ML20206S228

Louisiana Power & Light Co,1986 Annual Rept

ML20206S228
Person / Time
Site:	Grand Gulf, Arkansas Nuclear, Waterford, 05000000
Issue date:	12/31/1986
From:	Cain J LOUISIANA POWER & LIGHT CO.
To:
Shared Package
ML20206R980	List: ML20206S051 ML20206S115 ML20206S228 W3P87-1113, Forwards Louisiana Power & Light Co,New Orleans Public Svc, Inc & Middle South Utils,Inc Annual Repts for 1986
References
NUDOCS 8704220358
Download: ML20206S228 (36)

Text

4

~

r .

"I h [bhhhp ' j.'

Louisiana

- y. .

' bh[h,kddMpg%@h.[f. } [

% ,.,rgk . j p'.

lrc('? g".,3~-y

. '/

• % (%f

't'- *

+ A f .: f

... ...?k

.Q'g.

Q

,s

' . Powr & Light Comp

• G v lI N ', f :I wh [.

1 .

5'_ _ ,

,q [

y , , , . , *{;-..,

e

• em %n .

gy%& ..

AWY,.?

p n m.,Q py y ' , 3 ,

pp'{, p, . ~g

[W,lqm~ pM?y&- QfL{ek? &,y%l I\w\l5 r  ; . ,

m .. . , , ,

tw '

O'&.

2  % A , ' \. - \N . '~.l .I 4 ,,... A * '% 1;.

, -l 4 y_ . ,.2 .s a m ,, >

i I -. '

g, n-l qg y},

N / _-

g g, , , .g,. 'g s

3s, 4,;

4, w . , na . g4 $' ..

. 4. . g. e' *

'e yvmer;%, c"U * , ~;- q T. ,- c yr .,p y m -

, q5,' *m'f h *% v[p --: > r. k1 _ .- < ; %' % ,~ : ,

. 9  %

, , ,. Y 5 ll .h

. N N {

• N L A

[x

, ,t Qf f.W g

' WQi@ %y. g9ji Q' :. W' ' ' c.i 6

g

(-

' ' i p' . , h . 4' .

f ,

q: "

c J: -4 p %.f [{' .

y , %. . , . vy - p= 4 9 5 i% ~ . , ', p];. 3 $ .,f.yTh@.y.: _ y. >my .~ s e

e: = ,

.mpuc.

UY: *' #

f S $ : '.; .. ?-

N' .! . '.

_l, 'k' d '

. , E

. v .. ' i d,. .'; m. .AQ-t As. uc- _;t -

• 1 d]' '$ '. . , j ,

• tR . *9

[

t ,

3 ,

'k k , , . ,.

- { .. ..g _

4

'gi ) " '9 . M .

' g, W y 2

- . 2), ) - ,

l  :..'

%a.- g,. , .

. %.Q.. Wm

~

. ,!g .ed_ [ h,/ .'

J s' n.W y ..

/ , - -

c.

.g **%

, ./j< %KQQg myff,,#5M .. bfl m ~

g , , y

? *. * -;

' , , , . "h

[,.,

6' S ..%

. $ + b'

{ s.. -'

• _5 .* f [t- ,.3 -g

'**'('

x.'..1  :- ' h. e . Z,v p: ' )

n

. , .f, . :r,.,

[E.lg'4

. , *.l s >?  ? ' ?e t.

s., '$.y-,lg, - -

A.

? , "W - ~ . - *#

v:

- .' @ '.'5'.

. . . 4 7't . ' ' '

' +i I 'j9. .. ~ . ' Cg% -

y., 4..,,,~. s v

n.; ; jf [ f, - .

.. J . y q q y r -

\

k~- -

,a . .

- - - - ' ' S,f . y' . .- '

}....

s y'.: m m. g o,.

s * .

-m# ' . - . k

, - .. y

. /J 1, : * ; *. f ;, . ; -

...4 #-

f* P ; *

+

)S 7; y

' - 'd . . . . ..j i -

h, p>f $. .' '. i 4 4

l i .s

.' , ; y .

.=., .

Q,' , l*

. ~ .. .. . .

4,

< *[I/

- % k fy ,

w w '-' '

, , , s . s v .'

s.; - .'s ? -

,.; ..~nb g4s.-

, . . . ;0

... ,4V f,f.:f. -

7

-t

', ., *  ;. . . *s , '

. - * , 7. g$.f *:. . .

s. m

. . , .g '. h .I

~. , .<, . , , , , . , ,,,.

.< , , . . - ' c .' ,,0 ' ' '

b

• g

', b f ' ' .. I' ; Y. a ,.

S

. .~ o ,n , ,

' ' . .' a '

-s"*

,a , f ..'4.- '

-w 7 '. ..-

a, y

>. ' y

~ y~ew sqqw,&%.' 9  ; . .

t A ;+ . - ,, y,, .-

v .; (' ' L: '. h.  ; ~;" m; q ' yk' .'*' i# * .. y f.,

g

. - ' ,_ han ;t: .. . .

), '

'b' '

'E.*

as. gy L... . , ! -

.:- u ^T. Q&_ u ~4.n ' . ~' -E ' ' ty, f. :$ . *

' >' ws -y6 .

! ',, ' } J. ' .gio s. e t y ,. , ,' g y ~ '

. 4 ,

' *: 4 .

y." -'  :

4

, f , -' ' .

. . . + .. -. -

,- , . t-,. ;y . .

_\'e #

y. .. .

' =

. . 7 - .

--l

'I , .

, _ _ e-- , .

. y 7. -

e- .

C m '-

't., . .. to ~ .

I, 8 , -

- : t

~ % r. -

1. . my w

aemy - .. ~ , g..r.

-g - . - -

. .L.. .

4W'

. y jgg.p m=w-

- ^

?. .

~_'--

y '- __

allll* , , *; y . -

'jj q t .

.c ' * .

' * . GW *

', '. .Qg r t,,cgy.'_

, ' ,. 4

.r _ -

. g .,

5

,f g, , # W * *. .*

'..'q.'.. ,

p s,

-M ' ,*

.+

.' ' . $ a , 'j. Ji V'[ J - .- 15 , f *:" .Y..

,. . s . .

, s ..

'3 4 h , . . e.

• y,

• ~ " '

.) ' ' #4,'"f . * * -

h, .

• 'w- V'

~

.m

- . . p C '. ; . - ... . o ,,  ?. . r . . , . . . ., ,

- _. - p g .. .

._f

. b_WW3, ._QWE , ? ' ' ' ' :l

__. .Q, _. ~ _~ *

,A - ~. c' +.&-L . ,

• x ' .7 u, . -- _

s ..,,,n.

~_..1.a,-

--_, ~ . .. ,

n.> llW,, Y ' t A-lS' '

This 1986 Annual Report b prepared for the information of stockholden,

. employees, and other interested persons.

He Company's 1986 Annual Report to the Securities and Exchange Com- ,

mission on Form 10-K (including finan-cial statement schedules) is available to any stockholder without charge. Stock-holders can obtain a copy by writing to:

M. H. Mcletchie Senior Vice President -

Accounting & Finance, and Treasurer

- IDUISIANA POWER & 1.lGHT COMPANY P. O. Ikix 6006 New Orleans, louisiana 70174 Telephone:(504) 366-2345 e

ir 4

4 i

I

( On the cover: 4the coast oflouisiana in the l Gulf of Mexico scenes like this are connum.

l Scores offishing boats ccminbute to the annual haul ofshrimp and a wide variety offish O establish Inuisiana as a leader in the

, production ofseafm>d in the United States.

f Opposite: Shipping and port activities pmvide thousands ofjobs amistimulate braines activity

l. in other sec6ers'of the economy Inuisiana

! , ports rank in the top ten of U.S. ports, bawd on value of cargo. _

HIGHLIGHTS As of As of 1)er. 31,19Ni 1)ec. 31,1985 Pl. int inn estment $ 1,51#i,119,f M H) $ 1,839,191JHH1 Itcs en ne $ 1,339,211,t H HI $ 1,239,770,000 Nc Incorne $ 110Jiol.000 $ 131,3ti9,fMN)

I' cal I .o.ul (no un cil 7/30 Ni.uul(i 3/83) -1 f103,000 KW 1,333,1K)O K W Generating (:apabilits 5Jiti.>.000 KW 5,fiti3,000 KW

( Ill%b HilCl % St19,229 bli7,82 i Ascr. ige annual kilowatt-houis useil per ini<lential j < ustorne : 13,927 11,013 Ascrage annual icsenne per j rni<lential kilowan-In nu ti 7!k' SjNW j l'opulation in .uca wisc<l 1.fi70,0t H) I,fitiH,000 I

l nplo3en 3,o92 2,998 1

1 i

i I

l 4

__ __.,_._ kE '

I

! f

) %j ';;, ' - ,

.\~ ..

+.

\.

.- Sg l

.g ~

i l :n g 4 '

g i '

Y'.

~ ), ... ity , - . . . . ~ . ,

I i

l 4

I .

Iiilh m mg the pimleni e up n1. a sciics U '% of he.nings was hehl to iiriciminc .i i

final iate ih i nion b o M.ucifoiil 3 ( in lain un M l'M. the ( i on nuwinn i

-l outrial a our imic-onk i pen i nt I

MN C I * -

nu irase in n u inic bo 1 PA l ioullmg Wi2 nullom \lso un iniini in the w t u et '

iln noin was ihr I IN A aulinoiration 3 "g ,

h foi ihr ( omlum to toc Wi imlhon in lexat o irinin t sentenn in nu mn bi help j inihl ibiu n ihr i ost of i In n a seis n c

- , anit ollsri ik trunt u.oritout 3

~

i nsh. .\ gionp ol u n h nti ul i nsh unris.

as urli as jelicison l'.o nh it onnis 1. lus

, ;< o quesint the i IN ' to in oinnici os l ,../. ili i nion Ilien lon . it irin nns ini, r.n h j ,I/*.*[. to ch n unme ihr unp.n t of the 1 IN Ps j */ f*, .n non. oi w bribi i we will liini o l i

.ff nii rwan in appr.il As foi iln litt\ i

1. I t,, lo mh in e irpois, o n m.uns .m oja n iss u t' .1% llie ( .pitiliiisso ni !!.n init s et ili < o b il ulu lin i 18 .nti]i lin' sli n l\ .

Injnh l'Ni l pal hh il a ute j I o n n er po posal u n h ihr Neu ( h ic.nn

( os ( omo il toi i usiona n n suhng i lii illt lilla U alsi t il lin' ( 'll\ i ll '\ r u

( h h .un i \lan N for a poi taia s ini j I it i ou n b o M a'ribint i . uni ( .t.un! l l

l

( .nll I nn linhug .in appoison.nr j 13 s r.n phei .m pl.nr llus irnuins .m open mur o ihr u.ni of UN u nh

(, e.T ( i n na ll i r onulci.iin m rNin < ini

!, T -% !ain ilns u .n l -

%%- P a , w ill aho sa ihr ( omo il lanni h i w- a si ili s t il lli' lllilas slli ti ilin!llig lfli*

Tile PRESIDENTS LETTER '" ! """ h ' '" I I ' " ' " I"' " l '" " A I""'h'""'(""'""'""4"""'""I3 woi i.an i i Pix \ i in note a son h oi i h .n me .o r u ro beam m lune Itu I cllon No Linihh n . mil I mplou i s pomble i osi ou n uns on % aloitoni i w o b a ih i noin i spn int in ilic r.n h

\ s I i niiniaiu l'a ik rl A I I ',lli ( i oi!l all\ Ii instlin lo 01. tin t h e i'\.illllin' iln' w ns h oil silililin i. lit t iilllimi lo oi % nli lli.il illlliig.

t ilh is th Idlill ti il ill se is n i h e l s olist.itu, s tl I l'A I s i niti.n Illig h e is i t'in i j u tu i'l illi- ( i nitii il alsi e i oi h*ii t l I l'A 1 b 8 i i

! In oh ihr ( ion lum .nnt ioni stair .n r In im ( .t. uni ( .nll I m l'i o t ( olm m. iiminun the h x.n a s u olrinent it Imni, j

l h n Luq tii a loialure lutmr. \hssnsippi I he ( i onp.un toi mni a un inp \ g,un. In o h e il il ry in.uten allo i onh )

! \hhough ihr suiri n onoun lui a of i mplou i s i alh il ilm l'unh m e Mi silunk % w ( hir.un i usionn is m lhe low i hh m Insn. their an i in in n agma Wrwnn ni Supp.oi h .n n ( P.\51 i in iononninn.! \lgins ugns ahr.nl f oi ihr iol . uni gm nulusin, woil u nh ihr .nnloon i In nen in ihr Ibpor ihr i onnou iss sunonmimg l n nu nm . uni lo l PA I lIN I he pmp m of iln l' \51 gionp u an ih oil 1. Iln umi tunt to un il u oh l

( ine u n unpon.no .n i ompInhnn ni um to po n nir ilh \ a iln oongh. ihsinn in m. gi m unna on o r than o h j loi i l'A I m uni u m ihr 8 ninpaini ih n unn nicil honin of ilu pl.no lolhon kilou.ui hom s of cln o n in l lulhilnn ni of us pn onne h e in s inne \hn a u u n miinth son h. ilm ny br ou i n N pu m hr l'W8.u ni % n rnilu i i in icio i m p.n n u ni it o s s pi.u n t h w h o h I' \s t j in n o h il on o r ihan i 1.niin PNi u.a t h o si 3 u i a orw n i onl hit iln ninnis on pn h in il sn i L I ha n th i n hnhooalihn unu nh odalhna l>n nio ihr un ni i h i o n in crurutal m ihr Uni i a turn ion. net a heahhn i Im.nn iil pa ;i s. Ilh \ n<ionnu mhila siIi unn ol i onunrn ut oprunon ot all I s orn hnon h o the ( innp.un u nh i spn u nulln in iln illou un i m u.in iloni i \lo hlle Sonih I nhin s i \l51 i um Ir.n toon ho iiintunn il sin nailu mna % oh i omio n a n in i osh. i h n piinunh to ih I.n s arm unna mus h u i a in u \lst uionl ilui m unml, I m pirw il to te p oi ih o I hn uninun u m Irw ilun ihr s .'5 I bo the inosi ch i o n in generan il ni a m i un ione h o Pisn oiulh il s I in n u nthon ilnalliin.u n i ol % autioni tiosh iahint.n unn I milu i. it w as unkt il .n nulln m an un n asr of Wi nilloin ini i l l'A 1 aan e il hi m ihr % n rinin i InCi sin onmin i eine ( oinhintion i namn inq PIO \ i omph ir h n L .o I l'A l i l'an h mpioan van u nh nu ni u nh ihr i IN ir.n tio h o un ns pinu a genruint in hn.un ut pn nur folbius m ihr iluni lla ( ionp un niok nsur u nli ihr sng l'nn .un t u m u ioni m the nation los so ru m ol ibis Repoit unn il unpi m b in , ahhonuh ui ahn hni gioss grin uto m in .nn pirumient in ihr n gulatois .ni lu. Iln I onnuiu ta diil slut nun h m the irpio s um lau o. v an i n .nto:

Pohin sen n r ( onunmoin il IN ir.n h able to 1PAI. I hr u .o PNi aho saw a ugmhi.m

. - - - ._____ __ . _ _ ~ - _ .. _. , _ _ _ _ - . - - -

legal sictory fiir 1.P&l., In August, a 1.P&I. has also offered its own educa- We aiso had some promotions of key federaljiulge found United Gas Pipe tional experience. In 198(i, more than penonnel. Shelton G. Curmingham,Jr.,

l.ine Company guilty of merc haixing 8,500 people tomed the Energy Isluation was elected Senior Vice President-1.P&l. fi>r natural gas tw>iler fuel Center near Waterfont 3 to learn about Alarketing & Rotes, and RobertJ. Durm fium 1978 through 1985. This case is elc< tricity in genend ami nuclear Vice President-Administratise Sen' ices.

continuing into 1987 sirue thejudge did technologs in particular. Afore than a Richant C. Guthrie was elected Vice imt specify the amount of daniages and huruired lantisiana u hex >l grouin toumi Pirsident-Public Aflain arul W.J. *Will' urged the patties in the suit to negotiate the liitility, aint ten special educati< mal lannes ill Vice President-System a settlement. Following the spirit of the esents were held there. Engineering.Jenuld G 1)ewrise was ruling, the Company arul United Gas in 198ti, area Councih im Aging elected Senior Vice President-Nuclear are cunently distinsing the amount of receised $129,257 from lleiping Ilatuts, Opemtions: Ross P. Ilarkhunt elected the settlement. a prognim for people tio yean or obter Vice President-Nudear Opemtions;and While I.P&l. was worLing hant to or hatulicapped individuah, lhing on a CaryJ.1)udenhefer elected Assistant pnnide reliable senice to its customen, low or fixed itu ome. I rom tlic time Secretan.

the Company aho dedicated its tesounes I.P&l. helped start the prugnun in 1983 Aru! tiie following changes were in 198ti to help pnnide fi>r unme of the until the end of 1986, total cumulathe announced: G. F. *Gui Delciy f rom Vice other things that atlet t the lhes of umtributions hom I.P&l.,its shter President-Consumer Senices to Vice Inuisianiain. <umpany New Orleans Public Sctrice President-ila:Leting:1.cc W. Ituutall On the emnomic fiont,l.P&l.oilkials Inc., aiul its employces ami cust< mien, fium Vice President-Accounting &

helped supgunt the artisities of the state base euceded $1 million. licaunt to Vi(e President-Anounting ami local govenunents in attnu ting new 198ti was alue the year that 1.P&l. & 'licasury, arul Awistant Ticasurer; imiustry to Inuisiana by maintaining an pulled together its uimmitment to Richani L N!urlowski inun Senior Vice aggressise hminew development pro- community senice. For >can, l.P&l. President-Administration & Senices to giam. Out-of-state trips to targeted employ e-s has e iren play gmuml imipires, Senior Vice President-Administration iminstries cartied the mewage that there una< hes, Sunday scluw>l teachen, fund- & Planning.

