ML20248E964
| ML20248E964 | |
| Person / Time | |
|---|---|
| Site: | Vermont Yankee File:NorthStar Vermont Yankee icon.png |
| Issue date: | 04/03/1989 |
| From: | Capstick R VERMONT YANKEE NUCLEAR POWER CORP. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| BVY-89-33, NUDOCS 8904120421 | |
| Download: ML20248E964 (20) | |
Text
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o VERMONT YANKEE NUCLEAR POWER CORPORATION L
s RD 5. Box 169. Ferry Road, Brattleboro, VT 05301 ENGINEERING OFFICE 580 MAIN STREET BOLTON, MA 01740 (508)779 6711 BVY 89-33 United States Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555
Reference:
(a)
License No. DPR-28 (Docket No. 50-271)
Subject:
Vermont Yankee Nuclear Power Corporation Annual Financial State tents
Dear Sir:
In accordance with the provisions of 10CFR50.71(b), enclosed please find one (1) copy of Vermont Yankee Nuclear Power Corporation's certified financial statements for the three (3) year period ending December 31, 1988.
Should you have any questions regarding this report, please do not hesitate to contact this office.
Very truly yours, VERMONT YANKEE NUCLEAR POWER CORPORATION I
R.
W. Capstick Licensing Engineer RWC/sv Enclosure cc:
Resident Inspector, VYNPS g
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l 8904120421 890403 ADOCK0500g1 PDR
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VERMONT YANKEE NUCLEAR POWER CORPORATION
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Financial Statements December 31, 1988, 1987 and 1986 (With Independent Auditors' Report Thereon)
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M Peat Marwick Certified Public Accountants Peat Marwick Main & Co.
I One Boston Place Telephone 617 723 7700 Telecopier 617 723 6864 Boston. MA 02108 Telex 617 443 0082 PMMBOST
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Independent Auditors' Report The Stockholders and Board of Directors
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Vermont Yankee Nuclear Power Corporation:
We have audited the accompanying balance sheets of Vermont Yankee Nuclear Power Corportion as of December 31, 1988 and 1987 and the related statements of income and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1988.
These financial statements are h
the responsibility of the Company's management.
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 audit to obtain reasonable assurance about whether the financial statements are free
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of material misstatement.
An audit includes examining, on a test b' asis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
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In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vermont Yankee Nuclear Power Corporation at December 31, 1988 and 1987, and the results of its operations and cash flows for each of the years in the three-year period ended December 31, 1988, in conformity with generally accepted accounting
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principles.
W MY
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February 10, 1989
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uomoer rirmai Ktymeld Peat Marwick 00erdelef
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VERMONT YANKEE NUCLEAR POWER CORPORATION l
Balance Sheets December 31, 1988 and 1987
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Assets 1988 1987 (Dollars in thousands)
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Utility plant:
Electric plant, at cost
$ 340,044 339,220 Less accumulated depreciation 137,207 123,686 202,837 215,534 Construction work in progress 12,245 3,323 Net electric plant 215.082 218.857
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Nuclear fuel, at cost:
Assemblies in reactor 90,858 90,858 Fuel in process 4,444 8,593 Fuel in stock 30,515 Spent fuel 162,921 162,921
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288,738 262,372 Less accumulated amortization of burned nuclear fuel 226,530 200,163 62,208 62,209 Less accumulated amortization of final core nuclear fuel 2,959 2,092
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Net nuclear fuel 59,249 60,117 Net utility plant 274,331 278,974 Current assets:
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Cash 2,718 3,502 Temporary investments, at amortized cost which approximates market 6,711 3,813 Special deposit 2,475 1,739 Accounts receivable, primarily from sponsors 13,156 12,808 Income tax refunds receivable 2,140 1,406
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Materials and supplies 12,097 15.531 Prepaid expenses 2,561 2,279_
Total current assets 41,858 41,078 Deferred charges:
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Decommissioning fund (note 2) 28,590 11,588 Deferred decommissioning costs (note 2) 24,148 23.028 Accumulated deferred income taxes 4.873 13,683 Postretirement medical benefits fund 1,062 Other deferred charges (note 3) 9,362 6.138
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Total deferred charges 68,035 54,437
$ 384.224 374.489 See accompanying notes to financial statements.
