ML20003D905

Annual Financial Rept 1980

ML20003D905
Person / Time
Site:	Arkansas Nuclear
Issue date:	03/31/1981
From:	ARKANSAS POWER & LIGHT CO.
To:
Shared Package
ML20003D904	List: ML20003D903 ML20003D905
References
NUDOCS 8104010365
Download: ML20003D905 (36)

Text

x PERFORMANCE HIGHIJGHTS f~  %

1980 1979 increase Revenues from operations (000) $ 750,497 5 583,826 29 Operation and maintenance expenses (000) $ 541,946 $ 438,124 24 Allowance for funds used during construction (000) $ 37,503 $ 65,903 (76)

Net income (000) $ 65,230 $ 83,742 (22)

Capitalization (000) 51,640,215 $1,565,741 5 Construction expenditures (000) $ 230,474 $ 291,771 (21)

Total utility plant investment-end of year (000) 52,423,231 $2,211,886 10 l

Customers (End of year) 469,013 463,087 1 Energy sales to ultimate customers (Millions of kilowatt hours) 14,540 13,684 6 Employees (End of year) 3,943 3,714 6 Peak demand (Megawatts) 4,179 3,521 19 Average use per customer (Kilowatt hours)

Residential 11,112 9,778 14 Commercial 54,330 50,041 9 This report reflects the operations of Arkansas Power & Light Cornpany for the period ended Decernber 31, 1980, and does not include the effects of the consolidation with Arkansas-Afissouri Power Contpany which occurred on January 1,1981. (See Note 3 to Financial Staternents-

• Business Consolidation.")

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A MESSAGE FROM THE PRESIDENT l

1 imy t. mzw The first step was placed into effect, subject to  !

(Q<4',m refund, in late October 1980. In a pre-hearing r e om " stipulation agreement between the Company p .

"a and the APSC staff, the Commission staff p_(T recommended an increase of approximately

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$90 milhon and, in return, the Company agreed not to contest certain staff adjustments which w

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'tJ M 4D 4 would have the effect of reducing our original request of $130 million to approximately l Mg y $117 million. We hope to have a final decision by May L m, To gain wholesale rate relief, AP&L filed a two-phase increase of almost $10 million with the Federal Energy Regulatory Commission in late August pursuant to a pre-filing settlement agreement with our wholesale customers. The Company began collecting-subject to possible refund-interim increased rates totaling almost

$7 million on an annual basis in November.

In addition, because Arkansas-Missouri Power Company was consolidated into the AP&L system on January 1,1981, AP&L has assumed responsibility for a retail rate applica-tion filed before the APSC last July for an increase of some $7.5 million. The full amount was placed into effect-subject to possible in 1980 the management of At~nsas Power refund-in December with hearings to begin

& Light Company was tested to its full measure in March 1981.

as we sought to regain financial stability, to meet To strengthen our financial posture, the record-breaking electric energy demand, to Company initiated an agreement with Mississippi move forward with our fuel diversification Power & Light Company, a sister company in program and to complete the consolidation of the Middle South Utilities System, to sell a 25 Arkansas-Missouri Power Company into the percent ownership interest in Independence AP&L system. T hese challenges were met in Steam Electric Station.This two-unit coal-fueled an operating climate characterized by double- facility is currently under construction near digit inflation, lagging rate adjustments and Newark with the first unit scheduled for opera-fiscal pressures. tion in 1983 and the second unit scheduled for Throughout the year, we were forced by our service in 1985. Both AP&L and MP&L have l weakened financial position to place a high made filings with regulatory bodies in Arkansas priority on reestablishing our fiscal integnty. and Mississippi to secure approval of this sale.

This situation led to the implementation of the Approval and implementation of these most stringent cost control measures we have fmancial steps will hopefully allow us to regain ever instituted at AP&L. At the same time, we our tinancial momentum in 1981. In addition, aggressively moved ahead with rate initiatives this financial position will mean that we at both the retailand wholesale les els. In February can continue to finance our construction i

the Arkansas Public Service Commission ( APSC) program.

granted a modest six percent retail increase. There's no doubt that the best inte ests which was long overdue because of the delay cf our customers and investors will be served in the start-up of commercial operation of Unit 2 by completion of generating facilities both of Arkansas Nuclear One and was the first under construction and planned. Oil-fueled i l

rise in retail rates approved since 1977. electric generation is an energy option that immediately following the implementation is neither economical nor reliable when of the new rates apfroved by the Commission, compared with uranium , coal- or lignite-fueled the Company filed a two-step retail rate applica- generation. Prior to the 1973-74 Arab Oil tion with the APSC totaling $130 million. The Embargo, we were buying oil for about $3 application requoted that the first phase of the per barrel. Today that same barrel of oil is increase in the amount of $86.7 million be placed costing approximately $32 per barrel, an almost into effect immediately with the remainder ten-fold increase over the last eight years, requested for implementation on June 1,1981. and the future outlook for oil prices indicates 2

that this upward spiral will continue. All four coal units are being built in partnership Pro}ections made by nationally-recognized with the Arkansas Electric Cooperative Corpora-economic forecasting institutions show that the tion (AECC) and several municipalities.

1990 per-barrel price of oil may be as high as Another step forward in displacing our 575-5100. We don't want to have to live with that current oil-fueled generation will be taken at the magnitude of fuel cost increase, so AP&L is Arkan(as Lignite Energy Center near Hampton.

moving away from oil as quickly as possible. Plans for this tw& unit facility to be fueled by That's why we are enthusiastic about the benefits Arkansas signite were announced in the fall that will accrue to all our constituents when by of 1979. We are currently projecting that these 1985, assuming completion of various construc- two units will come "on line" sometime early tion projects, approximately 80 percent of our in the next decade.

Company's energy sales to its retail and whole- The need for these additions to the AP&L sale customers (excluding System sales) will generating system was dramatically demon-be provided by uranium- and coal-fueled strated by the record electric energy demand generatmg units. that we experienced in the summer of 1980.

Progress was made toward that goal in 1980 During that time, one of the hottest and longest when the second unit at Arkansas Nuclear One heat waves ever to strike Arkansas pushed and the first unit at White Bluff Steam Electric customer usage higher and higher. This demand Station began commercial operation. This established a new peak demand on the AP&L second nuclear-fueled unit completes a construc- system of 4,179 megawatts-a 19 percent increase tion effort at this two-unit facility launched in over the previous record peak of 3,521 megawatts.

1968, making Arkansas Nuclear One the first These weather conditions contributed to the fact nuclear-fueled electric generating station that AP&L experienced an overall six percent in the Southwest. rise in 1980 energy sales to ultimate customers Unit I at White Bluff near Redfield is the first when compared with the 1979 total. This record modern-day coal 4ueled unit on the AP&Lsystem. summer demand also pushed the average This unit will be joined by a second unit at the kilowatt-hour usage leveis to new highs for both Station in the summer of 1981. As previously residential and commercial customers. The mentioned, we are also constructing two addi- residential average rose 14 percent to a 1980 tional coal-fueled units at Independence Station. level of 11,112 kilowatt hours while commercial M%I f ed a l

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l customers on the average, used nine percent development that will aid us in planning for more energy with a 1980 level of 54,330 the years ahead.

kilowatt hours. Another major highlight during the year was These usage totals would most probably be the consolidation, effective January 1,1981, of higher if it were not for the energy conservation the electric operations of our sister company and load management programs that we already in the Niiddle South Utilities System, Arkansas-had in place when this extended hot weather hit Niissouri Power Company (Ark-Nio), into those our service area. We're proud of the initiatives of AP&L At the same time, an Ark-Nio subsid-that the Company has taken through these iary, Associated Natural Gas Company, became innovative operations and have an even further a subsidiary of AP&L. Ark-N1o becomes our commitment to the future. In February a new sixth geographic division, adding approximately Conservation and Renewable Resources Depart- 60,000 electric customers to our system. We're ment was established within our organization. glad to be serving this new area and appreciate The Department has responsibility for develop- the support and confidence placed in AP&L ing the new business strategies AP& L will pursue. by this important region's leadership.

I Essentially, its function is to match new technol- In order to meet more effectively the

ogies and new energy economics to new markets. challenges of the future, the AP& L Board of The benefits of this reorganization are already Directors broadened the senior management i becoming apparent through the Department's team at its December meeting, promoting five l current thrusts. N1ajor activities include investi- key officers to higher levels and electing six to gation of the development of a joint gasification the officer and assistant officer ranks. Each of and cogeneration network in south Arkansas these executives is an experienced professional in concert with the Tosco Corporation and committed to achieving our corporate objectives.

research into a similar gasification/ cogeneration This executive leadership coupled with the project in central Arkansas through a $3.4 organizational streamlining we have undertaken million grant from the United States Department assures that AP&L is totally prepared to meet of Energy. We're convinced that these projects todays and tomorrow's management challenges.

plus numerous others will provide us with the In summary, we believe that the Company data base and insights into future energy has established a solid plan for the future keyed to restoring financial integrity, maintaining reliable and economic operation and taking a lead in developing new and creative energy solutions. With timely and adequate rate relici, p~ np' >t'

, %b arm" -n those goals are attainable. However, as we have learned over the past few years it is becoming increasingly difficult to accomplish both short-and long-range objectives when confronted by

