.0 mill per kilowatthour for electricity generated by nuclear power after April 7, 1983, but, based on a 1985 U.S. Court of Appeals decision, the kilowatthour basis upon which the fee was assessed by the DOE vas reduced by approximately 5 percent to conform with the terms of the Act that the fee be based on net electrical generation.
The Company has been collecting monthly from Sponsors and paying the DOE quarterly for fuel burned after April 7, 1983 in accordance with its contract with the DOE.
The fee for fuel burned prior to April 7, 1983 was determined in accordance with a fee structure based on-fuel burnup. The DOE contract specifies three options for payment of the fee for fuel burned prior to April 7, 1983. The Company has selected the deferred lump sum payment option, which allows for payment at any time prior to the first delivery of spent fuel to the DOE. The Company currently anticipates making payment to the DOE just before the first delivery of spent fuel. Fees due to the DOE for disposal of l nuclear fuel used prior to April 7, 1983 are approximately $75.0 million as of
- December 31, 1988, including interest costs of $26.2 million accrued from April 7, 1983 through December 31, 1958. The Company had recovered
$66.4 million for payment of this amount through rates as of December 31, 1988. The Company plans to recover the remaining $8.6 million through rates by May 1990. The Company is currently collecting, through rates, the interest accruing on the December 31, 1988 balance of $75.0 million.
The Company plans to meet its spent fuel obligation to the DOE vith respect to the period prior to April 7, 1983 by way of annual contributions to an independent irrevocable trust to be established by the company and maintained by a commercial bank. $30 million of the net proceeds from the j sale of the Company's Series A Bonds in 1988, with the income thereon, is being held by the trustee under the Company's mortgage indenture and it is expected that such funds vill ultimately be deposited in the trust. See
" Existing Debt Arrangements."
In return for payment of the fees prescribed by the Act, the' federal government is to take title to and dispose of the utilities' high-level vastes 1
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and spent nuclear fuel beginning no later than 1998. On January 28, 1987, the l DOE announced that its first high-level vaste repository vill not be in i l operation earlier than the year 2003, and that a monitored retrievable storage l facility, if approved by Congress, vill not be in operation earlier than 2003, I
l notwithstanding DOE's statutory and contractual responsibility to begin I l disposal of high-level radioactive vaste and spent nuclear fuel beginning no j i
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t later than January 31, 1998. Until the federal government begins receiving such materials in accordance with the Act, operating nuclear generating plants will need to retain high-level vastes and spent fuel on-site or make some other storage provisions.
The Company expects that existing storage facilities at the Plant are adequate through the mid-1990's. Developments in fuel consolidation technology could extend the storage capacity through the remaining projected
- l life of the Plant.
Low-Level Vaste Disposal costs for low-level radioactive vastes that result from normal operation of the Plant have increased significantly in recent years, despite j reduced volumes of such vastes, and are expected to continue to rise. The j cost increases are functions of higher fees and surcharges charged by the j disposal facilities and increased packaging and transportation costs. j Pursuant to the Low-Level Radioactive Vaste Policy Act of 1980, each State 1 became responsible for providing disposal facilities for low-level radioactive l vaste generated within the State and was authorized to join with other States j in regional compacts to jointly fulfill their responsibilities. Pursuant to the Low-Level Radioactive Vaste Policy Amendments Act of 1985 (the " Amendments Act"), each State in which a present disposal facility is located (South Carolina, Nevada and Vashington) is allowed to impose volume limits and a ;
surcharge on shipments of low-level radioactive vaste from States that are not I members of a compact in the region in which the racility is located.
Surcharges of $10/ cubic foot were imposed on January 1, 1986 and rose to
$20/ cubic foot on January 1, 1988. A future increase to $40/ cubic foot is scheduled to occur on January 1, 1990. The Amendments Act also requires that the following actions be taken by January 1, 1990 to avoid potential denial of access to the currently operating disposal sites: (1) a complete application must be filed with the NRC for a license to operate a low-level radioactive vaste disposal facility within each nonsited compact region, or (2) the Governor of the State in which a disposal facility is to be located must provide written certification to the NRC that the state vill be capable of providing for, and vill provide for, the storage, disposal, or management of any low-level radioactive vaste generated within the State after December 31, 1992.
The Northeast Interstate Low-Level Radioactive Waste Commission identified both Connecticut and New Jersey as dual host States for vaste facilities, and, therefore, both States must meet the above requirements.
Because the State governments are responsible for the development of disposal facilities, the Company cannot predict whether future milestones vill be met, penalties vill be imposed, or access to disposal sites will be denied.
There is no assurance that vastes from the Plant can be sent to the present facilities in 1990 or thereafter. If present facilities do not accept low-level radioactive vastes from the Plant, the Company expects to incur ,
substantial costs in developing alternative arrangements. To provide temporary storage of low-level radioactive vaste that may not be accepted by present disposal facilities, the Company has constructed low-level radioactive ,
vaste storage buildings at the Plant. The Company will be able to store approximately two years worth of vaste generation at this facility and other facilities expected to be available to the Company.
t Decommissioning The Company accrues decommissioning costs for the Plant on the basis of immediate and complete dismantlement at retirement. Immediate dismantlement is feasible only if a facility is available to recci.ve high level vaste. The Company reviews and updates its estimated decommissioning costs regularly to reflect inflation and changes in decommissioning requirements and technology.
The estimated cost of decommissioning the Plant as of December 31, 1988 was
$152.0 million in December 1988 dollars. The last decommissioning cost study was done in January 1987 and the cost has been inflated to December 1988 dollars. Changes in requirements or technology, or adoption of a decommissioning method other than immediate dismantlement, could have a material effect on the estimated cost of decommissioning.
The State of Connecticut enacted a law in 1983 requiring the operators of nuclear generating units to file periodically with regulatory agencies their plans for financing the decommissioning of such units. Pursuant to this law, The Connecticut Light and Power Company filed plans with the DPUC for financing the decommissioning of the Plant as part of its 1985 retail rate application. In its decision dated March 11, 1986, the DPUC declined to take action with respect to the plans for the Plant, on the grounds that the Company's rates are regulated by the FERC.
In 1982, the FERC authorized the recovery of $87.6 million of decommissioning costs through billings under the Power Contracts. The order also authorized a funding mechanism that allowed the Company to earn a return on an amount of net unit investment equivalent to its d" commissioning reserve.
Pursuant to the rate settlement with respect to the li Supplementary Power Contracts referred to below under " Rates," the Company currently may recover
$130 million of decommissioning expenses from Sponsors. The Company believes that revenues in amounts greater than those currently being collected vill be required to pay the full projected cost or decommissioning.
In 1984, the Company transferred the fund balance in its decommissioning reserve account to an independent, irrevocable trust maintained by a commercial bank. Each month the Sponsors are billed for their proportionate share of decommissioning expense and make payments directly to the trust. The trust balance, including interest earnings, must be used exclusively to discharge decommissioning costs as incurred. As of December 31, 1988, the market value of the trust assets was $50.6 million, and the book value was
$45.6 million. ,
In June 1988, the NRC published its final decommissioning rule, which amends its regulations concerning decommissioning planning, timing, funding, and environmental reviews. The Company believes that it currently meets the requirement of this rule.
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The Sponsors' obligations.to pay decommissioning costs will continue under the 1987 Supplementary Power Contracts until the completion of deconimissioning, notwithstanding any cancellation of the Power Contracts. See
" Sponsor Contracts." )
Insurance The public liability of the owner of a nuclear power plant arising from an ~
accident at the plant is limited by the federal Price-Anderson Act._ On j August 22, 1988, an extension of the Price-Anderson Act (Act) through August J 1, 2002 was signed, revising nuclear liability indemnification. The revised Act limits public liability from a single incident at a nuclear power plant to )
$7.6 billion. The first $160 million of liability would be provided by purchasing the maximum amount of commercially available insurance. Additional l coverage of up to $7.1 billion would be provided by an assessment of I
$63 million per incident, levied on each of the 113 nuclear units currently 1 licensed to operate in the United States, subject to a maximum assessment of j
$10 million per incident per nuclear unit in any year. In addition, if the !
sum of all public liability claims and legal costs arising from any nuclear incident exceeds the maximum amount of financial protection, each reactor operator can be assessed an additional five percent, up to $3.2 million. The j maximum assessment is to be adjusted at least every five years to reflect !
inflationary changes. The Company expects that its share of any assessment would be classified as an operating expense which would be passed on to the Sponsors under the Power Contracts.
The Company also has an indemnification agreement with the NRC under which the United States would indemnify and hold harmless the Company from public liability arising from a nuclear accident occurring at the Plant for all amounts in excess of the amount of required insurance (including the portion obtained from assessments against other plant owners).
The Company has purchased from American Nuclear Insurers ("ANI") and Mutual Atomic Energy Liability Underwriters ("MAELU") vorkers tort liability insurance to provide coverage for radiation injury claims presented by nuclear workers. The worker policies provide an industry aggregate coverage of $160 1
million. Each site insured under this program is subject to a maximum retrospective assessment of approximately $2.7 million. ,
d In addition, the Company has purchased from ANI/MAELU all risk primary i property insurance (including decontamination expenses) of $500 million I covering the Plant, and has purchased the currently available amount of excess property insurance of $825 million from Nuclear Electric Insurance Limited
("NEIL") and $400 million from ANI/MAELU. ANI/MAELU will provide up to
$400 million, and NEIL vill provide up to $100 million, in initial excess coverage. NEIL vill furnish the balance of coverage ($725 million) above the
$500 million excess layer up to the currently availavle maximum excess coverage of $1.725 billion. The NEIL agreement provides for a retrospective premium adjustment of up to 7.5 times the annual premium in the event of .
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property damage to another nuclear plant. The present maximum adjustment ;
payable by the Company vould be approximately $7.1 million which the Company i expects would be classified as an operating expense which would be passed on ,
to the Sponsors under the Power Contracts.
l On October 5, 1987, the NRC amended its regulations to require nuclear power plants to obtain property insurance coverage in a minimum amount of
$1.06 billion and to require such plants to establish a system of prioritized use of insurance proceeds in the case of a nuclear plant accident. Upon the
, occurrence of an accident, the first $1.06 billion of insurance proceeds must be placed in a trust beyond the reach of any creditor including a bondholders' trustee. The licensee must then use the insurance proceeds to stabilize the
~ reactor to prevent any significant risk to the public health and safety. Once stabilization is achieved the licensee vill be required to submit a plan to the Director of the Office of Nuclear Reactor Regulation identifying cleanup operations necessary to bring the reactor either to the point of decommissioning or to the point of restart. Only following completion of approved decontamination operations would the balance, if any, of the segregated insurance proceeds become available to the bondholders' trustee.
On March 17, 1989, the NRC changed the effective date of the modified I property insurance rule to April 4, 1990. The Plant currently carries more than $1.06 billion of on-site property insurance coverage, but without the segregation features of the NRC's amended property insurance rule. The Company is unable to predict what effect the NRC's new regulation may have on the time at which insurance proceeds would be made available to it or the bondholders' trustee.
Although the coverage on the Plant is expected to continue to be the --
maximum currently available from conventional nuclear insurance pools, the cost of a nuclear accident could exceed available insurance proceeds.
REGULATORY AND ENVIRONMENTAL MATTERS Rates The Company's charges for its power sales to the Sponsors under the Power Contracts are subject to the FERC s jurisdiction and the Power Contracts have been filed with the FERC. Under the Company's 1987 Supplementary Power Contracts, as modified by a FERC d(cision rendered September 30, 1987 and a settlement agreement accepted by FEP.C on November 16, 1987, the ROE component of the Company's rates was reduced to 12 percent, effective May 6, 1988. This rate reduction is expected to reduce revenues in 1989 by approximately
$5.0 million.
Other changes under the settlement agreement and the FERC decision include (1) a reduction from $134 million to $130 million in the amount on which permitted recoveries of decommissioning costs and other costs vill be based, (2) a requirement that the Company, upon the grant of a license extension by the NRC, make conforming changes in depreciation and amortization charges, (3) a requirement that the Company establish, in any future proceeding before the FERC, the propriety of amortizing the costs of unburned nuclear fuel remaining at the end of the Plant's service life, and (4) a provision permitting specified interested parties or the FERC staff to initiate annual reviews of the R0E in the future, with possible refund exposure for the
, Company (the " equity reopener"). On January 19, 1988, the Company was granted a license extension by the NRC. See " Regulatory And Environmental Matters--Nuclear Plant Licensing." On February 13, 1988, the Company filed
amendments to certain Sponsor Contracts with the FERC making the conforming changes required by the settlement agreement.
