ML20082R593
| ML20082R593 | |
| Person / Time | |
|---|---|
| Site: | Monticello, Prairie Island  |
| Issue date: | 12/31/1994 |
| From: | Richard Anderson NORTHERN STATES POWER CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| NUDOCS 9505020143 | |
| Download: ML20082R593 (54) | |
Text
{{#Wiki_filter:r' 4 Northem States Power Company 414 Nicollet Mall Minneapolis, Minnesota 554011927 Telephone (612) 330-5500 April 24, 1995 10 CFR 50.71(b) U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555 MONTICELLO NUCLEAR GENERATING PLANT Docket No. 50-263 License No. DPR-22 PRAIRIE ISLAND NUCLEAR GENERATING PLANT Docket No. 50-282 License No. DPR-40 50-306 DPR-60 Submittal of 1994 Annual Report Includino the Certified Financial Statements In accordance with 10 CFR 50.71(b) and Item No. 70 in Regulatory Guide 10.1, enclosed are ten (10) copies of our 1994 Annual Report, including the certified financial statements. If you have any questions with regard to this information, please call Scott L. Weatherby at 612-330-7643 or Mel Opstad at 612-295-1653. Sincerely, k [ Sc7 Roger O. Anderson Director, Licensing & Management Issues Enclosures c: w/ enclosure Regional Administrator-III, NRC Monticello NRR Project Manager, NRC Monticello Resident Inspector, NRC Prairie Island NRR Project Manager, NRC Prairie Island Resident Inspector, NRC
- c w/o enclosure State of Minnesota, Attn Kris Sanda J E Silberg S L Weatherby 92 -
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orthern States Power Company (NSP). head- in Minnesota Wisconsin. No N quartered utilityin Minneapolis. with growing domestic and overseas th Minn is a major U.S. and provide a variety of energy-non-regulated operations. NSP and its wholly owned subsidiary. Northern States Power Company-Wisconsin. NRG Energy. Inc., a wholly owned su operate generation, transmission and distribution and hasinterestsinindependent.non facilities providing electricity to about 1.4 million and energy businesses in the United customers in Minnesota. Wisconsin. North Dakota, countries, with major projects in Germ South Dakota and Michigan.The two companies also Viking Gas Transmission Company a distribute natural gas to more than 400.000 customers both wholly owned subsidiaries, e 4 9 fi j m , i i a'
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Year ended Dec. 31 [- i1996 1 9'13 % Change Earnings per share $3.46 83.02 14.6ct Dividende declared per share $2.625 $2.565 2.3% Utility operating revenues (millions) $2,486.5 $2,4M.0 3.4% Net income (millions) $243.5 $211.7 15.0% - Iteturn on e<piity 12.4 % 11.4 % Asseis (millionn) $5,953.6 $5,587.7 6.5% Customm (thousanda) 1,786.4 1,755.5 ~ 1.8% Peak electric demand (megawatts) 7,101 6,990 1.6% Retail electric energy sales (millions of Lilowatt imura) 33,096 31,860- 3.9% Benefit employcen 7,032 7,362 _ _ (4.5%) C [emmon stock Price Range 70 years or omnend crowth am 50 3.00 40 5 2.50 30 2.00 W j 20
$ 1.50 10 1.00 am- 0 0.50 1990 1991 1992 1993 1994 f --
0.00
- Year 4nd 1975 1980 1985 1990 1994 Earnings Per Share Return on [ommon Iquity
~
3.50 ' 14 3.00 12
. 2.50 10 g y 2.00 3 0
= 1.50 .
6
= .
1.00 4 i,!; 6.50 2 ; 3 1990 1991 1992 1993 1994 1990 1991 1992 1993 1994
, sum Total as intal aus Continuing operations excluding aus Continuing operations excluding accounting change secounting change e
_ . . _ . .. .. I
a a a g g a S W W mthern States Power Company To remain our customers' energy had a successful 1991. Your. partner of choice, our top priori . company achieved strong ties have been and continue to be irnings with our regulated elec- excellence in customer semce - fM ie and natural gas operations - and reliability, providing an array nforming well, and our non-reg- of services at competitive prices, ated subsidiary, NRG Energy, pmfitable grmvth of our businesses . c., contributing solid results. and sound financial performance.
~
Our challenge every day is to - e worked hanl to establish the ensure that we deploy all of our undation for future growth and resources - human, financial and sperior financial performance in technical -in ways that enhance deregulated, fully competitive value for our customers and our ivimnment. We have the energy, shareholders. solve and strategies to meet our ompetitive challenges and oppor- l'm pleased to report earnings per mities. And, more importantly, share were $3.46, compared with e have the will and detennina- $3.02 in 1993, an increase of 14.6 ' on to execute those strategies. percent. Net income for the year- , ended December 31,1994, was .
'he utility business is changing, $243.5 million, companxl with nd so is your company. As the 1993 results of $211.7 million.
lectric industry heads toward leregulation, we expect indepen- Despite uncooperative weather, lent power producers (IPPs), strong sales growth in the core
>oth utility affiliates and non- utility businesses and efforts to Utilities, to increase their presence control operating costs resulted .
jin the marketplace. To transmit in improved regulated earnings. blectricity to their customers, Our non-regulated businesses Your company's stock continued . $PPs will use our transmission contributed 49 cents per share, to perform well in 1994, despite system, aml competition will compared with 9 cents in 1993. the fact that utility etocks wem hit. 'ncrease. This annual report For the 20th consecutive year, hard by increasing interest rates, q ighlights such changes in the your dividend increased, reach- uncertainties of the national econ- ' electric industry and how your ing an annual rate of $2.61 per omy, and concern about the effects
.ompany is positioning itself share, compared with $2.58 in of competition in our industry.
o take mlvantage of the new 1993. NSP's common stock NSP stock opened at $43.125 on apportunities being created. reached an annual high of 47 in January 3,1994, and closed at 1994, compared with a recon! $44 on December 30,1994, high of 47% in 1993. reflecting a 2 percent increase. I 3
The Dow Jones Utilities Index Apache 'Iiribe to temporarily store meeting our customers' needs l opened at 229.30 and closed at used nuclear fuel on the tribe's for electricity, natural gas, 181.52. a decline of 20.8 percent. land in New Mexico. However, on steam, cooling and other energy The average price for a group of January 31,1995, the tribe voted services. We are striving for j peer companies declined 14.5 against the plan. While we are continued, profitable growth of / percent. The marketplace disappointed in the outcome, we these core businesses. We also i appears to be recognizing NSP's will continue to pursue other expect the businesses of our strong earnings, ongoing atten- options to ensure sufficient storage larger subsidiaries, NilG, tion to cost control, and NilG's space is available until the federal Cenergy and Viking, to thrive. continued success. government meets its responsi- NIlG is globalizing your investi bility to establish a permanent ment by competing successfully Hesides improving financial repository. We will continue to in international energy markets. results and gmwing our business seek a permanent solution to the Cenergy, which markets natural-in' 1994, your company success- nuclear waste disposal issue by gas and energy-related servic fully met other challenges, working with government officials and intends to market electricit including imislative appmval to in Washington, D.C., Minnesota is positioning itself to compete temporarily store used nuclear and other states, and through in domestic energy markets. fuel in sealed, steel containers on industry groups such as the Overall, your company is well the Prairie Island plant site in Nuclear Energy Institute and prepared for the future, and w Minnesota. The legislative action Edison Electric Institute. should enable NSP to keep this Ilesolving the used nuclear fuel highly reliable, economical issue is critical for our company, A-power plant operating. We plan to the utility industry and our coun-begin using the temporary stor-NQ ~' try. We at NSP have taken a age facility during the fmit quar- leadership role, and we intend to ter of 1995. continue our efforts until the issue is resolved successfully. We are making pmgress in meet-ing all requirements of the Prairie Another focus in 1994 was Island legislation, including the excellence in customer service. development of additional wind- Our customers tell us they want generated electricity. In May,25 energy that is competitively megawatts of wind power went priced, reliable and produced in into service, and we are pro- an environmentally responsible ceeding with the requirement to manner. We are striving to exceed develop or purrhase an additional their expectations by providing a 400 megawatts of wind-generated variety of services at competitive power by 2002. We also are pro- prices. Our goal is to maintain a ceeding with plans to develop or steadily growing customer base have the energy and will to exe-purchase 125 megawatts derived when deregtdation and full com- cute our strategies successfully. from biomass such as crops and petition occur, and to build upon plants. We intend to focus on and impmve our already excellent Edwin M. Theisen, who retired managing the costs of these environmental record. in 1994 as president and chief renewable energy sources while operating officer after serving complying with the legislation. The theme of this annual report your company for 40 years, wa in addition to the Prairie Island is "NSP is Energy." To remain instrumental in helping shape storage pmject, NSP and 32 other successful, your company is NSP for a successful future. utilities and related businesses focusing on what we do best - pursued a plan with the Mescalero 4 _ _ - - - - - --- - - - [
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- 1 :.... j ; ? .[ J . D f.3: . A C Y i . f;i We appreciate his~strongleader ' .
m, ,
. j .Xe . ship and his interest in the well--
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. being of our communities and our . 1 77g. . . . z.
customers. Ed epitomized the ' N. w '- . 7 3 .3.s
.. _w energ>> and dedication of NSP ~
L . : .my v,7 .. ~ - .... . .., .
~ ..
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-Tf~ ,.. . employees, and we wish him -
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- . well in retirement.
_ 'q @*. . . , . - .. _ _ ' . . *
? gCniesg ; * * .'doye.and3 Ped.'Mina b$ tut,atal. . j3 In addition 1o contributing to the 1: 's g'e rncarats.WhitbMes inthdes Niecensin; successes of your company, our M .. W "hudi. 980stslgni Nichigan's!OpporJPeninsulaf .
lleNeedt:$$titeeNtofhtence/Gie.1dflei400segufsa ..'. ige C .~ k employees' energy is evident in the communities we serve thiough jg gliesidhis'ti$stlef4e ceilNeut $Nedgb .$Jit : sad 4910 .tistigt': 7. /r ,; business development and volun- - . linnaienflie W96.7.NSP ceniplein work as essaginie despispisestpatieds 6 . ,1 teer projects, meludmg the United ' M3 coyppaniesiin-$lingtedalhese? E 'T h eandud to1:] Way, Meals-On-Wheels, the - NtNielsieadditiend$$alihipsK91eir! L [ '. , sulalpitgtedltreellagf United Negro College Fund Walk- -
- A-Thon and other local events.
w .. $$M9ledet.EH y e 7. 7 C 3:1; y:. S 1 NE ?MO 'i.; y ; % f j y ; l 7 1 .. f i In 1994, more than 1,800 NSP
%.... fe _ ;6..:w: . 1: 9 L.:.1.;? ..MW : l.v:h.c ;;. ; - representatives volunteered for -
333%,y,.,.y;;g p ;;W._.
. .s . .
3 ; ., .
. . : ;. ..gy s.c M.n > ; w.c:.. m..: % ; y.,4 company-sponsored community ^-
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yim .q;c . . ,;q;w My . 9e.;.,: a
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service events.
-:w.g;g) {g: ., g;c.
~
96[ We are pmud of our region's vital-
. y .-
ity, and we will use our energy to 3 help keep our communities and
<. m Jj :..- your company strong.
a t . .~ .. 7. E1;a . 1i .- J i jgy 'S - dc Sincerely, [q1 G y4i
. Ep 7 ..
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%..; .i W i.1 ~ ..J K -. ;.-:.4 s - o James J. Howard 42 Cyairman of the Boan,,
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uvewegl'I$ i:a Apw, . e kk N Q. N h e.4 President and Chief Executive officer 7 7 .( g;gz g 3, '.7.
