ML20042C736

Annual Financial Rept 1981

ML20042C736
Person / Time
Site:	Grand Gulf
Issue date:	02/12/1982
From:	MISSISSIPPI POWER & LIGHT CO.
To:
Shared Package
ML20042C738	List: AECM-82-284, Forwards Annual Financial Repts 1981 for South Ms Electric Power Association & Ms Power & Light Co.Middle South Energy, Inc Financial Statements for 1980 & 1981 & Auditors Opinion Encl ML20042C736 ML20054L350
References
NUDOCS 8207070437
Download: ML20042C736 (23)

Text

_IVISSISSIPPIPOWER & LIGHT CblV PANY 1981 ANNUAL REPORT

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The Cover THE COMPANY S 1981 ANNUAL REPORT TO THE thiz:ppi Puter & Laht SECURITIES AND Company ; piant E'/ CHANGE COMMISSION construction program is ON FORM 10 K (INCLUDING rp it. d tov, ird one major Fit J ANCI AL STATE MENT S

(;o:1! d* eersit ying the AND FIN ANCIAL STATEMENT Cunpany s fuel base from SCHEDULES)IS AVAILABLE rutur:ii qu and oil to coal TO ANY STOCKHOLDER and nuchzar UPON REQUEST WITHOUT When f u Hy imphfrner:ted. CHARGE Persons interested MP&L's pntnary generating in obtaining a copy should units Atil tp: run on fuels vsnte to Frank S York Jr . Vice availab!e in trus country at Presidert and Secretary at more stabie pnces. f ucis not the address below.

subp:ct to the e.hirns of MISSISSIPPI POWER &

tcmqn gc.er nments as to LIGH T COMPANY e tner poung or cut otts P O. Box 1610 Ono rn i,nr component of Jackson. Mississippi 39205 MP&L:s f uel diversthcation (601)969-2,11 3 I pro (pam is the recently auluired 25 percent interest REGISTRAR (for preferred in tn coa! burning stock).

Indepondr:nct Plant of Deposit Guaranty National Arkanuas Power & Light Bank Company another is the Jackson, Mississippi Grand Guif Nuclear Stapan TRANSFER AGENT (for nmr Port G!bson in Claiborne preferred stock).

Cnuntj First National Bank of Jackson Jackson, Massissippi The Company MISSISSlPPI POWER &

System Map LIGFil COMPANY is a regulated ef ectnc utihty . . , . _

operating in 46 counties of , , , , , , , , , ,

Western Mississippi The Campany is one of the .L+-

ponapal ope rating , , ,

utradunes of Mrddie South -

U t : h t u t- Inc and its systern is mterconnected voith and operated as a part of the ,@ ,w Middle South Utihties , u fr System. which supphes tne electnc energy requirements A' b N'"

of more inan 1.5 rniliion . h ' k l-customers in a 92 000-square rniM area of Ark,lnSaS C-L Ouiblana, M6b3ISs1ppi and ~

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Misseun

President's Letter Dear Stock holders Despite inflation, nsing costs Smgle A the lowest of the par value. This is over twice of capital funds and other high quahty ratings, to Baa the dividend rate on our last fiscal and operating we feel that this action was preferred stock issue, sold in p pressures, there were in 1981 based on conditions which 1973. and illustrates the i

several reasons for encouragement for were not related to our 1981 operations There was no extremely high cost of funds n the capital market Nf

,h Mississippi Power & Light reduction in the rating of our While average use per . , A' Cunpany first mortgage bonds during residential customer p ~q-- "*

The most noticeable was the year and our commercial declined in 1981. we - -

the significant progress paper retained its P-2 rating, anticipate slight growth in the made in our construction one notch below the top. residential sector through the '

program's goal of A continuing problem in remainder of this decade diversifying the fuel base our business is the nsing cost The 1981 dechne was the from natural gas and oil to of fuel MP&L's five plants result of a very hot 1980 and a coal and nuclear. We did this now in operation all use oil or milder than normal 1981. Had by acquiring a 25 percent natural gas as boiler fuel normal weather occurred in ownership mterest in two Since 1973. oil purchased for both years we estimate there 7 coal-hred generating units generating plants has wouid have been 3 percent

• under construction by increased from $513 per growth in use per customer Arkansas Power & Light barrel to $25 03 per barrel Assuming normal weather, g Company and by contractmg Fuel and purchased power we anticipate total energy for a specific part of the costs which in 1973 were 37 sales will grow at an annual ae output of Mississippis first parcent of the revenue dollar rate of about 4 percent during nuclear power plant, Grand are now 65 percent of the the remainder of this decade.

Gutt Nuclear Station. with the revenue dollar 1981 was a difficult year first unit scheduled to be in Our national dependence for the entire country, as it commercial operation in on high pnced foreign oil has was for us The years ahead 1983 caused higher electnc costs promise continuing The year 1981 showed a and has created demands for challenges. The dedication modest increase of 61 conservation. This problem is and skills of our 2,079 percent in our earnings over not unique to Mississippi employees. the Company's 1980, due pnncipally to the Power & Light Company, but human resources, give rate rehef at the level granted conf ronts the entire industry assurance that these ,

by the Mississippi Public One of the major goals of challenges will he met Service Commission and in the electnc industry is to successfully for the benefit of eff ect for the entire 12-month stabihze the rates customers customers, investors and penod The Pubhc Service must pay for electncity The employees ,

Commission granted the best way to stabihze rates is Company $48 3 milhon. to mitigate the sharp rise in Sincerely. /

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about 70 percent of the $68 8 fuel costs We havept.aady ,

milhon requested, and this set into motion plans to ' '

g q decision is presently on accomphsh this objective appeal before the with the addition of coal and Donald C. Lutken Mississippi Supreme Court nuclear generation By 1984 Although we were unable we will have diversified our to obtain the full amount of sources of fuel and will also the rate increase we had be in a position to serve requested with our additional growth that is employees' help in predicted to come to the contralhng expenses and Sunbelt By 1990 we plan to construction costs, we were be in a position to generate able to get through the year almost 60 percent of our Aith reasonable financial customers' electrical power

'esults and thus without requ,rements from nuclear ugnificant down rating of our and coal

ecunbes Besides the problem of Even though Moody's and fossil fuel costs, another

)uff and Phelps - two of four major problem for the electnc ecognized rating agencies - mdustry is the cost of capital educed their ratmg of our in September the Company

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Operating Revenues conservation information Total operating revenues for the year were down shghtly. suggesting ways to control

$531.843.000, as compared with $532,988.000 in 1980, due their energy usage. Tnis was to lagging ki'owatt-hour sales under the federally mandated The distnbution of the Company's 1981 revenue dollars was Residential Conservation

% as follows- Service (RCS) Program.

E in addition to performing

.,7 1 Amount  % of energy audits, Company 4, (in thousands) Revenue specialists assisted i Fuel $238,836 44 91 commect,al and industnal customers in designing,

[ Purchased Power 105.183 19.78 carrying out and monitoring

• j Total Fuel and their tailor-made

[h. \ 5 Purchased Power Taxes 344,019 42,236 64 69 7 94 conservation programs. More than 150 businesses, i' \ Payroll 28.896 5.43 f actones, hospitals, schools

/  % q Depreciation

' Other Expenses 23,359 4 39 and government buildings

._ benefitted f rom these energy n"

and Deductions 35,999 6.77 conservation efforts.

im Cost of Capital: Campaigns were continued gy ,

g :dv Cost of Debt (Interest)

Net income (Cost of 21,303 4 01 in support of such proven energy-saving programs as y4 '

Preferred and the heat pump, the " Zip Up" T j Common Stock) 36.031 6.77*

program, and the E3 (energy g,* '

Total Revenue . $531,843 100.00 efficient electric) home construction plan Also

• 68% paid as prdened dmdends 4 85% paid as cornmon omdends. and 124% retnvested in tac Aties to serve customers MPR mMM N 'PQ y Up-Snug Up" campaign to promote gasket sealers for Expenses Up Slightly coHected f rom customers is electrical plug and switch paid out to suppliers of fuel outlets. The campaign was Through our continuing and purchased power. designed to make the public emphasis on operating aware of the benefit of efficiency. operating . reducing this source of air expenses showed a 0.3 Financing infiltration. The gaskets were percent increase over last MP&L accepted bids on a $20 m vH e to customes year, totaling $483,479.000.  ! a nominal price through This was $1.494,000 more million preferred stock issue in September with the best Company field offices.

