ML20009B616

Annual Financial Rept 1978

ML20009B616
Person / Time
Site:	Grand Gulf
Issue date:	02/02/1979
From:	MISSISSIPPI POWER & LIGHT CO.
To:
Shared Package
ML20009B613	List: ML20009B612 ML20009B614 ML20009B615 ML20009B616 ML20009B617 ML20009B618 ML20009B620 ML20009B621 ML20009B623
References
NUDOCS 8107160437
Download: ML20009B616 (20)

Text

l 1978 ANNUAL REPORT MISSISSIPPI POWER & LIGHT COMPANY C,K i

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occcove Principal Power Sources g New Urist under construction Proposed Power Source 1978 New & Expanded Industries . . . . . . . . . . . . . . 72 FACTS ABOUT MP&L n xes . . . . . . . . . . . . . . . . . . . . . . . . . . $35,442,000 Plant Investment . .,. . . . . . . . . . . . . $721,625,000 Company Chartered . . . . . . . . . . . April 12,1923 Generating Capability . . . . . 2,763,000 kilowatts operating Area . . . . . . . 45 Counties (See Map) Number of Generating Stations . . . 5 (See Map)

Population (area served) . . . . . . . 1,226,000 (est.) Average Cost, Residential KWil . . . . . . . . 3.88e Number of Employees . . . . . . . . . . . . . . . . 1,550 Total Miles, Power Lines . . . . . . . . . . . . . 18,334 Employee Payroll . . . . . . . . . . . . . . . . $ 19,513,000 Company-owned 115,000 volt substations . . 125 Custo mers . . . . . . . . . . . . . . . . . . . . . . . . . 297,941 Number of 500,000 volt (ElIV) substations . . . 3 Customers Added During Year . . . . . . . . . 6,795 Number of 230,000 volt substations . . . . . . . . . 5 A'uout Our Cover General Offices The first coal fired generating plant in the MP&L system is Electric Iluilding, Jackson, Mississippi 39205 planned to be built in DeSoto County,on the east bank of the Itegistrar (for preferred stock)

Mississippi Iliver near the Tunica County line. looking over a Deposit Guaranty National Bank, Jackson, Mississippi model of the proposed plant's power block are three Company Transfer Agent employees involved in planning the facility. They are, from First National Bank of Jackson, Jackson, Mississippi left: James it. Itider, manager of Fossil Production; Linda This report is prepared for the information of security Dean, biologist in Production Engineering; and lien A. Dud. holders, employees and other interested persons. It is not ding, manager of Production Planning and a member of the transmitted in connection with the sale of any security or Middle South Coal Task Force Committee. offer to sell or offer to buy any security.

To Our Stockholders and Members of Our Organization The Company's operating results for 1978 were generally was initiating plans for building a 100-megawatt coal-fired good, due to some favorable factors which, unfortunately, plant in DeSoto County. The hiississippi Public Service Com-are not assured to continue in the future. mission,in early 1979 granted a Certificate of Public Conven.

Among the positive forces influencing our 55th year were ience and Necessity to construct the $800-million facility,and such things as;a relatively stable fuel cost and supply; contin- other required permits are in the process of being secured. On ued restraint on spending and operating on a closely controlled site construction is expected to start by 1981, with comple-budget; and weather conditions which resulted in above average tion scheduled in 1985. It will be the first coal fired plant in consumption of electricity by our customers. Another positive the AIP&L system, and is in line with the policy announced by factor and one expected to continue was the high productivity Aliddle South Utilities, Inc., of which 51P&L is a part, to and excellent performance of Company employees. develop a " balanced mix" of coal and nuclear fueled generat.

Under such conditions the Company's basic rate level, last ing stations to provide baseline power in the system in the changed in December,1975, was sufficient to produce an ade- future.

quate rate of return on investment necessary to keep the Com-pany financially sound and able to meet its franchise obliga-tion to its customers. No Rate Increase The successful results attained during the year do not mean that problems facing our Company and all electric utilities Fortunately, h1P&L's standard rate schedules generated diminished. In fact, the problems outlined in these last several sufficient revenue to cover costs during the year, and no in-annual reports continued to grow. Despite enactment of the crease in rates was required. On the other hand, there was a so-called National Energy Act in 1978,the nation does not yet slight decrease in customers bills during the year, when the h!is-have a clearly defined energy program. Conditions on the sissippi Irgislature enacted a measure eliminating the five per-international front at year's end and in early 1979 were dis- cent sales tax on energy sold by utilities to residential custo-hearte..ing. The situation in Iran and other oil producing mers. This saving was immediately reflected in customers' nations served to cloud the world energy picture.The Organi- bills. Also, in early 1979, a change in the federal corporate zation of Petroleum Exporting Countries (OPEC) has income tax law allowed for a small reduction,one-half of one arnounced a 14.5'1 price increase during 1979. At home, percent, on bills of residential, commercial and industrial there is little being done to actually speed up the use of coal customers. 51P&L constantly monitors its f'mancial situation, and nuclear resources to meet energy demands in the near and an application for rate adjustments is made only if and future, and the energy " crisis" time-clock continues to tick when conditions make such an application essential to main-away. On top of this, inflationary pressures on costs for tain the Company's ability to continue to attract capital on capital, material and supplies continue to mount and it seems reasonable terms.