On July 1, 1988, the Company appealed the equity reopener portion of the FERC decision to the United States Court of Appeals ,for the District of ,
Columbia Circuit. Yankee-Atomic Electric Company ("YAEC") and Vermont' Yankee Nuclear Power Corporation (" Vermont Yankee") filed a similar appeal. On September 23, 1988, the two appeals were consolidated. ,
On October 6, 1988, the Regulatory Fairness Act, Pub.L. 100-473 (the "RFA") was signed into law, giving the FERC the authority to order refunds in proceedings brought under Section 206 of the Federal Power Act when the FERC finds that rates collected by public utilities exceed just and reasonable rates. In light of the enactment of_the RFA, on December 27, 1988 the FERC filed a motion for voluntary remand of the proceedings on appeal, on the grounds that it had reconsidered the need for an equity reopener clause in light of the RFA, and had withdrawn the requirement in two subsequent proceedings. On January 5, 1989, the Company, YAEC and Vermont Yankee filed a response supporting the remand motion reserving, however, their objections to the equity reopener clause requirement in the event that the FERC failed to withdraw the equity reopener requirement from the decisions. The Court granted the motion for remand on March 8, 1989.
See " Regulatory and Environmental Matters--Public Utility Regulation" for a discussion of the jurisdiction of State public utilities commissions over the retail rates of Sponsors.
Publ Utility Regulation The Company and four of the Sponsors, The Connecticut Light and Power Company, New England Power Company, Vestern Massachusetts Electric Company and Montaup Electric Company, are subject to the Public Utility Holding Company Act of 1935 (the "1935 Act"). Under the 1935 Act, the SEC has jurisdiction over the Company, the four Sponsors and other members of their holding company systems with respect to, among other things, securities issues, sales and acquisitions of securities and utility assets, intercompany loans, services performed by and for associated companies, accounts and records, involvement in non-utility operations, and dividends.
The Company is subject to regulation by the Connecticut Department of Public Utility Control ("DPUC"), which has jurisdiction, among other things, j over accounting procedures, certain dispositions of property and plant, l mergers and consolidations, securities issues, and construction and operation of generation, transmission and distribution facilities.
Each of the Sponsors is also subject to regulation by one or more State public utility commissions. While the nature of State-jurisdiction over each Sponsor varies, the jurisdiction may include, among other things, regulation of retail rates and the issuance or acquisition of securities. The Company is _
unaware of any situation in which a State regulatory body with jurisdiction over a Sponsor's retail rates has disallowed, for rate purposes, payments made to the Cumpany under the $ponsor's Power Contract. However, at least two '
State Commissions have denied Company Sponsors recovery of certain payments made by the Sponsors for replacement power during Plant outages, where the
State Commissions determined that the same resulted from imprudent operation of the Plant by the Company.
The Company and each of the Sponsors is a public utility under Part II of the Federal Power Act and is subject to regulation by the FERC with respect to, among other things, interconnection and coordination of facilities, wholesale rates and accounting procedures.
Nuclear Plant Licensing As the holder of an operating license for a nuclear reactor, the Company is subject to the jurisdiction of the NRC. The NRC has broad jurisdiction over the design, construction and operation of nuclear generating stations, including matters of public health and safety, financial qualifications, antitrust considerations and environmental impact.
A full term power operating license issued by the NRC for the Plant has been in effect since June 29, 1967. On January 19, 1988 the NRC amended the operating license changing the operating license expiration date from May 26, 2004 to June 29, 2007, as requested by the Company. The extension allows the Plant to operate for a full 40 years from the time the operating license was first issued.
The NRC regularly conducts generic reviews of technical issues, a number of which may affect the Plant. Issues currently under review include seismic design for nuclear plants located in the eastern United States, individual Plant examination programs to evaluate the likelihood and effects of severe accidents at operating nuclear plants, pipe crack phenomena, fire protection, the ability of safety-related equipment to function properly under accident conditions. post-accident measures for controlling hydrogen, reactor vessel embrittlement, anticipated departures from normal operation in which a reactor does not automatically shut down, upgrading of emergency response facilities and communications, the ability of plants to cope with a total loss of power, cmergency response planning, reactor containment suitability, maintenance, adequacy, motor-operated valve testing, education requirements for licensed operators, fitness for duty, and other issues. At present, the outcome of the NRC's reviews of these and other technical issues, and the ways in which the Plant may be affected, cannot be determined. The cost of complying with any new requirements that may result from these reviews cannot be estimated at this time, but such costs could be substantial.
It is anticipated that increases in the capital expenditures and operating costs associated with the Plant might result from additional changes in nuclear plant construction, including further backfitting of existing plants, or in nuclear plant operations due to changes in NRC regulations required by the NRC. Some equipment modifications have required and may in the future require shutdowns of the Plant that would not otherwise be necessary end that
- result in additional costs to the Sponsors for replacement power. The amounts of increased capital expenditures and operating costs, including costs of replacement power. might be substantial but cannot be estimated at this time.
Public controversy concerning nuclear power could affect the Company and/or the Plant Proposals to force the premature shutdown of nuclear units have become issues of serious attention in Maine, Massachusetts and Vermont,
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and the fate of the Seabrook project has become a major issue throughout New j England. A 1988 referendum that would have shut down operating nuclear plants i in Massachusetts was defeated by a vote of 68 to 32 percent. The continuing ]j controversy about nuclear power vill affect the cost of operating the Plant, and it is possible that the Plant could encounter a premature shutdown. ,
I The Company is subject to mandatory, periodic, in-depth inspections by the !
NRC of its facilities, operating procedures and staffing. At the completion of each such inspection, the NRC issues a Systematic Assessment of Licensee
- Performance report which rates the particular nuclear generating facility in specific functional areas, including Emergency Preparedness. Ratings are based on a grading system consisting of: " Category 1" where the utility has performed in an outstanding manner and reduced NRC attention may be appropriate; " Category 2" where performance is average and NRC monitoring j should be maintained at normal levels; and " Category 3" where performance is below average and the level of NRC attention should be increased.
CY received six Category 1 ratings, one Category 2 rating, and no Category 3 ratings for the seven functional areas reviewed by the NRC in its latest report for the review period April 1, 1987 through July 31, 1988. In the summary portion of this report, the NRC stated the report results " reflect a significant improvement in performance in all areas, with senior station management playing a prime role in that achievement."
The Category 2 rating was in the newly combined maintenance and surveillance functional area. The NRC noted several problems in this area, among them "two plant trips in seven months of operation... due to maintenance inadequacies [;]... improper cutting of a containment penetration, breaching of fire barriers, improper motor-operated valve motor greasing, severing of a diesel fuel line, and breaching of vital area barriers."
The Company's ratings for the prior reporting period, in which functional areas were broken down differently, vere one Category 1, ten Category 2, and one Category 3.
The Plant is also subject to periodic, in-depth inspections and i evaluations by the Institute of Nuclear Power Operations ("INP0"). In its report on its most recent evaluation of site activities at the Plant in November 1988, INPO commented favorably on the Company's experienced work force and accomplishments in establishing and communicating to its personnel high performance standards. The report recommended improvements in a number j of areas, including implementation of training programs, minimization of chemical contaminants in the secondary system, and planning and conduct of maintenance work activities. The Company is addressing these concerns.
Environmental Regulation General !
The National Environmental Policy Act ("NEPA") requires that detailed statements of the environmental effects of major federal actions be prepared by federal agencies. Major federal actions can include licenses or permits '
issued to the Company by the FERC, the NRC and other federal agencies for construction or operation of generation and transmission facilities. NEPA i
t requires that federal licensing agencies make an independent evaluation of the alternatives and environmental impacts of the proposed action.
Under Connecticut law, major generating or transmission facilities may not o
bt. constructed or significantly modified without the, issuance of a certificate of environmental compatibility and public need from the Connecticut Siting Council ("CSC"). After public hearings, the CSC may issue the certificate, which addresses the basis of public need and probable environmental impact of the facility and may impose specific conditions for protection of the environment.
The Company incurs substantial capital expenditures and operating expenses i to comply with environmental, energy, licensing and other regulatory !
requirements, including those described in the following subsections, and it ]
expects to incur additional costs to meet further developments in these and other areas of regulation. Because of the continually changing nature of {
l regulations affecting the Company, the total amount of these costs is not now j determinable. Compliance with existing and proposed regulations also affects the Company's rates and revenues, all in ways that may be substantial but not jl readily calculable. Additional environmental legislation that could have a '
material effect on the Company is being seriously considered before Congress and the Connecticut legislature in the fields of air quality, hazardous vaste handling and disposal, and toxic substances. Until and unless any such legislation is enacted, the effects on the Company cannot be determined.
Surface Water Quality Requirements The federal Clean Vater Act (" CWA") provides that every " point source" discharger of pollutants into navigable waters must obtain a National Pollutant Discharge Elimination System (" NPDES") permit specifying the allowable quantity and characteristics of its effluent. To obtain an NPDES permit, a discharger must meet technology-based and biologically-based effluent standards and must also demonstrate that its effluent vill not cause a violation of established standards for the quality of the receiving waters.
Connecticut regulations contain similar permit requirements and authorize the state to impose more stringent requirements.
The joint NPDES-Connecticut discharge permit for the Plant was renewed on January 10, 1986 for a five-year period. Such permit may be reopened at any time to reflect more stringent requirements promulgated by the U.S.
Environmental Protection Agency (" EPA") or by the Connecticut Department of Environmental Protection ("DEP"). Compliance with NPDES and Connecticut requirements has necessitated substantial expenditures and may require further substantial expenditures in the future.
The CVA requires the EPA and the DEP to approve the intake structure design and thermal discharge of thermal generating plants. The Plant has received these approvals.
Existing and proposed federal and state water pollution control permit requirements also apply to water discharges (including storm vater discharges) from Company garages, area work centers and other buildings.
e The ultimate cost impact of the CVA and state water quality regulations on the Company cannot be estimated because~of uncertainties such as the impact of changes to the effluent guidelines or water quality standards.
Air 0uality Requirements. , ,
Under.the federal Clean Air.Act,-the' EPA has promulgated national ambient air quality standards for certain air pollutants, including sulfur oxides,.
particulate matter and nitrogen oxides. The EPA has approved a Connecticut implementation plan prepared by the DEP for the achievement and maintenance.of these standards. The Connecticut plan imposes limits on the amounts of various pollutants that can be emitted from Plant facilities such as emergency.
diesel generators and. auxiliary boilers. The Clean Air.Act.also imposes-str'ingent emission standards on new and modified sources of~ air pollutants.
Such standards would apply to any new source at-the Plant such as replacements i of the facilities listed above.
L The EPA is also requiring Connecticut to implement a plan to address ozone nonattainment. Probable actions include additional nitrogen oxide controls, which could affect the Company's facilities.
Hazardous Waste Regulations Under the federal Resource Conservation and Recovery Act of 1976, as amended (" RCRA"), the generation, transportation, treatment, storage and disposal of hazardous vastes are subject to EPA regulations. Connecticut has adopted state regulations that parallel RCRA regulations but in some cases are more stringent. A change in interpretation of RCRA.by EPA now requires that nuclear facilities obtain EPA permits to handle radioactive vastes that are l also hazardous under RCRA (so-called mixed vastes). The .proce ; ares by which-the Company handles,. stores, treats, and disposes of hazardous vaste products vill be revised, where necessary,.to comply'vith these regulations.
1984 amendments to RCRA as well as Connecticut regulations also regulate underground tanks storing petroleum products or hazardous substances. .The Company has four underground storage tanks that are used primarily for gasoline and diesel fuel. The Company has completed a testingLprogram for all gasoline tanks and is implementing a program designed to provide better corrosion protection for all underground tanks and piping. The Company could incur in the future substantial costs for actions taken to prevent underground tanks from leaking, to detect leaks and to remedy contamination of groundwater.
As many other industries have done in the past, the Company has disposed of residues from operations by depositing or burying such materials on-site or disposing of them at off-site landfills or facilities. In recent years, it has been determined that deposited or buried wastes, under certain circumstances, could cause groundwater contamination or other environmental harm. The Company is currently evaluating the environmental impact of its ,
former disposal practices. If the Company or regulatory agencies determine that remedial actions must be taken in relation to past disposal practices, the Company could incur substantial costs. ,
Federal and Connecticut asbestos regulations have required the Company to expend significant sums on removal of asbestos including measures to protect the health of workers and the general public and to properly dispose of asbestos vastes. Piping and electrical cable trays in many areas of the Plant a have recently undergone or vill in the near future undergo removal of asbestos. In 1988, approximately $400,000 was expen'ded on the removal of asbestos and the Company expects to expend approximately another $500,000 in
, 1989. Even greater sums are likely to be required in the future as federal and state asbestos regulations become more stringent.
