ML20205G417

Cajun Electric Power Cooperative,Inc 1987 Annual Rept

ML20205G417
Person / Time
Site:	River Bend
Issue date:	12/31/1987
From:	CAJUN ELECTRIC POWER COOPERATIVE, INC.
To:
Shared Package
ML20205G406	List: ML20205G417 RBG-29095, Forwards Cajun Electric Power Cooperative,Inc 1987 Annual Rept
References
NUDOCS 8810280259
Download: ML20205G417 (36)

Text

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l CONTENTS:

i Financial Highlights . . . . . . . . .I President's Renitt . . ...... .. 2 General Manager's Report . . . . . . .4 Finance. Audit & Rate Committee Ren>rt . . . . . .. .. ... .... 6 Power Surt ly & Fuels Committee Repirr...... ... .......... 8 l Operation $ Committee Rep >rt .. . 10 Cooperatives' Statistical Information . . . . . . . . . .. .12 Louisiana's Electric Cooperative . .14 1987 Board of Directors . . . . .... 15 Financial Statements . . . . . . . . 16 Notes to Financial Statements . . . . . 20 Auditor's Opinion . . . . . . . . . . . . . 31 Officers & Directors . . . . . .. ... 33

1987 FINANCIAL HIGHLIGHTS linmusanasi increase 1987 1986 (Decrease)

Operating Revenues $ 511,877 5 462,639 5 48,238 Operating Expenses 5 328,904 5 276,827 5 52,077 Operating Margin $ 182,973 $ 186,812 $ (3,839)

N t Margins 5 (66,402) $ 5,936 $ (72,338).

Pl:nt Additions $ 13,517 5 155,356 $ (141,839)

Energy Sales (Megawatt flours)

A. To Members 4,889,550 5,013,963 (124,413)

B. Toothers 1,315,895 1,468,392 (152,497)

C, River Bend Sellback 963,010 527,129 435,88i System Peak Demand (Megawatts) 1,200 1,280 (80)

Cost of Fuel Used in Generation $ 121,378 $ 135,943 $ (14,565)

Assets $ 3,050,602 $ 3,092,947 5 (42,345)

Accumulated Margins anJ Equity $ (29,462) $ 36,940 $ (66,402)

Employees Full Time 575 594 (19)

Itv:nue Per KWii Sold to M :mbers (Cents) 6.0 6.5 (0,5) 1

PRESIDENTS REPORT reduce coal and coal transportation m costs and better manage our debt

~

.- through a series ofongoing measures.

l ,. By the end of 1986, Cajun was begin-bK ' %'

ning to experience some important measures of success. For examrle, Cajun haJ lowered its delivered coal i

D' costs for boiler fuel to a level under

.,  ; that of any electric utility in our

, state. Also, by the end of 1986 Cajun was successful in reducing the aver-age interest rate by 1.5 percentage points on our $ 3 plus billion debt.

This alone resulted in a $45 million

. annual reduction in interest exrense,

/  %. and did much to offset cost increases M C E related to the commercial operation g.'"

7' of the River Bend Nuclear Power e Plant.

' " These important early steps M T. scanlan. Presu<nr enabled Cajun to hold the average member wholesale cost to $0.0649 During the late nineteen seventi:s Electric. Cajun's annual forecast rer kilowatt hour for 1986. In 1987, and early eighties, Louisiana's elec- projected the 1986 average wholesale aJJirional negotiations with fuel tric cooperatives made tremendous rate to be $0.073 per kilowatt hour surpliers and other cost savings steps, capital investments in new coal and and a 1987 average wholesale rate of including the successful refinancing nuclear power plants in order to 50.079. Additional increases in sub. of $1.045 billion of our high cost accommodate prevailing national sequent years were also forecast. The Federal Financine Bank debt, enabled energy policy and federal law and to Cajun Board of Directors made the Cajun to reduce the average whole-meet the growing demand for elec- decision that wholesale rates to sale Price of electric power to its tric energy in Louniana. Unfor- members coulJ not be increased until members to $0.0600 rer kilowatt hour tunately, as a consequence of the six Louisiana's economy began to re- for the year. This was a rate reJuc.

vear energy bascJ recession which cover from it s deep economic depres- tion of arproximately ten rercent has devastated the very foundations sion and electric distribution coor- which was ra"eJ along to the ar.

of Louisiana's economy, the antici- erative terail electric rates were proximately 309.000 retail members pared load growth which these elec- reasonably comretitive with those of of Louisiana's thirteen membership tric power plants were built to serve other state utility systems. The cooreratives. The 1987 wholesale has failed to materiali:e. battle to cut our costs, remain com. kilowart hour cost average of in late 1984, Louisiana's elec- reritive and viable, and to retain $0.0600 was about two cents lower tric coorerative member / customers market share was launched on several than the 1984 forecast hadP re-were faccJ with the er,m rrosrec ts of major fronts. dicteJ. This rate reduction, how-steadily increasing w holesale rower Since our major costs of opera. ever, resulted in a $66 million net rates well into the future from Cajun tion are fuel and Jebt service, Lajun Electric Pow er Coorerative, Inc. i institurcJ an acercisive Program to i I

l 1

- - - - - - - - - , . - - ,~w------.---

l

~

' loss for the year 1987. In July of ' was~ developed recognite that Louisi. Cajun workout in coop' eration with '1 1987, Cajun asked the Rural Electri. ana's rural electric cooperatives all parties, including the REA,  !

fication Administration (REA) to  : cannot currently charge rate levels Cajun's major creditor. The Bohd of - R l ce the cooperative in the that fully support their nuclear Directors of Cajun has targeted l

~ p' national workout group" composedinvestment considering the curren't ' November I,1988 as the date by ~

'~

primarily of other generation and economic depression, the high costs which the final voluntary plan must tr:nsmission cooperatives that were associated with the construction of be in place. 1 in financial distress due to their the River Bend Nuclear Station, and Cajun's long term strategic i investments in nuclear power p'lants. the low world market prices of ' plan is predicated on offering com- 1 A large measure of Cajun s (1- natural gas and oil, petitive retail electric rates in rural ~

n:ncial problems of today stem from Cajun's ability to achieve a Louisiana in' order to hold or increase Cajun Electric's 30 percent owner. voluntary workout is currently our market share and increase off.

~s hip position in the River Bend affected by the Chapter 11 bank- system sales to other utilities in order ~ l

~

Nuclear Power Plant, built and ruptcy proceedings of one of Cajun's to maximi:e payments to its creditors. l operated by Gulf States Utilities. ~ thirteen distribution cooperative Cajun's challenge is to be fair to its  ;

Although this plant only represents member / owners. In July of 1987, member / customers who will ulti- l 15 percent of Cajun's electric gen. Washington St. Tammany Electric mately benefit and must pay for their crating capacity,'it constitutes 51 Cooperative, Inc. filed for bank- power supply and to be fair to the percent of Cajun s debt service ruptcy under the terms ofChapter 1i creditors who have helped make burden. Even th augh the reduced and, as of July 31,1988, is approxi. these investments in the future of wholesale rate level was vital to the~ mately $16 million in arrears to rurai Louisiana possible.

protection of Louisiana's rural Cajun on its wholesale power m.

economy, the Board of Directors voices. In addition Washington St.

knew that the reduced rate level Tammany has filed a motion wich the would be insufficient to cover its Bankruptcy Court inNew Orleans to debt service on its nuclear invest. reject its all requirements wholesale ment. On July 10,1987 Cajun filed contract with Cajun. Cajun is vig-with the REA a proposed workout orously defending against this move plan intended te secure needed relief to reject this fundamental contract.

from its pressing debt service obliga. Ca un'sgoalofprovidingalong-term, tions. The plan called for this relief stable, affordable supply of electric to be granted without having to place power to rural Louisiana will be in.

the cooperative under the protection creasingly difficult to achieve if 1 of the federal courts in a formal Washington St. 'lammany succeeds in tejecting the contract which sup.

bankruptcy pmceeding. Important tenants on which the workout plan ported the building of Big Cajun II

and other generating assets.

Our aim with Washington St.

[ '

Tammany, as with all others with whom Cajun transacts business, is to achieve a negotiated solution, grounded in a realistic, voluntary a

4

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t

GENERAL MANAGER'S REPORT 1987 was a very significant year for -

Cajun. We initiated a comrrehensive ""

plan to resolve our pressing financial ( /,'

• C 1ww 4

problems related to our investment "--

l in the River Bend Nuclear Power A,

! Plant. This plan is highlighted by C r G.

i a major restructuring of our debt . h [( ;) m, .

service payments to major creditors u y-

under voluntary, negotiated workout agreements. Our objectives in this M-t l' '

workout pn> cess include full debt i i

repayment over time, but under new /

l terms which allow Cajun to trovide '

wholesale power to member coorera-tives Priced low enough to enable ai

! them to offer electric service at rates .w

• -d J

which are comretitive and fair in DauJ Lee Marc. Eiccume We Prendem & Gencal Manager i light of the pressing economic prob.

lems of our state and maintain or j enhance market share. As a part of were 1,316 GWhs, down 10 rercent ability of Unit 3 was 88.5 percent.

4 this strategy, Cajun is also attempt- from 1986. As a result oflower This $40 megawatt unit generated ing to become a major regional energy wholesale charges to member coop- 2,I52 GWhs with a capacity factorof l cratives and a decrease in total 45.5 percent. Cajun's 1987 operat-supplier in order to imrrove the efhciency of our rower plants and kilowatt-hour sales, Cajun ended ing statistics for its coal-fired units 4

maximi:e repayments to our creditors. 1987 with a nee loss of $66.4 million. continued to compare very favorably Cajun's staff and Board of During the year, Cajun cut ex- with industry norms.

Directors have been working dili- penses in tesronse to reduction in Even though Cajun's 30 rer-gently with the REA, other creditors, revenue and the filing ofits financial cent investment in the River Bend i and all surrliers in order to achieve workout plan. Cajun's overall ex. Nuclear Power Plant is the primary j a comrrehensive, equitable and ac- renses for le year were $3.5 million reason for our current financial Prob-I cerrable workout. While the final below ine 1987 budeer. Carital out- lems, the plant is orerating well and i stnicture of the workout has not yet lays amounted to $23.4 million dur- its performances compares favorably

! been agreed to, the negotiations are ing the year, $ 30.2 million below the with other nuclear plants. River i continuing. The REA has agreed to 1987 budect. Unfortunately, as a re- Bend completed its first fuel cycle l an interim olan that has significantly sult of a full oreratine year at the during 1937, and de5P i te the sched-

improved the comretitive pation of River BenJ Nuclear Power Plant, oled refueling outage, operated at a Louisiana's electric cooreratives. interest exrense increased to $2 51 capacity factor of 60.6 rercent.

) million, an increase of 25 rercent River Bend set an American record l j compared to 1986. for General Electric's boiling water I Year End Results reactor series six (BWR/6) with 151 Cajun lowcred tis average wholeute continuous dan of oreration during charges to Louisiana's electric dn- Power Production the first fuel cycle.

tribution cooperatives from $0.0649 During 1987, Cajun's power riants 1 to 50.0600 during 1987 in an effort performed very reliably and effi.

j to allow member cooreratives to ciently. The two unit Big Cajun 1 Off System Sales offer ele,tric service at more com- gas. fired power Pl ant experienced in 1987, Cajun began aggressively petitive prices. Reasonably comreti- only one unscheduled outage and pursuing business errottunities in rive rates in rural Louisiana are had a 96.9 perc ent availability factor the bulk power energy market and especially important considering the for the year. Gross generation from has gained recognition as a derend.

current tconomic problems of our Big Cajun I amounted to 172 GWhs, able regional supplier of power.

I state. resulting in a combined 8.5 percent increased off system sales enables

{ The 1987 coinciJent reak for caracity factor. Cajun to more efficiently orerate its

{ louisiana's electric Jiitnbution Unit 1 of the Big Cajun 11 coal. power plants at all times of the year, fired electric generating plant op- improve cash 110w and attain coal cooperatives was I,159 megawatts.

This terresents a 6.1 rercent de- erated at 91.1 rercent avadabihty contract uuge minimums.

creaie compared to the 1986 member and generated 2,163 GWhs at a 45.7 In September, Cajun conium-coincident telemetered reak. In Percent caracity factor. Unit 2 had mated a 300 MW agreement with 1987, ules to member cooperanves 92.1 percent availability for 1987 Louisiana Power and Light for econ-w ere 4,885 GWhs, 2.6 rercent low er and generated 2,019 GWhs at a 4 3. I omy caracity through 1988. Necuti.

than 1986. Sales to non members rercent caracity factor. The avail. ations were also comrleted for a 105 i

1 4 i

l MWten yearsaleofsemi firmexcess through Congress, which ultimately ing out of cancellation of a proposed ~

cnergy to South Mississippi Electric resulted in Cajun receiving more north Louisiana lignite generating '~

Power Association. A wheeling ar- than 50 percent of the total FFB ' plant which was~ determined not to r:ngement was aiso established refinancing allocation of S2 billion be nceded byour member / customers.

through Mississippi Power and Light that the U.S. Congress approved for While major litigation is always time Company for excess energy deliveries the entire United States. consuming and expensive, Cajun's to th Tennessee Valley Authority. Cajun sold $1.045 billion in obligations to both its members and Sales to the Tennessee Valle Au- securities to the Jackson Bank for the ultimate rural electric consumers '

thority have ranged from 1 to 400 Cooperatis es (JBC) and used the justify and require our pursuit and megawatts. .

proceeds from that sale to prepay les defense of these matters. Addition.

Off system sale.s revenues were outstanding high interest loans ally, Cajun has preserved and will

$28,013,102 in 1986, $21,450,727 owed to the FFB and guaranteed by ' continue to preserve its rights and in 1987 and are $34,370,515 for the ~t he Rural Electrification Adminis- claims against Gulf States Utilities first half of 1988. Negotiations are tration. The sale of the certificates to Company (GSU) arising out of the

continuing with several other utili- the J BC provides initial financing for construction of the River Bend ties and Cajun fully expects to close Cajun's prepayment of outstanding Nuclear Plant.

additionaloff system sales in 1988. high interest FFB loans.

Long term financing is being provided through a public offering of Cost Reduction Efforts Cooperatives Utilities Trust Certift. Economic Development During 1987 and early 1988, Cajun cares. Smith Barney, Harris Upham ' Louisiana has for too long been achieved several successes in its .& Co., Inc. is the senior manager for overly dependent on the oil and gas efforts to lower recurring operating the offering, with additional partici. industry. As a result of Louisiana'-

costs. Cajun negotiated significant pation coming from Manufacturers six year oil based recession, the transportation cost reductions with Hanover Trust Company, Morgan state's governor, Buddy Roemer, the Burlington Northern Railroad Stanley & CompanyInc. and Nomura began the tremendous rebuilding job and with American Commercial Securities International, Inc. that was so urgently needed. Cajun Barge Lines. Our efforts, however, to Since 83.0 cents of every and Louisiana's electric distribution get a negotiated price reduction from operating dollar at Cajun goes to pay cooperatives are committed to ac-our coal supplier have not yet been for fuel, production maintenance, tively working with Govemor successful. As a consequence, we are interest and depreciation costs. Roemer to assure the full economic seeking relief from the courts in order Cajun has concentrated on reducing recovery of our state through the to gain what we believe is due us these costs first. He, wever, Cajun diversification ofour economic base.

under the provisions of our existing managemer e has also endeavored to Cajun is implementing an eco-contract with the surplier. reduce othei costs of orcration and nomic develorment program which in early 1988, Cajun refinanced has instituted a stringent capital involves working with America's at lower interest rates $1.045 billion addition minirwation program. business leaders and encouraging of high cost Federal Financing Bank. Over the past five tear <, Cajun has them to invest in the productive

'(FFB) debt carrying an average reduced its annual capteal outlays capacity of rural Louisiana. We interest rate of 10.8 percent. This frorn $397 million in 1983 to $23 believe that rural Louisiana has refinancing culminated several years million in 1987. much to offer companies planning to of effort and should result in esti- make plant and equipment invest-mated annual interest cost savings of ments and that its people are among

$1015 million per year for each of Major Litigation the most productive and hard.

the next ten years. Another key element of Cajun's workingin America.