• ) continuing economic dilemma. Hopefully, the steps taken to help alleviate this situation will

~~~ establish a renewed pattern of success in 1981 l and beyond.

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As always, we at AP&L appreciate your comments and suggestions about our operations and invite you to let us know anytime we can l be of service. We look forward to the coming l year with the knowledge that we are prepared

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l lawrente Blatkwell llal E. Ifunter Jr lloyd W Luis Jerry L Ntau!Jen Attorney Attorney Chairman et the lhard Presudent & Ch;ef Lxauture I' vie Blu?f, Arkansas  % c AfaJrid. Aft >~ curs & l'resudent Ofurer of the Company 1 11atcJ l%$ llat J l128 81 AfudJlc South litthines. Inc. lattlc Ra k Arlan.sas

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Wilhan. C. Nolan, Jr. I D Philhp3 Robert D. Pugh

, Pr5sdent Attorney Senior he Pres >Jent President. Portland Gut i Afst Soutit i netnecrung C,t 11 Dorado. ArLanras of the Company Company r i llot Spr ungs, Arkansa, Lia tcJ 1971 Pune B!utt. Arkan:~as Portland. Arlan,as j llatcJ 1977 Ilected 1972 Elested 1971 1

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. 'i~ 0a hy George K Rees es Reeves L Ritchie Dr. lierrnan B Smah. Jr Gus B. Walton, Jr Attorney Retur -J Cha:rman of the Board Chanal or of the Univer~ity Attornev Caruther~ nile. \fisseur s c' the Cempany ot Arkan~an a! Poue B utt ' little Ra L Arlansas IlatcJ l l'i 8I Iattle Ra k. Arkansas Pine Blu". Arkansa, Elected 1l23 'SI 11a ted 1%2 fla tcJ 1980 ADVISORY DIRECTORS

, -.e All Past Directors of the Company

.g Rn harti C. Butler L C. Carter

, Cha:r r an of the Board Pa~t Poc~udent y Peop!c< Sannp & Iran A,,a RucianJ Toods Ket.

%.* Iattle Ra L. Arkansas Sit <ttgart, Arlan~as f ElectcJ AJet,oru Durecter 12. 80 11a ted Adnwry Thrater 12:80

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N1 chael E Wilson R. l L Wilson ut m and ComI'any ~

lec Wul~,m and Lempa tv

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MN M Financial Condition l

l Arkansas Power & Light Company has, financing measures, such as sale-leaseback as have most other electric utilities, exper- arrangements, to meet its cash needs.

ienced financial problems over the last three Two factors were primarily at the heart years. These problems were either caused of these problems. These factors are:

or magnified by (a) increasing costs of fuel, (1) large construction costs with construction wages and materials, (b) greater capital work in progress (CWIP) excluded from outlays and longer construction periods for the rate base on which the Company was complex new generating units needed to allowed to earn a cash return, therefore both meet customer demands and accom- expanding the need for external financing plish fuel diversification, the latter in the and (2) the lack of rate increases.

best interest of our customers and our The Company believes that certam factors nation, (c) extensive reliance on and high have been set in motion that should improve costs of debt and equity capital, (d) com- the overall financial picture within the next pliance with environmental requirements, twelve months. Actions taken by the (e) controversies and increased regulation Company include negotiations for the sale over the use of nuclear power, and (f) regula- of a 25 percent interest in one of the tory lag in granting needed rate increases Company's two-unit coal-fueled steam and the inadequacy of such increases electric stations currently under construc-when granted. tion and the scheduled completion and Specific symptoms of these financial placing into service in mid-1981 of the problems are deteriorating mortgage and second unit of the Company's other two-unit charter coverage ratios, which declined from coal-fueled steam electric station currently 1978 (2.39 mortgage,1.91 charter) to 1980 unde r construction. These actions should (1.75 mortgage,1.25 charter). Revenues reduce the company's need for outside subject to refund were excluded in the capital and provide additional plant-in-calculation of these ratios. To issue addi- service to be included in the Company's rate tional bonds, eligible earnings of the base on which cash dollars can be earned.

Company must be at least two times the Other actions taken by the Company also annual interest requirements on both the include increased emphasis on conservation, outstanding bonds and the proposed new including a proposed customer conservation issue, or a mortgage coverage ratio of 2.00. financing program which should decrease To issue additional preferred stock, cligible future needs for additional generating carnings of the Company must be at least capacity and aggressive pursuit of rate one and one-half times the annual interest increases. The Company currently has both and preferred dividend requirements on retail and wholesale rate increases pending, both outstanding debt and preferred stock which should be acted upon by the appro-and the dividend requirements on the priate segulatory bodies in the first half of proposed new issue, or a charter coverage 1981 and which it hopes will provide ratio of 1.50. These requiremen's coupled sufficient earnings to allow the Company with depressed earnings levels severely to re-enter the long-term debt market and limited the Company's access to the money provide for a more realistic and equitable market for long-term capital causing it to rely return on invested capital.

heavily on short-term and nonconventional 6

NNA EE Liquidity and Capital Resources As indicated previously, the availability earnings expected from rate increase of sufficient capital has continued to be a requests, the Company.should be able to problem over the last few years. Cash flow rely more on long-term and conventional from operations, after dividends on common financing measures and internally generated and preferred stock, or funds retained in funds rather than relying on short-term

! the business available primarily for the debt and nonconventional financing to fund construction program, decreased from $39 construction needs in the future. Construc-million in 1978 to a negative $2.5 million tion expenditures for 1981,1982 and 1983 in 1979 and was only $8 million in 1980. are expected to be 5326 million, $189 This general decline resulted from low million and S166 million, respectively.

i earnings due to inadequate rates and Due to earnings coverage limitations, increasing interest cost on debt sustained capitalization restrictions and short-term to finance CWIP on which the Company debt limits, it became apparent in 1980 that was not earning a cash return. The Company, the Company could not continue to fund its in an attempt to conserve cash, has reviewed portion of three jointly-owned coal units all requests for staffing including replace- then under construction. Upon notification ment personnel and requests for materials of this fact, one co-owner exercised its option, and equipment through the use of a special as specified in the Ownership Agreement, ad hoc committee, approving only those to advance the Company's share of these requests which were essential to the contin- construction funds in order to keep con-ued reliability of service or compliance struction on schedule. Approximately $69 with regulatory directives and, as described million was advanced through December 31, in further detail below, temporarily ceased 1980, and construction of the projects has supplying funds for the construction of three continued on schedule. The Company plans coal-fired units. CWIP balances for 1978, to repay these funds in 1981 primarily with 1979 and 1980 were $785 million, $980 proceeds from the sale of a 25 percent million and $282 million, respectively. The interest in one of the Company's coal-fueled CWIP balance at the end of 1980 reflects generating stations as discussed above. This the transfer to plant-in-service of two planned repayment has been reflected in

generating units during the year. These large the 1981 construction costs quoted above.

! asset balances on which no cash earnings The Company is currently authorized i were available to offset increasing financing to make short-term borrowings through

! costs have had a detrimental effect on the June 1982 in an aggregate amount outstand-1- Company's ability to generate adequate ing at any one time of up to the lesser of cash earnings. Ilowever, due to the reduction $170 million or 10 percent of capitalization.

in the 1980 CWIP balance and the estimated At December 31,1980, only $36.4 million of further reduction in the CWIP balance for short-term borrowings were outstanding, 1981, CWIP may be expected to have less so that the Company had available unused

. impact on capital resources in the future. short-term credit lines on that date of With the anticipated reduction in future $127.1 million.

construction requirements and increased 1

7

V'.Cie 4007H won wm Results of Operations Net income was approximately $88 realized by the Company and less in the million, $84 million and $65 million in 1978, CWIP category on which AFDC was bcing 1979 and 1980, respectively. Revenues for recorded.

each of these years were approximately Interest requirements were another item

$556 million in 1978,$584 million in 1979 affecting the results of operations. The total and $750 million in 1980. Yearly increases interest charges for 1978,1979 and 1980 have been primarily attributable to the were $61 million, $76 million and $85 recovery of increased fuel related costs, million, respectively. These increases were which contributed nothing to net income. due to two factors: (1) the increased level Rate increases received during these years, of debt outstanding, both long-term bonds which impact net income, were in relatively and short-term debt and (2) the significant minor amounts. An annual retail rate in ; eases in the interest rates on debt.