is op[wirtunity in Inuisiana amt many raisen amt vohmtcen for area relief I hase taken this op[mrtunity to tell advantages to comider for plant hwatium agem ies. In 198ti, these imimitant ><m almut the financial perliinnance of

or expamium. mnmiunity volunteen combined their I.P&l.during 198ti arut some of the l

Inuisiana innitwss aiul inulustry leaden talents amt ofhirn to help numerous esents thru allected the Company's l herame a(thcly imohed in education gmups iluough I OCL'S: the Family of pestio mance. I hase also discussed some in 198(i, arul 1.P&l. led the way. Nearly Comnmnity and l'tility Sup[unten. of the im[mrtant acthities our people fi,0001.miisianiam aie taking part in the Ahea<h, R)CUS has gathered the base imested their time ami energies in j General Education !)esciogunent (GEI)) largest single donation of final to New to make Inuisiana a better pla<c in I

program put togriher by the state Orleans area fomthanks (more than 8W whi< h to the amt earn a lhing. Ilut there I)cpartment of Education, Inuisiana tom). Telephone banks were stalled by is more to lmth I.P&l. and Inuhiana Pubhc Ihoadcasting, arnt various neigh- R)Ct'S mlunteen for New Orleans than simply finame and senice. There Inn homt adult learning < enten. 'I he Chikhen's limpital, public teleshion, h beliefin our people, our state.

pmgram enables adults to carn the the Nfan h ofI)imes, the United Negro We beliese quite sin mgly that inuisiana capiivalent of a high u hool diploma at College Fumt and othen. In all, thousands Power & l.ight has an optimi tic and home finough telesised < l.nses or b) of mlunteer houn are imuring .ut of encouraging future ahead ofit, due attetuling t lasses at a neighlx n hm ul c enter. H )Ct'S and into the state, with unmiless ruainly to the op;mitunities that exist,

'Io support ami publicife the pmgnun, ihousuuh more planned for 1987. arut the wondeiful, hant-working people I.P&lagumsored aihettisements 198ti aho saw some t hanges imolving who live in louisiana. l.P&l. has made throughout our seni<c area to enomrage many of our employees. mmiderable progiew in 198fi toward pariliipation. Ihe Company also One note of interest is the retirement ac hieving finamial heahh, and we twlieve furnhhed free cdmarional materiah to of a longtime employee and feierut, this tremi will mntinue in 1987 and thme students who signed up early in Gerald 1). Nh I.cndon. Af ter 10 )can of beyond. Please take a few rnoments to the piojec t. senic e in 1.P&l. aiul friemhhip to his review the next section of this Repmt h As part ofihe Aliehlte South Utilities m-woiken he met along the way, he will addresses some of the many gru ul & ngs

%w Opportunities Puignun," 1.P&l. he greatly iniwed. Ile wot Led his wa) up almut Inuisiana that justify mn le inxed radio and teleshion stations through the nmLs of the Company, and optimhm. We are mnfidcm m our throughout the state to air public senice uhimately sening as Emuthe Vi<c Company, but enore so we arc < onlident announcements aimed at getting those President. IIis replacement h 1)onakl in Inuisiana,"t he Opportunity Staic" who c annot read to call a centnd toll- llunter,loriner Vice President-Projec ts

' Simerch; fice number. That call would put the at Emkee Atomic Lic(tric Company in

[rnon in tmu h with the nealest 'Icarn Fnuningham, Slawac husetts. Aho, 7 s i to scad" progr.un. Thousmds h.nc taken R. Ihake Keith was named Exe< uthe /- _ #et.,

a<hantage of the seni< c, thanks in past Vh e Picsident in early 1987, Ile mines nilx ili 1.P&l. avid the landsiana Awoci. io if&l. Innn Slidille South Utilities, Jairies St. (htin ation of linwicauen, w hh h h aho heasily Inc. w here he serted as Senior Vice President l imohed with educational impnnement Picsident, System Exec uthe progiusm. Finarn ial Olih er. I hunut.n, Alan h li,1987 3

LOUISIANA: THE W

~

OPPORTUNITY STATE lauhiana 1%wer & l.ight h prowl of thh state and io many strnogtln. There h muuh in

~}.

Innhiana to enamrage omfidence and optimbm.

I

\Vhile f.umbiana has its share of problems, thh state leath the nation in many arras, and we whh to share Anme of ihnn with you.

\Ye hope you enjoy this brief kn>h at wme of Iimhiana\ exceptional reumrrn. .and u hat nurpnople are making of them. *.

• lhere's a platefor pride in limhiana. And runm Jur growth. \\ r at I.I'UI. are doing nur share to imprrrer on the many fine things we already have.

l FisilING ANI) Tilt!'I'ING f ouhiana \ lSJNWI mdr a uunthne tthe natiim 's ,

longntI h host to many lhhing andfur trapping ,

indrutries. InJart,1.7 billion jumnih or 26 prrrent of all U.S, scafrulconsumption h j caught in lauhiana.

/

O l I

r.

9  !

lD {

l

'Ihe state lauh the nation in catches n{

shrimp annually, and is among the inl> thrre in the U.S. in nyster prodsution. Amrrica's largnt Jrnhunterfhhnen pnuhu tonn is in Innhiana, ,

and 1.1 milhon prits, more than any other state, are pnnlm ed in Inuhiana, ineInding nutria, muskrat, mink, otter and banYr.

4

a-. _ ..-a - . ._ -...-_+_-a _ _ _ a a. - - -

av -f d

,8 h 6

'S r (, .g ,

W, '

• r A s * -

-g

,.,s -.

.,*t-"

e .**'t* *5 *d  %

$' ' ~

j/ , k

.g

<%.6 _, ( '.3@9- s

,+., '4 4-

-  ?

-3 x / ,, .i t ,.

t , j' *

'3 r ;.%;,

^

t

{'.,

g,a 'v J j

. , ,,, ' -(,_- y - y v s, , .

' .I-

. s 'M C , , -'

.  ; ' t * .- t 's a

, 2..s3 ,

e x'N N ,3' '-

,. p..

. .. -e

' .. .v;

,.9 F..^

3'. [, '.

s og ' J ,

+

e' d s

j ,' - ,

, 3~

1 s -

3 d h/ D = $. t 4

s, c' <r ',,

4 ..v u

. ,..; #ca.

- . c, ., . r,. .-

,s -

t ::

~;,e , ;:vrp

+s ' - .. ;- ~,, ;

1,_mia, .Q;\.3 d d 8- 7 < zd.1 y.

P%y? A:y.

t

., 2_ L_ z,yg

.g 6 * , '*

W

y

?q..iy

,v,., ,

,s,.

- n. . s 3

.h.

I i

l

,i i #

w ,

,a py- J s' 9%'(k-W.#

1 1

s 4 i

L. p. ,

s-.-) l :. + "a %h, ,K

.  : L- ,

% i

% ~ - .

oOO0 N As m

p

$et J N

~ _ . .s' '

1 1

+ 'T, s .r *, G y M. , ,

-.x~-~m, w. ~~

% h%%, *

'I I

% ; ..w., '

l (l .

j4 . 'Ny_

85' , ' '91wdh. ,

1- -

l at v ..- ' ,. a .

g3 0

N 5 l

? "

l -

1 I

1 i

i

y., w p I ,

f

\

. 4. >>

~ ,,-

_\ l t f, k > f' \ .

% 'Q

>j . s a .

[k,.I

~

f' .

ql  ;

• lhe antermeulal nrtuvrk of rail, air, lungr Q ,

h 's $N ,

anel surfare tranAlnntation geruYates thentAanels lx\lq .\  % \A ' ' , of jobs arulpnn i<les a vitallink beturen l'.S.

1 T, cfrainations or poinb vl enigin anil places Y ~ ;N n. .

'Y arurtnd thr ginbr.

AGlilCl' lit 'llE I.onniana ranks in America \ top ten in the .

hanntmg of unany twjn. Ihr invarue, Ismisiana  ?

is setoruf in the jarwintlinn of sugar oane neul suvrt potatnes, thrvel on ritr, fifth in eotton and in fuoarn, anal tenth in wybrans.

Iintisiana \ n'orkfurte, int irh*ntally, gerniatrs a vaine-added farfor 17pruernt higher than the l'.h. average, u sth uvrk stoppages 5th percent bncer than the natannal averngr.

I w; ., ,

-4 1 4, p.

, y 7$ . ,

hilll>l>l.vc 0- .I .50 3- d. -Si'8,... <,

Calhng on the .\fndsuppi linrr ou perhaps .. g ,

f'f' ,

sts gsraint natural vrwntre, l.onisiana bonnh 'g *e- gg gg'e ' y) ,}e

)

the nation \ largot port, Nne Orleans, and the , /

( ,

fourth lar; a. Ilaton llonge. /he f.unturana is .  ? 1< .i h *'IO ^U '

II ,} -

that thnperjnntlis the only l'.5.

f' f*>

Offshow, < ,

' ~ ' v- ~'

lunt unj F . nj handhng supenbrps.

Grain, for irutance, minces through the ihrt of New tJrlearn from the nation \ midunt at a ,

rate that v.akn 1.ouhiana the largnt handler /

ofgrainfor nport in the nation. .\ lore than -It) _p percent of U.S. grain nports minrs through . ,

finasiana parts.

[^ .

g 4.V

. p%

> 4,'T  %;r w

^

.-  ;/Yif A ~m k ~;

h j L. <

s t

.sp 7e AEltOSIMCE, llESEARCil V

~'

ANI) l)EVEll)lofENT

'lhe Satur7s hornter nwhets that put men on the menm urre built in Louhiana, as are the giant nternalfuel tanksfor NASA \ Space Shuttle program.

.~~~~.,

. ,, And speaking of high technologs, l.nubiana

• ..l. '

h a leader in manyfields of nvarch, including animalgenetics, tropical medicine and agri.

culture. Isollow-fibre membrane let huology and synthetic rubber and highatane compounds evenemen ,. used thnmghout the uvrid urrr developed in

, , , , , , , , , , lemhiana labs.

ty,j ],

,e maeammesse e

,,3 2..

-,y

,p <#

7

,n o

,Q

. \

? _

j ,

j - ,

l .

\

l l 9 I J'

x .

'~

s

g .,

\ k , /> . .,

4'I t -

1 1 \ <

j , l

$ k.i  :.

4 1 L r

~

~

vy . :.

l  :

s -

p.

m *y 3 ,.. #

s , ., ,

_ hI ,

INDUXIlllAl. cal'ACITY iAntisiana has thegreatnt concentration of r 4 '

crudt oil refinerin, naturalgas prun' ruing jdants and petror honical prrxtuction fat ihtra f

in the \Vntan linnisphere. ljus helps to junituin 1.ouisiana as the third !argnt pnnhurr .I ofpetroinern and the third leading state in L l

?

petroleurn refining on the U.S., pr<uhuing rnare than 10 billion gallons ofgawline peryear. ,

^

l.orsuiana is alw in the top three s:atn in the s Q '.

manufacture of chnniaals. The state prenhun '

} ~

./ #

t i 25 pncent of the natwn's ehnnicals, valued at h* I I-l more than $II hillion per year. *

~.

. , .. , 1

{.

F l

\

l i A ,

hk OIL AND GAS l'IiODUCTION Oil andgas pnuhu tion alniund in l>>uisiana and offits shorn. This u the state that pionrared offshore dnthng, and unany of the trehniques j rard thnsughout the uvild uvre developed by

, finaisianiara. la vrw this vrtid <ffshore iruhutry, the unnid h largnt fleet of lu licopten ( 7W)) is

, luurd hne in laruisiana.

• liinisiana alw pr<nhun one-third of the l

%g .. nation's natur<dgas and 1I percent of the total uvrld pnwhation, making at the bugnt pnuhver

, of ru turalgas in Amniaa.

i .

4

, g, 4 *g t'-

i - ~

l s Jj j' ,.[.

, %c, gg,,g?E

g, 4 d' .A .' y\;

'l na <

y . . p:

I J .

! 1h ,h

/ y i i

1. y .e I

J

CUSTOMERS OPERATING REVENUES (Thousands) From I& tail Customm (Afilliom of Dollan) 1986 = $69.2 1986 = 1,286.3 1976 77 78 79 m) HI H2 M3 R1 M5 Ni 1976 77 78 79 N) HI 82 83 31 85 86 60 $ 1,2f.) _ E se . . . .aIs i,.., _ saIII

4. .sIIIIIIIII > IIIIII

,, IIIIIIIIIII ,,,, aIIIIII 1 ... IIIIIIIIIII ... . IIIIIII im IIIIIIIIIII 2. , .IIIIIIIII o IIIIIIIIIII o IIIIIIIIIII ENERGY SALES AVERAGE KWH USE To I& tail Customm (Ilillions of Kilowatt-floun) IW Iksidential Customer 1986 = 23.68 1986 = 13,927 1976 77 78 79 NO HI M2 M3 34 H5 N6 1976 77 78 79 M0 HI H2 N3 84 85 86 2s i s,..,

2n _ m aE -E Es i 2,,, . EBEE =_m E E is . sIIIIIIII io,.., IIIIIIIIIII io IIIIIIIIIII 7.s . , IIIIIIIIIII s IIIIIIIIIII s,. ., IIIIIIIIIII

,, IIIIIIIIIII 2, , IIIIIIIIIII

,, IIIIIIIIIII CONSTRUCTION EXPENDITURES GROSS UTILITY PLANT (S1illiams ofIk>llan) (51illions ofIkillan) 1986 = $115.1 1986 = $4,546.4 i 1976 77 78 79 NO HI M2 M3 48 M5 N6 i976 77 7M 73 NO N1 M2 M3 38 M5 N6

$O0) $ 4,10

,, .m ,,,.., _sI

.m, II. s, , . III

,m . III. s , . .. . IIII

., IIsIIIII 23., _ IIIII

i. .IIIIIIIII. 2, . ., _ EIIIIII o IIIIIIIIIII i s,, EIIIIIIII u.., aIIIIIIIIII s., IIIIIIIIIII e lIIIIIIIIII 10 l __ __ _ . . _ _ , _ _ _ . _ _ . _ _ _ _ . - _ _ _ _ _ _ _ ,_. __ _ _ _ _ _ _ _ _ _ _ _ . . _ _ _ . . _ . . _ _ _ . . . _ _ _

REPORT OF MANAGEMENT The management of Louisiana Power & Light Company The boani of directon punues its responsibility for has prepared and is responsible fbr the financial statements reported financial infonnation thmugh its audit committee, and related financial infbrmation included in this annual composed of outside directon. The audit committee meets report. The financial statements are based on generally periodically with management, the internal auditon, and accepted accounting principles consistently applied, except the independent public accountants to discuss auditing, for the change in 19&l in the method of accounting for internal control, and financial reponing matters. The revenues as described in Note IB to the financial statements. independent public accountants and the internal auditors Financial infonnation included elsewhere in this report is have free access to the audit committee at any time.

consistent with the financial statements. The independent public accountants pmvide an objective To meet its responsibilities with respect to financial assessment of the degree to which management meets its infbrmation, management maintains and enforces a system resp <msibility for fairness of financial reporting. They regu-ofinternal accounting contmis that is designed to pmvide larly evaluate the system ofinternal accounting controls and reas< nable assurance, on a cost effective basis, as to the perfonn such tests and other procedures as they deem integrity, objectivity, and reliability of the financial reconis necessary to reach and express an opinion on the fairness and as to the pmtection of assets. This system includes of the financial statements.

communication through written policies and pmcedures as Afanagement believes that these policies and pmcedures well as an organiiation structure that pmvides fbr appmpdate provide reasonable assumnce that its opemtions are canied division of res[mnsibility and the training of pen <mnel. This out with a high standant of business conduct.

system is also tested by a comprehensive internal audit progm m.

