ML19309E155

Annual Financial Rept 1979

ML19309E155
Person / Time
Site:	Crystal River
Issue date:	02/01/1980
From:	ORLANDO, FL
To:
Shared Package
ML19309E142	List: ML19309E140 ML19309E148 ML19309E151 ML19309E155 ML19309E160 ML19309E165 ML19309E172 ML19309E174
References
NUDOCS 8004180478
Download: ML19309E155 (30)

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son < i so y7g 1979 Annual Report

o , Florida aO O

                                                                               !      Power C O R PO R ATIO N Highlights of 1979 1979                   1978 l Revenues increased 11.2%                                        $835,493,000           $751,220,000 Fuel And Purchased Power- Up 24.4%                              $411,747,000           $330,939,000 Earnings Per Share Were Down                                        $4.14                   $4.74 Dividends on Common Stock Increased                                 $2.82                   $2.55 Construction Expenditures Were Higher                           $193,099,000           $124,191,000 l Sales of Energy - Up 3.1%                                    17.6 Billion KWH         17 Billion KWH Average Customers increased 5.1%                                   735,633                699,677 Average Residential Usage Was Down for the First Time Since 1975                                        10,496 KWH             10,895 KWH Peak Demand Was Up Only 2.2%                                    4,224,000 KW           4,135,000 KW Contents 1    President's Report to Shareholders             13 Employees 3 Financial                                          16 Financial Statements 5 Rates and Regulation                               26 Summary of Operations 5 Construction Program                               27 Discucsion of the Summary of Operations
          "*'                                          27 Common Stock Prices and                          !

9 System Operations Dividends per Share 10 Energy Sales and Usage 28 Directors and Officers 11 Energy Conservation Programs 28 ShareholderInformation 13 Environmental Compliance 29 Business and System Map About the Cover The men and women on our cover and highlighted inside our report represent the almost 4,000 l employees of Florida Power Corporation. Their jobs, skills, responsibilities and careers are as varied as their family lifestyles. In serving our customers around the clock, many of these jobs require extra  ! I hours for special or emergency duty. This often requires employees to sacrifice leisure time with their families. This report is dedicated to those employees and to their families. t l \

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Dear Fellow Shareholders:

                                                                                            ~'

This year's annual report is dedicated to the families of Florida Power ~ employees. These are the men, J; women and children behind the

• scenes who are the support and the purpose of an employee's career. , I; '

They are subjected to the stress and / " pressure which reflect from jobs in s the fast changing energy business. President Andrew H.Hines,Jr.,and wife. Ann, Theirloyalty and backing in the symbolize the dedication of the many Florida community help make Florida Power Power Corporation employees and their families a better company. who contribute t,o the quality of their communities by participating in public service activities. At it is my purpose in this letter to Florida Power, being a g0od neighbor is an integral pan of providing reliable service. consider some general factors in our Company's record and to discuss its problems and prospects for the present and future. The bottom line is a good place to and the marketability of the common stock. We have a large capital start. In 1979, we earned $4.14 per build,ngi program in front of us and share. This represented a decrease of

      $.60 per share or 12.7% from the level must raise substantial amounts of                       ,

established in 1978. Our earnings addit,onal i equity dollars in the next l few years. growth over the past few years has  ! I not been satisfactory, having been Turning from the financial aspects to adversely affected by the same the physical side of operations for inflationary pressures that have 1979, we achieved severallong severely impacted our r ation. sought objectives. Crystal River Unit Nonetheless,your Board of Directors No.1 was converted back to coalin has continued a 27 year record of mid-year. This enables us to increase increases in the dividends paid each our replacement of oil by coal to well year, with a year-end annual rate of over 20,000 barrels per day. The

      $3.00 per share.                        substantial price differential between il and coalis reflected in lower fuel At the January 1980 meeting, the adjustments to our customers. Our Board approved a recommendation fuel subsidiary purchased coal for a two-for-one stock split to be reserves to strengthen our long-term effective April 2,1980. This fuel supply.

recommendation will be voted on at the annual meeting on March 22, During the year, the nuclear unit at 1980.The purpose of the stock split Crystal River generated 20% of the is to broaden the base of ownership energy produced on the Florida

Power system. lt was out of service During 1979, the Florida Public for five months for refueling, steam Service Commission announced generator repairs, Nuclear plans to have a management audit Regulatory Commission required made of Florida Power Corporation. modifications and operating This work is underway under the problems.The capacity factor of the supervision of ArthurYoung & unit has improved substantially over Company. We believe that an the last few months, and it is a major objective analysis will indicate that factor in our power supply picture. your Company is efficiently l managed. lf areas can be found for We made many changes during the improvement, we will do all that we course of the year to improve can to take advantage of them. operating efficiency and customer service. Among the results was a The year 1980 will see the Company drop in the average length of outage actively seeking rate increases on for our customers. In 1979, the both the wholesale and retail levels. average customer of Florida Power Success in these efforts is critical, if had service available for all except we are to continue to provide 104 minutes of the year. Service sufficient electric service for Florida's reliability is extremely important future and to be able to continue the todayin viewof theincreasing shift to coal which our national and orientation of our society toward individualinterests dictate. electrical use not only for energy in summary, our plans for meeting purposes, but also for computer and the future needs of our service area communication reasons. are unfolding smoothly but are As we have pointed out before, contingent on our ability to secure electric supply is a long-term additional financial resources to business. Our capacity expansion implement them.The support of loyal program for the future emphasizes and effective employees and your coal and should bear its first fruit in own counsel and backing have been this regard late in 1982 when a new a source of great strength to those of 640 megawatt generating unit is us who are charged with managing scheduled for service at Crystal your Company. River. An additional unit is scheduled . for the summer of 1984.This Forthe Board of Directors, continued thrust away from o.lisi of extreme importance in view of the timid and indecisive attitude and actions that we have taken as a j nation in response to OPEC's / . highjacking of theeconomyof the Western world. { . The year 1979 saw the Three Mile Island accident which has had grave President repercussions for the nuclear l industry. As you know, Florida Power , has a Babcock & Wilcox nuclear ' steam supply system.This is the ) same type of system which was February 22,1980 - involved at Three Mile Island;  ; however, the plants are different in many respects. During the year, a number of personnel changes were made to strengthen the management and support of our nuclear functions. 2 l

FINANCIAL over91%of thetotalincreasein operating expenses. Maintenance expenses contributed another $8.3 Earnings million to the increase in operating expenses. This was due primarily Although Operating Revenues to a $3.7 mMon increase in increased $84.3 million in 1979 nuclear maintenance expenses. earnings per common share were down substantially from 1978. Our Other income and Deductions rose earnings per share decreased from in 1979 principally due to a change

                     $4.74 in 1978 to $4.14 in 1979. This            in the proposed oil pricing resulted primarily from                         litigation settlement agreement.

skyrocketing world oil prices This change, discussed in Note 6b which caused unrecovered fuel of the Notes to Financial expenses to increase $8.3 million, Statements, increased earnings or $.30 per share. $.18 per share. Higher levels of short-term debt, higher interest rates and accrued interest on Dividends asserted federalincome tax The annual dividend rate was deficiencies caused interest raised from $2.76 to $3.00 per charges to climb $9 million, or common share beginning with the 18.1% over 1978. December 20,1979 quarterly dividend payment.This was the Construction Expenditures 27th consecut,ve i year that the Company's total common stock Construction expenditures totaled dividends have increased. At year- $193.1 million in 1979, up $68.9 end 1979, there were 30,881 million over 1978. Construction common shareholders residing in expenditures in 1980 are expected all 50 states, the District of to reach $347.6 million. During the Columbia and several foreign next three years, construction countries. About 9,000 expenditures wi!! total almost $1.2 shareholders live in Florida. billion. Approximately 58% of these expenditures will be directed towards the expansion of our base Revenues load generating capability.This is Revenues climbed to $835.5 represented primarily by the , million in 1979, up 11.2% from construction of the two new 1978.This increase primarily coal-fired units at our Crystal River reflects the impact of the higher oil Plant site scheduled for operation 1 prices. Through the operation of in 1982 and 1984. ) the fuel adjustment clause, our l revenues are adjusted according Financing to increases or decreases in our 1 fuel costs on a two month, delayed Approximately two thirds of our  ! basis. Increased energy sales due 1979 construction program was to customer growth accounted for financed by internal sources of the remainder of the revenue gain, funds.The balance was provided through short-term borrowings , Expenses and long term finanaings,  ! I including the Cor ;;any's dividend Operating expenses increased reinvestment plan and employee