than the year before Another agM bid bearing a 17 percent way the Company was able to consemahn in wate nan dividend rate, the highest control expenses was through the purchase of additional secunties financing rate in the by selling heat pump water heaters. Also, the Ccmpany Company's history volumes of natural gas for e This is the first permanent generation due to the " Heater Helper", which is the financing the Company has increased availabihty of a ng a had since 1975 when the more competitive natural gas w ste-heat recovery water Company sold a $25 milhon pnce level dunng most of the a e. The Company also year This. along with bond issue at an interest rate g, g g monitored the results of five purchased power, he! ped solar asssW wate NaWs, Looking back at the last reduce fuel oil purchases by preferred stock issue in with each installation havir~'

45 9 percent, down to a Mment band of acWe February.1973. the dividend 2,729.000 barrels for the year rate was 7.44 percent which is solay waW Mahng or 2,316.000 fewer barrels equipment.

than the previous year This less than half the current The Company developed a dividend rate.

had a moderating influence computer analysis upon the rise in fuel Costs, but (Pesidential Energy Analysis fuel and purchased power Alding Customers Program) to help customers still accounted for the greater analyze the cost effectiveness part of expenses, amounting in 1981, approximately 200 of vanous conservation to $344,019.000, only 2.67 residential customers measures, types of heating percent under 1980 About 65 received individuahzed home equipment, and water heating percent of each dollar energy audits and options we awauctmq a newcents conse v2 an 3emce home ene g> aua L Be e,u meet.ng eng neer uses a speaat uns%:nent10 aderm ne at sa,ar mstf abans wu!d be feas b:e 3

A special effort was made 115 KV Substation near its share cf the plant's in 1981 to assist architects. Southa.ren was completed construction MP&L's total builders and manuf acturers in with the Hurn Lake to cost is expected to be $232 8 learnmg which conservation Greenbrook 115 KV Une milhon Ultimately 408.000 methods are the most scheduled for completion in kilowatts of coal fired practical and cost effective 1982 Conversion to 230 KV of generating capacity will be MP&L also assisted the Tillatoba to Batesville 115 available to MP&L customers industnal development KV Lme continued and from the plant The first agencies actively seeking reconductonng of the Independence unit is i new and expanded industry Natchez SES to Natchez scheduled to become j for the state Company Substation 115 KV Line was operahonal in 1983 speciahsts worked with completed Witnesses before the .

Industrial prospects The disthbution switchrack Mississippi Pubhc Service .

4-mplainmg the availabihty of at the Clari sdale Substation Commission estimated that in electric power in Westem was completely rebuilt the first eight years of the Mississippi and designing Transformer capacity was Independence Plant conservation programs added at the Grenada. operation MP&L customers e Dunng the year. 80 mdustnal Florence. Jackson Airport. will save from $320 milhon to firms announced plans to West Jackson and Old Canton $500 million by virtue of the locate or es pand facilities in Road-Jackson Substations cost differential between MP&L's service area. creatmg and a portion of the coa!-bred Generation of , ,

3.819 new jobs and an Hollandale Substation was electncity and oil- and ,

af estimated annual payroll of rebuilt after storm damage gas-fired generation ,, *

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approximately $45 278.200 Construction of the '

Mc Adams 500 KV switchyard -

Construction is now 20 percent complete.

the Attala 230 KV Substation Grand Gulf Nuclear Station NW- ' \ T Expendityres for construction dunnq the year wen 2

$146.095.000, an increase of is 45 percent complete and the Pickens 230 KV Substahon is 30 percent in November the staff of the Nuclear Regulatory r-

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$115.075 000 over 1980 This Commission (NRC) e < 's complete '

was due largely to the concluded that, from the Installation of a new radio ,

$86 495 000 cpent for the standpoint of environmental purchase of a 25 percent communication system was effects and subject to certain

<( s completed in all of the 7 ownership interest in the conditions. an operating 4y; Southern Division and in the '

independence Steam Electnc Cleveland Distuct of the North hcense for Grand Gulf r, Nuclear Station now under "

Station f rom Arkansas Power Central Division s

& Ught Company and An additional 115 KV tie to construction in Claiborne ;Y

$23 213 000 which is the Company's share of the SMEPA at Magee was County should be issued Their conclusion involved

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completed, raising the expenditures for the coal capacity of this tie 10 300 MVA weighing the environmental, h

handhng equipment economic and technical Some of the major projects benehts of Grand Gulf against* .; -

dunng the year included the Independence Plant environmental costs and ,

completion of the available energy alternatives, e Magee-Silver Creek 115 KV Representatives of MP&L and according to the NRC k' ,

hne and 115 KV Substation at Arkansas Power & Light At year end Grand Gulf No. .

New Hebron. the Raymond Company ( AP&L) signed 1 was 95 percent complete j# ,

115 KV Substation with documents in Little Rock on and plans have been made to #

connecting transmission and September 10th by which load nuclear f ue!. the first step 3 ,

MP&L acquired a twenty-five in actual start-up, in Apn!,

• distribution hoes. the f annm "

Road 115 KV Substation in the percent ownership interest in 1982 This will lead to the first ,

Flowood Pearl area. and the the Independence Plant generation of electncity later 9 115 KV Substation on Hoy being constructed by AP&L. in the year. and f ull i =

Road in Madison with its This purchase required the commercial operation by j connecting distobution hnes approval of the Mississippi February 1983 Unit No. 2 was Work continued on the Rex and Arkansas Pubhc Service about 22 percent complete Brown SES to Brandon 230 KV Commissions and the when construction was halted -

Une conversion and the 115 Secunties and Exchange late in 1979 Current plans are KV Line between the Natchez Commission Followmg its to resume construction of Unit and South Natchez acquisition MP&L began 2 after Unit 1 is placed in _

Substations The Greenbrook making regular payments for commercial operation Weed + a & + ,t at mcs cr v vriv w. me n n n n ts'vca v na w w e' T Ny P y,p , 'N gn Angu '

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The timely completion of Capital Corporation of Wooten was named Central Grand Guit. particularly Unit Jackson. and succeeds Division Engineer. Lee Baker No 1. is of utmost importance Robert M Heann as director became division engineer at to MP&L and the entire Middle Frank S York. Jr . vice Vicksburg; and Tom Monasco

,- South System This project is president and secretary of was named distnct engineer 4 - being financed by Middle MP&L. was also elected to the in Chnton.

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. South Energy. Inc (MSE)

South Mississippi Electnc Company's Board of Directors j@p Power Association is the Bob Lothn was promoted to Special Recognition o Aner of a ten percent director of General Property

, interest. and the Municipal and Services in Jackson. He At a signal national awards Energy Agency of Mississippi replaced W T ~ Smokey- recognition dinner. Donald C.

..F,,) is also negotiating to acquire Woods, vice president, who Lutken, president of MP&L.

4 from MSE up to a 2 48 percent retired received an award for

\ interest The plant is not being Hiram Walters aas named ' Outstanding Leadership

financed by. nor included in director of division operations from the Amencan Society of

-  % the rate base of. MP&L nor any in Jackson Mechanical Enginars 3 -

of the other operating Clark Colvin was promoted ( ASME)in the field of Energy companies MP&Lis under to assistant to the president. Engineenng Sc;ences contract with Middle South while Will Mayo became The awards from the g[d. Energy. Inc . to build and manager of area 100.000-member engineenng rne cenry sponsms an operate the plant When development organization are made f+p p say;est+n completed. MP&L will be Willard Woods became the annually for outstanding p%;m gere emp,e. s allocated a 33 percent manager, management service over a period of un omr a,m N capacity interest in Grand information systems years' to individuals who me e wenue g reem e Gulf - 827 000 kilowatts of Frank Gallaher was named represent 'the highest level of j gensating capacity director of engineenng and achievement?

]Le{vrv a o[m ewca 3 shipment of The first Manon Townsend was in late 1981. Lutken

, vam , e ve me,s nuclear fuel for Grand Gulf promoted to assistant to the assumed duties as president rea my e.gus m n was received in October and chief engineer of the Jackson Chamber of r< ~ ; ac m m et most of it was on hand at Commerce, and is now Forest Persons was year's end As received. it has promoted to distnct manager serving as chairman of the been inspected and made in Natchet while Billy Soutnwest Power Pool, as ready for placing in the Howell. Jr , became distnct chairman of the board of reactor when the operating manager in Lexington. directors of the Mississippi hcense is received David Bagwell became the Ballet International. and as a Additional secunty measures manager of the Rolling Fork board member and second are being implemented with and Hollandale offices, while vice president of the the reCelpt of fuel and Charles Young was promoted Southeastem Electric preparations for operations. to manager of the Hernando Exchange The Federal Emergency office J. W Robinson was Management Agency and the named manager in Carthage.