inevitable that before too long the cumulative effect of these increases will require the Company to again request an increase in its rate level. Operating Revenues AIP&L, along with other utilities, must constantly contend with rising costs, unrealistic government regulations, red-tape, AIP&L operating revenues for the year amounted to and growing restrictions on freedom of operation which im- S400,276,000, the highest in history. The figure compares pede providing service to customers. We are proud of the fact with $365,346,000 for 1977. The revenue increase was due that our Company has met every demand of customers for in part to recovery of increased costs for fuel and purchased electricity, required for their jobs, homes, businesses, indus- power, but most of the improvement was due to customer tries and fe Despite the trying conditions under which we growth and increased energy sales.

must opera 6 1P&L power continues to e, in our opinion, the biggest bargain in the family budget. ' he average cost of AIP&L residential electricity for 1978 w.s 3.88 cents per Expenses Up kilowatt hour, compared with 4.02 cents per kilowatt hour in 1945. Few,if any, other items in the family budget hold such Operating Expenses for the year also increased, amounting a record. to $353,279,000 for 1978, compared with $322,338,000 for the previous year. This was 10 percent, or $30,941,000 more than the year before. The largest part of the expense was Coal Fired Plant the $248,210,000 spent for fuel and purchased power, an increase of 11 percent over 1977. Fuel oil purchased for Com-To meet the future electricity needs of our customers, pany plants showed a 14 percent increase, or 15,127,773 bar-alp &L in 1978 took a number of positive steps. The biggest rels as compared with 13,330,777 barrels in 1977.

Revenue Distribution each year by the Edison Electric Institute. The program was also honored by being judged the best complete campaign in The tabulation below shows the distribution of the Com. marketing and conservation in the nation's oldest advertising pany's revenue dollars collected in 1978: contest among utilities, sponsored by the Public Utilities Communicators Association. It also was named as first place (In Thousands)  % winner in con'ests sponsored by the Greater Jackson Adver.

tising Club and the 7th District of the Advertising Federation Fuel $208,161 52.00 of America.

Purchased power 40,049 10.01 In addition to the " Zip Up" program, the Company Total Fuel & Purchased Power 248.210 62.01 e ntinued its aggressive campaign to acquaint customers Taxes 35,442 and the public with '.Le proven heat pump and E3 home 8.85 e nstruction programs. A continuing educational campaign Payroll 19,513 4.87 Depreciation 5 13 20'528 of thousands of pamphlets, the speakers bureau, workshops

• Other Expenses & Deductions 27,014 6.76 and films.

Cost of Capital:

Cost of Debt (Interest) 20,694 5.17 Net Income (Cost of Preferred) Construction

& Common Stock) 28,845 7.21*

Construction expenditures for 1978 amounted to TOTAL REVENUE $400,276 100.00% $24,386,000, a slight increase over the previous year, but still below the average for the past decade of expansion.

• 60"o paid as preferred dividends, 4.45% paid as common

. During the year the Company completed conversion of for.

dividends, and 2.16% reinvested in facilities to serve custo. mer gas-fired plants to burn fuel oil.

mers. A major project for the year, unplanned at the beginning of the year, was the repair of damage caused by tornadic winds Unusual circumstances contributing to net income during to the 500,000 Extra High Voltage (EllV) substation and 1978 were: (1) high sales to other utilities resulting from related facilities at the Grand Gulf Nuclear Station. The weather conditions and the coal strike, (2) unusual tempera- April 17th storm did extensive damage to the substation with tures in the Company service area, and (3) other non-recur- restoration work costing approximately $4.million. Repair ring factors. s well underway and a major portion of this substation was Total energy sales by the Company for the year amounted energized in December,1978.

to 12.83 billion kilowatt-hours, an 11% increase over 1977. Other construction during the year included: completion Sales to ultimate customers increased 6% over the previous of the 115,000 volt transmission line from Franklin 500,000 year, and totaled 7.2 billion kilowatt. hours. Residential EllV substation to Liberty; purchasing of rights-of way for the usage for the year was up 5%, commercial up 8"c, and 500,000 EllV transmission line from Grand Gulf to the Baxter industrial up 64. Wilson Steam Electric Station in Vicksburg, and completing Peak demand on Company lines occurred at 4:00 p.m.on 70% of the foundation work by year's end; completion and August 21,1978, and was 1,899,000 kilowatts, an increase energizing the 230,000 volt Robinson Road substation, to of 115,000 kilowatts over 1977. serve the growing load in the southwestern part of Jackson, The increase in industrial demand for the year reflects the including the huge Metrocenter shopping facility, and the continued industrial development taking place in the 45 enlarged flinds General llospital. The Robinson Road sub-county area in which MP&L operates. Total new and expanded station represented an investment of approximately $1.5 industries in the area for the year numbered 72, with 35 being million.

new location and 37 being expansions of present industries. In addition to the above projects, preliminary planning The new and expanded plants will add 3,038 new employees and work was carried out on a number of projects slated for to the state's industrial force. the near future. Among them are: the proposed DeSoto County coal-fired plant; a 230,000 volt transmission line from Customers increase Indianola to Tillatoba; conversion of the 115,000 volt trans.

mission line from Tillatoba to Batesville to a 230,000 volt At year's caJ, total customers on Company lines numbered I ne; a 24-mile 115,000 volt transmission line from Silver 297,941, for an increase of 6,795 over the year before. Cus- Creek to Magee:and acquiring property and designing an ElIV tomers by classification were: residential, 255,174, com. substation at McAdams, with a 230,000 volt transmission line mercial,37,405; industrial,3,245; government and municipal, to Pickens and two 115,000 volt lines to tie to the 115,000 2,049; cooperatives and municip.' 66; and other public voit transmission circuit south of Kosciusko. Other 115,000 utilities,2. volt lines in various stages of design are from Hovina to North Residential customers continued to lead all other classifi- Vicksburg, from the Jackson Airport to Brandon, from the citions in electricity usage, 2.9 billion kilowatt-hours. The Natchez substation to South Natchez, and from the Franklin average usage by residential customers was 11,330 kilowatt- EllV substation to Brookhaven.

hours, an increase of 292 kilowatt-hours over 1977.