                    $88.5 million or 14.3% over 1978.                benefit plans which supplied $4.5 increases in fuel and purchased                  million in common equity. External      l power expenses, as a result of                   financings this year included two       I higher oil prices, accounted for                 $20 million pollution control           )

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JACK L. davis revenue bonds offered at coupon in an effort to settle various legal oistrier uanage' rates of 6%% and 67/s%. We also proceedings surrounding the enu cw issued $50 million of cumulative alleged overcharges to the preferred stock. This 10.50% Company for spot market light oil

                    '"         preferred stock was sold through a     purchases during 1973-74, the FLrda         er othe p op e Company agreed in late 1978 to in their service area.They     negotiated underwriting at a cost h ve a 24 hour a day, sev. to the Company of 10.61%.             advance $6.5 mii: ion so that cn day a week responsi-                                              refunds might be made to its The Company began its dividend        customers.The Company planned bility to our customers.        reinvestment plan in late 1975.

Th:y speak for the Com- to pursue litigat, ion to recover the Since that time, participants have advance. While the proposal was p ny and representit with a hrst of civic and social or- provided $3.9 million in common approved by the Florida Public g:nizations.They are in, equity. Almost 70% of this was Service Commission,it was valved, regularly, with local provided by re,nvested i dividends, rejected by the federal court. g:vernment.The job le one with the remainder coming from Subsequently, a new proposal was cf understanding and optional cash Investments. Since entered into among the Company kn w-how. its visiol,n v 4.n the plan began, participants have and various other parties during a p;r with that of the Co* been able to increase their p:ny logo. Everyone knows 1979.This agreement provides that holdings by almost 150,000 shares ,, th] district manager. But, a settlement fund of $5 million will without incurring brokerage fees be established, with the Company m:st of all,they are a vital and service charges.Two of the p;rt of the community.They contributing $1.5 million and the cro the joiners and the Company's employee benefit plans balance from the other parties. drrs.They are involved, have contributed $8.4 million since Th,si proposalis pending before duply, with today's service they began purchasing new the Court and the Commission. end tomorrow's future. common stock in 1976. Hime, to the Davis fam-Ily,is In the "other Florida," th:t beautifulland of rolling RATES AND REGULATION CONSTRUCTION PROGRAM hills and lake-dotted val-t sta e.ltYa w rld made N Unandal Wegmy d the RanNng W We grod in f rleisurely boating and Company must be mainta,ined to energy demand requires b::kyard family get- furnish our customers with an consideration of uncertainties tog;thers; activities which adequate supply of energy while such as inflation, fuel shortages, clw:ys stand a chance of providing a fair return to our population changes, l Int:rruption when a service investors. In order to help achieve environmental regulation, new cm:rgency or customer these goals, on January 28,1980, technology and much more. Past pr blem comes up unex- the Company filed a petition with experience no longer provides a P:ctedly, the Federal Energy Regulatory reliable guide to the electrical Commission to increase its needs of tomorrow's customers. wholesale-for-resale rates by $21.5 For the five-year period ended in million annually, or 15.6%. 1973, our compound annual peak demand growth was about 14%. The Company plans to seek an During the balance of the 1970's, i increase in retail rates in the early our demand growth averaged spring. We have not sought an increase in retall rates since 1974, above 7% annually and we anticipate an annual growth rate of except for an adjustment to cover about 5% in the 1980,s. l the fixed costs associated with the i Crystal River nuclear unit.The Florida Public Service Commission approval of the Future FacilY vs adjustment was ordered in April With the$ nsd 3-4% annual 1979, but was appealed to the custone pd. rate in the Florida Supreme Court by the 1980's. we me.culld new facilities Florida Public Counsel and is to meenhis demain Our objective still pending. is to maintain adequate ruserve 5 i-

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EDNA C. JONES margins during the 1980's units.We are studying the sup:rvisor primarily with new base load environmental and engineering EqualEmployment opportunity aspects of two sites for this plant. generating units. stIefers$urg These studies should be Construction continues on concluded by the end of 1980, schedule at our Crystal River Plant when the s,ite will be selected. We A Florida Power Corpora

• site for Unit Nos. 4 and 5. These tl:n goalls to be a good are also considering joint units, which will provide 640,000 wnership of these units w,thi n:Ighbor and corporate citl- kilowatts of capacity each, will be z:n wherever we serve. As other utility systems.

such, the Company has an the final units to be built at this cqual employment oppor- site.The first unit is to 9o into tunity obilgation to fulfillto operation .inlate 1982 and the FUEL th3 community.This means second about 18 months later.The cqual opportunities, not Company's first natural draft Although domestic coalis cnly for present employees, cooling towers will be built for expected to become the but for each Individual who these new units.The units will be Company's major boiler fuel s:c ks a career with our required to burn low sulfur coal. during the 1980's, oil is presently Ctmpany.This is no simple However, " scrubber" equipment our major fuel. As a result of the pr:cedure, but calls for both will not be required to meet air political developments in Iran and y'j,'",,"",d',','y", ding quality standards. the subsequent impact on world y y,,anJ prices, the cost of a barrel of oil cil supervisors. Final work is being completed on almost doubled during 1979. Edna Jones' schedule is combustion turbine peaking units Throughout this period, our a busy one, combining th' which will be ready for operation in erncerns of minority and Company was able to maintain an late 1980. Located at our Suwannee adequate supply of oil. Our w: men's organizations River Plant site, these units will , with those of the Company Continuing policy of mainta,ining in b:th day and evening Cost about $28 million to build.

                                               .                                        firm contracts for supplies of ali mr tings. She travels ex.           They will provide 150,000 kilowatts                fuels strengthens reliability during t;nsively, helping em.               of capacity,to be used during high these kinds of crises.

pl yees meet career goals, demand periods. No additional but there always is time for peaking capacity is planned for the To meet the growing demand for th3 church activltles and for balance of the 1980's. energy, ourlong-range objective is th3 youth sports programs to utilize Coal, oil and uranium for cr und which herfamilylife We also plan to purchase capacity our fuel mix. Coal will become our is built. from neighboring utilit,esi during primary fuel as our new coal-fired the first half of the 1980 s.These . generat.ing units come on-line purchases will range from 300,000 during the 1980 s. Our subsidiary, to 600,000 kilowatts each year. Electric Fuels Corporation, During the late 1980's, the currently supplies our existing Company plans to build two requirements for coal through four 800,000 kilowatt coal-burning major contracts.One-half of our ! Construction Expenditures (s Mmeans) i 76 FIMensm s124 2 1975 7e mM sini , r ,,,o ,,et,,, ,,, l co,t 2,s _,, -Mg ;g l man 3, 7

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CUZNTIN S. HERNDON supplies are delivered by water operating costs by over $1 million sweeman transportation under control of the through fuel savings alone. causeene subsidiary. The other half is delivered by railin unit trains Reliable operation also requires When trouble strikes and owned by the subsidiary. Electric interconnections with neighboring Fuels Corporation is currently utility systems.This provides the tricft t ls n m ch capacity for assistance in the event Fl:rlda Power Corporation developing sources of additional coal and the transportation for of powershortages o but a serviceman who pro. emergencies, and opportunity , the,r other vid:s the on-the scene, delivery to our new coal fired p:rconal touch that brings generating units. to purchase or sell energy at tha house back to life.This economically attractive rates. Our t k;s a wide range of tech- Our nuclear fuel supply is under interconnected systems provided nicci skills on the part of a long-term contracts through 1987. the opportunity for Florida utilities s:rviceman. it also calls for We continue to use natural gas in to develop a new concept, the tha kind of dedication that Certain generating units when " Energy Broker." The Energy c n brave the aftermath of interruptible natural gas is Broker matches hourly quotations c hurricane and put up, will- available. We have no current of energy prices for both buying