NRC observed an emergency Mickey Hawkins became Rex 1. Brown preparedness demonstration manager in Greenwood, of the Company's plans for Charles Thomas was named Rex l Brown. age 91, former coping with any possible manager in Sumner; and R L. president of MP&L. died in emergency situation and they "Phid~ Hooper was promoted Jackson on January 29th.

gave the Company, along with to manager in Tunica. A native of Lowell.

the state and local authonties Other management Michigan, he became who participated. good marks changes included naming J associated with Arkansas in November B Bonds to manager of Power & Light Company in the operational audits in Jackson: late 1920 s. coming to Donald S Tumer to Mississippi Power & Light Management Changes distnbution planning Company in 1932, where he engineer in Jackson. David served as president from 1936 Focusing on present and Kerr to manager of system to 1954 He was Board future management needs planning in Jackson. Jimmy Chairman until 1959. and and continued growth of the Carpenter to manager of Charrrr.an Ementus until 1964.

Company several changes division marketing for the Brown was the builder who were made in the Company's Company's North Central stretched the MP&L system leadership Division, and John Izard to across 45 counties in Western Frank R Day was elected to employee benefits manager Mississippi and played an MP&L's Board of Directors in Alvin W Shedd was active role in scores of civic May Heis the board chairman promoted to division endeavors at the same time and chief executive c'ficer of supenntendent of the First National Bank and First Southern Division Howard 6

Mississippi Power & Light Company and Subsidiary 1981 Financial Review Report of Management The management of the Company has The board of directors pursues .ts prepared and is responsible for the responsibility for reported financial financial statements and related financial information through its audit committee, information included in this annual report. composed cf outside directors. The audit The financial statements are based on committee meets periodically with generally accepted accounting management. the internal auditors, and

, pnnciples, consistently applied the independent public accountants to Financial information included elsewhere discuss auditing. internal control, and in this report is consistent with the financial reporting matters. The financial statements. independent public accoun: ants have To meet its responsibihties with respect f ree access to the audit committee at any to financial information, management time.

maintains and enforces a system of The independent public accountants rternal accounting controls which is provide an objective assessment of the designed to provide reasonable degree to which management meets its assura6ce, on a cost ef fective basis, as to responsibility for fairness of financial the integrity, objectivity and reliability of reporting. They regularly evaluate the the finanaal records and as to the system of internal accounting control and protection of assets. This system includes perform such tests and other procedures communication through written policies they deem necessary to reach and and procedures, and an organizational express an opinion on the fairness of the structure that provides for appropriate financial statements.

division of responsibility and the training We believe that these policies and of personnel This system is also tested procedures vovide reasonable by a comprehensive internal audit assurance that our operations are carried program out with a higi; standard of business conduct Avditors' Opinion Mississippi Pov.er & Light Company We have examined the consolidated balance sheets of Mississippi Power & Light Company and its subsidiary as of December 31,1981 and 1980 and the related consolidated statements of income, retained earnings, and changes in financ%i position for each of the three years in the period ended December 31,1981. Our exaninations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auddng procedures as we considered necessary in tre circumstances.

In our opinion, the above-mentioned consohdated financial statements present fairly the financial position of the Company and its subsidiary at December 31,1981 and 1980 and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31,1981, in conformity with generally accepted accounting pnnciples applied on a consistent basis.

Ce m V February 12.1982 New Orleans. Louisiana 7

1

Mississippi Power & Light Company and Subsidiary ,

Consolidated Balance Sheets December 31,1981 and 1980 l ASSETS 1981 1980 in Thousands UTILITY PLANT: j Electnc plant S 784,663 $ 760.885 Construction work in progress (Note 6) 135,605 17,702 Electnc plant acquisition adjustments 2,043 2.225 Total 922,311 780.812 Less accumulated depreciation 260,343 239.534 Utility plant-net 661,968 541.278 oTHER PROPERTY ANDINVESTMENTS:

Investment in associated company, at equity (Note 6) 18,884 16.644 Other 844 962 Total 19,728 17,606 CURRENT ASSETS:

Cash (Note 7) 28 2.478 Special deposits 855 84 Temporary investments. at cost which approximates market -

33.000 Accounts receivable' Customer and other-less allowance for doubtful accounts of $154,000 25,836 23.744 Associated companies 100 10.596 Matenals and supplies-at average cost:

Fuel 4,907 5.321 Other 10,068 9,104 Other 3,521 4.203 Total 45,315 88.530 DEFERRED DEBITS:

Unamortized debt expense 983 1,037 Other 483 650 Total 1,466 1.687 TOTAL $ 728,477 $ 649.101 See Nates to F,'uncw Sta'en'ents 8

UABluTIES 1981 1980 in Thousands CAPITAUZATION:

Common stock. no par value (stated value $23 per share) authorized 15,000.000 shares; outstanding 4,540,000 shares $ 104,420 $ 104.420 Retained earnings (Note 8) 81,596 74.979 The common shareholder's equity . 186,016 179,399 Preferred stock, without sinking f und (Note 4) 38,077 38,077 Preferred stock, with sinking fund (Note 4) 20,000 -

Long term debt and premium (Note 5) 284,349 262.860 Total 528,442 480.336 CURRENT UABluTIES:

Currently maturing lon0-term debt 427 456 Notes payable (Note 7) 3,000 -

Accounts payable:

Associated companies 15,815 7,687 Customers (Note 2) . 29,513 10.360 Other 13,248 25.265 Customer deposits 10,551 9.734 Taxes accrued 23,020 24,740 Interest accrued 10,205 6,994 Dividends declared 6,587 5,485 Other 2,128 2,808 Total 114,494 93,529 DEFERRED CREDITS:

Accumulated deferred income taxes (Note 3) . 42,446 49,453 Accumulated deferred investment tax credits (Note 3) 28,916 21.071 Other 7,068 458 Total 78,430 70.982 RESERVES 7,111 4.254 COMMITMENTS AND CONTINGENCIES (Notes 2 and 6)

TOTAL . $ 7281 4U $ 649,101 Seet Notes to F inancial Statements I

9 L- _ _ - - _ _ _ _ _ _ _ _ _ _

Mississippi Power & Light Company and Subsidiary Statements of Consolidatedincome For the Years Ended December 31,1981,1980 and 1979 1981 1980 1979 in Thousands OPERAllNG REVENUES (Note 2) $ 531,843 $ 532.988 $ 436.524 OPERATING EXPENSES:

Operation-Fuel 238,836 267,685 217,160 Power purchased 105,183 85.782 69.094 Other 49,617 43.207 38.638 Maintenance 24,248 26.021 23.500 I Depreciation 23,359 22.672 21.974 Taxes other than income taxes 20,053 18.012 16.177 income taxes (Note 3) 22,183 18.606 9.995 Total 483,479 481.985 396.538 OPERATING INCOME . 48,364 51.003 39.986 OTHERINCOME AND DEDUCTIONS:

Allowance for equity funds used dunng construction 2,429 923 747 Miscellaneous-net 7,316 3.600 2.900 Income taxes (Note 3) (775) (1.431) (1.145)

Total 8,970 3.092 2.502 INTEREST CHARGES:

Interest on long-term debt 20,650 19.454 19.586 Other interest-net of debt premium 2,821 1.131 651 Allowance for borrowed funds used during construction (2,168) (444) (330)

Total 21,303 20.141 19.907 NETINCOME (Note 2) $ 36,031 $ 33.954 $ 22.581 l

Statements of Consolidated Retained Earnings F@r the years ended December 31,1981,1980 and 1979 RETAIN ED EARNINGS, J ANUARY 1 . . . . . . . . . . . . . . . . . . S 74,979 $ 65.383 $ 64,617 ADD-Net income 36,031 33.954 22.581 Total 111,010 99.337 87.198 DEDUCT:

Dividends-cash:

Common stock 25,774 21,974 19.431 Preferred stock 3,640 2.384 2.384 Total 29,414 24.358 21.815 RETAINED EARNINGS, DECEMBER 31 (Note 8) $ 81,596 $ 74.979 $ 65.383 See Nctes to Financial Statements 10

Mississippi Power & Light Company and Subsidiary Statements of Changes in Consolidated Financial Position For the Years Ended December 31,1981,1980 and 1979 1981 1980 1979 In Thousands FUNDS PROVIDED BY:

Operations.