AUDITORS' OPINION loui;iana Power & Light Company:

We have examined the balance sheets oflouisiana Power which pmvides permanent rates for Watedbrd 3 costs. Also,

& Light Company as of December 31,1986 and 1985 and the independent consultants retained by the 1.PSC to con-the related statements ofincome, retained earnings and duct a prudence investigation of Waterfbni 3's costs made changes in financial position for each of the three yean in public their report that concluded $143 million of such costs the period ended December 31,1986. Our examinations were imprudently incurred.The Company believes that were made in acconlance with generally accepted auditing since this amount is less than the $2&l million which they stand. mis and, accontingly, included such tests of the account- have previously agreed to absorb, no additional financial ing records and such other auditing pmcedures as we con- disallowance isjustified. Accordingly, our opinion on the 1 sidered necessary in the circumstances. 19&l and 1985 financial statements, as expressed herein, is As discussed in Note 2 of Notes to Financial Statements, )

different from that expressed in our previous report.

the Company agreed to permanently absorb $2&l million in our opinion, the above-mentioned financial state.

of the cost of Waterfoni 3 as part of an interim rate onter ments present fairly the financial position of the Company issued by the Louisiana Public Service Commission (I.PSC) at December 31,1986 and 1985 and the results of its opem-in November 1985. A new accounting standant will require tions and changes in its financial position ibr each of the that this $281 million disallowance, net of related income three yean in the perimi ended December 31,1986 in con-tax effects, be recogniied as a loss by the Company by 1988, formity with generally accepted accounting principles con-the year in which the new standard becomes effective. sistently applied during the perimi subsequent to the change, in our report dated hf arch 11,1986, our opinion on the with which we concur, made as ofJanuary 1,19&l,in the 19&l and 1985 financial statements was qualified as being method of accounting ihr revenues as descdbed in Note lit subject to the effects on those financial statements of such of Notes to Financial Statements.

adjustments, if any, as might have been required had the outcome of uncertainties concerning the results of a pru- i '

dence review of Waterfbnl 3 and the amount of permanent

" * " ~J / _

rates that would be gr:mted reflecting its in-senice status '

been known. As discmsed in Note 2 of Notes to Financial New Orleans, Louisiana Statements, the LPSC issued a rate onler inJanuary 1987 February 27,1987

BALANCE SHEETS December 31,1986 and 1985 1986 1985 h gg (In Thousands)

UTII. fly PLANT (Notes 2,8A, and 9):

$4,425,672 $4,352,305 FJectric 120,747 87,189 Construction work in progress 20,495 20,262 Nuclear fuel 4,566,914 4,459,756 listal 750,343 623,059 Ins accumulated depreciation 3,83G,571 3,836,697 Utility plant - net UTIIER PROPERTY AND INVF5fMIN15:

49,524 53,128 Investment in subsidiary - at celuity (Note HI) 611 563 Other 50,135 53,6H7 Total CURRENT ASSE1S:

16,756 11,020 Crh and special deposits 1emlmrary imestments - at cost, which approximates market:

11,100 -

Awxlated companies (Note 4) 82,900 -

Other 336 518 Notes reteivable Annunts receivable:

j Cmtomer and other (less allowance for doubtful customer 55,177 60,195 annunts of $1,385,000 in 1986 and $1,035,000 in 1985) 942 456 Amiciated companies 54,973 51,21H -

Anrued unbilled resenues(Note IB) 20,640 19,967 i income taxes receivable (Note 3) 14,404 11,49H Materials and supplies - at average <ost

- l1,43 8 Power pun base advance payments (Note ND) 19,421 10,157 Other 276,649 179,493 listal j DEFERRED DEBII5:

226,120 20,120 Deferred Watetfont 3 expemes (Notes 1G and 2) 28,221 3,897 linamortised debt espeme (Note 6) 790 459 Other 255,131 28,476 liital

$4,418,486 $1,098,353 TOTAL.

see s, cu., rmam w wemenm.

I

?

l

Capitalization and Liabilities 1986 1985 (In Thousands)

CAPffAIJZATION:

Common stock, no par value, authoriied 150,000,000 shares; issued and outstanding 137,110,900 shares (Note 5) $ 903,900 $ 903,900 l' aid-in capital 650 1,124 Retained earnings (Notes 2,5,7, and 8G) 142,029 M,500 Total common shareholder's equity 1,046,579 959.524 Preferred stak, without sinking fund (Note 5) 145,882 145,882 Preferred stock, with sinking fund (Note 5) 272,129 278,423 Inng-term debt (Note 6) 1,783,032 1,470,078

%:al 3.247,622 2,853,907 OTIIER NONCURRENT LLAlllLirlES:

Accumulated provision for property insurance 6,963 6,302 Ac umulated provision for injuries and damages 3,398 1,382 Total 10.381 7,684 CURRENT 1.IAlllLTTIES:

Notes payable (Note 4):

Associated companies - 34,700 ILmLs - 99,160 Currently maturing long-term debt (Note 6) 22,774 2,675 Accounts payable:

Associated companies 48,902 73,564 Other 60,418 71,666 Customer deposits 29,828 28,345 Taxes accrued 16,938 17,231 Accumulated deferred income taxes (Note 3) 14,782 6,630 Interest accrued 45,363 45,014 Preferred disidends (Note 5) 13,141 26,705 Gas contract sett!cment - liability to customers (Notes 2 and 12) 56,450 56,077 Deferred fuel costs 16,376 30,368 Other 10,200 1,884 Total 335,172 493,999 DEFERRED CREDf13:

Accumulated deferred income taxes (Note 3) 296,900 151,985 Accumulated defetred imestment tax credits (Note 3) 169,777 171,031 Gas contract settlement - liability to custometi(Notes 2 and 12) 338,076 398,823 -

Other 20,558 20,924 Total 825,311 738,763 COMMITMEN13 AND CONTINGENCIES (Notes 2,8,9, and 12)

TOTAL $4,418,486 $1,094,353 Mrc %ecs no Hn. uni.il %tements.

1 l

1 l

l 13 I

l

STATEMENTS OF INCOME For the )can ended December 31,1986,1985, and 19&l . 1986 1985 19&l (in Thousands)

OPERATING REVENUFS $1,339,211 $1,259,770 $1,245,659 OPERATING EXPENSFS:

Operation:

Fuct 302,327 374,759 379,921 Purchased power 306,708 379,548 367,287 Deferred fuel costs (13,993) 13,513 21,432 Other 219,129 164,785 106,164 Maintenance 88,198 50,040 51,805 Depre iation 123,048 68,462 47,951 Taxes other than income taxes 42,393 37,442 28,397 income taxes (Note 3) 37,661 (3,fM)) 35,975 Rate defetTals:

Deferred Waterfont 3 expenses (Notes IG and 2) (206.000) (20,120) -

Income taxes (Note 3) 103,659 10,124 -

Total 1,003,130 1,074,953 1,038,935 OPERATING INCOME $36,081 181,817 206,724 OfflER INCOME:

Allowance for equity funds used during construction (Note IF) 1,880 90,371 91,517 Mbellaneous income and deductions - net 8,717 13,997 13,230 income taxes (Note 3) (4,468) (7,106) (6,085) lbtal 6.129 97,262 98,f42 INTERFSF CIIARGFS:

Interest on long-term debt 187,516 166,587 138,824 Other interest - net (Notes 4 and 12) 14,857 20,835 20,105 Allowance for lorrowed funds used during construction (Note IF) (767) (36,912) (36,928)

Tbtal 201,606 150,510 122,001 INCOME BEFORE CUMULATIVE ElTECF OF A CllANGE IN ACCOUNTING METilOD 140,604 131,569 183,385 CUMULATIVE EFFECF TUJANUARY 1,1988 OF ACCRUING UNillLI.ED REVENUFS (NET OF INCOME TAXFS OF $16.54H,000)(Note IH) - - 17,626 NET INCOME $ 140,604 $ 131,569 $ 201,011 STATEMENTS OF RETAINED EARNINGS For the yean ended December 31,1986,1985, and 1986 1986 1985 19&l (in Thousands)

RETAINED EARNINGS, January I $ 54,500 $ 51,199 $ 39,898 ADD: Net income 140,604 131,569 201,01I lbtal 195,104 182,768 240,909 DEDUCF:

Disidends (Note 5)-

Prefened sam k 53,068 26,91H 49,207 Preferted simk arrearages - 26,705 -

Common sem k - 74,M5 140,182 Capital stm k expenses, etc. 7 -

321 lbtal 53,075 128,268 1H9,710 RETAINED EARNINGS, December 31 (Notes 2,7, and MG) $ 142,029 $ M,500 $ 51,199

%ee Nos hl hnAtu ldl %fements.

Il

STATEMENTS OF CHANGES IN FINANCIAL POSITION For the yean ended December 31,1986,1985, and 1984 1986 1985 1984 (In Thousands)

FUNDS PROVIDED BY:

Operations:

Net income (1981 includes $17.6 million special item)(Note IB) $140,604 $131,569 $201,011 Depreciation 123,048 68,462 47,951 Amortization of nuclear fuel assemblies 2,161 6,179 -

Defened income taxes and investment tax credit adjustments - net 151,813 28,871 46,208 Defened Waterfi>rd 3 expenses (Notes 1G and 2) (206,000) (20,120) -

Allowance for equity funds used during construction (Note IF) (1,880) (90,371) (91,517)

Tbtal funds pn>vided by operations 209,746 124,590 203,653 Other-Allowance for equity funds used during construction (Note IF) I,880 90,371 91,517-Gas contract settlement (Note 12) - - 247,526 Power purchase advance payments (Note 8D) 11,434 88,719 -

Aliscellaneous - net - 11,5M (18,915)

Tbtal ftmds pnnided excluding financing transactions 223,060 315.274 523,781 Financing tranuctions:

Common stock - 100,000 65,000 Preferred st<xk - - 50,000 Fint mongage bonds 555,000 - 190,000 Other long-term debt 134,952 1,457 113,543 S.de and leasebac k of nudear fuel 48,405 2,940 -

Short-term wrurities - net - 144,002 -

'Ibtal funds pnivided hv financing tranuctions 738,357 248,399 418,543 lbial fimds prmided $961,417 $563,673 $912,324 FUNDS APPI.IED TO:

Utility plant additions:

Comtruction expenditures Ihr utility plant $115,121 $329,803 $442,051 Nudcar fuel expenditures 56,424 12,716 6,276 lbtal gnm additions (includes allowance for funds uwd during comtruction) 171,545 342,519 448,327 Other:

Disidends dedareil on common stock - 74,til5 140,182 Disidends declared on preferred stock 53,068 26,918 49,207 Disidends in arrean on prefened stock (Note 5) - 26,705 -

l Investment in subsidiary - 2,107 4,M4 Gauontract settlement (Notes 2 and 12) 56,374 62,961 20,018 Power punhase adsance payments (Note ND) - 37,776 62,377 Increa c (decrease)in working rapital' 68,181 (19,020) 13,207 hliscellaneous - net 18,076 - -

'Ibtal funds applied exduding financing transactions 367,244 554,614 738.262 Financing transac tiom:

Redemption of preferred stoc k 6,744 6,510 5,000 Retirement of fint mortgage bonds 355,000 - 18,000 Retirement of other long tenn debt 4,569 2,549 2,462 Short term ecurities - net 227,860 - 178,600 linal funds applied to financing transactiom 594,173 9,059 204,062 lbtal funds applied $961.417 $563,673 $962,324 In trase (decreaw)in wotking capital *:

Notes and accounts receivable - net $ (3,989) $ (2,130) $ 43,531 Atcounts pa)able 35,890 (49,124) 15,815 Prefened disidends (Note 5) 13,564 22,072 (16,359)

Defened fuel onts 13,993 (13,513) (21,432)

Other 8,723 23,675 (8.348) lidal $ 68,181 $ (19.020) $ 13,207 0 Fxdudenhort tenn w(utities - net, currently maturing long term debt, defened income taxes, gas contract wttlement - hability to cu tomen induded in t unent liabilities and power purchaw pa> ments induded in current assets, we s,.co, nn n.u s.wmenn 15

NOTES 'IO FINANCIAL STATEMENTS to its mntribution to the consolidated taxable income. Income For the yean ended December 11,1986,1985, an(1 1981 taxes receivable incitute estimated amounts due under the tax allocation agreement.

1.

SUMMARY

OF SIGNIFICANT l>efened income taxes an pnnided for differences between ACCOUNTING POLICIES lxmk and taxable income to the extent pennitted by the A. System of Accounts regulatory bmlies fi>r ratemaking pur[mses. Investment tax The accounts of the Company are maintained in credits allocued to the Company are defened and amortiied acconlance with the system of accounts prescribed hv the based on the aventge useful life of the related pn>perty Innisiana Public Senice Conunission (1.PSC), which' beginning with the year allowed in the corw>lidated tax return.

suintantially confi>mts to that of the Federal Encigy Regulatory F. Allowance fi>r Funds Used Commission (FERC). During Construction IL Revenues li> the extent that the Company is not permitted by its Prior to january 1,1931, the Company recognized revenue regulatory bmlies to recover in current rates the canying when billed.'li> pnnide a better matching of revenues and costs of funds used fiir construction,it capitalizes as an expenses, cilecthe january 1,19&l, the Company adopted, appn>priate cost of utility plant AFDC, whic h is calculated in N! arch 1981, a cliange in accounting mettux! to pn> vide aiul irconted as pnnided by the irgulaton maem of accounts, fi>r accrual of the non-fuelI mrtion of estimated unbilled Under this utility industry practice, comton tion work in revenues. Unbilled resenues result fnnn energy delivered progress (CWIP) on the balance sheet is charged and the since the peri <xt cmered by the latest hillings to customen. income statement is credited fi>r the approximate net The cumulative effect of this accounting change as ofjanuary anupmite interest ont of bonuwed funds and fi>r a trasonable 1,1981 was reconled in Nfarch 1981 and increased the 1981 return on the equity funds med for construction.This net income appnnimately $17.6 million (net ofirlated income procedure is intended to remove fium the income statement the effect of the cost of financing the construction pnignun taxes of $16.5 million).

the rate st hedules of the Company indude fuel adjustment and results in treating the AFDC (hanges in the same manner as construction laimr and material costs. As non-cash items, dames muter which fuel onts are billed to customen.The Omnpany defen muter /over rennelies of fuel onsts that occur these owlits to the income statement have no cifix t on amrnt thnmgh operation of the hiel adjustment dames until these cash earnings. After the property is placed in senice, the onts/ credits are reticued in billings to customen. AFDC charged to comtruction costs is secoverabic t' rom

" "*"" "* ""' " * " ""'C' C. Utility Plant and Depreciation #E"W"" E"'

charge d liir utility senice. Ihe Cornpany ceased accruing Utility plant is stated at original cost. The cost of.uhlitions AFDC on Wateriimi 3 as ofits in-service date of September to utility plant indudes contracted work, diirct labor, mateiials, 21,1985. On Nfarch 2,1941,in acconlance with a rate unter alh> cable mesheads, and an allowance fiir the rom]wisite received in February 19R1, the Company began ming an cmt of fund, used during comtruction (AFDC). The costs accrual rate of 3.5G on its Wateiiimi 3 imestment applied of units of property actired aie removed from utility plant, n, a maxinnun investment of $1,(195,(H)0,000. For the and such unts plus remmal costs less sedvage are charged Compmy's Waterfimi 3 investment in excess of $1,W3,(MM),(MM) to auumulated depreciation. Ntaintenance and repain of and the remaining CWIP, the Company med an accrual pauperty and the replacement of items detennined to be rate of 9.79%. %ubsequent to the Waterfind 3 in-senice date, less than units of property are c harged to operatirq expenses. the Company continued to use the 9.79% rate on the Principally all of the utility plant is subject to the lien of the remaining CWIP. For the periodJanuary 1,1981, through Companyi Nf ortgage. Nfarch 1,1981, the Company used an accrual rate of 3% on Depreciation is (omputed on the straight-line basis at its imestment in Watertimi 3 up to an investment of rates based on the estimated sessice lises of the variom $1,260,(NH),fM)0 and 9cl% on the remaining CWIP and on dawes of prope:1). Depreciation rates fiir Waterfind 3 imestments in Waterford 3 in excess of $1.2tio,000,tHM).

imtude a jnmision for nudcar plant deonnmissioning cmts. The Companyi policy is m cominue m c9stdire AFDC Depreciatmn provnnem on average deprenable property on prujects during periods ofinterrupted comtrudion when amounted to appnnimately 2.8% in 1986,3.0% in 1985, such interruption is temporary and the omrinuation can be-and 3.3% in 1981. jmtified as being reamnable under the cinnimstances.

D. Pmtretirement lienefits G. Rate Deferrals

'I he Company has postretirement plam onering The Company agreed to a rate phase in plan as part of sulatantially all employees. The Company's policy is to fund the November i1,1985 LPSC rate onter to teduce the pension onts in acomlam e with guidelines established by immediate elkxt on mtepayen of the inc!mion of Waterfimi the Fmployee i etirement Inmme Security Act of 1971. 3 costs in rates. Under this plan, certain onts are deferred

, Pemion onts an rued in exceu of amounts funded are in the early yean of commer ial operation and collected in amontiicd mer 10 Scan.'l he onts of other pmtretirement later yean hum customen. 'Ihe defened onts wete to be benefit plam ate funded as innmed. phased in on a schedule to be detennined by the I.PSC. Ily E. Income Taxes defening amounts to the future when they wouhl be rollnted The Compant joim its parent, Sliddle South Utilities, Inc. duough increased rates billed to (ustomen, the impact of (NISU),in filing a mmolidated federalinmme tax return. the deferral aspect of the phase.in plan on the inonne Inonne taxes are allocated to the Company in pro [mition statement has been temmed. Ilecame the at tual milection

of revenues to reciner the deferred amount was not to occur the I.PSC netained an independent consulting finu to until the future, the Company reconled a defenrd asset conduct a prudence irnestigation of the Company's representing the amount of the deferral and, at the same a>nstruction of Watedbnl 3 aiul participation in Grand time, incurred additional capital arquirements to finance Gulf 1. On Odober 22,1986, following a lengthy investigation, this deferral.This policy remained in ellict until theJanuarf the consultants made public their repon, in whit h they 30,19871.PSC rate onter that required that there he no conduded that $113 million in expenditures associated with funher or future plutse-ins regarding Waterfbnl 3 costs. The the construction of WaterIbnl 3 were impnutently incurred.

onler also provided the Company with inunediate reonery It is the [msition of the Company that none of the costs of the $217 million in deferred costs accumulated through were impmdently incurred. Aforeover, since the consultants January 31,1987, as explained in Note 2," Rate Alatten." auributed an amount to imprudence ofless than the agreed Certain inte: Tenon have filed with the I.PSC motions fbr upon $281 million, the Company belieses that no additional reheadng and for stay of thejanuary 30,1987 onler. Shouhl financial disallowance isjustified. As a result of a new the order ultimately, after any appeals are exl>austed, he accounting standatd effective for years beginning after rescinded or rumlified, the gwissibility exists that the Comluny December 15,1987, the Company must sco>gniie the $281 may have to reconsider the phase-in plan. The matter is million disallowance as a loss, net of related income tax pending.

cilists, either by restating the ap[n optiate prior >can' financial II. Other Noncurrent I.iabilities st ternents or by (harging it against current income. (See

.I.he Company pnnides fbr uninsured pn>perty nsks and Note 8,' Commitments and Contingencies - New Accounting tbr cla.ims f.or mjunes and damages through cha'rges to StandantT).The retx>n alus concluded that the decisions to operating expenses on an accrual basis. S,u(h expenses hase build Waterfbnl 3 and to enter into a contract ihr G, rand been allowed fbr ratemaking purimses. Gulf I [xmcr weir reasonable, Ily unter datedJanuary 30,1987, the I.PSC, in addition