increase of $14.7 million was granted on The effects of inflation together with the February 29,1980, with billings beginning high cost of cap 2 to finance the Company's in June 1980 and annual wholesale rate business increased the cost of serving our increases of $4.9 million, $2.2 million customers and have not been reflected in and $4.7 million vcere granted in December rates in a timely manner. The Company 1978, January 1979 and May 1980, respec- currently has pending before the Arkansas tively. Also kilowatt hour sales to ultimate Public Service Commission a request for customers increased each year (4 percent a $130 million retail rate increase. The from 1978 to 1979 and 6 percent from Company also has before the Federal Energy 1979 to 1980). Operating and maintenance Regulatory Commission a proposed $10 expences have continued to climb signi- million rate increase to its wholesale cus-ficantly during this period, again primarily tomers. A portion of these increased rates, due to increased fuel-related and purchased approximately $94 million, is currently power costs. As inflation continued at a being collected subject to refund pending record pace, other costs such as labor and the final rate orders which are anticipated materiah have escalated. Operating by mid-1981. (See Note 2 to Financial expenses have also increased as a result Statements " Rate Matters.")

of increased regulation and in-house expertise needed for both old generating Effects of Inflation facilities and the newer technology nuclear and coal-fueled umts. inflation has had a si8nificant impact on

.m recent Allowance for funds used during the Company's operations years.

construction (AFDC), a noncash item ,

(See Note 15 to Financial Statements-relating to the capitalization of certain debt cts of Indatmn on Operations.,)

and equity carrying cost of construction work in p'rogress, contributed substantially b "" *Y to the net income of the Company during Company management believes that this period. Net income less AFDC was beginning in 1981, due to actions it has

$37 million in 1978, $18 million in 1979 and taken to reduce construction funding

$28 million in 1980. While 1979 earnings requirements, to encourage customer (excluding noncash AFDC) relative to 1978 conservation elforts, to streamline Company decreased by $19 million,1980 earnings operations and to aggressively pursue (excluding noncash AFDC) relative to 1979 needed rate increases, the financial position actually increased by $10 million. This of the Company should begin to improve.

increase in 1980 resulted primarily from Such improvement will, however, be contin-more dollars being in the plant-in-service gent largely upon the Company's ability category on which cash earnings were being to obtain adequate rate relief.

8

REPORT OF MANAGEMENT L %W"l" The management of Arkansas Power committee meets periodically with manage-

& Light Company has prepared and ment, the internal auditors and the indepen-responsible for the rinancial statements and dent public accountants to discuss auditing, related financialinformation included in this internal control and financial reporting annual report. The financial statements are matters. The independent public accountants based on generally accepted accounting have free access to the audit committee principles, consistently applied. Financial at any time.

information included elsewhere in this The independent public accountants report is consistent with the financial provide an objective assessment of the statements, degree to which management meets its To meet its responsibilities with respect responsibility for fairness of financial t( financial information, management reporting. They regularly evaluate the maintains and enforces a system of internal system of internal accounting control and accounting controls which is designed to perform such tests and other procedures provide reasonable assurance, on a cost they deem necessary to reach and express effective basis, as to the integrity, objectivity en opinion on the fairness of the financial and reliability of the financial records and statements.

as to the protection of assets. This system We believe that these policies and includes communication through written procedures provide reasonable assurance policies and procedures and an organiza- that our operations are carried out with tional structure that provides for appropriate a high standard of business conduct.

division of responsibility and the training of personnel. This system is also tested by a comprehensive internal audit program. ,#

The board of directors pursues its 7 Mea '

responsibility for reported financial information through its audit committee, Jerry L Maulden composed of outside directors. The audit President & Chief Executive Officer 9

AUDITORF OFINION MnlMWO Arkansas Power & Light Company:

We have examined the balance sheets considered necessary in the circumstances.

of Arkansas Power & Light Company as of In our opinion, the above-mentioned December 31,1980 and 1979 and the related financial statements present fairly the statements of income and retained earnings financial position of the Company at and of changes in financial position for each December 31,1980 and 1979 and the results -

of the three years in the period ended of its operations and the changes in its December 31,1980. Our examinations were financial position for each of the three years made in accordance with generally accepted in the period ended December 31,1980, auditing standards and, accordingly, in conformity with generally accepted included such tests of the accounting records accounting principles applied on a and such other auditing procedures as we consistent basis.

&.L$s Ce +SW New Orleans, Louisiana February 13,1981 i

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1980 ARKAMSAS POWER & LIGHT COMPANY j FINANCIAL REVIEW 2'{;.' ~._ . _

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( BALANCE SHEETS AT DECEMBER 31,1980 and 1979 k

MM 2%C 1980 1979 In Thousands ASSETS Utility Plant (Notes 3,5 and 6):

Electric plant. 52,133,704 $1,231,832 Construction work in progress. 282,376 980,054 Nuclear fuel. _

7,151 -

Total . 2,423,231 2,211,886 Less-accumulated depreciation and amortization. 417,435 364,447 Utility plant-net. 2,005,796 1,847,439 Other Property and Investments:

Investments in associated companies, at equity (Note 5) . 31,378 32,002 Other, at cost (less accumulated depreciation) 470 467 Total . 31,848 32,469 Current Assets:

Cash and special deposits (Note 8) . 10,246 3,863 Notes receivable. 1,425 1,801 Accounts receivable:

Customer and other (less allowance for doubtful accounts-$1.396,000 in 1980 and $924,000 in 1979) 45,428 29,011 Associated companies. 76 712 Deferred fuel cost 7,833 13,192 Fuel inventory, at average cost . 28,982 -

Materials and supplies, at average cost. 6,689 6,930 Prepayments and other. _ _ 5,119 2,302 Total . 105,818 57,811 Deferred Debits . _

4,521 2,924 Total . 52,147,983 $1,940,643 NY .Wlcr f.e FI*tJets tal b!atemer %

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$UM R&'O 1980 1979 in Tlwusands LIACILITIES Capitalization:

Common stock, $12.50 par value: authorized 50,000,000 shares; issued and outstanding, 36,636,773 shares in 1980 and 34,236,773 shares in 1979 (Note 10) . . . . . . $ 457,960 $ 427,960 Paid-in capital. . . . ... . .... . . 609 -

Retained earnings (Note 9) . . . . . . . . . .. . 59,024 90,657 Total common shareholder's equity. . . . .. . 517,593 518,617 Preferred stock and premium, without sinking fund (Note 10) . . . . . .. ... . .. . . . 126,890 126,890 Preferred stock and premium, with sinking fund (Note 10) . . . . . . 147,065 100,518 Long-term debt (Notes 3 and 11). . . . ... . . 848,667 819,716 Total . . . . . 1,640,215 1,565,741 i

Current Liabilities:

l Currently maturing long-term debt (Note 11). 68,000 6,000 Notes payable (Note 8) . .. . 36,400 80,130 Accounts payable:

Associated companies. . .. . 13,338 3,791 Other... . . . 77,851 46,839 Customer deposits. . . . . . 4,668 4,949 Taxes accrued . .. .. .. 28,284 24,327 Accumulated deferred income taxes (Note 4). . ... 3,867 6,496 Interest accrued . . .. . 23,194 22,730 Dividends declared . . 24,462 4,887 Nuclear fuel reserve . . . . . .. 14,822 3,351 Other . .. . 17,299 6,675 Total . . . . .. . 312,185 210,175 Deferred Credits and Other Liabilities:

Accumulated deferred income taxes (Note 4). .. . 147,334 125,417 Accumulated deferred investment tax credits (Note 4). . 30,807 32,211 Other. . . . 14,304 6,766 Total . . .. 192,445 164,394 Reserves. . . . . . . 3,138 333 Commitments and Contingencies (Notes 2,3,5 and 6) - -

Total . . . . . . . $2,147,983 $1,940,643 su Nota ta rinanaar stau,nos 13

STATEMENTS OF INCOME AND RETAINED EARNINGS For the Years Ended December 31,1980,1979 and 1978

$$uIM 1980 1979 1978 Statements of Income In Du>usands Operating Revenues (Notes 2,3 and 13) . .

$750,497 $583,826 $556,488 Operating Expenses:

Operation:

l Fuel. . ... . 237,346 174,667 167,681 Purchased power. . ... 154,126 171,425 120,804 Other. . .. 121,332 61,850 62,136 Maintenance. .

29,142 30,182 28,856 Depreciation. 59,574 39,708 38,365 i Taxes other than income taxes. 25,401 25,032 23,436

! Income taxes (Note 4) . . 28,632 11,213 33,813 Total. 655,553 514,077 475,091 i . . . . .

l Operating Income. 94,944 69,749 81,397 Other Income and Deductions:

Allowance for equity funds used during construction . . 22,482 45,045 36,214 Miscellaneous-net. 5,277 6,874 4,583 l Income taxes (Note 4) . 12,191 16,753 12,403 Total. . . 39,950 68,672 53,200 Interest Charges:

l Interest on long-term debt .. 67,036 67,091 56,949 l Other interest-net of debt premium. 17,649 8,446 4,076 i Allowance for borrowed funds used during construction . . (15,021) (20,858) (14,048)

Total. . 69,664 54,679 46,977 Net Income (Notes 2 and 3) . S 65,230 $ 83,742 $ 87,620 Staternents of Retained Earnings Retained Earnings-January 1. S 90,657 $ 81,448 $ 55,641 Add-Net income . 65,230 83,742 87,620 i Total. . 155,887 165,190 143,261 l

Deduct-Cash dividends:

Preferred stock. 2.5,400 17,474 14,020 Common stock. . 71,463 57,059 47,793 Total. 96,863 74,533 61,813 Retained Earnings-December 31 (Note 9). $ 59,024 $ 90,657 $ 81,448 See Notes to nnam ut Statements l

l l

14

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/ j STATEMENTS OF CHANGE 8 IN FINANCIAL POSITION For the Years Ended December 31,1980,1979 and 1978 M?M 0%

1980 1979 1978 in Thousands Funds Provided By:

Operations:

Net income $ 65,230 $ 83,742 5 87,620 Depreciation . . . ..

59,574 39,708 38,365 Deferred income taxes and investment tax credit adjustments-net. . .. 17,885 14,508 25,197 Allowance for funds used during construction. (37,503) (65,903) (50,262)

Total funds provided from op, rations. 105,186 72,055 100,920 Other:

Allowanct for funds used during construction. . 37,503 65,903 50,262 Decreaw in working capital

• 38,362 11,659 -

Miscellaneous-net 9,943 - -

Total funds provided by operations and other , 190,994 149,617 151,182 Financing transactions:

Common stock . 30,000 30,000 15,000 Preferred stock . . . . 50,000 55,000 -

First mortgage bonds. 70,000 60,000 75,000 installment purchase transactions. 27,466 16,406 15,317 Sale and leaseback transactions. 18,709 24,652 -

Book value of utility plant sold . 934 9,547 13,532 Short-term securities-net . -

39,930 69,515 Total funds provided from financing. 197,109 235,535 _188,364 Total funds provided. $388,103 $385,152 $339,546 Funds Applied To:

Utility plant additions:

Construction expenditures for utility plant. $230,474 $291,771 $262,863 Expenditures for nuclear fuel. 7,151 -

784 Other- net. 98 (3,513) _ _43,788)

(

Total gross additions (includes allowance for funds used during construction of $37,503 in 1980,

$65,903 in 1979 and $50,262 in 1978) 237,723 288,258 219,859 Other-Dividends declared on preferred stock . 25,400 17,474 14,020 Dividends declared on common stock. 71,463 57,059 47,793 increase in working capital * - -

48,613 Miscellaneous-net . -

13,661 1,759 Total funds applied to other . 96,863 88,194 112,187 Financing transactions:

Redemption of preferred stock . . 3,787 - -

Retirement of first mortgage bonds . 6,000 8,700 7,500 Repayment of short-term securities-net. 43,730 - -

Total funds applied to financing. 53,517 8,700 7,500 Total funds applied $388,103 $385,152 $339,546

• n'..rku.ug s aputal < x. lud s >Irart Ictm securaws a urrens maturntws and Jdested taxes snsludcJ sn curuns lubsistucs 11w 1480 nct decrea,e nr worisng carrtal n Jue premanly to wwavs un auouerts payaHe, as sounts p.ryaHe to am nawJ somgwrer JanJends Jalared nuslear rewrts and hisar El uff soal advaw 11rew were gurtsally othet Fy sn reaws un ~gvcsal J, posits aucunts encreaNr. and fuel st.n L The awkmg naptal da rea~c nos 1979 and un rease s un 1973 av prrmanly attrsbutaNe to tnstea~es sn 1979 ausJ da rcase nn 1978 s,e accos.nts paveHe and lates an ruel St Notes to Tun tnsial Statements 15

MOTES TO FINANCIAL STATEMENTS

== $wm

" " ' 1.

SUMMARY

OF SIGNIFICANT E. Income Taxes ACCOUNTING pot.ICIES The Company joins its parent in filing a consolidated Federal income tax return. Income A. System of Accounts taxes are alh>cated to the Company in proportion The accounts of the Company are maintained to its contribution to the consolidated tax liability.

in accordance with the system of accounts Deferred income taxes are provided for prescribed by the Federal Energy Regulatory differences between book and taxable income Commission (FERC). to the extent permitted by the regulatory bodies for ratemaking purposes. Investment tax credits H. Revenues and Fuel Costs allocated to the Company are deferred and The Company records revenues as billed to amortized, based upon the average useful life its customers on a cycle billing basis. Revenue of the related property, begi. ming with the is not accrued far energy delivered but not billed year allowed in the consolidated tax retum.

at the end of the fiscal period.

Substantially all of the rate schedules of F. Allowance for Funds Used During the Company include adjustment clauses under Construction which fuel costs above or below the levels To the extent that the Company is not alloweu in the various rate schedules are permitted by its regulatory bodies to recover permitted to be billed or required to be credited in current rates the carrying cost of funds used to customers. The Company has adopted a for construction, the Company capitalizes as an deferral method of accounting for these fuel appropriate cost of utility plant, an allowance costs recoverable under fuel adjustment clauses. for funds used during construction (AFDC)

Under this method, such costs are deferred to the which is calculated and recorded as provided month in which the related revenues are billed. by the regulatory system of accounts. Under this The fuel adjustment factor contains an amount utility industry practice, construction work in for a nuclear reserve fund, estimated to cover progress on the balance sheet is charged and the cost of replacement energy when the nuclear the income statement is credited for the approxi-plant is down for scheduled maintenance and mate net composite interest cost of borrowed refueling, The fund bears interest and is credited funds and for a reasonable return on the equity to fuel and purchased power expenses during funds used for construction. This procedure is the shutdown period. intended to remove from the income statement the effect of the cost of financing the construction C. Utility Plant and Depreciation program and results in treating the AFDC Utility plant is stated at original cost. The charges in the same manner as construction cost of additions to utility plant includes labor and material costs. As non-cash items contracted work, direct labor and materials these credits to the income statement have allocable overheads and an allowance for the no effect on current cash earnings. After the l composite cost of funds used during construction. property is placed in service the AFDC charged l The costs of units of property retired are to construction costa is recoverable from removed from utility plant and such costs plus customers through depreciation provisions removal costs, less salvage, are charged to included in rates charged for utility service.

accumulated depreciation. Maintenance and The effective cemposite AFDC rate for the repair of property and replacement of items Company was 8.1%,7.7% ar.d 7.6% for 1980,

, determined to be less than units of property 1979 and 1978, respectively.

l are charged to operating expenses. The Company's policy is to capitalize l

Depreciation is computed on the straight-line allowance for funds used during construction on t basis at rates based on the estimated service lives projects during periods of interrupted construc-of the various classes of property. Depreciation tion when such interruption is temporary and provided on average depreciable property in the continuation can be justified as being 1980,1979 and 1978 amoun'ed to approximately reasonable under the circumstances.

3 4% each year, Principally all the Company's G. Reserves utility plant is subject to the lien of its first mortgage bond indenture. It is the policy of the Company to provide reserves for unmsured property nsks and for D. Pension Plan claims for injuries and damages through charges i

The Company has a pension plan covering to operating expense on an accrual basis.

substantially all of its employees. The policy of Accruals for these reserves have been allowed the Company is to fund pension costs accrued for ratemaking purposes 16

. .- - - . .- - . - - _ ~ - _ _ . ._ - - _ . - - - . .- . - - - - .

I I

i i

i' i

"lN UON 2. RATF. MA'1TERS

i. On hiay 29,1930 the Company filed with wholesale rates designed to produce approxi-1 the Ark.msas Public Service Commission (APSC) mately $9,800,000 annually. Approximately j an application to increase, through a two-stage $7,000,000 of thisincrease was placed into effect, process, its retail rates a total of approximately subject to refund, on November 2,1980; as of 4 $130,100,000 on an annual basis On October 28, December 31,1980 operating revenues include 1980 the Company placed in effect, subject to approximately $450,000 from these increased refund, approxima;ely $86,700,000 of the rates The remainder of the total increase is

' ~

increase; as of December 31,1980 operating proposed to be placed into effect on June 1,1981.

, revenues include approximately $10,600,000 The Company's wholesale customers have i from the increased rates. The balance of the agreed to the proposed rates subject to some 4-requested increase, approximately $43,400,000, possible reduction should the APSC not allow I is proposed to be implemented on June 1,1981. the full amount of the Company's currently

'l i

In a pre. hearing stipulation agreement between pending retail rate request discussed above.

the Company and the APSC staff, the Commis- As the result of a complaint filed by the l . sion staff recommended an increase of approxi- Attorney General of Arkansas during 1979, on

mately $90,000,000 and, in return, the Company October 27,1980 the APSC issued an order j agreed not to contest certain staff adjustments finding that the Company had over-collected

, which would have the effect of reducing the from its custemers approximately $6,200,000, Company's request from $130,100,000 to plus interest, through the erroneous application i approximately $117,000,000. The APSC has of the fuel adjustment clause during 1977,1978 completed taking of testimony and final briefs and 1979. On November 3,1960 the Company of all parties are to be filed in Afarch 1981. appealed the APSC decision and obtained a On August 28,1980 the Company filed with temporary stay of the obligation to repay this the FERC an application for an increase in its amount. This matter is currently pending.

l

3. BUSINESS CONSOLIDATION

$21,000,000 principal amount of Ark-Mo's In order to increase economic efficiency and outstanding first mortgage bonds, the Company