Net income $ 36,031 $ 33.954 $ 22,581 Depreciation 23,359 22,672 21,974 Deferred income taxes and investment tax credit adjustments-net 1,875 957 6,620 Allowance for funds used dunng construction (4,597) (1.367) (1,077)

Total funds provided from operations 56,668 56.216 50,098 Other:

Allowance for funds used during construction . 4,597 1,367 1,077 Decrease in working capital

• 28,206 32,783 -

Investment in associated company -

340 -

Miscellaneous-net 9,630 4.601 1.394 Total funds provided from operations and other 99,101 95.307 52.569 Financing transactions:

Preferred stock 20,000 - -

Other long-term cebt 23,052 - -

Short-term secunties-net . 36,000 -

23.500 Total funds provided from financing . 79,052 -

23.500 Total funds provided $ 178,153 $ 95.307 $ 76.069 FUNDS APPLIEDTO:

Utikty plant additions:

Construction expenditures (includes allowance for funds used dunng construction) $ 146,095 $ 31.020 $ 33,218 Other:

Dividends declared on common stock 25,774 21,974 19,431 Dividends declared on preferred stock . 3,640 2,384 2,384 Investment in associated company 2,240 -

6,715 increase in working capital * - -

4,545 Miscellaneous-net - - 1,871 Total funds applied excluding financing transactions 177,749 55.378 68.164 Financing transactions:

Retirement of First Mortgage Bonds - 7,500 7,500 Retirement of other long-term debt 404 429 405 Short-term securities-net -

32.000 -

Total funds applied to financing 404 39.929 7,905 Total funds applied $ 178,153 $ 95.307 $ 76.069

" Working capital excludes short-term securities and current maturities of long-term debt, the 1981 nel decrease is due primarily to increases in accounts payable and decreases in accounts receivable. the 1980 net decrease is due pnmarily to increases in accounts payable and accrued income taxes See Notes to Financia! Statements II l

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies tne construction programs and results in treating the AFDC charges in the same manner as construction labor and material A. BASIS OF CONSOLIDATION costs As non-cash items, these credits to the income The consolidated financial statements include the accounts statement have no effect on current cash earnings After the of Mississippi Power & Light Company (the Company) and the property is placed in service the AFDC charged to Company's pro-rata share of a 50 percent owned subsidiary, construction costs is recoverable from customers through j ISES Corporation, which war formed in 1981 All significant depreciation provisions included in rates charged for utility irtercompany balances and transactions have been service The effective composite AFDC rates were 8 30%.

eliminated 7.30% and 7.79% for 1981.1980 and 1979 respectively The Company continues to capitalize allowance for funds D. SYSTEM OF ACCOUNTS used dunng construction on projects during penods of The accounts of the Company are maintained in accordance interrupted construction when such interruption is temporary with the system of accounts prescribed by the Federal Energy and the Continuation Can be justified as being reasonable Regulatory Commission under the circumstances C. REVEMES H. RESERVES T he Company records revenues as billed to its customers on It is the pohcy of the Company to provide reserves for a cycle bilhng basis Revenue is not accrued for energy uninsured property nsks and for claims for injunes and I dehvered but not billed at the end of the fiscal penod The rate

! amages through charges to operating expense on an accrual Schedules of the Company include fuel adjustment clauses basis Accruals for these reserves have been allowed for under which f uel costs above or below the base levels allowed rate-making purposes in the vanous rate schedules are permitted to be billed or required to be credited to CLstomers

2. Rate Matters D. UTILITY PLANT AND DEPRECIATION Utiht/ plant is stated at onginal cost The costs of additions On May 28.1980 the Company filed with the Mississippi to utility plant include contracted work. direct labor and Public Service Commis: son (MPSC) for an annual increase in matenals. allocable overheads and an allowance for the its ret ill electric rates of approximately $68.800.000 based on composite cost of funds used dunng construction The costs of the projected test year beginning July 1.1980. The new rates units of property retired are removed from utility plant, and were put into ef fect for service on and after July 1.1980. subject such costs plus removal costs, less sa!vage. are charged to to refund On November 24,1980 the MPSC rendered its j accumulated depreciation Maintenance and repairs of decision allowing the Company $48.300.000 in additional i property and replacement and renewal of items determined to annual revenues The Company, the Mississippi Attorney I be less than units of property are charged to operating General s Office and the Mississippi Legal Services Coalition espenses Pnncipally all of the utihty plant is subiect to the hen appealed the MPSC's order to the Chancery Court of Hinds of the Company's first mortgage bond indenture ' County Mississippi The City of Jackson, the Town of Mengold.

Depreciation is computed on the straight-line basis at rates the Town of Ruleville and the County of Hinds intervened in the based on the estimated serviCO hves of the vanous classes of case as parties On October 30,1981. the Chancery Court pruperty Depreciation provided in 1981,1980 and 1979 entered a Final Decree affirming the November 24,1980 amounted to approximately 3 2% on average depreciable decision of the MoSC. insof ar as the MPSC allowed the property Company $48.300.000 in additional annual revenues The Company. the Mississippi Legal Services Coahtion, the E. PENSION PLAN Mississippi Attomey General and the City of Jackson have The Company has a pension plan covering substantially all appealed the decision of the Chancery Court to the Mississippi of its employees The pohcy of the Company is to fund pension Supreme Court. Until a decision is reached by the Mississippi costs as accrued Supreme Court in the case. the full amount of the rate increase s ught w'lli continue to be collected The Company is currently F. IMCOME TAXES including only that portion approved by the MPSC and by the The Company joins its parent in filing a consolidated Chancery Court in its camings For the year ended December Federal income tax return income taxes are allocated to the 31.1981 the revised rates produced additional revenues of l

Company in proportion to its contnbution to the conschdated $67.400.000 Of this total. $48.300.000, the amount whtCh tax habihty would have been billed under the rates approved by the Deferred income taxes are provided for differences between book and taxab!e income to the extent permitted by the was EoM as unue and N mmainda was recorded as a liability At the end of 1981 the Company had a regulatory bod es for rate-making purposes Investment tax habihty of $29.500.000 recorded for possible refunds.

credits allocated to the Company are deferred and amortized based upon the average useful hfe of the related property On December 4.1981 the Company filed with the Federal j Energy Regulatory Commission (FERC) for an increase in beginning with the year allowed in the conschdated tax return certain of its wholesale and transmission service rates of l G. ALLOWANCE FOR FUNDS USED DURING approximately $4.763.000 based on the projected test year l

CONSTRUCTION ending December 31,1982 By order issued February 2.1982, in accordance with the regulatory system of accounts. the the FERC accepted the rate increase for fihng and suspended Company capitahzes. as an appropnate cost of utihty plant. an the proposed changes to become eff ective July 3.1982.

allowance for funds used dunng construction (AFDC) Under subject to refund. and ordered a heanng thereon The this utihty industry practice. construction work in progress on Company has requested in this fihng that it be allowed to place the balance sheet is charged and the income statement is in effect a full recovery f uel adjustment clause which would cred,ted for the approumate net composite interest cost of involve the use of projected sales and energy costs for the borrowed funds and for a reasonable return on the equity funds month, aojusted for any over- or under-recovenes due to used for construction Th:s procedure is intended to remove differences between the actual and estimated costs of energy l trom the income statement the effect of the cost of refinancing and sales levels for the second prior month 12

3. Income Taxes Incorte tan enpense consists of the follomng 1081 1980 1979 in Thousands Current Federal $18,546 $16 828 5 3.748 State 2,537 2 252 772 Total 21,083 19 080 4 520 Deferred-Net Revenue subg>ct to ref und (9,224) (4.989) -

Untwied revenue (407) (1.617) 524 Literahzed deprciation 4,240 4.827 4.617 Other _(579) (572) 193 Total J5,970) (2.351) 5.334 Investment tax credit adjustments-Net 7,845 3 308 1.286 Recorded income tan enpense $22,958 $20.037 $11.140 Charged to operations $22,183 $18 606 $ 9.995 Charged to other income 775 1 431 1,145 Recorded income tax enpense 22,958 20.037 11.140 income taxes apphed against the debt component of AFDC 806 409 304 Total income ta x es $23,764 $20 446 $11444 Total income taxes d1!fer from the amounts computed by applying the statutory Federal income tax rate to income before taxes The reasons for the dif ferences are as follows:

1981 1980 1979 in Thousands

% of s of  % of Pre-Ta x Pre-Ta x Pre-Ta x Amount income Amount income Amount income Computed at ',htutory rate $27,135 46.0 % $24.836 46 0% $15 512 46 0%

Increases (reductions) in ta x resulting from Allo Aance for funds used dunng ccastructron (1,520) (2.6%) (629) (12%) (495) (1.5%)

Tax sanngs due to fihng consohdated return (2,399) (4.1%) (4.792) (8 9%) (3.200) (9 5%)

Other - net _(258) (.49 4 622 12% (677) (2 0%)

Recorded income tax e, pense 22,958 38.9'i 20.037 37.1% 11.140 33 0 %

income taxes apphed against the debt component of AFDC 806 .8'i 409 5% 304 6%

Total income taies $23,764 39.7 % $20 446 37 6 % $11.444 33 6 %

Unused investment tax credits at December 31.1981 amounted to $5 019.000. of v,hich $2.311.000 may be carned forward through 1992. and $2.708.000 through 1993 13