Under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, commonly known as Superfund, the EPA has the authority to clean up hazardous vaste sites and to impose the cleanup costs on parties deemed responsible for the hazardous vaste activities on the sites. It is the EPA's position, generally upheld by the courts, that all responsible parties are jointly and severally liable, so that any single responsible party can be required to pay the entire costs of cleaning up the site. As a practical matter, however, the costs of cleanup are usually allocated by agreement of the parties by the courts on an equitable basis among the parties deemed responsible-The EPA has notified the Northeast Utilities holding company system (the System) that it may be a potentially responsible party for six Superfund sites. It appears that the Company may have sent a small amount of hazardous ;
substances to one of these sites and thus expects that its share of the costs '
of cleanup of this site, if any, vill not be material. The System is a member of the potentially responsible party steering committee that is negotiating a ;
cleanup of this site with the EPA.
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CONSTRUCTION, NUCLEAR FUEL EXPENDITURES AND FINANCING The Company's estimated construction program expenditures (including Allowance for Funds Used During Construction ("AFUDC")) for the years 1989 through 1993 are as follows:
(Thousands of Dollars)
Year Cash AFUDC Total 1989 ....................................... $27,087 $2,287 $29,374 1990 ....................................... 11,274 622 11,896 1991 ....................................... 10,673 748 11,421 1992 ....................................... 10,880 768 11,648 1993 ....................................... 12,650 492 13,142 Total ...................................... $72,564 $4,917 $77,481 These estimated construction expenditures are for Plant modifications and improvements, to meet requirements imposed by the NRC and to maintain and
. improve the reliability of the Plant. The estimates are subje et to periodic review and revision by the Company to reflect changes in regulatory requirements, the Plant's operating experience and other matters.
The Company's estimated expenditures for the purchase of nuclear fuel '
(including AFUDC) for the years 1989 through 1993 are as follows:
(Thousands of Dollars)
Year Cash 'AFUDC Total'
- 1989 ....................................... .$18,679 $1,492 $20,171 1990 ....................................... ,24,266 690 24,956' -
1991 ....................................... 21,867 275 22,142 1992 ....................................... 12,565. 744- 13,309 1993 ....................................... 19,569 1,101- 20,670
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$96,946 $4,302 $101,248 Total ......................................
For the years 1984 through 1988, the Company's construction. expenditures.
vere-$132.2 million and its. nuclear fuel expenditures were $105.0 million, of-which AFUDC was $13.3 million and $10.2 million, respectively.
In addition to the construction and nuclear fuel. requirements described' above, the Company is obligated to meet $22.0 million (net of reacquired.
amounts) of long-term debt maturities and cash sinking fund requirements in j the years 1989 through 1993. In 1989,'long-term debt maturities and cash l' sinking fund requirements-(net of reacquired amounts) vill be-$5.1 million,-
including a payment of $879,000 which was made in January 1989 to fully retire the Company's outstanding First Mortgage Bonds. For more-information on the Company's sinking fund requirements, see Note 5 to the Company's Notes to Financial Statements. For information on the Company's plans for meeting its '
obligations to the DOE vith respect to payment for disposal of spent nuclear fuel used prior to April 7, 1983, see'" Operations--Vaste Disposal and Decommissioning--High-Level Vaste."
The Company's construction and nuclear fuel requirements and-long-term debt maturities and cash sinking fund requirements in these' years are' expected to be largely satisfied from internal sources. . The Company expects to obtain the balance of its requirements under the Credit Agreement described under
" Existing Debt Arrangements" and, to the extent necessary, from additional sales of securities.
EXISTING DEBT ARRANGEMENTS On June 8, 1988, the Company issued $100 million of General and Refunding Mortgage Bonds, Series A, due June 1, 2000 (the " Series A Bonds") under a Mortgage Indenture and Deed of Trust-(the " Mortgage") between.the Company and The First National Bank of Boston, as trustee (the " Trustee"). The Series A Bonds and a Series B Bond issued under the Mortgage (see below) are secured under the Mortgage by a first mortgage lien on the company's property and, '
until 1998, by $30 million deposited into a fund held by the Trustee, plus income thereon. At December 31, 1988, the. fund balance aggregated
$31.25 million. This fund will be released to the Company in 1998 to be used to fucd disposal of previously generated spent nuclear fuel and high-level -
r radioactive vaste. See " Operations--Spent Fuel and Vaste Disposal--
High-Level Vaste." Until the Company retired the remaining $879,000 of 4-1/2%
First Hortgage Bonds ("First Mortgage Bonds") in January 1989, the lien I securing the Series A and B Bonds i:nder .the Mortgage was junior to the lien a securing the First-Mortgage Bonds. Eighty-four percent of the outstanding.
- principal value of.the Series A Bonds is scheduled td be retired during !
1994-1999, pursuant to a mandatory sinking fund. The Series-A Bonds are also
, subj ec t to redemption upon the occurrence-of certain events including casualty. ']
q or condemnation.
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'1 On November 20, 1986, the Company entered into a $90 million credit and Letter'of Credit Agreement (the " Credit Agreement") vith a consortium of; foreign banks (the " Banks"). Under the Credit Agreement,.the Company.has the t option to obtain funds either through the issuance of letter'of credit-backed commercial paper or through direct borrovings from the Banks at rates based,- i at the Company's election, on the London Interbank Offered Rate, a certificate-1 of deposit-. rate,.or prime rate. The Company has committed to'the SEC that its-aggregate short-term.borrowings under the Credit Agreement and any other j short-term arrangements will not exceed $80 million without further SEC authorization.
The Credit Agreement has a term of five years, which may be extended by mutual consent for.three additional one year terms. On March 1, 1989, the- {
Company had approximately $16 million of commercial paper (and no direct '
borrowings) outstanding under the Credit Agreement. Borrovings under the Credit Agreement are not guaranteed by the Sponsors.
In order to obtain a necessary consent to the issuance of the Series A Bonds as secured indebtedness from the Banks, the Company agreed to secure the Banks equally with the holders of the Series A Bonds, through the issue of a )
Series B Bond under the Mortgage and the delivery of this bond to the agent !
for the Banks. The principal amount'of the Series B-Bond, at any time, vill i be equal to the lesser of the amount of obligations outstanding at the time under the Credit Agreement or $96 million. The Series A and Series B Bonds.
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are secured by the Mortgage pari passu. The. Credit Agreement, as amended, contains various covenants, including an indemnity in favor of.the Banks-against liabilities for various environmental matters. 4 I
In 1985, the Company entered into a $25 million revolving credit agreement with four domestic banks, and each Sponsor guaranteed proportionate ownership share of any borrowings thereunder. This agreement was terminated on June 10, l 1988 following the sale of the Series A Bonds.
1 The Company's outstanding long-term debt at December 31, 1988 consisted of '
$879,000 of 4-1/2% First Mortgage Bonds, due 1993, $100 million of Series A !
Bonds, due 2000, $3.4 million of 6% pollution control notes, due 1997, i'
$29.4 million of 17% Series A Debentures due 1996 which are guaranteed by nine of the Sponsors in accordance with their proportionate ownership shares and :
$1.4 million of 17% Series B Debentures which are owned by the other Sponsor.
The First Mortgage Bonds were retired in January 1989, at which time the lien securing the Series A and Series B Bonds became a direct first mortgage lien.
4 CERTAIN CONTINGENCIES AFFECTING SPONSORS The earnings and/or financial condition of certain of the Sponsors have in recent years been, or may in the future be, adversely affected by developments with respect to other nuclear generating units, principally Seabrook Unit 1, i which is jointly owned in tenancy in common by various Sponsors and other utilities. Vrite-offs of portions of Sponsor investments in Seabrook Units 1 and 2 or Hillstone Unit 3 have been or will be required as a result of disallowances by regulatory bodies and the accounting standards specified in '
Statement of Financial Accounting Standards No. 90, which deals with accounting for abandonments and disallowances of plant costs. Seabrook Unit 2 has been canceled.
The Seabrook project is highly controversial. Construction of Seabrook Unit 1 vas completed in 1986. The Nuclear Regulatory Commission (NRC) has granted a license for Seabrook Unit 1 authorizing loading of nuclear fuel, which was completed in 1986, and conducting of precriticality testing. The Federal Emergency Management Agency (" FEMA") has conditionally approved emergency response and evacuation plans for New Hampshire and for six municipalities in Massachusetts. In 1988 and the early part of 1989, the Seabrook project made substantial progress.in resolving the outstanding emergency planning and evacuation response issues that have prevented the issuance of a low power operating license. However, Seabrook Unit I has not yet received authorization from the NRC to commence low power testing.
Seabrook Unit 1 has faced serious and persistent opposition to its efforts to obtain an operating license. Opposition to Seabrook Unit 1 from local governmental officials in the adjoining Massachusetts municipalities, and from senior elected officials of The Commonwealth of Massachusetts, has contributed strongly to delays in the plant's licensing. The Governor of Massachusetts has refused to submit emergency response and evacuation plans for the unit to federal authorities and has committed to a challenge of the NRC's actions if the NRC grants an operating license for Seabrook Unit 1 without Massachusetts' approval of emergency response and evacuation plans. In November 1988, then President Reagan issued an Executive Order enabling FEMA to take compensatory emergency planning actions in instances when a local or state government fails or declines to plan for a radiological emergency at a nuclear power plant.
As a consequence of these and other problems, start-up of the unit has been delayed for an extended period, adding to the unit's cost and exacerbating the financial dif ficulties of several joint owners. The areas of controversy impeding the licensing process have included issues related to the qualifications of the Seabrook Unit 1 joint ovners to meet their financial obligations.
Six of the Sponsors or their affiliates are among the joint ovners of Seabrook Unit 1. These Sponsors and their ownership percentages of Seabrook Unit 1 are as follows: Public Service Company of New Harnshire ,
(PSNH)--35.6 percent, The United Illuminating Company (UI)--17.5 percent, Montaup Electric Company--2.9 percent and an affiliate, EUA Power Corporation--12.1 percent, New England Power Company (NEP)--9.9 percent, ,
CL&P--4.1 percent and an affiliate of Cambridge Electric Light Company (CELCO)--3.5 percent.
PSNH, which owns the largest individual share of Seabrook Unit.1, filed a ,
petition seeking reorganization under Chapter 11 of the Federal Bankruptcy {
Code on January 28, 1988. PSNH has met its financial obligations to the l Seabrook project subsequent to its bankruptcy filing.- The ultimate effect of
.. PSNH's bankruptcy on the Seabrook project cannot be predicted at this time. '
PSNH had paid in full the amount due under its Power Contract to the Company through January in advance of its filing, and has since paid the monthly
, payments becoming due for the period subsequent to January 28, 1988. The Company expects that PSNH vill continue to make Power Contract payments when due although there is no assurance that it vill do so. ;
The Company can make no prediction as to whether or when Seabrook Unit 1 i vill operate, or.what the unit's final cost vill be. .The financial problems of Company sponsors that have ownership interests in Seabrook Unit 1 are likely to be exacerbated by similar problems and actions of other Seabrook participants who are not Company Sponsors. It is impossible to predict what effects, if any, developments with respect to Seabrook may have on the Company or the Plant.
EMPLOYEES As of December 31, 1988, the Company had 266 regular full-time employees, 123 of whom were represented by a union. The present two-year Company contract with the union expires March 1, 1990. The contract provides for a ;
second-year wage increase, which went into effect February 26, 1989. j ltem 2. Pronerties The principal elements of the Company's property are the Plant and a ,
separate control room simulator. .The Plant structures include a reactor building and a turbine generator building and, more recently, a radvaste reduction building and a safety-related electrical switch building. In addition, a new Plant access / office building /varehouse is under construction. ,
1 The Plant is located on a site of approximately 525 acres on the Connecticut River at Haddam Neck in the Town of Haddam, near Middletown, Connecticut. The Plant occupies about 15 percent (75 acres) of the total area. The rest of the site, primarily woodlands and meadows, remains in its natural state.
The simulator is located in Vaterford, Connecticut in a leased portion of the Northeast Nuclear Energy Company's nuclear control room simulator I building. The Company is accounting for the lease of the simulator premises I as an operating lease.
The Plant and the simulator are subject to the lien of the Mortgage.