 '"9'Y                          contracts for a firm supply. We are                 and selling energy among the
     ,an        ergency a Ican                                                      group of participants.Each c ma for his help at any constantly alert for opportunities tim 3 of the day or night. to increase our supply and use of                    participant has the opportunity to Grandparents are special   natural gas; however, the use of                     operate the existing facilities pxple in the eyec of chil. gas is restricted by the pipeline                    within their system or purchase dran and the Herndons         capability in Florida, by the                        power from their neighbors if it is cnjsy every minute of every   availability of the gas in the field                 less expensive.

visit. Their home, practi- and by government policy. With c lly on the shores of the the exception of natural gas, our n:rthern Gulf beaches, current supply situation in all fuels mik:s fishing trips with the is strong. During 1980, we expect System Capability y ungsters particularly ap- our fuel mix to be about 43% oil, pxling, but no outing takes Dunng 1979, the Company's 26% nuclear,26% coal and 5% gas. plics without the under-By 1985, we estimate that our fuel generat,ng i capacity was affeMo st:nding that it could be cut by the Three Mile Island incident sh by an emergency call mix will e 54% coal,25% oil and

world-wide oil shortages, the need for purchased power and the delayed startup of our Anclote Unit No. 2 which began operation in

, SYSTEM OPERATIONS May.The addition of this second Anclote unit to our base load System reliability includes reduced capacity, was a major factor in our l cost to the customer through Company's ability to meet our ! improved procedures and more summer demand while the nuclear l efficient facilities. To improve our unit was unavailable. system reliability we have taken several major steps. A significant milestone was the completion of our Energy Control Center which Nuclear Energy l went on-line at year-end 1979. The Our Crystal River nuclear unit l new center will enhance system began a scheduled refueling reliability by controlling the use of operation on April 23 and was l our facilities to minimize fuel expected to return to service in costs. It provides a method for the June. During the refueling Company to evaluate operating operation, however, certain alternatives to meet load Nuclear Regulatory Commission requirements on a minute-by- required inspections and the minute basis. We anticipate that installation of modifications this facility will reduce annual extended the outage through July. 9

l l l l Earnings and Dividends ' After returning to service in version of the existing dilution Per Share August, the unit experienced cooling system.The new cooling

    ""                                several minor problems which            system will be completed in 1981 forced it to shut down again. In        and require over $27 million to September, the unit returned to         build. Meanwhile, the operation of Ip "    s J            full service and operated at a          the unit must be reduced if certain water temperatures are exceeded da 95.8% capacity level through the

balance of the year. during warmer weather.

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The nuclear accident at Three Mile

      .=       E li                    Island focused world attention on      Second Coal Unit Returns
                            "          the potential safety and financial     Completing the Company's first impact of nuclear-fueled power 2.

lill,>;jj , 4 generation.While there can be no guarantee that future accidents step forward in the development of coal as a major fuel source, our Crystal River Unit No.1 was

                ' l ii               will not occur, results of studies     converted from burning oil to y: hp ;p i,1j y 1                         since the Three Mile Island            burning coal. This 373,000 kilowatt incident indicate that certa,ni g ,; j , f                                                          unit returned to service in June.

D ,.> fundamental changes in the NRC The adjacent 415,000 kilowatt unit

          ;j , ,, 7                    and actions by the utility industry    No. 2 was converted to burning
                      ;[ y             should further m,n,imize i       these nsks.
          ;                                                                   coalin December 1976.
          !) W '                .      Like the Three Mile Island unit, our Crystal River nuclear unit has a nuclear steam supply system            ENERGY SALES AND USAGE E EARN!NGS                    manufactured by Babcock &

M DMDENDS Wilcox. However, the units are Florida Economy different ,in many other respects. Even so, modifications to various Florida's economy continues to safety equipment have been grow despite the recessionary implemented, as well as additional clouds on the national economic operator training, safety analyses horizon. Tourism during 1979 was and procedural modifications, all above 1978 levels, although our to help insure the continued safe service area was affected by the operation of the unit. impact of gasoline shortages in early summer. During 1979, more than 33 million tourists visited Florida and spent $14.7 billion, up Anclote Unit No. 2 Goes 14% from the previous year. On Line Florida was the fastest growing large state during the 1970's. Completed in April 1978, this During that period, our populat,on i 511,000 kilowatt oil-fired unit was increased 30.5%, or 3.5 times the on " standby" status to be used in national growth rate. As a result, emergency situations only.This was a result of the lack of a cooling [esidential construct,on i has increased substantially, although water discharge permit from the the rate of increase began to slow Environmental Protection Agency. down during 1979. Although the EPA had indicated a need for more elaborate cooling tower systems, an agreement was reached requiring the installation Energy Sales of " helper" cooling towers to be Milder than normalweather, which used in combination with a limited caused reduced heating and l 10

i Capacity and i Peak Demand cooling requirements, resulted in year.The reclassification of [E.*N!M7"" total kilowatt-hour sales customers from Commercial to

                                                ""                             increasing only 3.1% this year         Other Sa6s contributed somewhat compared to last year's 7%             to the increase. However, most of (g  >   increase. Our average customer         our Other Sales represent energy 5=                            growth rate during 1979 was 5.1%,      sales to other utilities for resale to 3     $i l           up from the 4.5% growth rate           their retail customers. Sales to
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U lle aqd pj g H of 1978. these wholesale customers "a ,. increased only 1.6% in 1979,

                                                        " h, hi si N                                                  following last year's gain of 8.8%.

g ;qc, Residential i_ike our residential sales, our wholesale sales reflected the

                                                  *          (,            -    Energy sales to our residential 4 r3
                                                           ~;'~* U E.l          customers increased only 1.3% in      impact of the milderweatherand
                                                        ;'<       '
                                                                          "     1979, following a 7.3% increase in    higher fuel costs.

2" 7 ,; 1978.The average energy usage by

                                                               ,J!: y           our residential customers was
                                                         ,;!j ! H (i            10,496 kilowatt-hours in 1979, a 3.7% ENERGY CONSERVATION
                                                                -               decrease from the average 10,895 3

PROGRAMS

                                                         ,;fIO d U              kilowatt-hours used in 1978.
                                                                *';d -

Reduced heating and cooling Although the majority of our ee=;= requirements due to mild weather energy is sold during the warm

                                                                ;,gg            and some price resistance due to      summer months, our peak demand higher fuel costs are the primary      occurs in the winter. Due to reasons for this decl,ne.

i moderate weather, our peak demand during the 1978-79 winter Commercial season was 4,224,000 kilowatts. This was up only 2.2% from the Kilowatt Our commercial customers used previous winter, compared to Hour Sales 3.2% less energy in 1979 than in gams of 6.1% and 10.5% in the two m 1978.This would appear to be a prior winters.

                                             , , .                      =_      changing trend following last E       year's 6.8% increase in usage.

y However, this decrease was the Energy Management M result of the reclassification of Programs 2'" approximately 2,800 customers from the Commercial classification As the cost of energy continues to

                                                                  -N                                                   increase,the Company continues NO n

to the Other Sales classification in to search for new ways to operate room August. Despite this reclassification, we had a net more efficiently. Energy ypi increase of 2,071 commercial management is a way to alter the

                                                               ,M H customers during 1979.                 pattern of the use of electricity.By 3hM                                                     being able to utilize our present iz j b

r ja industrial plant and equipment more efficiently,we can limit the need

                                                            ,t_M                Growth in industrial energy sales      for new generating facilities and 3,

climbed 9.3% in 1979. This is more i y qtq[ p than twice last year's rate of 4.6%. use primarily those facilities which are the most cost effective.This g

s ph d , p( g; it is primarily due to expanded will benefit customers and "a activity in the phosphate industry. shareholders alike by holding g) down rate increases and reducing Other Sales the need for new capital.