- g. 7,33jg.g .y 7 g Fehmary 8,1995
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1 f.. (- he world is changing for NSP. transitional steps necessary to should be permitted to recover Within the next decade, we T expect to be operating in a create an open and fair competitive electric market. Our vision includes the cost of investments that were previously authorized under tra-fully competitive environment. the belief that all customers ditional regulation. Our customers will be able to should be able to choose their choose their energy provider- and electric provider by 2001, the same Our goal is a competitive market __ we intend to t>e their choice. year we believe the generation with efficient, reliable systems an portion of our business should be a balance of shareholder and cus Evidence of change is all around deregulated. We propose that tomer interests. NSP suppods co us. In 1994, NSP filed an initiative utilities retain operational control petition because we believe that with the Public Service Commis- of their transmission and distribu- customers benefit and that we ca, sion of Wisconsin outlining the tion systems. Utility owners also prosper in such an environment. , NSP's open access transmission tariff fihng with the Federal Energy Regulatory Commission offers a menu of service optici allowmg customers to obtain wholesale transmission services tailored to their needs 4 4 4 M s
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We have made it clear to regtdators . businesses. We are empowering and and'others that a level playing field training employees to make them
! must be established for full and customer-focused, multi-skilled I i fair competition to take place. In and ready for competition. And we j other words,' our competitors - are taking advantage of opportu-should face the same requirements nities to grow. l sud regulations we do.-
t In short, NSP is energy... focused in another sign of changing times, on customers, the marketplace, INSP was one of the first utilities fundamentals and pnfitable growth. to fde an 4 en access transmission tariff with the Federal Energy ,, Hegulatory Commission (FERC) CUSt0mefS dn.VedeCISlonS
'n response to the Energy Policy ustomer satisfaction directed '
set of 1992, which allows energy much of our activity in 1994. roviders to use other utilities' Our Centre Pointe customer ansmission systems to transport business office began answering holesale electricity. We want to customer telephone calls 24 hours isure that your company is fairly a day, seven days a week. We impensated for granting access opened a new customer service '
> its system and that the reliabil-center in downtown Minneapolis y of the system is maintained, that is twice as large as our previ-hich is crucial to our customers. ous location and more customer JSP also is advocating that the tid-Continent Area Power Pool Both NSP's electric and gas utilities MAPP) develop a consistent set of now offer service guarantees that gnns and conditions for regional ensure NSP crews will install a ransmission groups (RTGs), an new service on schedule and will trrangement in which a gmup of leave a construction site in the stilities makes available its collec- ya same condition as when crews ~ -
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ive transmission facilities. MAPP arrived. The service guarantees d tselfis a group of 49 Upper Mid- were the result of a partnership k
. vest electric power suppliers, with builders and developers, neluding NSP, with interconnecting f ure r - .
who are valuable customen making / Inmsmission lines encompassing decisions such as whether to site lnearly a million square miles. We new developments in NSP's ser-believe RTGs can play a role in vice territory. ( pmmoting fair access m transmis-1994, which is vital in the advent ) ion systems and in resolving a We are working one-on-one with a of retail competition, when our host of complex operating, pricing group oflarge commercial and cnd competitive issues. To succeed competitors will target many of industrial customers to better our largest customers. in this emerging competitive envi- understand and meet their indi-nonment, NSP has several strate-vidual electric reliability needs. Helping customers define the 3i es in place. We are establishing While customers' energy require- services they need from us is indnerships with customem to pm- ments differ, a reliable electric another factor critical to prospering ride cost-competitive energy and supply is universally important. in a competitive market. For acet their individual needs. We are Heliability of service to key cus- example, Target Stores (Target), 7npmving many aspects of our core tomers significantly improved in an upscale discount store chain, I
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As we shape relationships with land, Australia.The transition customers, we also are laying the from public to private ownership foundation for future success by went smoothly, and the plant devoting expertise to upgrade, inte- began contributing to earnings in j grate and create a new infonnation the second quarter of 1994. network. This technology will enable NSP to manage energy Another profitable new project is delivery, from transmission to MIBRAG, an industrial complex' distribution to the customer. near Leipzig, Germany, of which
. NRG and two' partners acquired - l The new systems willinclude a effective ownership early in 19942 Customer Service System for _ MIBRAG's primary businesses .
- greater speed and flexibility in are mining brown coal, generating e
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billing, marketing and responding electricity and providing steam to ' nib to customers; an Energy Manage- industrial plants. The acquisitionf M - y" ment System to identify the most includes.two active open-cast lig economic energy sources and nite coal mines and three indus-enhance reliable delivery and trial power plants.
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j quicker service restorations; and
- ._J a Geographic Infonnation System Brown coal from the mines will so employees have immediate provide fuel to a 900-megawatt ;
l- told us they plan to reduce the access to precise geographic and coal-fired generating plant calle l number of energy suppliers serving .
' demographic information, enabling Schkopau, under construction them nationally. With many stores in NSP's service territory, Target them to respond faster and more near Leipzig. NRG and a partner is a vital customer we plan to accurately to customers. acquired a 400-megawatt share o keep. We are responsive to the the plant, which is scheduled to company's needs locally, and in begin operating in late 1995.
1994 designed energy-efficiency Non-regulated operations buihling specifications it can use The NEO Corporation (NEO), an perform Well
. in new stores amund the country. NRG subsidiary, in 1995 pur-chased a 50-percent interest in Our effons to help customers con _ W hile we focus on existing customers and innovative ways to serve them, we STS Hydro Power Ltd., a Michigan corporation that operates 10 serve energy allowed us to earn additional revenues and an also seek opportunities for prof- hydroelectric facilities across the itable growth, which are most United States. NEO develops, investment return of $7 million in 1994 because of an incentive promising in the non-regulated ' owns and operates small generation arena. NSP's non-regulated busi- and co-generation facilities, program that rewards NSP for nesses e ntributed 49 cents per focusing on projects that use -l reaching an overall goal for selected conservation programs.
share to earnings in 1994, com- renewable fuels such as landfill : " We also are making significant pared with 9 cents in 1993. gas. The company has two operat-
. progress toward our goal of ing landfill gas operations and reducing system-wide peak elec. Much of that success was due to two under construction. -I tric demand 1,700 megawatts by strong performances from NRG l the yem 2000. In 1994, our cus. Energy, Inc. (NRG), a wholly NRG's domestic operations, owned NSP subsidiary. In March including the Minneapolis Energy tomeni reduced demand more than 1994, NRG became the operator Center, two refuse-derived fuel i 160 megawatts, for a cumulative reduction of more than 1,000 and part owner of a six-unit. processing plants, two steam lin 1,680-megawatt coal-fired and five fluidized-bed generatin'g megawatts.
generating plant called the Glad- plants, also performed well in stone Power Station in Queens- 1994. Our confidence in NRG is f 8 (
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* :_ . . ?.-' -'<,.y, '- ., s .'.lW.;.' ..-- .,; -
.. . e, .
_ , . .:.n'. . . .
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Fundamentals are strong
.- J<
s we look to the future, we recognize that much of our
$ strength lies in such funda-mental practices as generating ;
y% . electricity cost-effectively, reli- l ably and in an environmentally k"g . sound manner. NSP's power plants continued to perform well, with , several outstanding achievements
@g in 1994. ,
pN s -
'Our Prairie Island nuclear plant again received a top rating from th9 s
j 888 j [ '
' institute of Nuclear Power Opera t-tions (INPO), indicating the plant
,,sr8' ,
,, j _
" i overall performance is excellent y
me , wJ h - ' Prairie Island Unit I confirmed it A h 3 d ,h M ill? l quality of performance in setting plant recon] of 443 days of contin Nj[g[gy4% o ~y }j - E,I' Bj -
%"f Ma:
,j uous operation. The plant also wa hJhy .k [g#h ia h
# i /( '
4 recognized by the Utility Data
, g4 ; ?' Institute as second on the nation Mh{nM[ SRFL,'w@j p
~,
? '%
top 10 list oflow-cost nuclear power producem. j jQwokkNQTg
+
4 e ,; ff , Ns = ,Ng /e%c g'y NSP's Monticello nuclear plant
"' also received the top INPO rating
'.Ag? W@fk hi and was recognized twice by the M kp[Qp l if
@$Q j j Nuclear Regulatory Commission ' t W$3d@ {"_ / .,
for outstanding safety pedormance. SI ; r . An industry publication listed thej
$0ge -
7
'~
plant as having the lowest fuel cost among all boiling-water reac-The Schkopau coal-hred generating plant. in which NRG Energy. Inc~ and a partner tom (BWRs) in the United States.
- Mont,icello employees completed (
have a 400-megawatt share. is scheduled to begin operating in late 1995.
. maintenance and refueling outage )
in 39 days, compared with the lat-! est BWit industr, outage average . of 79 days. Anoth er industry publi-demonstrated by our plan to received approval from FERC to . ation named NS
- the No. I mult.i-
. invest $500 million in equity in market electricity in the United site U.S. nucle r utility, with a plant NRG by 2000, the year we expect States. Cenergy already had capacity factor .sf 83.4 percent.
our non-regulated businesses to expanded its ofkrings from market-contribute 20 percent of NSP's ing natural gas to include electric . . Our combustmn and hydroelectne earnings. products and seivices, and s.igned Pl ""'* P' **d "9""1ly i"P'"**I"*' agreements in 1994 with a variety
. Unit 3 of our Sherburne County Another of our non-regulated of bus. messes to provide energy ser-
. . . . (Shereo) three-um.t, coal-fired businesses, Cenergy, Inc. (Cenergy), vices to the.ir locations natmnwide.
10 o
*j ,.
w:
. , v s'
<a w
-8j,
.nn . . ..
>- p-P a generating facility achieved an Environmental protection is d TYh D_h,h( Q y ' 'l availability rating of 97 percent, another fundamental we continue k D g., R compared with the industry average to emphasize. Employees at h${!gi:1 ogW 2 M -R W of 82 percent. Our 19 Wisconsin Sherco developed an innovative 7"" M hydroelectric plants generated application of wet electrostatic k[hh h: !Y 1t . .
+
,;. l 832,925 megawatt-hours (Mwh)precipitator in (ESP) technology that
~
. b -T ~ Q 1991, which was less than the 1993 has the potential to greatly n~ luce total in part because the Chippewa fine particulate erM m fem
- Falls hydro plant is under renova- Units 1 and 2. A wa Edi tw tion. The renovation will allow the module will be evaluated during plant, which has generated power 1995 to determine the viability of on the Chippewa Iliver since 1928, nsing the technology on both to operate for another 40 yeans. units. The project is the first full-scale application of wet ESP technology at a coal-fired plant.
11
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f f [y 't:;.y ;:1.Q _. I' <. ? I * ,;., .. .;s b%. 1;. ' Y ' * ' g.7N'tu) g.5%Ng["::.cd ;3:t.o.2, g .y.;:< ::: % ;,~ :l:W}r: :y;i73: Process improvements, hetter out- ;; . age management and careful allo-Ed))y f '.i.J.M-Q. $$.j.fh(7 3 [.3 f.y.C.S.[::p[QK.$.[ij@f 1(.Qj cation of capital and maintenance ;. ?
.Jb16 QTM:gd f M z T.6r f[ y f M . P:?p y'.J.C 3.M
.}.f.M
! dollars enabled NSP Generation to
= reduce the cost ofits product 10 M::/; W;.:.:;:J.fD$nTV i ; J' :
. 93.Y.R/T.Wi.fi.? [ .M W :f d. M . G M
. ,t ercent from 1992 to 1994. As our .:;.
.,I.i. ,. ci:1. .Y.g . . .N. .', &. . : .f _V.?i F. . . ~
V ;c i N..;.i.M.i.' I. ,O.e.Y. ; .; : . .
- generating business moves towant i;H.1. 4. .!.. T,:xN. .,....,r
. :.W. :: ?f c "
.. M. ,. /. .S:' .. .L. .a:z : .2 ;ipf H.E :1@ ...:. , . .
= deregulation, we intend to provide '. V ..i. k..=,a. ... ,X. < S T 4: W:!. 4 , . $: . ,, .rW(. u :. . . .
li
':. w ):wy- ... ~~.. e :n: ? n <: n . wi x y,- :,.*..*,,a; . , s..-
_electne sem,cc to our customers at +.........,<.. 9.
. . .s.:
M. 3: .. ~;T .,1
- . .~
. .:; n i.]r,
?
- ... . u- < -
D
-competitive prices. . . ,' . .r.::...?: 4
.1. W.;
. 1:< :h' s+
- . .. . M. .. 1 ..J. . c : . Q:.