4. Preferred Stock 5. Long Term Debt Preferred stock at December 31.1981 and 1980 consisted of Long-term debt at December 31.1981 and 1980 censisted of the follomng the follo mng-Current 1981 1980 Shares Shares Outstanding Ca:1Pnce First Mortgage Bonds M Thousands Authonzed 1981 1980 Per Share 3sn% Senes due 1983 $ 12,000 $ 12.000 Without sinhng 4t.% Senes due 1988 15,000 15.000 fund 4%% Senes due 1995 20,000 20.000 4 36% Senes 60.000 59,920 59.920 $ 103 86 5' e% Senes due 1996 25,000 25.000 l 4 56% Senes 44.476 43,888 43 888 107.00 61s% Senes due 1996 10,000 10.000 4 92% Senes 100.000 100,000 100.000 102 88 9sa% Senes due 1999 20,000 20.000 916% Senes 75.000 75,000 75.000 106 35 9V4% Senes due 2000 17,500 17.500 7 44% Senes 100.000 100,000 100 000 106 53 714 % Senes due 2002 15,000 15.000 714% Senes due 2003 30,000 30.000 Total 379 474 378,808 376 303

^ -

814 % Senes due 2003 20,000 20.000 With sinhn9 9'a% Senes due 2004 25,000 25.000 fund 107s% Senes due 2005 25,000 25.000 17 00% Senes* 200.000 200,000 117.00 234,500 234.500 Unissued 1425000 Principal Amount of Capitahzed Lease-8% due senally through 1993 5,890 7.292 Total . 2.004.476-- Pollution Control Bonds.

7%% due 2004 9,400 9.400 In Thousands 8h% due 2004 8,575 8.575 fund Without 6W% to 8h% due 1983 Stated sinkmq'00 at $1 a share . $37,881 $37.881 to 1995 1,900 2.000 Premium 196 196 ISES Corporation - at pnme rate Total $38,077 $38 077 due 1983. 23,052 -

With sinking fund nnu i seng fund Stated at $100 a share $20,000 requirements. which may be

'Beginning September 1.1986. the 17% senes is required to met by certification of property be redeemed for a sinking fund at the rate of 10.000 shares additions at the rate of 167% of each year The Company will have a non-cumulative option on such requiremerts. amount to September 1 in each year, commencing with the year 1986 to $2.304.000 for 1982, and redeem up to an additional 10.000 shares $2.148.000 for 1983.1984, 1985, and 1986 ) $284,349 $ 262.860 Dunng tne first quarter of 1982, the Company expects to sell 100.000 shares of $100 per share preferred stock.

subsidianes of Middle South Utihties. Inc SFI operates on a

6. Commitments and Financing non-profit basis for the purpose of plann og and implementing in September.1981. the Company acquired a 25% interest programs for the procurement of fuel supphes for all of the (etclusive of coal handhng equipment)in the Independence operating companies, its costs are pnmarily recovered through Steam Electric Generating Station findependence Plant') from charges for fuel dehvered and services rendered Arkansas Power & Light Company ( AP&L) The Independence The parent companies of SFl have made loans to SFl to Plant is also owned by AP&L. Arkansas Electnc Cooperatn,e finance its fuel supply business under a loan agreement dated Corporation. City Water and Light Plant of the City of January 4.1978. as amended January 1.1982 which provides Jonesboro. Arkansas. the City of Conway Arkansas. the City of for SFI to borrow up to $327.000.000 from its parent companies West Memphis. Arkansas and the City of Osceola. Arkansas in through December 31.1982. As of December 31,1981. the proport ens of 315% .35% 5% 2% 1% and 5% respectively Company has loaned $11.505.000 to SFl pursuant to this loan AP&L wdi operate the independence Plant on behatt of all agreement and the Company's share of the unused loan commitment is $39.105.000 Notes under this agreement participants, including the Company The coal handhng equipment being constructed at the mature December 31. 2007. In addition. the Company had independence Plant. which was owned 100% by AP&L. was loaned SFI $7.375.250 under previous loan agreements Notes sold by AP&L in August.1981 to a wholly-owned subsidiary. mature in 10 and 25 years from date of borrowing under the provisions of the previous loan agreements Matunties in 1982 A ISES Corpcration in September.1981. 50% of the outstand ng common stock of ISES Corporation was sold to the Company of $1.605.750 are expected to be refinanced as part of the After f mancing the construction of the equipment ISES amended January 4.1978 agreement.

Corporation will sell the equipment to a third-party lessor or. as In connection with certain of SFI's borrowing arrangements.

an a'ternatn,e. sell or tease the equipment back to the SFI's parent companies. includ ng the Company. have Company and AP&L covenanted and agreed. severally in accordance mth tneir The Company's 1982 constructron program contemplates respective shares of ownershrp of SFI's common stock, that expend:tures of approumately $118 milhon includmg they w di take any and all action necessary to keep SFlin a approumate!y $76 mdhon for the Company's interest in the sound f:nancial condition and to place SFl m a position to indepenjence Plant Construction expenditures for 1983 and discharge, and to cause SFI to discharge its obhgations under 1984 are est. mated to be $76 mithon and $61 mahan these arrangements At December 31.1981. the total loan t respectively commitment under these arrangements amourted to The Company has a 19% mterest in System Fuels. Inc. (SFI). $221022.000 cf which $163.637.000 was outstandrng atinat date A!so SFl s parent companies inc!ud;ng the Company, a jointly-owned subsidiary of the four pnncipal operat:ng 14

h;ae rrwje sm Qr unenar.ts and agreeents in connection with Mississippi barws. which have not been used Additionahy. the icng term Nses by 5f I of oil sturage and handhng f acil. ties Company has jomed with tne other Middle South System j ar,d cual h0rper cars At Deterr.her 31 1981. the aggreg Me operating companies in estabashing $243 milhon in dKcouraed value of these lece arrangements was conschdated hnes of credit with banks outside the Middle 1 % 30/,000 South System service area The Company may borrow any 9 I has entered into a contract with a joint venture f" a port;on of these hnes sub;ect only to its maximum authonzed I suppij of r cal from a rnine in Wyoming which is espected ta level of short-term borrowings The operating companies had promfe 150 to 210 mohon tons over a penod of 26 to 42 years valable at the end of 1981 and 1980 $190 8 milhon and $223 the a.d supphed is expected to t>e used at the Independence milhon, respectively under the consohdated hnes of credit Punt SFI s puent comp inies includtng the Companv each Compensating balances, required by certain of these lendmg

,ict ng m accordance with their respective shares of ownership banks were $21 milhon at December 31.1981 and 1980.

cf SFi s common stock joined in. ratified, confirmed ard The Company has received authonzation from the Secunties adopted the contract and the obhg:stions of SFl thereunder and Exchange Commission under the Pubhc Utihty Hofding The Company together mth the other Midd!e Soutn System Company Act of 1935 to have outstanding at any cne time l operating c orrp inies is obhgated under agreements (MSE shcrt-term borrowings (bank loans and commercial paper)

Agreements) with M.ddle Snuth Energy. Inc tMSE) m aggregating not more tnan the lesser of $45 milhon or 10% of accordance with fixed percentgages specified therem to the Company's capitahzation (approximately $478 milhon at rnake payments or subordinated advances adequate to cover year end) all of the operatmg expenses and certain of the capital costs of Short-term borrowings all of which Aere commercial paper.

MSE and, in return. is entiffed to receive a share of the power and the apphcable interest rates (cetermined by dividing the avmlable to MSE from the Grand Guif Plant The Company s actual interest expense dunng the year by the average amount percentage responsibihty and related entitlement under the outstanding) were as follows.

MSE Agreements is 313 o Through 1981. $2 2 bilhon had been e, pended by MSE on the Grand Gulf Plant's two umts the 1981 1980 1979 first unit of which is schedu!ed for commercial operation in in Tnousands February 1983 Under certain circumstances, the Company Maximum borrowmg $ 6,000 $10.000 $ 9.000 may be reqmred under the MSE Agreements to make its sh:tro Average borrowing $ 562 $ 1.993 $ 1.153 l nf advance power purchase payments of $12 5 melhon per Average interest rate 15.5 % 12 % 11.2 %

month commencing January 2.19d4 if the first unit of the G,and Borrowings at end Guif Plant has not been placed in commercial operation by of penod . $ 3,000 - -

December 31.1983 Average interest rate at Effective November 1981 the System operating companies end of penod 12.0% - -

entered into a reallocation agreement to revise tN iimed pe r centage allocations for Umt No 1 and Unit No 2 to be th Cornpany 3163% and 43 97% Louisiana Power & Light 8. Retained Earnings Ccmpany(LP&L). 38 57% and 26 23% and New Orleans The indenture provisions relating to the Company's long-Pubhc Service inc (NOPSI). 29 80% and 29 80% respectwely term debt provide for restnctions on the payment of cash di-Unoer the reaflocation agreement, the Company LP&L. and vidends on common stock As of December 31 1981 NOPSI. in proportion to such allocations, have agreed to $59 981.000 of retained earnings were free from such restric-ascume and hold AP&L harmiess from all of the tions responsibilities and obligations of that company with respect to the MSE Agreements and. in consideration thereof. AP&L 9. Transactions With Affiliates has reltnquished its nghts in the Grand Gulf Plant.