                                                      $eaA=                     The remainder of our 1979 energy       To slow the growth of peak sales were up 8% over the previous      demand we are actively involved in istemo 11

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Checkup Program for existing JULIE A. KING , severalload management costomerservice programs. We have developed a homes.The program provides our

                 ""                    broad communications program to                                                                                residential customers with trained ct        er                                                                                                                                       energy surveyors to locate energy educate our customers about energy conservation through                                                                                    leaks and losses in order to reduce energy waste i,n their homes. This Flarlda Power is a voice on Various billinserts and other Informat,on    is analyzed and th3 telephone. Hundreds of          publications, especially dur,ng                i                                                                           i peak periods of our summer and                                                                                 returned to the customers, with thrusands of calls come in cnnually and each must be           winter seasons We are continuing                                                                               advice on the energy saving r::ponded to politely and           to experiment with fixed time-of-                                                                              options available to them and the kn:wledgeably.The spe-              day rates which are designed to                                                                                estimated cost for installing each clil people who are the             shift energy usage from peak                                                                                   option. Approximately 1,200 Cimpany's customer ser-             periods to off-peak periods. We are                                                                            customers received a Home vica representatives often          alco researching a technique to                                                                                Energy Checkup during the cro asked to respond to in-         level Customer demand by using                                                                                 operation of the pilot program. In radio-controlled devices on a                                                                                  1980, the program will be initiated

pie . hel days c n e throughout our entire service area.

l lEng, the dozens of calls tir-special group of residential Ing. But, when a late night customers' water heaters and thunderstorm plays havoc central air conditioning and ENVIRONMENTAL with our power distribution heating units. Radio transmitters operate control devices attached COMPLIANCE < system, the service repre-s:ntative returns to work to to these customers' appliances, The Company's policy toward r:cssure anxious callers shutting them off for short periods compliance vith environmental th;t Florida Power is on of the day during times of peak regulations continues to be the th3 job. demand.We have also begun to cost-benefit approach, where Just being together In the apply this experiment to a group of improvements in environmental

                             *"        our commercial customers,
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     ,      ,d s " a o rce                                                                                                                            impact are balanced against cost.    ,

dzp down satisfaction for hoping to benefit from lower peak The impact on energy resources is yrung familles like Julie demand from these larger users. becoming an important factor in King's.They plan camping this balancing process.The use of cnd fishing trips as often as " helper" cooling towers at the time will allow. But, when Energy Saver New Home Anclote Plant only during the en cmergency comes up, Award Program warmermonthsof theyearto th3 job comes first and The Energy Saver New Home Protect the environment while fishing must walt. Award Program has continued to saving operating costs and benefit both building contractors conserving energy during the and homebuyers. Now in its third remainderof theyear reflects this year, the program provides cost-benefit relationship. guidelines for selecting energy The new electrostatic precipitator saving options which are most for Crystal River Unit No.1 has beneficial for individual needs. been completed and placed into These options include extra operation. Tests have successfully insulation, tinted or reduced demonstrated this unit to be in I amounts of glass, high efficiency compliance with air quality i air conditioners and solar water requirements.The electrostatic heaters. Homes built to minimum precipitator modification for Unit energy saver standards may No. 2, which is currently in provide a homeowner with energy operation,is to be completed he savings of up to 25% annually. the fall of 1980. Home Energy Audit EMPLOYEES During 1979, we successfully To fulfill our abligation to provide implemented our Home Energy reliable service to our customers 13

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ROGER W. SCHOOLEY we must have the most efficient range career advancement and Flint Manager and productive team of employees management development CrystalRiver unit Nos.1 and 2 ossible.This is accomplished by programs designed to produce a hiring qualified individuals, viable, flexible work force as our The power plant is the Company grows. bre upon which any elec-upgrading achievement levels, offering adequate incentive programs and insuring that our We believe that employee self-fst ents funct on improvement means Company 24 hours a day the year employee communications are , r:und.The men and women open and timely, improvement.We offer assistance ' who operate them encom- to all employees who wish to pace many professions, attend schools and colleges to skills and trades.The plant Equal Employment study subjects related to their jobs. m: nager, then, must be a Opportunity person of many parts; an cngineer, a technical spe. Our Company is dedicated to its ci: list, and an administra- policy of taking affirmative action Management Changes tir. He must deal with ma- in employment of allindividuals chinery and people equally To strengthen the leadersh.ip of and to encourage equal w:ll. And,with the power employment opportunities. We our Company and recognize the plint on a 24 hour day, the have established a corporate growth of our management m: nager is never entirely objective which directs responsibilities, three new officers

 '"    "'#'                                                              were named in March 1979. Mr.

Like many Florida Power mana9ement to accomPli sh our Carl R. Collins, Jr.' was elected cmployees, the Schooley equal opportunity goals.These Vice President, Suncoast Division, f mily also enjoys the goals have been established for the purpose of better utikzing th and Maurice H. Phillips was cv:ryday outdoor living of Fl:rlda. Living close to the human resources available in the Gulf of Mexico, boating and communities in which we serve. eand ected Northern Vice President'. Divisions Mr. Centra w ter skiing are pleasant George C. Moore was elected . p:rts of regular family out- Assistant Vice President, Ings. But family plans Union Contract Corporate Planning;later, he was s metimes are changed by named Assistant Vice Pres, i dent, cn emergency call from the About one-half of ouremployees Power Production. pl:nt. The plant manager's are represented by the d:dication to reliable elec* International Brotherhood of tric service is very much a Electrical Workers.The contract f:muy analr. expired December 16,1979, but Employee Communications was extended automatically until Our Company has expanded its the Company and the union agree efforts to insure that employees on contract changes, now under throughout our widespread system negotiation. are accurately informed of corporate developments. In 1 Employee Development addition to our newspaper for , I employees, special meetings with We continue to emphasize training employees and news updates, the in all of our operations to further Company began ACCESS,a upgrade the quality of our service monthly video tape report to all I by improving employee employees. ACCESS reports on l effectiveness and efficiency.The industry, Company and related Company provides a wide range of activities which affect every training programs to stress employee, helping them to be personal growth and technical better informed representatives of training for improved job skills. the Company in the communities This includes training for long- we serve. 15 l

l l l FLORIDA POWER CORPORATION l l Balance Sheets DECEMBER 31,1979 AND 1978 Assets 1979 1978 ELECTRIC PLANT (Notes 1,6a and 8); In service and held for future use $1,927,662 $1,826,490 Less-Accumulated depreciation 414,192 359,500 1,513,470 1,466,990 Construction work in progress 116,275 65,109 Nuclear fuel, at amortized cost 47,027 35 416 1,676,772 1,567,515 OTHER PROPERTY AND INVESTMENTS: Nonutility property and other investments 4,276 4,791 Investment in and aavances to subs' diary (Nota 1e) 8,472 12.325 12,748 17,116 CURRENT ASSETS: Cash (Note 5) 9,149 12,035 ; Speclal deposits 7,538 1,732 Temporary cash investments 6,000 4,000 Accounts receivable,less reserve of $1,327,000 in 1979 and $1,264,000 in 1978 49,229 36,991 Materials and supplies, at average cost-Fuel 85,103 58,535 Plant materials and operating supplies 34,521 25,574 Prepayments 1,893 2,374 193,433 141,241 1 DEFERRED CHARGES: l Unamortized debt expense, being amortized over term of debt 4,432 4,132 Other 26,840 9,077 1 31,272 13,209

                                                                        $1,914,225     $1,739,081 The accompanying notes are an integral part of these financial statements.