2. RATE MATTERS to a number of other less significant actions and after mak-On O(tober 9,1985, a state district comt issued ajudgment ing a number of downward adjustments in the Company's autimriring an inacase in the Company's retail rates, subject rate base, with which adjustments the Company is not nec-n> 1.PSC regulation, of $113.9 million annually. This rate essarily in agreement,(1) ruled that the merall fair nue of increase represented full and undefined reonery from the Companisjurisdictional ctail customen of their share of return on rate base appn>priate Ihr ratennling purposes g costs resulting from the Company's 11% allocated share of ihr the Company (utilizing a rate of retum on conunon equity M of 129)is 10.759;(2) ordered the Company to forego fur-Grand Gulf 1. On November 11,1985, the I.PSC issued an ther refimds to itsjurisdictional customen previously onlered onter on the Companfs Wateifont 3 rate application granting in omnection with the pmceeds of a settlement with a gas an emergencs interim rate increase subject to certain supplier (see Note 12,'Scytlement Agreement with Gas Sup-conditions, subsequently agreed to by the Company. The pli< r") and to use these limds,(appmximately $386 million) order provided, among other things, subject to pmspec tive m to these customen within the 1.PSCjurisdiction,(a) to be revision as a result of a prudence review discussed below, applied against (used to recover) the acuimulated Water-for a net increase to retail customen, after fuel savings, of Ibrd 3 defiired cmts approximating $247 million as ofJan-

$126 million Ihr Waterfont 3. Iloweser, after application of uary 31,1987 that had been deferred punuant to the the conditions discussed below, the actual net increase to November 1985 order. and (b) to reduce its rate base invest-the ratepayers over cunent nues allowed the Company was ment in Waterfbni 3 with the remaining $139 million;(3)

$106.7 million. The order provided, among other things, gnmted the Company,in addition to the rate incteases result-Ihr the Company (1) to defer $206 million ofits fir t year ing fmm the November 190 onter, an additional rate increase Waterford 3 costs, to be phased-in on a schedule to be of $76.2 million annually;(1)ontered that there he no fur-detennined by the 1.PSC;(2) to retain permanently and not ther or future phase-ins and no additional recoveries of recover from its retail customen the aests associated with Waterfbni 3 ants (the 1.PSC assening that (2) and (3) would 18% of its share of Grand Gulf 1, reducing the Company's provide the Company with recovety of the entire revenue Grand Gulf I resenue (previously granted by the state district requirement Ihr Waterfbnl 3); and (5) stated that the pru-cout1) by $2 5 million in the fint year (however, the Company deuce issue wouhl not be resolved in this onter. In arriving was allowed to recover l.fi cents per Lilowatt hour, estimated at its decision, the I.PSC incorporated the estimated effects to approximate $5 million, for the energy related to the on the Company's revenue requirements of two facton:(1) pennanently retained penenrage timiugh the fuel adjustment the lower corporate income tax rates to be implemented clause with the Company's portion of the permanently under the Tax Refbrm Act of 1986 and (2) an assumed low-retained capacity and energy to be available fbr sale to non-cring of System Energy Resources, Inc.'s (SERI), Ibrrnedy affiliated panies subject to 1.PSC approval); and (3) to absm b Niiddle South Energy, Inc., rate of return on common equity pennanemly and not rermer from its retail customen $281 (which ibnns part of the Company's Grand Gulf I-related million of the $2.81 billion estimated ont of Watedbnl 3 payments to SERI) from 16% to 13.25%, pmjected by the regantless of the outcome of a prudence resiew of the I.PSC to beanne effective (which would require a l'ERC construction of Waterford 3.The amount of Waterfbnl 3 onter) by August 1987.

costs, dis;dlowed ihr impmdence will be limited to the amount.

The Company has not decided whether to appeal the if any, by which impmdent investment is Ibund to exceed on!cr. Ahhough the order utilized a rate of retum on com-

$281 million, mon equity of 12%, as a result of t'.e $281 million disallow-In connection with the November 11,1985 rate unter, ance in rate base and the non .syvery of 18% of the 17

Company's 14% FERC allocation of Grand Gulf I-related appeals are exhausted, be rescinded or modified in such a costs, the Company does not expect to achieve a rate of manner that is unfavorable to the Company, such outcome return on common equity of 12%. Ilowever, the Company could, but would not necessarily, have a material advene does anticipate that rash flow will impmve due to the elim- effect on the Company's earnings, liquidity, and financial ination of the phase-in plan and the retention of the remain- condition. The matter is pending.

ing balance of the Texaco settlement subject to the LPSC OnJuly 11,1986, the Company filed with the New Orleans peri 4 diction. On February 6,1987, a group of industrial cus- City Council (Council), with respect to the 15th Ward of the tomen who are intenenon in the proceeding filed with the City of New Odeans, a general retail rate increase application to LPSC a motion for rehearing and for a stay of theJanuary reflect com associated with Grand Gulf 1, to reflect the in-service 30 onter pending the decision of the LPSC to grant or deny status of Waterford 3, and to produce ajust and reasonable the motion, and one of such industrial customen also filed rate of retum. On February 19,1987, the Council by resolution a separate motion for rehearing and for such a stay. Another initiated a prudence investigation with regard to the con-intervenor, the Parish ofJeffenon, louisiana, untimely filed struction of Waterford 3. Ilearings related to the Company's with the LPSC a motion for a rehearing and suspension of above mentioned rate application including the issue of theJanuary 30 order. Should the order ultimately, after any prudence are scheduled to begin onJune 8,1987.

3. INCOME TAXES Income tax expeme (t.enefit) consists of the following-1986 1985 1981 (In ' Thousands)

Current Federal $ 4,658 $(13,140) $ 5,019 State (10.683) (2,101) 7,381 Total (6,025) (15,241) 12,400 Deferred - net I.iberatiicd depreciation 146,465 49,850 826 13eferred fuel costs 7,041 (7.120) (10,378)

Unbilled revenue 1,112 11,131 18,082 Deferred Waterfor 13 expenses 103,659 10,125 -

Adjustment of prior yean' tax provisions - (14,113) -

Provision for estimated losses (8,113) (8,929) -

Reduction due to tax loss carryforward (M,019) (14,073) -

Other (3,078) 2,451 2,702 Total 153.067 29.322 11,232 Investment tax credit adjustments - net (1.254) (451) 34,976 Recorded income tax expense $145.788 $13.630 $58,608 Charged to operations $141,320 $ 6,524 $35,975 Charged to other income 4,468 7,106 6,085 Charged to cumulative effect of a change in accounting methrxl - - 16,M 8 Recorded income tax expense 145,788 13,630 58,608 Income taxes applied against the debt component of AFDC 777 33,225 34,249 Total income taxes $146.565 $ 46,855 $92.857 Total income taxes differ from the amount computed by before taxes. The reasons for the differences are as follows applying the statutory federal income tax rate to income (dollan in thousands)-

1986 1985 1981

% of  % of  % of Pre-Tax Pre-Tax Pre-Tax Amount Income Amount income Amount income Computed at statutory rate $131,740 46.0% $66,792 46.0% $119,425 46.0%

Increases (reductions)in tax resulting from:

Allowance for funds used during construction (865) (0.3) (57,850) (39.8) (58,879) (22.7)

State income taxes net of federal income tax effect 13,539 4.7 7.362 5.1 2,801 1.1 Depreciation 7,530 2.6 4,076 2.8 218 0.1 Other - net (6,156) (2.1) (6.750) (4.7) (4.987) (1.9)

Recorded income tax expense 145,788 50.9 13.630 9.4 58,608 22.6 income taxes applied against debt component of AFDC 777 0.1 33.225 16.9 34,219 9.0 Total income taxes $146.565 51M $16,855 26.3% $ 92.857 31EG 18

The tax effect of the ponion of the 1985 and 1986 federal If not used, they will expire in 1992 through 2001.

tax losses that are canied forward has been recorded as a Cumulative income tax timing differences for which reduction of deferred income taxes. These losses totalling deferred income taxes have not been provided are $125

$221.9 million are available to offset taxable income in future million, $138.7 million, and $109.9 million as of the end of years and,if not utilized, will expire in the years 2000 and 1986,1985, and 1984, respectively.

2001. Unused investment tax credits at December 31,1986 See 5fanagement's Financial Discussion and Analysis for amounted to $96.3 million before any reduction resulting a discussion of the Tax Refonn Act of 1986 on page 29 of from the Tax Reform Act of 1986. These credits may be this report and its impact on the Company.

applied against federal income tax liabilities in future yean.

4. LINES OF CREDIT AND RELATED BORROWINGS At December 31,1986, the Company had $38.4 million louisiana banks and $80.5 million in lines of credit with in lines of credit with louisiana banks and $110 million in banks outside the 5 fiddle South System senice area, all of lines of credit with banks outside the Afiddle South System which had been used.

area of senice. The lines of credit with louisiana banks The short-tenn Imrmwings and the applicable interest include a $10 million line of credit shared by the Company rates (determined by dividing applicable interest expense and New Orleans Public Senice Inc. (NOPSI). Compensating excluding that accrued in 1985 and 1984 on settlement balances (approximately 5% of the commitment amounts) agreement funds used by the Company (see Note 12, or equivalent fees are required by certain of the non- " Settlement Agreement with Gas Supplier") by the average senice area lending banks. Additionally, the Company amount Imrrowed] for the Company were as follows:

participates with certain other companies of the hfiddle South 1986 1985 19M System in a money pool arrangement whereby those (Dollan In Thousands) companies with available ftmds make short-tenn loans to 5faximum bom> wing $168,360 $229,710 $159,201 other companies in the System having short-term borrowing Year-end Imrrowing-requirements. The Company may bom>w fmm these sources Itmk loans - $ 99,160 -

subject only to its maximum authorized level of short-term Associated companies - $ 34,700 -

borrowings and the availability of funds. The Company has Aserage bonuwing-received authorization from the Securities and Exchange llank loans $ 77,656 $ 75,998 $ 32,861 Commission (SEC) under the Public l'tility Holding Company Anociated companies $ 15,787 $ 95,176 $ 26,066 Act of 1935 to have outstanding at any one time short-tenn ^' *"'K' I"' F# d "Ti"R honuwings aggregating not more than 10% of the Company's capitalization. At the end of 1986, the aggregate amount of 3 "(( g gg g Associated companies 7.6% 8.2% 10.7%

unused lines of credit with louisiana banks and with banks Average interest rate at end outside the Niiddle South System senice area was $38.4 of pedod-million and $110 million, respedively. At December 31,1985, Ikmk loans -

9.9% -

the Company had $18.7 million in lines of credit with Associated companies -

8.5% -

5. PREFERRED AND COMMON STOCK Preferred stock at December 31,1986 and 1985 consisted of the following-Shares Authoriied at Shares Outstanding Current December 31, at December 31, Cumulatis e, $100 Par Value Call Price 1986 1986 1985 Per Share Without sinking ftmd:

4.96% Series 60,(MN) 60J)00 60.000 4.16% Series $101.25 70,000 70JMW) 70,(MM) 104.21 4.4 4% Series 70jHX) 70fXX) 70/XX) 101.06 5.16% Series 75JK0 75J)00 75,000 104.18 5.104 Series 80/X)0 80J)OO 80,000 103.00 6.41% Series 80,000 80JMK) 80,000 102.92 9.52% Series 70JM)0 70,000 70,000 101.20 7.84% Series 100,000 100,000 100,000 103.78 7.36% Series 100JXN) 100J)00 100JXX) 105.20 8.56% Series 100,000 100,000 100J)00 105.28 9.4 4% Series 300jHM) 300J)00 300j)00 109.08 11.48% Series 350JKK) 350.000 350jk)0 111.11

%tal I,455.000 1,455 000 1,455J)00 t?niuued 3,045JW)0 - -

Total 4,500JWW) I,4553NN) 1,455fKK) l

Shares Authorized at Shares Outstanding Current December 31, t December 31, Call Price Cumulatise, $25 Par Value 1986 1986 1985 Per Share With sinking fund:

10.72% Series 2,039,850 2,039,850 2,159,600 $ 27.01 13.12% Series 1,355,000 1,355 (XW) 1,410,000 27.16 15.20% Series 1,075,000 1,075,000 1,140,(XX) 27.85 14.72% Series 2,000,0m) 2,000,000 2,000,(XX) 28.68 12.68% Series 3,000,000 3,000,0t M) 3,(XN),000 28.16 19.204 Series 2.000,000 2,000,000 2.000,(x)0 28.73

'li,tal i1,469,850 11,469,850 11,739,f410 Uniuurd 9,8WUMW) - -

'li>ia1 21,269.850 11,469.850 11.739,fdW) 1986 1985 (In Thousands)

Without sinking fund:

Stated at $100 a share $ 145,500 $ 145,500 Premium 382 382

'li>tal preferred stoc k and piemium. without sinking fund $ 145,882 $ 145,882 With sinking fund:

Stated at $25 a share $ 286,746 $ 293,490 hsuance expeme (14,617) (15.067)

'li>tal prefetred stot L and iwuame expeme, with sinLing fund S 272.129 $ 278,423 The 10.72% 13.12% 15.20114.72112.61% and 19.207c prefet ed stock outstanding duting the yean ended December preferred stock issues are each subject to a sinking fund 31,1986,1985, and 1981 were as follows:

pursuant to which the Company is obligated to redeem, Number of Shares commencing on July 1,1981, October 1,19&l, Nmember 1986 1985 1981 1,1985, Alay 1,1987, February 1,1988, and August 1,19'H), Common stock shares sold - 15,152,000 9,817,800 respectively, and ending in the year in which all of the shares $25 Preferred simk shares sold - - 2,000,000 of said issues have been redeemed, 120,000, 80,000,60,000, $25 Preferred stock shares redeemed 269.750 260,400 200,000 100,000,150,000, and 400,(x)0 shares, respectively, at a price of $25 per share plus accumulated and unpaid dividends. The Company has received authorization from the SEC in addition, the Company has the non-cumulative option to issue and sell to its purnt, NISU, up to 11,3GI,fWX) additiotud to redeem an additional like amount of said shares each shares of common stock from time to time tim > ugh December year. 31,1987. In addition, the Company has filed with the SEC On Ntay 1,1986, quarterly dividends for both the unpaid for authority to issue and sell from time to time through February 1,1986 quarterly dividends, and the regularly December 31,1988 up to $100 million aggregate par vahic siheduled 51ay 1,1986 dividends, were paid on all series of of additional preferred stock, the proceeds of which couhl the Compmy's prefetred stock thereby eliminating atrearages. be used for the redemption,in whole or in part, of the The Company continued to remain current with respect to Company's 15.2(F/c,13.12% and/or 11.72% Series Preferred payment ofits quarterly disidends in 1986. Ilowever, the Stock. The Company is also considering the possible Company has not paid quarterly dividends on its common redemption ofits 19.20% Series Prefe Ted Stock with the stock sinceJune 1985. proceeds of the sale of its common stock to NISU or through The changes in the number of shares of common and the use ofinternally generated funds.

6. LONG-TERM DEBT Inng-term debt at December 31,1986 and 1985 consisted of the following (in thousands):

1986 1985 l'irst %fortgage Ibnds:

1%% Seties due 1987 $ 20,000 $ 20,000 15%% Series due 1988 - 50,000 1075 % Series dtic 1989 45,000 45,000 5 % Series due 1990 20,000 20,000 16 % Series duc 199I - 75,000 16%% Series due 1991 - 100,000 Ii % Series duc 1992 60,000 60,000 10%% Series due 1993* 200,(NX) -

1986 '1985

- 12 ' % Series due 1993 '100,000 100,000 :

4%% Series due 1994 - ~ 25,000 _ 25,000 16 % Series due 19J1. 100,000 - 100,000 L I4%% Series due 1995 ~ 15,000 ' 15,000 5%% Series due 1996 .35,000 -35,000 :

. 5%% Serics duc 1997 ' 16,000 16,000 6%% Series due 1997 18,000 18,000 7%% Series due 1998 '.35,000 - 35,000 9%% Series due 19991 25,000 - 25,000 9%% Series duc 2000 ' 20,000- 20,000 7%% Series due 2001 25,000 25,000 -

7%% Series due 2002 25,000 25,000 7%% Series duc 2002 25,000 25,000 -

8 % Series due 2003 ' 45,000 145,000-8%% Series due 2001 L45,000 45,000 8%% Series due 2006 -40,000 40,000 --

10 % Series due 2008 60,000 60,000 13%% Series due 2009 -' ~ 55,000 .

13%% Series due 2013 '100,000 100,000 13 % Series duc 2013 50.000 50,000 14%% Series due 2014 55,000 - 55,000 15%% Series duc 2011 35,000 35,000 10%% Series due 2016 280,000 -

Total First Mortgage Bonds 1,519.000 1,319.000 Other:

St. Charles Parish Pollution Contml Revenue Ikmds, Series 1984 .

-115,000i fl15,000 (

St. Charles Parish Pollution Contml Revenue Bonds, Second Series 19&l (less, in 1985, $105,000 then held in a cash collateral security account) 105,000 - -

Other pollution control and industrial revenue bond obligations. -

6.4058% due 1988-2009 16,300 16,300 Principal amount of municipal revenue Ixmd obligations, l%58% due serially 1987-2001, and other future obligations under operating agreements 29,118 _ 31,793 Purchase obligations under an inventory supply agreement 28,058 -

Total Other 293,476 L 163,093 Unamortiied premium and discount on long-term debt - net (6,670) (9,340)

Total long-Term Debt I,R05,H06 ' '1,472,753 less - Amount due within one year 22,774 2,675 Inng-Term Debt excluding Amount Due Within One Year ' $1,783,032 $1,470,078

• In April 1986, the Company sold $200 million principal amount of intermediate-term secured notes at an annual interest rate of ;

10%%. On August 28,1986, the Company collateralized these outstanding intermediate-term secured , notes by depositing first -

mortgage Ixmds in that amount with the trustee for such notes effectively making such notes of equal rank with the outstanding first mortgage bonds of the Company.