The electNc power supply facihties of the Company are The Company buys from and sells electncity to the operating mterconnected with the facihties of Mississippi Power subsidianes of Middle South Utilities. Inc its parent. under Company a neighbonng utihty which is part of the Southern rate schedutes f ated with the Federal Energy Regulatory Com-Company System (SCS) In May.1980 the Company entered mission in addition, the Company purchases fuel from SFl and into a long-term agreement which provided for the Company to receives technical and advisory services from Middle South Services, Inc purchase 200 meguatts of capacity from Southern Company Operating revenues include revenues from sales to affiliates Services. Inc when avmlable dunng the pened July 1.1980 through December 31 198u The energy cost. which includes a amounting to $89.393 000 m 1981. $132.417.000 in 1980 and capacity charge. is based upon a formula whrch adjusts for $90.959.000 in 1979 Operating expenses include charges

' rom aftihates for fuel cost, purchased power, and technical heurly incremental cost of SCS coahfaed steam generation if the energy is to be supplied from higher cost sources the and advisory services totallmg $145.607.000 in 1981

, Company may at its option refuse the purchase and a credit $141993.000 in 1980 and $165.359.000 in 1979 ad;ustment to the capacity charge will be mado The Federal income tax returns for the years 1971 through 10. Pension Plan 1976 have been en amined by the Internal Revenue Service Dunng 1981 the companies of the Middle South System (IRS) and adjustments have been proposed The pnncipal selected a single truc'ee for all of their retirement plans. The issue is whether customer deposits are includible in taxable plans' assets were transferred or assigned to this new trustee income Fermat wntten protests have been filed and who assumed responsibinty for pension payments to retirees conferences are being held with an Appeals Officer of the IRS Responsibility for management of the pians' assets remained Any final habihty for taxes resulting from settlement with the with the then existing investment managers until the beginning IRS would not have a matenal effect on net income income of 1982 when additional managers were retained in addition to tases on customer deposits would be normabled Most of the this master trust arrangement the companies also selected a omer issues have been sett:ed and adequate provisions have singte actuary to perform the necessary actuanal valuations for been recorded the mdividual company plans beginning with the January 1, 1981 va!uation Other than the change in the assumed rate of

7. Lint.s of Credit and Short-Term Borrowings return discussed below. the actuanal assumptions and At Decemoer 31 1981 and 1980 the Company had $20 6 accounting methods utibzed by the new actuary did not vary mil hon and $201 mdhon. respectiveh in hnes of credit with stgnificantly from those used by the previous actuaries 15

The pension erpense of the Company for 1981.1980 and 11. Quarterly Results(Unaudited) 1979 was $4 587.000. $3 543.000 and 12.712.000- Unaudited operating results by quarters follow (in thousands)-

respectively, which includes amortization of past service cost over 10 years A companson of the actuanal present value of Quarter Ended '

accumulated plan benefits and plan net assets for the defined March June Septembe- December t;enefit p!an is presented bNow This compa"ison was determined in accordance with the provisions of Sidement of 90_l Financial Accounting Standards No 36 which reqmre 2tre use Orecating; of certain assurnptions which are different from those used by revenues $120,265 $131,689 $166,230 $113,653 our actuary in determining an appropnate level of lunding f or Operatir g I the Company incorr.c 12,348 4,806 20,150 10.970 Net income 8,611 1,584 16,659 9,177 January 1.

1981 1980

-1980 OperaSog (in Thousands) revenues $113.J63 $106.455 $ 191.20? $122.268 j Actuanal present value of Operating l accumulated plan benefits: income 9303 7,129 22.265 11,906 vested $24,161 $25.463 Net income 5,477 2.948- 18 003 7.520 Nonvested 3,719 443 The business of the Company is subject to seascnal

$27,880 Total $25 99G fluctuatione with peak penodi occurnn; during the sumtr er j Net assets availab!e for plan benefits $35,031 $n156 months Accordingif earnings aformation for any three-rionth penod should not be considered as a basis for est matirg the The weigh'ed average assumed rate of retum used in resu'ts Of ooerations for a f# year determ'ning i the actuanal present values of accumulated plan benefits was 9% in 1981 and 7% in 1980

12. Effect of Inflation on Operations (Unaudited)

The following suoplementary information about the effects of changing pnces on the Company is provided in accoroaace with the requirements of Statement of Financial Accounting Standards No 33. ~ Financial Reporting and Changing Pnces". It shCuld be viewed as an estimate of the effect of changing pnces. rather than as a precise measure S'atement of income from Operations and Other Financial Data Adjusted for Effects of Changing Pnces for the Year Ended December 31.1981 (In Thousands)

Adjusted For As Reported in Aapsted For Changes in The Financial General intration Specific Prices Statements (Cc nstant Do:lars) (Current Costs)

Revenues * $531.843 $531843 $531.843 Operating espenses (excluding depremation)* 450.120 460,120 460.120 Depreciation 23.359 48.896 54.806 Total operating expense . 483.479 509.016 515,016 Operating income . 48.364 22,827 16.827 Other income" 8.970 8.970 8,970 Interest & other charges

• 21.303 21.303 21.303 income from operations (excluding reduction to net recoverable cost)" $ 36.031

$ 10.494 $ 4.404 increase in specific prices (current costs) cf croperty. p!ar:.

and equipment held dunng the year"* $171,226 Reduction to net recoverable cost . $ (22.544) (77.550)

Eff ect of increase in general pnce leve l (110.220)

Excess of increase in general pnce level over mcrease in specific pnces after reduction to net recoverable cost (16.544)

Gam from dechne in purchasing ;30aer of net amounts owed 34 875 34.875 Net $ 12.331 $ 18.331

• Assumed to be in ' average for the year' dollars and thus arO not restated

" including the reduction to net recoverable cost. the loss 90m opernbon on a constant defar basis would have been $12.050 for 1981

'"At December 31.1981, cunent cost of proceny plam, and equpment net of accumutateo depreciation was $1.435.726, while histoncal cost or net cost recoverable throu-gh depreCytion was $66Q 709 16

Five-Year Companson of Selected Supplementary Fmancia! Data Adjusted for Ettects of Chang:ng Pnces fin Thousands of Average 1981 Donars)

Years Ended Decamber 31.

1981 1980 1979 1978 1977 OPERATING REVENUES $531,843 $588.274 $546.960 $558 010 $548.321 Historical cost information adjusted for general lnflation income from operations (excluding reduction to net recoverable cost) $ 10,494 $ 11562 $ 5.210 Net assets at year-end at not recoverabl0 cost $180,003 $189.124 $201.200 Current cost information locame from operations (excluding reduction to net recoverable cost) $ 4,494 $ 8 690 $ (3.279)

Excess of mcrease in general pnce level over increase in specific pnces atter reduetion to net recoverab!e cost $ 16,544 $ 39120 $ 50.142 Net assets at year-end at net recoverable cost $180,003 $189.124 $201.200 Generallnformation Gain from dechne in purchasing poAer cf net amounts owed $ 34,875 $ 47.293 $ 55.449 Aserage consumer pnce index 272.4 246 8 217 4 195 4 181 5 Note The statement requires that histoncal cost information adjusted for general inflation and Current cost information be provided for 1979 and subsequent years Comparable information is not readily available for the years poor to 1979 and thus is not provided Constant dollar amounts represent histoncal costs adjusted for the effects of general inflation The effects are determmed by converting these Costs into dollars of equal purchasing poAer using the Consumer Pnce index for all Urban Consumers (CPI-U).

Current cost amounts reflect the changes m specific pnces of property plant and equipment from the year of acquisition to the present The current costs of property piant and equipment. which represent the estimated costs of replacmg existing plant assets, are determined by applying the Handy-Whitman Index of Pubhc Utihty Construction Costs (HWI) to the cost of the surviving plant by year of acquisit.on Land and certain other plant assets which are not included in the HWI were converted using the CPI-U.