Marketing programs under the direction of the Cuon ar Services Department received special recognition ty the in- Grand Gulf Progress dustry during 1978. The " Zip Up" campaign, a basic program for energy conservation, was among the top three programs in The first unit of the Grand Gulf Nuclear Station, the lar-the nation competing for the coveted Edison Award presented gest industrial project in the history of Mississippi, was

pproximately 73 percent complete at year's end. The $2.3 Director of the new Distribution Construction and Operations illion project is being financed and will be owned by Middle Management System, and he was succeeded at Indianola by puth Energy, Inc., a generating subsidiary of Middle South Itobert E. Gramling.

7tilities, Inc. It is being built and will be maintained and In the power plants, these promotions and changes were aperated by MP& L. made: Itichard Denman, to Manager of the Natchez Steam Each unit of the Grand Gulf facility will have a capability Electric Station; Malcolm Allred, to Manager of the Baxter

)f generating 1,250,000 kilowatts. or a total capacity from Wilson Steam Electric Station at Vicksburg; Rex Shannon, uth units of 2,500,000 kilowatts. Peak construction employ. to Manager of the Delta Steam Electric Station at Cleve.

nent is 1,000. Total coratruction payroll for both units is land; Alan Sobren, to Manager of the Gerald Andrus Steam spected to be $550 millit n. The first unit is slated for com. Electric Station at Greenville; and A. T. Johnson, to Manager nercial operation in 19M, with the second unit to be com. of the Itex Brown Steam Electric Station in Jackson.

>1eted in 1981. The plant will hase a permanent staff of some At the Grand Gulf Nuclear Station, Kenneth (Ken) McCoy 250, with the annual operating payroll to be approximately was promoted to Manager; Larry Dale was promoted to 1,570.000. Assistant Nuclear Project Manager; and Gaines E. Osborne A guided visite s tour on weekends was init,ted during the was promoted to Nuclear Construction Supervisor.

ummer at the site. The tour included assembling at a huge ont to see an education exhibit and program to acquaint Looking To Future

isitors with nuclear energy. The actual tour of the site was lade in old-fashioned surreys pulled by tractors. Some 3,500 Unfortunately, the future of MP&L and the electric indus.

isitors made the tours during the summer, try is dependent upon forces over which we or the industry have little if any control-the government. As controls and edicts are handed down by bureaus and agencies set up by Management Promotions legislative act, it becomes increasingly more difficult to operate and to serve our customers efficiently. llistory clearly People are the key ingredient to any successful industry teaches that the greatest good to the greatest number of peration and MP& L is fortunate in having the highest type of people comes from business and industry operating under the mployees in its Company family. MP&L provides stable traditional free enterprise system. Your Company will mployment for approximately 1,550 men and women in the continue to oppose restrictions to our freedom, while at the 5-county area of western Mississippi, with the average length same time redoubling its efforts to render the best possible f service of employets being 13.2 years. service at the lowest possible cost to customers.

During the year, a number of promotions and changes were Achievements of this past year, as well as any progress we lade among personnelin ort.er to strengthen the management may make in the future, are dependent upon the support of

'am. Three veteran employees were made vice. presidents. our customers and the dedication and loyalty of our em-

' hey are: Donald E. Meiners, of Customer Services; J. S. playees, board of directors and investors making this Company rame, of Personnel and Administrative Services;and Frank S. possible. We face the future optimistically, believing that the

'ork, Jr., Chief Financial Officec and Secretary. current energy problems can be solved if we are allowed to James P. McGaughy was promoted to Director of Power work together in an atmosphere of freedom.

'roduction, including both nuclear and fossil, in the general Sincerely, iffice Production Department. Other department promotions / M ,/

,ere: James it. Itider to Manager or Fossil Production; Lamar

! ail to Manager of Production Engineering; and I en Dudding

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u Manager of Production Planning. Donald C. Lutken Itobert N. llenry, former Manager at h.4ianola, was named President & Chief Executive Officer V 'A J

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2 Board of Directors #

Donald C. L ut ken Jackvin President and I Chief Executive Officer qm

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hNorman ddB. Gillis, Jr. I Robert M. licarin M

J. lier man liines G. Lawrence Adams Natchez M cComb Jackson J ackson Attorney 41. Law Attorney 4t-Law lioard Chairman Hoard Chairman Chief 1:xecutive Chief 1:x ecutive I~irst National Bank Deposit Guaranty Nat 't. Bank

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• J. II. Johnston, Jr., M.D. Robert I:. Kennington,il AA.

I-loyd W. Lewis Jackuin J ac kson Grenada New Orleans Retired Chairman Chairman President Deposit Guaranty Nat *t. Dank Chief 1:xecutive Middle South Utilities,Inc.

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Richard D. Mcitae I eRoy P. Percy Dr. Walter Washington Robert M. (Bob) Williams, Jr.