Congress passed the Omnibus overall cost control and containment We beheve that as a result of Budget Reconctliation Act of 1987 efforts is Cajun's vigorous pursuit of the pmitive and vital steps we have (P.L.100 203) in 1987 which per- litigative claims against Rilev Stoker taken to lower the wholesale price of mitted generating and transmission Corporation, which surplied defec- power to rural Louisiana, Cajun has cooperatives to borrow money at tive equipment for the Big Cajun 11 become well positioned to help fuel today's lower interest rates to use the coal fired generating plant, Units i Louisiana's permanent economic funds to repay FFB loans incurred and 2, and against Fischbach & revitalization. We are confident that when interest rates were much higher. Moore, Inc. and several other na- we are back on the important road to U.S. Senators J. Bennett tional electrical contractors which economic viability and look to the

'ohnston and John Breaux, and the Cajun has alleged were guilty of price promise of a bright future for the Louisiana House Delegation, includ, fixing and bid. rigging during the people of rural Louisiana, w hom we ing Governor Buddy Roemer who construction of the Big Cajun 11 are privileged to serve.

was a member of Congresi at the units. Ccnversely, we have resisted time, deserve a large share of the claims of certain other parties, Prin-credit for helping set the legislation cipally Phillips Coal Company, aris-5

FINANCE, AUDIT AND RATE COMMITTEE REPORT The Finance, Audir and Rate Department of Justice (DOJ) which amounted to more than fifty percent

. Committee oversees the financial waives officers' and directors' of the entire national refinancing activities of Cajun. Its responsibili- personal liability to the federal alhxation approved by Congress and ties include accounting and tax government for cash shortfalls is expected to save between $10 and matters, cperating and capital related to debt service payments. $15 million per year in interest ex.

budgeting, financd forecasting, At year end 1987, Cajun was $44.8 cense over each of the next ten years rate decign and tw . (atory compli- million in arrears to the federal despite the recent deterioration in ance, cash mangment, procure- government for debt service the bond markets, ment of shon . m and permanent payments.

financing, ehtons with bankers Appmximately 50 percent of Assets dam.$

and lendis ;nstitutions, business debt service requirements are related reportint riw management and to Cajun's $ 1.5 billion investm Tt in ww financial avdit activities. the River Bend Nuclear Station con.

Tetd revenue for 1987 was structed and operated by Gulf States nx

$511.9 million compared to $463.6 Utilities. Cajun is presently operat.

millim,in 1986, an increase of 10.4 ing under an ir.rerim workout ar- "

3m zw 9 percen t. The cooperative's orerating rancement approved by the REA and m magin for 1987 was $183.0 million the 3713 waiver arproved by DGJ. zw :o compared to $186.8 million in 1986, Cajun continues to negotiate with a decrease of 2.1 percent. Interest the REA concerning a permanent :m.

and debt related expenses were restructuring arrangement.

$246.2 million in 1987, an increase The interim workout plan ap- nx of 28.6 Percent over 1986 interest proved by the REA is explicit that expenses of $191.4 raillion. Cajun Cajun is to continue operating as a no nu nu n% rn ended 1987 with a net loss of 566.4 reliable providerof electric service to million compared to a ner margin of rural Louisiana and to make pay. Rates and Regulations

$ 5.9 million for the prior year. Total ments of routine costs and exrenses in 1987 Cajun instituted a Large assets at year end totalled $3.05 as they come due. A permanent Power Inwntive (LPI) rate designed billion. workout "lan is exrected to be com- to aid the economic recovery oflarge pleted and arrroved in November, commercial and industrial customers 1988. During 1987, Cajun was able in the members' service area. During Operating Revenues on uaua to reduce the average wholesale rate 1987 eighteen customers of the to its thirteen member / customers by members took advanta je of the LPI ex arproximately 9.1 percent. Average rate. A total of 90.5 mi lion kWh's

• wholesale charges to member coop- were sold to these LPI cesmmers in

_sx m eratives decreased from 64.9 mills to 1987, generating energy / evenues of 60.0 mills during 1987. 52.5 million for Cajun, while saving a na these customers arproximately w 2e yeral Financing Bank Debt $800,000 for the year. As cf May, w W ~~"' ;lednancing in 1987, Congren paned the 1988 five additional customers have taken service under LP!.

m Omnibus Budget Reconciliatir Act in a further effort to promote which permitted generation anu economic develorment and en.

nu ny no ou no transminion cooperatives to reft- courage new industry to kier.te in nance at lower interest rates part of rural Louisiana, Cajun expects to their Federal Financing Bank (FFB) offer an economic develorment ser.

Voluntary Workout Program loans incurred when interest rates vice rate in the latter part of 1988.

Cajun hied a voluntary restructuring were much higher. United States In addition to the economic develop-proposal with the Rural Electrifica. Senators J. Bennett Johnston and ment rate for new business, Cajun tion Administration (REA)in July, John Breaux and the Louisiana espects to receive arproval from 1987. As a part of the rian, Cajun llouse delegation, including Gov. regulators to expand arplicability of sought REA arrroval to restructure etnor Buddy Reemer, who was a the LPI rate to aJJitional existing Cajun's $ 3 billion Jebt and reduce member of Congress at the time, customers.

obolesale electric trices to allow deserve a large share of the credit for During 1987, the Louisiana Louisiana's distnbution cooperatives helring set this vital piece oflecis- Public Service Commission (LPSC) to become price competitive with lation through the Congren. anerted jurisdiction over Cajun and ,

surrounding utilities and auist the On February 25,1938 Cajun all thirteen members. Cajun and six economic recovery of rural Louisi. was able to close a $ 1.045 bilion of its members filed for declaratory ana. Ca un has also requested and refinancing. The Cajun refinancing juJement in the 19th JuJicial Dis-received a 3713 Waiver from the trict Court, and in March 1988, the O

t .

77- -

s mF '

- (GSU) to continue making sellback payments to Cajun and other matters

'R

, . related to Cajun's current inability to c

fully recover costs as well as certain b*

, f a

• departures from generally acc epted accounting principles related to the

)

• . J 6 foregoing matters which would have increased the net deficit. The ability

, of Cajun to develop a permanent i)- workout plan with the REA and its

$' 'e '

~

other significant creditors, and the s

k, M < - . -

7 resolution of related matters wil!

' \ '..J>h - * - . * /- .

~

ultimately auditor's opinion in the future.

determine Cajun the e of wil tv[ receive

. <> ~-

,$ Mig

-a 4 A' > Other Financial Highlights

.' s

. P% . '

Interest and debt ; lated expenses

-- increased by $54.8 million because River BenJ was in commercial opera-From left to Ruht: Pufm3 Aumm. MY. Scanlan Guy F. Ha!!. Elmer J. Pois. Charks M Datu, tion far the full twelve months of Charks L Oterm.m. A C. Reut. Jr. 8. Glynn Farmer. E'. Leo Panne. J M HolNg, 1987 compared to 6.5 months in the D. Jad HmH<. Jr Not Pictured Ann Barron prior year.

Construction in progress (CWIP) drorped to $12.1 million at court nded that the LPSC could Central Financial Planning yew: rod- de lowest !cvel since

.nsert constitutional authority over System 1974.

the cooperatives. That decision has Cajun implemented a new central Proceeds from lone term debt been appealed to the Louisiana financial planning system in 1987. issues were only $ 1.0 million in 1987 Supreme Court. The state-of the art system inte- compared to $ 156.0 million the prior The Board of Directors of grates the financialdata from various year as Cajun continued its program Cajun has resolved on several occa- internal sources and is enhancing to minimi:e further debt.

sions that the coyrative will coop- Cajun *5 financial planning abihty Total debt outstanJing Je-erate with the LPdC in all respects. and accuracy. The integrated and creased at year end for the first time in keeping with this resolution, expanded data bases have been es- since 1973. Debt rayments since the Cajun cooperated fully and complic d sentialin preparing surporting docu- inception of Cajun aggregated with all requests for information ments for the Federal Financing $143.4 million at year end.

when the LPSC sc at an auditor to Bank refinancing and the workout Revenues from sales to non-Cajun in late 1987 to examine the negotiations. members amounted to almost $218.0 recordsof the cooperative. In May of millior, acludir.q River BenJ sell-1983 the LPSC held a hearing on the General Ledger Accounting back revenues, the highest level ever rates and charges assessed by C*i m System in the history of Cajun.

to its members. To date, Cajun lias Cajun successfully converted to a received no repo.t as a result of the new general ledeer accountine sys.

audit, nor has the LPSC inued any tem during 1987. This automated Weighted Average Interest Rate

. ru, u m~o orders with respect to Cajun's rates. computer system will provide a more At present, the cooperative is uncer- expeditious and complete rewnse u tain as to its obligations to tl.e LPSC to Cajun's financial reporting re-with respect to rate matters and this quirements. Certain related ac- n m counting subsy stems are scheduled - "' a uncertainty may penist for an ex-tended period of time. In the mean- to be completed in 1988. i, u time. Cajun intends to vicorously

.. H pursue any and all necessary ap. 43 pravals to charee rates that are cem- Auditor's Opinion petitive with those being charged by ('ajun received a qualified auditor's .

other providen 41ectncity in union for the year ended December Louisiana and s h will promote s 1.1987. The opinion was qualified - 9s ms u- oc

, economic develorment in the state. due to the uncertainty of the ability of Gulf States Utilities Company 7

i l

POWER SUP'".Y & FUELS COMMITTEE REPORT  ;

l~

~ ~ ~ ~ The Power Supply & Fuels Commic- provements at Big Cajun 11 will also mits Cajun to better gather and tGe is responsible for power supply . promote better and more efficient monitordata from the nuclear plant.

planning: construction, operations plant operation improvements at ' Cajun's careful monitoring of the

" _ and mair.rm.ance of gsneration, Big Cajun 11 in 1987 included in. plant helps assure Louisiana coop-

. transminton, substation a sd com. stallation of automatic cold end seal crative member / customers that

. munications facilities; and the pro- adjusting systems on the Unit 3 air charges are fair and prudent. J curement and delivery of fuel. heaters, modi 0 cations to the bottom ash rank water surply which will allow the plant to re use wastewater, Fuel and Fuel Transportation Power Production Plants and installation of the coal reclaim Costs '

~ Cajun owns 1,885 MW of steam rotary plow wet suppression system. During 1987, Cajun continued its electric generating power plant aggressive contract renegotiation capacity. A total of1,675 MW or 89 . Average Generating Unit program with its boiler fuel end fuel ,

perc ent of this capacity uses coat or Availability ago transportation surpliers. These ne.

nuc! ar energy for boiler fuel. Cajun gotiations ar e being conducted under is less dependent on natural gas and ix ou ., the hardship provisions of the origi-oil than any electric utility in the nal contracts negotiated with these

~

• 3 sa.4 ua

• State of Louisiana. As a consequence. .e " , . - . - %', suppliers. The tremendous economic Louisiana's electric cooperatives are .

a2a a44 au problems of the Louisiana economy well positioned to keep fuel costs e na have made successful renegotiation t relatively stable even in periods of of these contracts very vitalin our ~i rising prices of natural gas and fuel e ability to compete with other energy oil, suppliers. Thus far, the renegotia-Cajun operates three 540N 20 . tions have been productive and en-MW coal fired units. During 1987, couraging. l the employees of Big Cajun 11 con- ny ny im 9% mt in 1987, Cajun purchased 4.2 l tinued to improve the availability .. million tons of coal a' an average ,

and efficiency of all units. The plant niocnesi rio caleN ii piice of $1.62 per million BTU's de- '

continued to successfully blend high livered to Big Cajun 11 and 1,800,000 !

BTU eastem coal with lower BTU Cajun owns 282 MW of the MMCF of natural gas at an average western coal, thereby improving River Bend Nuclear Plant operated price of $1.59 per million BTU's. '

their heat rate. Cajun owns 1,393 by GSU. During 1987, Rker Bend '

MW of the Big Cajun 11 units. The completed its fi se fuel cycle. Despite I remainder is owned by Gulf States the scheduled tefueling ouuce, the Coal Price: Big Cajun 11 t Utilities (GSU). During 1937, these plant completed the year with a *% uu 8m j

units operated at a comeined avail- capacity factor of 60.o percent. , mas ability of 90.9 percent compared to River Bend set an American record  !

83.6 percent in 1986 despite con- for General Electric's boiling water w I tinuing problems with the coal reactor series six (BWR/6) with 151 ' 23 ' to I

.pulveriters at units one and two. continuous days of operation during 2: .  !

Big Cajun 11 generated 6,354 GWhs the first fuel cycle. i in 1987. Cajun' son sitemonitoringpro ::  !

Cajun owns two 105N MW gram of the operations of the River  ;

gas. fired steam electric stations. Bend Nuclear Station received con u i l Although Big Cajun I units were siderable attention and has been the primarily used for peaking purposes impetusin the format 6onof a nation

1 i, "2 m '

during 1987, the units had an avail- organi:ation of forty non operating ability factor of 96.9 percent. They nuclear power plant owners called im 99 an g% .

generated 172 GWhs with a capacity the Nuclear Non Operating Owners _ nn !

factor of 8.5 percent. Group. l Capital: 7rovements were Cajun completed an audit of Transmission / System l completed .; Cajun i during Administrative and General Over- Improvements  :

1987 to its  : plant efficiency and head Expenses being charged to the Cajun's 1987 member coinc'Jent tobetter v at plant performance. River Bend Nuclear Plant by GSU telemetered peak was 1,159 mega.  ;

included e me improvements for and is negotiating with GSU regard- watts. This occurred on June 23, Big Cajun I was the installation of a ing these charges. A remote terminal 1987 at 6:00 P.M., and represented a l

new sequence of events recorder unit (RTU) was also installed at the 6.3 percent decrease compared to syrem at the plant. Capital im- Fancy Point Substation which per the 1,248 megawatts telemet red on  ;

l 1

i s

l

July 30,1986. " ' ~ ~ ~ '

(

During 1987, Cajun made sev. ., ,

eral major improv-ments to the high '

, ; e*

voltage transmission system. The ~  ;+ .

> w "

Archibald and Loreauville 34.5 kv

.. ,,t N

delivery points were completed to '*

A '

improve reliability and capacity. I '

k .' ,

The RTU installation of Fancy p, y> . .

Pcint, negotiated in 1986, was g .g

~

completed and provides continuous f(", ,, * ~

k *i update of River Bend .

f tion. The permanent bn)wer genera-e bays and bi W '.'\\ ] L, '

1 1 / i' loop feed to Semere Road were com- 3 pieted. A 230 kv line switch at * - '

' 7 ~ 7,i ' '

l.andry was completed to urgrade the - 4 metering facilities of French Settle- t ,

ment, Landry, hiinden, Black River

! and Persimmon hiill. Site acquist-p...-

M:

~

pg .y

~

/

1 tion was finali:ed for the Ruston East -4i%- . -

j delivery point and preliminary engi- Frenn L . /t to Rccht: John E. Ran. fall. Glana Gransn. finan R,vt. PML t G Harni. James T. trare.

j neering work began. Geau et R4merte. Char!<s lAf<tmd Lt.:m1, Mx<L Tou< Ocrau J.,is Mac.co.