'- , . , '..: ' (zi , ' e'. Im.h .. ... k .
.,L., ',. I,w . , .
'.'",';.k...
s..'y.:
; .' 7.[ . z. '_ .'., .
- f. - - . [l7 ; '*: .. ,, .f,g v _;3,l 1 .. .. J t .. s , 3 , . ; ,.t.t
_'_. - l: f'! Y
^
;_ . * . 'f ' .
. ; ;l ,e ,. '.
;NS? Gas continues to expand 4, A58%x M: Y. : TC NWeF ull-scale competition already .-
)[ ff. . , [ ffi f is a reality for NSP Gas, gy. .. .% 1; 7 which proved itself a formida- c.c y 7.::p,. jm.G -.,g,p,q:n.q O f l' D &f 7 :e.g.;p. y a::; MW.:
\... . .W .e. .. . %g t
.::. ;o .J,~,,......y:3,,..s.w. .' ygMQTEk:. f Mi W M,2:. "- W.%
JO. J. .,.i.M.M:=K : '.~'~3:.n
. , , . . .. r -
Rl:W '.%: ? .W.:.y,. ide eontender in 1994. In its .r.... , . . :.. ;> . . y . .G . ,...':V , . . A. .M.; ~
......,+o . .. . . , . .
g
- e. - . ;,. , . ,,.,g,,
margest natural gas expansion ever, t.c p ,.:..w:.;9g.c g .
# :.. gm Jgu g. cg..g jhc company broke ground in .'Q.E..?..f:ji -
t - f.:y.)./Q 9.Udy.N.[. .~.m. @M15@@l 3pril on a $23-million,550-mile
- a. .+.: .. p. ::MT .
,' ;rM%.~#h3.. . . . n ... . DM.w: %.f.h! .
.; v.:; : m: ,....w., +. . :.3..~..: ,.
capeh.ne pro 3cet to expand servn. ce . u. . ::;
,;. 9 p:: w . ,.;e W,;s M ' " . i io the lirainen! lakes Area in s ;f.N SM. l.M..i
-mrth central Minnesota. By year- Q: W[\ ...
V .? [N8MM. y; y,, fg
-nd " " .
e: w%g m-W l Wm..<..
~ c."%.M.lM.. '... z h .wv: n-
, .N,.i-)W[@i,,#c.W" ., m
.y -: - .
here,signed more up.than 6,000 customers [1N:MW;tME.:9. . p.[f.ki.
" Lakes Area was the most densely The Brainent h$. .
., f..((.[ew.s.oMQ Cd.. V.M.D'i;:@
....,.... ,s=......
ympulated region in Minnesota ..j., .1T:Qf. $. . ..f 4...% j: 4. .i.*nf 7.3.S.
~ ..
c .
.... . - M. ..f:f ;.E. .m .m . . -4without natural gas service. m. Q' Tl- ; W O . .v:0, w 4 C. .O: ... 0:~ e.m ?:V. .
{;s-;; :p ; :.f^; .V[ Y 'c:.. ::. j:c. } f.;. : _ %.. .? .: n.. .::.%* ;._;( :: -
= ';. . Q.:?: s. g Q";;l&l:.{t g-[: ^ ./.&j,:l.Cd:.r
- . =:7.
l+.h,f. . .[. .;' J. {S,mce November 1993, NSI Gas ;.
- ; ifgjQ;}
v~ - -
~
~~^m w 4:ww;rw a wf- :. . p.
=
v94
-has been successfully operating #;v
- n. ,.v' .:.! e. ,~. n: : j -. , i .
c. m a .; .,w :+.u. ... ;: w. . . w::s c. .,:.m..w.
~i.m. . a.c :.
sLgRQNs,?W.
.$lN.
1.#%N
;under FEHC Onler 636, which '
UM. < g3.g.#.,WW. . EU, M, E
! allows distributors such as NSP to
- buy gas directly from a number of customers as muc;i as 10 to 20 " # NM.s ..
%v N+:m..w M.~. ..
n:. " ~.. g" a
- W:e.
S..,.NE.Zn +:@ v C _-pmducers and transport it to cus-percent on t}icir mont}i}y }illls. c:P .qy q .
~
u j:. .c.; ,
-tomers via interstate p,pelines. i A v1
'. '. ll;, . - ..!
w . w3 s.:yJ::.; *g???:g ;M;:j,; _
. . ' . y: y :.a : . Y new computenzed m. fonnatmn sys- *' . c: ~ .-
In addition to expamjing to the ? .:w. t -
. . ~ -
.y .r. .
tem helps monitor and control our Braineni I akes Area, NSP Gas ~ . E,.- ybg a4. . . ' ~ i ' M:.1g, - r g:N g..<..~a .u Eas d.istribut, mn s} stem *
.n. c .. . : e:,:-.~.~. +Mw- .m ' w"c u
added the Minnesota communities of a: A... ::q . .1.
?.7.;c. 2y:..: ; '.:
J., g
. . ..v..
a: o.o .v; - n..::a .;. . t '_e ;
;: .t NSP Gas added several new, non-P easant Lake and St. Stephens to P' '. W"wN!b M .N;a<.n.a R is : 4 . f 'A 4 P_;; M
' . w :: &- '*H- F e .S.i:M u m u.a Ww :- G:
its service territory. In Onsconsm, .. traditional products for its large service was ex ianded to Fall Creek
- im. . . .. 9.,'h V . N. N- ;s .g .r a. w.
- o M.. , .N. ::x . .[N commercial and industrial interrupt- i m_ u . ." .
. . ~ .
- d. IlO Lils aloullu.
i u . .. L / . . .T.p.qg' .:-- : <s .J 7, q. t : .,w. ' ible customers in 1994 to help them f T jj+ . ' ' O J: a:.3.. U. . ,
. .' " .i.e . .c;l a, w"l
- - .'0.... c .?. , .
~ _
SaVe ellergy o!!ars. kly offering . . 1.1 . M .:i; 1. . :n. .. .f.. . L. . '. .~J
. . .?. . M.
ellefKy supp 7 mallagemellt services '...., 7i
.. ' . . . ..(, ;l,... . . ... . < * , . ,, . . . . - . . . , . . . . - and new slipply backup and rebate .
PM .' m.1
]((.((
pmgrams, NSP Gas is saving some {. E' .. f ;S : ..,.',j,....:c
'. M,,,f[,{f 1{}}f.)
. -, *: . ' .. .: ' .j. . ,.i .'.:', ..,
'..;;;l.
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l,
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n
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r....
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;? : i
+.3** ', . ! ;.,
Y: NSPis energy .
... . .SingSpringQardens.liie,swiradirs,largengmineranapachirer ,t 4: ',7. 7
. . predahopenedtentmaluifactsingsite4thefanhWis GatewayM ggg pen l ting in a fully cornpetitive '
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i Douglaa W. Leathentale (58) i,2 Plincipal0fficers of the l Directors of the Minnesota Company Chairman of the Ikiard, Pnwdent
. M.innesota Company ana CEO
- 11. Lyman (Tad) Hrctting (58) 3,4 The St. Paul Companies, Inc.
President and CEO Douglas D. Antony (52) Property and liability insurance C. G. Bretting Manufacturing President-NSP Generation organization Company, Inc. (elected April 1991) Manufacturer of napkin and Arland D. Brusven (62)
~ per towel folding machines Vice President-Finance John E. Pearson (68) 2,3 elected March 1990) Hetired Chairman The NWNL Companies, Inc. and Nonh. Jackle A. Currier (43) avid A. Chriatenaen (60) 2,4 Vice President and Treasurer western National life insurance Co.
resident and CEO (elected December 1983) 4taven industries, Inc. Janies J. Iloward (59) f anufacturers of reinforced pletics, Chairman of the Ik>ard. President C.M. Pie chel (67) 1,3 wn pnxlucts and electronic equipmer.t and CEO Chairman of the Board (elected December 1976) Farmers and Mnchants State Bank (elected Fehmary 1978) Cary H. Johnson (48)
. John Driacoll(65) I,2 Vice President, General Counsel Hetired Chairman of the Hoani and Corporate Secretary Dr. Margaret H. Preska (57) 2,4 llock Island Company Distinguished Service Professor Private investment finn Cynthia L. Lesher (46)
Minnesota State Universities lected November 1974) (elected January 1980) Vice President-iluman Resources cle L. Ilaakenatad (67) I,4 E Iwani J. McIntyre (44) A. Patricia Sanip*on (46) 1,3 etired President and CEO Vice President and CFO Hetired Executive Director ' 'estern States Life Greater Minneapolis Area Chapter surance Company Thoman A. Micheletti(48) Arnerican Hed Cross
.lected February 1978) Vice President-Public and (elected January 1985)
Government Affaini amca J. Ilowani (59)* Edwin M. Theinen (M) 3,4 hainnan of the Itoani, Hoger D. Sandeen (49) Hetired President and COO resident and CEO Vice President, Controller and ClO Northern States Power Company orthern States Power Company (elected July 1990)
' elected January 1987) Hohert II. Schulte (42)
U"""I Committee. Vice President-Customer Service Allen F. Jacohaon (68) 2,4 ,
- 1. Audit Retired Chairman and CEO Loren L. Taylor (48)
- 2. Corporate Management Minnemta Mining and President-NSP Electric
- 3. Finance Manufacturing Company
- 4. Power Supnly kelectal January 1983)'
- JJ. Iloward is an er oficio member Edward L. Watzl(55) of au mmmittees. Vice President-Nuclear Generation Hichard M. Kosacetich (51) 3,4 President and Chief Executive Officer Keith II. Wietecki(45)
Norwest Corporation President-NSP Gas 'llolding compan;for banking l institutions (eh cted April 1990) I I 15 j -
Directofs of the Wisconsin Company Principd Officers of the Principd Officers of NRG Energy. Inc. Wisconsin Company II. I,yman (Tad) liretilng (511)* David II. l'eterson (53) President and CEO 31ichael N. Gregerson (47) Chairman of the !!oard, President and CE( C. G. Ilretting Manufacturing Vice President-Customer 3cnice Company, Inc. Jarnes J. Ilender (38) Manufacturer of napkin and Jolm P. aloore. Jr. (48) Assistant General Counsel paper towel folding machines Secretary and General Counsel and Corporate Secretary (elected March 1990) John A. Noer (18) leonard A. Illulun (49) l'hilip 31. Gelatt (1f)* Chainnan, President and CEO Vice President and CFO President Northern Engraving Corguiration Anthony G. Sehnster (50) Valorie A. llornetun (3fl) Manufactun-r of decorative cominments Vice President-Power Delivery Controller for the automobile, appliance and and Generation electronic controin industries Irc II. Carlson (55) (elected May 1990) Neal A. Siikarla (18) Treasurer Treasurer Wayne E. Ilarrinon (67) Carl A. Carreca (58) Dairy Fanner Patrick D. Watkins (51) Vice President-International !!usiness (elected Augn* 1990) Vice President-Corporate Services Development and Marketing Ilay A. I.arsam (65)* Kenneth J. ZagrelmLi (35) Julie A. Jorgenson (33) President Controller Vice President and General Counsel Wiwota Sand and Gravel Company (elected Novemirr 1979) Craig A. MatarzynsLi(34) Vice President-U.S. Ilusiness Developme jolm A. Norr (til) Chainnan, President and CEO Directors Of NRG Energy.inc. iamise T. nonthe (38) Northern States Pow. r Company Vice President-iluman Hewurces (Wi consin) Douglas D. Antony (52) and Administration (elected December 1912) President-NSP Generation (elertnl February 1995) llonahl J. Will (51) I.arry G. Schnack (57)* Vice President-Operations Chancellor Jackie A. Currier (43) and Engineering Unisersity of Wisconsin-Eau Claire Vice President and Treasurer (elected May 191HI) Northern States Power Company (elected January 1993) 1.oren I Tn3 or 1 (48) President-NSP Electric Gary II. Johnson (411) NSP-Minnesota Vice President, General Counsel (elected May 1992) and Corporate Secretary Northern States Power Company
- Audit Cmnmittee members (elected February 1993)
Falward J. McIntyre (14) Vice Prnident and CFO Northern States Power Cmnpany (elected May 1992) Dasid 11. Peter on (53) Chairman. President and CEO NilG Energy, Inc. (chrted July 19f f>) 16
V T , V N g l gV Nl N Nortlwrn States Power Company, a Minnesota corporation
- To increa*e dividends on a regular hui* and maintain (the Company), hp two significant subsidiaries Northern States a long-term average payout ratio in the range of 65 to Power Company, a Wisconsin corporation (the Wisconsin Com- 75 percent. The objective payout ratio is based on long-tenn pany), and NIIG fnergy, Inc., a Delaware corporation (NilG). earning expectations. In June 1994, NSI"s annualized
& Company also has oneral other subsidiaries, including common dividend rate was increased by 6 cents per share, or Viking Gas Transminion Company (Viking) and Cenergy, Inc., 2.3 gercent, from $2.58 to $2.61. The disidend payout ratio (Cenergy). The Company and its subsidiaries collectively are was 76 gercent in 1991. NSi% goal is to n turn to the objectis e 1