J ac kson Greenville Alcorn Sout haven l' resident . M cRae's. Inc. P8wter President Part ner Atcorn State University Reeves-Williams liuilders

• Mernber of Advisor y lioard

Wississippi Power & Ligl Company L978 Financial Review Summary of Significant Accounting Policies L SYSTEh10F ACCOUNTS tially all of its employees. Pension costs in 1978 and The accounts of the Company are maintained in 1977 amounted to $2,402,000 and $1,705,000, respec-accordance with the system of accounts prescribed by tively, including amortization of unfunded prior service the Federal Energy Itegulatory Commission, costs over a period of 20 years. The policy of the Com-pany is to fund pension costs as accrued.

l. ItEVENUES The Company records revenues as billed to its cus- E. INCOh1E TANES tomers on a cycle billing basis. Itevenue is not accrued The Company joins its parent in filing a consolidated for energy delivered but not billed at the end of the Federal income tax return. Income taxes are allocated fiscal period. The rates of the Company include fuel to the Company generally in proportion to its contri-adjustment clauses under which fuel costs above or be- bution to the consolidated tax liability.

Iow the base levels allowed in the various rate schedules Deferred income taxes are provided for differences are permitted to be billed or required to be credited to between book and taxable income to the extent per-customers. mitted by the regulatory bodies for rate-making pur-poses.

UTILITY PLANT AND DEPItECIATION Investment tax credits utilized are deferred and Utility plant is stated at original cost. The costs of amortized over the average useful life of the related additions to utility plant include contracted work, property.

direct labor and materials, allocable overheads and an allowance for the composite cost of funds used during construction. The costs of units of property retired are F. ALLOWANCE FOlt FUNDS ITSED DUltlNG removed from utility plant, and such costs plus removal CONSTitUCTION costs,less salvage, are charged to accumulated deprecia- In accordance with the regulatory system of accounts, tion. Alaintenance and repairs of property and replace- the Company capitalizes, as an appropriate costof utility plant, an allowance for funds used during construction.

ment and renewal of items determined to be less than units of property are charged to operating expenses. Prin- ,s aHowar ce (a non< ash Rend represents the net cipally all of the utility plant is subject to the licn of the e st of funds used to finance construct. ion. The effective Company's first mortgage bond indenture, rates of such allowances were 7.35'1 and 6.92% for Depreciation is computed on the straight-line basis at 1978 and 1977, respectively.

rates based on the estimated service lives of the various classes of property. Depreciation provided in 1978 and G. ItESEftVES 1977 amounted to approximately 3.3'1 and 3#1, res. It is the policy of the Company to provide reserves pectively, on average depreciable property, for uninsured property risks and for claims for injuries and damages through charges to operating expense on I. PENSION PLAN an accrual basis. Accruals for these reserves have been The Company has a pension plan covering substan. allowed for rate-making purposes.

h11SSISSIPPI POWEll & LIGIIT COh!PANY We have examined the balance sheets of h!ississinpi Power & Light Company as of Decensber 31,1978 and 1977 and the related statements of income, retained earnings, and source of funds for utility plant additions for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the above-mentioned financial statements present fairly the financial position of the Company at December 31,1978 and 1977 and the rasults of its operations and source of funds for utility plant additions for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis, ary 2, W 9 New Orleans, Lou. .isiana DELOITTE IIASKINS & SELLS 1

1 Mississippi Power & Light Company Balance Sheet

. December 31,1978 and 1977 ASSETS 1978 1977 in Thousands UTILITY PLANT:

Electric plant . .. . .. . . .. . .. ... .... S 708,217 $ 681,620 Construction work in progress . . . ... ... . . .. . .. 10,820 15,660 Electric plant acquisition adjustments ... ... .. .. . .. . 2.588 2.769 Total .... .. ..... . . . .. . ... 721,625 700,049 Less accumulated depreciation . . . . . . .. .. . . . ..

197.M 177.324 Utility plant-net . .. . ..... . .. . . . 524,326 522,725 OTHER PROPERTY AND INVESTMENTS-At cost:

Investment in associated company (Note 3) ... . . 10.269 11.339 Other .. .. .... .. .... .. 930 956 Total .. .. . . . . . . . . . . 11.199 12.295 CURRENT ASSETS:

Cash (Note 2) . .. . . 445 2,1%

Specialdeposits . ..... .. . .. . . .. 891 770 Temporary investments, at cost w hich approximates market .. .. . 24,500 22,000 Accounts receivable:

Customer and other-less allowance for doubtful accounts of $154,000. . . . . 16,261 15.083 Associated companies . . ... .. .. . 4,724 3,410 Materials and supplies-at average cost:

Fuel . .. ... . . . . . . 5,439 4,365 l Other . . . . . . 7.185 6,022 j

Other . . .. . . . .. . 6.683 2.473 i Total .. .. . .. . 66.128 56.319

! DEFERRED DEBITS:

i Advances for gas purchases . ... . . - 1,070 l Unamortized debt expense . 1,149 1.207 Other . . . .. .. 1.010 1.369 Total . . . . . 2,159 3.646 TOTAL . . . . ., . $ 603.812 $ 594.985 See Notes to Financial Statementt l

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l LI ABILITIES 1978 1977 In Thousands CAPITAllZATION:

Preferred stock (Page 6) ..... . . ... . .. . .. . .....$ 38,077 5 38,077 Common stock, no par value (stated value $23 per share) r authorized 5,000,000 shares; outstanding 4,540,000 shares . . .. ..... . . .. ..... . . ... .. IN,420 IN,420 Paid.in surplus .. ... . .... .. ........... .. .. .... . 5 5 Retained earnings (Note 4) .... .. . . .. .. . . . ... ... . 64,618 55.954 Total .. .... . .. .. . . .. . .. .. . 207,120 198,456 Long-term debt (Page 6) .. .. . . . ... ..... . .. . ... 271,374 279,073 Total . .. .. .... . . ... ... . . .. .. . .. 478.494 477.529 CURRENT Li ARILITIES:

Long-term debt currently maturing . . .. .... . . .. 7,905 382 Accounts payable:

Associated companies . . . . . ...... .. .. .. .. .. ... 6,776 7,269 Other . . . . . . . .... ... . . . .. ... .. .... 11,122 7,398 Customerdeposits . ... .. ... .. . . .. .. . .. 8,303 7,284 Taxes accrued . . . ... . . .. . ... ... 15,528 24,230 Interest accrued .. . .... . .... . . .. .. ... 6,%1 6,609 Dividends declared . . .. . . . . . ... .. . . .. . 596 5%

Other . .. . ... .. . . . . .... . .. .. . 1.649 2.226 Total .......... . .. . .. . . . .......... 58.840 55.994 DEFERRED CREDITS:

Accumulated deferred income taxes . ... .. . . .. .. 47,369 41,890 Accumulated deferred investment tax credits .. . .. . . .... . 16,478 17,385 Other . ..... .. .. . . .. .. . . .... . .. . 344 326 Total .... ...... .. . .. .. . 64,191 59.601 R ES E RV ES . . . . . . . . . . .. .. .. .. . . .. .. 2.287 1,861 TOTAL .... ...... .. .... .. .. .. .. .. $ 603,812 $ 594.985 See Notes to Financial Statements.

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Mississippi Power & Light Company Statement ofIncome For the years ended December 31,1978 and 1977 1978 1977 In Thousands OPERATING REVENUES .. . ...... ... . . . . . . . . . . $ 400.276 $ 365,346 OPERATING EXPENSES:

Operation:

Fuel .. .... . . . .. . . . .. . . 208,161 181,168 Power purchased .... . .. . .. . .. ...... .. .. .. 40,(M9 42.471 Other . ... ..... . . . ......... .. ... .. 32,102 28.262 hiaintenance . .. .. .. . ... . ... ...... ..... 16,997 15,446 Depreciation . . . . . ... .. . .. ... . .. 20,528 19,728 Taxes other than income taxes ... . .... . . .. 14.950 14,299 income taxes (Note 1) . . . . . . ... .. .. .. 20,492 20.964 Total . . .. ... . . . .... ... . 353,279 322,338 OPERATING INCOhlE . .. . .

46,997 43,008 OTHER INCOhlE AND DEDUCTIONS:

Allowance for other fu nds used during construction . .... 826 1,093 Aliscellaneous-net .. . . . ... .. . . .. . .. . 2,286 1,027 Income taxes f Note l) . . . . .. .. .. . .. .. . . (916) (113)

Total . . .. .. .. 2,196 2.012 INTEP EST CHARGES:

In'.erest on iong-term debt .., .. . . 19,842 19,931 Other interest-net ofdebt premium ... . . . 852 565 Allowance for borrowed funds used during construction .. . . (346) (503)

Tiital . ...... .. . . . .. .. 20,348 19,993 NET INCOh!E . . . . . . ... . .. . . .

.$ 28,845 $ 25,027 l

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! Statement of Retained Earnings i

t For the years ended December 31,1978 and 1977 RETAINED EARNINGS JANUARY I .... ... . . . $ 55,954 $ 50,381 A DD-Net income . . . .. . .. . . ... . . .. 28.845 25,027 Total . . .. ... . .. . 84,799 75.408

! DEDUCT:

Dividends-cash:

Preferred stock ... . .. . . 2,384 2,384 l Common stock . . . . . . .. . .. . 17,797 17.070 Tiital .. . .. .... . . . . 20.181 19.454 RETAINED EARNINGS, DECEhmER 31 (Note 4) . ..$ 64.618 $ 55.954 i

See Notes to Financial . Statements.

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Mississippi Power & Light Company Statement of Source of Funds For Utility Plant Additions For the years ended December 31,1978 and 1977 1978 1977 in Thousands SOURCE OF FUNDS:

From operations:

Net income . . . . . . . . . . ..... . ..... . .. .. ...$ 28.845 $ 25,027 Depreciation .. . ... .... . .. .... ... 20.528 19,728 Deferred income taxes and investment tax credit adjitstments-net . 4.572 4,459 Allowance for funds used during construction ... .. .. ... (1.172) (l.601)

Total .. . . . .... . . . . . . . . . . 52,773 47,613 Less-dividends declared:

Preferred stock . . . .. . ... . . . ( 2,384) ( 2,384)

Common stock .. .. . .. . ... .. (17.797) (17.070)

Funds retained in business .. . .. ... 32,592 28,159 l

From decrease (Increase) in working capital (excluding short-term securities and current maturities oflong-term debt) . . .. . . .. .. (11,986)* 5,518 Investments in associated company .. . . ... . . 1,070 (2,595)

Niiscellaneous-net . . .... . . . .. 4,144 2,501 Total . .. .... .. .. .. .. ... . .. ..... . 25.820 33.583 Financing transactions:

First mortgage bonds (retirements) . . . . . . . . . .. .... -

(8,498)

Other long-term debt .. . .... .. . ... ....... ( !06) 1,235 Short-term securities- net . . . .. . . . .. .. .. ... . (2,500) (4,295)

Total .. ... . .. . . .. . . . . . ...... (2.606) (11.558)

UTILITY PLANT ADDITIONS (excludes allowance for funds used during constniction) . ..... . . .. ... . ..........$ 23,214 $ 22.025

'The increase in working capitalin 1978 is primarily due to a decrease in accrued income taxes.