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Capitalization and Liabilities 1988
.1987
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Capitalization:
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Common stock. equity (note 4):
Common' stock, $100 par value; authorized 400,100
. shares; outstanding 400,014 shares
$ 40,001' 40,001-Additional paid-in capital 14,431 14,455 Retained earnings 5.411 5.449 Total ~connon stock equity 59,843 59,905-Redeemable cumulative preferred stock, 7.48% series;
$100 par value; authorized 300,000 shares;.out-standing 83,535 and 91,585 shares in 1988 and 1987
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(note 4) 8,353 9,159 Long-term obligations, net (note 5) 85,875 94,445 Disposal fee and accrued interest for spent nuclear fuel (note 6) 60,487 56,642 Total capitalization 214.558 220,151-
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Current liabilities:
Notes payable (note 7) 6,185
. Accounts payable 26,684 18,223 Accrued interest 1,366 2,611
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Accrued taxes d63 3,497 Total current liabilities 34,898 24,331 Accrued decommissioning costs (cote 2) 55,176 47,519 Accumulated deferred income taxes 63,530 64,770
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Accumulated deferred investment tax credits 10,815 13,061 Unamortized gain on reacquired debt, net 4.110 4,532 Other deferred credits 1,137 125 Total deferred credits 134,768 130,007 T'
Commitments and contingencies (notes 2 and 11)
$ 384.224 374.489
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t VERMONT YANKEE NUCLEAR POWER CORPORATION Statements of Income and Retained Earnings Years ended December 31, 1988, 1987 and 1986 O
1988 1987 1986 (Dollars in thousands)
Operating revenues
$ 139,833 143,346 126,878 Operating expenses:
g Nuclear fuel expense 31,347 26,306 15,465 q
Other operation expense 52,181 50,306 47,277 Maintenance 8,279 14,584 17,341 Depreciation 14,247 15,255 11,684 Decommissioning expense (note 2) 6,108 5,811 5,526 Taxes n in me (n te 8) 2,616 3,851 5,686 O
Property and other taxes 5,511 5,654 5,285 Total operating expenses 120,289 121,767 108,264 Operating income 19,544 21,579 18,614 g
Other income and deductions:
Allowance for equity funds used during construction 433 381 1,856 Interest 604 1.006 40 Taxes on other income (note 8)
(236)
(452)
Other, net (25)
(51)
(120) 776 884 1,776 Q
Income before interest expense 20,320 22,463 20,390 Interest expense:
Interest on long-term debt 8,831 8,970 8,613 Q
Interest on disposal costs of spent nuclear fuel (note 6) 3,845 3,347 3,244 Other interest expense 82 1,210 192 Allowance for borrowed funds used during construction (866)
(739)
(1,472)
Total interest expense 11,892 12,788 10,577 O
Net income 8,428 9,675 9,813 Retained earnings at beginning of year 5,449 5,494 5,547 13,877 15,169 15,360 4
Dividends declared:
Preferred stock, $7.48 per share 674 728 874 i
l Common stock, $19.48, $22.48 and $22.48 l
per share, respectively 7,792 8.992 8,992 Retained earnings at end of year 5.411 5.449 5.494 Net income per average share of common stock outstanding
$M 22 AQ 21 35 See accompanying notes to financial statements.