Cajun negotiated and entcred JacPh M D m i. A

, into a new transmission intercon-

' nection acreement with Southwestern Electric Power Compan3 which will save Cajun's customerr $3.4 million hiember Gigawatt Hours Sales Safety i annually. pr %" M Cajun's employees worked very safely j in December, the Board of Di av during 1987. Only eicht recordable rectors approved the purchase of a injuries occurred in Cajun's 578

!' new computer system and associated nx person work force during the year software for a new energy control im with a total of six lost work days.

{ system. The system will be installed my 4w 49 .

%'i* 4. In 1987, Cajun employees worked and tested over the next two years. 1. I million hours and had an inci-

This sy. tem will enhance Cajun's .sy dent ofin ared to

} ability to operate and control the a nationa .ory averagerate of of4.7 1.4ancomIa Lou.

. bulk power supply and better meet ny isiana state average of 6.9. Although

! obligations to the Southwest Power Cajun is pleased with its enviable

' Pool and the North Amerkan Elec-ou u4 no n, nc safcty record, the Cooperative is j tric Reliability Council, constantly striving to improve.

l Frequency relays were installed in 1987, Big Cajun 11 emrloyees I at sixteen locations across the trans- had the best safety record in the his.

I mission system. These relays willim- Off System Sales tory of the plant. Emrloices at Big j prove the system's ability to control Cajun made significant progress in Cajun I completed another outstand.

j and regulate voltage. hiotor operator 1987 towards its goal of becoming a ing year with 932 consecutive days

! switches were installed at four sub- regional pwer supplier. This is one worked without a lost time injury.

l stations, nn addressable raJio sys- of Cajun s major strategic goals in its Cajun's substation maintenance de-l tem ( ADRS) was also successfully efforts to satisfactorily work out ofits partment continued their outstand.

. installed and tested in 1987. The financial problems with creditors. In ing work record of 1,171 consecutive j ADRS will improve system reliabdity August, Cajun completed negotia- days worked without a lost time j and lower communications costs by tions for a 300 htW per hour econ- accident.

replacing higher cwt telerhone leawd omy energy sale through 1989 with 4

lines. Cajun continues to study and Louisiana Power and Light (LP&L).

l evaluate the transmission system to Negotiations were also completed for

! enhance service reliability to 300 htW per hour of energy to the member cooperatives. Tennessee Valley Authority.

9

OPERATIONS COMMITTEE REPORT The Oremtions Committee is Director / Employee Education responsible for matters relating to During 1987, more than 1,000 dis.

, the overall management and admin. tribution cooperative directors, em- ,

! istration of Cajun. Responsibilities ployees and nembers toured Cajun's e j include the t evelopment of strategic facil: ties ar 's participated in infor-3 plans, maagement ir. formation sys- marional meetings. These informa- -

! tems, legal n .atters, environmental tional and educational meetings I j and external affairs, urchasing were a part of an effort to help all

• i

, policies, inte rnal au iting, human employees of Louisiana's electric resources, ar d the general manage- cooperarE es better understand the

! ment of company property and massive ufort and expense associ. J i auxiliary services. arcd with the generation and trans.

i mission ofelectric power. Comments have been quite favorable and the

Management Information project will continue during 1988.

! Systems i In'1987, Cajun installed a new I computer / data pmcess!ng system Environmental Affairs l and began imrlementing an exten- Environmentallaws promrted Cajun 1

{ sive portfolio of software The new to update and renew licenses for our

system is a key part of a five year power plants in 1987. The National strategic information system plan. Pollution Discharge Elimination -

.m This plan was the rnsluct of an ex. System (N PDES) permit for Big

• tensive study which called for more Cajun 11 was renewed for a five year comprehensive computer support for period to allow Cajun to release sre-

) the various departments within cific amounts of water discharge from

! Cajun. the plant site into the Mississippi Fr t,ficoa g,:o,,au r.p,nar, t One of the advantages of the River. Also, the Corps of Engineers G F. Thmas. Ortu Leum i acw ccmputer system and software is permit was renewed ta ellow for

! the integration of data from various maintenance dredging around the i sources for improved managemeat of coal unloading structwe and the information vital to the decision Unit 3 intake structure.

j making process. The software The passage of"Right to Know" Purchasing

inciudes general ledger, accounts regulations reqtired Cajun's Envir. The Purchasing Derartment Pro.

payable, fixed assets, purchase onmental Affairs Department to de- cessed almost 9,800 purchase orders i orders, capital projects and payroll. velop ha:ardous maternh listings of during 1987. Because of extensive i This systen, will provide access to chemicals used at all Cajun facilines. use of blanket agreements and

more timely and accurate informa. These regulations require that mc.ni- quantity discounts throughout 1987, j tion, as well as allow for more toring and record keeping be ut%e,i documented cost savings amounted 4

efficient use of financial and human in the event of an emergency involv- to arrroximately $400,000 for the

resources, mg ha

ardous chemicals. Cajun is year. The Purchasing Department

! As a part of the strategic plan, also monitoring Acid Rain legish - also began testing the McCormack &

j the Information Services Depart- non ~ ;ng considered by the U.S. Dodge Accounts Payable / Purchase ment was organi:ed into ehree units Coneress to Jetermir e its potential Order System to be implemented in during 1987: the Data Center, User and probable effect on Cajun's coal- 1988. The Accounts Payable /Pur.

Services and System Develorments. fired units. chase Order System is part of Cajun's j User Services is an important new overall strategic information systert, turction which provides computer plan and will provide nmely access tc.

training and surport to Cajun cudget and financial infonnation, employees. Implementation of the historical data and forecast models

. five year Strategic Information which will assist in the planning i Service Plan is ahead of schedule rnwess-and under budget.

{

4 l

4 10 l

~~ "

this nationally recogni:ed account- 1987 Total Expenses- $588 Million T T ~li E~~~~~E

" ' ' ~ ~ -

o l ing firm:

i.n

". . . We beliet e Cajun is u ell run and 2. n

• eN, $i f u hich rN nt 2" (T  ::

• h- 'f' ' T Q ..t-_ "'

the industry. Cajun's manwme nt j procedures and organizations hat e -. -

. 4a also changeJ rapiJly and effectively in KV?- -

?

,Tp *" .

recent scars. Fuel and interest are the ..

largest' expenditures. That is typical 'M ., .aum===-

i *, or other utilities u hich hat e been

• eas ilm involt ed in constructmn dur- .. '. .

p' u.a

[t\ mg the 14.'0's and 80's. In our -

opmion, as discussed in the report, Lajun management has dealt tcry

.I  ! .

i} t effectit~cly uich both areas." .

wgp

.U. / 4 The executive su f he b. ., ,. s $ h. '. o .

L, survey also discuuedajun L,mnkary o, t a a 6 percent ou nership of the River Bend

"' "

• 7 ---

G

'!' Nuclear Power Plant, an iuue w hich L fL'. ? h.. ' . ' e

<A has Presented and will continue to / n i ..

-i' . , .  :

we * ** ~ $ present sienificant challences to 1*

• y. . . . .,

Cajun. The survey confirme ' that

~ ~J Cajun recocni:es the sienif..-ance of W- -M.~A

• Frum i.</ to Ruhr T D fixinn, the River BenJ ione and is aJJreu.

ine it ettectively:

S.f A. *

". ' T l . '

1. ~ ' - - -

f. .

.s' J.lf &GeJm a, Anhur L Vera C A R,4ci, Jr . JAn C Tu,Lc 35 .1- .

~~;. I.. *e Le raturel Rdard S Ghnn "One of the most significant concerns y,? 4 -

3

.'.,Nn facing Cajun u as and stillis the -7 additmna. e spenses ass xurcJ u ith the -WJ~ L-Management Audit / Wage and commercial operation of the Rn er  :;g < s -

1 -

~-

Salary Survey Bend Nuclear Facilit, u hich Cajun

. / c.

A srecial committee of the Ibard of oum jointly uith Gulf States Utilities y W ,,, ,~~ .' C j . 1 .".

Directors was established to select (G5 U). Dealmg effectit ely uith Rn er O- . ~. .',,

^

and oversee the work of an inJeren- Bend is a stratecie issue Cafun must 1. ~- .-r '

dent manacement consultir.v firm in a.Lbess and u e beltet e is Jomg so .**?. ~". ' ' - .

a special audit of the manacement effecta cly. " f i) P '.

-s-practices and rrocedures of Cajun.

I he Deloitte Ilaskind Sells firm The Wyatt Company w as em- Jf E. and.

1 wpe. . f was selected and submitted the fiaJ. played to conduct an inJependent .:l m . . .

ines ofits manacement auJa to the wate and salan survey of Cajun dur. f '.  ; -

/.

Ibard in 1987, ing 1%7. The waee and salarv survey W :. * - .

h es1 '". - . .- .. .'

In the executive summary, the was Performed to msure char sabrics fol!ow ine St.iteme!)ts "'ere tuaJe by paid to Cajiin reisonnel are botb ex. I .. M  : -

ternally competitive and .nternally T& -

v .a equitable. D'iikc..w t :O f Ofgf;%U8$?$Y

_4 i;,

f y ., wn , */ __ ..

i n it

, MEMBER COOPERATIVES' STATISTICAL INFORMATIONjDoiiars in Thousandii

. %s E uied Decc5s 3I, I987 Beauregard _ Bossier Claiborne Concordia Disie _ Jeff Davis Ope ra t i n g R e ve n ue . . . . . . . . . . . . . . . . . . . . . . $ 32.036 $ 13.808 $ 21.849 $ 13.661 $ 73,936 $ 14.357 Espensesi .

Pu rc hased Powe r . . . . . . . . . . . . . . . . . . . . . . . .$ 23.144 5 9,622 $ 16.156 $ 8.682 5 -51,364 $ 10,249 Operations & Maintenance . . . . . . . . . . . . . . . 5,191 2,526 2,700 2,586 8,931 1.984 De,a rec i a t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459 679 923 864 4,196 '713 Taxes............................... .. 947 340 405 401 2,398 353 I n t e re s t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,283 1,137 882 1,073 7,044 829 Ot her Deduc tions . . . . . . . . . . . . . . . . . . . . . . . (225) 33 32 60 1,164 1

. Ope ra t i n g M a rgins . . . . . . . . . . . . . . . . . . . . . . . 5 (763) $ (529) $ 751 $ (5) $ (1,161) $ 228 Nonocerating Margins . . . . . . . . . . . . . . . . . . . 1,009 _ 142 371 813 586 157 N e t M a rgi n s . . . . . . . . . .' . . . . . . . . . . . . . . . . 5 246 $ (387) $ 1.122 $ SOS $ (575) $ 365 Assets

Total Utility Plant . . . . . . . . . . . . . . . . . . . . . . $ 55,044 $ 27,484 $ 31,973 $ 30,996 $ 137,869 5 23,411 Less: Accum. Depreciation . . . . . . . . . . . . . . . . (10,168) (6.056) (9,498) (8,115) (20,318) (4,443) '

Other Property and investments . . . . . . . . . . . 6,438 2.540 3.263 2,631 11,622 2,219 4 Current and Accrued Assets . . . . . . . . . . . . . . . 4,526 2,424 5.019 3,424 9,529 2,445 Defe rred De bi ts . . . . . . . . . . . . . . . . . . . . . . . . . 193 217 38 695 3,180 151 4 Total Assets 5 56.053 $ 26.609 5 30.795 $ 29.631 $141.882 $ 23.783 f'

Liabilities:

Margins and Equities . . . . . . . . . . . . . . . . . . . $ 10,767 $ 4.914 $ 12,183 $ 6,122 $ 19,434 $ 6.420 Long Term Debt ........................ 31.169 20,225 16,472 22,223 113,467 15,437 Current and Accrued Liabilities . . . . . . . . ... 2.084 1,469 2,059 1.264 8,924 1,278 De fe r red Cred i t s . . . . . . . . . . . . . . . . . . . . . . . I1,033 1 81 18 57 648 Operating Reserves . . . . . . . . . . . . . . . . . . . . . _

0 0 0 4 0 0 Total Equity and Liabilities . . . . . . . . . 29.631 $141,882 $ 23.783

$_5e.05] $_26.609 5 30.795 $

Other Statistics:

M iles o( Line . . . . . . . . . . . . . . . . . . . . . . . . . 4.381 1.924 3.455 2,431 6,291 1,489 Consu me rs Served . . . . . . . . . . . . . . . . . . . . . . 27,945 12,180 18.247 10,857 53,182 8,685 Consumen Per Mile . . . . . . . . . . . . . . . . . . . . . 6 6 5 4 8 6 Tot al M Wll'sSold . . . . . . . . . . . . . . . . . . . . . . 339.136 140.110 241,499 128.370 768.342 166.262 KWil's Sol.1 Per Customer . . . . . . . . . . . . . . 12.136 11.503 13.235 11,824 14,447 19.144 Revenue Per KWii Sold (cents). . ....... 9.446 9.855 9.047 10.642 9.623 8.635 Annual Revenue Per Consumer . . . . . . . . . . . . $ 1.146 S 1.134 $ 1,197 $ 1,258 $ 1,390 $ 1,653 Investinent Per Consumer . . . . . . . . . .... $ 1,927 $ 2,220 $ 1,722 5 2.778 $ 2,552 $ 2,659 12

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

1 1

Pointe South Southwest Washington

{ Total

! Northeast Coupee louisiana louliiana_ Teche valley. St. Tammany 9.%9 $ 25,726 $ 100,417 $ 11,152 5 36.074 $ 3 4,318 . . . . . . . . . . . . . . $ 401,495

$ 14.192 5

$ 10,077 6,890 $ 18.234 5 78,704 5 8,242 $ 23.8S0 $ 2 8,2 5 8 . . . . . . . . . . . . . . $ 293,502 1 1,924 1,629 3,068 10,170 1,54A 5,763 4,902.............. 52,914 538 1,477 3,877 307 1,780 1,567... .......... 18,929 J 549 233 211 690 1,709 158 1.002 933.............. 9,780 2,3 8 5 . . . . . . . . . . . .

2,161 2,656 2,942 25.245 755 936 162 6 12 39 78 0 0 411.............. 1.611 l J

$ 648 $ (247) $ 57 $ 3.223 $ 743 $ 707 $ ( 4,13 8) . . . . . . . . . . . . . $ (486) '

18 398 5.246 66 3% (53).. 9,978 I

) 759 . ........

1,407 455 5 8,469 $ 809 $ 1,103 $ (4.191) . . . . . . . . . . . . . $ 9,492 i $ $ (159) $

$ 20,159 $ 19,310 $ 51,955 139,126 $ 10,921 $ 67,258 5 5 7,5 5 8 . . . . . . . . . . . $ 673,064 f (5,166) (22,205) (2,015) (11.812) (10,05 3) . . . . ....... (120,049) i (2.974) (7.226) 2,456 4,833 10,802 1,039 6,522 5.414..... .. ..... 62,081 j 2.282

3,721 1,791 5,008 30.560 2,449 6,350 8,6 91 . . . . . . . . . . . . 85,937 i 0 1% 216 49 460 405. .......... 5.934  ;

j 134 158,499 $ 12.443 $ 68.778 62,015 .. 706 % 7 l $_21,170 $ 20,543 $ 54,766 $ .... ..

l 7,343 3,312 $ 15,179 $ 101,109 $ 8.%9 $ 18.561 5,73 9 . . . . . . . . . 220,052  !