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Item 3. 1,egal Proceedings See " Regulatory and Environmental Matters - Rates" in " Item 1. Business" for information with respect to the Company's proceedings before the FERC with l respect to the Power Contracts and rates. . , i See " Operations - Nuclear Fuel" in " Item 1. Business" for information with respect to litigation concerning the Company's fuel supply. ,
See " Sponsor Contracts - Power Contracts" in " Item 1. Business" for ,
information with respect to a Vermont Supreme Court decision which invalidates !
certain Seabrook power purchase contracts. l l
l Item 4. Submission of Matters to a Vote of Security Holders I
None. ,
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i PART II '
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters There is no market for the common stock of the C,cmpany. The stock is held solely'by the Sponsors and its transfer is restricted by the Company's.by-laws and by contractual agreement. There were ten holders of record of the company's
, common stock at December 31, 1988.
The Company declared and paid quarterly dividends totaling $38.00 per share l in 1988 and $58.80 per share in 1987. The company's Mortgage Indenture and Deed ;
of Trust, dated as of June 1, 1988, limits cash dividends on the Company's ]
common stock to retained earnings accumulated after December 31, 1987, of which approximately $11,741,000 was available at December 31, 1988, i 1
1 Item 6. Selected Financial Data For the Years Ended December 31, 1988 1987 1986 1985 1984 (Thousands of Dollars)
Operating Revenues $182,296 $207,162 $180,193 $152,381 $154,131 Operating Income 32,113 32,598 27,206 24,105 24,724 Net Income 17,041 20,162 20,997 19,791 18,616 Total Assets 375,813 349,117 335,205 303,645 286,496 Long-term Debt (including current {
maturities) 209,951 110,414 112,707 120,696 115,202 l 1
Dividends per Share $ 38.00 $ 58.80 $ 61.00 $ 56.00 $ 53.00 t
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4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations I
This section contains management's assessment of Connecticut Yankee Atomic l power Company's (the' Company) financial condition and the principal i factors which had an impact on the a sults of operations. This discussion should be read in conjunction with the Company's financial statements and footnotes.
- FINANCIAL CONDITION l
The power contracts between the Company and its ten stockholders - 4 (Sponsors) obligate the' Sponsors to purchase all of the not electrical output of its single unit nuclear electric plant (the plant) and to make 1 monthly payments during the balance of the plant's life designated to l cover the Company's total operating expenses plus a return on the l Company's net unit investment. Outside financing is necessary to the j extent that planned expenditures for nuclear fuel, construction projects ]
l and refunding of debt maturities exceed funds provided by the Sponsors. i l
The. Company's earnings per common share decreased to $48.69 for the twelve months ended December 31, 1988 from $57.61 for the twelve months ended i December 31, 1987. The decrease in earnings per share is primarily attributable to a reduction in the allowed return on equity (ROE) partially offset by an increase in the net unit investment. 3 Construction program and Financing Construction expenditures to support plant modifications and improvements, to meet requirements imposed by the Nuclear Regulatory Commission and to ,
maintain and improve the reliability of the plant amounted to
$29.3 million in 1988. Nuclear fuel expenditures for the same period amounted to $3.2 million. An estimated $77.5 million, including allowance for funds used during construction (AFUDC), will be needed for the period 1989 through 1993 to support planned construction expenditures for plant modifications and improvements. Nuclear fuel expenditures, excluding AFUDC, for the same period are estimated at $96.9 million.
The Company issued $100 million of General'and Refunding Mortgage Bonds, l Series A (the Series A Bonds) in June 1988. The proceeds from the sale of ;
the Series A Bonds were used to repay short-term borrowings incurred to finance the Company's construction program and purchase nuclear fuel, and j to deposit $30 million in a cash collateral account with the indenture I trustee as additional security for the Series A Bonds and the Company's .]
Series B Bond. In 1998, funds in the cash collateral account will be i available to be combined with other funds to satisfy the' Company's l obligation to the United States Department of Energy (DOE) for the {
l disposal of prior spent nuclear fuel. See " Notes to Financial Statements" l l for a further discussion on this financing.
To meet its general working capital needs, the Company has a $90 million Credit and Letter of Credit Agreement with nine foreign banks. The
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agreement allows the Company to obtain funds through either direct l borrowings or issuance of letter of credit-backed commercial paper. The agreement allows for participation of portions of the commitment. These participation will lower the effective cost of funds to the Company. On a December 31, 1988, the Company had $14.0 million of borrowings outstanding l under this agreement. Borrowings under this agreement are not guaranteed l
P by the Sponsors. The company's aggregate short-term borrowings under this agreement and any other arrangements will not exceed $80 million without further Securities and Exchange Commission approval. The Company also intends to meet its spent fuel obligation to the DOE with respect to the
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period prior to April 7, 1983 (after taking into account the $30 million deposited with the trustee for the Bonds) through deposits in a proposed
, spent fuel trust during the next five years, although it has no obligation '
to do so.
, The Company is obligated to meet $22.0 million of long-term debt )
maturities and cash sinking fund requirements in the years 1989 through i 1993. In 1989, long-term debt maturities and cash sinking fund j requirements will be $5.1 million.
Construction, nuclear fuel, and long-term debt maturities and cash sinking ,
fund requirements in these years are expected to be largely satisfied from l internal sources. The company expects to obtain the balance of its /
requirements under the foreign bank arrangement and, to the extent necessary, from additional sales of securities.
On June 10, 1988, the Company terminated a $25 million revolving credit ;
agreement.
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Outages 5 on July 18, 1987, the Company began a refueling and maintenance outage for l the plant, which was completed on April 9, 1988. Durlag the outage, all of the fuel was removed from the reactor to allow inspection of the reactor vessel. The inspection revealed damage to support assemblies which hold the Plant's thermal shield in place. Vibration caused several i of the bolts and pins that hold the thermal shield in place to break or move from their normal positions. These components have been repaired, and modifications were made to limit vibration.
1 As part of the refueling and maintenance outage, one-third of the ,
reactor's fuel assemblies were replaced with fresh fuel. Modifications were made to piping in the Plant's emergency core cooling system and' ;
l instrumentation in the reactor protection system. Two new low-pressure turbines (costing approximately $20 million) were installed to increase reliability and efficiency. A new control room process computer was installed, and an inspection and maintenance program for the Plant's'four steam generators was completed.
On April 30, 1988, the Company began an outage to replace a reactor 1 coolant pump seal, to improve water chemistry in the steam generators, and ;
to evaluate and resolve some emerging design criteria issues on reactor i plant systems. The plant returned to service on May 29, 1988 and reached.
full power on May 31, 1988.
The plant's 1989 refueling and maintenance outage is currently scheduled I' to commence on September 9, 1989 and last for eight weeks. For additional information regarding the 1989 outage, see " Business--Operations--General."
Rate Matters On March 26, 1987, the Federal Energy Regulatory Commission (FERC) initiated an investigation and hearing into the ROE component in the Company's power contracts. At the commencement of this proceeding, the ,
ROE was 17 percent. On April 17, 1987, the Company filad a rate schedule amendment with the FERC, which, among other things, would lower the Company's ROE to 15 percent; the FERC permitted the ROE to become j effective on June 1, 1987. On September 30, 1987, the FERC issued a decision in which it held that the ROE should be reduced to 12 percent.
Additionally, the FERC decided that interveners or the FERC staff, in the future, would be permitted to initiate annual reviews (equity reopeners) ,'
of the Company's ROE, which could result in the Company being required to refund amounts deemed in excLa6 of those which should have been earned.
On October 30, 1987, the Company filed a request for reconsideration of
- the FERC's decision. On May 6, 1988, the FERC denied the Company's request for rehearing. The ROE reduction frou. 15 percent to 12 percent l was effective on May 6, 1988, the date on which the FERC order became l final. Management estimates that 1989 annual revenues will be reduced j approximately $5.0 million as a result of the FERC's dec.ision to lower the !
ROE from 15 to 12 percent.
On July 1, 1988, the Company filed an appeal of the FERC's decision in the United Ste.tes t'urt of Appeals, District of Columbia circuit, concerning i the equity re, yoer provision of the order. w March 8, 1989, this matter .
was remanded to the FERC for reconsideration. For additional information regarding this matter, see " Business-Regulatory and Environmental j Matters--Rates." I l
Sponsors In recent years, one or more of the E,. usors have experienced, in varying degrees, financial difficulties and liquidity constraints, primarily as a result of investments in the Seabrook nuclear project. For additional l information regarding sponsor contingencies, see " Business--Certain I Contingencies Affecting Sponsors."
l New Accounting Standard I The Financial Accounting Standards Board has issued a new income tax accounting standard which will become effective in 1990. The new accounting standard requires, among other things, that regulated utilities reflect, on their balance sheets, the taxes related '.o the cumulative !
amount of income tax timing differences for whi o e . erred taxes have not been provided. The Company expects that, when t; aew standard is adopted i in 1990, it will increase assets and liabilities between $10 to
$15 million, but will not have a material ef fect on net income.
RESULTS OF OPERATIONS Operating revenues earned by th< Oompany are the aggregate of operating expenses, including depreciation, plus a return on net unit investment as stipulated in the power contracts with the ten Sponsors. Substantial operation and maintenance costs are incurred during refueling and maintenance outages and, as a result, such outages are one of the primary f causes of fluctuations in operation and maintenance expenses. ]
Operating revenues decreased $24.9 million in 1988 as compared to 1987 as a result of lower operating expenses and lower allowed ROE, partially j offset by higher debt expense. Operating revenues increased $27.0 million ;
in 1987 as compare 6 to 1986 as a result of higher operating expenses l t
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P associated with the extended refueling and maintenance outage which began in July 1987.
Kilowatthour generation increased 30.9 percent in 1988 as compar?d to 1987 an a result of the extended refueling and maintenance outage in 1987 and increased 17.6 percent in 1987 as compared to 1986 primarily as the result of scattered forced down periods throughout 1986. Accordingly, nuclear
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fuel expense increased $6.9 million in 1988 as compared to 1987 and increased $3.6 million in 1987 as compared to 1986.
Other operation and maintenance expenses decreased $22.7 million in 1988 as compared to 1987 as a result of lower outage expense in 1988 and increased $16.0 million in 1987 as compared to 1986 primarily because of expenses associated with the 1987 refueling and maintenance outage.
Depreciation expense decreased $2.0 million in 1988 as compared to 1987 and decreased $1.2 million in 1987 as compared to 1986 as a result of adjustments resulting from the extension of the Plant's depreciable life, in both periods. The license life was extended from 1997 to 2004 effective June 1, 1987 and further extended to 2007 effective January 1, 1988.
Federal and state income taxes decreased $8.7 million in 1988 as compared to 1987 as a result of lower taxable income and a lower Federal income tax rate, partially offset by a decrease in the amortization of prior normalized investment tax credit and increased $1.3 million in 1987 as compared to 1986 primarily as a result of higher taxable income.
Interest charges increased $4.9 million in 1988 as compared to 1987 as a result of the issuance of the Series A Bonds, partially offset by lower short-term borrowings in 1988. Interest charges increased $4.5 million in 1987 as compared to 1986 primarily because of higher short-term borrowing levels in 1987 and the reflection of interest on the prior period spent nuclear fuel disposal cost liability.
AFUDC increased $1.0 million in 1988 as compared to 1987 primarily due to an increase in the average equity portion of the AFUDC rate and decreased
$1.7 nlllion in 1987 as compared to 1986 primarily because construction and nuclear fuel expenditures were financed more by short-term borrowings in 1987 resulting in a lower average equity portion of the AFUDC rate.
Other income, net (excluding AFUDC) increased $1.4 million in 1988 as compared to 1987 primarily as a result of the interest income on the
$30 million deposited with the Trustee in the cash collateral account as required under the Series A Bonds Mortgage Indenture and Deed of Trust.