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VERMONT-YANKEE NUCLEAR POWER CORPORATION Statements of Cash Flows Years' ended December 31, 1988, 1987 and 1986
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1988 1987 1986 I
(Dollars in thousands)
Cash flows from operating activities:
Net income 8,428 9,675 9,813 Adjustments to reconcile net income to net
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cash provided by operating activities:
Amortization of nuclear fuel 27,234 22,770 13,406 Depreciation 14,247 15,255 11,684 Income tax accrual (2,472) 9,195 397 Income taxes paid
.(6,220)
(1,531) 5,289 Income tax refund received 6,801
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Nuclear fuel disposal fee interest accrual 3,845 3,347 3,244 Amortization of deferred taxes 7,570 (2,559) 2,511 Amortization of deferred investment tax credits (2,246)
(2,333) 2,778 Increase (decrease) in accounts payable 8,461 6,819 (15,419)
Other (5,662)
(153)
(4,320) y Total adjustments 51,558 50,810 19,570
. Net cash provided by operating activities 59,986 60,485 29,383 Cash flows from investing activities:
Electric plant additions (5,832)
(7,737) (32,578)
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Nuclear fuel additions
. (26,366) (23,311)
(9,249)
(Increase) decrease in materials and supplies (3,028)
(6,783) 16 Payments to decommissioning fund (11,186)
Payments to postretirement medical benefits fund (1,062)
Other 1,252 439 561
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Net cash used by investing activities (46,222) (37,392) (41,250)
Cash flows from financing. activities:
Common stock dividends (7,792)
(8,992)
(8,992)
Preferred stock dividends (674)
(728)
(874)
(Payment) issuance of notes payable 6,185 (4,000) 4,000
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(Reduction of) increase in long-term obligations (8,563)
(903) 15,917 Redemptfon of preferred. stock (806)
(2,024)
(500)
Net cash provided (used) by financing activities (11,650) (16,647) 9,551
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Net increase (decrease) in cash and temporary investments 2,114 6,446 (2,316)
Cash and temporary investments at beginning of year 7,315 869 3,185 Cash and temporary investments at end of year
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(note 9) 9.429 7.315 J See accompanying notes to financial statements.
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Stat..ents December 31, 1988, 1987 and 1986 (1) Summary of Significant Accounting Policies (a) Regulations and Operations The Company is subject to regulations prescribed by the Federal Energy
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Regulatory Commission ("FERC"), the Securities and Exchange Commission
("SEC") and the Public Service Board of the State of Vermont as to accounting, transactions subject to the Holding Company Act of 1935, and securities issues.
The Company is. also subject to regulation by the Nuclear Regulatory Commission ("NRC") for nuclear plant licensing and safety, and by Federal and state agencies for environmental matters 2
such as air quality, water quality and land use.
Pursuant to the terms of the Power Contracts and Additional Power Contracts, Sponsors are obligated to pay the Company each month, amounts equal to the Company's total fuel costs and operating expenses of its plant, plus an allowed return on equity (since May 6, 1988, 12%;
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from June 1,
1985 to May 6, 1988, 15%).
Such contracts also obligate the Sponsors to make decommissioning payments through the end of the plant's service life and the completion of the decommissioning of the unit.
All Sponsors are committed to such payments regardless of the plant's operating level or whether the plant is out of service during
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the period.
Under the terms of the Capital Funds Agreements, Sponsors are committed, subject to obtaining necessary regulatory authorizations, to make funds available to obtain or maintain licenses necessary to keep the plant in operation.
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See note 11 for information regarding one of the Company's Sponsors, with a 4% ownership interest, having filed voluntarily for protection under the U.S. Bankruptcy Code.
(b) Depreciation and Maintenance
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Electric plant is being depreciated on the straight-line method at rates designed to fully depreciate all depreciable properties over the lesser of estimated useful lives or the plant's remaining NRC license life which currently extends to 2007.
Depreciation expense was equivalent to overall effective rates of 4.10%, 4.43%, and 3.70% for the years 1988, 1987 and 1986, respectively.
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Renewals and betterments constituting retirement units are charged to electric plant.
Minor renewals and betterments are charged to maintenance expense.
When properti'i are retired, the original cost, plus cost of removal, less salvage are charged to the accumulated provision for depreciation.
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(Continued)
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2 VERMONT YANKEE NUCLEAR POWER CORPORATION l
Notes to Financial Statements
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(c) Amortization of Nuclear Fuel The cost of nuclear fuel is amortized to expense based on the rate of burn-up of the individual assemblies comprising the total core.