12,476 15,911 42,682 2,480 45,414 4 2.7 5 5 . . . . . . . . . . . 418,163

( 37.452 1,339 1,132 2,132 13,811 663 4,803 13,4 53 . . . . . . . . . . . . 55,411 ,

) 12 117 3 897 331 0 68. .......... . 13.266  ;

0 0 0 0 0. 75  :

l 0 71 . .....

$_ 21 170 ' $ 20,5p .

$ 54.766 5 158 1 4J $_12 43 $ 68.718 $

1 62.0p . . . . . . . ..

$_706.967 1,148 7,555 798 6,343 4,324 .... ... .... 43,406  ;

l 2,303 964 13,110 8,390 14.481 72.237 8,338 33,982 2 7,046 . . . . . . 308.6S0  :

6. 7 I

6 9 13 to 10 5 ... .. .

143,927 101,256 1,246,764 355,278 422,137 ... . ... 4.462,728 28S.301 121.346 . ,

l 19,9N 17,259 10,455 15,608 ... ..... . 14,457 4 10,978 12,069 14.553 8.923 8.054 9.190 10.154 8.13 0 . . . . . . . . . . . . 8.997 l 9.861 9.845 1,777 $ 1,390 $ 1,337 $ 1,062 $ 1,269 . . . ..... $ 1,301 l

$ l.083 $ 1,188 $

l 2,03 9 . . . . . 2,117 i 1,534 $ 2,276 5 3.557 $ 1,873 $ 1,298 5 1,768 $ ... . $

j $

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i 11  !

,,,,s...,,,,, ,,,m..... . ...s. .s. l LOUISIANA'S ELECTRIC COOPERATIVES c

! Association ofloulstana Electric '

Cooperatives, Inc, 10725 Airline Highway, Baron Roure, LA 70616 2 Beauregard Electric Cooperative,Inc.

P.O. Dramer 970 DeRidder LA 70634 3 Bosnier Rural Electric Membenhip Corporation 5(

P O. Ibn 5756, Ikwier Cerv, LA 71171 1C Jun Electric Power Cooperative,Inc. i P.O. Boi 15540, Baron Roure, LA 70895 [

4 Claiborne Electric Cooperative. Inc. I P.O. h3 719. Homer, LA 710

$ Concordia Electric Cwre ..ve, Inc. l 1102 Nonh E.E. Tallace Ibulevard. [

Feniday, LA 71334 ,

6 Disie Electric MembenhipCorporation l P.O. Ibn 15659, f aron Rouge, LA 70905 }

I 7 Jefferson Davis Electric Cooperatise,Inc.

P.O. Dra.er 1229. Jenninri. LA 70546 8 Northeast Louisiana Power Cmperative,Inc.

i

, P.O. Ibn 151, Winnsh,co, L A 712 95 l 9 Pointe Coupee Electric Membership I l Corporation j P.O. Ibn 160, Ne Roads, LA 70760-OI60 g  ;

10 South leulslana Electric Cooperathe i Association l P O. his 4037. Houma. LA 70361 l 11 Southment Louliiana Electric Membenhip  !

Corporation l 1420 Highway 167 Nonh, Lafsierte LA 70507 l

i 12 Teche Electric Cooperative,Inc.  ;

P.O. Draner 472, Jeanererre, L A 70544 l

!) Wiley Electric Membenhip Corporation i P O Ibn 659, Natch.whes. LA 71457 14 Washington St.Tammany Electric j Cooperath e. Inc.

P O. Dea.et N Franklinton, LA 704 55 Pow er (senerating Plant s l

O hsC., uni Nc.m a,tA O hs Casun 11, Ne. Ad, IA B Riwe IW1 Nuclear Semm, So Francuntle, LA I

l t

I 14

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1%7 BOARDS OF DIRECTORS Bearregard Electric Cooperative,Inc, Diale Ylectric Membenhip Corporation Southuest Louisiana Electric Membenhlp EJ.ard D. Brandt, Pres 6Jent. der 6dJet A, C. Roux, f r., Pnsident Promentle **fP0"'I "

C. R. Ccoley, Vice Prendent, DeRdjer Ron Mamc., V6ce President, Slaughter M. W. Scanlan, President Church Pomt Larry W. Stephenson, Secretary /Tuuunt, Cyn!"Cy" Barrwa, SecretaryrTreuvrer. Clark Gray, Sectenry, Cro ley Ltke Charles Baron Route Dave Aymond, Trepurer, Lafayette Ray Hauser, DeRidjer T. N. Samuel, Zachary HanolJ Kennien. Ce<6ha Ruth Shened, Sulphur Ruhard "Du k y" Sirman, GreenaNrs Dennis J. Brouuard, Kartan Giona Granret, DeRWer James E. Lott, Albny Jacqun Campktl, Gue,Jan R. EJ arJ Goins, DeRidder Roland Manm, Ltempton Wilham R. Huval, St. Martmnlle U.U. Rtvers, Piik in FreJJv Mete, St. Funcimile Den n LeJovi, Jr., Opelouan Herbert E. Strange. .'t., DeRdJer Jack Y. Milh an, Baton Route Jern F. Meaus, Duen Carrie L. Thomu, Chnton H. F. Young, Jr., Onkwan Eugene O. Traylor, Hammond Bouler Rural Electric Membenhip g$",'N," h,*nR e Corporation Teche Electric Cooperative,Inc.

Donny M. Hood, Freuder.t. Benton Ement Freyou, Prmdent, New Ikna C. A. Rodgm, Vxe Preudent, Plun Deshns Richard Lernon, Vue Preident Frankhn Dunne BearJ. Secretary /Treuvrer, Elin Grove Menon Davis Electric Cooperative,Inc. Anthony DonalJ Sigue, Secreten Jeannette O. b. Hitchell, Dmhne Eugene C Tcdd, Pnsident Wehh Dolan P. Klemnter Trenurer, Ne. lkria Sh261a T. Durbm, Prnceton Louis O. Trahan, Jr. , Fint Vxe Presamt. Guerdan Antome S. Luke. Frankhn Sustn Murrhy, Dmhne W. F. Hentv, Jr., Secord Vxe Pnadent Cameron Joseph M. Davis, Jr , Junerette GenlJ R. Robmette Coushatta Charles M. Davis, Secretary /Trenurer, Jennmgi Jukie Judge, New !bena FrtJJie D. Memrt, RinggolJ Rwhard J. Bytet, Lake Anhur Lloyd BerarJ St. Mamnnile R D. Elston, Elm Gron Sdney Deroven BellCity Earbne Hills, Jea ierette E. Gamer Nunn, Gnnd Chenier Glenn LanJn, Junerene Charles S. Heckeet, Bell Cary Jamn Rcdngues, Frankhn Claiborne Electrie Coopensive,Inc, J sera Turnt.k.hnnine Ra a k, ' eiden r Valley Electric Membenhlp Corporation A. J. Smith, Secretary /Trenurer Honeintle Northesit louisiana Powe' O. A. Fletcher, Prudent, Montromery G. F. Thomu, Hununtle Cooperatives. Inc, P. E. Cloutar, Jr., Vue PreuJent, Natchitochn Daniel Green, Manon John E. Randall, Preudent, Ne.ellton Larry Balthnar, Ses etarv/Treuvrer Natche Davd Senden, MirJen E. W. Patnck, Vue Prudent. Lake Prondence Charin Underwood, Leenv;lle Het Elk ma, Srearmlie Ray Bnan, Secretary /Trenune. Wmniboro Otus Le ms, Many Lonnie Minll, Hedm Georre A. Pnce, Sr., Wmnshoto Sammie Guilhame, Camret Leroy Pernet. Arcadia Corba L Henn, Ronlle Bill Bacle Coushatta Roy W. McIntyn Delhi John G Burford, Jr., Gloster Mg hael Bamdse. Erre Cynthia Gamn Many Rudoirh M. Elkma, Oak Grove Concordia Electric Cooperative,Inc. Columbus H. (Lum) Do, B aerep Df y ,Vue dent, Hamsonkra  %'aihington St.Tammany Electric U. F. Gandy, Secretary Funday Cooperatise, Inc.

Dernli Wele h. Tre aiuter, Vaaha P inte Co spee Electric MembenhlP Ed.arJ C. Senee, PrmJent. $1 dell Ann Barron, S,cil, litanJ Corpon tion Kerry Harwell, Vxe President,4 Iusa Jee V. Colhna, Jens J. M. Hollo n, Prendent, Mannrowin Loucniw Reynolds, Secretary, Angie Charles A Ennshi, Sicily liland RuharJ F. Glynn, Vwe Prendent, Venereis Richard Smsletan Trenunt, Pearl Rint ikbby Ray E.mg. Jonemtle Ement S anen Trenunt, Port Allen George Da.wn, Folem U. U. Manm, Jonemile Mrs Frank H Rue, Secntary, Buchelce B Glynn Farmer. Angie L G. Crochet. Labarn Tone GeralJ. Franklmton John Genafts Batchelor Will Smith, Jr., Fnnk hnton McVea Ben on. Leets. orth De.avne Grue. Amite South loulalana Elecede Cooperative Association Alesander Dmle, Prendent. Houna Dand Luke. Vue Prmdent, Houma Rohrt Aycock, Secretary Houma Cientand Deiste, Trenarer, Orn Buford Aucom, Ameha Harold Felse, Raceland Eroy J. Accova, Morgan City Bnan River, Gheens Terry J. Tnhan, Houma LlovJ Gibon, AJnwr to the BoarJ. Gibwn 15

.s,,,. ....,,........A,i,~. ~ s .

BALANCE SHEETS nnThousanasi _

December 31 1987 1986 ASSETS UTILITY Pl. ANT E l e c t ric pla n t i n se. ri : e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,678,718 $2,670,164 Co ns t ruc t ion in p rog r e s s . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.126 14,650 N uc lea r fuel a t a mort is ed cos t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.436 92.408 2,775,280 2,777,222 l ess a ccumulat ed deprec ia t ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,004 195.957 2,495,276 2,581,265 Electric plan t held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.182 10.182  ;

2.505.458 2,591,447 l OTilER PROPERTY AND INVESTMENTS i N on u t il i ty p re pe rty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ 675 675 ;

Restric ted funds held by tru s tees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,690 28.956 )

Investmenti in associated organiza tions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,176 74,111 J Other receivables . . . . . . .............................. ........................ 11.908 118.449 103,742 ,

CURRENT ASSETS Ca sh a nd short .t e rm in ves tme n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,071 55,589 Accounts receivable - electric customers:

Members................................................................ 13.662 16,723 r N o n m e mbe r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... ...................... 32,679 4,380 l Ac c ount s rec e iv able - othe r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,161 2,995 !

Fue l a nd suppli es in ven torie s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,902 32.686 :

Prepayment .. .. ..... ... .. ................. .................... ........ 1,784 1,248 l l Other............................................. .................... . 627 1.113 ; ,

l 140.886 114.734 DEFERRED Cil ARGES . . . . ............................................... .... 285,809 283,024 i

$ 3.050,602 $3.092.947 ! t l r

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December 31 1987 1986 EQUITY AND LIABILITIES EQUITY AND MARGIN (DEFICIT) ,

M e m be rsh i ps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ I $ 1 Pc t ronage ca pi t al c red i t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,533 36.513 U n alloc a t ed (de fic i t ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ' (66.402)

Do n a t ed ca p i t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406 406 (29.462) 36.940 LONG. TERM DEBT 1:ss sc hed uled ma turit ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,868,397 2,982,188 i

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CURRENT LI ABILITIES Ac cou n t s pa y a ble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,105 3,215 Acc rued in te rest a nd ot he r e x pe nses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 *t 12 32,856 i Scheduled maturities of long. term debt . . . . . . . . . . . . . . . . . . . . ........................ 122,030 30.508 202,877 66.579  ;

1 t D E FE R R E D C R E D ITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.790 7,240 i

i COMMITMENTS AND CONTINGENCIES

$3.050,602 $3.092.947 l l

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STATEMENTS OF REVENUE AND EXPENSES nnThousandst Year Ended December 31 1987 1986 OPERATING REVENUE Sales of electric energy:

Members..................................................................... $ 293,538 5 325,535 N o n m e m be rs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217.696 137,176 Other......................................................................... 643 928 511,877 463,639

. OPERATING EXPENSES Power production:

Fuel......................................................................... 121,378 135.943 Ope ra t ions and mai nte na nc e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,029 34,681 Pu rc h a sed po w e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,181 12,361 Ot h e r powe r s u ppl y e x pe n se s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 718 T r a n s m i s s io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,934 27,209 Ad minis t ra ti ve and ge ne ral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,472 5,905 Deprec ia t ion a nd amortiza t ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,692 57,985 Ta x e s , ot he r t h a n i ncom e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.460 2.025 328,904 276,827 l O P E R ATI N G M A R G IN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,973 186,812 OTHER INCOME AND EXPENSES I nt e re s t , re n t s a nd lea se s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,626 3,996 Ot h e r i nc o m e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.893 5,135 Allowance for funds used during constructlon . . . . . . . . . . . . . . . ......... .............. 1,218 908 Amorti:ation of deferred charges . . . ....... ...... ................................ (12,945) (9.349)

( Ex t raord i na ry t t e m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.852 (3.208) 10,542 MARGIN BEFORE INTEREST AND OTilER DEBT EXPENSE . . . . . . . . ............ 179.765 197,354 INTE R EST AND OTilER DE BT EXPENS E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246.167 191.418 N ET M A R G I N ( D E FIC IT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (66.402) $ 5.936 STATEMENTS OF CH ANGES IN EQUITY AND MARGIN (DEFICIT) nnThousanasi Years Ended December 31,1987 and 1986 Patronage Member. Carital Unallocated Donated fit Credit. (Deficit) Capital Total B ALANCE J ANUARY 1,1986. . . . . . . . . . . $1 $30.597 $406 $ 31.004 Net margin for the g ear . . . . . . . . . . . . . . . 5.936 5.936 BALANCE DECEMBER 31,1986 ....... I 36,533 406 36.940 Net (def' cit) for the year . . . . . . . . . . . . . $(6o.402) (66.402)

CALANCE DECEMBER 31,1987 . . . . . . . _51 _

536.533 5(66.4021 5406 $(29.462) suwes w uswaan iS

STATEMENTS OF CASH FLOWS lin musonasi Year Ended December 31 1987 1986 OPERATING ACTIVITIES Not ma rg i n ( d e fi c i t ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(66.402) $ 5,936 Adjustments to reconcile net income to net cash Provided by operating activities: .............

De p r e c i a t io n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.050 57,465 A mortira tion of nuc le a r fue l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.456 6,095 AmortIration of deferred charges and credit:- net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.195 9,173 (Inc rease) decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,404) 20,766 (Increasa) dec rease in fuel and supplies inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,216) 10.471

( I nc re a se ) i n p r e pa ym e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (536) (410) inc rease (dec rease) in account s payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,109) 313 Increase in accrued interest and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,885 3,038

( I nc rea se ) dec re a se - o t he r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 (379) ,

NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.406 112,468 INVESTING ACTIVITIES Purc hases of utility pla nt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...................... (1 J,$17) (155,356)

( I nc rea se ) i n i n v e s t m e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,972) (1,805)

(Increase) dec rease in restricted funds held by trmtee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 ( t,324) i Pa y me n ts for de fe rred c ha rges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,731) (38,469) ,

Rec eipti of deferred c redit s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.300 619 Proceeds from sale of non. utility property . . . . . ...... ............ ..................... 10 NET CASil USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,655) (196.325)

FINANCING ACTIVITIES Prereeds from long.rerm debt . ................... ................................... 1,000 155.952 ,

Pa)ments on long. term debt and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . .... ........... (23.269) (20,634) ,

t NET CASil PROVIDED (USED) BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . (22.269) 135.318 [

INCREASE (DECREASE) IN CASil AND CASit EQUIVALENTS . . . . . . . . . . . . . . . . . . (3,518) 51,461 Cosh and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.589 4.128 CASil AND CASit EQUlVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 $2.071 $. 55,589 ,

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_______________________________________j

NOTES TO FINANCIAL STATEMENTS locc:mber si,19871 NOTE A-COMMITMENTS AND ceiving low interest rate substitute loans or REA equiva.