1 Item 8. Financial Statements and Supplementary Data I Index to Financial Statements Page ,
Report of Independent Public Accountants 31 Statements of Income for the years ended ;
December 31, 1988, 1987 and 1986 32 l Statements of Retained Earnings for the years ended December 31, 1988, 1987 and 1986 32 Statements of Cash Flows for the years' ended December 31, 1988, 1987 and 1986 33 Balance Sheets at December 31, 1988 and 1987 34 Notes to Financ3 d Statements ,
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Report of Independent Public Accountants o To the Board of Directors of Connecticut Yankee Atomic Power Company:
We have audited the accompanying balance sheets of Connecticut Yankee
. Atomic Power Company (a Connecticut corporation) as of December 31, 1988 and 1987, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1988. These financial ntatements are the responsibility of the Company's managemant. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dicciosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as wel) as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Connecticut Yankee Atomic Power Company as of December 31, 1988 and 1987 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1988, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Hartford, Connecticut March 3, 1989
Connecticut Yankee Atomic power Company STATEMENTS OF INCOME j
For the Years Ended December 31, 1988 1987 1986 )
(Thousands of Dollars, i Except Share Information) 4 Operating Revenues......................... $182,296 $207,162 $180,193
- Operating Expenses: ;
operation -- , j Fuclear fuel.......................... 33,535 26,612 22,983 Other.......... ...................... 67,910 68,237 55,245 Maintenance.............................. 17,731 40,131 37,160 ]
Depreciation............................. 13,990 15,981 17,202 i Federal and state income taxes (Note 2).. 8,433 17,101 15,835 i Taxes other than income taxes............ 8,584 6,502 4,562 Total operating expenses.............. 150,183 174,564 152,987 Operating Income. ......................... 32,113 32,598 27,206 Other Income:
Allowance for other funds used i during construction.................... 1,389 387 1,696 l Other, net............................... 1,362 (29) (79)
Income taxes applicable to other i income (Note 2)....... ................ (67) 41 82 l Other income, net.................... 2,684 399 1,699 Income before interest charges....... 34,797 32,997 28,905 Interest Charges:
Interest on long-term debt............... 17,307 10,440 8,192 l l Other interest........................... 3,042 5,007 2,748 I
! Allowance for borrowed funds used '
during construction.................... (2,593) (2,512) (3,032)
Interest charges, net................ 17,756 _ 12,835 7,908 I i
Net Income........... ..................... $ 17,041 $ 20,162 $ 20,997 l Earnings per Common Share.................. $ 48.69 $ 57.61 > 59.99 1
Common Shares outstanding.................. 350,000 350,000 350,000 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1988 1987 1986 (Thousands of Dollars) l Balance at beginning of period............. $ 50,145 $ 50,563 $ 50,916 Net income............................... 17,041 20,162 20,997 Dividends declared on common stock....... (13,300) (20,580) (21,350) ,
Balance at end of period................... $ 53,886(a) $ 50,145 $ 50,563 (a) At December 31, 1988, there was approximately $11,741,000 of retained earni gs available for payment of cash dividends on common stock under the provisions of the Company's Mortgage Indenture and Deed of Trust.
The accompanying notes are an integral part of these financial statements.
Connecticut Yankee Atomic power Company STATEMENTS OF CASH FIDMS For the Years Ended December 31, 1988 1987 1986 (Thousands of Dollars)
Cash Flows From Operations:
Not income......... . ......... ......... $17,041 $20,162 $20,997 Adjusted for the following:
Depreciation.......... .. .... ...... 10,113 10,794 11,589 Deferred income taxes, net............ (3,655) (1,078) 3,249
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Allowance for other funds used during construction......................... ( .1,389 ) (387) (1,696)
Amortization of nuclear fuel.......... 30,207 24,071 20,863 Interest on prior period spent nuclear fuel disposal costs.......... 9,994 6,994 566 Amortization of deferred charges and other noncash items..... ............ 491 1,156 (27)
Changes to working capital:
Receivables........................ 5,601 (12,986) 7,361 Materials and supplies.............. (1,744) (1,814) (5,403)
Accounts payable......... ......... (11,162) 13,851 (5,574)
Accrued taxes................ ...... (7,467) 3,114 993 Other working capital (excludes cash).............................. 683 722 (337)
Net cash flows from operations............. 48,713 64,599 52,581 Cash Flows From Financing Activities:
Long-term debt........ ................. 100,000 - -
Nuclear fuel payable. ................... - -
(14,745)
Cash collateral account.................. (30,000) - -
Not increase (decrease) in short-term debt..... .......... .................. (60,500) 18,500 56,000 Cash dividends............ ..... ........ (13,300) (20,580) (21,350)
Reacquisitions and retirements of long-term debt and financing expenses... (9,295) (6,332) (12,308)
Not cash flows from financing activities... (13,095) (8,412) 7,597 Investment in Plant:
Electric utility plant................... (29,291) (42,667) (27,934)
Nuclear fuel.. ............. ............ (3,233) (13,901) (33,937)
Gross investment in plant.................. (32,524) (56,568) (61,871)
Less: Allowance for other funds used during construction.......... ... . (1,389) (387) (1,696)
Net investment in plant.................. . (31,135) (56,181) (60,175)
Not Increase In Cash For the period........ $ 4,483 $ 6 $ 3 Supplemental Cash Flow Information cash paid during the year for:
Interest, net of amounts capitalized
. during construction.................. $12,444 $ 9,569 $ 7,208 Income t axes . . . . . . . . . . .............. 14,505 15,217 11,910 The accompanying notes are an integral part of these financial statements.
Connecticut Yankee Atomic Power Company IWLANCE SilEETS At December 31, 1988 1987 (Thousands of Dollars)
ASSETS ,
Utility Plant, at original cost:
Electric.......................................... $287,706 $285,572 ~
Less: accumulated provision for depreciation.... 121,115 125,608 166,591 159,964 Construction work in progress..................... 27,026 14,123 Nuclear fuel, net of amortization................. 88,715 115,689 Total net utility plant...................... 282,332 289,776 Special Deposit (Note 7)............................ 31,250 -
Current Assets:
Cash.............................................. 4,502 19 Accounts receivable............................... 20,910 26,511 Materials and supplies, at average cost........... 17,166 16,067 Prepayments and other....... ........... .. ...... 2,231 2,355 44,809 44,952 Deferred Charges:
Unrecovered interest on spent nuclear fuel disposal costs.............. .................... 8,570 13,060 Unamortized debt expense.......................... 3,785 806 Other....................... ........ ............ 5,067 523 17,422 34,389 Total Assets........... ..................... $375,813 $349,117 The accompanying notes are an integral part of these financial statements.
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, Connecticut Yankee Atomic power Company BAIJiNCE SHEETS At December 31, 1988 1987 (Thousands of Dollars)
CAPITALIZATION AND LIABILITIES Capitalization:
Common stock--$100 par value. Authorized 700,000 shares; outstanding 350,000 shares in 1988 and 1987................................ $ 35,000 $ 35,000 Capital surplus, paid in....................... 2,964 2,964 Retained earnings.............................. 53,886 50,145 Total common stockholders' equity.......... 91,850 88,109 Long-term debt, not (Note 5)................... 204,846 104,353 Total capitalization....................... 296,696 192,462 Current Liabilities:
Commercial paper (Note 6)........ ............ 14,000 74,500 Current portion of long-term debt (Note 5)..... 5,105 6,061 Accounts payable............ .................. 12,094 23,256 Accrued taxes.... ............................. 9,502 16,969 Accrued interest............................... 2,361 1,604 Other.......................................... 2,018 2,216 45,080 124,606 Deferred Credits:
Unamortized gain on reacquired debt............ 1,519 1,890 Accumulated deferred investment tax credits.... 12,762 14,904 Accumulated deferred income taxes.............. 18,448 14,465 0ther.......................................... 1,308 790 34,037 32,049 Consnitmenta and Contingencies (Note 9)
Total Capitalization and Liabilities....... 3375,813 $349,117 l
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I The accompanying notes are an integral part of these financial statements.
Connecticut Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS (1)
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES General - Connecticut Yankee Atomic Power Company (the Company) owns and
) operates a single unit nuclear-power electric geherating plant of the i pressurized water type, having a net capability of 587,000 kilowatts (the Plant). The Plant commenced commercial operation on January 1, 1968. The Company's common stock is owned by ten New England electric utilitie s. .
Northeast Utilities, whose operating subsidiaries have a combined 44 percent ownership interest in the Company, furnishes accounting, engineering, construction, maintenance, financial, legal and other administrative services to the Company through its Northeast Utilities service Company subsidiary. The total cost of these services billed to the Company amounted to $39,805,000, $48,741,000 and $42,045,000 for the years ended December 31, 198., 1987 and 1986, respectively.
Sponsors - The Company has entered into power contracts with its ten stock-holders (Sponsors) for the sale to them of the entire output of the plant for the life of the Plant. Under the terms of the contracts each Sponsor is required to pay the Company an amount equal to its entitlement percentage of the Company's total operating expenses, including a return on net unit investmant, d
in recent years, one or more of the Sponsors have experienced, in varying degrees, financial difficulties and liquicity constraints primarily as a result of investments in the Seabrook nuclear project. One Sponsor, Public Service Company of New Hampshire (PSNH, a 5% owner of the Company) filed a petition seeking reorganization under Chapter 11 of the federal Bankruptcy Code on January 28, 1988. PSNH has paid in full the amount due under its power contract through January 1989 and the Company expects that PSNH will make future power contract payments when due, although there is no assurance that it will do so.
Apart from the above considerations, the extent to which the bankruptcy of PSNH will adversely affect the Company will depend on, among other things, the adverse effects which the bankruptcy may have on the financial conditions of other Sponsors. So far as the company is aware, no other Sponsor is currently experiencing financial difficulties or liquidity constraints which are as severe as PSNH's were prior to its bankruptcy filing.
Public Utility Regulation - The Company and each of its Sponsors is a public utility under Part II of the Federal Power Act and is subject to regulation by the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, wholesale rates and accounting procedures. The i company is subject to further regulation regarding both its long-term and short-term financings by The Securities and Exchange commission under the .
Public Utility Holding Company Act of 1935. In addition, the Connecticut I
Department of public Utility Control has jurisdiction over the Company, with respect to, among other things, accounting procedures, certain .
dispositions of property and plant, mergers and consolidations, securities a' issues, and construction and operation of generation, transmission and distribution facilities.
, Connecticut yankee Atomic power Company NOTES TO FINANCIAL STATEMENTS Allowance for Funds Used During Construction ( AFUDC) - AFUDC, a noncash item calculated in accordance with FERC guidelines, represents the
- estimated cost of capital funds used to finance the Company's construction and nuclear fuel program. These costs, which are'one component of the total capitalized costs of nuclear fuel, plant modifications and improvements, generally are not recognized as part of the not unit investment until facilities are placed in service.
The effective AFUDC rates for 1988, 1987 and 1986 were 11.0 percent, 8.6 percent and 11.5 percent, respectively. These rates were calculated in accordance with FERC guidelines.
Nuclear Fuel - The cost of nuclear fuel is amortized to operation expense on a units-of-production method at rates based on estimated kilowatthours (kWh) of energy provided. Under che Nuclear Waste Policy Act of 1982 (the Act), the Company must pay the United States Department of Energy (DOE) for the disposal of spent nuclear fuel and high-level radioactive waste. For nuclear fuel burned prior to April 7,1983 (prior period fuel), the payment may be made anytime prior to the first delivery of spent fuel to the DOE.
At December 31, 1988, fees due to the DOE for the disposal of prior period fuel were approximately $75.0 million including accrued interest costs of
$26.2 million. As of December 31, 1988, approximately $66.4 million of these fees had been collected through rates. Current rates include a provision for the collection of remaining prior period fuel costs, including interest. Fees for fuel burned af ter April 7,1983 are paid to the DOE on a quarterly basis.
Depreciation - The provision for depreciation is calculated using the straight-line method based on estimated remaining lives of the depreciable utility plant in service, adjusted for expected salvage value and removal costs as approved by the FERC. Depreciation factors are applied to the average plant in service during the period. When plant is retired from service, the original cost of planL, including costs of removal, less salvage, is charged to the accumulated provision for depreciation.
The depreciation rates for the various classes of plant in service are equivalent to composite rates of 4.8 percent in 1988, 6.2 percent in 1987 and 7.6 percent 1986.
Income Taxen - The tax ef fect of timing differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect taxable income) is accounted for in accordance with the ratomaking treatment of the FERC.
The Company had not provide 6 deferred income taxes for certain timing
, differences during periods when the FERC did not permit the current recovery of such income taxes through rates. The cumulative not amount of income tax timing differences for which deferred taxes have not been provided was approximately $19.4 million at December 31, 1988. As allowed under current regulatory practices, deferred taxes not previously provided are being collected in rates over the remaining life of the unit. .