In August 1986, the Company obtained approxim'ately which are secured by letters of credit, currently bear interest

$30 million under an inventory supply agreement with a at 8.75% per annum for three years from the mspective dates non-alfiliated entity, with respect to spam parts for Waterfbrd of the original issue thereof and thereafter convert to an

3. Additionally, on November 6,1986, the Company sold - annually adjusted interest rate, not to exceed 15% per annum.

$280 million aggregate principal amount of Fint Mortgage  ; With respect to the Series 1984 bonds, however, the Company .

Bonds,10%% Series due November 1,2016. The Company has filed with the SEC for authority to substitute for the used the net pmceeds fmm the sale to redeem an aggregate ' related letter of credit its collateral first mortgage bonds as

. of $280 million of several series ofits outstanding fint - security therefor and, in connection therewith, to convert mottgage bonds hearing interest at rates ranging fmm 13%% the interest on the Series 1984 bonds to a fixed inte per to 16%1 As a result of such refinancing, the Company annum until maturity, in December 1986, upon participation realized an $18.7 million loss on the reacquired debt. The of several banks in the letter of credit, the Company received '

loss will be amortiied over the life of the new issue as the Second Series 1984 bond proceeds of 3105 million permitted for ratemaking purposes. previously held in a cash collateral security account, .

InJune and December 19&l, the Company entered into Sinking fund requirements on first mortgage bonds and agreements with St. Chades Parish (Parish), Inuisiana, whereby maturities under long-term debt instruments in effect at the Parish issued $115 million (Series 1984) and $105 million December 31,1986 for the yean 1987 thmugh 1991 are as (Second Series 1984), respectively, of adjustable /lixed rate follows:

Pollution Contml Revenue Ikmds due 2014, The bonds, 21

Year Sinking Fund

• Maturities Certain of System Fuels, Inc?s (SFI) financing agreements On Thousamts) and leases may require payments by the Company and the 1987 5 9,440 $22,77 8 other Sptem operating companies, htSU or SERI in the 1988 12.210 2,H32 event SFrs obligations under such documents are accelerated 1989 12.210 48.016 as a result of the insolvency of a System operating company 19'NI I1,790 23.202 and SFI is unable to meet these obligations or otherwise to 1991 11.590 2.687 satisfy these obligations through the sale of the collateral

• Sinking fund requirements may be satisfied by certification of se u ng suc o g dons. Inseency of any gtem operating propeny additions at the rate of 167% of suc h requirements. company would cause acceleration of SERI.s mdebtedness under certain agtrements unless waiven were obtained under ne Company has filed with the SEC for authority to these agnements. Acceleration of such indebtedness of SERI issue and sell frum time to time tim > ugh December 31,1988, could also occur if a N1PSC proceeding relating to the up to $200 million aggregate principal amount of additional certificate of convenience and necessity for the Grand Gulf fint mortgage bonds, the proceeds of which could be used, St;uion were to make the continued operation of Grand among other things, to acquire (by tender offer or otherwise) Gulf 1 i practical. Given the substantial amount of these all or a portion ofits outstanding first mortgage bonds of obligations, SERI, with its financial resourtes curwntly limited, the 14%% Series due 2014,15W7c Series due December.1, would not be able to meet these obligations,if accelerated.

2014, and/or 16% Series due 1991. Under SERTs financing ag rements, NISU, and not the System operating companies, would be responsible to pay SERrs

7. RETAINED EARNINGS accelerated obligations. stSU, with its financial resources The Company's Articles ofIncorporation and indentures currently limited, including limitations on its ability to borrow contain provisions restricting the payment of dividends or ftmds or issue additional shares ofits common stock, would other distributions to common stockholden. At December rmt be in a position to satisfy SERrs accelerated obligations 31,1986, all retained eamings were free fmm such restrictions. aml/or provide the Company with desired common stock equity. In addition, insolvency of one or more Aliddle South

8. COMMITMENTS AND CONTINGENCIES System companies could impair the ability to obtain financing A. Capital Requirements and Financing in the capital markets for other Niiddle South System At December 31,1986, the Company's most significant companies.

commitments and contingencies related to (1) the effect C. Dividend Suspcnsion on the Company of a new accounting standant (see "New Accounting Standant"),(2) the potential outcome of In @t of the uncertainties continuing to face the 5 fiddle motions filed with the LPSC for rehearing and stav of the f"". %sem s weH as e nm to consmr cash resources LPSC's Januaq 30,1987, rate outer and any resulting potential m view of these uncettainties, the Company and the other long-tenn ellect upon the Company's earnings, liquidity,  %*m opem6ng companies have not declared dividends onI common stock since the second quarter of 1985.

and financial condition (see Note 2'" Rate N!atten"),(3) the final resolution of the LPSC prudence investigation has been unable m declare its own common stock dividend since that time. Resumption of the Company's and (see Note 2 " Rate Statten'1 (4) the future status of Grami Gulf 2 and the possible alh> cation to the Company of costs s conunon smck diMends may depend, among other associated with that unit (see " Grand Gulf 2"), and (5) the t ngs, upon the funkr remlution or modemtion of the ultimate outcome of challenges to the alk> cation of capacity uncqt:unnes and further improvement in the financial con non of the hfiddle South System.

and enetyy from Grand Gulf 1 that couhl have a significant impact on the Company. D. Unit Power Sales Agreement

'Ihe Company's obligation for payments to SERI for Gmnd The Unit Power Sales Agreement, as approved by the Gulf I capacity and energy is approximately $1I million FERC onJune 13,1985 (June 13 Decision), obligates the per month. System operating companies to purchase from SERI at SERrs The Company's construction program contemplates full cost of senice all of SERrs 90% share of the capacity expenditures including AFDC of approximately $175 million and energy from Grand Gulf 1 in accordance with the in 1987, $143.4 million in 1988, and $162.5 million in 1989. following percentage alh> cations: the Company,14W; Arkansas it Potential Debt Acceleration and Related NIatters Power & Light Company (AP&L),36%; alp &L,33%; and Certam of the other Aliddle South System operating NOPSI,17%. Payments thmugh the N! arch 1986 payment wem reduced by credits fbr power purchase advance payments companies'(System operating companics) retail rate onters previously made to SERI. OnJanuan 6,1987, the United with respect to their alh>cated costs fbr Grand Gulf I aq>acity and eneigy are still being challenged and reconsidered. On 6 Die @hW Gd allirmed the FERC'sJune 13 Decision. Various parties have Februaq 25,1987, Nhssissippi Power and Light ate order was reversed on appeal by.

ssissippi the Sh.

Supreme . . filed

's (NIP &L)for rehearing with the Court of Appeals and requests petitions fbr certiorari with the United States Supreme Couit.

L.ourt and remanded to the Al. .ississippi Public Serv. ice L,om-mission (NIPSC) thr reconsideration. The Council is con. E. Availability and Reath> cation Agreements ducting a prtalence imestigation of NOPSrs involvement The System operating companies are severally obligated in Grand Gulf 1, which couhl result in non-recovery by to SERI under the Availability Agreement in accordance NOPSI of any Grand Gulf I costs fbund by the Council to with stated percentages (the Company,26.9%; AP&L, be imprudently incurred. 17.1%; h1P&L,31.3%; NOPSI,24.7%) to make payments or

subonlinated advances adequate to cover all of the operating serrmgly contested on various gmunds including imprudence.

expenses including depreciation of SERI. The System If costs associated with Grand Gulf 2 were allocated to the operating companies in November 1981 entered into a  : Company and it were unable to recover these costs from its

- Reallocation Agreement that would have allocated the capacity customers, the Company's financial condition could be and energy available to SERI from the Grand Gulf Station ' materially and advenely affected.

and the related costs to the Company, MP&L, and NOPSL G. New Accounting Standard Rese companies had agreed to assume all the responsibilities and obligations of AP&L with respect to the Grand Gulf The accounting standards relating specifically to public Station under the Availability Agirement and Power Purthase utilities and cenain other regulated enterprises are set forth Advance Payment Agreement, with AP&L relmquishing its by the Financial Accounting Standards Board (FASB)in nghts with respect to capacity and energy from the Grand Statement of Financial Accounting Standards (SFAS) No.

71. In December 1986, the FASB issued SFAS No. 90, Gulf Station. Each of the System operating companies

. Regulated Enterprises-Accounting for Abandonments and mcluding AP&I mdividually, would have armained pnman,ly liable to SERI and its assignees for payments or adunces Disallowances of Plant Costs." as an amendment to SFAS under these agwements. AP&L was obligated to make its No. 71. SFAS No. 90 pmvides that, when an abandonment share of the payments or advances only if the other System of a plant or a disallowance of costs with respect to a newly operating companies were unable to meet their contractual completed plant becomes pmbable, the following amounts, obligations. However, the FERC'sJune 13 Decision alkicating net of related tax benefits, would be reported either by a portion of Grand Gulf I capacity and energy to AP&L restating the appmpriate prior yean' financial statements or supenedes the Reallocation Agreement insofar as it relates by a charge against current income:(1) costs of abandoned to Grand Gulf 1. generating plants in excess of the present value of estimated recoveries and (2) the amount of partial disallowances of F. Grand Gulf 2 tecently completed generating plants for ratemaking purposes.

As of December 31,1986, SERI had invested appmximately The FASB had previously indicated that the new standan!

$908 million in Grand Gulf 2 (including appmximately $390 would also include revisions in accounting for the phase-in -

million of AFDC), which was appmximately 3l% complete of rates associated with the costs of new generating plants.

based on the estimated man. hours needed to complete the The FASB has resumed deliberations on the appropriate unit. From late 1979 until September 1985, only a limited accounting for phase-in plans and what action, if any, the amount of construction was performed on Grand Gulf 2. FASB will ultimately take regarding this matter cannot be Effective September 18,1985, construction activities on Grand predicted at this time. SFAS No. 90 will have application to Gulf 2 were suspended following an order of the MPSC. . the Company due to the revisions made in the accounting Since that time, SERI has continued suspension ofconstruction treatment of plant costs related to (2)above. Specifically, the on Grand Gulf 2 and has limited expenditures to only those LPSC's November 1985 retail rate order includes the activities that are absolutely necessary for demobilization disallowance of $2&l million of the Company's investment and suspension. In December 1986, SERTs Board of Directors in Waterford 3. Under the new standard, this amount is to (with the MSU Boani of Directon concuning) adopted the be recognized as a loss (net of related income taxes) in the secommendation of a special gmup of Middle South officials manner stated above. SFAS No. 90 is effective for fiscal years that suspension of construction be continued and that a beginning after December 15,1987 with retmactive application -

further decision be made by 1990 on the future status of for prior transactions. De Company presently plans to record Grand Gulf 2 in light of alternatives available at that time. this adjustment in early 1988, which will reduce retained During the period of continued suspension, SERFS earnings. However, because of the related complex income expenditures on Grand Gulf 2, as well as the increase in its tax implications, the Company has not finally determined investment in the unit, will be limited. Further, SERI does whether the adjustment will be reported by restating the - i not intend to make an application to the FERC during the appmpriate prior years' financial statements or by charging period of suspension with respect to recovery through rates it against current income in 1988, ofits investment in Grand Gulf 2. In addition, SERI will H. MSU Shairholder Litigation l consider, among other things, whether certain equipment In 1985 MSU, certain other Middle South System or facilities should continue to be carried at their full cost.-

Any detennmanon that the value of SERrs investment should companies, including the Company, and individuals became defendants in a purported class action suit. The initial be reduced and the amount of any such reduction written off could advenely affect various companies in the Middle complaint was filed in August 1985 by an MSU shareholder -

South Sprem, mcluding the Company. - (purponing to represent a class that purchased MSU common In connection with the ultimate decm, ,on regarding the stock) followed by four similar complaints filed by MSU shairholders in August and September 1985.nc Sve actions l future of Grand Gulf 2, SERI will, at an appmpriate time, -

make a determination as to the appmpriate recovery ofits - were consolidated in the U.S. District Court for the Eastern investment. Any action by SERI to seek recovery of Grand District of Louisiana. The consolidated, amended, and i

Gulf 2 costs would likely involve a filing with the FERC supplemental complaint alleged violations of the disch>sure requirements of the Securities Exchange Act of 1934 and requesting such recovery over a period of years thmugh the Securities Act of 1933, common law fraud and common charges to the Sptem operating companies and irlated filings by the System operating companies before state or local law negligent misrepresentation in connection with the regulatoiy authorities to recognize the FERC-allowed charges financial condition of MSU and prayed for compensatory in retail rates.Such proceedings could be pmtracted and and punitive damages, legal costs and fees, and other proper relief against MSU, various other Sptem companies including 23 -

_ A

the Company, certain ollicers (and fonner olFicers) and SFl has executed a coal supply agreement for the purchase dinston of NISU, the unnluny's outside auditon, and certain of approximately 1(H) million tons of coal fbr use at the underwriten of SISU Conunon Stock. In April 1986, SISU Company's proposed Wilton Station with an option to i and the other defendants induding the Company filed a purchase an additional 50 million tons. By se[ urate agirement, I

nmtion to dismiss or, in the abernati e, a umtion (br sununary the Company guaranteed SFrs perfinmance of the contract l jmtgment. On January 12,11)87, the District Court entered and agreed to purchase the coal fmm SFI. SFI had [nrviously a judgment granting defendants' motions (br summary advised the coal supplier that, because ofIbrces beyond its judgment and dismissed the suit. On February 6,1987, the contrui, including, in particular, the regulatory situation, the plaintiffs in the consolidated action filed a Notice of Appeal earliest [wissible dates that the two units of the station could in the U.S. Court of Appeals Ihr the Fif th Circuit. The he put into openuion were 1993 and 1995, respectively, and defendants intend to op[x>se vigomusly the appeal of the funher that the station might he delayed to a time that would District Court's decision. make the existing contract non-viable. In August 1985, SFI funluT advised dw supplier that, based on the latest appraisal,

1. System Fuels, Inc.

for planning puqxises, the Sprem's requirement (br additional

.rhe Company has a 33% interest in SFI, ay. .untly owned coal-fired generating capacity is now forecast to be in a time subsidiary of the Company, AP&l, alp &L, and NOPSI. SFl dia nas the existing contract,in fact, non-viable, operates on a non-pnilit basis li>r the purpose of planning The supplier has refused to agree that regulatory constraints and nuplementing programs fbr the pn>curement of fuel any other dilliculties base constituted events of Ibrce supplies fbr all of the System operating companies and SFRI. inajeiIre under the coal supply agreement. Upon receipt of its costs are primaiily recmered through charges (br fuel the August 1985 notification, the supplier filed a demand

".I " "" for arbitration under the coal supply agreement to establish Ihe parent companies of SFI hase made loans to SFI to that the agreement remains in full lbrce and elTect and that Imance its fuel supply business under a loan agreement SFI is not excused from perfbnning its obligations and, datedJanuary 1, !!)S1, as amended January 1,1987, which atively, that SFrs actions constitute anticipatory provides (br SFI to Ix>nuw up to $51JWX)J)00 fmm its parent repudiation of the coal supply agreement. The parties hase companies through Decend>er 31,1987. As of December agreed to a [mstponement of the arbitration on the basis 31,1986, the C,om[uny had loaned $1,71IJN N) to SFI punuant that it can be restat1ed by e.it her party on ten days notice.

~

to this hun agreement and the Company,s sham of the unused The Company has filed an application with the LPSC for a loan comtnitment was $18JH)oJMH). Notes under this .

. certificate authon. .nng the construction of the Wilton plant agreement mature December 31,1992. In addition, the .

within a time frame of 199a_ or earlier. In view of the reduction Company had loaned SFI $~l1,806JHH) under previous loan

. in pn>jected load requirements widu.n the Company's ama since agreements. Notes matute m 2002 and 2008 utyler the the time the coal supply agreement was entered into and .m pnnisions of the presious loan agreements. .

uew of other facton relating to the C,ompany, there .is a In connet tion with certain of SFrs lxinuwing amun;ements, '

stmng likelih<xxl that the LPSC wd. l not grant such a cestificate.

SFl,s parent companies, including the Company, have .