The l
Company also provides for the costs of disposing of spent nuclear fuel at rates specified by the United States Department of Energy
(" DOE")
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under a contract for disposal between the Company and the DOE.
i In 1985, the Company began amortizing to expense on a straight-line basis seventy-five percent of the estimated costs of the final unspent 3
nuclear fuel core which is expected to be in place at the expiration of J
the plant's NRC operating license in 2007.
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(d) Amortiza tion of Materials and Supplies In 1985, the Company began amortizing to expense a formula amount designed to fully amortize the cost of the material and supplies inventory which is expected to be on hand at the expiration of the plant's NRC
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operating license in 2007.
(e) A11ovance for Funds Used During Construction Allowance for funds used during construction (AFUDC) is the estimated cost of funds used to finance the Company's construction work in progress and nuclear fuel in process which is not recovered from
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Spons rs through current revenues.
The allowance is not realized in cash currently, but under the Power Contracts the allowance will be recovered in cash over the plant's service life because of higher revenues associated with higher depreciation and amortization expense.
AFUDC was capitalized at overall effective rates of 7.72%, 7.11% and
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10.28% for 1988, 1987 and 1986 respectively, using the gross rate method.
(f) Decommissioning The Company is accruing the estimated costs of decommissioning its plant over the plant's remaining NRC license life.
See note 2.
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(g) Taxes on Income The tax effects of timing differences are accounted for in accordance with the rate-making policies of the FERC.
Provisions for deferred income taxes reflect the tax effects of all timing differences.
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Investment tax credits have been deferred and are being amortized to income over the lives of the related assets.
(h) Cash Equivalents For purposes of the Statements of Cash Flows, the Company considers all highly liquid short-term investments with a maturity of three months or
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less to be cash equivalents.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements i
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l (2) Decommissioning The Company accrues estimated decommissioning _ costs for its nuclear plant based on an updated 1981 study by an independent engineering firm which assumes that decommissioning will be accomplished by the prompt removal
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and. dismantling method.
This method requires.that radioactive materials be removed from the plant site with all buildings and f acilities dismantled immediately af ter shutdown.
The study estimates that approximately six years would be required to dismantle the plant at shutdown, remove wastes and restore the site.
The original study which estimated total decommissioning costs of $72.8 million in 1981
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dollars was updated for one major est in connection with the 1985 FERC rate case to an estimate of $96.8 million in 1984 dollars.
Based on an assumed inflation rate of 7% per annum the estimated cost of decommissioning at the expiration of the plant's NRC operating license in 2007 is $459.000,000.
The present value of the prorata portion of decommissioning costs recorded to date is $55,176,000.
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Billings to Sponsors for estimated decommissioning costs commenced during 1983, at which time the Company recorded a deferred charge for the present value of the prorata portion of decommissioning costs applicable to operations of the plant for prior periods.
Current
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period decommissioning costs not funded through billings to Sponsors or earnings on decommissioning fund assets are also deferred.
These deferred costs will be amortized to expense as they are funded over the remaining life of the NRC operating license.
On January 1,1989, and each four year period thereaf ter, the Company must
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revise its schedule of future annual decommissioning fund collections to reflect historical differences between assumed and actual rates of inflation, and historical differences between assumed and actual rates of earnings on decommissioning fund assets.
Changes in Federal corpot - income tax laws and rates require immediate revisien in the decommissioning funding schedule and subsequently in b illings.
As a
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result of the 1985 FERC rate case, the Company is airo required to update its decommissioning cost estimate at least every four years.
In February 1989, a second decommissioning study was completed which estimates total decommissioning costs of approximately $220 million in 1988 dollars.
The results of this study are subject to review by the
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FERC.
At this time the Company cannot estimate the amount of decommissioning dollars that will be allowed; therefore, the effects of this study have not been reflected in the financial statements presented.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
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In March, 1988, the Internal Revenue Service issued the final regulations implementing Section 468A of the Code and delineating the criteria for establishing a qualified decommissioning trust, deposits into which
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would be allowed as a
current deduction for tax purposes.