! to consolidate into one corporate entity, the issued to the holders thereof, in exchange for Company acquired, effective January 1,1981, the surrender and cancellation of such bonds, all the outstanding shares of common stock of a like aggregate principal amount of the

Arkansas-Missouri Power Company (Ark-Mo) Companfs first mortgage bonds. Upon l from Middle South Utilities, Inc. (MSU), the consummation of these transactions, Ark-Mo Company's parent, and effected the liquidation became a division of the Company and j of Ark-Mo and the distribution of its assets to . Associated Natural Gas Company a subsidiary the Company, including the outstanding shares of the Company.

of common stock of Associated Natural Gas if Ark-Mo had been combined with the Company. Concurrently with the acquisition by Company for the year ended December 31,1980, the Company of Ark-Mo's assets, the Company operating revenues and net income would have assumed all of Ark-Mo's liabilities and contrac- been app oximately $817,962,000 and tual commitments, With respect to approximately $68,491,000, respectively.

l s

4 i

17

rr r

• M 0"l." 4. INCOME TA XES Income tax expense (credit) consists of the following:

1980 1979 1978 in Thousands Current Federal . $ (1,084) $(20,593) $ (3,248)

State. _

(360) 545 (540)

Total. _ (1,444) (20,048) (3,788)

Deferred- net Liberalized depreciation 18,570 25,134 17,626 2,181 4,633 4,022 Taxes capitalized on books.

Interest capitalized on nuclear fuel. 1,520 3,778 3,109 Revenues collected in advance-nuclear fuel reserve. (5,648) 3,041 (34)

Deferred fuel cost. (2,629) 4,052 (208)

Restoration (reduction) due to tax loss carryforward . 10,636 (25,824) -

Nuclear fuel disposal costs. (4,164) - -

(1,177) 446 2,118 Other.

Total. 19,289 15,260 26,633 Investment tax credit adjustments-net (1,404) (752) (1,435)

Total income taxes . $ 16,441 $ (5,540) $ 21,410 Charged to operations . $ 28,632 $ 11,213 $ 33,813 Credited to other income. (12,191) (16,753) (12,403)

Total income taxes . $ 16,441 $ (5,540) $ 21,410 Totalincome taxes differ from the amounts computed by applying the statutory Federal income tax rate to income before taxes. The reasons for the differences are as follows:

1980 1979 1978

% of  % of  % of Pre-Tax Pre-Ta x Pre-Tax Amount income Amount income Amount income Computed at statutory rate. $37,50e 46.0 % $ 35,973 46.0 % $52,334 48.0 %

Increases (reductions) in tax resulting from:

Allowance for funds used during construction. (17,251) (21.1 %) (30,316) (38 8%) (24,126) (22.1%)

Difference between book depreciation and tax < traight-hne depreciation . (710) (0.9%) (9,027) (11.5%) (4,415) (4.1%)

Difference between interest capitalized on nuclear fuel combined with tax deprecia-tion of nuclear tuel and nuclear fuel expense. (2,141) (2.6%) (2,405) (3.1%) (856) (0.8%)

Ad iustment of consolidated savings due to tax loss . - -

1,912 2.4% - -

Other-net . (1,025) (1.3%) (1.677) (2.1%) (1,527) (1.4%)

Recorded income taxes . 6.441 20.1 % $ (5,540) (7.1%) $21,410 19.6 %

in 1979, the Company incurred a Federal In 1980, the Arkansas Public Service tax loss. The tax effect on the portion of the loss Commission approved rates which allowed the which was not realized during 1979 was Company, on a prospective basis beginning recorded as a reduction of deferred income June 1980, to normalize the differences between taxes The tax effect on the loss carryforward book and tax straight-line depreciation on certain used in 1980 has been recorded as a restoration power plants, all removal costs, decommission-of deferred income taxes. The remaining Federal ing costs and negative salvage on nuclear fuel.

tax loss carryforward at December 31,1980 Unused investment tax credits at December 31, is $27,150.000. 1980 amounted to $76,566,000 of which 18

- /

gg $6,274,000 may be carried forward through company. Effective with 1979 the method of 1984, $33,018,000 through 1985, 521,375,000 allocating investment tax credit was changed through 1986 and $15,899,000 through 1987. whereby each company is allocated the credit Prior to 1979 the mvestment tax credit allowable based on its portion of the consoli-utilized in the consolidated tax return was dated tax liability. Any additional consolidated allocated to cach hiiddle South System Company credit utilized is allocated on the basis of the on the basis of the credit contributed by each remaining tax credits.

5. CON 1MITMENT AND CONTINGENCIES shares of ownership of SFI's common stock, that The construction program contemplates they will take any and all action necessary to Company construction expenditures of approxi- keep SFI in a sound financial condition and to mately $326,400,000 in 1981, $188,600,000 in place SFI in a position to discharge, and to cause 1982 and $166,000,000 in 1983. SFI to discharge its obligations under these

'The Federal income tax returns for the years arrangements. At December 31,1980, the total 1971 through 1976 have been examined by the loan commitment under these arrangements Internal Revenue Service (IRS) and adjustments amounted to $221,196,000 of which 5128,224,000 have been proposed. The principal issue is was outstanding at that date. Also, SFI's paren' whether customer deposits are includable in companies including the Company, have trade taxable income. A formal written protest has similar covenants and agreements in conne ction been filed and conferences are being held with with long-term leases by SFl of oil storage and an Appeals Officer of the IRS. Any finalliability handling facilities and coal hopper cars. At for taxes resulting from settlement with the December 31,1980, the aggregate discounted IRS would not have a material effect on net value of these lease arrangements was $59,150,000.

income. Income taxes on customer deposits The Company has agreed to purchase, over would be normalized. Most of the other issues a 20-year period,100 million tons of coal for use have been settled am. adequate provisions at the White Bluff Steam Electric Station. In have been recorded. addition, SFl has entered into a contract with The Company has a 35% interest in System a joint venture for a supply of coal from a mine Fuels Inc. (SFI), a jointiy owned subsidiary in Wyoming, which is expected to provide 150 of the four principal operating subsidiaries of to 210 million tons over a period of 26 to 42 Middle South Utilities, Inc. SFI operates on a years. Parent companies of SFI, including the non-profit basis for the purpose of planning and Company, each acting in accordance with their implementing programs for the procurement respective shares of ownership of SFI's coramon of fuelsupplies forallof theoperatingcompanies; stock, joined in, ratified, confirmed and adopted its costs are primarily recovered through charges the contract and the obligations of SFI there-for fuel delivered. under.

The parent companies of SFI have made loans The Company, under the terms of its nuclear to SFI to finance its fuel supply business under fuel lease, is responsible for the storage and a loan agreement dated January 4,1978, as disposal of spent nuclear fuel. The Company amended January 1,1981, which provides for considers all costs incurred or to be incurred in SFl to borrow up to $261,500,000 from its parent the use and disposal of nuclear fuel to be proper companies through December 31,1981. As of components of nuclear fuel expense and provi-December 31,1980 the Company had loaned sions to recover such costs have been or will be

$17,630,000 to SFI pursuant to this loan agree- made in applications to regulatory commissions.

ment and the Company's share of the unused The Company collected approximately loan commitment is $66,240,000. Notes undet $7,382,000 in 1980 for the storage or disposal of this agreement mature December 31,2006. spent fuel. The Company is also recovering in addition, the Company had loaned SFI approximately $61,000,000 for decommissioning

$13,565,250 under previous loan agreements. costs for its two nuclear units through increased No'es mature in 10 and 25 years from date of depreciation charges over the life of the station.

borrowing under the provisions of the previous Based upon a study performed by the Company, loan agreements. nuclear plant decommissioning costs are in connection with certain of SFI's borrowing projected to be in excess of these amounts.

arrangements, SFI's parent companies, including The Company is requesting and will request the Company, have covenanted and agreed recovery of estimated increased costs in severally in accordance with their respective applications to its regulatory commissions.

19

1 The Company, together with the other Middle related to the Grand Gulf Plant and the Company Mggy South System opersting companies, is obligated and Arkansas-Missouri Power Company, which under agreements with Middle South Energy, did not receive allocations, will relinquish their

, Inc. (MSE), to make payments or subordinated rights in the plant. The proposed reallocation advances adequa'e to cover all of the operating is subject to the receipt of the approval of expenses and capital costs of MSE and, in return, regulatory agencies and of all other necessary

}

is entitled to receive the power available to approvals,

MSE from the Grand Gulf Plant. Through 1980, During 1980, the Company could not i- $1.8 billion had been expended by MSE on the continue to fund its portion of three coal units Grand Gulf Plant's two units which are under construction, which the Company owns scheduled for completion in 1982 and 1986. jointly with both rural electric cooperatives l Under certain circumstances, payments may be and various municipalities. Upon notification j required to be made commencing December 31, of this fact one co-owner exercised its option 1982 if the first unit of the Grand Gulf Plant to advance the Company's share of these has not been completed by the date. During construction funds in order to keep the construc-1980 the Operating Companies agreed in tion on schedule. As of December 31,1980, l