The difference between current cost amounts and constant dollar amounts results from specific pnces of property plant and equipment (as measured by the HWI) changing at a rate d.fferent than the rate of general inflation (as measured by the CPI-U)

The current year s depreciation expense on the constant dollar and current cost amounts of property plant and equrpment were determmed by applying the Company's deprecution rates to the indemed amounts Fuet inventones and the cost of fuel used in generation have not been restated from their histoncal cost in nominal dollars Regulat.on hmits the recovery of fuel costs through the operation of adjustment clauses or adjustments in basic rate schedules to

ctual costs Fcr this reason fuel inventones are e"ectively ranetary assets As prescobed in Statement of Financial Account ng Sta, Jard Na 33. income taxes were not adjusted The regulatory comm ssions to which the Company is st t iect allow only the histanca! cost of piant to be recovered in revenues as depreciat.on Therefore tne excess cost of plant stated in t ' rms of constant dol!ars or current cost over the histoncal ccst of plant is not presently recoverabte m rates This e= cess is ref;ected a t a reduction to net recoverable cost White the rate-makmg process gives ra recognition to the current cost of replac ng property. plant and equipment the Company beheves. based on past e=penences that it udl be aho Aed to earn on the mcreased Cost Cf its net investment when replacement of facihties actualiy occurs To preperly reflect the economics of rate regulation in the Statement of Income f rom Operations presented above. the reduction of net property, ptant and equipment to net recoverabte cost is offset by the gam from the dechne in purchasmg power of net amounts owed Durng a per od of int!ation hoiders of monetary assets suffer a loss of general purchasing power while holders of monetary habihties expenence a gain The ga

n from the dechne in purenas ng poAer of net amounts owed is pomanly attnbutab:e to the substantul amount of dett which has been used to finance preperty p! ant and equ;pment Since the depreciation on tnis plant is h"1sted to the recovery of histoncal costs. the Company does not have the opportunity to reahle a holding gain on debt and is limited to recovery only of the embedded Cost of debt CaDital 17 L--- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . . _ _ _ _ _ _ . _ _

Mississippi Power & Light Company and Subsidiary R@ cord of Progress 1971-1981 1981 1980 1979 SELECTED FINANCIAL DATA (000's OMITTED)

ELECTRIC OPERATING REVENUES:

Residential $ 178,051 $ 153.397 $ 120.246 Commercial 121,905 100.471 83.562 industrial .. . 116,180 94.834 83.491 Government & Municipal . 21,120 16.601 13.433 Cooperatives & Municipalities 16,975 34.377 39.423 Total From Energy Sales (Miss. Area) 454,231 399.680 340.155 Sales to Other Public Utilities 93,237 139.076 93 347 Total From Energy Sales 547,468 538.756 433.502 Miscellaneous Revenues . . (15,920)2 (6.877)2 4.568 Deferred Fuel Adjustme.nt Revenues' 295 1.109 (1.546)

Total Electnc Operating Revenues S 531,843 $ 532.988 5 436.524 NET INCOME - $ 36,031 $ 33.954 $ 22.581 TOTAL ELECTRIC UTill1Y PLANT:

Production S 355,771 $ 355.084 $ 352.658 Transmission 179,778 171.810 149.687 Distnbution 225,152 212.035 201.361 General & Other 20,646 18.641 17.128 Total Utility Plant Completed 731,347 757.570 721.034 Plant Held for Future Use 3,316 3.316 3.270 Construction Work in Progress 135,605 17,702 25.913 Electnc Plant Acquisition Adjustments 2,043 2.224 2.406 Total Utility Plant $ 922,311 5 780.812 5 752.623 TOTAL ASSETS .. $ 728,477 $ 649.101 5 607.643 LONG-TER M D EBT . . . . . . . . . . . . . . . . . . . . . $ 284,349 $ 262.860 $ 263.380 PREFERRED STOCK, WITH SINKING FUND $ 20,000 - -

OTHER DATA ELECTRIC ENERGY SALES (MKWH):

Residential 2,M3,959 3.069.404 2,787.432 Commercial 1,938,341 1.918.334 1,832,462 Industnal .. 2,196,968 2.217.846 2.285.120 Govemment & Municipal 387,503 385.133 369.441 Cooperatives & Municipalities 418,447 986.063 1.270.584 Total Energy Sales (Miss Area) 7,885,218 8.576.780 8.545.039 Sales to Other Pubhc Utilities 2,419,177 4 343.224 3.681.898 Total Electnc Energy Sales 10,304,395 12.920,004 12.226.937 ELECTRIC CbSTOMERS (END OF PERIOD):

Residential 266,975 263.850 260.421 Commercial 38,427 38.115 37,919 Industnal . ... .. 3,351 3.276 3.230 Government & Municipal . 2,221 2.132 2.087 Cooperatives & Municipalities . 12 39 64 Total Customers (Miss Area) 310,986 307.412 303.721 Other Public Utilities 2 2 2 Total Electric Customers 310,988 307.414 303.723 SYSTEM INPUT (MKWH):

Mississippi Area 8,464,044 9.407.985 9.309.449 Other . 4,080,059 7.033.874 7.177.690 Total System input . 12,544,103 1L441.859 16.487.139 PEAK LOAD (MISS. AREA)-KW . 1,912,000 2.078.000 1.913.000 LOAD FACTOR (MISS. AREA)-PER CENT . 51 52 56 NET PLANT CAPABILITY-KW . 2,763,000 2.763 000 2,763 000 CIRCUIT MILES OF ELECTRIC LINES 19,120 18.855 18.504

'See Item C to Note 1-Summary of Significant Accounting Pohcies zincludes adjustments for revenues billed subject to refund of $19153.000 in 1981 and $10.360.000in 1980.See Note 2 to Financial Statements 18

1978 1977 1976 1975 1974 1973 1972 1971 5 110.705 $ 106,520 $ 91.849 $ 74.296 $ 67.690 $ 47.473 $ 38,096 $ 32.499 73 542 69.114 60.855 47.484 43.559 31.294 25.701 22.126 70.306 67.948 58.645 42.863 41.743 26.852 22.399 19.439 11.804 11.158 9.899 7,022 6.163 3.975 3.193 2.842 36.591 34.073 25.622 21.399 13.362 9 915 9.884 7.914 302.948 288.813 246.870 193.064 172,517 119.509 99.273 84.820 93 701 77.732 57,298 43.084 10.484 6.684 15.223 9.423 396.649 366.545 304.168 236,148 183,001 126.193 114.496 94,243 3.187 1.441 1,113 838 574 449 374 393 440 (2.640) 3.495 3.071 (5.134) - - -

$ 400.276 5 365 346 $ 308.776 $ 240.057 $ 178,441 $ 126.642 $ 114,870 $ 94.636

$ 28.845 $ 25.027 $ 25.745 $ 20.803 $ 20,454 $ 17.346 $ 18.101 $ 15.106

$ 351.646 $ 349.195 $ 338.118 $ 299.583 $ 292.491 $ 176.217 $ 166,537 $ 166.364 146.227 132.966 118.137 118.450 109.960 91,535 91,068 85,074 190.820 180.035 171.955 166.590 158.256 148.492 130,191 124.523 16 254 16.154 15.727 15.366 14.763 14.355 13.598 13.372 704.947 678.350 643.937 599.989 575,470 430.599 401.394 389.333 3.270 3.270 3.270 4.070 1.219 1,144 1.146 594 10.820 15.660 28.061 35.772 16.688 121.908 50.070 12,396 2.588 2.769 2.951 3.113 3.293 3.067 - -

$ 721.625 $ 700,049 $ 678.219 $ 642.944 $ 596.670 $ 556.718 $ 452.610 $ 402.323

$ 603.812 $ 594.985 $ 584.022 $ 559.009 $ 516.437 $ 473.943 $ 373.752 $ 332,129

$ 271.374 $ 279.073 $ 278.029 $ 286.060 $ 258.082 $ 229.498 $ 169.998 $ 154.998 2,856.736 2,727.718 2.491,067 2,440.460 2.268.954 2.356.073 2.032.670 1.802,675 1.781,881 1.647.919 1.537.169 1.457,505 1.356.173 1,380.035 1,213.432 1.091.553 2.187.020 2.071.093 1.935.573 1,751.042 1.793.055 1.787.741 1.677,137 1.624.499 371.811 344.634 326.275 302,319 271.233 262.645 238.624 219,463 1.280 949 1.217.042 1.064.636 990.309 938.205 988.351 1.089.349 966.015 8.478.397 8 008.406 7.354.720 6.941.635 6.627.620 6.774.845 6.251.212 5.704.205 4 354 425 3.580.571 2.624.001 1.638.144 487.097 312.454 1.269.927 1.282.153 12.832.822 11.588.977 9.978,721 8.579.779 7,114,717 7,087,299 7,521.139 6,986.358 255.174 249 889 245.384 241,739 237,085 229,761 206.222 198.435 37.405 35.922 34.718 33 801 33.474 33.109 30.629 29.453 3 245 3.301 3.247 3.247 3.267 3.213 3.168 3.209 2.049 1.965 1,920 1.879 1.789 1,731 1.618 1.558 66 67 67 66 63 y 74 75 297.939 291.144 285.336 280.732 275.678 267.875 241,711 232,730 2 2 2 1 1 1 2 3 297.941 291,146 285.338 280.733 275.679 267.876 241,713 232,733 9.299.653 8.739.930 7.995.184 7.583.971 7.249.896 7.378,216 6.906.300 6.246.040 8 105.780 7.422.162 6.275 856 5.369.242 4.353.673 4.160,152 5.081.123 4.700.857 17.405.433 16.162.092 14.271.040 12.953.213 11,603.569 11.538.368 11.987.423 10.946.897 1.893.000 1.784.000 1.733.000 1.642.000 1,640,000 1.565.000 1.476.000 1.343.000 56 56 53 52 51 54 53 53 2.763 000 2.763.000 2.752 000 2,752,000 2.752.000 2.002.000 2.002,000 2.002.000 18 334 18.109 17,859 17.713 17.461 17.146 14.279 14,061 19