CONTINGENCIES lent relief to reduce future interest costs; d) negotiating with suppliers to reduce future operating costs; e) selling assets, where and if appropriate; f) returning any On December 31,1987, CaIun Electric Pover Coop'ra- **I'd"fed unnee cash to the REA; g) implementing appropriate tiv , Inc. (the Cooperative) did not make full payment on accounting changes. Subsequent to December 31,1987, qu:rterly debt service obligations and was in arrean by the Cooperative is continuing negotiations with its credi-t pproximately $44.8 million. (See Note F for other events tors, supplien and othen regarding the workout / restructure of default and Note Q for subsequent events regarding debt service in arrears.) The Cooperative and its major creditors Pt an' had anticipated the payment default and took actions that During 1987, as a result of Board of Directors' action, the allowed the Cooperative to avert the immediate need to Cooperative implen.ented a change in the accounting for se;k court protection from creditor actions. The events of certain fuel related costs that resulted in an approximate def: ult, through cross default provisions of the various five mill per kWh decrease in the fuel cost adjustment debt agreements, cause an event of default to exist on component of wholesale rates to Members. The Gvpera-substantially all of the Cooperative's debt. tive is negotiating with its supplien and creditors to achieve further reductions in wholesale rates to Members.

On December 14,1987, the United States Department of The Gurerative intends to charge wholesale rates to its Justice (DOJ), representing the U.S. Department of Agn. '

Members that will allow in Members to charge competi. I culture, Rural Electrification Administration (REA), tive retail prices to their patrons. Electric utilities operat.

stated by letter that the DOj, on behalf of the REA, would ing in Louisiana have been, and continue to be, subjected not bring suit agairut individual officen and directors of to avere business conditions that limit their ability to the Cooperative with respect to monies used by the Cup. increase rates commensurate with added investment in crative to pay reasonable operatmg expenses and certau. productive generating assets. As a result, the Cooperative other requirements for continued reliable operation of the does not believe that it can charge rates to recover its Cooperative (the 3713 4 aiver). The 3713 % a'ver relates additional investment in River Bend in the ordinary to bection 3713 of Title 31 of the U.S. Code and is course of business, and estimates the deficiency between effective for the priod December 31,1987 through March cash produced by competitive rates and cash required to <

30,1988 (see Note Q for subsequent events); however, meet normal operating expenses and existing debt service i the IX)J reserved the right to revoke or modify any pro- requirements could be substantial before a turnaround can vision of its action on seven days wr (

Goperative. In the event of thes revocation DOJ,itten betoexpected.

noticecould the The Cooperative believes the deficiency i of the be mitigated, moderated or eliminated entirely l 3713 % aiver, the Cooperative may seek rrotection from under certain workout / restructure alternatives and is its creditors under Chapter 11 of the Bankruptcy Code' negotiating with its creditors to restructure existing debt The Qvrerative engaged special counsel to a,sist in l yn. ice requirements so that a default condition does not '

I workout / restructure negotiations and bankruptcy matters. exist in perpetuity.

in similar situations involving other troubled ccupera- The Ovperative has remised its workout / restructure tives, the DO has issued a senes of 3713 % aivers during the pendency)of workout negotiations and the Gvrera- plan negotiations on the belief that all panies (unsecured '

l tive ant,icipates the DO) to continue to provide a renew ed and secured rive and creditors, its Members) are surbiers, regulaton, eter served if the Coo the Qvrera-rative i 3713 % aiver each nmety dayqs it has previously done in remains a reliable producer of competitively price hole-similar situations. The 3713 % alver did not provide pro- term tection from legal action by the DOJ with respect to sale predictelectricity for the the outcome of t tonhekout/

wor.restructure The Cooperative negotia- cannot pa)ments made by the Luperative on unsecured debri tions currently underway.

accordingly, the Qvrerative ceased making payments with respect to debt service and fees on pollution control On luly 17, 1987, one of the Cooperative's Memben, revenue bonds. Washington St. Tammany Electric Geperative, Inc.

On July 10, 1987, the Cooperative filed a workout /re. ( , sought protection from its crediron under Chap-ter il of the U.S. Bankruptcy Code. At the time of filing, structure plan w.it h the REA. The Gvperative, lan WST owed the Coperative $6.7 million in pre. petition involves several actions by the Geperative, its supp ien power bills. WST resumed payments for power, but at and creditors, and its Members designed to achieve re-liable, competitively priced electricity for rural Louisiana, amounts below the billed rate. De Gercrative continued sur lying power to WST in order to preserve its rights The workout / restructure plan proposed by the Coopera- un[er the terms of the power supply contract between the tive includes the following major provisions: a) reducing Cooperative and WST.

cholesale rates charged Memben and indezing future rate increases; b) restructuring debt service payment obliga- On November 17, 1987, the Coperative and WST en-tions to be commensurate with future cash tiows: c) re- tered into a temporary agreement calling for full payment u

of power bills for the period of November 1987 through On February 14, 1987, the Cooperative's directon and M:rch 1988. That agreement was approved by the Bank- officers insurance expired. The Coopcrative has not been ruptcy Court on February 22, 1988. Payments under the successful in obtaining replacement coverage at a reason-agrrement were predicated upon WST's ability to main- able cost but intends to continue in its efforts to replace trin certain minimum cash levels. the insurance.

Pc:t petition amounts unpaid at December 31, 1987 At December 31,1987, the Cooperative had unadvanced amounted to $2.05 million. The Cooperative is the single loan commitments from the Federal Financing Bank (FFB) largest unsecured creditor in the WST bankruptcy pro- (guaranteed by, and subject to control of, the REA) and ceeding. Recovery ohhe amounts owed to the Coopera- two unsecured lines of credit totaling aprroximately $150 tive for power supplied to WST cannot be predicted with million. The Cooperative dxs not expect the commit-cartainty. (See Note Q for subsequent events regarding ments to be available until the workout / restructure nego.

WST.) tiations have progressed further and it has established cash on hand above levels normally required for dayeto-day As discussed more fully in Note O, Gulf States Utilitie' operations. At December 31,1987, the Cooperative had Company (GSU) owes the Cooperative approximately unadvanced loan commitments (the FFB set asides)

$300,000,000 over the remaining three and one half years ammmting to approximately $182 million related to pollu-of the Sell back Agreement which is related to the joint tion control assets and outstanding pollution control Ownership Participation and Operating Agreement for bonds. The FFB set asides are guaranteed by, and subject ,

the River Bend nuclear facility. This Sell back Agreement to the control of, the REA. The Cooperative is uncertain j h:s th2 effec,t of mitigating the cost and rate imract of the ofits ability to draw down funds under the FFB set asides. '

rative s $1.5 billion investment for its 30% share of Coobyer the Bend nuclear plant. Should these revenues not P regarding possible regulation of the Coopera-See Note be received from GSU in the amounts and in accordance tive by the Louisiana Public Service Commission (LPdC). '

with the schedule contractually agreed to, the Geperative could be further impaired in in ability to meet its obliga. L tions. GSU ls not only a competitor, it is also a cint owner of major generating and transmission assets anc, as a result NOTE B- SIGNIFICANT ACCOUNTING of th2 Sell back Agreement, is the Geperative's largest POLICIES single contractual customer. The continued financial via-bility of GSU is a critical factor in the Generative's General: The Gvperative is a rural electric generation continuing negotiations with its creditors. (See Note O as and transmission cooperative owned by 13 distribunon i to certain claims by GSU w hich are disputed by the Cmp- cooperatives (Memben) providing electricity to approxi.

erative.) mately 300,000 metered customers terresenting over i' The Coo rative is a party to contracts for the acquisition IMM pe ple residing throughout 80% of the land of coal, rchases under the terms of these and related area of Louisiana. he Cmperative and its 13 Memben have entered into w holesale power contracts which require transportation contracts during 1987 and 1986 were ap.

proximately $114,000,000 and $145,000,000, respec, the Memben to purchase all of their electric energy re-tiv:ly. The base contract purchases are subject to certain pirements from the Cooperative through the year 2021. '

, price escalators and deflators, to minimum quantity takes Fmancing assistance iy provided by the REA and, there- ,

riodic price reopenen at then current market fore, the Cooperative is subject to certain rules and regula-cnd to rions promulgated for rural electric borrowen by the REA.

l anagement is of the opinion that these coal  ;

prices.

contracts will properly meet the anticipated coal fuel needs of the generating unin. The transportation con- System of Accounts: The cmp'rative maintains its ac-counting records in accordance with the Federal Energy tracts expire in 1999 while the coal contracts are for the Regulatory Commusion s (FERC) chart of accounts as usefullives of the units. (See Note Q for iubsequent event, <

reg:rding coal supplier and coal transportation contracts. ) modified and adopted by the REA. ,

The Cmperative is the defendant in certain litigation Electric Plant in Service: Electric plant in service is stated tor: ling approximately $77 million conceming claims of on the basis of cost. Depreciation is computed using the l contracton principally related to the construction of its straight line method over the expected usefullives of the coal fired utility plant and an abandoned lignite facility. related component assets. The cost of units of property The Cwrerative is also the plentiff in other litigation rerlaced or retired, including costs of removal, net of any

tot

ling approximately $450 million concerning construc- salvage value, is charged to accumulated depreciaticn.

tion issues. The results of these lawsuits cannot be pre.

, dicted with certainty, and the final judgments in either Nuclear Fuel: The cost of nuclear fuel, including interest situation could be significant and material to the Cmp- on borrowed funds and allowances for other funds used er:tive. during construction, is being amortized to fuel expense on 2n ,

/

the basis of the actual number of units of thermal energy the flow throuch method for recognizing investment tax produced, multiplied by a unit cost which reflects the total credits, thermal units expected to be produced over the life of the fuel (see Note L). Patronase Capital Credits: ne Cooperative is organized and operates on a not for profit basis. Patronage capital Construction in Peogren: Construction in progress I, credits represent that portion of the Cooperative's net stated on the basis of cost, which includes interest on margins which have been assigned to Member coopera.

borrowed funds and allowance for other funds used during tives. As provided in the Cooperative's By Laws, all amounts received from the furnishing of electric energy in construction, adjusted for costs allocable to joint partici.

pation agreements and, during the resting phase, certain excess of the sum of operating costs and expenses and amounts required to ottset any cunent year losses are operating costs net of amounts received from the sales of assigned to Memben' patronage capital credit accounts on t:st energy generated, a patronage basis or, at the discretion of the Board of Direct ts, may be offset against losses of any prior fiscal kvestments: He terms of financing arrangements with year. All ther amounts received from its operations in the National Rural Utilities Cooperative Finance Corpo- excess f c ses and expenses are used to offset losses in-ration (CFC) and the Jackson Bank for Cooperatives (JBC) curred during the current or any prior fiscal year and to the require investment in ca i extent n t needed therefore, are assigned to Memben on a "C"stock, respectivelyesebtal term certificates investments are carried at and Class harmnL ws,ge thebasis, indeficit 1987 net accordance withallocated has not been the Cooperative to the s cost in the accom[anying with undistribute financial patronage capital statements credits from these together h[ ember cooperatives.

organizations.

The Cooperative allocates patronage capital credits re. Cash Equivalentst ne Cooperative considers all highly ceived from associated organizations to assets and expenses liquid investments with a maturity of three months or less in the same ratio as the interest paid to these organi:ations when purchased to be cash equivalents.

Is capitalized and expensed, respectively.

Reclassifications: Certain reclassifications have been Fuel and Supplies inventoeles: Fuel and supplies inven, made to the 1986 financial statements to conform to the tories are stated at cost (weighted average cost method). 1987 presentation. In November 1987, the Financial Ac.

counting Standards Board issued Statement No. 95 Statement of Cash Flows. He Cooperative adopted the Defereed Charges and Credits: Deferred charges r present pmvisions of the Statement in 1987 and restated the costs incorred which are defened punuant to arproval by previously reported statement of changes in financial posi- i the Board of Directon and the REA. Defened charges tion for 1986, consist primarily of certain costs associated with an aban-doned li nite project, the costs of development and opera-tion of e$cetrical generating facilities (including costs as. NOTE C-UTILITY PLANT sociated with common facilities and stockpiling fuel in-Electric plant in service at December 31 consisted of the ventory) prior to commercial operation status and/or f 11 wing (in thousandsh thereafter, but before the facilities achieved full capacity end certain costs associated with the amendment to the ten im River Bend Sell back Agreement. These costs, with the puo, exception of costs associated with excess coal, are being Na,, .

u,m.ni u,m,m amortized over periods prescribed by the Board of Direc- Cmi na on , i.t:2. m i,m.m ton and by the REA which do not exceed 15 yean (see inn = = w p no suC2 omni . 10.H i s.tu Note E). Defened credits at December 31.1987 constit primarily of insurance claims, environmental closure funds -u.cs-* m

~u.co,m~

and Member prepayments of power bilh.

No Cwnthe Cwnshe income Taxes: Certain revenue and expense items are u ,,...n o.=nw u,s...n recognized in different periods for financial reporting and ce=no., u.a ant.,- roi sun - skm ~

income tax purposes, thus creating timing differences. gm,, uoy en,, , ,e y ,i,, 33 2s2 Deferred income taxes are provided on these timing differ- m,og gi, en. i so w in se ences which are principally related to depreciation on ma c un it. uw. 2 se ow im se electric plant in Service, income and deductioni related to ma c.un 11. Unit s se c=i sw its the additions to and amortiration of deferred charges and Na Cmn l. Um i ici NuclGa im 105 credits, and the sale of tax benefin. De Cooperative uses Ng Cwn I. Um 2 105 Nuclum im 105 l

21

---

- -__- a

Riv;r Bend, Unit I and Big Cajun 11, Unit 3 are jointly I'97 t***

owned by the Cooperative and GSU (see Note O), crc. . . s 9.52s s 9.75s Construction.Introgress consists of general additions to existing plants. Ihe estimated cost to complete these

[3,;, ", ,

projects at December 31, 1987 was approximately U M D O '1'l 57,616,000. See Note Q for subsequent events regarding cn agreement to sell a partial share in Big Cajun 11, Unit 1. The Cooperative's investment in the JBC is substantially pledged to secure certain borrowings from that organtra.

rative's 30% share of Nuclear River Bendfuel fuel represents and as repe.ed the b Coo $OSU at December ti n (see 31Note F).

consisted of the following (in thousands):

1997 1946 Nwice fwhn picne . ... . . .. s 4 U 54 s 15.15s NOTE E-DEFERRED CllARGES Nwl.ar twhn t cror . . . , 61.541 47.171 srce nwi,,fwi . . , ..  ;.257 Deferred charges at December 31, net of accumulated ne,i,7 ie:,73, amorti:ation, consisted of the following (in ihousands):

l,st nwl,ar fwl amorntat6on (21.721) (10,121) 1997 1946 Nie nulue fuel . . . . , ,

s 84 416 s 92.4 3 Ab.njon,J r 9,c,ce.cs,. . s 75.017 s 82.060 Interest on enc ess coal . . 83,760 72.203 Nuclear fuel in Process terresents the accumulated cost,

'""""""'d"' ' "" " 6" including interest, of fuel required for four complete re- Bt c)t r1)J . . 12,$H 12.5H loads. The fuel is in vrying stages of conversion, enrich- A ,a m,n, oga ,,B,na i

mCnt or fabrication. Nuclear fuelin the reactor was initially s,n +.a Agum,ne . to.9n is.22s loaded in February 19S5 and is being amorti:ed to fuel tv er,emwn s inenni en emnmon cxpense, it will be replaced over three operating cycles (mhnn ai sirc en ti covering approximately five years. The first operating all able ea Unie l . 9.506 i t . i >0 cycl 2 was completed in late 1987 and in December 1987. Worb3<a nad o'h"- 27.2'O 21 0**

the first replacement of nuclear fuel (totaling arrroxi- s sse s 2ne24

~ ~ ~ ' ~ -~

m: rely one third of the initial fuelload) was comrleted.