In accordance with these regulations, the Company established the Vermont Yankee Decommissioning Trust, pursuant to an Indenture of Trust, dated March 11, 1988, with The Chittenden Trust Company, as Trustee, and deposited therein $12,106,000, being the amount of decommissioning costs collected in 1987 and prior years.
In July, 1988, the Internal
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Revenue Service issued its letter, pursvant to said regulations, establishing the Ruling Amount allowable for each year since 1984.
Based on this letter, the Company filed amended returns for the years 1982 and 1984 through 1986 and the refunds received from the amended returns will be deposited into the Decommissioning Trust.
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Cash received from Sponsors for plant decommissioning costs is deposited into the Decommissioning Trust in either the qualified Fund (i.e.,
amounts deductible pursuant to the IRS letter) or the Non-Qualified Fund (i.e., excess collections pursuant to FERC authorization whch are not currently deductible).
Funds held by the Trust are invested in high grade government securities or certificates of deposit of banking
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institutions with assets in excess of $100 million.
(3) Other Deferred Charges Approximately $8.1 and $4.1 million of the $9.4 and $6.1 million in total other deferred charges at December 31, 1988 and 1987, respectively,
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relate to payments made to contractors for the construction of a emergency response facility information system.
The Company is currently financing the construction of this project which will ultimately be purchased at cost by a third party and leased to the Company under an operating lease.
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(4) Capital Stock If cumulative preferred stock is outstanding, the payment of cash dividends and distributions on Common Stock are limited when Common Stock Equity (as defined) is less than 25% of Total Capitalization (as defim 1).
This excludes redemptions which require 30% Common Stock
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Equity after redemption. At December 31, 1988, Common Stock Equity was 38.82% of Total Capitalization and the Company had retained earnings of
$5,255,000 available for payment of dividends on Common Stock.
The 7.48% series preferred stock is redeemable at par through a mandatory sinking fund in the amount of $1,100,000 per annum and is redeemable at l
an additional $1,100,000 per annum at the option of the Company.
Redemption prices range from $103 per share in 1989 to $100 per share in 1998, along with accrued and unpaid dividends to the redemption date.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
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(5) Long-Term Obligations
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A summary of long-term obligations at December 31, 1988 and 1987 is as follows:
1988 1987 (Dollars in thousands)
First mortgage bonds:
Series A - 9.625% due 1998
$ 10,485 10,485
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Series B - 8.50% due 1998 1,332 1,332 j
Series C - 7.70% due 1998 3,695 3,695 j
Series D - 10 1/8% due 2007 27,259 27,259 Series E - 9 7/8% due 2007 5,703 5,703 Series F - 9 3/8% due 2007 5,704 5,704
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Total first mortgage bonds 54,178 54,178 Unamortized premium on debt 69 77 Net first mortgage bonds 54,247 54,255 Commercial paper issued under Eurodollar Credit Agreement - weighted average interest rate
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of 8.50% and 8.36% at December 31, 1988 and 1987 31,628 38,998 Commercial paper issued by Vernon Energy Trust - weighted average interest rate 1,192 of 8.55% at December 31, 1987
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Total long-term obligations
$ fLL815 94 M1 During the fall of 1986, pursuant to an exchange offer of the Company, holders of more than 66 2/3% of the then outstanding Series A, Series B and Series C first mortgage bonds exchanged said bonds, respectively,
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for new Series D.
Series E and Series F first mortgage bonds.
The exchange constituted consent to the amendment of certain provisions of the Company's mortgage indenture and permitted the Company to extens the average maturity of its outstanding mortgage debt.
The first mortgage bonds are secured by a rirst lien on utility plant,
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exclusive of nuclear fuel.
Such bonds are further secured by a pledge of the Power Contracts (except for fuel payments) and the Capital Funds Agreements with Sponsors.
Annual sinking fund requirements for Series A. Series B and Series C first mortgage bonds will be met by depositing bonds received in the exchange offer described above.
Cash sinking fund requirements for Series D,
Series E and Series F first mortgage
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bonds will commence in 1998.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
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The Company has a $75,000,000 Eurodollar Credit Agreement which expires on July. 19, 1990.