See Notes to Financial Statements.

5

Mississippi Power & Light Company Schedule of Preferred Stock and Long-Term Debt December 31,1978 and 1977 Current Shares _

Call Price

1. Authorized Outst.uding Per Share PREFERRED STOCK Cumulative, $100 Par Value 4.36% Series ....... .. .... .. ... . . .... 60,000 59,920 $ 103.86 4.56% Series . . . . . . . ..... .. .... .... .. 44,476 43,888 107.00 4.92% Series .. .... ..... . . ... .... . 100,000 100,000 102.88 9.16% Series . . ... ..... ... . .. . ... .... 75,000 75,000 108.64 7.447c Series .. .. . ... . .. .. 100,000 100,0m) 106.53 Other Series . . . . ... . . . 325.0(X) -

Total . . . .... . .... .. . . . 7N,476 378,808 In Thousands Stated at $100 a Share ... .. . ... . .. . . .. . $ 37,881 Premium on Prefeacu sack . . . . . . . 1%

TW . . . . . $ 38.077 l_ONG-TERM DEBT 1978 1977 First Mortgage Bonds: In Thousands 3%% Series duc 1979 . ... . . $ - 5 7,500 2%7c Series due 1980 . . . . .

7,500 7,500 3%% Series due 1983 . 12.000 12,000 4%7c Series due 1988 .. . . . 15,000 15,000 4%% 5eries due 1995 . . 20,000 20,000 5%7c Series due 19% . . . . . 25,000 25,000 647c Series due 1996 . . 10,(XX) 10,000 9%% Series due 1999 . 20,000 20,0(X) 9%7c Series due 2000 . . 17,500 17,500 7M7c Series due 2002 . . . . . 15,000 15.0m) 7M7c Series due 2003 . 30.000 30,000

' 8%% Series due 2003 . . 20,000 20,0(X) 9%7c Series due 2004 ... . . . 25,000 25,000 10%7c Series due 2005 . .. .. . 25,0(X) 25,000 242,(XX) 249.500 Principal Amount of Capitalized 1 case-C, due serially through 1993 .. 7,977 8,282 Polhaion Control Bonds:

7M7c due 2004 . . . 9,400 9.400 MW due 2004 ... . . . . . 8,575 8,575 We to 8h7e due 19781o 1995 . 2,200 2,024 Unamortized Premium on Debt 1,222 1,292 Total (Annual sinking fund requirements, which may be met by certification of property additions at the rate of 167% of such requirements, amount to

$2,537,000 for 1979.) . . $ 271,374 $ 279.073 6

Notes to Financial Statements

1. IFCOME TAXES 2. LINES OF CREDIT AND SHORT-TERM BORROWINGS The Company has arrangements, not requiring commitment Income tax expense consists of the following: fees, with certain banks providing for short-term borrowings of la.72 ta77 up to $22,000,000 as of December 31, 1978. The lines of n at hmk M, M ad M.

In Thousands There were no short-term borrowings during 1978. During current the twelve months ended December 31,1977, the maximum i ederal . .514.s68 $ 14.981 aggregate amount of short-term borrowings ouhtanding at the state . i352 a.s24 end of any month was $8,700,000. The average amount of Toet.

s 15.920 16. sos short-term borrowings outstanding during the twelve months ended December 31,1977, (based on the average of the sum Deterred -- Net of daily outstanding principal balances) approximated S904,000 Liberatired depreciation . s,139 s.300 of commercial paper. The approximate average interest rate Other. 340 (l.046) (determined by dividing the actual interest expense on short-term borrowings during the year by the average short-term Totat . s.479 4.254 borrowings) was 5.57c for commercial paper.

Investment tax credit adjustments - net. (ao7) 20s

3. COMMITMENTS AND CONTINGENCIES Total iharged to operations . 20.492 20.964 The Company's construction program contemplates expen-ditures of approximately $54,000,000 in 1979.

charged to other income. 96 i,3 The Company has a 19% interest in System Fuels, Inc.

(SFI), a jointly-owned subsidiary of four of the principal Totai . .s 2 i .408 521.077 >perating subsidiaries of Middle South Utilities, Inc. (SFI stockholders). SFI operates on a non-profit basis in planning Total income taxes differ from the amounts computed by and implementing programs for the procurement of fuel sup-applying the statutory Federal income tax rate to income plies for thc generating units of these operating companies;its before taxes. The reasons for the lifferences are as follows: costs are recovered through charges for fuel delivered.

The Company has made loans to SFI a further its fuel 1978 1977 supply business under certain loan agreements which provide for SFI to borrow from its stockholders up to S149,400,000.