. It is SFI,s counsel,s op. .mion that a refusal by the LPSC to cmenanted and agreed, severally .m acconlance with the.ir . .

gnmt a certificate on a reasonable bas.is wdl constitute the respectise shares of ownersh.ip of.SFI.s common stock that .

existence of a force majeure which would relieve the thev- w.ll i take any and all action ne(essan to keep SFI m. a Company and SFI of a substantial part,if not all, of the.ir sound financial condition and to place SFI in a position to

" "E"#*#"'

dis (harge and to cause SFI to dist harge its obligations under N" "" " " "' ' " '"* '" .E E

• unpany, an e c<ul suppher base entered .mto discussions these airangements. At January 1,1987, the total loan concenung, among other ihmgs, a possible new ammgement.

commitment tinder these ammgements amounted to nsaus . nory msolution of du.s matter could [mssibly expose

$160JHH)JHM) of which $131j)OOJHN) was outstanding at that SFI and the Company to claims fbr sigmficant damages m date. Also, SFFs parent companies, induding the Company,

. the event SFl .is unable to negotiate a new arrangement with have made s.mular covenants and agreements in connection e coal suppl.ier, es not uhimately prevail .m with long-tenu leases by SFI of oil storage and handling

""# "N '#""'"

facilities and coal hopper cars. At December 31,1986, the "*"

• l"" " '" #*'"'#1 perfbnnance, or other etIbrts to mitigate possible sigmficant aggregate discounted s.alue of these lease ammgements was

$76,100,000. In connection with an SFI $50 million secured """E"'"" ""'" '" "

financing of nuclear fuel imentories, the Company, AP&L, J. Nuclear Liability Insurance atul SERI hase agreed to purchase such imentories in the As of December 31,1986, the Price-Anderson Act (Act) event that SFI is imable to fulfill its oblig;uions under the limited the public liability of a licensee of a nuclear power honowing ammgement. At December 31,1986, the total plant to $695 million Ihr a single nuclear incident. This amount outstanding under this arrongement was $18 million. limit will increase by $5 million ihr each additional operating SFI has mntnuted with ajoint venture ihr a supply of license issued by the Nudear Regulatory Commission (NRC).

mal fmm a mine in Wyoming, which based on estimated Imunmce Ihr this exposure is provided by private insunmce resenes is presently expc< ted to prmide ihr at least thirty and an indemnity agreement with the NRC. Evety licensee yean of the pmjeacd requirements of the Independence of a nudear power plant is obligated to pay retrospective Station. SFrs [urent com[unies, induding the Com[uny, eac h assessments of up to $5 million per incident Ihr each licensed acting in accontame with their share of the ownenhip of reactor it openues or up to a maximum per reactor owned SFFs mmmon stock, joined in, ratified, confirmed, and of $10 million in any calendar year in the esent of a nuclear adopted the contract and the obligations of SFI thereunder. incident invohing any mmmercial nudear facility in the

^

m

-1

~ L Uniied States that.results in damages in excess of the private De b>mpany has SEC authorization to lease nuclear fuel iinsurance. The Company has one licensed reactor. The Act ugs to $130 million. Lease payments based on nuclear fuel is scheduled to expire in August 1987, and the U.S. Congmss use will be treated as cost of fuel. De $126,104,000 credit -

is considering several pruposals to amend it. The Company line associated with the nuclear fuel lease is currently .

is unable to predict what action Congress might ultimately-scheduled to terminate inJune 1987, Upon tennination,-

(take regarding the Act and what effect such action might the Company will be required to repurchase the fuel then have on the Company's potential liability. . _

under lease unless the present line is extended or a new The Company is a member-insured of Nuclear Electric line secured.The unrecovered cost base of the lease at

. Insurance Limited (NEIL), a mutual insurer that provides- December 31,' 1986, was $116,274,000, in accordance with -

its memben with insurance coverage for certain costs of . SFAS No. 71,'the Company will capitalize its nuclear fuel .

i replacement power incuned due to cenain pmkmged outages

. lease and record the related obligations in the fint quarter

~of nuclear units (NEIL I). In addition,'the Company is a . of 1987.

-- member-insured under NEIL II,~which provides $610 million . Other lease commitments are not significant. ..

of coverage for pmpeny damage sustained by.the insured in excess of $500 million caused by radioactive contamina- 10. POSTRETIREMENT BENEFITS

~

tio'nor other specified damage. Tiie Company is also a The companies of the Middle South System have various member-insured under a primary pmperty ' damage insur-' lxntretirement beneSt plans covenng substantially all of their ance program provided by Nuclear Mutual 1.imited, another employees.'

mutual insurer. As a member-insumd with these mutuals, - Pension plans are administered by a trustee who is -

' the Company is subject to assessments if h>sses exceed the resp (msible for pension pay ments to retirees. Various accumulated funds available to'the insurer. The Company's investment managen have responsibility for management.

present maximtim assessment for incidents occurring during of the plans' assets. In addition, an independent actuary .

a policy year is appmximately $35 million. perforns the necessary actuarial valuations for the individual K. Spent Nuclear Fuel and Decommissioning Costs C"*E "I E "5 -

Total pension expense of the Company for 1986,1985,-

Under the tenns ofits nuclear fuel lease, the Company is res-ponsible for the dis [msal of spent nuclear fuel. The Company and 19M was $737,000, $1,221,000 and $7,471,000, respectively.

The decrease in 1986 expense compared to_1985 resulted c msiden all costs mcurred or to be incurred in the use ami disposal of nuclear fuel to be pmper components of nuclear primarily from inclusion of $1,510,000 in 1985 for a special fuel expense and pmvisions to recover such costs have been early retirement pmgram that was offered for a limited period accepted by the LPSC. The Company has executed a contract and was not available in 1986.The decrease in 1985 pension wnh the Department of Energy (DOE) whereby the DOE will expense compared with 1984 resulted from an adjustment :

funu_sh disposal senice for the Company's spent nuclear fuel in 1985 to revene $2,391,000 of 1984 ex' pense and from at a cost of one smil per kilowatt-hour of net generation. changes in actuarial assumptions and cost methods used by In addition to the recovery of costs asociated with the the Company. These changes included an increase in the disposal of spent nuclear fuel, the Company is presently assumed rate of return used in determining the actuarial present value of pmjected plan benefits from 8% to 9% and recovering a total of approximately $2.1 milhon annually for decommissioning costs for its nuclear unit. The Company an increase of 1% at each age in expected salary increases currently projects total esumated nuclear plant decommis- for active plan participants. Additionally, the Company siomng costs to be $140.6 milhon, exclusive of the effects changed the actuarial cost method and amortization method ofinflation. for recognizing the difference between assets and past senice liabilities and amended the plan effectiveJanuary 1,1985

- L Consolidation with NOPSI to comply with the Retirement Equity Act.

In the interest ofincreased economic efliciency, the During 1985, new standards for employers' accounting Company and NOPSI have developed a long-term plan to for pensions were issued (SFAS No. 87). The Company will consolidate the two companies and their operations. Under adopt the new pension aceounting and disclosure standards -

the pmposed arnmgement, subject to receipt of necessaiy in 1987. Ilowever,it is not expected that the new standards regulatory and other approvals, the two companies would will have a material impact on the Company's financial be consolidated into a new company to be called Louisiana position or results ofoperation.

Power & l.ight Company. MSU, which cunently owns all A com[xuistm of the actuanal present values of accumulated the outstanding common stock of the Company and NOPSI, pension plan benefits and plan net assets for the Company's would own all the common stock of the new company. defined benefit plan is presented below. This comparis<m

9. LEASES w s detennined in ccordance with the provisions of SFAS In 1980, the Company entered into a sale and leaseback No. 36, that requires the use of certain assumptions that are -

g ,

, g of certain oflice buildings and related real properties. A g g, og g g gain of $13,438,000 has been deferred and is now being -

amonimi over the life of the lease. 'Ihe lease is for a primary term of 20 yean and requires minimum annual rentals of approximately $3,'507,000 fi>r 1986 and thereafter Rental expense amounted to appmximately $6,724,000,

$6,267,000, and $5,736,000 in 1986,1985, and 1984, respectively. 25 '

January 1, by the Com[xmy inJune 1982,Januaq 1983, and January 1986 1985 1981, respectively) plus a guaranty of savings of at least $585 (In Thousands) million in certain gas acquisition costs between 1982 and Actuarial present value of 1996. In N1 arch 1983, the 1.PSC onlered in general that the accumulated pension plan benefits: refunds be made as follows: the $587 million received on Vested $ 72,199 $ 62,719 June 1,1982 plus interest or a total of $637 million to be Nonvested 4,3fel 4,153 refunded in 1983; the $250 million received in Januaq 1983 Total $ 76.563 $ rdi.872 to be refunded in 10 equal annual installments beginning Net assets available for in 1981; and the $250 million received inJanuaq 19R1 to pension benefits $ 139.858 $117.025 he refunded in nine equal annual installments beginning in 1985. In addition,in Februaq 1981, the I.PSC onlered The assumed rate of return used in detennining the the Company to refund $32.6 million, representing interest actuarial present value of accumulated pension plan benefits not already covered in its hlarch 1983 refund onter, to was 91 customen in equal installments over a nine year perimi The Company also provides cettain health care and life beginning with the 1985 refund. As a result of the I.PSC insurance benefits for retired employees. Substantially all onten, the Company accrued in 1985 and 19R1 net interest employees may become eligible for these benefits if they expense in the amounts of $.2 million and $9.2 million, reach retirement age while still working for the Company. respectively. No accrual was required for 1986. Through These benefits and similar benefits fbr acthe employees are I)ecember 31,1986, the Comixmy had refunded a total of provided through various means including payments of approximately $770 million to its customers.

premiums to insurance companies and/or accruals for self- On Januaq 30,1987, the LPSC issued a rate onler which, insurance policies managed by insurance companies. The among other things, onlemi the Company to make no fmther Company recognizes the cost of pnniding these benefits by refunds to itsjurisdictional customers of the remaining expensing the payments made to the insumnce companies pn>cceds from the aforementioned settlement. As ofjanuaq or accruing the cost as recommended by the managing 30,1987, the remaining proceeds as to these customen were insurance company.The cost of providing these benefits for appmximately $386 million. Ilowever, the amount applicable retirees is not separable from the cost of providing benefits to the Company's senice tenitog in the 15th Ward of the for actise employees. 'Ihe total cost of pnniding these benefits City of New Orleans will continue to be refunded.

and the number of active employees and retirees for the last three fiscal yean were as follows: 13. QUARTERLY RESULTS (Unaudited)

Unaudited operating results fbr the fbur quarten of 1986 1986 1985 1936 and 1985 Gdlow-

'Ibtal cmt of health care and life

$7,995 $6.523 $6,598 Quaner Operating Operating Net irwurance(in thousands) Ended Resenues Income Income (Im)

Number of a<tise emplo>ces 3,05l 2,985 2,915 Number of retirees 638 539 522 (In Thousands) 1986:

Ntarch $297,517 $ 71,875 $27,369

11. TRANSACTIONS WITH AFFILIATES June 332,296 88.210 39,i88

'lle Company buys electricity fmm and'or sells electricity 112,303 62,819 September 109.757 to the other operating subsich. anes of NISU, .mcluding SERI' I d 299fA1  % 691 10J98 under rate schedules filed with the FERC. In addition, the Company purchases fuel fmm SFl and receives technical 1985:

and achisoy senices imm NfSU System Senices, Inc. (fbnnerl# hlarch $281,059 $ 46,993 $11.225 Middle South Senices, Inc.). In addition, during 1986 the June 308,508 51,310 17,870 Company paid SFI approximately S-17 million for nudear September (2) 351,787 56,Gl6 52,186 fuel processing senices. December (1) 318.116 26.838 (9,712)

Operating trvenues indude revenues fium sales to alliliates amounting to $18.5 million in 1986, $13.6 million in 1985, (1) The (;uanen ended December 31,1986 and December 31, and $12.2 million in 1981. Operating expenses indude charges 1985 indude the effect of an $8A million and a $22.1 million from alliliates (br fuel cost, purchased power, and technical "I"' 0""' "C' "I '"* i" "PCFd'i"RI " "*" *"d " *' I"'"*"'

'"P*C

• ue to the pnnNons for enmated 1 owes Me and achisory senices totalling $379A million in 1986, $389.9 m deh,midy

. Company,s share of certain costs awociated with mdh.on m 198a., and $338. ,/ milh.on m 19&l.

delayed future fossil-fuel generating f.uilities.

(2) For the quarter ended September 30,1985 operating income

12. SETTLEMENT AGREEMENT WITH and net inmme decreased hv $17.6 miUion, net of tax, due to GAS SUPPLIER ihe unrecovered nxed charges associated with (; rand (;ulf rs A dispute between a gas supplier and the Company arising commercial operation.

from the gas supplier's claimed inability to deliver the full quantities of fuel gas due the Company under seveml natumi The business of the Company is subject to seasonal gas contracts was settled by the execution of a settlement fluctuations with the peak period occurring during the agreement onJune 1,1982.The settlement agreement summer months. Accordingly, camings infbrmation ihr any l provides for the payment of $1,087 billion in cash (of which interim period should not be considered as a basis Ihr l

$587 million, $250 million, and $250 million were received estimating the results of operations for a fidl year.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS FINANCIAL. CONDITION The Company experienced a gmdual improvement in and final rate relief for Waterfbrd 3, the LPSC stated in the earnings, financial condition, and liquidity during 1986, order that the issue of prudence was not being resolved in primarily as a result of rate relief granted in late 1985. that order. It is the position of the Company that none of C<msequently, net income, fint mongage bond eamings the Waterfbrd 3 costs were impmdently incuiTed.

coverages, and internally generated funds increased. Ily the Eamings will continue to be adversely affected by end of year, net income had surpassed the 1985 level by the Company's agreement to retain permanently the 7%, earnings coverages climbed to 2.99 times the annual afbrementioned $284 million of Waterford 3 investment as mortgage bond interest trquirements, and funds provided part of the November 1985 interim rate relief granted by by opemtions had increased $85.2 million as compared to the LPSC. In this connection,in December 1986, the FASB 1985. The Company became current with respect to the issued Statement of Financial Accounting Standards (SFAS) declaration and payment ofits preferred stock dividads. No. 90 amending SFAS No. 71 (which relates specifically to flowever, the Company has not paid any dividends on its accoimting fbr public utilities and certain other regulated common stock sinceJune 1985. enterprises) with respect to the accounting fbr abandonments During 1986, the Company faced several unccrtainties of partially completed genemting plants and disallowance and challenges. These induded the resolution of a pennanent of costs associated with newly completed generating plants.

rate irlief request pending belbre the Inuisiana Public Senice SFAS No. 90 is elTective (br fiscal years beginning after Commission (LPSC); a prudence investigation of the December 15,1987, with retroactive application fbr prior Company's decision to construct Waterh >rd 3, the plant's period transactions. Under the new statement, the $284 constmction costs and the Company's decision to buy power million,less the related income tax elTect, disallowed by the from Grand Gulf 1; a proposed amendment by the Financial 1.PSC in November 1985 must be recognized as a loss. The Accounting Standards Board (FASB) regarding financial Company presently plans to record this adjustment in early reporting by regulated companies; the outcome of a 1988, which will reduce retained eamings. Ilowever, because challenge to the allocation of capacity and energy fium Grand of the related complex income tax implications, the Company Gulf 1; the uncenain status of Gand Gulf 2 (see Note 8, has not finally detennined whether the adjustment will be

" Commitments and Contingencies - Grand Gulf 2") and reported by restating the appropriate prior years' financial the accounting treatment and possible cost allocation in the statements or by charging it against current income in 1988.

event of cancellation; and the effects of the new federal income Additionally, the Company's agreement to retain tax legislation. While the majority of these issues have been pennanently 18% ofits share of Grand Gulf I costs continues resolved, certain of them are still pending. to affect the Company's camings adversely. However, the OnJanuary 30,1987, the LPSC issued a permanent unter capacity and enen;y relating to the Company's pennanently for mte relief that will allow the Compmy a base rate increase retained percentage of Gmnd Gulf I costs could be available of $76.2 million over and above the rate relief granted the Ihr sale to non-alliliated parties, subject to LPSC appmval.

Company in November 1985. Additionally, the order will OnJanuary 6,1987, the United States Court of Appeals fbr require the Company to retain approximately $386 million the District of Columbia Circuit affirmed the Federal Energy of the balance of proceeds of a gas contract settlement and Regidatory Commission'sJune 13,1985, decision in the Unit to use these fimds to recover the Waterfbrd 3 deferTed Power Sales Agreement case alh>cating capacity and energy expenses accumulated throughJanuary 31,1987 from Grand Gulf I and the cost thereof as fbliows: Arkansas (appmximately $217 million). The remainder of the $386 Power & Light Company,36%;1ouisiana Power & Light Com-million is to be used as a rate base reduction to be amonized pmy,16; Niississippi Power & Light Company,33%; and New mer the life of Waterfont 3. The pennanent rate relief order Orleans Public Senice Inc. (NOPSI),17%, Other issues were represents about a 5% resenue increase and eliminates the also affirmed with minor m<xtifiations. 'Ihe Coun of Appeals multi-year phase-in plan, originally proposed to finance a decision is the subject of requests (br rehearing to the pnion of the costs associated with Waterfel 3 (the installed Court of Appeals and petitions fbr ceniorui to the United States cost of which is apprmimately $2.38 billion enluding nuclear Supreme Court. Should the Company's percentage alk) cation fuel). (See Note 2," Rate Nf atters")

be increased, its camings could be adversely affected.

As put of the November 1985 interim rate relief agreement, the Company agreed to absorb $231 million of Waterford 3 LIQUIDITY AND CAPITAL RESOURCES cmta. At that time, the LPSC order also prmided that any dis- During 1986, the Company's primary capital requirements allowance resulting from a prudence investigation would be included the financing of deferred Waterfbrd 3 expenses limited to the amount by which the amount the LPSC found (which at December 31,1986 had accumulated to impmdent exceeds $231 million. In a repnt issued in October appmximately $226 million), payment of all preferred stock 1986, Theodore I any & Associates, a national consulting dividc nds, a net disbursement of $56.1 million to its customers finn employed by the LPSC, concluded that the Company's in connection with the contract settlement with a gas supplier, decision to build Wateribrd 3 was reasonable. They also repayment of outstanding short-tenn borrowings, and the concluded that no more than $113 million of the total financing of construction expenditures. In order to meet its Wateribnl 3 construction costs could be classified as capital rieeds, the Company obtained $200 million from impmdently incunrd and that Grand Gulf I was a reasonable the sale ofintermediate-term secured notes in the second alternative to meet pmjected system demand. Although the qurrter of 1986 (such notes were collateralized by first LPSC'sJanuary 30,1987, onier purponed to grant permanent n ongage bonds in August 1986); obtained approximately 27

l

, $30 million in August 198f> under a nuclear spare parts million line of credit with louisiana banks includes a line inventory supply annngement with a non-alliliated entity; of credit shared by the Company and NOPSI not to exceed, and secured in December 1986, the pniceeds of $105 million in the aggregate, $10 million. Ih>nowings can also be effected principal amount of pollution control revenue Ix>nds issued thniugh the Aliddle South System Nfoney Pool, sul> ject to and sohl in December 1981 that were being retained in a the availability oflimds, which at any particular time may cuh collateral sennity account. The balance of the Cominny's be limited. At December 31,1986, the Company had no cash needs were satisfied through intemally generated funds. outstanding shon-tenn bonuwings fnnn assmiated companies.