Spent nuclear fuel consists of the original cost of fuel in January 1985, the Cooperative abandoned a rianned bunJtes removed from the reactor dunne the first fuel I gnite Project and determined that certain incurred costs, r; load chich have been fully amorti:ed. aggregating approximately 399,000,C00, had no future See Note E for electric plant held for future use. benefit. These costs were reclassified to deferred charges in 1985 and are being amorti:cd over periods not exceed.

I The net change in accumulated Jerreciation for the years ing 15 years. The land has been retained as a possible site ended December 31 was as foilows (in thousands): for a future generating facility and its cost, $9,802.000, is included in electric plant held for future use.

l Effective January 1987, the Cooperative, with the arrroval chuna io ont.nna ncen u. s $4 eso s s7.us I.H S i,c70 of the REA, su5 rended antil July 1988 the expensing of ChrecJ eo fuhnunwnn chunaioa,fn,,ach,,,n interest on the excess coal notes and the amortiration of isu sa, n . 2m deferred charges relating to interest on excess coal, charges for nondelivery of coal and losses resulting from decreases suo nus in Bru content of stockpitcJ coal.

in. .. ei av.i. . tuin 02n l s*"s4 c47~ s 6un

~^ ~

The Cooperative hai deferred costs of cerrain River Bend energy resulting from the amended Sell back Agreement.

These costs arplied to the portion of energy taken by GSU from the commercial operation date of June 16,1986 until the Sell back Agreement was amended Sertember 2,1986.

Prior to December 31, 1988, GSU is obligated, at the l NOTE D-lNVESTMENTS IN ASSOCI ATED option of the Cooperative, to replace in kind or ray for 1 ORGANIZATIONS that portion of the power that they received from River Bend op: rations during this period which, due to the l Investments in associated organi:ations at December 31 retroactive change in the Sell back Agreement, belonged consisted of the following (in thousands): to the Cooperative. The total cost associated with River l

l l

21 l t

BCnd operations for (bis PCriod Was approximately tauumpt knd h un d $% to 8.6% u

$15,183,000. The variable costs of this power. arproxi- NemN' ll.1987h Ja no latee than mately $2,830,000, will be expensed concurrently with Ik emk' 20li- 8'.2 50 89.250 the future payments or in kind rerlacement received from GSU. The fixed cost of this power, approximately P"""

• C"'"d Re ""* **J ' * "" I * * * -

$12.353,000, will be amorti:ed over the remainder of the '"""""""'"'"'"""J'**"*"'**"'

amendeJ sell back period ending on June 16,1991 (see "7,',','d s ,i'"l'*j3Q',',$',"l/,','"3('

3 Notes A and O). i,gn ao,i,,y ,s , y,, git , , nu ny l ronunon c,mena Rnenue nmJ. snu ies4 ,

i NOTE F- LONG. TERM DEBT inenne .r unme nin h=J on . n.n.maur

recoenoeJ inJei dmmrar.Me tai e nemrt l Substantially all of the Qvrerative's long term debt to Wnd mun (* cs a Ikembo i t.19ML '

i the FFB and the JBC is guaranteed by the REA. Under the Je na luehaa Ikemk' 2014 5 * ^Y '8 600 I terms of its loan agreements, the Cooperative is required l to maintain certain ratio covenants, including interest P"" u' k* C'* ""l R " '"* h *3' '* "" N' 4 -

l coverace anJ annual debt service coverage. The Coopera- '"'""'"""'"8"'"b'"d""*"""**"'

I tive was unable to meet the above mentioned ratio cove-nants for 1987. On December 31,1987, the Ovrerative Q,"*,d ,

'M",*,"",',$"l],",*i{'

guiao, no i,,,,,g n %,ms, n a 55 m 35m l did not fully meet its quarterly debt service obligations and the REA, as guarantor of the debt, was required to make p n ,, n,na mn,,,,, non ymm,,,,n,, ,n,yn, payments totaling $44.8 million to the FFB. As a result, c i% ,o i% wt,. pnm, ,,e n 30% ,

substantially all of the Cooperative's debt is subject to [bembo ll,19Mh Ju in menthly acceleration and other actions by creditors. in.e.umenn a mva t m<iudm, menno I kgmnm, July l#$ 24.0e4 17.179 Though generally accepted accounting principles require otherwise, the Cooperative has elected to treat all debt y g subject to acceleration as long term debt until the work- u.. ame,e. . m 2. m oml out/ restructure negotiations have progressed further. On 5 2MPI s 2erdu -

I that basis long term debt at December 31 consisted of the following (in thousandsh There are two types of notes payable to the FFB. The fine type can have, at the option of the Geperative, short-term maturity periods of 2 to i years during the fint 7 yeari i an advance is outstanding, unless the Geperative elects a l uen,,,e noen r...ne ,o ihe a t s. meerne a long term maturity,in which case the maturity date would '

2% eo 5%.J m eonni, m.unmea"'h"wh be 34 years after the end of the calendar year in which the i

! June 20w s si.:ss s 4u" advance was made. Principal repayment is generally de. l l ferred for 7 years. The second type of note can have, at the i N..en ranHe 'a H B. m'une n e n '"

. Je n unni, mu.nmenn ehnwh option of the Cooperative, recurring short term maturity l i ,,y m i,, p 7

L,eriods of 2elects ooperative yearsa during long term thematurity, term of in thewhich note,case unica, E u ru mal twee. puHe to H B. mruns e the maturity date would be a maximum of 34 years from

• G 7% :o

• 2%. Je been ahev 6%i .Jun,e. the end of the calendar year in whir h the note was inued. ;

J. m ins.19w .nJ iNi in n i25m Principal amorti:ation on the second type of note is re- -

lated to the projected commercial operation date of the m n nunetojoc.mineuo unm.,un project as prescribed by the REA.

(0.1% ta S 9% se themkr 11.194L Jae m

.auorterionwaHmente rhrswh Under the terms of the notes outstandmg at December 31, l (k ember 20lo. 605.5N Mull 1987, aggregate FFB notes of $138.469,697, escluding i excess coal notes, mature in 1939; however, the Coopera-Induurullbelpent Roenee h.nJ,. Nne, tive plans to ultimately extend these notes on a long term l 1952, meceen at t.o thuJ ,4 rnme rate basis under the above options; therefore, the pnncipal l l 0 9% at (kemkr 11.19M). Jse m 10 amorti!ation on these notes has been included in tuture ;

annual muaHmenn trun Wu thrmh lN' 4M 4 kV maturities beginning in 1959 in the matunty schedule !

below. '

r,aton.m conersa newnJ.n, noenme ama,.

l &nn te4. menne u un m, nrn b-J on . The inJenture agreements of the Series 1954 pollution l nare,uu ,ewsm:eJ indeennne control revenue and refundmg revenue tends contain i

24

l l

certain provisions whereby the bondholders may, at their Substantially all of the Guperative's assets are pledged to option, redeem the bonds at the end of each intereit secure long term debt payable to the REA, the FFB and adjustment period, which is typically from I to 90 days. In the JBC.

the event that the Cwrerative, through its remarketing At December 31,1937, the Cv erative had, subject to agent, is unable to remarket such redeemed bondi, the certain restrictions, unadvanced [oan commitments from i bond enntees have the ability to use the restricted fund' the FFB (guaranteed by, and subject to the control of, the

, held b the tnntees or draw on irrevocable letters of cred;t i issued y Citibank, N. A. or the Cooperative may restruc- REA) of ot arbroximately $90,000,000 related to tranimis-ture the debt through REA guaranteed long. term financing sion and er ca - .

era ve had availdleal lea projects. Additionally, the Go[B '

commitments from the FFB (the FFB set asides). Accord- ser asides (guaranteed y, and subject to the$182 bproximately million control of, in F

, ingly, these bonds have been classified as long term debt the REA) related to illution control anets. (See Note A L in the accompanying financial statements. The FTB ser- for discussion of avaiIability.)  ;

4 asides and the letters of credit exf i re in varying amounti from 1988 through 1991. The Goperative is currently At December 31, 1987, the Cooperative was continuing r negotiating with Citibank, N. A. and the REA for the efforts to refinance over $1 billion of its higher cost FFB  !

exeension of the letters of credit and the FFB set asides. debt. (See Note Q for subsequent events regarding refi.

nancing ( FFB debt.)

At December 31,1987, restricted funds held by trustees r cere limited primarily to the payment of the costs of i acquiring, constructing and installing pollution control 7

equipment at Big Cajun 11 and River Bend, and to the NOTE G - SHORT. TERM INVESTMENTS payment of principal and interest on the pollution control bonds. Substantially all of these funds were invested in At December 31,1987, the Gvperative's cash and short-U.S. Government securities, U.S. Agency securities sad term investments were substantially invested in short term certificates of deposit with maturities ofless than one year. instruments inued by CFC The objective of the Gvrera-(See Note Q for subsequent events regarding the status of rive's investment strategy for short term investments is the pollution control bonds.) the achievement of an optimal balance between maximum i yield and min. mum risk. All investmenti conform with  :

Scheduled maturities on long term debt at December 31, 1987 are shown below On thousands). These maturitie, the , guidelines established by the REA and the Coopera-include excess coal notes w hich are due in 1988,1989 and tive i Board of Directors. Maturities are selected to cor- .

respnd with cash flow requirements and are generally for 1991 in the amounts of $81,000,000, $40,000,000 and periods fless than two weeks.

$4,000,000, respecovely. However, the Coperative in- '

tends to request from the REA an extension of the maturi-ties of eheic notes to 27 Sean as an element of the debt rectructuring as more fully Jncuued in Note A. NOTE II--INCOME TAXES im s in m During 198 3, less than 85% of the income of the Copera-im gd t im q.n tive was collected from Members for the sole rurpose of '

m um meeting loues and expenses. As a result, pursuant to I

im 4m Section 501(c)(12)( A) of the Internal Revenue Code of ner .nce ps1:5 1954 as amendcJ, the Gvrerative became a taxable entity  !

stw n in 1983. The Geperative has received a trivate letter j

- - ~

ruling from the Internal Revenue Service stating that 5 once taxable, the Guperative shall remain taxaHe until [

Interect and other debt expense incurred on notes payable and long term Jebt for the seats ended December 11 n application is submitted and ar i tenninanon of its taxane nann. groved e Gvrerative for thehas rede-consiseed of the following (in thousands):

made an election under the Internal Revenue Code to W '** remain a taxable entity through the year 2003 in order to I inier<u . h,J wn r...n< ,, n n . s :4tu4 sim parncipate in certain equipment leases. l oahe,Aheinn . un 2x ,

Anim io Ae,rrea h.,m The Gurerative had no current or deferred income tax z inte,,en e mo mt . e.53 provisions for the years ended December 31,1987 and  !

Amerdrnent to Rner Ferd Sell h,d I98b A I C ",w <.,tml Anim u,-raia a. revea ue, 5:e e+5e5 At December 31,1987, the Gvperative had eeneral busi-nen credit carr terwards of arrroximately $175,000AY, or which arproximately $10AY.000 exrire in 1998; 5h 5 M* 5 o8,0tY,000 expire in 1999: $135,000,000 exptre in 2000; n '

\ i l

i and $2,000,000 expire in 2001. As a consequence of the NOTE I-EMPLOYEE BENEFIT PLAN Tax Reform Act of 1986, the general business credit carry-forwards were reduced by 17.5% for 1987 and will be Substantially all of the Cooperative's employees partici.  ;

i further reduced by an additional 17.5% to $138,000,000 pate in the National Rural Electric Cooperative Associa- :

for years subsequent to 1987. tion (NRECA) Retirement and Security Program. The [

In addition, the Coo rative has loss carryforwards of Cmpnative makes annual carributims to the plan equal y approximately $ 1,566,$T,000 which may be used to offset to the amounts accrued for pension expense. In this mas- ;

tu multiple empt yn plan, which is available to all mem-future taxable income. The expiration dates and amount, bn cmpnatives of the NRECA, the accumulated benefits ,

of the net operating loss portion of the total loss carry- and plan assets are not determined or allocated separately ;

forwards are as follows (la thousands): by individual employer. The Cooperative i pens'on ex. ;

pense under the plan for 1987 and 1986 was $422,000 and  ;

im tw ,:S, ma 51,304,000, respectively, As a result of a better than i im 2n.m anticipated return from investments of the NRECA's Re-x2 ire. m tirement and Security Program, the Cmperative's 1987 ,

contributions to the plan were significantly reduced.

gg l t

The remaining losses of approximately $885,000,000 are AMENDMENT OF NATURAL GAS I attrib"aable to member activities and may be carried for. NOTEJ CT CONTRA j ward indefinitely, s In April 1983, the Cooperative negotiated an amendment i The Cooperative has available approximately $601,000,* to its primary natural gas purchase contract, whereby the !

000 in net operating loss carrytorwards for attemative Cooperative could sell to the supplier its right to receive !

minimum tax purposes. The expiration dates and amounts certain quantities of gas under the amended delivery r of these loss carryforwards are as follows (in thousandi): Schedule. In 1986, the Cmperative received final pay. !

ments of $13.895,000 under this provision and accounted ,

y sjw for the funds as a reduction in fuel costs through its fuel i e st djustment clause in accordance with the approval of :

,m ma im Wm the Ibard of Directors. j E'S  :

NOTE K- RELATED PARTY TRANSACTIONS l Also, the Cmperative has approximately $799,000,000 of In December 1986, the Cooperative purchased certain i losses attributable to Member activities for alternative substation equipment owned by eight ofits Member coop- l minimum tax purposes uhich may be carried forward in, eratives. The purpose of the transaction was to better definitely. AdJitionally, the approximate $138,000,0tV <

ofinvestment tax credit carr) forwards of the Cmperative define c.perating responsibilities of the transmission sys. ,

tem. The aggregate purchase price of $12,359,000 was may be used to offset future alternative minimum tax, These credits (in thousands) expire in: partially financed by the Cooperative assuming lonc term [

notes payable to the REA in the amount of $8.372,000. In addition, the Cooperative agreed to make future payments i im i s. m im nw to certain Members and to the REA for the benefit of these t Members totaling $3.987.000 over 25 years. Final REA l

n ia.m 2xi i.e approval for certain of these transactions is still pending as ;

of December 31,1987.