The Company has' issued commercial paper under this Agreement with weights 4 average interest rates of 8.15% for 1988 and 7.24% for 1987.
Payment Of tue cc mercial paper is supported by the
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Eurodollar Credit Agreement which is secced by the nuclear ' core of the Company's generating facility.
Although the commercial paper has short-term maturity dates, the Company has the intent and the ability I
to refinance the commercial paper beyond 1988.
Accordingly, the commercial paper has been classified as long-term debt at December 31, 1988 and 1987.
1 The Company has a $40,000,000 Nuclear Fuel Sales Agreement with Vernon Energy Trust. This agreement permits the Company within that limit (i) to finance its nuclear fuel requirements and repay the same as the fuel is consumed, or (ii) to obtain term loans payable when the agreement terminates.
Current interest and financing costs are payable quarterly
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under either alternative, except that such costs relating to fuel financing may be capitalized prior to inserting the fuel in the reactor.
The Trust finances its needs through the issuance of commercial paper supported by a revolving credit agreement with Bankers Trust or by direct borrowings under that agreement.
The Company has secured its borrowings from the Trust by a pledge of the fuel payments
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payable under its Power Contracts with Sponsors. 'During 1988 and 1987 the average amount of commercial paper outstanding was $1,120,000 and
$14,321,000, with related weighted average interest rates of 6.99% and 6.95%, respectively.
Other than the Company's obligation under the Eurodollar Credit Agreement,
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there are no annual cash sinking fund requirements and maturities of long-tenn obligations for the five years ending December 31, 1993.
(6) Disposal Fee for Spent Nuclear Fuel The Company has a contract with the United States Department of Energy
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(" DOE") for the permanent disposal of spent nuclear fuel.
Under the terms of this contract, in exchange for the one-time fee discussed below and a current fee of 1 mil per kwh of generation paid quarterly, DOE agrees to provide disposal services when a facility for spent nuclear fuel and other high-level radioactive waste is available, which is required by current statute to be prior to January 31, 1998.
The DOE contract obligates the Company to pay a one-time fee of
$39,285,000 for disposal costs for all spent fuel discharged through April 7, 1983.
Although such amount has been collected in rates from the Sponsors, the Company has elected to defer payment of the fee to the DOE as perLitted by the DOE contract.
The fee must be paid no
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later than the first delivery of spent nuclerer fuel to the DOE.
Interest accrues on the unpaid obligation based on the thirteen-week Treasury Bill rate and is compounded quarterly.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements O-(7) Compensating Balances and Short-Term Borrowings The Company had lines of credit f rom various banks totalling $26,500,000 and $16,000,000 at December 31, 1988 and 1987, respectively.
The maximum amount of short-term borrowings outstanding at any month-end
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during 1988,1987, and 1986 was $6,185,000, $4,000,000 and $4,000,000, respectively.
The average daily amount of short-term borrowings outstanding was $2,172,000, $367,000, and $452,000 with corresponding weighted average interest rates of 9.78%,
7.26%,
and 7.25%,
respectively.
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(8) Taxes on Income The components of income tax expense for the years ended December 31, 1988, 1987 and 1986 are as follows:
1988 1987 1986 q)
(Dollars in thousands)
Taxes on operating income:
Federal - current
$ (2,607) 6,987 (591)
Federal - deferred 5,941 (1,947) 1,894 c)
State - curren" (101) 1,756 988 State - deferred 1,629 (612) 617 2,333) 2, 7_7_8 Investment tax credit adjustments (2,246)
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2,616 3,851 5,686 Taxes on other income:
Federal - current 190 369
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State - current
___ 46 83 236 452 Total income taxes
$ 1312
_4 303 LAlf2 2
A reconciliation of the Company's effective inccme tax rates with the Federal statutory rate is as follows:
10 1988 1987 1986 Federal statutory rate s4.0 40.0%
46.0%
State income taxes, net of Federal income tex benefit 9.2 5.4 5.6 C)
Investment credit (19.9)
(16.7)
(13.7)
Book depreciation in excess of tax basis 5.9 6.8 4.3 AFUDC equity (1.1)
(5.5)
Flowback of excess deferred taxes (6.9)
(3.6)
Other 3.0 O
LL12% _ lad %
m%
(Continued)
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O' VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statemente The items comprising deferred income tax expense are as follows:
C) 1988 1987 1986 (Dollars in thousands)
Decommissioning costs
$ 10,476 (3,048)
(3,171)
Tax depreciation over financial statement depreciation 1,315 2,316 4,928 Tax fuel amortization over (under) financial O
statement amortization (1,841)
(7:5) 1,331 Pension expense disallowed (463)
Postretirement benefits disallowed (414)
Flowback of excess deferred taxes (775)
(478)
_ 577)
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Othe-(728)
(584)
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$JM (2.559) 2.511 In December
- 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96, " Accounting for Income Taxes".