g refermd to herein as NSP. range through gmwth in earninp. I FINANCIAL RESULTS AND OBJECTIVES . To maintain continued financial strength with a double 1994 FinancialResults A l><md rating, & Companyi first mongage bonds continued NS!N 1991 earnings ger share were $3.46, an increase of 41 to be rated AA by S&P. AA- by Duff & Phelps,Inc., and AA cents, or 14.6 gercent, mer the $3.02 earned in 1993. Sales by Fitch investors Service, Inc. In 1991, M<xxlyi downgraded growth in the core electric and gas utility businesses offset NSPi first mongage lond rating fmm Aa2 to Al basnl on its continuing unfasorable weather and higher operating costs, for interpretations of a Minnesota law enacted in 1991 regarding a nulest increase in utility earning. In 1991, non-regulated the Prairie I., land nuclear generating plant uvd fuel storage businnses contributed a material gortion of NSP's earnings for pmject. First undgage innds issued by the Wisconsin Company the first time, with 14.2 percent of NSi% earning ger share carry comparable rating. NSl% pretax interest coverage ratio, being derised Imm non-regulatnl operations. Most of this non- based on income without Allowance for Funds Used During regulatal earning growth was generated from investments in Construction (AFC), was 3.9 in 1994. A capital structure energy projects in Germany and Au,tralia. Imestor returns consisting of 47.5 percent common equity at year-end 1991, also were enhanced in 1991 by an increase in the dividend including inth regulated and non-regulated operations, 4 rate, as disruned below. contributes ta NSIN financial flexibility and strength. NSP remained fmancially simng in 1991, as evidenced by continued high ogerating cash flows and interest emerage. NSP . To prmide 20 percent of NSP carnings from non-maintained its double A first mortgage bond rating with all regulated busincues by the year 2(MH). NSP expects to rating agencies dming 1991 except Mely's imestors Senices meet this goal ihmugh gmwing profitability of existing non-(Mmlyi). Moodyi downgraded NSPi first mortgage Imnd rat- regulated businesses and thmugh the addition of new non-reg-inn to A1 hasni on it* interpretation of pnnisions of a Minnesota ulated businesses. Non-regulatal businesses pmvidni 14.2 law enacini in IW1 reganling the Prairie Island nuclear gener- gercent of NSIN carning in 1994. ating plant used fuel storage project. (See discussion of this legi lation in Notes 16 and 17 to the Financial Statements.) . To maintain long-term average annual carning growth of 5 percent. Non-regulatal operation 4 are expected to pro-TotalReturn vide a significant inrtion of NSl% earning gmuth in the fore-1)itidend increases plus stock price appn ciation comprise total serable future. In 1991, total carnings increased 14.6 percent return to NSl4 imestors. NSP increased its common dividend mer 1993, with non-regulated earning contributing most of rate by more than 2 percent in 1991 and maintainni a steady that earning gmwth. stock price despite a general industry decline in utility stock prices. Since the beginning of 19M. the total return on NSi% Business Strategies comnnn stock has useragni 14.3 gercent ger year. The total NSl% management is proacthe in shaping the new business retum for the Standan] & Poori (S& P) comgusite stock index for environment in which it will be operating. Managementi busi-TOO irwliistrial companies has asentged 14.4 percent ger year for new strategies include-the same geriod. )
- Focusing on the core energy busince. The eh ctric utility FinancialObjectives industry is becoming more complex as customers, as well as NSi% financial objectises are: utilities and fnleral and state regulators, promote comgetition.
- To prmide imestor returns in the top om -fourth of the To remain successful in this more complex envimnment, NSP utility imiu try as men ured by a three-year aserage will maintain its focus on its core energy-relaint actisities.
return on equity. NSl% aserage return on equity (including the cumulatise effect of the 1992 accounting change for = Prmiding reliable, low-co*t, environmentally reepon-unbilln! resenues) for the three y ears ending in 1994 was 11.9 sihic energy, Whether energy is pnuluced through NSl% ) gercent. Due largely to unusually mild weather in lW2, this regulated utility or ihmugh its non-regulated businesses, three return was irlow the three-> car userage of the top one-fourth general concepts proside a focus for its energy busineers: of the industry (approdmately 12.8 grreentL reliable energy, low-cost energy and emimnmentally re gon-sible energy.
)
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- Ilegionding to cuatomer needs. Customers will hase an Sales to other utilities decreased 21.6 percent in 1991 after increasing numler of options for meeting their energy needs, increasing 30.5 percent in 1993 shen there was higher demand and there will ir competition among energy companies for the from utilities in fhod-stricken Midwestern states. The 1993 privilege of sening those custmners. NSP will work with its increaw also reflected the impact of ice damage to transmission cu-tomers to deselop innmatise onxlucts and enices that lines in Iowa, which limited sales in 1992.
leneht hoth llr customer and NSP. Tlw table helow summarizes the principal reasons for the electric resenue changes during the past two years.
- Increasing non-regulated inmtments and earnings. As _
7 midenced by the financial d, petites for emngs growth, Ofilliam ofrMlars) 1998to1993 . 1993 vs 1992 non-regulated businesses wr J he an important part of NSI"s lletad saln growth future. Deregulation in if e utility indust *y is ex[weted to (-xcluding weather impact 4 $36 $ 32 proside new imestnrnt opportunities in nou-regulated husi- Estimaied impact of weather on newe*. Participation in (Lne opportunities is cyrcled to retail sales volume 8 34 impnne the pnefitahility of NP. Itate changes 17 74 Sales to other utilities (20) 20 RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL Fueladiu*"neatclau* 23 (2) l RESOURCES Oth" 8 (6) I The following discussion and analysis by managemem 6 ruses on l"tal revenue increase 892 8152 those factors that had a material effect on NSl"s financial condi-tion aml results of olerations during 1991 and 1993. It should he Na electric resenues are adjusted for changes in fuel and read in conjunction with the accompaming Financial Statements pun awd enngy amts fnim aniounts cunently included in and Notes thereto. Trend, and continpi ncin of a material nature appmsal hase rates through fuel adjustment clauws in all juris-are discussed to tle nient known and considern! relnant. dktions, nn pt as noin! helow for Wisconsin. While the lag in implementing these hilling adjustments is appmximately 60 days, RESULTS OF OPERATIONS an "timate of the adjustment
- is reconini in unbillni rnenue in 1994 Compared with 1993 and 1992 thononth in w hich cosis an incurrnh in Wieonsin, the biennial NSI"* 1991 earnings irr share were $3.46, up 41 cents fnnn the n4 ail rate nwiew pnm considers changes in electric fuel and
$3.02 carnni in lW3 and up $1.15 fnnn the $2.31 carnn! hefore punleni enngy costs in lieu of a fuel adjustment clause.
accounting changes in IW2. Itegulated utility busines-n generated earning irr share of $2.97 in lWl, $2.93 in IW3, Bertrie ?mluction &penses fuel npense for electric gen-and $2.33 (Irfore accounting changes) in 1992. Non-regulated nation inneawd $5.6 million, or 1.11 percent, in 1994 com-husinesses pencrated earnings per share of 49 cents in 1991 pand with an innea* of $19A millios or 6.6 percent, in 1993, and 9 cent
- in 1993, and a loss per share of 2 cents in 1992. The Total output fnnn Wa p nerating plants decreased 1.5 percent result
- of the regulated utility busineses and the non.regu- in 1991 and increased R4 gercent in 1993. Fuel exienses were lated businessn are discusse I in more detail below. In addi- highn in 1991 hecauw of the higher cost of nuclear fuel per tion to the rnenue ami eyrn e changes,1991 carnings per megawatt-hour OlWil) due to increased payments to the U.S.
share were impacted by a higher m erage number of common and Department of Energy (DOE) for decommissioning and decon-niuisalent shares out tanding. Common and equisalent shans tamination of the Dolcs uranium enrichm-nt facilities and increa-ni in 1991 and 1993 due to stock issuances, including nuclear fuel di-posal cost *. In addition, fossil fuel costs were a general offering of 2.6 million sharn in May 1993. higher as a result of fewer purchases of coal at the lowest con-tractual prien la !c lower fossil plant output in 1991. These Utility Operating Results inenaws wne somewhai ofret by est decreasu from lower Uccaric iferennn Sales to retail cu-tomers, whi< h account output due to more scheduled fossil plant maintenance outages. for more than 90 gercent of NSI"* electrie n%cnue, increa,ed The fuel nienw increase in 1993 was due to higher output to 3.9 grrcent in 1998 and 1.0 percent in lW3 Cool summer mnq sals donand, partially offwt by lower cost of fuel per weather redueni sales in 1992 and, to a inwr nient,in 1991 MMI, which nfnis increa*n! use of low-cost purchases, as and 1993. During 1991, NSP added 16,519 retail electric co - S *"*"II*I"*- tomer*, a 1.2-percent increa c. Total salu of electricity Purchasedi nmer costs increa.ed $41.1 million, or 19.7 decrea ni 0.2 jrrcent in 1991. The decrease is due to lower lerceni, in 1991 and $53.0 million, or 31.1 percent, in 1993. sales to other utilitin (as discu snl later), mo th offet hv The inenaw in 1991 primarily was due to additional demand increaws in salce in retail cu tomers and municipal' utilities. ' "*lenes of $21 million for the full-year impact of capacity on a weather-adju-ted basis, salm to retail customers chargu fnun the power purchase agreements with Manitoba increa-nl an ntimated 3.1 percent in 1991 and 2.1 percent in liydnrElectric floant 0H1), which went into effect in May 1993, as discuwn! in Note 17 to the Financial Statements, in IW3. lietail sales gnm th for 1995 is e-timated to le 3.0 ;rrcent mer 1991, or 2.2 percent on a weather-adju-ted basis, addition to den:and nienws, purcha nl nmer i n*ts increased inun more enerp purchaws and higher prices. Energy purchaws 18
increaxed due to more schnluled plant maintenance outages in off-system customers. The cost of gas associated with 19% off-1931. The market pricing of energy purchases increased in system sales was $12.7 million. In 1733, the cost of gas pur-1731 compared to more fasorable market pricing in 1993. The chased and tran9orted increasnl $61.7 million, or 21LO increase in purchased gmer costs in 1993 mer 17>2 was percent, due to higher sendout volu.nes and higher purchasnl largely due to a demand exgen*e increase of $12 million for the gas prices. The aserage cost per thousand cubic feet (mef) of capacity charges under [mer purchase agreements with Mll. NSP-ownnl gas sohl in 1991 was IL4 percent lower than it was Energy purchasnl from other utilities increased in 1993 due to in 1993, when the net was 11.7 percent higher than it was in t economically pnced energy asailable to meet growing retail 1712. The decrease in IVM is due mainly to lower market pricing demand and resale opportunities to other utilities. of gas. NSP views most of the increases in 1993 and 1992 as I a reemery from unsustainably low wellhead gas prices in Cas Herenues The majority of NSI"s gas sales are categorized 1990 and 1991. l as finn (primarily space heating cusionrrs) and interruptible (commercial /indu trial cu tomers with an ahernate energy sup- Other Operation, 3faintenance and Administratire and ply). Finn sales in lY)1 decreasnt 5.4 percent compared with Generni 'llmse ex;rnses,in total, increased by $26.5 million, 1993 sales, while finn sales in IV>3 increased 17.0 percent m er or 1.1 percent, in 1991 compared with a decrease of $27.2 ] IW2 males.11m 1991 decrease is due largely to wann weather million, or 4.0 percent, in 1993. The 19)1 increase is primarily I in the la-t quarter of 1991. Warm weather in the first quarter of due to higher postretirement heahh care costs, including 1992 is the main cause for the increase in 1993. NSP adited amounts deferrnl from IW3, and higher postemployment costs, 11,102 finn gas customer
- in 1991, a 3.7-pen ent increase. as discussed in Note 3 to the Financial Statements.11 e 1993
< On a we ather-adjusted basis, finn sales are estimatnl to decrease was the resuh of fewer scheduled plant maintenance
/ hase dern a,nl 0.7 sercent in 1991 and increasnl 0.9 ;rreent outages, rnluent employee lesels and lower administrative in 1993 (excluding a one-time unbilled resenue adjustment). costs. lim 1993 decrease is net of a $1i million cost increase Finn ga sale
- in lW5 are estimated to increase by 7.2 percent because wages in 1992 did not include accruals for incentive relatise to 1998, with a 5.9-irreent increase on a weather- com[ensation. (See Note 14 to the Financial Statements for a adju tnl basis. Tim 1995 increase includes the impact of addi- summary of administratise and general expenses.)