'n gm j i

In December 1987, the Financial Accounting Standards NOTE L- SPENT NUCLEAR FUEL AND [

l

• Ibard issued Statement of Financial Accounting Standards DECOMMISSIONING COSTS (SFAS) No. 96 Accounting for Income Taxes. Manage-ment is in the process of analy:ing this Statement and its GSU has executed a contract with the Department of potential effect upon the Cooperative. The imrlementa- Energy (DOE) whereby the DOE will furnish dismsal tion of SFAS No. 96, which must be adorted before 1990, service for the spent nuclear fuel from River Bend. Cur.

may have a significant impact, the extent of w hich has not rently, the cost amounts to 0.1 cents per kilowatt hour of i yet been determined. net generation. This cost is subject to change in accordance j i

l I

I 1

with the provisions of the Nuclear Waste Policy Act of pany exceed the accumulated funds available. The Coop.

1982, erative's maximum assenment for incide nts occurring dur.

The Nuclear Regulatory Comminion (NRC) has recently ing a poucy year is appmximately $2,550,000.

l proposed an amendment to its regulations which sets forth  !

th; technical and financial criteria for Jecommissioning licensed nuclear facihtien The rule adJrcues decommis' NOTE N- EXTRAORDINARY ITEM AND '

sioning alternatives, timing, financial assurance and en. OTHER INCOME i

i vironmental review requirements. Thedorule During 1983, the Cooperative entered into certain leases rebuires elec.

• ric utilities either to certify that a minimum ar amount

, vill be available to decommluion the facility or to submit for income tax purp ses and wld the rights to tax benefits +

' a decommissioning funding plan, The Cooperative plan, asmciated with,its undivided ownenhip interest in the  ;

to est:blish a decommissioning reserve fund for its nuclear boiler and turbme assets of Big Cajun 11, Unit 3. Total i facility and is accruing an amount currently estimated to cash proceeds received on the sale were $57,817,000. The ,

Coornative was required by the REA during 1984 to use r be sufficient to pay for iu share of the cost of decommis. the pr ceeds, and interest earned thereon, exmlusively to sioning at the end of the estimated useful life of River p y all transaction costs and retire outstanding FFB debt.

L

• i Bend' The Cooperative has agreed to indemnify the purchasers against the occurrence of certain events which could result

] in the loss of the purchased tax benefits. Letten of credit

] NOTE M-NUCLEAR INSURANCE inued by the JBC are available for funding any potential indemnification payments. The letters of credit expire in /

l Under the Price Andermn Act (Price Andenon), OSU, 1988 and the Cooperative is currently negotiating with  !

< es the operator of River Bend, together with the Coopera. the JBC for an extension. In 1986, the final portinn of the f i tive, maintains private insurance and agreements of in. proceeds, $9,852,000, was recogni:ed in other income  !

' demnity with the NRC to cover public liability arising if a and expenses in accordance with the rate making policy of i

! nuclear incident were to occur at River Bend. Price. the Board of Directors of the Cooperative. Due to the t i Andermn expired on August I,1987, and Congress has existence of general business credit and loss carryforwards  !

j not subsequently passed any replacement legislation, at December 31,1987 (see Note H), and the anticipated  !

However, since Congress has paned no replacement legis. tax lones expected to originate in future yean, future  !

i lition, the terms of Price.Andermn continue to apply income taxes payable related to the sale of the tax benefits

, until new legislation is enacted. The Omperative is unable are expected to be minimal.

t predict what e,ffect Congressional action might have on in 1987, the Cooperative received and recognized as other 2 t Cooperative s potentialliability, income approximately $2.8 million from GSU resulting I Currently, public liability in case of a nuclear incident at from a calculation of the difference between transmission l

! eny licensed nuclear facility in the U.S. is limited to comphance rates and transmission settlement rates for the t

$715,000,000 under the provisions of Price Anderwn. period July 25,1985 through December 31,1986, in ac.  !

This amount is funded by the Cooperative and GSU, cordance with a FERC order.  !

p:rtially by insurance and the remainder by an auessment  ;

4 against eachlicensee of a U.S. nuclear row er plant. Private  ;

, insuren provide $ 160,000,000 of the required amount and NOTE O - GULF STATES UTILITIES COMPANY  !

, the additional $555,000,000 is to be obtained by auessing [

ecch licensee up to $5,000,000 for each occurrence, sub. In August 1979, the Cooperative and GSU entered into a ,

}cct to a maximum aucument in one year of $ 10,000,000. contractual agreement for the joint ownenhip of River i Bend, Unit 1, a 940 net megawatt boiling water nuclear i I The

$1.500,0 Cebrative's maximum for one incident share and $ 3,000,000 ofyear.

in one this aneument reactor (seeis Note C). The generating facility is located ,

near St. Francisville, Louisiana. Construction has been j The GeP'rative, together with OSU, ma,intaini $500.. completed and the unit was declared in commercial opera. r

00LO00 3 property damage insurance and $t 50,000,0N of tion as of June 16, 1986. The Qvrerative has a 30%  ;

excess insurance for River Bend from the rnvate msur. undivided interest in River Bend and is responsible for i 4 ance market. Additionally, the Gvperative is a member. 30% of River Bend's costs of construction, capital addi.

j insured of Nuclear Electric Insurance Limited 11 (NEll11) tions and operations. GSU is the operator of the facility. J 3 which provides $775,000,000 of insurance coverage for ,

1 property damage sustained by the member. insured in ex. In November 1980, the Cooperative and GSU entered ,

j cen of 5500,000,000 caused by radioactive contamination into a contractual agreement for joint ownership of Big g

] or other specified damage. As a member insured, the Gu Cajun 11, Unit 3, a 540 net megawatt coal fired generating

operative, in exchange for the protection it receives, is unit and certain common facilities at Big Cajun !! (see f

! subject to aucument if the loues of the insurance com. Note C). The Gvperative has a 58% undivided interest  :

i U

in Unit 3 and an approximate 86% undivided interest in District Court in Baton Rouge and as of this date a decision the common facilities. The Cooperative is the operator of in this matter has not been rendered.

the facilities.

In November 1986 GSU requested a $144 million rate in August 1979, the Cooperative and GSU al.o entered increase in Texas. In April 1987, GSU was awarded a $40 into a Sell back Agreement whereby, commensurate with million emergency rate increase by the Public Utility the commercial operation date of River Bend, OSU will Commission of Texas (PUCT). On February 23,1988, the purchase, regardless of availability,100% of the rights of PUCr issued a preliminary rate case decision expected to the Gmperative to the output of River Bend for the first result in a rate decrease of approximately $14 million to twelve months,67% the second twelve months and 33% $19 million. AdJirionally, the PUCT rejected a 10 year '

she third twelve months. phase in of River Bend costs as proposed by GSU, GSU rative and GSU amend. has stated that if the Texas decision stands, it will deplete On September ed the 2,1986,suc Sell back Agreement the Coohthat, retroactive toitsJune cash in late April or early May 1988. Additionally, the 16, 1986, GSU will PUCT, in its preliminary ruling, stated that GSU had 70% of the rights of t!. purchase, e Cooperative to theregardless mven the prudency of only 50.5% of its River Bend of availability, output of River Bend for the first twelve months, 56% the second twelve

[nvestment, t $1.6 billion out of a total plant investmen months, 42% the turd twelve months, 28% the fourth ( $3.15 billion. The remainder was not disallowed or f und imprudent, but will be held in abeyance pending a -

I twelve months and 19% the fifth twelve months. The further attempt by OSU at justification of the costs in ,

rative received approximately $196,125,000 in Coobnd 198 $109,000,000 in 1986 from GSU, and expects either toreheanng or a future rate case. The PUCT re. '

duced GSU s allowed retum on equity from 16.25% to receive a total of approximately $300,000,000 over the 13% A written rder has not been issued by the PUCT remaining term of the amended Sell.back Agreement (see due to the preliminary status ofits findings and settlement N " A)' negotiations are at this time continuing between GSU, The following three paragraphs are unaudited and repre. the PUCT and the intervenors in Texas, sent management's understanding based upon review of court, LPSC and PUCT documents, media reports, and OSU ceased paying dividends to common stockholders in

the second uarter nf 1986. GSU has expressed concem

' discussions with GSU attomeys. that the NRb could suspend the operation of River Ben In December 1987, the LPSC rendered a decision in the GSU's financial condition continues to deteriorate, and OSU rate case involving River Bend. The LPSC aprroved has indicated in its filings with the Securities and Ex.

an initial rate increase of $63 million which included a change Commission, in regulatory commission hearings, previously allowed $57 million emergency rate hike with- in press releases and in notices to investors, that without 1 out specifying future rate increases under a rate modera. adequate rate relief, it may have to seek protection from its tion plan which had been submitted by GSU. The LPSC creditors under Chaper 11 of the Federal Bankruptcy l also allowed GSU a 12% retum on equity citing the most Code. The Gmperative e3nnot predict if GSU will re !

recent FERC benchmark rate es support for their determi- ceive adequate rate relief, the ann,ont or timing of such nation. In addition, the LPSC disallowed as imprudent relief, nor can the Coopeative predict whether GSU will r 44% or $1.4 billion of GSU's total investment in River seek protection under the Bankruptcy Code.  :

Bend of $3.15 billion, thereby Oisallowing $670 million >

from the Louisiana jurisdictional si are of GSU's rate base. During 1987, settlement talks with GSU on a dispute !

GSU arpealed the LPSC order and, ,n February 18,1988, regarding service schedule CTGC of the Power Intercon. l the District Court approved a 14% cetum on equity in, nection Agreement between the Cooperative and GSU ,

River Bend accounts resulting in the following failed to reach a satisfactory conclusion. Accordingly, on cludinfrate increases: lulv 17,1987, the Cooperative filed a complaint wi  ;

annua on s n suiu FERC alleging that G5U had improperly calculated the

• nw w sur , equali:ing charge under service schedule CTOC resulting ,

un u suu in estimated overcharges of $37 million as of December '

tw w suu 31,1956. The Cooperative has net paid or accrued these t*: n suu amounts, Service schedule CTOC was intended to provide i 5 suu the access, ownership and right to use GSU's and the i --

Cooperative's integrated transmission system. Service ,

! schedule CTOCyrovides that an equaliting charge will be '

l The LPSC has appealed the judgement of the 19th Judicial levied on the Cooperative or GSU to the extent the ;

District Court to the Louisiana State Supreme Court and Cooperative's transmission investment is below or above !

she outcome of the LPSCs appeal cannot be predicted. its required investment. The criteria determining what &

GSU's overall petition to appeal the LPSC finding as to facilities are to be included in qualified transmission facili ,

prudency is still under con ideration by the 19th Judicial ties for the purpose ofcalculating the equali:ing charge are i

N 5

broadly set forth in service schedule CTOC. GSU now rates and reports to facilitate the then existing regulatory tsserts that the Cooperative owes it arrroximately $40 pmcess of the seven Memben.

million for transmission service including interest and a During 1987, the Coo true up of the equaliting charge. Testimony in this case is ings, as required byuisiana brative corducted two public hea continuing with a hearing date set for September 13, Revised Statute 12:409' enacted in 1983. One public hearing led to implementing 1988. The Goperative is unable to predict the outcome of n incentive rate designed to facilitate the economic im-these proceedings, provement of certain large retail customers of the Mem.

The Gvperative and GSU are continuing negotiations bers. The REA arrroved the change. The second rublic related to certain Provisions of the River Bend Sell.back hearing led to the Board of Direcron' arrroval to reduce Agreement. OSU asserts that the Omrerative owes ap- base rates, and that matter is still pending before the REA.

proximately $21.1 million in adjustments in Sell back In September 1987, the LPSC issued Special Order 8 87 p:yments for the period from June 16,1986 through De- asserting lurisdiction over the Qvrerative and all thirteen cember 31,1987 The Qvrerative disrutes GSU s asser. Memben. The Cooperative and six ofits Memben filed for tion. The Coo rative is unable to predict the timing or judgement in 19th Judicial District Court the outcome o negotiations at this time. a declarato7 seeking to c a rify if State statutes enacted after 1974 p As previously reported in the Cooperative's 1986 annual raining to LPSC regulation of the Qvrerative and its report, GSU did not remit its payment for the January Memben were valid or if the LPSC did in fact have rienary 1987 billing ($15,575,000) unJer the River Bend Sell. authority over the cooperatives in Louisiana.

back Agreement. GSU has indicated publicly that it as. On February 28,19S8, the 19th Judicial District Court serts a right to offset the January 1987 bilhng against ruled that the LPSC could assert constitutional authority amounts presently in disrute with the Cooperative involv. over the Cooperative and its Memben, and that the ability ing service schedule C'IOC transmission costs. The Co.

operative denies that OSU has a nght of offpt and i' of the LPSC to exercise its jurisdiction was not [re empted assessing GSU penalties and interest for the mnsed pay' by ment federalla.

and expects The harive to be joinedplans to a[$a one in the arrea theorjudge-more ment. GSU has remitted all subsequent payments for y * *y"'

bilhngs under the Sell back Agreement subject to the items under negotiation as noted above. At present, the Cooperative is uncertain as to its obliga.

tions t the LPSC with respect to rate matt-n and the The Omperative has informed GSU that it l'ntends to uncenainty may penin for an extenM perW of time. In exercise its option under the River Bend Joint Ownenhip the meantime, the Goperative intends to vigorously pur-Participation and Operating Agreement to perform a final cost audit of the River Bend nuclear facility. The Coop. '"' " P [ oval (s) t charge rates that are competitive with those ing charged by other providen of lectricity in erative expects the results of this audit to be a matter of l"" I ' I ' "' '

extensive negotiations.

As discussed in Note 0, the LPSC disallowed 44% of GSU's River Bend costs as imprudent. GSU has arpealed this finding to the 19th Judicial District Court and has NOTE P-RATES AND REGULATION inJicated that the final adjudication of the prudency issue may result in a significant write off of its investment in Through calendar year 1987, the rates of the Generative River Bend in accordance with Statement of Financial cere set by the Board of Directors and generally designed Accounting Standards No. 90, Regulated Enterprises -

in accordance with its not for profit character and provi- Accounting for Abandonments and Daallowances of Plant sions of the REA mortgage which require that rates be Costs. As mentioned above, the Cooperative may now be designed to recover allcosts and pay alldebts. Any change subject to the juritdiction of the LPSC, A similar imrru-in rates was to be included fint in a notice to its Memben dency finding by the LPSC regarding the Generative's and be the subject of a pubhc heanng. Following the investment in the River Bend nuclear generating facility public hearing, the Board of Directors may, in accordance could have a material and signifWnt impact on the finan-with the State law, enact a change in rates. Through cial condition of the Cooperatis -

provisions in loan documents, the REA exercises control and supervision in matters of accounting, issuances of securities, rates anj charees for the sale of electricity, and the operation of facilities.

Prior to December 31. 1987, seven of the Qvrerative's NOTE Q- SUBSEQUENT EVENTS thirteen Members had voted for voluntary LPSC regula-tion in accordance with the Louisiana Revised Stature See Note P for subsequent events regarding rate and 12:426, enacted in 1983, and the Qvrerative designed its regulatory matters.

a

E 1

l l l

! i Refinancing FFB Debt: On February 25,1988, as a part of unable to be remarketed and were reacquired by the re.

the restructure of the Cooperative's debt, the Cooperative spective bond trustees. As a result, the respective bond executed final documents and closed on the refinancing of trustees have drawn approximately $169,050,000 against ,

$ 1.115 billion ofits highest cost FFB debt (average coupon three of the four letters of credit to pay all principal, l rate of 10.82%). Interest, and certain fees with respect to the bonds. Draws i I n the letters of credit constitute demand notes with an ne initial funding utill,ed the issuance o(Certificates of interest rate at prime rate plus two percentag 4 Beneficial Interest (CBI s) to the JBC at rates varying from Cmperative is negotiating with Citibank N. A., the REA !