T of hf As of December 31, 1978 the Company had loaned ProTax i rot *" $10,265,250 to SFI pursuant to the loan agreements,and the A mo un t income Amount Income Company's share of the unused loan commitrnent is approxi-comruied at statutory rate .s24.122 48.0% $ 2 2,130 48.0% mately $15,793,000. Loans mature in 10 and 25 years from increases (redunions)in tax the date of borrowing.

resuhing from: In connection with certain financing arrangements by SFI Tai sasings due to risins totaling $113,702,000 at December 31, 1978, the Company consolidated return . . (1,900) (3.8) (i.800) ( 3.9 ) and the other SFI stockholders have covenanted and agreed Other - net (814) (1.6) 747 i .6 severally in accordance with their respective shares of owner-ship of SFI's common stock, that they will bke any and all necorded income tax expense.s21.408 42.60 s21.077 4s.74 action necessary to keep SFI in a sound financal condition and to place SFI in a position to disfiarg, and ta cause SFI to discharge,its obligations.

Unused investment tex credits at December 31, 1978 SFI has entered into a contract with a joint venture for a amounted to S5,556,000,of which $2,831,000 may be carried supply of coal from a mine to be developed in Wyoming forward through 1984 and $2,725,000 through 1985. Certain which is expected to provide 150 to 210 million tons over a reclassifications of previously reported amounts have been period of 26 to 42 years.

made to reflect current classifications.

The Federal income tax returns for the years 1971 through 4. RETAMED EARNINGS 1974 have been exarnined and assessments, which have been The indenture provisions relating to the Company's long-protested, have been proposed by the Internal Revenue Ser- term debt provide for restrictions on the payment of cash vice. The years subsequent to 1974 are subject to examina- dividends on common stock. As of December 31, 1978, tion. Management is of the opinion that adequate provisions $43,003,000 of retained eamings are free from such restric-have been made for any tues that may ultimately be assessed. tions.

7

5. TRANSACTIONS WITH AFFILIATE:7 The business of the Company is subject to seasonal flue-The Company buys from and setis electricity to the tuations with peak periods occurring during the summer operating subsidiaries of Middle South Utilities, Inc., its months. Accordingly, earnings information for any three-parent, under rate schedules filed with the Federal Energy month p<riod should not be considered as a basis for estimat.

Regulatory Commission. In addition, the Company purchases ing the results of operations for a full year, fuel from System Fuels,Inc.

Operating revenues include revenues from sales to affiliates 7. REPLACEMENT COST (Unaudited) amounting to $82,899,000 in 1978 and $74,186,000 in 1977. The impact of the rete of inflation experienced in recent Operating expenses include fuel cost and purchased power years has resulted in replacement costs of productive capacity charges from affiliates totaling $164,360,000 in 1978 and that are significantly greater than the historical costs of such

$157,093,000 in 1977. assets reported in the Company's financial statements. In com.

pliance with reporting requirements, estimated replacement

6. QUARTERLY RESULTS (Unaudited) cost information is disclosed in the Middle South Utilities, Inc.

Unaudited operating results by quarters follow (in thousands): annual report to the Securities and Exchange Commission on Form 10K.

Quarter Ended 1978 March June September December 8. ACCOUNTING POLICIES The summary of significant accounting policies on page 1 is oyerating revenues $ 104,034 5 81,894 $ 119,694 5 94,654 an integral part of these notes to financial statements.

f>perating income 12,05) 7,629 14,839 12,470 P5et income 7,5 64 2,826 10,349 8,106 1977 Operating revenues 5 84,32s $ 83,455 $ 106,601 5 90,965 Operating income 1I,397 8,7 31 I4,207 8,673 Net income 6,949 4,231 9,534 4,313 1

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DONALD E. MEINERS, Vice-President, Customer Services; f T110 MAS A. DALLAS, Manager, Engineering, System Opera-t ~ ' - tions and Construction; JAMES R. MARTIN, Treasurer; Dj 1 fifth row, from left: GEORGE LEDLOW, Director, Internal

( .- PM Auditing; W. T. WOODS, JR., Manager, General Property and Services; ALLAN II. MAPP, Assistant Treasurer and Assistant h Mi ... [? -

Secretary;and MARION TOWNSEND, Chief Engineer.

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Mississippi Power & Light Company Record Of Progress 1968 - 1978 1978 1977 1976 El.EC1 HIC OPERATING REVENUES (000s 0%11 TIT.D)

Residential ,, $ 116,705 $ 106,520 $ 91,849 Commer cial . 73,542 69,114 60,855 Industrial ........ , 70,306 67,948 58,645 Government & Alunicipal... I I,804 11,158 9,899 Cooperatises & hlunicipalities 36,591 34,073 25,622 Total From Energy Sales (hliw. Area) , 302,948 288,813 246,870 Sales to Other Pubhc Utilities . 93,701 77,732 57,298 Total From I nergy Sales ,

396,649 366,545 304,168 hliscellaneous Revenues ... ... 3,187 1,441 1.113 Deferred Fuel Adjustment Revenues * , 440 (2,640) 3,495 Total Electric Operating Resenues $ 400,276 $ 365,346 $ 308,776 El.ECTRIC ENERGY SAI.I.S (%IK%Ill Residential . . . 2.856,736 2,727,718 2,491,067 Commercial 1;;91,8N1 1,647,919 1,537,169 Industrial ......, 2,187,020 2,071,093 1,935,573 Gosernment & hlunicipal... 371,811 344,634 326,275 Cooperatives & hlunicipalitics 1.280,949 1,217.042 1,064,636 Total Energy Sales (N1iu. Area) 8,478,397 H,008,406 7.354,720 Sales to Other Public Utilitie. 4,354,425 3,580,571 2,624,001 Total Electric Energy Sales 12,832,822 11.588,977 9,978,721 El.ECTRIC CUSTONIERS (END OF PERIOD)