iional resenues of appnnimately $6 million due to a IW1 gas [ expansion project in north central Minnesota, where 6,100 new Conserration and Energy Afanagement Costs in 1991 customers were signed up for new menice as of I)ec. 31, IWl. remained comparable with 1993. Costs in 1993 were higher interruptible sale
- of gas increased 4.4 percent in lWI and than in 1992 Imcause NSI"s regulators apprm ed higher expense 17.3 percent in 1993. Other gas deliseries, including Viking's lesels for consenation and demand-side management efforts.
transmissii.n solumes, increasnl 73.5 pen ent in 1991 due to a fnli ear 3 of Viking artisity and to sales of gas to off-*ystem cu,- Depreciation and Amortiwtion The increases in depreciation tomers. Other ga4 deliieries increasnl dramatically in 1993 due in 1994 and 1993 reflect higher lesels of depreciable plant for to ihe acquisition of Viking. all rrials i and changes in the depreciable lises of certain pmperty The table Irlow summari7es the princigud reasons for the in 1994 and IW3. (See Note I to the Financial Statements for ga* resenue cbages during the pa t two ? cars. discussion of depreciation changes and rate filings.) tildlimu vi dollan J 1998 n 1993 P)93 u 1992 Property and General Taxes Propedy and general taxes Ntesgrowth increased in 1991 and 1993 primarily as a result of higher (cuhnhng weather impacts) $0 $17 property tax rates and property additions. In addition, the Ltimated impact of weather iw in 19M pially is due m hi@ p miy m on fmn sale
- solume (II) 28 4;4 , g g; 4; Viking Ga* (acquired in June Un3) 3 9 ltate change
- 3 9
} ry Incmne Taxes Um sariations in income taxe* primar-Aah to ofMtem cu iomern ii Pun hami pE ailjastment ily are attributable to fluctuations in pretax look income. Taxes and other (23) 30 in 1993 al<o increased ainut 83 million due to a 1-rercent I lotal retenue increaw 6tencaw) $(9) $ 93 increa*e in the federal tax rate. (See Note 11 to the financial Statements for a detailml reconciliation of the statutory tax rate NSl"* gas resenues are adjusted for changes in purchasnl to the effectine tax rate.) pa* nwt* from ankumtr currently includal in apprmnlluise rates through purchasnl gas adjustment clauses in all juriulictions. Non-operating items Related to Utility Businesses 3 Allmrunce for Funds Used During Construction (AFC) Cmt of Cas Eld 'Itc co<i of pa* purcha ed and tran<poned Tim differences in AFC for the reportal perials are attributable decreased SIIth million, or 6.6 gercent. in lwl. Tim decrease to varying lesels of conetruction work in progress and lower AFC refin t lown ga, prices ami co-t n cmen adju tments, panially rates associated with increasni use of lower-cost, short-term
) offset by higher sendout solumes primarily for salc< of gas to horrowings to fund construction.
19 1 _ - -_- -_ _ --- ------- - - - - -
MA'd. ' ' I
?
l l' 'l g Nortliern States Power Compay Missessta arid Sdsidimes (hher income and Expence Note 14 to the Financial Non-regulatnl operating resenues increasni $151.3 million, or Statements lists the nnnguinents of Other Innime and Dnluction, 167 percent in lW1, and $2R1 million, or 45 percent in 1993, Net reponni on the Conelidatul Statements of income. Other due mainly to the impact of gas marketing and industrial heating than the operating revenues, expensea and income taxes of and cooling businesses acquirni during IW3. Non-regulatal i non-regulatal businem.es, as discussnl in the next section, non- operating expenses had corresponding increases in 1991 due to ogerating income and expense items relatnl to utility businesses the effects of IW3 acquisitions. In addition, such expenses decrea ed $2.5 million in IW1 and increased S0.11 million in increasnl in lW1 due to fewer pmject development costs being IW3, net of associated income taxes. The IWi decrease primar- capitaliznl on pending pmjects in IW1 comparnt with IW3, and ily is due to higher expenses for environmental and regulatory project write-downs, as discussal below. The increase in 1993 contingencies and higher public and government affairs non-regulated ogn rating income was due to imprmed IlDF oper-expenses associatnl with the Prairie Island fuel storage issue, ations, acquired businesses and 1992 project write-downs that padially offset by interest inconr associatn! with the Companyi did not recur in 1993. Non-regulated operating expenses include settlement of a federal income tax dispute. The increase in lW3 charges of $5.0 million in 1991 and $6.11 million in 1992 for was due to higher insestment income and lower expenses for previously capitalized deselopment and investment costs to reflect a decrease in the expected future cash flows of certain regulatory contingencica. f energy projects. L Inscrest Chnrges (Ilefore AFC) Interest costs recogni.*d for NSl% utilitj busines*cs, including amounts capitalized to Equity income NSP has a less-than-majority equity interest in l reflect the financing costs of construction activities, were $107.fi many non-regulated projects, as discussnl in Notes 4 and 5 to the l million in lWl, $111.2 million in 1993 and $109.1 million in Financial Statements. Consequently, a large portion of NSI"a IW2. The decrease in 1998 reflects the impact of refmancing non-regulatnl earnings is reported as Equity in Earnings of r sescral higher-rate long-tenn debt issues in IW3 and IW1. Unconsolidain! Imestees on the Consolidated Statements of These interest savings were partially offset by interest on higher income. The IW1 increase in niuity income primarily is due to short-term debt balances and new Viking debt (issued late in new energy projects NilG entered into during 1991 (as discussed lw3). The aserage short-term debt balance was $201.5 million in Notes 4 and 5 to the Financial Statements) and to more } in 1Wl, $77.0 million in 1993 and $l11.0 million in 1992. profitable operations of other energy projects in which NIlG has The increase in IW3 is due to amortization of refmancing costs, been an investor for seseral y ears. partially offset by interest sasings from refmancing long-term debt ut lower rates. Non-operating Cain in 1991, a cogeneration project in which . NilG was a 50-percent investor received a payment fmm an
.lcrounting Chnnge Eamings in 1992 included a net-of-tax unrelated utility company that had agreed to purchase the income item of $15.5 million for the cumulatise effect (related project cogeneration energy as compensation for terminating the to prior years) of changing the Companyi restnue n cognition energy purchase agreernent. Other income and Dnluctions-Net methml to Irgin recording estimated unbilled revenues for includes a pretas gain of $9.7 million for NilCi share of the utility sersice. termination settlement, net of project imestment costs.
Preferred Diridends Dividends on NSIN preferred stock Interest Expense Interest charges on the Consolidated decreasnl in 1991 and 1993 primarily due to redemptions of the Statements of income include interest expense related to non- !
$7.111 Series Cumulathe Preferred Stock in October IW3 and regulated businesses of $7.3 million in 1991, $2.3 million in the $11.Phics Cumulatise Preferred Stock in April 1992. 1993 and $0.1 million in 1992. The increases in 1991 and 1993 relate primarily to new non-utility long-term debt issued to Nonvegulatad Business Results rmance the IW3 acquisitions of Nilci industrial heating and NSIi non regulatni operations include many dhersified coohng business (Minneapolis Energy Center), a gas marketing buunesses, .uch as independent power pnuluction, gas marketing, business now operated by Cenergy, and 1991 investments in industrial acating and cooling, and energy-related refuse- affonlable housing projects by Eloigne Company (a wholly deriini fuel (IIDF) pnuluction. NSP also has imestments in ow ned subsidiary of the Company). In addition. during 1991 and affonlable housing projects and seseral income-pnwlucing late 1993, United Power & I,and and First Midwest Auto Park, properties. The following discusses NSl% dhersified business wholly owned subsidiaries of the Company, issued long-tenn results in the aggregate. debt secured by non-regulated pniperties and lowered NSl%
equity imestment. Operating Recennes and Expenses itecause non-regulated operating resenues are less than 10 percent of NSl% consoli- Income Taxes Other income and Deductions-Net re;uirted on dated resenues, the nel results of non-regulated businesses the Consolidaint Statements of Income (and as shown in Note are reportniin Other income and Dnluction*-Net on the Con- 14 to the Financial Statements) includes income tax expense solidatni 5tatements of Income. (Note I 1 to the Financial State- (credits) relaled to non-regulated businesses of $6.4 million ments list, the indisidual components of this line item.) in 1991, $3.5 million in IW3 and $(0.3) million in 1992. The 20 L_--__--____ - _
increase in lW1 is due mainly to higler income and gains from allows NSP and its affiliates to use market 4msed rates to nell NilG*a energy projects, as discussed above. The IW1 effective capacity and energy. The FEllC also announced a new transmis-tax rate is substantially less than the U.S. fnleral tax rate due sion pricing policy statement in October 1W1. The new policy mainly to the tax treatment of income from NitG's international intnxluces greater flexibility in transmission pricing structure. projects and to energy and low-income housing tax credits, as NSI"a revenues and earnings are not expecinl to be materially ebown in Note 1I to tie Financial Statements. affected by the FEllC's new pricing policies for transmission ser-vices. NSP management plans to continue its efforts to be a com-Factors Affecting Results of Operations petitisely prieni supplier of electricity and an actise panicipani NSI"o n sults of ogerations during IWi and IW3 were primarily in the competitive market for electricity. degendent on the ogerations of the Company's and Wisconsin In resguinse to the developing electric industry competi-Company's utility busincues consisting of the generation, tion, Cenergy applied for and was granted pennission by the transminion and sale of electricity and the distribution, trans- FEllC to market electricity (except electricity generated by portation and sale of natural gas. NSire utility resenues degend NSP) in the United States, effectise Dec.1, IW1. Cenergy in on customer usage, w hich s aries w ith weather conditions, general one of the first affiliates of an electric utility to obtain this business conditions, the state of the economy and the cost of approval from the FEllC. energy *enices. Various regulatory agencies determine the Some states are considering pmjussals to require '" retail prices for electric and gas menice within their respective whecling", which is the transmission of power generated by a third jurisdictions, in addition, NSP's non-regulated businesses are party to retail customers of another utility. In lWl, NSP filed a leginning to contribute significantly to NSP's earnings. The response io a prognisal by its regulator in Wisconsin outlining the historical and future trends of NSI"s operating results has e been transition 2d steps necessary to create an ogen and fair competitive y/ and are npected to le affected by the following factors: ekrtric market. NSI"s position is that all customers should Ir able 3 to choose their electric supplies m *SI, and that generation also Comperision Tim Energy Policy Act of IW2 (tle Act)is a cat- shouki he deregulatal by 2001. NSP proposes that utilities retain alyst for comprehensise and significant changes in the oieration otrrational nintrol of their transmision and distribution systems, of electric utilities, including inen ased comittition. Tl e Act's and that utilities should be gennitted to recover the cost of reform of the Publ;c Utility lloiding Company Act (PUllCA) investments that were authorizal under traditional regulation. promotes creation of wholesale non-utility [mer generators and Itegulamrs in Wisconsin are currently considering what action, if authorizes the Federal Energy llegulatory Commission (FEllC) any, they should take regarding electric industry comgetition. to require utilities to prmide wholesale transmission senices to During IW2 and lW3, the FEllC issued a series of onlers thin] parties. The legislation allows utilities and non-regulatnl (together called Order 636) addressing interstate natural gas companies to build, own and operate lxmer plants nationally pi[eline service restructuring. This restructuring has "unbun- e and internationally without Iring subject to restrictions that dled" cach of the services (sales, trans[mrtation, storage and prninusly applini to utilities under the PUllCA. Managema.t ancillary senices) traditionally pmvided by gas pigeline com- < lelieses this legislation will promote the continued trend of panies. Onler 636 ended the traditional pip 'ine sales service increasnl comietition in the electric energy markets. function, which in the past had met local distributiot compa-In lWl, the FEltC issunl proposed rulemaking to address nies' (l.DCs)'needs for reliability of supply and flexibility for , the rate treatment of justential " stranded imestment" nists that meeting varying load conditions. The im;dementation of Onler , 1 could occur as wholesale electric markets benwne more com;eti- 636 has applied more pressure on all IJ)Cs to keep gas supply tise. The FEllC is soliciting comments on options for reemery of and transmission pricing for large customers competitise in light transition costs associaini with existing electric imestments for of the alternatises now available to these customers. Interstate