This Statement will require the Company to change from the deferred method to the liability method of accounting for income O
taxes.
The liability method accounts for deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities.
Adoption of this Statement, which is required for years beginning after December 15, 1989 but may be adopted earlier, will not have a significant effect on tax expense or cash flows of the Company.
g (9) Supplemental Cash Flow Information The following information supplements the cash flow information provided in the Statements of Cash Flows:
1988 1987 1986 O
(Dollars in thousands)
Cash (paid) received during the year for:
Interest (net of amount capitalized)
$ 1 112)
(8.178)
(7.380)
Income taxes
$ 1 220)
M],1) 5.289 O
Decommissioning fund activity:
Payments from the Company
$ 11,186 Cash received from Sponsors 6,076 5,793 5,575 Investment income 1,526 972 758 Income taxes paid (1,050)
(7,675)
(521) lO Net increase (decrease) 17,738 (910) 5,812 Balances at beginning of year:
Decotr.nissioning fund 11,588 8,274 5,395 Special deposit 1,739 5,963 3,030 0
Balances at end of year
$ 31.065 13.327 14.237 Decommissioning fund 28,590 11,588 8,274 Special deposit 2,475 1,739 5,963
$ 31.065 13.327 14.237 0
(Continued)
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O VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
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Postretirement medical benefits fund activity:
1988 1987 1986 (Dollars in thousands)
Payments from the Company
$ 1,062 Balance at beginning of year Balance at end of year
$ 12Q62 In November, 1988 the Company's Bt u of Directors approved the accrual of
$1,062,000 for postretirement medical benefits based on an estimat calculated by the Company's actuary.
The Company subsequently C) deposited $1,062,000 into an escrow account established to accumulate these funds.
(10) Pension Plans, The Company has two noncontributory trusteed pension plans covering
()
substantially all of its regular employees.
The Company's funding policy is to fund the net periodic pension expense accrued each year.
Benefits are based on age, years of service and the level of compensation during the final years of employment.
The aggregate funded status of the Company's pension plans as of December c) 31, 1988 and January 1, 1988 is as follows:
December 31, January 1, 1988 1988 (Dollars in thousands)
O Vested benefits
$ 3,005 2,207 Nonvested benefits 870 817 Accumulated benefit obligation 3,875 3,024 Additional benefits related to future compensation levels 6.183 5,063 O
Projected benefit obligation 10,058 8,087 Fair value of plan assets, invested primarily in equities and bonds 8,203 6,664 Projected benefit obligation in excess of plan assets
$ 1.855 1.413 lO l
Certain changes in the items shown above are not recognized as they occur, but are amortized systematically over subsequent periods. Unrecognized amounts still to be amortized and the amount which is included in the balance sheet appear below.
C)
(Continued)
O
10 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements December 31, January 1,
()
1988 1988 (Dollars in thousands)
Unrecognized net transition obligation
$ 1,298 1,358 Unrecognized net loss 135 100 Pension liability (prepaid cost) included O
in balance shest 422 (35)
Projected ben fit obligation in excess of plan assets
$ LSjj, id23 The weighted average discount rate was 8.0% as of December 31, 1988 and O
January 1, 1988.
The rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation was 7.5%, and the expected long-term rate of return on plan assets was 8.5% as of December 31, 1988 and January 1, 1988.