l principle to a permanent allocation of the Grand approximately $68.6 million was so advanced Gulf Plant's capability. Under this agreement and construction of these projects continued those companies receiving allocations, louisiana on schedule. The 1980 construction expenditures Power & Light Company, Mississippi Power do not include these advances; the 1981 budgeted

& Light Company and New Orleans Public construction expenditures ref!cct the reim-( Service, Inc., will assume, in proportion to such bursement of these expenditures.

[ allocations, all responsibilities and obligations i

' 6. LEASES revenues utih. zed to recover the lease costs.

( The Company accounts for leases on the Application of criteria used to define a capital same basis as that used by its regulatory authority lease would permit recording the following in the ratemaking process which determines the assets and liabilities on the balance sheet:

1980 1979 1978 i in Thousands Assets:

Utility plant. . . . . $35,299 $38,982 $13,948

, Accumulated amortization. 8,013 9,533 7,201 Net leased property. $27,286 $29,449 $26,747 l

Liabilities:

Noncurrent obligations under capital leases . . $29,827 $30,730 $27,117 Current obligations under capital leases. $ 1,482 $ 2,431, $ 1,718 l Recordir.g of such leases would not materially Prior to August 31,1978, the Company was

affect the amounts reported as either expense a party to two nuclear fuel leases aggregating

( or net income. $90,000,000. On August 31,1978, the Company terminated one of the leases and amended the

! At December 31,1980, there were noncancel- remaining lease to permit the Company to lease r able leases with minimum rcntal commitments nuclear tuel up to a maximum of $100,000,000.

I as follows: On November 2,1979, the Company increased the amount of nuclear fuel which it can lease i In Thousands from $100,000,000 to $130,000,000. Lease

, payments, which are not induded in the tabula-i 1981. $ 12,240 tions above, are based on nuclear fuel use. The 1982. . . 9,639 lease, unless sooner terminated by one of the 1983... . .

9,546 parties, will continue until 2018. The unre-1984 . . . 9,470 covered cost base of the lease at December 31, 1985. . 8,998 1980,1979 and 1978 was $123,740,000,

For years thereafter. 135,289

$111,037,000 and $91,318,000, respectively.

l TOTAL. . $185,182 Nuclear fuel expense of $37,300,000 in 1980, l

1 20

gyg gg $15,318,000 in 1979 and $13,279,000 in 1978 amounted to approximately $10,833,000, was charged to operations. $8,017,000 and $7,295,000 in 1980,1979 Rental expense (excluding nuclear fuel) and 1978, respectively.

7. PENSION PLANS includes amortization of past service cost over Total pension expense of the Company a period of 20 years. A comparison of accumu-for 1980,1979 and 1978 was $6,305,000, lated plan benefits and plan net assets for the

$5,035,000 and $5,202,000, respectively, which defined benefit plan is presented below:

January 1, [

Actuarial present value of accumulated plan benefits: 1980 1979 l Vested . . .. . . $63,710,000 550,308,000 i Nonvested. . . . 1,379,000 3,984,000 i Total . . .. . ... . . . $65,089,000 $54,292,000 ,

Net assets available for benefits . $69,935,000 $61,563,000 The weighted average assumed rate of return of accumulated plan benefits was 7% for 1980 used in determining the actuarial present values and 1979.

8. LINES OF CREDIT AND SiiORT-TERM BORROWINGS Company has authority to have outstanding At December 31,1980 the Company had at any one time short-term promissory notes and

$56.4 million in lines of credit with Arkansas commercial paper in amounts aggregating not banks. Additionally, the Company has joined more than the lesser of $170,000,000 or 10%

with three other Middle South System operating of capitalization. The aggregate amounts of the companies in establishing $253 million in lines unused lines of credit as of December 31,1980 of credit with banks outside the Middle South and December 31,1979 were $127,100,000 System service area. Compensating balances and $44,870,000, respectively.

are required by certain of the lending banks. The short-term borrowings and the applicable The Company may borrow any portion of these interest rates (determined by dividing applicable lines subject to its maximum authorized level interest expense by the average amount bor-of borrowings. Through June 30,1982, the rowed) for the Company were as follows-1980 197 1978 Maximum borrowing. . $135,250,000 $96,000,w '37,100,000 Average borrowing:

Bank loans. $ 93,683,000 $33,144,000 -

Commercial paper. . .. $ 990,000 $19,961,000 $39,151,000 Average interest rate during the period:

Bank loans. . 14.6 % 13.9 % -

Commercial paper. . 15.3 % 11.0 % 8.1%

Average interest rate at end of period:

Bank loans. . . 21.0 % 15.8 % -

Commercial paper. .

13.7 % 10.4 %  :

Borrowings at end of period. . $ 36,400,000 $80,130,000 $40,200,000

9. RESTRICTED RETAINED EARNINGS preferred stock provide for restrictions on the The indenture relating to the Company's payment of cash dividends on common stock.

long-term debt and provisions of the articles - As of December 31,1980, $34,204,000 of re-of incorporation relating to the Company's tained earnings are free from such restrictions 21

$$5#$" 10. PREFERRED AND COMMON STOCK Preferred stock outstanding at December 31,1980 and 1979 consisted of the following-Current Shares Shares Outstanding _ Call Price Cumulative, $100 Par Value, Authorized 1980 1979 Per Share Without sinking fund:

4.32% series. ... ...... . ,. 70,000 70,000 70,000 $103.647 4.72% series. . ... .. .. .. . 93,500 93,500 93,500 107.00 4.56% series. . .. . . .... 75,000 75.000 75,000 102.83 4.56 % 1965 series . . .. . .. .. .. 75,000 75,000 75,000 102.50 6.08% series. . . .... .. . .. 100,000 100,000 100,000 102.83 7.32% series. . . . ...... .. .. 100,000 100,000 100,000 103.17 7.80% series. . .., .

150,000 150,000 150,000 107.15 7.40% series. . . . . . 200,000 200,000 200,000 106.50 7.88% series. . . . ..... .. 150,000 150,000 150,000 106.94 Total . , .. .. . 1,013,500 1,013,503 1,013,500 With sinking fund *:

10.60% series. . . .. .. . 182,134 182,134 200,000 109.39 11.04% series. .. . 380,000 _380,000 400,000 109.78 Total . . . . . . . .. . 562,134 562,134 600,000 Unissued . . . . . . .. . 2,386,500 Total . . . . .. . . .

3,962,134 Cumulative, $25 Par Value Without sinking fund:

8.84% series. . . . ... 400,000 400,000 400,000 28.21 10.40% series. .. .. 600,000 600,000 600,000 28.60 Total . . . . .. 1,000,000 1,000,000 1,000,000 With sinking fund *:

9.92% series. . . . . . .. 1,600,000 1,600,000 1,600,000 28 18 13.28% series. .

2,000,000 2,000,000 -

29.88 Total . . . . . . . . 3,600,000 3,600,000 1,600,000 Unissued . . . . . 5,400,000 l' Total . . . . . . 10,000,000 i,

Total Preferred Stock. . . . _13,962,134 in Thousands Without sinking fund:

Stated at $100 a share . . ..., ... . .. $101,350 $101,350 i

Stated at $25 a share .. . .. . ... .. 25,000 25,000 Premium . . . . .. . .. . .. .. . . 540 540 Total preferred stock and premium, without sinking fund. . . . .. $126,890 $126,890 With sinking fund:

Stated at $100 a share , , .. ... $ 56,213 $ 60,000 l

Stated at $25 a share . .. ... 90,000 40,000 Premium. . . . . .. . . . 852 518 Total prefened stock and premium, with sinking fund. . . ... .. . $147,065 $100,518

• These wrses are to be rettred in tuli through the operation of sinking funds at a redemptwn prve of $100 per share on ahe 10.60%

and 1104% series and $25 per share on the 9 92% and 13 28% series plus accumulatrJ Juridends to the date of sus k reJemptwn.

The 10s0% wries is besng redeemed at the rate of 10.000 shares each year. The 11.04% wries is being rcJermed at the rate of 20.000 shares each year. Begmnung June 1,19s4. the 9.92% series as to be redeemed at the rate of 80,000 sharcs eath year Beginning any has the lanuary 1.1981 non-cu"mulative optrenthe 13 28%

to redeem wries is aru additional liketo be redeemed

. amount of said shares ateach theyear rate of 100.000 commencung in theshares ftrst year oeach year. In addstw l in eu h respesture wrscL 22 I

u e va, , wu , a The changes in the number of shares of common (all issued at par value) and preferred stock

"" ""* outstanding in 1978,1979 and 1980 were:

Common Stock Preferred Stock Shares Sold Shares Sold (Redeemed) 5100 Par 525 Par 1978. 1,200,000 -

1979. 2,400,000 -

2,200,000 1980. 2,400,000 (37,866) 2,000,000

11. LONG-TERN 1 DEllT Long-term debt outstanding consisted of the following:

1980 1979 In Tiwusands FIRST N10RTGAGE DONDS:

2-7/8% series due 1980. 5 5 6,000 3-5/8% series due 1981. 8,000 8,000 9-1/4% series due 1981. 60,000 60,000 3-1/2"6 series due 1982. 15,000 15,000 3-1/4% series due 1984. 7,500 7,500 3-3/8% series due 19fl5. 18,000 18,000 16-1/8% series du 1986. 70,000 4-7/8% series due 1991. 12,000 12,000 4-3/8% series due 1993. 15,000 15,000 4-5/8 6 series due 1995. 25,000 25,000 5-3/4% series due 1996. 25,000 25,000 5-7/8% series due 1997. 30,000 30,000 7-3/8% series due 1998. 15,000 15,000 9-1/4% series due 1999. 25,000 25,000 9-5/8% series due 2000. 25,000 25,000 7-5/890 series due 2001. 30,000 30,000 8 "6 series due 2001. 30,000 30,000 7-3/4"'oseries due 2002. 35,000 35,000 7-1/2"o series due 2002. 15,000 15,000 8  % series due 2003. 40,000 40,000 8-l/8% series due 2003. 40,000 40,000 10-1/2% series due 2004. 40,000 40,000 10-1/8% series due 2005. 40,000 40,000 4-1/8% series due 2007. 75,000 75,000 9-7/8% seriet due 2008. 75,000 75,000 10-1/4% series due 2009 60,000 60,000 TOTAL FIRST N10RTGAGE BONDS 830,500 76n,500 INSTAI.LN1ENT PURCllASE CONTRACTS:

Pope County, Arkansas; due 1986 to 2008 at rates ranging from 7-,,4% to 10%. 20,800 19,500 Jefferson County, Arkansas; due 1986 to 2008 at rates ranging from 6-1/8"b to 10%. 71,700 56,200 Less: Amount held in construction funds. 7,580 18,246 TOTAL INSTALLN1ENT PURCilASE CONTRACTS . 84,920 57,454 UNAN10RTIZED PREN11UN1 AND DISCOUNT ON DEUT-NET. 1,247 1,762 TOTAL. 916,667 825,716 LESS: CURRENT N1ATURITIES INCLUDED IN CURRENT LIABILITIES. 68,000 6,000 LONG-TERN 1 DEBT EXCLUDING AN10UNT DL'E WITillN ONE YEAR. 5848,667 5819,716 23

uM@n L9;l,'" At December 31,1980, the first mortgage bonds have sinking fund requirements and maturities for years 1981 through 1985 as follows:

