================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to ---------------------------------------------- Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. - - ----------- ----------------------------------- ------------------ 1-3526 The Southern Company 58-0690070 (A Delaware Corporation) 270 Peachtree Street, N.W. Atlanta, Georgia 30303 (770) 393-0650 1-3164 Alabama Power Company 63-0004250 (An Alabama Corporation) 600 North 18th Street Birmingham, Alabama 35291 (205) 250-1000 1-6468 Georgia Power Company 58-0257110 (A Georgia Corporation) 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 (404) 526-6526 0-2429 Gulf Power Company 59-0276810 (A Maine Corporation) 500 Bayfront Parkway Pensacola, Florida 32501 (904) 444-6111 0-6849 Mississippi Power Company 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (601) 864-1211 1-5072 Savannah Electric and Power Company 58-0418070 (A Georgia Corporation) 600 Bay Street, East Savannah, Georgia 31401 (912) 232-7171 ================================================================================
Securities registered pursuant to Section 12(b) of the Act: Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is registered on the New York Stock Exchange. Title of each class Registrant - - ------------------- ---------- Common Stock, $5 par value The Southern Company ------------------------------------------------- Class A preferred, cumulative, $25 stated capital Alabama Power Company 7.60% (First 1992 Series) 6.80% Series 7.60% (Second 1992 Series) 6.40% Series Adjustable Rate (1993 Series) First mortgage bonds 9 1/4% Series due 2021 ------------------------------------------------- Preferred stock, cumulative, $100 stated value Georgia Power Company $7.72 Series $7.80 Series Class A preferred, cumulative, $25 stated value $2.125 Series $1.9375 Series $1.90 Series Adjustable Rate (First 1993 Series) $1.9875 Series Adjustable Rate (Second 1993 Series) $1.925 Series Subsidiary obligated mandatorily redeemable preferred securities, $25 stated value* 9% Monthly Income Preferred Securities, Series A First mortgage bonds 6 1/8% Series due 1999 6 7/8% Series due 2002 ---------------------------------------------------- Depositary preferred shares, each representing Mississippi Power Company one-fourth of a share of preferred stock, cumulative, $100 par value 7.25% Series 6.32% Series 6.65% Series ----------------------------------------------------- Preferred stock, cumulative, $25 par value Savannah Electric and Power Company 6.64% Series *Issued by Georgia Power Capital, L.P., and guaranteed to the extent Georgia Power Capital has funds by Georgia Power Company. ================================================================================
Securities registered pursuant to Section 12(g) of the Act: Title of each class Registrant - - ------------------- ---------- Preferred stock, cumulative, $100 par value Alabama Power Company 4.20% Series 4.64% Series 5.96% Series 4.52% Series 4.72% Series 6.88% Series 4.60% Series 4.92% Series Class A preferred, cumulative, $100,000 stated capital Auction (1993 Series) Class A preferred, cumulative, $100 stated capital Auction (1988 Series) -------------------------------------------------------- Preferred stock, cumulative, $100 stated value Georgia Power Company $4.60 Series $4.72 Series $5.64 Series $4.60 Series (1962) $4.92 Series $6.48 Series $4.60 Series (1963) $4.96 Series $6.60 Series $4.60 Series (1964) $5.00 Series -------------------------------------------------------- Preferred stock, cumulative, $100 par value Gulf Power Company 4.64% Series 5.44% Series 7.88% Series 5.16% Series 7.52% Series Class A preferred, cumulative, $10 par, $25 stated capital 6.72% Series 7.00% Series 7.30% Series Adjustable Rate (1993 Series) -------------------------------------------------------- Preferred stock, cumulative, $100 par value Mississippi Power Company 4.40% Series 4.60% Series 4.72% Series 7.00% Series ================================================================================
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Aggregate market value of voting stock held by non-affiliates of The Southern Company at February 29, 1996: $16.0 billion. Each of such other registrants is a wholly-owned subsidiary of The Southern Company and has no voting stock other than its common stock. A description of registrants' common stock follows: <TABLE> <CAPTION> Description of Shares Outstanding Registrant Common Stock at February 29, 1996 - - ---------- -------------- -------------------- <S> <C> <C> The Southern Company Par Value $5 Per Share 670,097,500 Alabama Power Company Par Value $40 Per Share 5,608,955 Georgia Power Company No Par Value 7,761,500 Gulf Power Company No Par Value 992,717 Mississippi Power Company Without Par Value 1,121,000 Savannah Electric and Power Company Par Value $5 Per Share 10,844,635 </TABLE> Documents incorporated by reference: specified portions of The Southern Company's Proxy Statement relating to the 1996 Annual Meeting of Stockholders are incorporated by reference into PART III. This combined Form 10-K is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies. ================================================================================