In addition to raising capital to meet its requirements for The Company's earnings emerages for its first mortgage ctsh, the Company reduced its cost of debt through the bonds increased to 2.99 times the annual mongage bond issuance and sale of $280 million of fint mortgage bonds in interest requirements at year-end 1986 fmm 1.37 times at November 1986, the pmceeds of which were used to trfund year-end 1985. At year-end 1981, the carnings coverage for an equal principal amount of outstanding lxmds beating fint mortgage Imnds was 1.98 times the annual mortgage higher interest rates. interest requirements. Earnings cmerages for its preferred Over the next duce yean, the Company projects that capital stock increased to 1.37 times the annual interest charges will be required for construction expenditures (inclusive of and pirferred stock dividend requirements at year-end 1986 AFDC) of $175 million in 1987,$143.4 million in 1988, and fnnn 1.32 times in 1985. The p rfened stak camings coverage

$162.5 million in 1989; the retirement oflint m<ntgage bonds was 1.51 times at year-end 1981.

of $20 million in 1987 and $15 million in 1989; and the 'lhe minimum camings onemge requirements fbr issuing retirement of other long-term debt and preferred stock fint mongage bonds (other than Ihr refunding purposes) aggregating $65.1 million in 1987, $18.9 million in 1988, and prrferred stock are 2.0 times and 1.5 times, respectively, and $19.1 million in 1989. The Company anticipates that its on a pro forma basis. Itased upon December 31,1986 capital needs will be satisfied through internally generated camings, the Company was precluded from mising capital funds, the possible sale of $25 million of common stock to through the sale of prefened st<xk. Ittsed upon mongage its parent, Aliddle Soudi Utilities, Inc.(MSU)in each of 1987 carnings coverages and an assumed interest mte of 101 and 1988, and the sale of such other securities as may be the Company c<mid have issued up to $810 million of detennined to be appropriate.The Company believes that additional fint nu>ngage Ixmds (if sullicient unlimded pmpeny MSU may be willing to pnnide additional common equity additions were available ihr that purpose). Iloweser, the capital to die Company depending upm the ultimate outcome anmunt of additional first mortgage lumds that couhl have of the I.PSC'sJanuary 30,1987 rate onler and also depending been issued based upon available propeny additions at that upon continued improvement in the Company's financial date was limited to $613 million. The Company's lx nin! of condition so that the Company am resume paying conunon directors has authorized a plan to reduce the Company's st<gk dividends to MSU. As noted above, the Company has overall cost of debt and equity capital by the redemption, not decided whether to appeal theJanuary 30 mte onler. It purchase, or other acquisition of all or a portion of cenain is anticipated that while theJanuan 30,1987 rate onler outstaruling series of the Company's high interest rate fint wouhl pnnide only a modest rate of return on common mongage Ixinds and high dividend rate preferred stock. (See equity, cash flow is expected to impnve due to the elimination Notes 5 and 6 Preferred and Common Sto< k" and "long-of the phase-in plan and the retention of the undistributed term Debt," respectively.)This program,if successfully balance of the proceeds of a settlement with a gas supplier. completed, shouhl help to impnne the Company's bond Should the onter ultimately, aller any appeals are exhausted, and prefe:Ted stock earnings coverages and, accontingly, its he rescinded or modified in a manner that is unfasorable future financing flexiblity.

to the Company, the outcome couhl, but wouhl not necessarily

_ itESUITS OF OPERATIONS have a matenal adverse effect on the Company s cammgs, Net income amounted to $140.6 million in 1986, an liquidity, and financial condition.

'the Company has the Securities and Exchange .

< neme nu. .on or 3 7e in 198a when conipared to Commission's (SEC) authorization to lease nuclear fuel up

1. ' " ' " " * * " #" """"""C#

to $130 million. The $126.1 million credit line associated during construction (AFDC) amounted to $138 mdlion ihr

' ' .""k I#

wah u.s nudear fuel lease .is anTently s(heduled to tenninate 1984, a $133.7 million increase over 1985. Net income m June 1987. It n currently assumed that this line of cred.it c exclusive of AFDC, and the cumulau.ve effect of a change .m will either be extended punuant to agreements subsequentiv .

accountmg method, two non-cash items, amounted to $51.9 negotiated or that alternative new I.mes wdl be secured. l.o-milh.on m 1988.

the extent, howeser, that du.s does not wcm, add. .itmnal capital

. .l,otal operating revenues increased $79.1 m.dlion or 6'7e requirements of up to $126 milh.on ihr the C,ompany could .

m 1986 and $14.1 m.dlion or 17c .m 198a. when compared to result. As of December 31,1986, the unrecovered cost base . . .

a amt 1981, respectisely. The 1986, .mcrease was pnmanly of the lease was $116.3 million.

. the result of rate increases implemented m late 1985 offset In onter to provide interim i,mancm.g, the C,ompany is " #"#"" ' ." ""' ""# "' '#'# " "C' ""'# '"

ctmrntly authorized by the SEC to effect shon-tenn bonuwing of up to 10% of capit.d.iratmn subj.ect to the availabih.ty of.

fuel costs. Tbtal electnc sales (kilowatt-hours) Ihr 1986.

""# "#'""" " ' " ' * " "*'W ' " " "

shon-term credit sources. The Company had unsecured hank unho.es, which accounted for less than a 17o increase in total lines of cred.it of appmximately $38.1 milh.on wuh lom. .siana ..

1. "" . # #**"*"'" I" *"' """"""#'

hanks and $110 million with mm-tenitorial banks at December m total energy sales of 57c.

31,1986,, none of which were utilized at that date. Fhe $38.4

.----mm_

Total operating expenses decreased by'$71.8 million or_ - EFFECT3 OF THE TAX, REFORM ACF OF 1986 7% in 1986 and increased $36 million or 3% in 1985 as : On October 22,' 1986, the President signed into law the

. compared to 1985 and 1984, respectively.The 1986 decrease :

Tax Reform Act of 1986 (Act), portions of which could have

. irsuited from an increase in deferird Waterford 3 expenses a significant impact on the utility industry. Pmvisions contained 1

of $185.9 million plus decreases in fuel, purchased power, in this law will, among other things, diminish the value of and deferred fuel costs of $172.7 million offset by a net -

investment tax cmdit carryforwards, lengthen the peri <xt over increase of $286.8 million in maintenance, depreciation, taxesc which utility property can be depreciated for tax purposes, -

and other operating expenses. _. _

impose a new alternative minimum tax, and reduce the

. During 1986, the Company deferred for future recovery marginal corporate income tax rate. -

through rates $206 million in Waterford 3-related operating - For the Company, the above pmvisions of the Act will expenses in connection with the then-effective phase-in plan. have varying consequences. As a result of signifiamt amounts

~ (See Note 2," Rate Matten")

~

of net operating k>ss and investment tax credit canyfbtwards, .

The combined fuel, purchased power,and defe:Ted fuel _ these provisions are not expected to have a substantial effect -

costs dectrased $172.7 million or 22% in 1986 and $0.8 million on the Company's results of operations or financial condition.

in 1985 as compared to the preceding year in each case.

However, the future cash flow of the Company will be The 1986 decrease was caused primarily by the increased impacted as the lower corporate income tax rates will result use of nuclear generation at lower average unit costs. in reduced charges to customers. While these reduced Maintenance expenses increased $38.2 million or 76% in -

collections will lower internal cash generation, cash' flow is 1986 compared to 1985 and decreased $1.8 million or 3%

not expected to be so severely impacted as to increase in 1985 compared to 1981. Appmximately $34 million of the substantially the need for external financings.

$38.2 million increase reflected the impact of a full year of maintenance expenses associated with Waterford 3.

SUMMARY

Depreciation expense increased $M.6 rr.illion or 80% in The Company's increased net income and internally .

1986 and $20.5 million or 43% in 1985 as compared to 1985 generated funds, the fact that coverages exceed the minimum and 1984, respectively. In both years, the increases were due requirements under its mortgage for issuance of addit onal -

principally to Wateribrd 3 depreciation. In 1986, Waterford fint mortgage Ixmds, and that it has become current wah

- 3 depreciation increased $50.7 million and the associated . respect to the payrnent of preferred stock dividends are decommissioning costs increased $1.9 million. In 1985, Positive indications of the Company's improving financial Waterfbrd 3 depreciation accounted for $18.6 million of . condition. However, the Company's future financial condmon -

the 1985 increase. is dependent on its ability to absorb the $284 milhon In 1986, total income taxes increased significantly as a - disallowance of Waterford 3 costs and the resolution of the irsult ofincreased pre-tax income offset by decreased levels . items set forth in Note 2," Rate Matters"and Note 8, of AFDC. Income taxes decreased in 1985 primarily as a ' " Commitments and Contingencies" result of a decrease in pre-tax income.

AFDC decreased in 1986 by $124.6 million or 98% when

._ compared to 1985 and remained level in'1985 as compared

. to 1984. Although Waterfont 3 began commercial operation

-in late September 1985, AFDC of$127.3 million in 1985 remained comparable to AFDC of $128.4 million in 1984 due to the comparatively larger constmction work in pmgress balance in 1985 until the in-seitice date of the plant. Since that date, the Company has ceased to accrue AFDC in association with Waterford 3.

Interest on long-tenn debt increased by $20.9 million or 4

13% in 1986 and $27.8 million or 20% in 1985 compared to i 1985 and 1984, respectively.These increases were mainly attributable to the Company's issuance of additional debt.

EFFECTS OF INFLATION In December 1986, the FASB issued SFAS Ni 89, which rescinded the requirement to pmvide cenain supplementasy

' information concerning the effect of changing prices on the System. This information, which was presented in previous years as a note to the financial statements, has been deleted

. fmm this year's report. '

The Company's operations were not significantly impacted by inflation in 1986,1985, and 1984 as inflation rates were below prior year levels. The opposite was the case in certain

previous years when inflation rates were high. In the future, should inflation rates increase, the Company's operations could be adversely affected if timely and adequate rate relief

~ '

is not received. 29

RECORD OF PROGRESS 1976-1986 1986 1985 1988 1983 Estimated population setved 1,670,000 1,668,000 1,061,000 1,629,000 Electric customers-year end Residential 501,611- 499,835 495.416 487,148 Commercial 57,305 57,149 55,838 53,812 Industrial ' 6,435 7,073 7,312 . 7,503 Other 3,878 3,767 -3,677 3,562 Total electric customers 569.229 567,821 562.273 552,025 Electric operating revenues ($0m))

Residential $ 473,307 $ 411,738 $ 401,752 $ 358,810 Commercial 265,480 226,917 215,444 186,822 Industrial 512,900 528,399 562,088 529,689 Other 87,524 92,716 - 63,375 69,432 Total electric operating revenues $1,339,211 $1,259,770 $1,245,659 ' $l.144,743 KWil sales (millions)

Residential 6,975 6,981 6,630 6,274 Commercial 3,773 3,708 3,410 3,168 Industrial 12,341 12,468 12,168 11,491 Other 2,052 I,329 1,082 1,305 Total Sales 25,141 24,486 23,290 22,238 Residential customer data Average annual use - KWil 13,927 14,013 13,479 12,996 Average annual revenue per KWil 6,79f 5.90e ft10e 5.72f Commercial customer data Aserage annual use - KW1I 65,901 65,451 62,039 59,886 Aserage annual resenue per KWil 7,04c 6.12f 6.32f 5.90c Peak System demand (MW) 4,603 4,355 4,200 4,207 System input (KWil in millions)

Generation 20,286 16,478 14,100 12,922 Purchased power 6,213 9,270 10,419 10,662 Total spiem input 26,499 25,748 21,519 23.5&l Fuel cmt for generation ($000) $ 302,327 $ 374,759 $ 379,924 $ 349,596 Generating capability (MW) 5,665 5,665 4,605 4,618 IIcat rate - IITU Per KWil generated 10,831 10,753 10,649 10,793 Operating income ($000) $ 336,081 $ 181,817 $ 206,724 ' $ 172,454 Net income ($000)* $ 140,604 $ 131,569 $ 201,011 $ 131,516 Gron electric plant t$000) $4,546,419 $4.439,494 $4,116,786 $3,688,148 Total assets ($000) $4,418,486 $4,091,353 $3,849,138 $3,565,316 -

Capitaliiation ($000) long-term debt $1,783,032 $1,470,078 $1,471,855 $1,173,453 Preferred sto(L. with sinking fund 272,129 278,423 284,501 240,951 Preferred stock, without sinLing fund 145,882 145,882 145,882 145,882 Common equity" 1,046,579 959.524 855,857 778,798

_ Total capitaliiation $3,247,622 $2,853,907 $2,758.095 $2,339,084 Employees - year end 3,092 2,998 2.973 2,756

• Net inc..me for 1981 includes the cumulative effect tojanuary 1,1981, of accming unbilled revenues in the amount of $17,626 thousand after income taxes.

"See Note 8G regarding the impact on common equity ofimplementing a new accounting standard.

30

- _ _ _ _ _ - 'I

l 1982 1981 1980 1979 1978 1977 1976 1,600,000 1,585,000 1,553,000 1,509,000 1,455,000 1,345,000 1,3G1,000 478,360 469,998 457,191 443,527 427,938 395,479 3M,213 52,001 50,574 48,617 46,M8 44,881 40,096 38,632 6,618 6,655 6,M6 7,162 7,518 7,651 6,586 3,408 3352 3,250 3,173 3,044 2,770 2,634 M O,387 530,579 515,946 500,710 483,3M 445,996 432,065

$ 364,005 $ 341,555 $ 265,080 $ 180,361 $ 146,326 ' $ 124,500 $ 93,712 182,981 161,653 123,656 85,983 68,328 55,398 42,505 574,060 525,349 358,177 212,853 141,803 114,874 77,278 74,537 86,201 106,610 78,276 99,918 84.179 117,782

$1,195,583 $1.117,761 S 853,523 $ 557,476 5 456375 $ 378,951 $ 331,277 6,129 6,405 6,398 5,996 5,862 5,334 4,597 3,130 3,016 2,876 2,721 2,621 2,268 1,965 12,997 13.067 11,963 11,388 9,685 9,028 8,068 1385 Iffel 2,708 3,147 4,541 4,322 6,921 23,941 24,152 23,915 23,252 22,712 20,952 21.551 13A15 13,791 11,177 13,758 11,063 13,680 12,328 5fft 533t 4.11C 3.0lt 2.50t 233t 2,41t 60,900 60,669 60,129 59,363 60,498 57,502 53,115 5.85t 5.46c 4.30t 3,16e 2.60c 2.44f 2,16e 4,259 4,256 4,078 4,091 3,852 3.515 3,180 11510 15,471 16,140 18,429 21,251 20,204 21,541 10,567 9.745 8,670 5,860 2,799 1,901 1,077 25,107 25,216 25,110 24,289 24,050 22.105 22,618

$ 387,710 $ 356,786 $ 296,820 $ 190,226 $ 168,117 $ 141,236 $ 135,211 1,625 4,625 4,625 4,612 4,603 4,447 4,392 10,800 10.681 10,753 10,625 10,185 10,202 10,036

. $ 187,336 $ 167,221 $ 133,018 $ 88,067 $ 79,659 $ 69,410 $ 63,617

$ 117,158 $ 121,469 $ 100,676 $ 65,129 $ 53,744 $ 44,406 $ 39,227

$3,131,461 $2fal,000 $2,319.246 $2,069,106 $1,792,952 $1,509,785 $1,309,439

$3,602,112 $2,330,201 12,078,445 $1,842,365 $1,557,157 $1,298,751 $1,158,262

$ 917,596 $1,001,209 $ 828,989 $ 827,430 $ 728,748 $ 566,315 $ 575,809 169,101 121,381 121,381 92,990 - - -

145,882 145,882 145,882 145,882 110,809 110,809 80,776 E19,881 615,895 561,109 487,441 417,192 363,763 332,725

$1,912.460 $1,884367 $lt(n361 $1,553,743 $1,256,749 $1.alo887 $ 989,310 2,721 2,199 2,312 2.329 2,216 2,129 2,118 31

DIRECTORS OFFICERS W J I ^NNES Ill Vice Presulent-JAMES St. CAIN JAMES St. CAIN System F.ngineering President of the Company President TlIOM AS O. l.IND I"'*.I""'

DONAl.D llUNTER' Vice President-New Oileans Public Sen. ice Inc. Emaiw Vice President Regulatory Counsel.

'I EX R. Kit. PATRICK' R. DRAKE KEITIl' "

• I ^ "I" "' S'""7 nsident Executive Vice President 1.EE V. M AURIN

({.cntral Amen. can

\,.' E'#'"I""'-

1.ife insunmce Company GERAl.D D. Mct.ENDON' Executise Vice President Fo$ wd Opennions

-]OSEPil J. KREllS, ]R*' -

D. l ash.El.l. J AM ESJ. McCIDSKEV,JR.

Chainnan of the lloant Y.' E ." "'~

'J. J. Krebs & Sons. Inc. Senior Vice President-Energy Supply-Fossil U.'".

'"""""*M ""R"'

EDWIN 1.UPilERGER" 1.EE W. RANDAl.l.

Chainnan ami President ]OllN .

Middle South Utilities, Inc. Senior'l. CORDA RO Vice President-VI"' P' C'"I""'.~Freasury, Accounting &

External Attain .