Net pension expense for 1988 included the following components:
(Dollars in thousands)
Service cost - benefits earned 937 Interest cost on projected benefit obligation 751 Actual return on plan assets (1,083)
Net amortization and deferral 561 g
Net pension expense
$ idftfg Pension expense was 41,166,000, $1,120,000 and $686,000 for the years 1988, 1987 and 19Et. respectively.
O (11) Commitments and Contingencies The Company has commitments through 1999 approximating
$94.000,000 associated with nuclear fuel requirements,.
Such commitments amount to approximately $16,000,000, $21,000,000, $11,000,000, $21,000,000 and O
$9,000,000 for the years 1989 through
- 1993, respectively, and approximately $16,000,000 thereafter.
Included in these amounts are minimum payments aggregating $118,000 plus interest which the Company is committed to make under a contract for uranium by-product extraction associated with a fertilizer plant.
The fertilizer plant ceased operations in September, 1987 and the Company is unlikely to receive lO any future deliveries of uranium under this contract.
The Company has contracted for uranium concentrate to meet substantially all of its power production requirements through 1999.
The Company has contracted for uranium enrichment services from a company
'O in France.
This contract provider for all the Company's uranium l
enrichment services for the period 1988 to 1996, with an option to extend. The Company also has an enrichment contract with the DOE which expires in 2001.
However, the Company has exercised its right to partially terminate the DOE contract for the period 1988 to 1996.
Q (Continued)
11 O
VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements O
The Company has commitments for capital expenditures amounting to approximately $5,000,000 for 1989.
One of the Company's Sponsors, Public Service Company of New Hampshire, O
purchaser of 4% of the Company's energy output, voluntarily filed for protection under provisions of the U.S.
Bankruptcy Code in January, 1988.
At the time of such filing and at all times since then, that Sponsor has been current in all its obligations to the Company.
The Company beleives tach Sponsor will continue to honor its obligations pursuant to the on :racts and agreements described in note 1, but there O
can be no assurs..ce that it will do so.
If such Sponsor does not honor its obligations, the Company would petition the Bankruptcy Court to require the Sponsor to make prompt payment.
Should any payment under those contracts not be made when it is due and payable and if the default is not remedied within 30 days, the Company would be in def ault under its First Mortgage Indenture and other debt agreements.
This O
might result in acceleration of the maturity of significant amounts of the Company's long-term obligations.
.The Price-Anderson Act provides, among other things, that the liability for damages resulting from a nuclear incident would not exceed the g
greater of $560,000,000 or the amount of financial protection required of the licensee (presently about
$7.2 billion).
Under the NRC regulations promulgated pursuant to the Price-Anderson Act, the Company has insured against this exposure by purchasing the maximum available private !nsurance and maintaining an indemnity agreement with the NRC.
Under a mandatory industry-wide program, owners of operating nuclear facilities (including the Company) may be assessed a retrospective o
premium of up to $63,000,000 for each reactor owned in the event of any one nuclear incident occurring at any reactor in the United States, with a maximum assessment of $10,000,000 per year per reactor owned.
Such owners may also be assessed additional retrospective premiums with respect to insurance purchased to cover property damage and
- O decontamination costs resulting from certain events, but in no case will such additional premiums exceed 5%
of above-referenced retrospective premium.
(Continued) lO O
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12 O
VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements O
(12) Unaudited Quarterly Financial Information The following quarterly financial information is unaudited and in the opinion of management includes all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of results of
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operations for such periods.
Quarter ended 1988 March June September December (Dollars in thousands - except per share amounts)
()
Operating revenues
$ 34,978 33,575 34,731 36,549 Operating income 5,372 4,764 4,561 4,847 Net income 2,406 2,123 1,957 1,942 Net income per share of common stock 5.59 4.88 4.48 4.43 O
1987 Operating revenues
$ 32,603 33,255 39,160 38,328 Operating income 4,494 6,198 5,157 5,730 Net income 2,434 2,430 2,408 2,403 C)
Net income per share of common stcck 5.60 5.59 5.59 5.62 O
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