Residential , , 255,174 249,889 245,384 Commercial 37,405 35,922 34,718 Industrial ....... 3,245 3,301 3,247 Government & Nlunicipal.., 2,049 1,965 1,920 Cooperatives & hlunicipalities 66 67 67 Total Customers (Sliw. Area) 297,939 291,144 285,336 Other Public Utilities 2 2 2 Total Electric Customers 297,941 291,146 285,338 SYSTE%I INPUT (%1K%Ill Sliwiwippi Area 9.299,653 8,739,930 7,995,184 Other 8,105,780 7,422,162 6,275,856 Total System Input 17,405,433 16.162,092 14,271,040 PEAK I.OAD 0115S, AREA)-KW 1,899,000 1,784,000 1,733,000 1.OAD FAC10R OllSS AREA)-PER CENT 56 56 53 NET Pl. ANT CAPABil.IrY-KW 2,763.000 2,763,000 2,752,000 18,334 18,109 17,859 CIRCUIT %1II.ES Ol' El.ECTRIC I.INES TOTAI, El.ECTRIC UTII.lTY Pl. ANT (000s 0%IITIT.D)

Product;on $ 351,646 $ 349,195 $ 338,118 146,227 132,966 118,137 Transmiwion Distribution . . . . 190,N20 180,035 171,935 16,254 16.154 15,727 General & Other .

Total Utility Plant Completed 704,947 678,350 643,937 Plant IIeld for Future Use 3,270 3,270 3,270 Construction Work in Progrew ...

10,M20 15,660 28,061 2,5 NN 2,95:

Electric Plant Acquisition Adjustments 2,769_

Total Utility Plant 5 721,625 $ 700,049 $ 678,219

• See item Il to Summary of Significant Accounting Policies.

1975 1974 1973 1972 1971 1970 1969 1968 74,296 $ 67,690 $ 47,473 $ 38,096 5 32,499 $ 30.097 $ 27,353 $ 24,528 47,484 43,559 31,294 25.701 22,126 20,290 18,507 16,797 42,863 41,743 26,852 22,399 19,439 17,535 17,076 15,979 7,023 6,163 3,975 3,193 2,842 2,707 2,437 2,194 21.399 13,362 9,915 9,884 7,914 7,027 6,299 5,592 l93,064 172,517 119,509 99,273 84,820 77,656 71,672 65,090 43,084 10,484 6.684 15,223 9,423 4,911 5,090 4,452 136,148 183,001 126,193 114,496 94,243 82,567 76,762 69,542 838 574 449 374 393 364 3,071 (5,134) - -

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!40,057 $ 178,441 $ 126,642 $ I14,870 $ 94,636 $ 82,931 $ 77,104 5 69,851 40,460 2,268,954 2,356,073 2,032,670 1,802,675 1,674,415 1,470,430 1,274,923 07,505 1,356,173 1,380,035 1,213,432 1,091,553 1,007,557 907.912 823,035 01,042 1,793,055 1,787,741 1,677,137 1,624,499 1,464,602 1,410,912 1,351,195 02,319 271,233 262,645 238,624 219,463 210.951 179,178 157,279 90,309 938,205 988,351 1,089,349 966,015 959,649 860,842 765,837 41,635 6,627,620 6,774,845 6,251,212 5,704,205 5,317,174 4,829,274 4,372,269 38,144 487,097 312,454 I,269.927 1,282,153 984,933 1,143,398 870,335 79,779 7.114,717 7,087,299 7,521,139 6,986,358 6,302,107 5,972,672 5,242,604 41,739 237,085 229,761 206,222 198,435 191,529 187,670 183,538 U3,801 33,474 33,109 30,629 29.453 28,419 28,109 27,532 3,347 3,267 3,213 3.168 3,209 3,140 3,022 2,990 1,879 I,789 1,731 1,618 1,558 1,514 I,447 1,393 66 63 61 74 75 71 70 67 80,732 275,678 267,875 241,711 232,730 224,673 220,318 215,520 1 1 1 2 3 4 4 4 80,733 275,679 267,876 241,713 232,733 224,677 220,322 215,524 g 896 7,378,216 6,906,300 6,246,040 5,875,777 5.326,174 4,783,640 7 353, 4 249'673 4,160,152 5,08I,123 4,700,857 4,429,887 4,957,040 3,677,783 6

11,603,569 11,538,368 11,987,423 10,946,897 10,305,664 10,283.214 8,461,423 Q3,213

,42,000 1,640,000 1,565,000 1,476,000 1,343,000 1,238.000 1,176,000 1,005,000 52 51 54 53 53 54 51 53 32,000 2,752,000 2,002,000 2,002,000 2,002,000 1,231,000 1,231,000 1,231,000 17,713 17,461 17,146 14.279 14,061 13,892 13,783 13,588

.99,583 $ 292.491 $ 176,217 $ 166,537 $ 166,364 $ 106,419 $ 106,434 $ 106,582 18,450 109.960 91,535 91,068 85,074 79,225 79,218 76,988 66,590 158.256 148,492 130,191 124,523  !!9,198 113,428 108,049 15,366 14,763 14,355 13,598 13,372 13,283 12,401 13,765 99,989 575.470 430,599 401,394 389,333 318,125 311,481 303,384 4,070 1,219 1,144 1,146 594 564 564 511 D5,772 16,688 121,908 50,070 12,396 53,257 16,445 3,524 3,113 3,293 3,067

,42,944 5 596,670 $ 556,718 $ 452,610 $ 402,323 $ 371,946 $ 328,490 $ 307,419

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