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4 Connecticut Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS In December 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96, " Accounting for Income Taxes" (SFAS 96) . SFAS 96 supersedes previously issued income tax accounting standards and will be effective in 1990. The Company expects
- that when SFAS 96 is adopted, it will increase assets and liabilities between $10 million and $15 million but will not have a material effect on not income. -
(2) INCOME TAXES The components of the federal and state income tax provisions are:
For the Years Ended December 31, 1988 1987 1986_,
(Thousands of Dollars)
Current income taxes:
Federal.............. ............ $ 9,180 $13,177 $ 9,137 State................. ........... 2,975 4,961 3,367 Total current................... 12,155 18,138 12,504 Deferred income taxes, net:
Inves tment tax credits. . . . . . . . . . . . (2,142) (1,823) (877)
Federal. ............ ............ (724) 155 2,772 State............................. (789) 590 1,354 Total deferred.................. ~l3,655) (1,078) 3,249 Total income tax expense........ 8,500 17,060 15,753 Less: Income taxes (credits) included in other income..... 67 (41) (82)
Total income taxes charged to operating expenses............. $ 8,433 }17,101 $15,835 Deferred income taxes are comprised of the tax effects of timing differences as follows:
Investment tax credits............... $(2,142) $(1,823) $ (877)
Allowance for borrowed funds used during construction................. - -
1,567 Spent nuclear fuel disposal costs, including interest........ ......... (2,821) (1,923) 1,500 Decommissioning cost accruals........ 1,348 (2,072) (2,5821 Liberalized depreciation............. 2,400 6,237 3,011 Decomndssioning trust earnings. . . . . . . (1,930) - -
Other...................... ......... (510) (1,497) 630 Deferred income taxes, net...... $(3,655) $(1,078) $ 3,249 l
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. Connecticut Yankee Atomic power Company NOTES TO FINANCIAL STATEMENTS The effective income tax rate is computed by dividing total income tax expense by the sum of such taxes and net income. The differences between
' the effective income tax rate and the federal r . > tory income tax rate are:
For the Years Ended December 31, 1988 1987 1986 Federal statutory income tax rate...... 34.00% 39.95% 46.00%
Tax effect of differences:
Depreciation differences............. 4.44 5.06 0.91 Investment tax credit amortization... (8.85) (9.29) (8.42)
State incomo taxes, net of federal benefit.... ........... ............ 5.65 8.96 6.94 Allowance for other funds used during construction-not recognized as income for tax purposes.. .... .. (1.85) ( .0. 4 2 ) (2.12)
Unrecovered final core and materials and supply inventory................ 3.90 2.36 -
Accrual adjustment--tax differential. (3.73) ( 's . 41 ) -
Other, net. .... ............... ...
__( 0.28) (0.38) (0.44)
Effective income tax rate.. .......... 33.28% 45.83% 42.87%
(3) NUCLEAR DECOMMISSIONING The Company accrues decommissioning costs, which are included in depreciation expense, on the basis of immediate dismantlement at retirement. The estimated decommissioning cost, based on a 1987 study, is approximately $152.0 million in year-end 1988 dollars. Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, technology and inflation. Changes in requirements, technology or adoption of a decommissioning method other than immediate dismantlement coula increase inese estimates. As a result of 1987 FERC actions, the Company's depreciation expense includes a provision for decommissioning at a level of $130 million. The Company believes that revenue in amounts greater than those currently being collected will be required to pay the full projected cost of decommissioning.
The Company has established an independent, irrevocable decommissioning trust with a commercial bank. Each month, the sponsors are j billed for their proportionate shares of decommissioning expense, as '
allowed by the FERC, and make payments directly to the trust. The trust balance, including interest earnings, must be used exclusively to discharge decommissioning costs as incurred. As of December 31, 1988, the Company has collected through rates $64 million, of which $45.6 million has been
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placed in the trust.
l (4) CAPITAL CONTRIBUTIONS i The Sponsors are obligated under the terms of the Capital Funds Agreements, entered into with the Company in 1964, to provide their percentage ownership of capital to the Company either through common stock
Connecticut Yankee Atomic Power Company 1
NOTES TO FINANCIAL STATEMENTS purchases, loans or advances. The total obligation of the Sponsors under ]
these agreements is limited to an aggregate amount of $70 million, of which l
$32 million had not been drawn down at December 31, 1988. ]
. 1 (5) LONG-TERM DEBT 4 Details of outstanding long-term debt (net of reacquired amounts) are: ,
i December 31, 1988 1987
.l (Thousands of Dollars) l General and Refunding Mortgage Bonds, Series A, 12% due June 1, 2000............ $100,000 $
j First Mortgage Bonds, Series A, 1 4-1/2% due January 1, 1993............... 879 2,720 l Debentures, 17% due 1996 Series A................................. 29,365 33,042 Series B.............. .................. 1,380' 1,554 pollution Control Note, 6% due 1997........ 3,375 3,750 j Fees and interest due for spent nuclear ]
fuel disposal costs....................... 74,951 69,346 j Unamortized premium....................... 1 2 i
,,,_209,951 110,414 Less: Amounts due within one year......... 5,105 6,061
$204,846 $104,353 ;
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l The General and Refunding Mortgage Bonds (Series A), secured by a direct lien on the Company's electric generating plant and a pledge of the Company's rights under the power contracts and capital funds agreements with its Sponsors, require annual sinking fund payments sufficient to retire $14,000,000 principal amount of the 9eries A on each June 1, commencing 1994 to and including June 1, 1999. For additional information regarding Series A, see Note 6 "Short-Term Debt" and Note 7 "Special Deposit."
The Company's 17% Debentures, which are guaranteed by nine of the Sponsors (Series A) or owned by the other Sponsor (Series B), have annual sinking fund requirements of $3,851,000 through October 1, 1995, and a final payment of $3,788,000 due on October 1, 1996. The 6% Pollution Control Note requires annual deposits of $375,000 into a sinking fund through November 1, 1996.
The remaining $879,000 First Mortgage Bonds, Series A, were retired in [
January 1989. l (6) SHORT-TERM DEBT To meet its general working capital needs, the Company has a j
$90 million Credit and Letter of Credit Agreement (the Credit Agreement) . I with nine foreign banks (the Banks). Under the terms of this credit l I
Agreement, the Company is obligated to pay a commitment fee of one-quarter of one percent per annum on the daily average of the unused amount. The i I
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. Connecticut Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS Credit Agreement allows the Company to obtain funds through either direct borrowings (with rates based on the London Interbank Offered Rate plus a
- margin of one-half of one percent or a certificate of deposit rate plus a margin of five-eighths of one percent or prime rate) or issuance of letter of credit-backed commercial paper. The Credit Agreement allows for participationsgof portions of the commitment. These participation will lower the effective cost of funds to the company. On December 31, 1988, the Company had $14.0 million of borrowings outstanding under this Credit Agreement. Borrowings under the Credit Agreement are not guaranteed by the Sponsors.
In order to issue the Series A Bonds under the Company's Mortgage Indenture and Deed of Trust (the Refunding Indenture) as secured indebtedness, the Company had to obtain approval from the Banks under the Credit Agreement. The Company agreed to secure the Banks equally with the holders of the Series A Bonds. In order to obtain this approval, the Company issued a Series B Bond under the Refunding Indenture to the agent for the Banks. The Series B Bonf will secure the aggregate amount owed from time to time under the Credit Agreement. The Series B Bond will bear interest at a rcte equal to that borne by loans under the Credit Agreement, but interest on the Series B Bond will accrue only during a period when the loans under the C: edit Agreement have been accelerated. The Series B Bond will mature on the tennination date of the Credit Agreement, which is November 20, 1991, unless extended. For additional information regarding Series A and B Bonds see Note 5 "Long-Term Debt" and Note 7 "Special Deposit."
(7) SPECIAL DEPOSIT As additional security for the Series A and B Bonds, $30 million was deposited with the Trustee under the Refunding Indenture in a cash collateral account. The funds in the cash collateral account may not be withdrawn by the Company prior to 1998. In 1998, funds in the cash collateral account will be available to be combined with other funds to satisfy the Company's obligation to the DOE for the disposal of prior spent nuclear fuel. For additional information regarding Series A and B Bonds see Note 5 "Long-Term Debt" and Note 6 "Short-Term Debt."
(B) RETIREMENT PLAN The company has a noncontributory defined benefit retirement plan covering all regular employees. The benefits are based on employees' number of years of service with the Company and average annual compensation for the five highest consecutive years in the last ten years of employment.
Total pension cost, part of which was charged to utility plant, l
, approximated $779,000 in 1988, $961,000 in 1987 and $556,000 in 1986. l The r'mpany has adopted the provisions of Statement of Financial Accounting S: % dards No. 87, " Employers' Accounting for Pensions" (SFAS 47) effective January 1, 1987. As required by SFAS 87, the actuarial cost method was changed from the entry age normal method to the projected un..t credit method.
i Connecticut Yankee Atomic Power Company i NOTES TO FINANCIAL STATEMENTS l
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It is the policy of the Company to fund annually an amount at least j equal to that which will satisfy the requirements.of the Employee Retirement Income Security Act '(E'(ISA) . Pension costs are determined using market-related value of pension a1 sets. Pension ~ assets are invested. .
primarily in equity securities and bonds.
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l The components of net pension cost are: ,
. For the Years Ended December 31, 1938 1987 (Thousands of Dollars)-
Service cost $'1,034 $1,046 Interest cost 1,242 1,075 Return on plan assets (1,504) (502)'
Net amortization 7 (658)
Net pension cost $ 779 $ 961 For calculating pension costs, the following actuarial assumpdons were used:
For the Years Ended December 31, 1988 1987 Discount rate 9.5% 8.5%-
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Expected long-term rate )
of return 10.0% 9.7% )
Compensation / progression rate 8.5% 7.5%
The following table thows the plan's funded status reconciled to the balance sheet:
For the Years Ended Decem a r 31, 1988 1987 (Thousands of Dollars)
Accumulated benefit obligation, including $3,922,000 of vested benefits at December 31, 1988 and
$3,062,000 at December 31, 1987 $ 5,194 $ 4,140 Projected benefit obligation $15,275 $13,415 Less: Market value of plan assets 15,630 13,324 Projected benefit obligation surplus /(unfunded) 355 (91)
Unrecognized transition amount (666) (699)
Unrecognized prior service costs 426 - 4 Unrecognized net gain (1,547) (727)
Accrued pension (liability) $(1,432) $(1,517) l
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, Connecticut yankee Atomic power Company NOTES TO FINANCIAL STATEMENTS The following actuarial assumptions were used in calculating the plan's year-end funded status:
a For the Years Ended December 31, 1988 1987
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Discount rate 9.5% 9.5%
Compensation / progression rate 8.5% 8.5%
In addition to pension benefits, the Company provides certain health care and life insurance benefits to retired employees. The cost of providing those benefits was not material for the years 1988, 1987 and 1986. The Company recognizes health care benefits primarily as incurred and provides for life insurance benefits through premiums paid to an insurance company.
l (9) COMMITMENTS AND CONTINGENCIES I
4 construction procram - The Company's approved construction budget for 1989 is $29.4 million, including AFUDC. A preliminary estimate for the l construction program for the years 1990--1993 is $48.1 million, including AFUDC. These estimated construction expenditures are for Plant modifications and improvements, to meet requirements imposed by the Nuclear Regulatory Commission and to maintain and improve the reliability of the l plant. The estimates are subject to periodic review and revision by the Company to reflect changes in regulatory requirements, the plant's operating experience and other matters.
Nuclear Fuel - The Company currently forecasts nuclear fuel expenditures of
$96.9 million (excluding AFUDC) for the years 1599-1993, of which l
$18.7 million is for 1989. I Nuclear Insurance Contingencies - On August 22, 1988, an extension of the price-Anderson Act (Act) through August 1, 2002 was signed, revising i nuclear liability indemnification. The revised Act limits public liability from a single incidant at a nuclear power plant to $7.6 billion. The first
$160 million of liability would be provided by purchasing the maximum amount of commercially available insurance. Additional coverage of up to
$7.1 billion would be provided by an assessment of $63 million per incident i
levied on each of the 113 nuclear units currently licensed to operate in the United States, subject to a maximum assessment of $10 million per incident per nuclear unit in any year. In addition, if the sum of all public liability claims and legal costs arising from any nuclear incident exceeds the maximum amount of financial protection, each reactor operator can be assessed an additional five percent, up to $3.2 million. The
, maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The maximum amount which the Company would currently be required to pay with respect to an incident at another nuclear plant is
$66.2 million. payments would be limited to a maximum payment of
$10 million per incident in any year. Under the terms of the Company's power contracts, an assessment would be passed on to the Sponsors.
d Connecticut Yankee Atomic powar Company NOTES TO FINANCIAL STATEMENTS Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement or decontamination of utility property resulting from insured occurrences. Under this policy, the company is subject to retroactive assessment's if losses exceed the .
accumulated funds available to NEIL. The maximum potential assessment j against the Company with respect to losses arising during the current i policy year is approximately $7.1 million which, under the terms of the ,
Company's powcr contracts, would be passed on to the Sponsor companies.
Although the company has purchased the limits of coverage currently available from conventional nuclear insurance pools, the cost of a nuclear incident could exceed available insurance proceeds.