, which comlrtilise market pricing might not prmide reemery. pipelines have been allowed to recover from their customers NSP is evaluating the FEltC proposal to detenniw the intential 100 gercent of prudently incurred transition costs attributable to f efftrts on operating results and customer rates and has responded Onler 636 restructuring. NSP estimates that it will le responsi-l to the FEliC indisidually and through an industry gmup. Tir Ide for less than $12 million of transition costs mer a five-year FI'ItC has not reachnl a final decision, and the effects of the pnr irriul leginning Nov.1, lW3. To date, NSl"s regulatory com-l posed rulemaking currently are not known. missions base apprmed rn mery of these restructuring charges
! NSP filnl olrn access transmiwinn tariff
- with the FERC in in retail gas rates through the purchased gas adjustment. New
! March IW1. In airepting the filing, the FEllC ruled NSI"s service agreements went into effect letween NSP and its l tariff would im subjeTt to the rn}uirement that NSP offer pipeline transporters on Nov.1. IW3. NSP does not expect transmiwinn senice to third parties using terms and conditions these new agreements under Order 636 to materially affect its comparable to its own u c of the system on Ichalf of NSl"s cost of ga* supply. NSirs acquisitions of Viking and a gas mar-traditiona' retail udes custoners. NSP also adilressnl the fol- Leting businew in lW3 hase enhanced its ability to participate lowing open acens issue
- in its filing: timely nmjen*cs to giunl in the more com[rtilise gas trans[mrtation husiness. In imple-faith tran-mieion rnmests; unhu sdling energy senices and menting Onler 636. Viking incurrn! no tran ition costs, establishing appn priate pricing mechanisms to ensure that cost allration presenta inter-class subsidies. In addition, the filing 21
V g J lv N[ N Regidation NSirs utility rates are apprmed by the FEllC, the commitmenta for NSP, including wind and bioma,s generation l Minnesota Public Utilities Commi*sion (MPUC), the Nonh sources. (See Notes 16 and 17 to the Financial Statements for Dakota Public Service Gemmieion, the Public Sen-ice Cmnmia- nuire infonnation.) sion of %isconsin (I'SCW), the Michigan Public Senice Com. mioion and the South Dakota Public Utilities Commission. Wholesale Castomers In 1992, nine of the Company's 19 l llates are desigrugl to termer plant investment and o[rrating municipal wholesale electric cu%tomers notifed the Company of l costs and an allowed return on imestment, using an annual their intent to terminate their [mwer supply agreements with the l period u[mn which rate case filings are hawed. NSP requests Company, effectise joly 1995 or july 194. These nine customers e hanges in ratew for utility services as nnNlcd through filings with currently represent approximately $29 million in annual res-
- l. the gowrning commiwinns. The rates chargni to retail customer
- enues and a maximum demand load of approximately 155 I in Wiscon*in are resicwed arul adjusted hiennially. llecause rate megawatts (MW).
changes are not requested annually in Minnesota, NSl"s primary in 1992 and 1993, the Company signed long-term [x,wer jurisdiction, changes in ojerating costs can affect NSi% earn- supply agreements with the 10 remaining municipal cus-ings, shareholders' equity and other financial results. Except for tomers. The agreements conunit the customers to purchase Wisconsin electrie operations, NSP% rate schnlules pnnide for power from the Company for up to 13 years (through 2005) at costmf-energy adjustment
- 10 billings and resenues for changes fi .nl rates rising at up to 3 percent per y ear. The 10 customers in the nest of fuel for electric generation, purchasnl energy aml reprewnt appmximately $10 million in current annual resenue purchasnl gas.14r Wisn>nsin electric oirrations, the idennial and a maximum demand load of approximately 59 MW. The retail rate review pnres* considers changes in electric fuel arul rates contained in the agreements were accepted by the FEllC.
purchasnl energv nists in lieu of a not-of-energy adjustment The Michigan Public l'tilities Conunission must also appnne clause, jn addition to changes in operatmg nwts, other factors the transaction, affecting rate filings are sales growth, conwenation and demand- During 1713. the Company signn! an electric power side management efforts and n>st of capital, agreement to prmide Michigan's llpper Peninsula Power Company (UPPCO) with up to 150 MW of baseload senice, Hate Changes NSP liled for IVG rate increases in Minnesota, peaking senice options and load regulation senice options North Dakota, South Dakota and Wi consin to off et increasing for 20 years from January 1713 through December 2017. l.oad costs li>r purchased power emnmitments, depn ciation, p ,perty regulation senice is designed to change the lesel of power taxes, pistretirement benefits and other expenws. NSP received delisery during each hour to match l'PPCO's load nquire-appnnals for approximately $102 million of annualiznl rate ments. UPPCO has nominatnl 50 MW of ha,e load and 5 MW increase
- for retail cu-tomers in thow states as well as for of winter season peaking power purchases fnim NSP leginning wholesale customers in Minnesota and Wiscon-in. These rate Jan.1, IVXL The annual resenue for 1918 is pn>jected to la changes increasnl resenues by apprmimately $83 million in appnnimately Sil million to Sl4 million. The interchange 140 and an additional $19 million in 1911 agreement letween i PPCO and NSP for ' sale was accepted As di cu-ed in Note 2 to the financial Statements, filings by the FEllC. The Michigan Public (:tilities Commission must for rate changes in ]V>l did not hase a material impact on also apprme the transaction.
financial resuhs. No significant general rate filings in any of NSi"a utility jurisdictions are expectnl for 1915. Iloweser, the Enrironmental Matters NSP incurs sescral types of emiron-Company requested that the MPL'C apprme a new raie mental costs including nuclear plant decommissioning. storage adjustment clause designni to accelerate reemery of IV)l and and ultimate disposal of used nuclear fuel, disposal of hazardous expectml lW5 deferred electric consenation program costs. mainials and wastes, remediation of contaminated sites and This adjustment clause could help reduce the need for filing monitoring of diwharge* into the environment. NSP is reconting a general rate increa-e rnpiest for reemery of inercases in nst* for emironmental monitoring and accrual
- for nuclear consenation extenditures. In February 1V35. the MPUC soled plant decommissioning and used nuclear fuel disposal as an to apprme the new rate adjustment clause for the perimi May ongoing olerating ex;ene and has recorded its he t estimate of 1915 through June 14>6. Thereafter. the Company wouhl le ihe full obliganon for emironmental remnliation. Ilecause of the n quirni to rniuest a new cost reemery lesel annually. The cor.tinuing trend towani greater entinmmental awarence and Company estimates it will reccise an additional $21 million in increasingly stringent regulation, NSP has Iren ex;rriencing a resenues in 1915.Thi* increasal reemery will resuh in a cor- trend tonanl increasing eminmmental costs. This trend has responding increase in conwnation cycnes. A final unter i, cau ed and may continue to cauw slightly higher ogerating eyrcinlin March 1935. cyrnses and capital eyenditures. Cost chargni to NSI"s operating eyenws for emironmental monitoring and di pmal
[ legisIntire Changes In May 1911, NSP n ceisnl legi latise of haranlous materials and waste
- in 1911 were uppnnimately authorization for dry cast fuel storage facihties at the Canpanis $7 million and are currently eyrcinl to increase to an aserage Prairie I land nuclear renerating facility. As a condition of this annual amount of apprmimately $12 million fier the fise-year authorization, the legi lature establi hed sescral resource gerim! IVG-IVM. Iloweser, the pn ci e timing and amount of 22
ensironnwntal costs, ine!uding those for site remediation and As discussnl in Notes 3 and 10 to the Financial Statements, di rnmal of hazanlous materials,are currently unknown. In 1991, in 1993 NSP changni its accounting for certain Iwwtretirement 1993 aral 1992, the Company s[rnt alniut $15 million, $15 million lenefits and twgan recording such lwnefits on an accrual basis. and $20 million, res[cclisely, for capital expenditures on NSl"s utility companies had presiously heen allowed rate n cmery ensironmental impnnements at its utility facilities. In 1995, the for gnw.tretirement henefits as paid. In the 1993 rate increases Company exlrcts to incur appnximately $15 million in capital discussnl previously, NEI'm utility companies obtained rate eq,enditan a for compliance with envininmental regulation *. reemery fi>r substantially all of the increased cost * (approxi.
, (See Notes 16 and 17 to the Financial Statements for further mately $20 million) accrued under Statement of Financial di.cussion of these and other ensironmental contingencies that Accounting Standards (SFAS) No.106 in 1993. Due to rate l could affect NSP.) recosery of higher costs, there was no material impact on NSI"s ogerating results from this acc. unting change.
Irenther NSl"s earnings can he dramatically affectnl hy NSP currently follows predominant industry practice in unusual weather. Mild weather, mainly crx>l ,,ununers, reduced reconting its emironmental liabilities for plant decommissioning carnings by an estimatal 13 cents per share in 1991 and 18 and site exit costs as a component of utility plant. The Financial cents per share in PM3. Iloweser, this was an impnnement mer Accounting Standanl* Iloani (FA511) is evaluating the financial Pr>2, when a warm winier and the coolest summer in 773cars presentation of these obligations and the relatn! ex[wnse accru-rnluced earnings by an estimated 51 cents ger share. als, which could require repoding reclassifications as early as 1 M5. The effects of regulation are expected to minimize or Arquisitions in 1998, NiiG acquired ownership interests in eliminate any impact on operating expenses from [mtential three significant international energy project * (as diseum! in accounting chaeges for deconunissioning costs. (For further dis- [ Note i to the Financial Statements) which increared 1991 cussion, see Note 16 to the Financial Statements.) t earnings h) appnnimately 38 cents [er share. NSP al o made three other strategically important business acquisitions in Use of l>criratires Through its subsidiaries, NSP uses 19T1, including an interstate natural gas pipeline (Viking). un derivatise financial instrument
- to manage the risks of fluctu-energy senices marketing business (Cenergy) and a steam heat- ations in foreign currencies and natural gas prices. At Dec. 31,
> ing and chillnl water nuling >> stem business (Minnea[wdis PM1, $93 nullion in notional amount (i.e. no transfer of prin-Energy Center, emw an NilG subsidiaryL WP continues to esal- cipal) of hedge instruments were in idace to hedge international uate opportunities to enliance its nenipetitis t- [wisition and imestments suldect to foreign currericy excliange fluctuations, shareholder returns through strategic husiness anjuisition%. and $16 million in notional amount of futures contracts were in place to hedge the sale of natural gas. NSP also uses interest rate impuri o[Non-regulateel Inrealments NSI"s net income in swap agreements to comed liwd rate debt to variable rate debt.