1 1

1 Mississippi Power & Light Company and Subsidiary Management's Discussion and Analysis of  ;

Financial Condition and Results of Operations

1. Financial Condition: The construction programs for tne years 1982.1983 and 1984 The financial condmon of the Company remained strong in am WM b N O B Mon, M m@on and W mWion respechveiy The Company presently expects to fund 1981 and net income increased to $36 mithon or 6 percent above the prior year The rate rehef granted in 1980 by the w maw m emm m on d entemal cash requirements m 1982 through the issuance and Mississippi Pubhc Seruce Commission (MPSC)(see Note 2 to the Conschdated Financial Statements) enabled the Company sa e of fast modgap bonds pmfened stod and common to recover from the low return on invested capital earned in s oc.t and by poHution control n venue bond financing it is espected that tne remaining $9 mdhon of the Company's 1979 From that iow point of $23 mdhon in 1979 net income mye SW se @ owing increased to $34 mdhon in 1980 and $36 mdhon in 1981 These or the issuance of additional secunties. depending upon improved e irnings also resutted in improved coverage ratios (important m the review and rating of the Company s bonds a con @m N M ca@ m@emnb Nm eenal sources are expected to be approximately $89 mdhon and the and stock by investment analysts) The Company's pre-tax Company espects to fund these requirements basicany with earnmos coverage of bond interest requirements which had permanent financing similar to tnat anticipated for 1982 The dechned to 3 00 m 1979. increased to 419 m 1980 and 4 64 in Company presently espects very httle. if any. external 1981 The coverage of interest charges and preferred stock " '"9* U '"

dividend requnements. which had deChned to 187 times in

'9" 'ncmawd t 2 34 tunes in 1980 and was 2 Onnne in Ill. Results of Operations 1981 after including a new $20 mdhon issue of 17 o preferred stoci. Since the Company would be legany precluded from Operatmg resu;ts for the year 1981 irrproved slightly over 1980 issu ng additional bonds (other than for refundmg purposes) but substantiahy over 1979 due poncipau/ to the rate increase should the related coverage be less than 2 0 and from issuing placed into effect on July 1,1980 Without this increase in rates.

additional preferred stock should the related coverage be less net income for 1981 would have been approximately $25 than 15 mamtenance of satisf actory earnings and coverage mdhon less than the recorded amount The 1980 rate increase ratios is essential to enable the Company to seu additional was the first since 1975 a:though there was a restructuring of amounts of senior securities on satisfactory terms to meet the fuel cost adjustment in 1976 future capital requirements The cost of fuel and purchased power continues to be one of the Compan/s major costs. accounting for approximately i Ao-thirds of its revenues from customers Fuel adjustment ll. Liquidity and Capital Resources ciaases in tne Company's retait rates provide recovery on a current basis of anticipated fuet costs wits subsequent The Company's construct:On programs for 1979 and 1980 were adjustrrent for actual results 3uch clauses in its wholesale relative!y small and the necessary fands were provided by rates provide recovery of actual costs with a two-month lag internal cash generation l High fuel costs, such as the Company has expenenced over The Company's construction and p! ant acquisition program the past severa! years. have produced distortions in the for 1981 resulted in expendetures cf approximately $146 Company's fuel expenses and reta'ed revenues However.

mdhon. mcluding approximately $110 mahon related to tne these factors tend to cancel out and have a neghgible effect on acquis, tion from Arkansas Power & Light Company and net income The effect of inflabon is felt more m the area of connnued construction of a 25% mtemt in the Independence wages interest rates matenals and supphes and other goods Steam Electnc Stanon and a 50% intt t in related coa' and services which the Company acquires from outside handhna equipment (see Note 610 thc ;onsondated Financial supphers Such pnce pressures are espected to continue to Statements) Approomately $108 mahon or 74 percent of these e xist and this wdl recune the Company to fde fu!Jre rate funds were supphed from mterna! casn generation and from increases mth the Mississippi Pubhc Service Commission on nomdatmg temporary mvestments The remainder was a regula' basis supphed from f unds from external sources This included $20 mahon from tne sa:e of pre

• erred stoct $3 mahon from short IV. Effect of Inflation I torm secunties and $23 monon from a pro;ect f mancmg inflatiun has had a significant impact on the Company's arrangement for the coal handhng equipment at the independence Stat.on The Company made m nimat use of short term borromng m 1981 w,th the maximum amount of 56 Financia! Statements) mahon being utihzed of the approximately $45 mdhon V. Summary authonted by the Securit,es and Exchange Commission The Statements of Changes in Conschdated Financ4al TN anihty of the Company to secure adequate and timely rate Posmon for the years ended December 3t.1981.1980 and 1979 reaef to cover ,ts portion of ine fixed costs of Grand Guif dtastrate the imorovement in tne Company's hnancial posihon Nuc ear Station and independence Steam Electnc Stahon (See from the ca no nt rerhed in 1979 Based or,1981 earnogs i

Note 6 to tre Ccosondated Financia! Statements) and coverages and an assumed mierest rate and preter ed increased costs due to mo a bon a have a matenal effect on dmdNd rate cf 15*e the Company could mue approximate!y the abmty to remam f nanc auy wat'e m the future. and thus be

$156 mhun of f ast mortgage bonds or apprownate y $68 ab:e ta proode the generatmg capacity and other resources manen of mete"ed rtock necess3'y to serve the p<esent and future energy reawrements of 113 Customers 20

Bocrd of Dircctora and Officcrs Board of Directors:

Donald C. Lutken, Jackson. President and Chief Executive Officer. Mississippi Power & Light Company, Jackson G. Lawrenco Adams. Pariner Adams, Forman, Truly. Ward Smith and Bramiette. Natchez Frank R Day, Chairman of the Board and Chief Executive Officer. First National Bank and First Capital Corporation. Jackson Norman B. Gilhs, Jr., Attomey at-Law. McComb Dr. J. H. Johnston, Jr., Pny sician, Jack son Robert E. Kennington,11, Chairman of the Board and Chief Executwe Officer, Grenada Banking System. Grenada Floyd W. Lewis, Chairmari of the Board and President. Middle South Utikties. Inc., New Oricans John R Maloney, Chairman of the Board and Chief Executive Officer. Deposit Guaranty National Bank, Jackson Richard D. McRae, President. McRae s Inc.. Jaci< son LeRoy P. Percy. Planter Greenville Dr. Walter Washington, President. A! corn State University. Lorman Robert M. (Bob) Williams, Jr., Partoer Reeves-Williams Builders, Southavea Frank S. York. Jr., Vice President and Secretary. Mississippi Power & Light Company. Jackson Officers:

Donald C. Luiken, President and Chief Executive Officer Norns L. Stamp ley. Senior Vice President. Nuclear Alex McKeigney, Vice Prr adent. Informational Services Frar,k S. York, Jr., Vice Wesident. Chief Financial Of ficer and Secretary J. Stewart Frame, Vice President. Personnel and Administrative Services W, Donald Colmer, Vice President. Pubhc Aff airs and Environmental Matters Thomas A. Dallas, Vice President and Chief Engineer Donald E. Meiners. Vice President. Customer Services John D. Ho! land, Vice President. Area Aff airs James R McGaughy. Assistant Vice President. Nuclear Production James R. Martin, Treasurer and Assistant Secretary Atlan H. Mapp, Assistant Treasurer and Assistant Secretary Division Managers:

David l. Bodgers, Western Vicksburg John R. Craft North Central. Greenville John E. Sherrod, Central. Jackson Graham H Tempel. Southern. Brook haven T. Ray Tomhnson, Northern. Senatobia Plant Managers:

Malcolm A! Ired. Baxter Wilson. Vicksburg Richard Denman, Natchez, Natchez A T Johnson, Rex Brown, Jackson Kenneth McCoy, Grand Gu'f Nuclear. Port Grbson Alan Sebren Gerald Andrus. Greenvilio Rex Shannon Delta. Cleveland

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PERMIT NO. 24

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