In Thousands Sinking Fund

• Maturities 1981 $6,h93 $68,000 1982 6,143 15,000 1983. 6,143 -

1984 6,068 7,500 1985. 5,888 18,000

• Anttual ssnisn3 fund requsvernents rwy be nret by <rrts!siatton of property addstsons at a valt of lh7% of susin requsrrntents

12. TRANSACTIONS WITil AFFILIATES Operating rei enues include revenues from sales to affiliate: amounting to $84,415,000, The Company buys from and sells electricity $48,320,000 anu $35,680,000 in 1980,1979 and to the operating subsidiaries of Middle South 1978, respectively. Operating expenses include Utilities, Inc., its parent, under rate schedules fuel cost and purchased power charges from filed with the Federal Energy Regulatory affiliates totaling $138,961,000, $197,864,000 Commission. In addition, the Company and $225,439,000 in 1980,1979 and 1978, purchases fuel from System Fuels, Inc. respectively.

13. MAJOR CUSTOMER Revenue derived from sales to Reynolds revenue) was 9.2% in 1980,11.3% in 1979 Metals Company (as a percent of total operating and 7.9% in 1978.

14. QUARTERLY RESULTS (Unaudited)

Operating results for the four quarters of 1980 and 1979 are as follows:

1980 March June September December in ThousanJ<

l Operating Revenue. $154,880 $154,782 5245,852 $194,983 Operating income. 14,856 15,062 40,757 24,269 l

Net income 22,435 6,439 27,618 8,738 1979 -

March June September Detember In Thousands Operating Revenues. $131,017 $129,486 $172,838 $150,485 Operating Income. 18,127 13,386 24,334 13,902 Net income 20,903 15,908 29,183 17,748 The business of the Company is subject ingly, earnings information for any three-month to seasonal fluctuations with the peak period period should not be considered as a basis occuring during the summer months .iccoid- for estimating the results for a full year.

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Nag ;gg 15. EFFECTS OF INFLATION requirements of Statement of Financial Account-ON OPERATIONS (Unaudited) ing Standards (SFAS) No. 33, " Financial Ihe following supplementary information Reporting and Changing Prices." It should be about the effects of changing prices on the viewed as an estimate of the effect of changing Company is provided in accordance with the prices, rather than a precise measure.

STATEMENT OF INCOME FRON1 OPERNIIONS AND ODIER FINANCIAL DATA ADJUSTED FOR EFFECTS OF CIIANGING PRICES FOR Tile YEAR ENDED DECEMBER 31,1980 (Irr 1%,,md,)

Adjusted For Adjusted For As Reported in General Changes In The 1-inancial inflation Specific Prices Statements (Constant Dollars) (Current Costs)

Operating revenues. $750,497 5 750,497* 5 750,497*

Operating expenses (excluding depreciation) 595,979 595,979* 595,979*

Depreciation . 59,574 109,707 125,937 Total operating expense 655,553 705,686 721,916 Operating income. 94,944 44,811 28,581 Other income 39,950 39,950* 39,950*

Interest and other charges - _ (69,664) (69,664)* (69,664)*

Income from operations (exduding reduction to net recoverable cost) . S 65,230 $ 15,097** $ (1,133)

Increase in specific prices (current costs) of property, plant and equipment held during the year"** $ 438,582 Reduction to net recoverable cost. 5(168,829) (182,905)

Effect of increase in general price level. (408,276)

Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost. (152,599)

Gain from decline in purchasing power of net amounts owed . 164,188 164,188 Net 5 (4,641) 5 11,589

• kton,J to be in " average for the ucar" Jollars and thus are not rc>ta!csi

• • Ins luJung the reduction to net rn overable cort, the 10~~ trens operattan~ on a con ~ tant Jo!!ar ba~ts s.cou!J have been $ 15 3..32 for N90.

• • • At Dn ensber 31. 1980 s urrent co~t of preperty. plant and equiperent net of as cianulated Jqrn tation was $1h9 n99, whde historu al cost or net cost rnoverable through Jcyreastron wa~ $1.99U05 25

APL EOEM FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CilANGING PRICES (in *Dtousands of Average 1980 Dollars)

Years Ended December 31 1980 1979 1978 1977 1976 Operating revenues. . . . .. $750,497 5 2,779 $702,873 $730,756 $574,077 llistorical cost information adjusted for general inflation income from operations (excluding reduction to net recoverable cost) . . .. . .. 15,097 54,310 Net assets at year-end at net recoverable cost . , .. .. .. 494,357 557,954 l Current cost information 4

Income from operations (excluding

! reduction to net recoverable I cost) . . . . . . . . .. .. (1,133) 39,348 i Excess of increase in general price level over increase in specific

prices after reduction to net i recoverable cost . . ,. . 152,599 186,500 l Net assets at year-end at net i recoverable cost . . .. 494,357 557,954 j Ger.eral information i Gain from decline in purchasing

. power of net amounts owed . 164,188 172,527 Average consumer price index. , .

246,8 217.4 195.4 181.5 170.5 i

NOTD STAS Na 33 requires that histoncal w>t informati<m adi usted for generalinflatton and surrent wst information be providcJ

, for 1979 and sub>caluent years Comparab!c snformation is not readdy avadablefor the years prior to 1979 and thus is not provided, Constant dollar amounts represent historical of the surviving plant by year of acquisiticn.

t costs adjusted for the effects of generalinflation. Lind and certain other plant assets which are l The effects are determined by converting these not included in the llWI were converted costs into dollars of equal purchasing power using the cpi-U.

j using the Consumer Price Index for all The difference between current cost amounts l Urban Consumers (CPI-U). and constant dollar amounts results from specific

Current cost amounts reflect the changes prices of property, plant and equipment (as in specific prices of property, plant and equip- measured by the llandy-Whitman Index) j ment from the year of acquisition to the present. changing at a rate different than the rate of The current costs of property, plant and equip- general inflation (as measured by the Consumer I ment, which represent the estimated costs of Price Index).

l replacing existing plant assets, are determined The current year's depreciation expense on

by applying the llandy-Whitman Index of Public the constant dollar and current cost amounts

! Utility Construction Costs (llWI) to the cost of property, plant and equipment were deter-i l

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$Eljf,C mined by applying the Company's depreciation experiences that it will be allowed to earn rates to the indexed amounts. on the increased cost of its net investment when

The cost of fuel used in generation has not replacement of facilities actually occurs.

, been restated from historical cost Regulation To properly reflect the economics of rate limits the recovery of fuel costa to actual costs regulation in the Statement of Income from through the operation of adjustment clauses 4

Operations presented above, the reduction of or adjustments in basic rate schedules. net property, plant and equipment to net As prescribed in Statement of Financial recoverable cost is offset by the gain from the Accou nting Standards No. 33, income ta xes were decline in purchasing power of net amounts not adjusted. owed. During a period of inflation, holders of

' 7 The regulatory commissions to which the monetary assets suffer a loss of general purchas-i Company is subject allow only the historical cost ing power while holders of monetary liabilities t of plant to be recovered in revenues as deprecia- experience a gain. The gain from the decline

tion. Therefore the excess cost of plant stated in purchasing power of net amounts owed is ,

in terms of constant dollars or current cost over primarily attributable to the substantial amount

! the historical cost of plant is not presently of debt which has been used to finance property, I

recoverable in rates. This excess is reflected as plant and equipment. Since the depreciation on e a reduction to net recoverable cost. While the this plant is limited to the recovery of historical rate-making process gives no recognition to the costs, the Company does not have the oppor-l current cost of replacing property, plant and tunity to realize a holding gain on debt equipment, the Company believes based on past I'

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['/ TEN YEARS OF PROGRESS / FINANCIAL 1980 v = wu r" (In Thousands of Dollars) umu s s"'""

Capitalization and Capitalization Ratio. Selected Financial Data wtuoNS of DoMAPs Net operating revenues . $ 750,497

• -, Net income. 65,230

• Total assets . . . 2,147,983 8"" ~ l 3'ENESI Long-term debt . ... . ... 848,667 700 - #M[r.72U'II,."~",*

' ~

- - Preferred stock, with sinking fund. 147,065 Capitalization-End of period:

i 600 - -

Preferred stock and premium. $ 273,955

_ Common stock. 458,569 500 - _-

Retained earnings . 59,024

~

400 - _- -

Total. 791,548 yg. _ __ _ _- _- _- Long-term debt:

First mortgage bonds 200- - - - and premium 1,2. 765,430 Installment purchase contracts l

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Sinking fund debentures .

Total .

83,237 848,667

[ 1971 1973 1975 1977 1979 1980 $1,640,215 l

Total capitalization. . -

Annual Payment Requirements:

Interest om utility Plant $ 73,551 wumss or nouAss First mortgage bonds .

Installment purchase contracts . 6,593 2500 I I I I Dividends on preferred stock. 25,778 l J 2250 -

--.- i..m ,a.,as,,,

q -

Utility Plant-End of period:

, -*- w ca a%,,,  : Electric plant completed. $2,133,704

'000 _

Construction work in progress. 282,376 1750  !

.l Nuclear fuel . 7,151 Total utility plant. 2,423,231

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Less-accumulated depreciation. 417,435 1250 Net utility plant . $2,0_05,796 .

I""" ~~

Income Statement:

750 Operating revenues. $ 750,497 3o9 Operating expenses: ,

l Fuel. _.. 237,346 250 Purchased power. 154,126 g Payroll-Operation and 1971 '72 '73 '74 '75 '76 '77 '78 '79 1980 mamtenance . 49,774 Other operation and maintenance . 100,700 Del reciation . 59,574 l

riet income Taxes. 54,033 un uoss ol ixn t Aus Total . 655,553 90 ~- -'