16

l l I r l l Capitalization and Liabilities 1979 1978 CAPITAllZATION (see accompanying statements): Common stock equity 8 538,181 S 515 200 Cumulative preferred stock 133,500 133,500 Cumulative preferred stock with sinking funds 87,125 38,700 Long term debt 682,605 658,676 1,441,411 1,346,076 CURRENT LIABILITIES: Accounts payable 27,311 19,198 Customers' deposits 25,185 23,243 Accrued income taxes 43.283 47,062 Accrued other taxes 33,827 14,438 Accrued interest 17,776 10,954 Other(Note 6b) 6,704 10,841 154,086 125,736 Long term debt due within one year 11,277 10,000 l Notes payable 9,609 - 174,972 135,736 DEFERRED CREDITS: Accumulated deferred income taxes (Note ig) 221,051 193,509 Accumulated deferred investment tax credits (Note 10) 74,598 61,562 Other 2,193 2,198 l 297,842 257,269 COMMITMENTS AND CONTINGENCIES (Note 6)

                                                 $1,914,225    $1,739,081 I

17

FLORIDA POWER CORPORATION Statements of income FOR THE YEARS ENDED DECEMBER 31,1979 AND 1978 1979 1978

                                ~

OPERATING REVENUES (Notes 1b and 6b): Residential $356,597 $327,146 Commercial 193,886 187,574 Industrial 121,336 101,479 Other 163,674 135,021 835,493 751,220 OPERATING EXPENSES: Operation-FueI(Note 1b) 359,579 282,876 Purchased power 52,168 48,063 Other 74,329 64,416 486,076 395,355 Maintenance (Note 1c) 44,885 36,572 Depreciation (Note 1c) 65,010 59,361 Taxes other than income taxes 48,665 44,627 income taxes (Notes 1g and 4)- Federal 56,370 74,931 State 7,147 8,804 708,153 619,650 OPERATING INCOME 127,340 131,570 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction (Note 1d) 769 575 Gain on reacquired bonds 1,188 1,263 Miscellaneous other income and (deductions) (Note 6b) 3,112 (2,058) 5,069 (220) INTEREST CHARGES: Interest on long term debt 47,994 46,624 Other interest expense 11,398 3,610 59,392 50,234 Allowance for borrowed funds used during construction (Note 1d) (502) (375) 58,890 49,859 NET INCOME 73,519 81,491 DIVIDENDS ON PREFERRED STOCK 13,649 13,340 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 59,870 $ 68,151 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 14,475,606 14,388,683 EARNINGS PER AVERAGE COMMON SHARE (Note 6b) $4.14 $4.74 I The accompanying notes are an integral part of these financial statements. 18

Statements of Retained Earnings FOR THE YEARS ENDED DECEMBER 31,1979 AND 1978 1979 3g73 (Thousands) Balance at Beginning of Year $272,695 $241,264 Add-Net income after dividends on preferred stock 59,870 68,151 332,565 309,415 1 Deduct: Cash dividends on common stock; quarterly dividends equivalent to the following annual rates-

      $2.48                                                                              -                                     26,759
      $2.76                                                                           29,912                                     9,946
      $3.00                                                                           10,925                                      -

Expense of issuing common and preferred stock 609 15 - 41,446 36,720 Balance at End of Year $291,119 $272,695 Statements of Source of Funds Used for Construction FOR THE YEARS ENDED DECEMBER 31,1979 AND 1978 1979 1978 SOURCE OF FUNDS: Funds Derived from Operations-Net income after dividends on preferred stock $ 59,870 $ 68,151 Less-Dividends on common stock 40,837 36,705 Earnings retained in the business 19,033 31,446 Items included in net incorne not requiring cash outlay-Depreciation 65,010 59,361 Amortization of nuclear fuel 8,748 5.218 Deferred income taxes and investment tax credit 38,402 29,290 Allowance for all funds used during construction (1,271) (950) 129,922 124,365 (Increase) Decrease in Net Current Assets (exclusive of temporary cash investments and current debt)(a) (21,842) 9,977 Funds from Financing and Other Sources (Uses)- Preferred stock 49,407 - Increase in short-term debt 9,609 - Pollution contro; revenue bonds 40,000 - Common stock-employee benefit and dividend reinvestment plans 4,541 2,342 Retirement of 4.10% pollution control revenue bond anticipation note (10,000) - Increase in temporary cash investments (2,000) - Long-term debt and preferred stock matured or reacquired for sinking funds (6,022) (11,547) (Increase) decrease in investment and advances to subsidiary 3,853 (4,954) Other sources-net (5,640) 3,058 83,748 (11,101) 191,828 123,241 Allowance for All Funds Used During Construction 1,271 950 FUNDS USED FOR CONSTRUCTION $193,099 $124,191 (a) Analysis of(Increase) Decreasein Net Current Assets-Accounts receivable ($ 12,238) ($ 5,675) Materials and supplies (35,515) (7,641) l Accounts payable 8,113 1,935 i Accrued income taxes (3,779) 17,311 l Accrued other taxes 19,389 2,077 l Accrued interest 6,822 1,551 l Other-net (4,634) 419 l ($ 21,842) $ 9,977 The accompanying notes are an integral part of these financial statements. 19

FLORIDA POWER CORPORATION Statements of Capitalization l DECEMBER 31,1979 AND 1978 1979 1978 COMMON STOCK EQUITY (Note 3): Common Stock Listed l Common stock, $2.50 par, authorized 30,000,000 shares New York l (442,705 shares reserved for conversion of convertible debentures), outstanding 14,579,876 shares in 1979 Stock Exchange and 14,426,122 in 1978 5 36,450 $ 36,065 Premium on capital stock 210,612 206,440 Transfer Agent for Retained earnings, including $52,035.000 not available Common Stock for dividends on common stock 291,119 272,695 Manufacturer:Hanover 538,181 37% 515,200 38 % Trust Company New York, N.Y. CUMULATIVE PREFERRED STOCK (Notes 2 and 3).

    $100 par, authorized 4,000,000 shares-Shares Outstanding Without Sinking Fund               Decernber 31,1979 4% - 4.75%                         335,000           33,500           33,500 7.40 %                             300,000            30,000          30,000 7.76 %                             500,000           50,000           50,000      Transfer Agent for 8.80 %                             200,000            20,000          20,000 Preferred Stock 133.500          133.500 Chemical Bank With Sinking Fund                                                                      New York, N.Y.

10.00 % 371,250 37,125 38,700 10.50 % 500,000 50,000 - 87,125 38,700 220,625 15% 172,200 13 % LONG-TERM DEBT (Note 2): First mortgage bonds-33/e% due July 1,1981 8,250 8,495 Trustees for 3%% due November 1,1982 8,874 9,136 First Mortgage Bonds 3%% due November 1,1983 5,836 6,011 Morgan Guran y rust 3%% due July 1,1984 7,089 7,299 Company of NewYork Maturing 1985 through 1994-3%% to 4%% 61,279 62,941 Matunng 1995 through 2004-4%% to 9% 440,109 442,034 Florida First National Maturing 2006-8%% 80,000 80,000 Bank of Jacksonvil!a Premium, being amortized over term of bonds 6,027 6,365 Par value of bonds reacquired to meet cash sinking fund requirements (4,913) (4,945) 612,551 617,336 Convertible debentures,4%% due August 1,1986 Trustee for (convertible into shares of common stock at the rate of Convertible Debentures one share for each $44.00 of principal amount) 19,479 19,484 9.10% electric consumer capital notes due October 1,1980 11,277 11,281 Irving Trust Company Guarantee of pollution control revenue bonds: *!:= York, N.Y. Citrus county 6%% due April 1,2004 20,000 - Trustee for Citrus county 6%% due April 1,2009 20,000 - Pasco county 7%% due July 1,2004 10,575 10,575 Electric Consumer l 410% pollution control revenue bond anticipation note Capital Notes due 1979 - 10,000 Southeast Banks Trust 693,882 668,676 Company, M. A. Long-term debt due within one year (11,277) (10,000) Largo, Florida 682,605 48% 658,676 49 %

                                                                 $1,441,411       $1,346,076 The accornpanying notes are an integral part of these financial statements.