In addition, effective January 1, 1988, insurance '
been purchased from American Nuclear Insurers / Mutual Atomic Energy Lie' v Underwriters, aggregating $160 million on an industry basis for covern v. " worker claims. All companies insured under this coverage are st' c to retrospective assessments. The maximum potential assessmoy n against the Company with respect to losses arising during the current policy period are approximately $2.7 million. Any such assessments, under the terms of the Company's power contracts, would be passed on to the Sponscr companies. ,
i (10) LEASES i The Company is leasing a portion of Northeast Nuclear Energy Company's (an affiliate of two of the Sponsors) nuclear control room simulator building. In addition, certain Sponsors, which provide administrative l support to the company, have entered into lease agreements for the use of l data processing equipment, office equipment, vehicles and office space. l '
The Company is billed for its proportionate share of these leases. For the years 1988, 1987 and 1986, the Company charged rental payments of
$2,027,000, $2,223,000 and $2,496,000, respectively, to operating expense.
Future minimum lease payments, excluding executory costs, are approximately:
1989.................. $ 2,118,000 f 1990......... ......... 1,932,000 1991................... 1,517,000 1992................... 1,179,000 1993................... 752,000 After 1993............. 5,700,000 i
$13,198,000 (11) SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
Quarter Ended 1988 March 31 June 30 September 30 December 31 ~
(Thousands of Dollars, except share information)
Operating Revenues $42,875 144,881 $46,858 $47,682 Operating Income $ 8,989 $ 8,047 $ 7,374 $ 7,703 Not Income $ 5,586 $ 4,259 $ 3,388 $ 3,808 Earnings per Common Share $ 15.96 $ 12.17 $ 9.68 },10.88 7
l Connecticut Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS Quarter Ended !
1987 Marun 31 June 30 September 30 December 31 (Thousands of Dollars, except share information)
Operating Revenues $45,308 $44,740 $56,427 $60,687
. Operating Income $ 7,892 }_7,600 $ 8,214 $ 8,892 Net Income $ 5,543 .$ 5,065 $ 4,326 $ 5,228 Earnings Per Common Share $ 15.84 $ 14.47 $ 12.36 $ 14.94 )
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Item 9. Disagreements on Accounting and Financial Disclosure No event which would be described in response to this item has occurred with respect to the Company.
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s PART III Item 10. Directors and Executive Officers of the Registrant The following table lists the directors and executive officers of the Company and their ages and principal occupations, the year each director first became a director of the Company, and a brief description of the business experience during the past five years.
Year First Elected a Name & Office Age Director Positions Held Arthur V. Adelberg 37 1988 Vice President since 1988 and General ,
Director Counsel since 1985 of Central Maine '
Power Company; previously with the law firm of Pepper, Hamilton & Scheetz since 1980. He is also a Director of Vermont Yankee Nuclear Power Corporation and Yankee Atomic Electric Company.
Villiam F. Burt(*) 63 1978 Assistant to the Chief Executive Director Officer since-1978 and a Director since 1974 of COM/ Energy Services Company.
He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee i Nuclear Power Corporation, and Yankee 1 Atomic Electric Company. j I
Robert E. Busch 42 1987 Senior Vice President of Northeast !
Senior Vice Utilities since 1987; previously President Director-Special Financial Projects and Director (1986-87) and Project Manager of Hillstone 3 (1981-86). 1 John C. Duffett 61 1984 President and Chief Executive Officer Director of Public Service Company of New l Hampshire and President and a Director '
of Properties, Inc., a subsidiary of j Public Service Company of New Hampshire since 1988; previously Executive Vice l President and Chief Operating Officer (1986-88) and Senior Vice President (1982-86) of Public Service Company of New Hampshire. He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation, and Yankee Atomic Electric Company.
'*' Retired on March 1, 1989 J
John F. G. Eichorn, Jr. 64 1971 Chairman since 1985, Chief Executive Director Officer since 1972 and a Trustee of Eastern Utilities Associates (EUA), and Chairman since 1973 and a Director since 1971 of various EUA subsidiaries.
He is also a Director of Maine Yankee ,
Atomic Power Company, Vermont Yankee Nuclear Fover Corporation and Yankee Atomic Electric Company. ,
William B. Ellis 48 1976 Chairman of the Board and Chief Chairman, Chief Executive Officer since 1983 and Executive Officer a Trustee since 1977 of Northeast and Director Utilities and Chairman of the Board and Chief Executive Officer since 1983 and a Director since 1976 of Northeast Utilities' principa1' subsidiary companies. President and a Director of Connecticut Economic Development Corporation, Inc., and a Director of Nuclear Electric Insurance Limited, Emhart Corporation, Connecticut Mutual Life Insurance Company, Bank of New England Corporation, Hartford Hospital, the Greater Hartford Chamber of Commerce, and Connecticut Business and Industry Association, Inc.
Robert L. Fiscus 51 1985 Executive Vice President and Chief Director Financial Officer of The United Illuminating Company since 1983.
Bernard M. Fox 46 1983 President and Chief Operating and President, Chief Financial Officer since 1987 Operating and and a' Trustee since 1986 of Financial Officer Northeast Utilities and President, and Director Chief Operating and Financial Officer since 1987 and a Director since 1983 of Northeast Utilities' principal subsidiary companies; previously Executive Vice President and Chief Financial and Administrative Officer (1986-87) and Senior Vice President and Chief Financial Officer (1983-86) of Northeast Utilities and its principal subsidiary companies. He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation and Yankee Atomic Electric Company. ,
4 Frederic E. Greenman 52 1984 Senior Vice President since_1987, ,
Director General Counsel since 1985 and l Secretary since 1984 of New England Electric System (NEES); Vice President since 1978 and a Director since 1986 of New England P'over Company, a NEES subsidiary, and a Director of NEES's
, principal subsidiary companies; previously Vice President (1985-87),
Acting General Counsel (1984-85) and Associate General Counsel (1978-84) of NEES. He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation and Yankee Atomic Electric Company.
Thomas J. Hay 41 1987 Senior Vice President since 1987 of Director Boston Edison Company; previously Vice' 3 President and Treasurer (1983-87) of i Boston Edison. Company. He is a !
Director of Yankee Atomic Electric Company.
Edward J. Mroczka 48 1986 Senior Vice President and a Director of Senior Vice Northeast Utilities Service Company and President other principal subsidiary companies and Director of Northeast Utilities since 1986; previously Vice President of Northeast Utilities Service Company and other principal subsidiary companies of l Northeast Utilities (1985-86) and Station Superintendent at the Millstone Nuclear Power Station (1980-85).
John F. Opeka 47 1985 Executive Vice President since 1986 Executive Vice and a Director since 1985 of Northeast President Utilities Service Company and other and Director principal subsidiary companies of Northeast Utilities; previously Senior Vice President (1985-86) and Vice President (1981-85) of Northeast Utilities Service Company and other principal subsidiaries of Northeast Utilities. He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation and Yankee Atomic Electric Company.
Lawrence H. Shay 55 1983 Senior Vice President since 1983 and Senior Vice a Director _since 1981 of Northeast
, President- Utilities Service Company other and Director principal subsidiary companies of Northeast Utilities.
Jeffrey D. Tranen 42 1984 Vice Prerident of New England Power Director Company since 1984 and Vice President of other principal subsidiary companies of New England Electric System; previously Manager of NEP00L .
Coordination for New England Power ,
Service Company (1982-84). He is also a Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power ~
Corporation, and Yankee Atomic Electric Company.
Thomas C. Uebb 54 1986 President, Chief Executive Officer and Director a Director of Central Vermont Pubic Service Corporation (CV) since 1986; previously Executive Vice President of Finance and Administration of CV (1985-86), Senior Vice President of Finance and Administration (1984-85) and Senior Vice President of Finance (1979-84) of Central Maine Power Company. He is Cheirman of the Board and a Director of Vermont Yankee Nuclear Power Corporation and a Director of Maine Yankee Atomic Power Company, Yankee Atomic Electric Company, and United Vermont Bancorporation.
Russell D. Vright 42 1989 Financial Vice President of Director Commonwealth Energy System and Financial Vice President and Director of wholly-owned subsidiary companies of Commonwealth Energy Systems since 1987; previously Assistant Vice President-Finance of wholly-ovned subsidiary companies of Commonwealth Energy Systems (1986-87), Director of Customer Services (1985-86) and Division controller (1979-85) of Commonwealth Electric Company. He is also a Director of Vermont Yankee Nuclear Power Corporation and Yankee Atomic Electric Company.
John V. Noyes 41 -
Vice President of Northeast Utilities Vice President Service Company and other principal subsidiary companies of Northeast Utilities since 1987; previously Director of Revenue Requirements ,
Preparation and Analysis of Northeast Utilities Service Company and other principal subsidiary companies of ~
Northeast Utilities (1983-87).
C. Thayer Browne 57 -
Vice President and Treasurer of Vice President Northeast Utilities Service Company and Treasurer and other principal subsidiary l companies of Northeast Utilities since 1988; previously Vice President of Northeast Utilities Service Company and other principal subsidiary companies of I Northeast Utilities (1981-88). l Vayne D. Romberg 43 -
Vice President of Northeast Utilities Vice President Service Company and other principal subsidiary companies of Northeast Utilities since 1986; previously Station Superintendent at the Millstone Nuclear Power Station (1985-86) and 1 Unit Superintendent at Millstone Unit 1 I (1983-85).
C. Frederick Sears 48 -
Vice President of Northeast Utilities i Vice President Service Company and other principal I subsidiary companies of Northeast Utilities since 1983. 1 i
Valter F. Torrance Jr. 61 -
Senior Vice President since 1986, Senior Vice President, Secretary since 1987 and General Secretary and Counsel since 1986 of Northeast General Counsel Utilities and Senior Vice President since 1980, Secretary since 1987, General Counsel since 1978 and a Director since 1978 of the principal subsidiary companies of Northeast Utilities. 1 i
George D. Uhl 54 -
Vice President since 1986 and i Vice President Controller since 1981 of Northeast l and Controller Utilities and its principal subsidiary companies.
1 Richard P. Verner 53 -
Vice President since 1981 of Northeast Vice President Utilities Service Company and other principal subsidiary companies of Northeast Utilities.
Ttem 11. Executive Compensation.
No director or officer of the Company receives compensation from the Company. All officers of the Company are officers and employees of Northeast Utilities Service Company and receive their compensation from it. See " Item
- 13. Certain Relationships and Related Transactions."
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Item 12. Security Ownership of Certain Beneficial Owners and Management (a) The following table shows, as of March 1, 1989, the security ownership of the Company's common stock, par value $100, by the Sponsors, the only stockholders of the Company. The common stock is the Company's only .
voting security. See " Item 1. Business--Sponsor Contracts" for a discussion ,
of agreements between the Company and each Sponsor with regard to the purchase of additional common stock.
Name and Address Percent Title of Class of Beneficial Owner Amount andOwnership Beneficial Nature of'*' of Class Common Stock, The Connecticut Light 120,750 shares 34.5%
$100 par value and Power Company P.O. Box 270 Hartford, CT 06141 Common Stock, New England Power 52,500 shares '*' 15.0%
$100 par value Company 25 Research Drive Vestboro, MA 01581 Common Stock, Boston Edison Company 33,250 shares 9.5%
$100 par value 800 Boylston Street Boston, MA 02199 Common Stock, The United Illuminating 33,250 shares 9.5%
$100 par value Company 80 Temple Street New Haven, CT 06506 Common Stock, '#'
Western Massachusetts 33,250 shares 9.5%
$100 par value Electric Company P.O. Box 270 Hartford, CT 06141 Common Stock, Central Maine Power 21,000 shares 6.0%
$100 par value Company Edison Drive Augusta, ME 04336 Common Stock, Public Service Company 17,500 shares 5.0%
$100 par value of New Hampshire ;
P.O. Box 330 '
Manchester, NH 03105 Common Stock, Cambridge Electric Light 15,750 shares '*'
4.5% l
$100 par value Company '
c/o Commonwealth Energy ;
System 4 l
675 Massachusetts Avenue !
Cambridge, MA 02139 e
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'5' Common Stock, Montaup Electric Company 15,750 shares 4.5%
$100 par value c/o Eastern Utilities Associates One Liberty Square Boston, MA 02109 Common Stock, Central Vermont Public 7,000 shares 2.0%
$100 par value Service Corporation 77 Grove Street i Rutland, VT 05701 )
'1' All beneficial ownership is direct by the Sponsors named. Indirect beneficial ownership by holding companies of certain of the Common Stock is indicated in Notes 2-5 below. .