6.98% to 7.19%, for an average initial variable rate of and others to restructure the provisions of the three bond l 7,06% ne proceeds fr i to prepay FFB loans. ithin a4,om periodthe sale of time of theinCBI documents specified s were the so that the bonds can be remarketed. One of <

used pollution control revenue bonds (Series 1984 for $38,. !

the documents, the Cmperative will cause one or more 600,000) continues to be remarketed daily in accordance l public offerms(s) of the CBI e to be conducted. The pro-with provisions of the bond documents, but the Ompera. l cceds of the public offering (s) will be used to repay the IBC and cause the rates to be fixed for the remaining life of the tive is uncertain that remarketing can continue pending ;!

changes to the 3713 Waiver.

CBls. l On March 24,1988, $500 million of CBI's were sold in the 3713 Walter: On hiarch 1,1988, the Cmperative for. ,

public capital markets calling for semi annual interest mally requested a renewalof thc 3713 Waiver (asdiscuued f payments and annual principal payments with final ma. in Note A). On March 11,1988, the Cooperative received !

i turities and coupons as follows: a renewal of the 3713 Waiver from the DOJ for the period '

beginning March 31,1988 and ending on June 30,1988. I

]

1 $ 21,896,000 at 8.08% due March 15.1o93 l

$ 37,750,000 at 8.93% due March 15,1998 Payments in Artearst As of March 15, 1938, the Cmp. !

$440,354,000 at 9.52% due March 15,2019 erative is in arrears as to interest on debt in the amounts ;

1 stated below (in thousands): l Re Cooperative expects to cause other public offerines of [

FFB l

at least $400 million to be conducted within the ncxt 90 t J BC l l Y. l '. '. '. l l $ '.I1,957 l 'd $ '. $23,466 l

120 days.

REA................ 588

(

$36,011  ;

) Washington St.Tammany Electric Cooperative,Inc.:In January 1988 WST inued a request for proposals (RFP) '

! for wholesale power to four power surpliers. The Cmpera- The REA, as guarantor of the debt, has paid the FFB and

! tive declined to render a bid on the grounds that a valid IBC the respective arrearages and. In connection with the <

contract already existed between the Cooperative and )TB refinancing mentioned elsewhere, required the Coop !

i WST for the surply of all of the power needs of WST. erative to execute, on February 25, 1988, t WST indicates that one response to the RFP was received note to evidence its obligation to the REA for a prominory payments !

ulon with an expression ofinterest from a second potential made by the REA under its guarantee. [

5 '"IP

Additionally, as of March 15, 1988, the Cooperative has '

) On March 8,1938, WST filed a motion with the Bank- been billed arproximately $3.4 million in various fees and .

l ruptcy Court to reject the existing contract with the Co- expenses relating to the pollution control bonds. The operative for the supply of power. Based upon an agree- Cmperative has not paid the amounts related to the bonds j ment entered into November 17, 1987, and arrroved by inasmuch as legal counsel has advised that to do so may the Gankruptcy Court on February 22, 1988 WST has subject the directors, officers and managers of the Cmp-agreed to pay the Cmperative the full rate for its wholesale crative to personal liability. (See Note A and Pollution I power for the period of November 1987 through March Control Bonds above as to a diwuuion of the 3713 Waiver.)

1988. WST has not paid the full amount of subsequent l billings as called for in the November 17,1987 agreement.

He outcome of these and other matters regarding WST Environmental Closure Fund: The Cmperative is required l l by the State of Louisiana Department of Environmental ,

cannot be predicted with certainty. (See Note A for dis- Quality (DEQ) to provide assurance that it has the ability !

j cussion of the agreement between the Cooperative and to fund the work which will be necessary to secure and i WST.) refurbish its Big Cajun 11 tly ash pond areas which, as the Qvrerative's solid waste disrosal sites, are subject to i Pollution Control Bonds: Cinbank, N. A. provided letters DEQ review and supervision Prior to 1987, the C*pera.

cf credit with respect to each of the four pollution control rive has provided evidence to the DEQ, by means of a 1 revenue Wnd issues of the Cooperative. Subsequent to letter of financial assurance, stating that the Cmperative j December 31, 1987, three of the four bond issues were for the year in question had a net worth of at least 510 1

i i M W

__ .. _ . -. d

1 l

l AUDITORS' REPORT

million. As a result of thq net deficit for 1987 and its Board of Directors impact upon the equity rosition of the Cooperativa, this Cajun Electric Power Cmperative, Inc.

form of assurance cannot be provided to the DEQ. The Baton Rouge, Louisiana I

l Cooperative is presently discussing with the DEQ other forms of assurance including insurance, letters of credit or i trusts in an effort to find an acceptable alternative. The We have examined the balance sheets of Cajun Electric tot:1 estimated liability for funding the solid waste disposal Power Cooperative, Inc. (the Cooperative) as of December site r2hibilitation is currently estimated to be approxi. 31,1987 and 1986, and the related statements of revenue f mitaly $4 million (1987 dollars), of which GSU ts respon. and expen$es, changes in equity and margin (deficit) and  !

I sible for approximately $500,000. GSU has recently fur- cash hws for the years then ended. Our examinations nished to the DEQ a letter of financial assurance for 1987. were made in accordance with generally accerted auditing i The cetual payments for site rehabilitation will not occur standards and, accordingly, included such tests of the  :

t until the end of the estimated useful life of the Big Cajun !! accounting records and such other auditing Procedures as '

coal. fired facility. He Geperative does not expect the we considered necessary in the circumstances.

cost of the new form of assurance to be significant.

As described in Note A, the Gwrerative hai determined  !

that due to present market conditions and escalating costs i Cod Suppliers and Coal Transportation Companiest As related to its investment in the River Bend nuclear gen-the Cooperative committed to in its workout / restructure crating facility, it will not be able co increase its wholesale ,

power rates to a level necessary to recover the recorded 1 l

pt:n filed inwith negotiations July 1987l supplier and coal transportationthe its coa Guperative costs of its assets entered nor to liquidate itsinto liabilities in the I companies in order to further reduce costs. As of this date, ordinary course of business. The Cooperative sustained a t two coal transportation companies have essentially acreed net deficit for the year ended December 31,1987, and was f to a restructuring of contract terms and conditions. If all unable to meet certain mortgage covenants and to pay all  !

parties involved settle at the price levels proposed by the of its scheduled interest payments on certain of its notes j Omperative, it will significantly reduce coal costs. (See payable to the Federal Financing Bank when due; these i Note A for a diseassion of the base contracts.) One coal events of default placed nbstantially all of the Cmpera- l transportation company brought suit against the Coopera- tive's long term indebtedness in default under cross de. [

tive in 1987 based upon anticipatory breach but it is fault provisions contained in the debt instruments. The  ;

expected by the Cooperative that this suit will be drorped Cooperative is presently negotiating with the United t upon conclusion of the settlement. Additionally,in htarch States Department of Agriculture Rural Electrification i 1988, the coal surrlier brought legal action against the Administration (REA), its major creditor as guarantor of l Qvrerative as a result of a reduction in payments by the substantially all of its long term debt, and with other  !

Qvoperative to the supplier. The timing or ultimate out- significant creditors to substantially restructure its debt i come of these matters cannot be predicted with certainty, agreements to defer and reduce its debt service require- [

ments to a level which will rovide P for recovery of its t recorded assets and liquidation of its liabilities in the i Partial Sale of Big Cajun 11. Unit 1: On htarch 18,1988, ordinary course of business. The Cwrerative is tresently  !

the Cooperative and Sam Ra3 burn G & T Qvrerative, unaNe to determine whether such a restructuring will {

inc. (SRG&T) entered into a joint ownershir participa- occur. The financial statements do not include any ad. t tion and operating agreement enabling SRG&T to acquire Justments relating to the recoverability and classification i a 7% undivided ownership share in Big Cajun 11. Unit I of recorded asset amounts or the amouris and classifica- [

(subject to REA approval). Under the terms of the agree- tion of liabilities that might be necessary in order for the 4 ment, the closing of the sale to SRG&T must take P lace Gwrerative to continue as a going concern. Realitation I of its assets and payment of its liabilities are dependent  ;

prior to June 1,1990. 9 upon the Cooperative's ability to successfully obtain the necessary restructuring of its debt agreements ,d the f Subse uent Litigation (unauditedh On August 29,1988 irnpmwment ohn puating resuln.

a Federal District Court jury in Baton Rouge awarded 7 Phillips Coal Comrany arrrmimately S21) million in As discussed in Notes A anJ O to the financial statements, the ability of Culf States Utilities Company (GSU) to l

damages relating to the Fronwed Oxbw and Chicot lignite >

generating units. The two tronned projects w ere cancelled continue making payments to *he Cooperative under an (

in the early 1980's at the insistence of the REA when it agreement for the output of the nuclear generating facility t became arparent that the demand for electrical energy in is uncertain. Also, GSU has asserted significant claims I the Guperativei service terntor

• would not reach fore- against the Gwretative for alleged overpayments related casted levels, hianagement of the Cmperative is consider- to this agreement and for certain transmission charges.

ing post judeement relief anJ. if necessary, an arreal to The Cwperative disputes these claims and is involved in the Fifth Circuit Cou:t of Arreals. proceedings and negotiation with GSU to resolve these l 5

.\l {

i l

(

l i

matters. Further, as discussed in Notes A, P and Q, the come of the uncertainties and the recoverability and ultimate outcome of the bankrurtcy proceedings of one of claulfication of recorded anet amounts and the amounts the Cooperative *s members as to the collection of amounts and classification of liabilities discussed in the second and receivable from the member of approximately $9 million third paragraphs been known, and except for the effects and continued sales to such member is uncertain; the on the 1987 financial statements of not classifying long-ultimate effects of regulation by the Louisiana Public Ser. term debt in default as a current liability and of not ex.

vice Coinminion and the uhimate. resolution of certain pensing and amorti:ing certain costs as discuued in the litigation cannot be presently determined. Failure of the fourth and fifth paragraphs, the financial statements re.

Cooperative to satisfactorily resolve these uncertainties ferred to above present fairly the financial position of could have a material effect on its financial position and Cajun Electric Power Cooperative, Inc. at December 31, could further impair the Cooperative's ability to continue 1987 and 1986, and the results of its operationi and its as a going concem. cash Hows for the years then ended, in conformity with As discuned in Note F to the financial statements and 8'"UY j'ccepted accounting princirles arplied on a

'""'I'"*'

referred to in the second paragraph of this report, the Cooperative is in default on substantially all of its long.

term debt agreements. In out opinion, generally accepted accounting principles requite long term debt in default f 4# /, f f .

and payable on demand to be clauined as a current lia.

bility in the balance sheet. The Coorerative has not c MAA. 7 (4/ Amt/

reciosified its long. term debt in default as a current lia-bility rending further progress on its debt restructure ne-gotiations. Baton Rouce, Louisiana 4

in 1982, the Cooperative ado ted the accounting methods prescribed in Statement of inancial Accounting Stan.

, 'd$ P(b'ch f

" AI h 24' I988' dards (SFAS) No. 71 which rrovided under approrriate circumstances for certain accounting principles unique to regulated enterprises. In our opinion SFAS No. 71 is not applicable to the Cooperative for 1987 inasmuch as the required relationship between its revenues from rates chaeged to its members and non members and its costs did not exist. The outcome of the debt restructure negotta.

tions could result in the Cooperative being able to adort the accounting principles of SFAS No. 71 in the future.

How ever, certain 1987 transactions were accounted for ai ehough SFAS Na. 71 did arrly, namely, the deferral of

$10 million of interest expense on its excess coal notes payable and the cenation of amortitation of $15 milhon of deferred exceu coal charges. In out orinion, under cen.

erally accepted accounting Principles, these uounts should have been charged to operations u hich would have increased the net deficit for the year by arrrmimately $25 milhon.

Our report on the 1986 financialirarements was quahfied as to the Cooperative's abihty to recaver its recorded auers and liquidate its liabilities in the ordinary course of businen as related to the ability of GSU to continue payments to the Cooperative for the output of the nuclear generating facihty and as to the implementanon of other elements ofits businen plans.

In our opinion, subject to the effects on the 1986 (mancial statements of such adjustments, if any, as might have been required had the outcome of the uncertainties referred to in the precedme paragrarh been known, and subject to the effects on the 1987 financial statements of such adjust.

ments, if any, as might have been required had the out.

n

OFFICERS & DIRECTORS Pre.Went Directors Generol Coun.el M. U. 5< r nian

• Giona Graneer S< h ab & Walte,

$=rbot lews.ana Eh ew Membrnkp Beam'agrJ Ekcew C.parne, tw Baton Rouge, Lw iana Yks Presuent Charici L Overman Corruente AuJitore l rA C Rous BeauregrJ Ekctw Camarne, tw Fens & 4%nne,

! Dinw E6rw Mem6cnQ C+=a'** * *#^ " "'"*

GeralJ R. R.+inerer l lbiner Rweal Ehrw Memknks l Sec retart/ Treasurer Information

!ImerJ.P..a C. A. Ralgen. Jr. Requeirs for renetal informatkin ClaAene Ebrw Catoarne. A lbswe, Real Ekcew MemknA.c . Nut Catun ilec erg ihmlJ be JirecteJ ro1neernal AffairiINrarement.

Esecuthe Yke Pre Ment anJ General Manas,, ' G F. Tbmas

[%d Lee Mohre ClaA*w Ekcrw Catceae. Iw Faua!Imtimment Orte"unirt Ernrlmes M F Ann Barron

' Senice Vks President Finance ConciaJa Elecrw Catodae. iv.

D. Jed liarede le.

W D. %nney Vks Pre:iJent anJ Corpoesie Coniroller Concen.La Ekcrew Caterune. lac 0:ry F. Hall Ro Manu Yke PretiJent anJ Cerrotete Treasurer lh'w Eh tN Mr*k"kp C.+ eum E I'"I*V"' )H.JeCorina I' "" * "* ' ' * '"I"#"""

Yks Pre >klent A/ mini eration Oerski E Peller Charles M. Dava leffmm t\ sus Ektw Catearne, tu Yks PresiJens Operath n.

F%Ilir G.Harns John E. Randall Nseskeus liaau.ru Pm ss Catesme. Inc VI:s Pretkient Production J:.mes T. Ware John C. Tud er N<*tkent Lomaiara Pac Cawane. lu Rsha 15, Givnn Bente Cee E h tw Me=AreAt C nwsum l M Halk=n ,

P.viu Gmpre Eh tw MemhrnQ C+ +4tt n l

!bfoed Am.wn l 5.wh !=$ sna Ekrw Catcause An.wt- ,

p Bnan Rnet [

Smsh !muars flecrw Cate ame Anuan.m leon) M sek [

S mabcu (ms.m.s Ehtw Mc=he*At C4a.ar..a Harou) Jurw a j Te.koL k w Gateatme.In. t Arthur l . Verret [

Teshe iktw C< ya.u Dr Or t u 1 e. ing i V43cs 16 tw Me=4nQ G+euem Char *r Urdernad Yau.Ehtw Memk'Ap C o emm Kern Har.cil W4Avw 5e Tammen E krw Cgcasse. fr-FJes J C Sn ace W4A+m %e Tammau Ele.sw C.>yaae. tr m twe arner 4r e a rs a writt ua m a nw,u uveru t e .nma= writs . n tt e u rro s n e t so wviru r s u rr es n rit tw i nn w 33

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i Cajun Electric Power Cooperatise ,

10719 Airline Highwav ,

Baton Rouge, Loulitana 70816 .

(504)291 3060 l I