PMI incimles after-tas carnings of $33.0 million, or 49 cents At Dec. 31,1991, NSP had $320 million in notional amount of per ,, hare, from all non-regulated businesses. As discussnl interest rate swap agreements. (See Note 13 to the Financial presiously, NilG acquired njuity interests in three significant Statements for fudher discus ion of NSl"s financial in4ruments energy projects in PMI. NSP expects to continue imesting and derisatises.) significant amounts in non-regulated projects. including domen-tic and internatianal power pnnluction projects through NilG, as Non-rcrurring licms NSl"s earnings for 1998 include sewral 1 de*criled under " Future fmancing llequirements". Depending non-recurring items. Although their net effect was an earnings on the success and timing ofimohement in these project *, NSP increase of only I cent per share,indisidually significant non-rymels that non-regulated earnings could increa*e in the future recurring iterns includnl a gain on tennination of a non-regulated to contribute al least 20 [ercent of NSl"s carnings by the year cogeneration contract, interest income from the settlement of a j 2tNNL The non-regulated projects in which NSP has imeste1 fnleral income tax dispute, a chv far pre-1991 postemployment carry a higher lesel of risk than NSl"s traditional utility hm,i- costs associatnl with adopting SFAS No.112, and asset impair-newes. Cunent and fulme imestment* in non-regulatnl pro cts ment write-downs for certain non-regulated energy projects. are suhject to uncertainties prior to final legal closing. and continuing operations are subject to foreign gmenunent actions, inflation lii torically, certain olerating costs, mainly labor partnership action or loth. The Unl olerating re ults of NSI"s and pniperty laws, base leen affected by inflation. Also, non-regulated businesses may not necessarily le indicatiw of inflation has tended to inerca e the replacement co t of olerat-future operating results. ing facilities. which has increa ed depreciation expense when replacement facilities are construcin!. Ilowewr, sewr'd signif-
.teconnling Cimnges Fffectiw jan.1,1991, NSP ndoptni three icant expen e items haw been less sensitiw to inflation, new accounting tandard< for instemployment lem fits, fair salue in< luding fuel costs, income taws and intere t expense. Owr-accounting for cedain im estments aml cmployee ,tock ownership all inflation at the lewl currently Iring eyerienced is not -
plan transactions. Tine am unting changes lud an immaterial cymetnl to materially affect NSI"* prices to customers or impact on camings in Uni. (See Note 3 in the Financial State- return to shareholders. ment for morr information on these accounting changes.) 23 L - - _ _ _ - - - - - - - - - - - - - - - - - - - - - - -
~ '
MANAHM N ' I I l' 'l hertlere State's Power Company Minnesota and Subsidiaries LIQUIDITY AND CAPITAL RESOURCES NSI% equity imestments in non-regulated projects during 1991 were fmanced thmugh internally generaini funds. Pmject 1991 Financing Itequirements N5I% need for capital funds financing requirements,in excess of equity contributions fmm l is primarily related to the construction of plant and equipment imestors, were satisfied with project debt. Project debt associ-to meet the nenl4 of electric and gas utility customers and to ated with many of NSl% non-regulatal investments is not fund equity commitnwnts or other itnestments in non-regulated reflected in NSl% halance sheet because the equity method of businesses. Total NSP utility capital ..xpendaures (including accounting is used for such imestments. (See Note 5 to the Al'C) were $387 million in 1991. Of that amount, $30t million Financial Statements.) , related to replacements and imprmement* of NSi% electric sys-tem and $60 million intohed construction of natural gas distri- Fufure financing Requirements Utility financing I bution facilities. NSP companies imented $159 million in requirements for 1995-1939 may be affected in varying degrees non-regulated projects and pngerty in 1991, mainly for equity by numerous factors including load gmwth, changes in capital 1 imestment* in domestic and international [wmer pmjects. Nil (3 fi[rnditure levels, rate increases allowed by regulatory agencies, imestnl in joint 4 enture pnsjects that acquiral electric general. new legislation, market entry of competing electric power genera-ing plants in Australia and Cennany, and ujeneast coal mining tors, changes in environmental regulations and other regulatory operations in Germany. Eloigne Company imested in affonlable requirements. NSP currently estimates that its utility capital housing pmjects, includ'ng wholly owned and limitnl partner- expenditures will be $383 million in 1995 and $1.9 billion for the ship sentures. fhe-year [eriod 1995-1999. Of the 1995 amount, $322 million is schnluled for electric facilities and $31 million for natural gas ! 1991 Financing Arsirity During 1994, NSl% primary sources facilities %ese utility capital expenditure estimates include of capital included intemally generatnl funds,long-tenu debt and appmximately $190 million of anticipated extenditun s for emi-l shon-term debt. Ilm allocation of financing requirement < letween ronmental improvements at utility facilities for the fise-year these capital options is ba nl on tir n lathe cost of each option, penod 1995-199'A in addition to utility capital expenditures, regulatory restrictions and the constraints of NSIN long-range ex;rcted financing requirements for the 1915-1999 gerical capital stmeture objecthes. During 1991, NSP continuni to meet include approximately $369 million to retire long-term debt and its long-range regulatnl capital structure objecthe of 45-50 per- meet first mortgage inmd sinking fund requirements. cent emmnon equity and 42-50 gercent debt. Thmugh its subsidiaries, NSP exp< cts to invest significant Fuml4 generated internally from operating cash flows in amounts in non-regulated pmjects in the future. Financing 1991 remained sufficient to meet working capital nents, debt ser- requirements for non-regulated pmject imestments may vary . sice, dnidend payout rniuirements and non-regulated imestment degending on the success, timing and lesel of involvement in commitnrnts, as well as fund a significant portion of construction projects currently under consideration. Potential capital cyrnditures. NSl% 1993 cash flows impnnn! mer 1992 mainly requirements for NSl% non-regulated projects and propeny are due to more fasorable weather and rate increar.es. The pretax estimated to be apprmimately $ 153 million in 1995 and appmx. interest emerage ratio, excluding AFC, wa* 3.9 in 1911 and 3.9 imately $623 million for the five-> ear geriod 1995-1999. These in 1933.11rse ratio < met NSIN objecthe range of 3.5-5.0 for amounts include expectnl NltG investments thmugh 1996 of up interesi nnerage. Internally generated funds couhl ha e pnnided to $16 million for an existing German pmject and Eloigne Com-financing for 69 lrreent of NSIN capital ex[rndituns for 1991 pany imestments of up to $23 million in 1995 and $13 million and 77 jercent of the $1.9 billion in capital egenditures incurn d annually in 1996-1999 for affordable housing projects. . for the (he-year jrriod 19)o-1991. Eloigne Company expects to finance appmximately 65 percent of The Company had apprmimately $238 million in short-tenn the e imestments in affonlable housing pmjects with equity l borrowings outstanding a* of Dec. 31,1991. Thmughout 1991, and approximately 35 percent with long-term debt. In addition short-term bormwings were used to finance utility capital ex[en- to imestment.4 in non-regulated projects, NSP continues to eval-ditures and pnnide for other NSP cash needs, uate opportunities to enhance shareholder returns and in 1991, the Company issun! $350 million of fir t mortgage achiese long *erm financial objectives through acquisitions of Imnds to refinance higher-nest debt issues and rnluce short- existing businesses long-term financing may be required for ; term debt lesels. In addition. United Power & l.and issued such investments.
$10 million of non-utility long-term debt to recapitalize the ne Company will also have future financing requirements Company's prior equity imestment in the subsidiary. Eloigne for the lurtion of nuclear plant deemumissioning costs not funded Company al o is unt apprmimately $8 million of long-tenu externally. Basnl on the most recent decommis ioning study, debt to finance affonlable hou ing pmject imestme nts. these amounts are expectnl to be apprmimateiy $363 million, 11r Company issun! 42,567 new shan s of nimmon stock and are expectnl to be paid during the years 2010 to 2022.
in 1994 under NSl% Ewcuthe long-Tenn incenthe Awant Stock Plan. At Dec. 31, 1998, the total numler of comm:.n shans oui 3tanding was 66.922,141. ( 24
- d
Future k,urces rif financing NSP exgwets to obtain external The Company registered first mortgage Ixinds with the capital for future financing requiremems by perialically iwuing Securities and Exchange Commiwion (SEC)in December 1993. long-tenn debt, comnuin stock and preferred stock as needed to Degending on capital market conditions, the Company expects maintain desind capitalization ratios. Oser the long-tenn, to issue the remaining $250 million of registered but unissued NSI". equity imestments in non-regulated projects are Ix>nds over the next wieral years to raise aihlitional capital or expected to le financed through internally generateil funds or redeem outstanding securities. NSI"s ieuance of comnon stock. Financing requirements for The Companyi lloard of Directors has appn>ved short. the non-regulatni projects, in excess of equity contributions term lxirrowing lesels up to 10 percent of capitalization. The Innn imestors, are exgectnl to le fulfilled ihn> ugh project debt. Company has received regulatory approval for $350 million in
, Decornmissioning expenses not funded by an external trust are short-tenn borrowing lesels and plans to keep its credit lines exgerted to le financed through a combination ofinternally gen- at or alane its aserage lesel of commercial pairr borrowings.
erated funds, long tenn deht and common stock. The extent of Commercial banks presently provide credit lines to the Com-external capital requirni for nuclear den >nunissioning cost
- is pany of approsmately $299 million, which excludes $11 mil-not known at this time. lion of credit lines pnnided to subsidiaries of the Company.
NSI"s ability to finance its utility construction program at These credit lines make short-tenn financing asailable in the a reasonable cost and to prmide for other capital needs form of liank loans. de[minl* on its ability to meet imestors' return expectations. The Companyi Articles of Incorporation authorize the financing flexibility is enhanced by prmiding working capital maximum amount of prefern d
- lock that may be issued. Under need* aml a high pen entage of total capital requirements from these pnnisions, the Gimpany could hase issued all $160 mih internal sources, and liming the ability to issue long-term lion ofits remaining authorized, but unissued, preferred stock at accurities and obtain short-term credit. NSP exject* to main- Dec. 31,1731, and remained in compliance with all interest and t tain adequate access to wourities markets in 1995. Access to disidend emerage requirements.
securities markets at a reasonable cost is determinal in a large The lesel of common stock authorsed under the Companyi part by credit quality. The Company % first mortgage lumd are Articles of Incorjoration is 160 mi' lion shares. llegistration raied A A- by Siandan! & Poori Coqmration, Al by Onlyi Statement < filed with the SEC pnnidt for the sale of up to 1.6 f lmestor* Senice,Inc. phnnlyi). A A- by Duff & Phelps,Inc., and million shares of conunon stock uadei the Companyi Disidend A A by Fitch lmestors Senice, Inc. itatings for the Wisconsin 1(eimestment and Stock Purchase Plan (DitSPP) Executhe Companyi fir t mortgage bonds are generally comparable. long-Tenn incentisc Awan! Stock Plan, and Employee Stock These ratings reflect the siews of such organizations, and an Ow nership Plan (ESOP) as of Dec. 31,1991. 'lle Company may explanation of the significance of these ratings may le obta'ned issue new shares or purchase shares on the ogen market for its from each agency. hxlyi downgraded NSI"* first mortgage stock plans. (See Note 7 to the Financial Statenwnts for discussion bond ratings to A1 based on its interpretation of pnnision* of a of stock awanh outstanding.) The Company does not plan any Minnesota law enacted in 14>l for used nuclear fuel storage at general public stock offerings in 1995, but may issue new shares the Prairic 1* land generating plant. (The other three rating for its DliSPP and FSOP plans. agencies reaffirmed their ratings of NSl"s Imnds after con-ider- Internally generated funds from utility oierations are ing the impact of the legi lation on NSP.) As di cussed in Notes experini to equal appmximately 115 gercent of anticipatnl utility 16 and 17 to the l'inancial Statements, the legislation requires capital extenditures for 1995 and approximately 95 gereent of the t NSP to increa e its use of renewable energy sources such as $1.9 billion in anticipatnl utility capital expenditures for the wind and biomass power, balyi has indicaini that il believes live-year geriod 1995-19/1 Internally generated funds from all these sources of power are considerably nmre costly than the operations are expected to equal apprmimately 60 gercent and
, power currently generated and that NSP's electric pnaluction 110 [ercent, resirethely, of the anticipated total capital expen-I costs will increase materially m er current lesels. NSP acknowl- ditures for 1995 and the fne-year perim! 1995-1999. Iterause of edges that electric pn=luction costs may increase as a result of NSl"* intention to reimest foreign cash flows in non-U.S.