20

Notes to Financial Statements (1)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (:) Electric Plant-Electric plant is stated at the original cost of construction which includes payroll and related costs such as taxes, pensions, and other fringe benefits, general and administrative costs and an allowance for funds used during construction. Substantially all of the Company's electric plant is pledged as collateral for the fu st mortgage bonds. (b) Operating Revenues and Fuel Expense-The Company recognizes revenues concurrent with billing to customers on a cycle billing basis.The cost of fuel for electric generation is charged to expense as burned. The cost of nuclear i Jet is gmortized to fuel expense based on the quantity of heat produced for generation of electric energy in relation to 1 0 quantity of heat expected to be p.oduced over the life of the nuclear fuel core. The Company is not presently providing on the books or in billing rates, for the recovery of future permanent storage and disposal costs of spent nuclear fuel. However, the Company is in the process of seeking approval from both the Florida Pubhc Service Commission (FPSC) and the Federal Energy Regulatory Commission to recover these costs. (1) Depreciation and Maintenance-The Company provides for the depreciation of the original cost of properties over their estimated useful lives on a straight-line basis. The annual provision for depreciation, expressed as a percentage of the average balances of depreciable plant, for 1979 and 1978 was 3.62% and 3.63%, respectively. The depreciation rate applied to nuclear facilities includes a factor for dismantling or removal costs to the extent allowed by the FPSC. The Company charges maintenance with the cost of repairs and minor renewals of property, the plant accounts with the cost of renewals and replacements of property units and accumulated depreciation with cost,less net salvage, of property units retired. (d) Allowance for Funds Used During Construction (AFDC)-This item represents the estimated cost of funds applicable to utility plant under construction. Recognition of this item as a cost of utility plant is appropriate because a constitutes an actual cost of construction and, under established regulatory rate practices, the Company is permitted to earn a return on such costs and to recover them in the rates charged for utility services. The rate used in computing AFDC for 1979 and 1978 was 8.66% which after consideration of deferred income taxes on the debt component of AFDC produces an af ter tax rate for 1979 ano 1978 of 6.99% and 6.93%, respectively. The rate of 8.66% is applied to the construction work in progress base which excludes $106.250,000, the amount allowed in the rate base for rate-making purposes. (:) Investment in Subsidiary-The Company has a wholly-owned subsidiary, Electric Fuels Corporation, formed to secure long-term fuel supplies. The Company accounts for the investment in the subsidiary on the equity method. (f) Pension Costs-The Company has a retirement plan for substantially all employees. The Company's policy is to fund pension costs accrued. Pension costs for the years 1979 and 1978 were $7,423,000 and $7,140,000, respectively. The unfunded past service liability of the plan, which is being funded over 10 years, was approximately $4,850,000 at December 31,1979. During 1979, a change in the interest rate assumption reduced the unfunded past service liability approximately $2,850,000. The assets of the plan exceed the actuarially computed value of the vested benefits at December 31,1979. (g) Income Taxes-Deferred income taxes result primarily from the use of liberalized depreciation, accelerated crNortization, the repair allowance and from the deferral cf taxes on the debt component of the allowance for funds used d jring construction and substantially all other current bcok-tax timing differences as recognized in rates by the FPSC. ~ he investment tax credits, including job development investment tax credits, have been deferred and are being amortized hrough credits to income over the lives of the related property. (2) SINKING FUND REQUIREMENTS The annual sinking fund requirement relating tG the first mortgage bonds at December 31,1979, is $10,050,000 of which $4,987,500 must be satisfied in cash or an equal principal amount of bonds and the balance may be satisfied with bondable additions. At December 31,1979, the Company had reacquired $9,587,500 principal amount of bonds. This amount will be used to satisfy the 1980 cash sinking fund requirement and the remainder will be used for future cash sinking fund rIquirements. The balance of the 1980 sinking fund requirement will be met with bondable additions. The Company is required to retire 15,750 shares of the cumulative preferred stock,10% series before August 15 of each yiar. The Company, starting November 15,1984, is required to retire 15,000 shares of the cumulative preferred stock, 10.50% series, with the option to retire a maximum of 30,000 shares before November 15 of each year, 21

l 1 FLORIDA POWER CORPORATION Notes to Financial Statements (3) EQUITY SECURITIES Preferred stock The changes in equity securities for 1979 Without With and 1978 are as follows: Pr mfu n Sn g 8n g C g on (Thousande) Balance December 31,1977 $35,876 $204,272 $133,500 $40,275 i 75,796 common shares sold 189 2,168 - - l 10% series 15,750 shares reacquired - - - (1,575)  ; Balance December 31,1978 36,065 206,440 133,500 38,700 ' 153,754 common shares sold 385 4,172 - - 10% series,15,750 shares reacquired - - - (1,575) 10.50% series,500,000 shares sold - - - 50,000 Balance December 31,1979 $36,450 $210,612 $133.500 $87,125 The Company has 1,000,000 shares of authorized but unissued preference stock, $100 par, and 5,000,000 shares of authorized but unissued cumulative preferred stock, no par. (4) INCOME TAX EXPENSE The amounts comprising income tax expense 197s 197s are detailed as follows: Federal State Federal state (Thousande) Payable currently $24,138 $4,886 $44,143 $5,880 Deferred to subsequent years (a) 32,052 3,654 26,588 2,919 Deferred income taxes-credits (11,959) (1,006) (6,534) (434) Investment tax credit, net of amortization 15,661 - 6,751 - Income tax expense 59,892 7,534 70,948 8,365 Taxes included in miscellaneous other income and deductions (3,522) (387) 3,983 439 Income tax expense in operating expenses $56,370 $7,147 $74,931 $8,804 (a) The components of income tax deferred n7s ,s7s to subsequent years were as follows. Federal State Federal State (Thousande) Exces s tax over book depreciation $20,308 $2,318 $15,983 $1,756 Norms lization of construction costs and other property rela'.ed items deducted for tax purposes 4,430 505 3,631 397 Repair allowance 3,138 358 4,711 519 Other 4,176 473 2,263 247

                                                                         $32,052          $3,654               $26,588              $2,919 The provision for federalincome tax, including amounts allocated to miscellaneous other income and deductions, produced an effective income tax rate of 45% in 1979 and 47% in 1978. The statutory rate was 46% in 1979 and 48% in 1978.

(5) SHORT TERM DEBT During the first seven months of 1979, the Company had established lines of credit which totaled $80 million, with interest payable at the prime rate. In August 1979, these lines were increased to $100 million. With the exception of basic working funds, substantially ali cash of the Company represents legally unrestricted compensating balances, maintained in support of these lines of credit which were unused at December 31,1979. The maximum amount, average monthly amount and the weighted average interest rate of short term borrowings during 1979 and 1978 were: I

                                                                                      ,,                  7, (Thousande)

Maximum amount $89,375 $21,000 Average monthly amount $31,379 $ 3,000 Weighted average interest rate 12.3% 7.9% l 1