(2)
Northeast Utilities, P.O. Box 270, Hartford, CT 06141, the parent of The Connecticut Light and Power Company (CL&P) and Vestern Massachusetts Electric Company (VMECO) has indirect beneficial ownership of the 154,000 shares (44.0% of the shares outstanding) owned by CL&P and VMECO. 1 l
'*' New England Electric System, 25 Research Drive, Westboro, MA 01581, the i
, parent of New England Power Company (NEP), has indirect beneficial l l ownership of the 52,500 shares (15.0% of the shares outstanding) owned by l NEP.
'*' Commonwealth Energy System, 675 Massachusetts Avenue, Cambridge, MA 02139, the patent of Cambridge Electric Light Company (CELCO), has indirect l beneficial ownership of the 15,750 shares (4.5% of the shares outstanding) '
owned by CELCO. !
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Eastern Utilities Associates, One Liberty Square, Boston, MA 02109, the l indirect parent of Montaup Electric Company (Montaup), has indirect beneficial ownership of the 15,750 shares (4.5% of the shares outstanding)- !
owned by Montaup.
(b) No director, nominee for director, or officer of the Company beneficially owns or has the right to require beneficial ownership of any equity securities of the Company.
(c) Under the terms of a stockholder agreement among the Sponsors, the Sponsors have agreed (i) that certain actions by the Company, including certain amendments to the Sponsor Contracts and construction of additional l
generating units by the Company, vill require a unanimous shareholder vote, (ii) that the Company will not permit the construction or operation of an additional generating unit at the site of the Plant by anyone other than the Company without two-thirds shareholder approval, and (iii) that in the event such approval is obtained, dissenting Sponsors vill have the option, subject to certain requirements, to sell their shares of Company common stock to the other Sponsors at book value, together with their rights and obligations under the Sponsor Contracts.
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Item 13. Certain Relationships and Related Transactions The Company has a service contract with Northeast Utilities Service Company ("NUSC0") under which NUSCO provides accounting, administrative, data ,
processing, engineering, financial, legal, operational, planning, purchasing i and other services to the Company. The charges under the contract, which are , i at cost, are subject to the jurisdiction of the SEC under the 1935 Act. The j Company paid NUSCO $39.8 million, $48.7 million and $42.0 million for services i furnished under the contract during calendar years 1988, 1987 and 1986, ,
i respectively. Certain of the Company's executive officers and directors are ]
officers and directors of NUSCO. See " Item 10. Directors and Executive l Officers of the Registrant."
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l PART IV Item 14. Exhibits, Financial Statement Schedulea and Reports on Form 8-K l
, (a) 1. Financial Statements (included in Item 8):
Repert of Independent Public Accountants (page 31).
Statements of Income for the three years ended December 31, 1988 (page 32). :
Statements of Retained Earnings for the three years ended '
December 31, 1988 (page 32).
Stetaments of Cash Flows for the three years ended December 31, 1988 (page 33). 1 Balance Sheets - December 31, 1988 and December 31, 1987 l (pages 34-35). j Notes to Financial Statements (pages 36-45). j
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l 2. Financial Statement Schedules (included in Part IV): )
Schedule V -
Utility Plant 1988, 1987 and 1986 !
(page S-1). j Schedule V -
Nuclear Fuel 1988, 1987 and 1986 (pages S-2--S-4).
t Schedule VI -
Accumulated Provision for Depreciation of l Utility Plant 1988, 1987 and 1986 (page S-5). .
Schedule IX -
Short-Term Borrowings 1988, 1987 and 1986 1 (page S-6). !
Schedule X -
Supplementary Income Statement Information 1988, 1987 and 1986 (page S-7).
All other schedules have been omitted as not applicable or not required or because the information required to be shown is included in the Financial Statements or the accompanying Notes to Financial Statements.
- 3. See Item 14(c) below.
(b) No reports on Form 8-K vere filed during the quarter ended December 31, 1988.
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l (c) The following Exhibits are filed herewith (each such document is incorporated by reference to the files of the Securities and Exchange 1 Commission, as indicated, unless the Exhibit Number is followed by an ]
asterisk):
Exhibit No. Description 3.1 Certificate of Incorporation of the Company (Exhibit 3.1, File No.
2-22958).
3.2 Bylaws of the Company (Exhibit 3.4, file No. 2-22958). !
l 4.1 First Mortgage Indenture and Deed of Trust of Connecticut Yankee !
Atomic Power Company to Hartford National Bank and Trust Company, ]
trustee, dated as of January 1, 1965 (Exhibit 4.1 to the Company's -
Quarterly Report on Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909).
4.2 First Supplemental Hortgage Indenture, dated as of June 29, 1966, to.
First Mortgage Indenture and Deed of Trust of Connecticut Yankee Atomic Fover Company, dated as of January 1, 1965 (Exhibit 4.2 to the Company's Quarterly Report on Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909).
4.3 Second Supplemental Mortgage Indenture, dted as of June 1, 1976, to First Mortgage Indenture and Deed of Trust of Connecticut Yankee Atomic Power Company, dated as of January 1, 1965 (Exhibit 4.3 to the Company's Quarterly Report on Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909).
4.4 Third Supplemental Hortgage Indenture, dated as of July 1, 1976, to First Mortgage Indenture and Deed of Trust of Connecticut Yankee Atomic Power Company, dated as of January 1, 1965 (Exhibit 4.4 to the Company's Quarterly Report on Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909).
4.5 Fourth Supplemental Hortgage Indenture, dated as of June 1, 1988, to First Mortgage Indenture and Deed of Trust of Connecticut Yankee Atomic Power Company, dated as of January 1, 1965-(Exhibit 4.5 to the Company's Quarterly Report on Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909).
4.6 Hortgage Indenture and Deed of Trust, dated as of June 1, 1988, of Connecticut Yankee Atomic Poser Company to The First National Bank of Boston, trustee (Exhibit 4.6 to the Company's Quarterly Report on ;
Form 10-0 for the quarter ended June 30, 1988, File No. 33-17909). 1 d
4.7 Credit and Letter of Credit Agreement Among the Company and Societe
- Generale as Agent Bank and Issuing Bank dated November 20, 1986 1 (Exhibit A.1, File No. 70-7255).
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4.8* Amendment No. 1 to the Credit and Letter of Credit Agreement Among Connecticut Yankee Atomic Power Company, Societe Generale, The Industrial Bank of Japan Trust Company, Daiva Bank Trust Company, The
, Tokai Bank, Limited, The Toronto-Dominion. Bank, Grand Cayman Islands Branch, Vestdeutsche Landesbank, New York Branch / Cayman Islands Branch, Bank of Ireland, The Gulf Bank, K.S.C., Instituto Bancario San Paolo di Torino, New York Limited Branch and Societe Generale as Agent Bank and as Issuing Bank dated as of June 1, 1988.
4.9 Form of Indenture Dated as of December 10, 1981 between the Company and The Connecticut Bank and Trust Company, N.A. (Exhibit A.3, File No. 70-6636).
4.10 Debenture Purchase Agreement dated as of November 13, 1981 between the Company and Cambridge Electric Light Company (Exhibit A.6, File No. 70 6636).
l 10.1 Composite Copy of Power Contract dated July 1, 1964 between the !
Company and the Sponsors (Exhibit 13.2, File No. 2-22958).
10.2 Composite Copy of Additional Power Contract dated ar, of April 30, J 1984 between the Company and the Sponsors (Exhibit 10.2.4, File No.
l 1-5324).
10.3* 1987 Supplementary Power Contract, as amended.
10.4 Composite Copy of Capital Funds Agreement dated September 1, 1964 (Exhibit 13.3, File Nc. 2-22958).
l 10.5 U.S.D.0.E. Contract No. DE-CR-01-83NE 44469.000 Contract for Disposal l of Spent Nuclear Fuel and/or High Level Radioactive Vaste dated as of June 30, 1983 (Exhibit 10.5, File No. 33-17909) 10.6 Uranium Enrichment Services Contract dated as of September 28, 1984 and Supplemental Agreement of Settlement dated as of September 28, 1984, between the U.S.D.O.E and Northeast Utilities Service Company (Exhibit No. 10.6, File No. 33-17909).
10.7 Reload Nuclear Fuel Supply Contract between Babcock & Wilcox Company and Connecticut Yankee Atomic Power Company dated December 21, 1984 (Exhibit 10.7, File No. 33-17909).
10.8 Agreement between Eldorado Nuclear Limited and Northeast Nuclear Energy Company and Connecticut Yankee Atomic Power Company dated as of January 1, 1984 as amended by Amendment No. I dated as of September 1, 1987 (Exhibit 10.8, File No. 33-17909).
, 10.c+ Agreement for the Sale of Natural Uranium Concentrates between Albuquerque Uranium Corporation, Northeast Nuclear Energy Company and Connecticut Yankee Atomic Power Company, dated as of October 3, 1988.
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o 10.10* Contract for Sale and Purchase of Uranium Concentrates between Northeast Nuclear Energy Compeny and Connecticut Yankee Atomic Power Company, and U.S. Energy Corp. and Crested Corp. doing business as USE/CC, dated as of October 20, 1988.
9 10.11* Uranium Concentrates Sales Agreement between Energy Fuels Exploration Company, Northeast Nuclear Energy Company and Connecticut Yankee Atomic Power Company, dated as of November 9, 1988. .
10.12 Lease of the Simulator Building between Connecticut Yankee Atomic Power Company and Northeast Nuclear Energy Company dated as of December 1, 1984 (Exhibit 10.10, File No. 33-17909). .
10.13 Connecticut Yankee Atomic Power Company Retirement Plan as amended and restated January 1, 1985, March 1, 1986,'and January 1, 1987 (Exhibit 10.11, File No. 33-17909).
10.14* Fourth Amendment to Connecticut Yankee Atomic Power Company Retirement Plan, effective as of January 1, 1989.
10.15 NUSCO Supplemental Retirement and Savings Plan effective as of January 1, 1985 and as amended April 8, 1985, January 1, 1986 and January 1, 1987 (Exhibit 10.12, File No. 33-17909).
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- _ _ _ _ - - ______-____________-__a
6 !
.. CONNECTICUT YANKEE ATOMIC POWER COMPANY !
.1 Signatures l
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant.has duly caused,this report'to be signed on its behalf by the undersigned, thereunto duly authorized.
CONNECTICUT YANKEE ATOMIC POWER COMPANY (Registrant)
Date: March 29, 1989 By /s/ William B. Ellis William B. Ellis 'l l Chairman, Chief Executive Officer 1
Pursuant to the requirements of the Securities Exchange Act of 1934, this !
I- report has been signed below by the following persons on behalf of the Registrant j l and in the capacities and on the dates indicated.
l Date Title Signature l
March 29, 1989' Chairman, Chief /s/ William B. Ellis j Executive Officer William B. Ellis and Director l
i 1
March 29, 1989 President, Chief /s/ Bernard M. Fox Operating and Financial Bernard M. Fox Officer and Director March 29, 1989 Vice President and /s/ George D. Uhl Controller George D. Uhl )
March 29, 1989 Director /s/ Robert E. Busch 1 Robert E. Busch l
l March 29, 1989 Director /s/ Edward J. Mroczka Edward J. Mroczka i
March 29, 1989 Director /s/ John F. Opeka John F. Opeka a
March 29, 1989 Director /s/ 1awrence H. Shay Lawrence H. Shay l
Date Title ~ Signature' j l
March 29, 1989 Director /s/ Arthur W. Adelberg Arthur W. Adelberg March 29, 1989 Director /s/ ahn C. Duffett '
John C. Duffett Director John F. G. Eichorn, Jr.
March 29, 1989 Director /s/ Robert L. Fiscus Robert L. Fiscus March 29, 1989 Director /s/ Frederic E. Greenman' Frederic E. Greenman Director j Thomas J. May i
d
'l March 29, 1989 Director /s/ Jeffrey D. Tranen j Jeffrey D. Tranen i Director Thomas C. Webb ,
1 1
1 March 29, 1989 Director /s/ Russell D. Wright Russell D. Wright ,
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Supplemental Information to be Furnished with Reports Piled Pursuant to Section 15(d) of the Act by Registrafite Which Have Not Registered. Securities Pursuant to Section 12 of the Act:
- 1 No annual report to security holders covering th'e registrant's last fiscal )
year (other than this Annual Report.on Form 10-K) has been or vill be sent to .j
, security holders. No proxy statement, form of proxy or other proxy soliciting i material has been sent to more ,uan t, of the registrant's security holders with respect to any annual or other meeting of security holders.
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