l the Prairic l land legislation. operatians, the equity innnne fnnu international imestment* The Companyi and the Wisconsin unnpanyi first mort- currently thrs not pnnide operating cash available for U.S. cash l page indentures limit the amount of first mortgage Imnds that requirenwnts such as payment of disidends, domestic capital may be issuni. The MPl'C and the PSCW hme jurisdiction mer expenditures and domestic debt senice. NSP intends to pursue i securities issuance. At Dec. 31,199 8, with an assumed interest a diserse portfolio of fi> reign energy projects with varying lesels l rate of11.5 percent, the Company could hase issued almut $1.9 of cash flows, income and foreign taxation to allow maximum billion of additional first mortgage bonds under its indenture, flexibility of foreign cash flows. and the Wisconsin Company couhl hase issued about $2111 mil-lion of additional hrst mortgage Imnds under its indenture. ) - - - - - - - -
I i l l l Year Ended Dec. 31 ITlwusands of dollars. except per dare data 1 1994 1993 1992 Utility Operating Revenues - Electric 82 066 644 $1974 916 $1823 316 Can 419 903 429 076 336 206 Total 2 4116 5 17 2 403 992 2 159 522 UtiUty Operating Expenses Electric pnnluction exicnws - fuel and purchased gunver 570 880 524 126 451 696 Co t of gas pun hawd and transported 263 443 282 028 220 370 Other operation 311119 3G1675 307 232 Maintenance 170 145 161 413 180 585 Adminir.trative and general 193 Bill 182 535 187 975 Conwrvation and energy rnanagement 31 231 29 358 17 626 Depreciation and ammtization 273 1101 261 517 212 914 Progerty and general taxes 234 564 223 108 201 439 income taxen 129 228 128 345 90 669 . Total 2 178 229 2100 RXi I 903 506 UtiUty Operating income 308 318 303 886 256 016 Otherincome and Expense Equily in earnings of unconsolidated investees 35 863 3 030 2 382 Allowance for funds used during construction - equity 4 518 7 328 8 993 Other income and desluctions - net 1961 5 588 '(3 423) Total 42 372 15 916 7 952 l Income Before Interest Charges 350 690 319 832 26'1 968 Interest Charges i Interest on long-term debt 97 143 101714 103 035 l Other interest and amortization 17 910 8 818 6 203 Allowance for funda used during construction - debt (71168) (5 470) (6 198) Total 107 215 108 092 103 010 income Before Accounting Change 213 475 211 740 160 928 Accounting Change Cumulative effect on prior year of change in accounting principle - unbilled resenues (net of deferred income taxen of $30,591) 45 512 Netincome 213 475 211 740 206 440 Preferred Stock Dividends 12 361 14 580 16 172 Earnings Asailable for Common Stock 8231 111 $197100 $190 268 Average numler of common and equivalent shares outstanihng 0xxts) 66 815 65 211 62 bil Earnings per Average Common Share: Income lefore accounting change $3.46 $3.02 $2.31 Cumulative effect of unbilled revenue accounting change .73 Total 83.46 $3.02 $3.01 Common Ihvidends Declared per Share 82.625 $2.565 $2.495 See hues to Fmancial Statements on pages 32 to 45 26 _ _____ ____ _-_____ _ l
MIIMIllliMf4MHfJiiMIN91MMEDI Year Ended Dec. 31
~ fTlwusar0ts of dallars) 1991 1993 1992 Cash Flows from Operating Activities:
Net Income ,3 475 $211740 $206 410 Adjustmenta to ren,ncile net income to cash fmm oierating activities: Depreciation and amortization 301 583 '286 855 261 A57 Nucicar fuel amortization 45 553 43 120 45 129
~ Deferrni inmnw taxes from ogerations (2 262) 12 256 5 186 Deferrni investment tax crnlita recogniznl (9 501) (9 223) (8 446)
Allowance for funda used during construction - niuity (4 518) (7 328) (8 993) ; Undistributed nguity in earnings of unconsolidated investees (27 427) (1 142) (1 006) Gain from non-regulated project lermination settlement (9 685) Cumulative effect of unbilled revenue accounting change - net of tax (45 512) Cnsh pmvidal by (u*ed for) changen in certain wmking capital items (11627) 33 259 (31 478) 1 Conservation pmgram ex[endituren - net of amortization (29 963) (21 185) (16 918) ] l Cmh providni by (usal for) changen in other a**ets ami liabilities (1 012) 12 340 2 767 l Net Cash Provided by Operating Activities 500 556 560 692 408 596 ) Cash Flows From investing Activities: Capital exrenditures: Utility businessen (387 026) (356 836) (423 346) Non-regulaint businesses (22 260) (4 859) (4 469) Increa e (decrea c)in construction payables !I 668 2 598 (2 863) Allowance for fund
- usnl dunng construction - equity 4 518 7 328 8 993 Sale (purchase) of short-term investments - net (1166) 62 1552 Irnestment in external decommi*sioning fund (12 677) (32 578) (27 929)
Pnreed* Imm non-regulatnl project tennination nettlenwnt 14 000 llusinena acquisitions (159 385) Intn.tnwnta in non-regidaini pmjects am! other (136 826) (25 957) 2 551 Net Cash Used for Investing Activities (559 439) (569 627) (445 508) Cash Flows From Financing Activities: Change in shor1-term debt - net issuancen (repayments) 132 239 (40 361) 146 561 i Pncents fmm issuance of long-term debt 367 181 613 120 126 531 llepayment oflong-term debt, including reacquisition premiums (272 097) (189 106) (48 314) Pnrenl* from issuance of comumn stm L 1 368 1&3 651 2 960 lledemption of preferred stock, including premium (36 092) (25 838) Disidends paid (186 568) (180 220) (171 355) Net Cash Provided by Financing Activities 42 126 50 995 30 495 Net increase (Decrease)in Cash and Cash Equivalents (16 757) 42 060 (6 417) Cash and Cash Equi 5alents at fleginning of Period 57 812 15 752 22 169 Cash and Cash Equivalents at End of Period 8 41 055 $ 57 812 $ 15 752 , Cash Provided by (Used for) Changes in Certain Working Capitalitems: Acniunts nerisable and accruni utility resenues 8 (1 695) $ (50 403) $ (14108) Material
- and supplien inventories (13 462) 13 911 (5 280)
Pay alilen and accruni liabilitien (excluding construction payables) 32 550 51247 5 206 Customer rate refund $ (10 410) 12 235 (11 987) Other (15 610) 3 269 (5 309) Net 8 (8 627) $ 33 259 $ (31478) Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest (net of amount capitalital) 8106 867 $ 107 037 $ 99 669 income tasca 8170 17i $ 120191 $ 93 032 See Antes la financial Statemettin on ptsges 32 In 45 27 ) __ _ - - - - - - - - _ - - - - - - - - - - - - - - - - _ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dec.31 iTlwasaruis of dollars) I99% 1993 Assets titility Plant Electric - including construction work in progrens: l'Ill, 8117.235; IY>3. $174,893 $6 372 317 $6167 670 Gan 677 233 621 871 Other 262 506 237 293 Total 7 312 056 7 026 834 Accumulated prosinion for depreciation (3116 til1) (2 888 144) Nuclear fuel-including amount
- in proce**: 1998, $12,505; 1993, $15,358 797 097 749 078 Accumulated provision for amortization (718 690) (673 669)
Net utility plant i 273 652 4 214 099 Current Assets Cash and cash equivalent. 41 055 57 812 Short-tenn investments 892 26 Account
- receivable - net of accumulatal pnnision for uncollectible accounta: 1911, $1,072; 1993, $ 1,476 280 8511 266 531 Accrued utility resenues 911651 111 2 %
Federal income tax anti intere*t reveivable 28 858 20 927 Material
- and supplies - at average cost Fuel 56 960 41 776 l Other 101 8711 103 599 Prepayment
- and other 56 075 40 885 Total current assets 665 227 642 852 Other Assets Regulatory assets 357 576 334 354 Non-regulated property - net of accumulated depreciation:
1991, $73,296; 1993, $63.,351 172 961 157 615 Insentmentr. in non-regulated projects 181 330 45 772 External decommisioning fund and other investmenta 165166 121 657 Federal income tax and interest recessable 56 358 Intangible as*ets and other 81 001 71 369 Total other asseta 1 014 692 730 767 Total 85 953 571 .85 587 718 Liabilities and Equity Capitalization (See pages 30-31) Common miockhohlers' equity $1896 967 $1827 451 l'referrn! wioi Lhohlers' equity 2 to 169 240 469 long-tenn ilebt 1 163 351 1 291 867 Total capitalization 3 600 790 3 359 790 Current Liabilities long-term debt due within one year 16 106 90 618 Other long-term debt potentially due within onc ycar 111 600 141 600 l Short-tenn debt - primarily conunercial pyier 238 139 106 200 Accounts payable 231 905 210 651 ) Tasca acenwd 178 119 177 853 Interest accruni 28 161 24 110 Disiilend* payable on common and preferred stocks 47 283 46 195 Accrunt pa3 roll, sacation and other 79 029 73 792 Total current liabilitica 963 615 871 022 Other Liabilities lieferrn) income taxes 8181570 788 378 g Deferrni investment tas credits 173 838 187 466 llegidatory liabilitien 200 517 213 880 Pension and other benefit obligation
- 92 511 61 224 73 397 72 958 i Other long-tenn obligations and defenni income
'Iotal other liabihtien 1 389 136 1 356 406 Commitments and Contingent liabilities (See Notes 16 and 17)
Total 85 953 571 85 587 718 See %es to hnancial Statements on p mes 32 to 43
0050 lia ti a emen S 0 30985 in Omplin i i I Jisrthern States Power Company. Minnesota and Sdsidianes , Cumulative , Currency ,
' Number of Hetained Share IIeld Trannlation , thullar aamuna in thoraands) Shares Inued Par Value Premium Earnings by FSOP Adjustmente Batante at Dec. 31.1991 62 511 401 s 156 354 s 368 021 s 1 f(26 559 s(14100 Net income 206 410 Dividends declarnl:
Cumulative preferrni at<tk at required ruten (16 172) Conunon aten k (156 109) Exen-i3e of stock options and other stock awants 56 956 142 2 805 l Preferred sinck rnlemption and i stock iuuante n>> ta (7) (822) Hepayment of ESOP loan 8 991 Balance at Dec. 31,1992 62 598 360 s 156 4 % s 370 819 s 1 099 896 s (5 113) ; Net income 211 710 Dividends declared: Cumulative preferred niork at required rates (14 580) Conunon stock (168 615) 14 nuances of common stock 4 281 217 10 703 176 2'X; Preferred stock redemption and stock iuuance nuts (3 315) (1 069) loan to ESOP to purthasen shares (15 000) Itepapnent of ESOP loan 9 226 l Balance at Dec. 31,1993 66 879 577 s 167 199 s sta 770 s 1 127 372 s(10 887) Net income 243 475 Dividends declarnl: Cumulatise preferrn! mtock at required rates (12361) Common niork (175 292) luuances of comnon ntork 42 567 106 1 312 Stoch i=uam e costn (80) Tas 1.cnefit from stock options exercisni 843 IL payment of ESOP lo.m 7 897 Currency translation adjustments s 3 586 Balance at Dec. 31.1994 66 922 111 8167 303 ssis 875 81 183 191 8(2 990) 83 586 See hies to nnantint Straements on pages 32 to 45 i i l l l l l 29 { _ . - 9
MMIMilKilNEIlNilNilIIIMllHflUtlH 11 ller. 31 (Ihousands of dollarn I99L IV13 Common Stockholders' Equity Common ni<rk - authoriwd 160J10IUKW) sharen of $2.50 par value; inued sharen: 1991,66,92}}