Operating income . 94,944 I

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Other income and deductions-net t e,,, o . .

(excluding AFDC*) . 17,468 70 - [,"2i;,*,.1", '""" ----

Interest and other charges:

60 - Interest on long-term debt. 67,036 l

l Other interest-net of 3g _

debt premium. 17,649 Total (excluding AFDC*) . 84.685 I 40 Income from revenues. 27,727 30 - Non-cash income from AFDC' 37,503

~~

Income from accounting change 3 l _l D- Net income. $_65,230 10 -

g,rdudo u,u,,mrtra J pn tertu,rs . ,, lo rg f r.. J, N Ivgrnning in 19,'3 2 LuluJn s urrent!_w rnaturung portwn.

IU I 1971 '72 *71 '74 '75 "76 '77 ~78 '791980 .n"o'"c"s""" 'U" ~ na* pI","r"u"a'

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1979 1978 1977 1976 1975 1974 1973 1972 1971

$ 583,826 S' 556,448 $ 537,408 $ 396,597 $ 316,831 $ 296,811 $ 209,327 ' $184,810 $166,063 83,742 87,620 70,685 46,963 40,713 55,562 41,946 36,771 28,908 1,940,643 1,694,337 1,563,544 1,421,940 1,311,433 1,124,177 1,002,893 823,096 709,851 819,716 749,262 667,484 591,382 586,318 546,284 480,829 398,175 348,400 100,518 60,063 60,063 60,063 60,063

$ 227,408 $ 171,772 $ 171,772 $ 171,772 $ 161,720 $ 101,657 $ 101,657 $ 86,615 $ 51,529 427,960 397,960 382,960 367,960 337,375 292,375 257,375 202,375 172,375 90,657 81,448 55,641 39,040 41,297 41,869 36,827 34,714 31,043 746,025 651,180 610,373 578,772 540,392 435,901 395,859 323,704 254,947 763,549 709,549 642,979 575,184 586,318 546,284 476,354 393,700 343,700 56,167 39,713 24,505 16,198 4,475 4,475 4,700 819,716 749,262 667,484 591,382 586,318 546,284 480,829 398,175 348,400

$1,565,741 $1,400,442 $1,277,857 $1,170,154 $1,126,710 $ 982,185 5 876,688 $721,879 $603,347

$ 62,436 5 56,536 $ 49,364 $ 42,837 5 42,837 5 38,787 $ 29,974 $ 23,524 $ 19,687 4,980 4,980 4,103 1,224 19,548 14,020 14,020 14,020 13,136 6,600 6,600 5,418 2,768

$1,231,832 $1,178,601 $1,139,511 $1,111,119 $1,097,913 $1,051,248 $ 762,319 $727,558 $684,668 980,054 785,684 610,557 505,669 350,941 215,794 330,585 216,055 151,797 12,747 4,562 8,179 5,229 29,953 26,722 9,148 2,211,886 1,964,285 1,762,815 1,621,350 1,457,033 1,272,271 1,122,857 970,335 845,613 364,447 331,231 297,464 265,099 240,014 211,456 193,400 175,144 160,665

$1,847,439 $1,633,054 $1,465,351 $1,356,251 $1,217,019 $1,060,815 $ 929,457 $795,191 $684,948

$ 583,826 $ 556,488 $ 537,408 $ 396,597 $ 316,831 5 296,811 5 209,327 $184,810 $166,063 174,667 167,681 169,890 107,213 76,322 83,840 46,605 36,648 3' '51 171,425 120,804 114,225 107,983 56,022 55,936 28,737 25,334 705 40,607 35,400 29,448 26,626 24,286 19,486 17,647 15,731 41 51,425 55,592 52,469 31,224 30,637 24,114 19,416 16,799 15,621 39,708 38,365 36,768 35,025 33,790 23,885 21,373 19,609 18,742 36,245 57,249 64,091 36,022 38,352 24,949 25,766 25,288 30,235 514,077 475,091 466,891 344,093 259,409 232,210 159,544 139,409 126,295 69,749 81,397 70,517 52,504 57,422 64,601 49,783 45,401 39,768 23,627 16,986 12,466 10,328 8,131 1,352 572 45 75 67,091 56,949 45,047 43,152 40,553 32,554 25,528 21,843 17,750 8,446 4.076 3,917 2,703 3,265 3,323 1,557 1,002 592 75,537 61,025 48,964 45,855 43,818 35,877 27,085 22,845 18,342 17,839 37,358 34,019 16,977 21,735 30,076 23,270 22,601 21,501 65,903 50,262 36,666 26,445 18,978 25,486 18,676 14,170 7,407 3,541 83,742 5 87.620 $ 70,685 $ 46,963 $ 40,713 $ 55,562 $ 41,946 $ 36,771 5 28,908 29 L - _ _ _ _ _ _ _ _ _

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f.s TEN YEARS OF PROGRESS / OPERATING v t ct t 5.ou m Average Annual Kilowatt Hour Use

• • WW Realdential Customer.

thousands of WH 1980 12.0 -

Electric Operating Revenues:

I (In Thousands of Dollars) l Residential . $212,833 io o ._ .

i Commercial . 128,477 Industrial-Aluminum processing. 69,171 8o i industrial-Other . . 140,422 Government and municipal . 12,824 60 Total from ultimate customers. 563,727

( Public utilities . 181,650 l

Miscellaneous revenues. 5,120 l 4o Totalelectric operating revenues. 5750,497

! m, t m,,,.

2.

l Em s.', .u,,,,, Electric Sales (Millions of Kilowatt flours):

Residential . 4,480 1 0 Commercial . 2,682 1971 72 73 74 75 76 77 78 79 1980 Industrial- Aluminum processing. 3,411 Industrial-Other . 3,675 Government and municipal . 292

" "

• s le.

Total sales to ultimate customers . 14,540

,t,"*",',g. .,

go [' tg muaoxs oF Kwn Public utilities . 5,445 l

16 0 19,985 Total energy sold .

l Number of customers,-end of year:

ng Residential . 405,717 Commercial . 49,444 10.0 - Industrial- Aluminum processing. 1 Industrial-Other . 12,284 80 Government and municipal . 1,548 l Total ultimate customers. 468,994 6"

l Public utilities . 19 4o Total customers. 469,013 l 2.0 Electric Energy:

Source and disposition o (Millions of Kilowatt flours) 1971 72 73 74 '75 76 77 78 79 1940 Generated- net station octout l Coal . 601 Gas . 4,741 Payroll Oil . 1,653 Mll ut..Ns oF DOLLARS Nuclear. 7,831 l

90' l l l  ! l 7 flydro. 103 so - , rm ,, a

-  ! I Total generated . 14,929

1.

I Purchased. 6,459 70 - E m, m . ,,. .. .. r" " l l l Net interchange. (209) l  !  ! Total 21,179 l bol 50 ' f f f f {, l Less: Company uses, losses and 1,194 unaccounted for .

~

ji 40 ,- Total energy sold . 19,985 Peak demand (Megawatts) . 4,179 3o j 20 1

10 o

1971 '72 7 3 74 75 76 '77 78 '79 1980 30 l

l_ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _

1979 1978 1977 1976 1975 1974 1973 1972 1971

$161,466 $165,347 $155,225 $121,267 $104,440 $ 86,337 $ 68,098 $ 57,976 $ 49,718 101,048 99,021 93,532 75,641 62,325 53,438 43,448 38,092 33,989 65,861 43,972 40,482 33,100 12,652 28.061 17,358 14,803 13,132 112,912 105,870 102,952 83,844 61,619 58,566 43,865 36,380 31,141 11,486 11,326 10.535 8,536 7,144 6,003 4,737 4,248 3,836 452,773 425,536 402,726 322,388 248,180 232,405 177,506 151,499 131,816 125,979 124,653 128,174 70,362 65,346 61,168 28,942 30,392 32,209 5,074 6,299 6,508 3,847 3,305 3,238 2,879 2,919 2,038

$583,826 $556,488 $537,408 $396,597 $316,831 $296,811 $209,327 $184,810 $166,063 3,884 4,062 3,838 3,369 3,386 3,077 3,103 2,770 2,393 2,444 2,472 2,353 2,162 2,072 1,893 1,903 1,753 1,614 149 2,686 2,597 2,145 1,011 2,569 2,594 2,569 2,540 3,n81 3,545 3,443 3,160 2,840 3,042 2,920 2,702 2,426 326 334 325 307 297 284 290 285 276 13,684 13,099 12,556 11,143 9,606 10,865 10,810 10,079 9,249 4,204 4,475 5,170 3,247 3,548 3,640 2,899 3,382 4,594 17,888 17,574 17,726 14,390 13,154 14,505 13,709 13,461 13,843 400,290 394,766 387,495 379,556 371,491 364,954 355,673 343,468 330,566 49,009 48,424 47,580 46,844 45,657 44,957 44,073 43,188 46,785 1 1 1 1 1 1 1 1 1 12,151 11,724 11,182 10,913 10,431 9,926 9,508 9,175 4,733 1,617 1,573 1,519 1,500 1,446 1,396 1,317 1,282 1,235 463,068 456,488 447,777 438,814 429,026 421,234 410,572 397,114 383,3^0 19 19 25 25 25 25 25 24 71 J3p87_ 456,507 _ _44_7,802 _ 438,839 429,051 _ 421,259 410,597 397,138 383,391 2,468 470 487 1,168 2,645 3,209 3,919 5,932 7,630 4,050 6,741 6,973 4,010 2,242 3,920 4,089 2,484 1,496 4,101 5,220 5,085 3,858 4.874 171 251 131 98 44 172 230 321 125 92 10,870 12,562 12,643 9,130 9,933 7,530 8,329 8,541 9,218 7,740 6,162 6,133 6,172 4,070 7,670 5,890 5,944 5,474 296 8 (65) 43 101 181 361 10 17 18,906 18,732 18,711 15,345 14,104 15,381 14,580 14,495 14,709 1,018 1,158 985 955 950 876 871 1,034 866 17,888 17,574 17,726 14,390 13,154 14,505 13,709 13,461 13,843

=R2C 3.654

_ 3,336 _ 3.24 2__ _ 2.868 3.049 2,744 2.607 2,565 l

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P00R-0RIGINAL OFFICERS

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Jerry L Mau!Jen I D. Philhps Charles L Steci Williarn Cavanaugh 111 Presuda nt & Sensor Vue President. Senwr Vuce President & Senior Vice Pressdent l Assistant to the Presudent E.ncrgu Supply Cinef her'utur Offraer Sysm I nguncerrng & Plannung m,m _;. -y. ,_

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Q Jerry D Jackson Senwr Vu e Pressdent. Tunansc.

Jack L ting Senwr Vue Pres.Jent al A John j llarton*

Vue President Chuel bN1 W. R. Southern" Vite President Regulatwn & legal Serrh es; Energu D.Intry & Serruces linancual Off tccr. Treasurer Administratuiv Services Secretary & Assu~ tant Treasurer & Assustant Ses retary

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h Ralph C. Mitshell llP' Charles Kelly" i N R A. Allen"

/ i' John M. Gnffin" Vuce President. Conservatwn & Vuee Pressdent. Assista .t Vu e President. Assistant Vsce President.

Reneu aHe Resounes Corporate Com"tunwatwns Inergy Dehrery & Servures Nuclear D;vrations l

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d Steve L Rige,s General Cou nsel &

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• Named vuce presudent c!!c<ture January 1.1981 "Nanted as Company ollicer ef*cctnv lanuary 1,1981 Assustant Ser retarv 32

COMPANY DIRECTORY Transfer Agents for Preferred Stock-Union National Bank of Uttle Rock,1 Union National Plaza, Uttle Rock, Arkansas 72203, and The Commercial National Bank of Little Rock, Second and Main Streets, Uttle Rock, Arkansas 72203 Registrar of Preferred Stocks-The First National Bank in Uttle Rock, Capitol and Broadway Streets, Uttle Rock, Arkansas 72203 Certified Public Accountants-Deloitte liaskins &

Sells, One Shell Square, New Orleans louisiana 70139 Executive Office-The First National Building, Capitol and Broadway Streets uttle Rock, Arkansas 72203, Phone (501) 371-4000 Engineering Office-Sixth Avenue and Pine Street, Pine Bluff, Arkansas 71601, Phone (501) 541-4700 Annual Meeting-Fourth Wednesday of May The Company's 1980 Annual Report to the Securities and Exchange Commission on Form 10-K (including Financial Statements and Financial Statement schedules) is available to any stockholder upon request, without charge. Persons interested in obtaining a copy should contact Nir. Jerry D.

Jackson, Senior Vice President, Secretary and Assistant Treasurer,at the address below:

ARKANSAS POWER & LIGIIT CON 1PANY P.O. Box 551 Little Rock, Arkansas 72203 (501) 371-4274

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MIDDLE SOUTH UTILITIES SYSTEM ARKANSAS POWER & LIGHT COMPANY l

_ - _ _ - _ . - . - - - -