II. DUKE Sil ACKEI. FORD' and Awistant Treasurer Agiicultural Interests S. G. CUNNINGil AM, jR. .

CARI. C. SMITil Senior Vice President-WM. Cl.lFFORD SMITil' y,7tc,;gg g g ,,gs Vice President-Picsident Dhision Manager T.15aker Smith & Son JERROI.D G. DEWEASE W.H.TAl.BOI, Senior Vice President-JACK M. WVAIT Vice President-3.d ar Opuim "

Fonner Chainnan of the lloani and Chief Assistant to the President, Executhe Ollit er of the Company M Al.COI.M l IIURSI El.l. arul Set retary (Retired August 1,1983) Senior Vice President-Encryv Deihen. ROllERTJ. AllADIE Controller

' Memben of Audit Committee R. S. l.EDDICK'

• Elected cirecthe 3'21/86 Sonior Vice President- JAMES C. Al.ACK Nuclear Opennions Anistant Controller M. II. Mcl.ETCillE T. W. BOATRIGilT Senior Vice Pnsident- A"I'Id"' C""""IICT Accounting & Finance, and Treasurer R. N. GARRETT,JR.

RICllARD 1 MURI.OWSKI Anistant Controller William II. 'lalbot. Vice President.

Awistant to the President. amt Senior Vice Picsident- s,y,oggi,MEyEn Secretary of the Company since 1983, Adminhtration & Planning Awistant Treasurer pawed away on Man h 12,1987.The '

J.J. S A ACKS' N.J. IIRII.EV Company is gnuclul (br his many sean (..roup \ ice Pres.

u lent- Awistant Secretary of senice and .isdeeply saddened by D hion Opiom his death. CARVJ. DUDENilEFER ROSS P. IIARKilURST Assistant Senetary Vice President-Nin lear NOI ES:

JOSEPil Q CIPRIANO ' Elected effecthe 1/26/87 -

Vic e President- ' Elected cifective 3/I/87 Dhision Manager ' lo ietire ellective 1/1/87 G. F. del.ERV ' Resigned ellerthe 3/27/86 Vic e President _ ' Resigned effective 2/1/87 Marketing ROllERT J. DUNN Vice President-Adminiurative Services RICll ARD C. GUTilRIE Vice President-Public Affain 32

3. . ; .,  ;. - r* -

, . , . . . . ~ " J'.

s,, ... - ?. '* .- "

'y;, g -

' , ,.. ,. .:_ . ". ;. +. , v , ;' i' . + -..?.,,...1-'

,r '; - : - - .?'. %. . .

.. ?. ,.8 ,..  : L. . . . - 1,1 -

,-~. -.',..-. -

~+ .

- . w . . , . .

. . . , , . 4 ..

. . .:. Q c a . - ..

4 . . .. ,_ .

'n  :,

. . *, .,y.., -Q ,.w3*.. -

,, . ' . ' ._'_'K

[_ l _ ' -

d . l l?'

s_

..c , f : n '> ..? 9), '. ,j .(:- - .,.: ^L- c-r .; }, . . . .  : . . . . ,

,98

- '. ..;.. ,. . , br :%gj;? y

- 'i c: - - . - ' i. . L..  : ' + _ '

'nu'T - " ' . . .. C.:; :..';, ' ,

f Q '.}. .fg' 4 't g . .:3>}. Q..' ' ,}%[ 'R, .z ',f.^7. . /: ' ._'.v.. . ._ q g} [ . ?

, : s f J. W _ ;. n v

.y.' [

w ._. e: - .)mn_ p:w ., g::.; & . 7. }yGQ[.}

v , .. .

q q  ::.g.+g3 e  ; . :: - ,..

m  ; - y, _ . : ._ '

4p7 .@R._:.tX

%.p

, - =-=--w&_- = =; x-:i = ----n- _ = _--

4,ws. W;- ndg.y. g .- +s . . .

. n..&m h6.'..Y,..

_ 9 g n . - , pg At.,m,, ; ;

. . :- a 7 . . .

m' = _

.~ .

_ . -y__--- .

= =='2 --g=_g.; w==-- g-- ,;r y n-;w .-1. .:. _, . .

, . , . A. . ..

.-s====E't'E EshE 'E == =2

+.j....A... . lQ"u w p.1~9 .K,

. 7; 4'. c.w.4^Y i

=L_ - E L' -'-- :2 ~M'- = . - = . 2 -: _ W ': .,

.: =-_: __- =- -_=_ R.&.. &[+G v i_ -; N S.pk %'fp+ Q.%.^:, A.-R  ;,--.:^ 2 ^ ( ;e '  ; . .

W ;w;m  ;'

m_= = =--w ==u+- =- x_5 = 2_ _--- _y(g;%w e. R.&i .  :

c

-; L -w " i - M =~-_- 2:5-_= -

xK f < .

3.

y . .+ ; f. .'[L - 'y .. e,- .

a' i.g, ;-

- :-m ata gg -= mE_ w w _= ___. &

, _- W-^ ng _- == =

v~'2~-- _

= - = ---- = =-- -m_=x---

_=_ = : ===- := y.Q.m

--==x---_=

_ _ - - - - - =

y;-)sp p M . Qs:. ..W  ;' >  ; q ,

p;,f.W.

. 'l, ,jQ. .

e.. . ..

h . yy ?;.w jc  ;. .

2.:- -:.;y- .

.,V .;.. ;.:.; y- Jm, -ll A g(.  : ' ' :, -6. 3.' q.., p : :Y ': .-...r

. A '; E*,. ..

.r , ' , .. ..;-*

=E - - - - - -

-r--- . .. T2 e:-if.;3 .n ,f,.c.:. b-- .J.f.'& k .).

t s \. ~- - '.l' b

--.--__w--==.-=-_==. -=

.e .- .a . f , . . t ; - ,. , -

. ,' .x

..-----===.- - _ m.: .

g.': Qg;g mmn g ';:a y . [}

x

.+ )m

- - a t.

a , -. ,

[ ;,

. \ - N; _L '; ."

. & % JM2;3W

--q!:?% M.yh w. :N ' '

y. .y ~-

J n

y; .~.."* .;%'t. . . r A' & 4 k j ', . :p .

.s . t

%:i."+=.*

C

.f- :. '

'. c n.

.

• M .'. ; '.-

?

'g

• f

t,- a i - .

,: ' s.

• O ' ".-.', : . .-

~ ' '

. '.; g. . .

i i. ' . - -

V.

__. =y,.s.;8,., ' N .v.0';[f '. _ Q. w;.~...a _ _ y ' '.

t yg-- y _'

~

.y n . .../  :. - .. . , -

)- e s b h.~,-~

.-.s.'." . _ '- '

.p-e As --.'k.v'n*c',f g'R' . ..'l .?. ,~-,- '

'j . A' Q,f s.- ,- , . . . _.? . ., -'

} %..

M'3NN. . . . . - - - . .

\: . , *

,I. , ,

& 4 s_. -n-3;;;

- - == , (-? _ d}'

. ;: ' '. -*- i

. s

. .(:.' J'

} ( }s* .

. AT: f * ,

_ y.

===- g (g ,. , . ,. .

' 34:g..g 7

-- L-- -- - ' .

- . _ 'la -- =_ . . g .. ,

' 1,0 . . $

~ - ' '

"'y--_ *.

/ -

{( ;

@d . -

/' = j' -

--=.--: . ,~, .;. .

_g __ .

s , ..;..,

4- -_---=- =_._,.

w. .

' ya , yg*.; *;

..( _

==\ - _ - - - ~ '

.y . y. : .-:

-

• O .j, , 7"( ; jl. i s ,a . y g..,.4r # >

g e

.,=

r. . r., c

- - . m .m :. . . -

,n

.. - . _ _ _ _ = ._w_=.=_==.

'

• 3 - * - -

7,,e r [ w' - - I

.d_ . . ' ..,

p ... . ,.

s

" .c . A. . G./ Mn.f,.1 @:, :. y,~i WdJ

.G.s .,. '

.' ' ' . E.W, ' ' , ' ,T ~. . . .' ' '; ' '.. .

p^ w ' T'i .. ' .

.~ :5(p.e,'*',.

.&M.S @y Q'3

.W V . r 'b g .s  ;

, =' s.. ' ' . .-

.?:. ~h.c i.m . .

.. : .**s.' .'

.y . ig' O., w [ ,

• W, _. .g

..-,s...

f

. -s

'}%

W .~,,I-

• • .g.' %*.-I; - . .

i , '- d , = , ' . .,; p

.g,g y.~ _I .,

,,~.;.-'

q g - .-~. #. . ' . . .. v' ,

.. .w

m. . -:q' % .$/.as'y - 1:[' .y .- ..,v

~

-yn. .; y %y'g &{

.; )

.. ..t

.: ] [ ; f. . ; ~ .'.' '

k' .O. ).R,9 '?9-Y. f f \, _Y - ~

W. .s.n 0;~Yv ~

'j %s%::O: f $ N.f; :; ' U%,.'

.;h

!g.,'g,f N7.3

% cawnw@h<e:'5+tGQf :..h t ~y f') M  ;

e.

p - r M,33.;.4g7 x g. n[c t..)..

n . L.

x; 99 1.,

.; 1;.i.,.

..- ,.e Wo ' u

. y 4

Jp np

~

g r%

x- .:;

unaw  ;.. :.g* . ; . - .  :- ..~....: - . .n. .u..,

g  %:.. y .-r.e  :[ gzyr.q y . s!j n_.yj.  : ' . . .%.'. .j.

. ;;l

.-3. .m - 'i >.  ; , f.<} y ~ - . ,. .

, ; i . . , .

., -

ma[:} mm. m.g a, ,; j Qv..N mvm

'x _

Q;..; ..

. 4p. - ;

y'

' ' ' ;<.; % :p s r x.

. q.g c.Se.n. ,.. '., n;i'.

la :uy

. .m g O (v.C, . W ' Gj { ,s, ..m .

g.-. ..

v &.q.

, ,m - w . . . ., -

- s . ; ', .~. .~

.{

g.f' : - .

}. j .;w +

'. . .-. 3 ; . . e

_._,.,.7.

y. . ,

._._.p.- .-Q>~- y,.y. y ..-

, w.u

u y .. . . n, ,n m,. u.. na.,

z%

ems .. ' . L. . ..* ., . a..~

- ,8 "

% , ;[L:

-y- } _J: y2 h r,.

,4x n L;w h] 2 *T.y; T _ g l<'. w' ' :.. .

. .}^..~.',[  ;, '

a y, 34,9;  : , c ._. 4...c.- .-(;  %._ u. s. . . , . ._3  ; ,, . n ,Q. , g,' . , ,,.

M i w. y . o .t h. . .s . . q r  ;-:.-W.'.'

' ~-

4 l.*

. _. p ? '_

; ..' e; .. Lfh ' - '

~

% w. % . f k h $* N ..Y

?gm. -- Y w .' 39{f l-

$'.' . ;K .l,. .j h m.. r $s. I' Yn.g -

i m.4 ; 3, c. y% e;. .. . 5 :x$

n- . ..~fpLeg; F;- w; A+.u :' a.;j m: .p e

. . y ~ ~ :

e w n;.. a u p & sd:, . ;

, t . .

y W _ s.;.9 " . %

p; w.m = L 4

. ; :.=l. . . ' ,' b.. . M, &M. J 7 x R y% - .w3 fW.y .. ~

o Y L k-  :

[:.:  ?

. J:

A n  %:.s!

Q T Y W. 9. - In L

. . ' ; m._].:._f (("I _ ifQC. N L tlMy_/ ., ['. / M, ,:. jif f n*m. g#g,m.f , WN.m.% , : f g;[ip..?  % *W: s y - - g . m; n y,..,.

m wn,.. e v, Q;. . .

.ym.. . . , ,

. . ' ). x y% &L .' ..~.

1 -

g'

• s.+;, .^f' . -, ..' .:. ... h l. $. .YO.~!Y n w; pn .

5 e . .~ . . $.

Y. .. . . . - ,; ,'

-n:~;A ,p p 2y g.,n. a;gxg m.q

, ' f. . c p:n . ; ~.', Iv'. .. .L

. , .  : .u .nm.

y.w, 4.L pa g,h*;

. . ;e%a;

. (. s a

f 7 . . '7 -

.,p:s_ .y...;

. - z) .( . Aw-. . ,~~ r. , ;: ..19 .m( . J . . X..

~  : w .y .3 s.:. .c 2,

L.4. m.M. .c ~t . m _ p%.y -. 7. Ay +,:.q-@..,":.>~:.,.'.n, .,', f_ ...W

w. _g - 7 ;- ;e . . .' ,c- ... .,C.4,.

- V . r- i: p - ..9. ,y,.y 7 .,:j ..,w.. .e- ,. .f?c,y(.y./V,4.f.y < ;.'. - " %; .u.~>:-

o

,M- n..': -6>:<,4 .-.s. y c.-

.q

-.f ..; ... ;- .'4 w

.x; p .,.

c. .-

.. ~ a.

x . .

m , : s . c.... .e ,4 , y;..-

,. .w. o p . . - .

..- .- . . . -. mw.4 -

a -

,a -, ' .

. z. g.r.

. , . 4. , 6. y..e

' ': -* .  :[ }l{ . f '} [  ?!,. e -l_ _,Y.t; -j ..

~ l ' f _3 ;l . ;. .j . . _ l : f' ' . ' {-

_ ' ' , ' . 'j' l,

. . ..; : ,_ g.. , . ,. y< . : . s. .g : ; - , w. .: .W;.f.l. .* { . %, -;* r .,., :y

,e.- .

..;:.? . .v. .,

.. s . -

dS[.. * #. .~.,

. c

. sy',v. . :: -

• E

p.-.' #

_' ' -.' .-"$ ~

,,,?

,,;e'

--r ,:'

. .. .. -; - a.dp . : ;- w;. . ; y g m ..?fy g 7 ....v gy.. e - :_yp v:._ 'z -

t .

p )y.. . - 4 y,..'..

. .. ,;g f( ~,.s mn )p-3,._;s y ?.

q .. ;

e . ~~ .; u q y.y .. 3 ; . - _; - - _;_ '

.e :.~ .. - 4;,.y_ . .

eu a ; ; ,- _ u x. -

. . . ~ -

l, y. j y: su v. eh.N?$. _  ?. ' '

l,*

^

_ Qf .l j .& [ l - l  ; ' O'? i ' - , _ - - ~

' . ~~

_ . _ , _ . ' N.I s f . Y. f. .

, , . /_ . i ;

e-c. . r .4 g4 ;y f yy ;; y.,g  ; a .n. , -. . p. ; . .

, . . . - y

.,";..' ' -- y L J' -

. .. .. -3y

= ' - QW r-

._ 3.\

,_ - 'e <; c.. ..v .? ; jl;4 t(

c 3'-a .fpi . .

, j W y'7 - .. >- . :-} ; & j ? G . .n[q L J% l v.{r yf j ] { 7 }s,f.{ h. p.y]..; p l . 4 f', ..

< 7* ,. .

,{ ' . *_ ; '. i ;G,' ;. .: , ' ' .

j. l - e. i.

, .: , n . qm a ' ':.% e v.: . . x. - .m h. . & .

s,

J - ' ,M ' ' :[ ' l _. . , :f ..: Q " .. - . .7, (*

'.,_.-1,% yF.

.._:. '1l- L. i_:h .

.' b;-

~+c . ' ' . ..~ -

_y)

_. ' e.A . g g - -: ,. .t'_ ' , _ .y y - .,,g.y 9 f:  ;, ; ? ~-

1. _ . ,

); '..t - ^. i . : ~, }$ q :. '(.a < , .f. ".... . .,., g4 . , , ,.VL- j .',. .. W ..' .:'

,. . ..y(, m i .7 b, -f *,i. , ;+,M.c

=..y.,  :. L.'.,. .: ~ .

.~

. - .jkp ,.=

... .c ....-w - .

->....;3..- .-

-1

. -r. . A g..m. y p 2

.;  :. ~; , u. - m , y a . . - - , . , ,

w.)s.,. .,.,.

I' -5 4.g$.N.

g,s. Y -;

_ . , . . ' . .- _ _ .....' %.j>" ; ^ N ' ] v 2 '".'

- (.9 _ 7 9

'.g.. s.

1, . , 4 .. <.

p . , ,. .'.' ' n  ; -

1' .

.%.=.

.n, .u ,. .?? t( . c ;,

-# f.,

. - . , pf

. . < ~ . . _ ..

e.;. . - , . - .. _

y. . .e . . - .- - , , . ,g

. .  :, ., . , , 2;y ,;..___ - . , . --

-. ' # ~' '

3 , ~ * , . j p , .; ./

-. \ ., .

p. . '

4 j.h ,, . .- . -

.o , ._

, .. . ...&'.1-9, e. . . '

M'. .. fb , .

/ j .'E ;q.[j y p.

E- 4, .,'..,. g -'1***-

, . .0 p . ;s ,q ( -, '

,.. ;e ,..v g. r .,,,,,.,.,f'*.?:.

7.. ., . A - N I.

. , , . , . , j. , . ;,._ - ,, .. ,' ' , , ,

' .,:'.. ".[ - ': . !' ,. f t ), -

[., ,. .. # '. . sd., .T.. . -. ,.*, * . .s .' '

'Y

- . , .O . j.

M. .. ,s 5 +.4 .I$'l-w . ' . . '.s ' l ht ... < . n

. I,

-.' 4 /. . N. .**

.i . ,. s ',.?

['" "..; ,

,. .. -.,': . s. - . .

r ' .-

4 Ill'I.K ltATE l!.S. I'() STAGE LOUISIANA l'All)

POWER & LIG HT l'etinit No. 510 IM20YsEsVIO New ()ileans, l.A l'.(). Ilox tiOUS New ()ileans, l.ouisiana < 017 i A<lciress (:onection llc <lueste<l

}

. . . . . . . . . _ . . . . . . . _ _ _