22

(6) COMMITMENTS AND CONTINGENCIES (:) Construction Program-Substantial commitments have been made in connection with the Company's 1980 construction program which is presently estimated to be $347.6 million. (b) Legal Proceedings-The $6,500,000 settlement agreement for alleged fuel overcharges, which was discussed in our 1978 annual report to shareholders, was not approved by the federal district court. In September 1979, a second agreement was filed in which other parties took responsibility for a portion of the settlement and reduced the Company's share to $1,500,000. This change in the proposed settlement increased earnings for the year 1979 by $.18 per share. The proposed settlement has not yet been approved by all parties. In April 1977, the Florida Public Service Commission (FPSC) granted the Company an interim rate increase of tpproximately $60,800,000 annually in order to recover the fixed costs associated with the ownership of its Crystal River nuclear unit. On February 2,1978, the FPSC made approximately $59,500,000 of this increase permanent. As a result of subsequent operating problems with the unit, the FPSC ordered that the permanent increase revert back to an interim increase. Then, on April 18,1979, the FPSC ordered that these revenues again be made permanent; however, Public Counsel appealed the order to the Florida Supreme Court.The final outcome of these proceedings cannot be guaranteed. However,in the opinion of management and Company counsel, the FPSC order is valid and the likelihood of any refund is remote. The forced shutdown of the Crystal River nuclear unit led to an investigation by the FPSC to determine whether the Company's actions relating to the shutdown or repair of the unit were in any way responsible for the time it was out of service. The unit was shut down on March 3,1978, to repair damages caused by loose parts within the unit and was returned to full service in early October 1978. While the unit was out of service, replacement and purchased power from fossil fueled generation caused sharp increases in the fuel adjustment portion of the customer's bill. About $49,000,000 is subject to possible refund pending the outcome of these proceedings. (7) QUARTERLY FINANCIAL DATA (Unaudited) The following quarterly information has been prepared without audit: Three Months Ended Merch 31 June 30 september 30 December 31 (Thousands) 1979 Operating revenues $176,435 $178,355 $279,299 $201,404 Net income (loss) 14,663 (1,453) 31,629 28,680 Earnings (loss) on common stock 11,353 (4,764) 28,339 24,942 Earnings (loss) per average common share .79 (.33) 1.96 1.72 1978 Operating revenues $178,250 $175,748 $223,729 $173,493 Net income 19,352 12,301 26,044 23,794 Earnings on common stock 16,002 8,951 22,714 20,484 Earnings per average common share 1.11 .62 1.58 1.43 As a result of recording the new refund settlement discussed in Note 6b, earnings for the third quarter 1979 were increased by $.18 per share, while as a result of the original settlement earnings for the fourth quarter 1978 were reduced by $.22 per share. The business of the Company is seasonalin nature and it is management's opinion that comparisons of earnings for the quarters do not give a true indication of overall trends and changes in the Company's operations. (8) SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited) The following supplementary presentation is made consistent with Statement No. 33 of the Financial Accounting Standards Board and is intended to set forth the effect of both generalinflation and changes in specific prices on the Company. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. Constant dollar amounts represent historical cost stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers. Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of inflation. The current cost of plant is determined by indexing surviving plant by the Handy-Whitman Index of Public Utility Construction Costs. Since the utility plant is not expected to be replaced precisely in kind, current cost does not necessarily represent the replacement cost of the Company's productive capacity. 23

FLORIDA POWER CORPORATION Notes to Financial Statements (8) SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited)-(Continued) Amortization of nuclear fuel, an item included in operating and maintenance expense, and depreciation are determined by epplying the Company's amortization and depreciation rates to the average indexed plant amounts. Since only historical costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted. Under the rate-making prescribed by the regulatory commissions to which the Company is subject, only the historic cost of plant is recoverable in revenues as amortization and depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars or current cost that exceeds the historic cost of plant is not presently recoverable in rates as amortization or depreciation, and is reflected as a reduction to net recoverable cost. To properly reflect the economics of rate regulation in the Statement of Income from Continuing Operations, the reduction of net plant should be offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance plant. Since the amortization and depreciation on this plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. The current cost data presented has replaced the reporting requirement.* *~ "eplacement Cost Information as previously reported annually in the Company's Form 10-K. FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANG!NG PRICES (in Thousands of Average 1979 Dollars) Years Ended December 31, 1979 1978 1977 1976 1975 Operating revenues $835,493 $835,800 $785,920 $703,125 $680,381 Historical cost Information adjusted for general inflation income from continuing operations (excluding reduction to net recoverable cost) 21,043 Income per common share (after dividend requirements on preferred stock) .51 Net assets at year-end at net recoverable cost 510,919 Current cost Information income from continuing operations (excluding reduction to net recoverable cost) 10,078 Loss per common share (after dividend requirements on preferred stock) (.25) Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost 130,980 Net assets at year-end at net recoverable cost 510,919 Gene;alInformation l Gain from decline in purchasing power of net amounts owed 128,972 Cash dividends declared per common share $2.82 $2.84 $2.79 $2.74 $2.68 Market price per common share at year-end $28.25 $34.35 $39.68 $40.80 $39.62 Average consumer price index 217.4 195.4 181.5 170.5 161.2 24 l

STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES For the Year Ended December 31,1979 (Thousands) Conventional Constant Doller- Current Cost-ont 19 o are 19 D are Operating revenues $835,493 $835,493 $835,493 Operating and maintenance expense 579,626 585,104 585,104 Depreciation expense 65,010 112,008 122,973 Income tax expense 63,517 63,517 63,517 Interest expense--net 58,890 58,890 58,890 Other income and deductions-net (5,069) (5,069) (5,069) 761,974 814,450 825,415 income from continuinp operations (excluding reduction to net recoverable cost) S 73,519 $ 21,043 $ 10.078 increase in specific prices (current cost) of plant held during the year $ - $214,101 Reduction to net recoverable cost (141,945) (28,231) Effect of increase in general price level - (316,850) (141,945) (130,980) Gain from decline in purchasing power of net amounts owed 128,972 128,972 Net ($ 12,973) ($ 2,008) Report of Independent Certified Public Accountants To the Shareholders of Florida Power Corporation: We have examined the balance sheets and statements of capitalization of Florida Power Corporation (a Florida corporation) as of December 31,1979 and 1978, and the related statements of income, retained earnings and source of funds used for construction for the years then ended. Our examinations were made in accordance with generally accepted tuditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. At the time of the issuance of our report dated February 2,1979, included in the 1978 Annual Report to the Shareholders of Florida Power Corporation, a total of approximately $155,400,000 of retail revenues ($39,800,000 recorded in 1977 and

 $66,600,000 recorded in 1978 relating to the " fixed cost" issue and $49,000,000 relating to the " prolonged repair" issue also recorded in 1978) was subject to possible refund to customers. Since that time, as more fully described in the second             I piragraph of Note 6b of Notes to Financial Statements, on April 18,1979, the Florida Public Service Commission took tction and ordered that approximately $106,400,000 of those revenues relating to recovery of fixed costs at the Crystal i River unit are permanent increases and no longer subject to refund. Accordingly, while our present opinion as presented hirein is still qualifieti subject to resolution of the remaining rate matter involving approximately $49,000,000, the amount of the potential refund is less than that expressed in our previous report.

( In our opinion, subject to the effect,if any, of the resolution of the rate matter discussed in the preceding paragraph, the financial statements referred to above present fairly the financial position of Florida Power Corporation as of December 31, 1979 and 1978, and the results of its operations and the source of funds used for construction for the years then ended,in conformity with generally accepted accounting principles applied on a consistent basis, l l Tampa, Florida, Fcbruary 1,1980. 1 I 25

FLORIDA POWER CORPORATION Summary of Operations 1975-1979 (Thousands) 1979 1978 1977 1976 1975 Operating Revenues $ 835,493 $ 751,220 $ 656,138 $ 551,439 $ 504.496 Operating Expenses: Fuel 359,579 282,876 260,610 248,849 235,138 Other Operating Expenses 285,057 253,039 190,219 164,752 145,676 Income Taxes 63,517 83,735 80,539 48,428 35,307 Total Operating Expenses 708,153 619,650 531,368 462,029 416,121 ! Operating income 127,340 131,570 124,770 89,410 88,375 Other Income (Deductions) 5,069 (220) 6,675 12,574 17,192 Interest Charges (Net) (58,890) (49,859) (49,093) (42,722) (38,524) Net income 73,519 81,491 82,352 59,262 67,043 Dividends on Preferred Stock 13,649 13,340 13,498 13,655 13,733 Net income after Dividends on . Preferred Stock $ 59,870 $ 68,151 $ 68,854 $ 45,607 $ 53,310 Average Shans of Common Stock Outstanding (000) 14,476 14,389 14,292 14,199 13,246 Earnings per Average Common Share $4.14 $4.74 $4.82 $3.21 $4.02 Dividends per Common Share $2.82 $2.55 $2.33 $2.145 $1.9875 Other Financial and Operating Data 1975-1979 1979 1978 1977 1976 1975 CAPITALIZATION (Thousands) Long-Term Debt $ 682,605 $ 658,676 $ 673,867 0 724,383 $ 661,233 Preferred Stock 220,625 172,200 173,775 175,350 176,920 Common Stock Equity 538,181 515,200 481,412 442,165 425,633 Total $1,441,411 $1,346,076 $1,329,054 $1,341,898 $1,263,786 ELECTRIC SALES (Thousands of KWH) Residential 6,927,339 6,838,906 6,373,899 5,750,889 5,411,991 Commercial 3,646,279 3,766,194 3,526,562 3,298,036 3,187,479 Industrial 3,215,932 2,942.065 2,813,000 2,690,525 2,479,378 Other 3,779,(,39 3,499,576 3,221,536 3,077,572 2,864,816 Total 17,569,189 17,046,741 15,934,997 14,817.022 13,943,664 RESIDENTIAL SERVICE (Average Annual) KWH Sales per Customer 10,496 10,895 10,604 9,932 9,701 Revenue per Customer $540.29 $521.19 $478.12 $416.15 $396.37 j Revenue per KWH 5.15C 4.78g 4.51 C 4.19C 4.09C OPERATING DATA Investment in Electric Plant (000) $2,113,614 $1,940,917 $1,831,680 $1,749,429 $1,623,387 Net Generating Capability (KW) 4,884,000 4,929,000 4,452,000 3,895,000 3,712,000 l Net System Peak Load (KW) 4,224,000 4,135,000 3,899,000 3,530,000 3,281,000 BTU per KWH of Net Output 10,503 10,481 10,423 10,136 10,046 Fuel Cost per Million BTU $2.01 $1.68 $1.51 $1.67 $1.68 Average Numberof Customers 735,633 699,677 669,615 644,846 621,780 Number of Employees 3,891 3,738 3,546 3,443 3,372 26

I l t Discussion of the Summary of Operations l Operating Revenues. In 1978, the increase depreciation expenses. Other operating in operating revenues was due to the recovery expenses for 1979 increased primarily due to of higher fuel expenses related to an extended higher operating, maintenance and outage at the nuclear unit. The 1979 increase depreciation expenses. The increase in is due primarily to revenues recovered operating and maintenance expenses through the fuel adjustment clause, resulted from a higher level of expenses at the nuclear unit. Depreciation expense included a Operating revenues increased as follows: full year's effect of Anclote Unit No. 2, which was placed in service in October 1978. Millions of Dollars 1979 1978 Otherincome(Deductions). In 1978, the Increase in revenue due to decline in other income was due to a $6.5 increase in price per million proposed settlement for alleged fuel kilowatt-hour sold $60.7 $49.5 overcharges. In 1979, the increase in other income was due to a revision of the previously increase in revenue due to kilowatt hours sold 22.7 45.0 proposed settlement which reduced the Company's share to $1.5 million (See Note 6b Increase in other revenues .9 .6 of Notes to Financial Statements for a more

                                 $84.3         $95.1              detailed explanation).

Interest Charges. In 1978, the increase in Operating Expenses. For 1978, fuel costs interest charges was due to interest on increased as the more costly fossil-fueled asserted federal income tax deficiencies for generation replaced lower cost nuclear. In part cf the year and a reduction in the 1979, the increase in fuel costs was due allowance for borrowed funds used during primarily to an increase in the unit cost of fuel construction. For 1979, interest charges purchased and an increase in net generation. increased due to a full year's effect of interest on asserted federal income tax deficiencies The 1978 increase in other operating and as a result of a higher level of short-term expenses was due to higher maintenance and borrowings and higher interest rates. Common Stock Prices and Dividends Per Share ! Price of Common stock on New York Stock Exchange Dividends Paid 1979 1978 Per Share High Low High Low 1979 1978 First Quarter $32% $30% $33 $29% $.69 $.62 Second Quarter 31 % 27 % 30 % 28 % .69 .62 l Third Quarter 31 % 28 33 % 29 % .69 .62 Fourth Ouarter 30 % 26 % 32 % 29 % .75 .69 27

l l 1 l Florida Power Corporation General Offices,320134th Street South, P. O. Box 14042. St. Petersburg, Florida 33733 Telephone 813-866-5151 DIRECTORS OFFICERS OTHER SHAREHOLDER INFORMATION THAN DIRECTORS Cobert C. Allen S. A.Brandimore Shareholder Semces Department Vice President, Walt Disney World Senior Vice President During 1979 ;ne Company assumed the cnd Chairman, Disney World Corporate Services and recordkr, ping activities for our common and Operating Committee General Counsel prefried shareholders. Alldividend checks, Lake Buena Vista, Florida C,areholder reports, proxy material and tax B. L Griffin forms are handled from our St. Petersburg Wilmer W. Bassett, Jr. Senior Vice President General Offices. All correspondence concerning President and General Manager Engineering and Construction address changes, dividend checks and related Bas Lee H. Scott matters should be directed to' (Da,sett Brothers, Inc. ny Busir'ess) Senior Vice President Monticello, Florida Operations Florida Power Corporation Shareholder Services Department Sam T. Dell C. R. Collins, Jr. P. O. Box 14042 Senior Partner, Dell, Graham, Vice President St. Petersburg. FL 33733 Willcox, Barber, Ryals, Suncoast Divie' Henderson & Monaco, P.A. Inquiries concerning the transfer of stock (Attorneys at Law) J. E. Gleason certificates should be directed to our New York Gainesville, Florida Vice President, Eastern transfer agents below. and Ridge Divisions Byron E. Herlong a Chairman of the Board A. S. Herlong & Co.,Inc. R. ViceR. HeYe. Presi dent and Transfer Agents and Registrars ControHer (Citrus Business) Leesburg, Florida Common Stock M. F. Hobb Vice President, Staff Manufacturers Hanover Trust Co. Andrew H. Hines, Jr. 4 New York Plaza President R. W. Nelser New York, New York 10015 Vice President and Preferred Stock Frank M. Hubbard Assistant General Counsel Chemical Bank Chairman of the Board 55 Water Street bard Construction ',*set New York, New York 10041 e (Highway Construction) Engineering and Construction Orlando, Florida M. H. Phillipe Vice President, Central Exchange Listing for Common Stock l Cichard C. Johnson and Northern Divisions l Chairman of the Board New York Stock Exchange Community Banks of Florida,Inc. N.B. Spake Ticker Symbol "FDP" Seminole, Florida Vice President Environment and New Clarence W. McKee, Jr. Technology Senior Vice President, Dividend Reinvestment Plan T. F. Thompson Financial Services The Company has also assumed the Vice President Administrative Services administration of the dividend reinvestment Cornest B. Myers plan. Plan enrollments, withdrawals and other Partner, Peterson, Myers. Craig- J.G. Loader correspondence should be directed to the Crews Brandon & Mann, P.A. Secretary and Treasurer Shareholjer Services Department at the (Attorneys at Law) address shown above. Lake Wales, Florida J. H. Bla nchard Assistant Vice President Coorge Ruppel System Operations Vice President and Secretary Annual Report Form 10-K and the . ss t t ce President Statistical Supplement (Manufa ture sof Au o a s) l Pinellas Park, Florida Power Production Upon request, the Company will furnish its J.H. Joyce shareholders without charge a copy of its 1979 Jean Giles Wittner Assistant Secretary and Form 10 K, without exhibits, as filed with the President, St. Petersburg Assistant Treasurer Securities and Exchange Commission. A l l Federal Savings & Loan detailed Ten-Year Statistical Report on the ' Association Betty M.Clayton Company's business is also available. Requests St. Petersburg, Florida Assistant Secretary should be addressed to J. G. Loader, Secretary. 28

BUSINESS AND SYSTEM MAP g g l i l W MONTICELLO 9 -_ G APALACHICOLA - UNIVERSITY g OF FLORIDA g DELAND G B CRYSTAL RIVER e ey WINTER PARK k The Company serves over 735.000 ORLD9 ' i customers in 375 cities,' towns and E TARPON SPRINGS O rural communities.The territory , l comprises approximately 20,600 L square miles with a population over . CLEARWATER S 3,000,000 located in 32 of 67 Florida . ST. PETERSBURG e g 9 LAKE WA l I counties. In addition to the generating plants indicated on the map, electric E t power can be supplied by l_ ~ - - - -

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