Table of Contents Page PART I Item 1 Business The SOUTHERN System........................................ I-1 New Business Development................................... I-2 Certain Factors Affecting the Industry..................... I-3 Construction Programs...................................... I-3 Financing Programs......................................... I-5 Fuel Supply................................................ I-7 Territory Served........................................... I-8 Competition................................................ I-12 Regulation................................................. I-13 Rate Matters............................................... I-15 Employee Relations......................................... I-17 Item 2 Properties................................................... I-18 Item 3 Legal Proceedings............................................ I-23 Item 4 Submission of Matters to a Vote of Security Holders.......... I-23 Executive Officers of SOUTHERN............................... I-24 PART II Item 5 Market for Registrants' Common Equity and Related Stockholder Matters........................................ II-1 Item 6 Selected Financial Data...................................... II-2 Item 7 Management's Discussion and Analysis of Results of Operations and Financial Condition...................... II-2 Item 8 Financial Statements and Supplementary Data.................. II-3 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................ II-4 PART III Item 10 Directors and Executive Officers of the Registrants......... III-1 Item 11 Executive Compensation...................................... III-13 Item 12 Security Ownership of Certain Beneficial Owners and Management................................................ III-30 Item 13 Certain Relationships and Related Transactions.............. III-36 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................... IV-1 i
DEFINITIONS When used in Items 1 through 5 and Items 10 through 14, the following terms will have the meanings indicated. Other defined terms specific only to Item 11 are found on page III-13. Term Meaning AEC.......................... Alabama Electric Cooperative, Inc. AFUDC........................ Allowance for Funds Used During Construction ALABAMA...................... Alabama Power Company Alicura...................... Hidroelectrica Alicura, S.A. (Argentina) AMEA......................... Alabama Municipal Electric Authority Clean Air Act................ Clean Air Act Amendments of 1990 Communications............... Southern Communications Services, Inc. Dalton....................... City of Dalton, Georgia DOE.......................... United States Department of Energy Edelnor...................... Empresa Electrica del Norte Grande, S.A. (Chile) Energy Act................... Energy Policy Act of 1992 EMF.......................... Electromagnetic field EPA.......................... United States Environmental Protection Agency FERC......................... Federal Energy Regulatory Commission FPC.......................... Florida Power Corporation FP&L......................... Florida Power & Light Company Freeport..................... Freeport Power Company (Bahamas) GEORGIA...................... Georgia Power Company GULF......................... Gulf Power Company Gulf States.................. Gulf States Utilities Company Holding Company Act.......... Public Utility Holding Company Act of 1935, as amended IBEW......................... International Brotherhood of Electrical Workers IRS.......................... Internal Revenue Service JEA.......................... Jacksonville Electric Authority MEAG......................... Municipal Electric Authority of Georgia MISSISSIPPI.................. Mississippi Power Company Mobile Energy................ Mobile Energy Services Company, L.L.C. NRC.......................... Nuclear Regulatory Commission OPC.......................... Oglethorpe Power Corporation operating affiliates......... ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH PSC.......................... Public Service Commission RUS.......................... Rural Utility Service (formerly Rural Electrification Administration) SAVANNAH..................... Savannah Electric and Power Company SCS.......................... Southern Company Services, Inc. SEC.......................... Securities and Exchange Commission SEGCO........................ Southern Electric Generating Company SEI.......................... Southern Electric International, Inc. SEPA......................... Southeastern Power Administration SERC......................... Southeastern Electric Reliability Council SMEPA........................ South Mississippi Electric Power Association SOUTHERN..................... The Southern Company Southern Development......... The Southern Development and Investment Group, Inc. Southern Nuclear............. Southern Nuclear Operating Company, Inc. SOUTHERN system.............. SOUTHERN, the operating affiliates, SEGCO, SEI, Southern Nuclear, SCS, Communications, Southern Development and other subsidiaries SWEB......................... South Western Electricity plc (United Kingdom) TVA.......................... Tennessee Valley Authority ii
PART I Item 1. BUSINESS SOUTHERN was incorporated under the laws of Delaware on November 9, 1945. SOUTHERN is domesticated under the laws of Georgia and is qualified to do business as a foreign corporation under the laws of Alabama. SOUTHERN owns all the outstanding common stock of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, each of which is an operating public utility company. ALABAMA and GEORGIA each own 50% of the outstanding common stock of SEGCO. The operating affiliates supply electric service in the states of Alabama, Georgia, Florida, Mississippi and Georgia, respectively, and SEGCO owns generating units at a large electric generating station which supplies power to ALABAMA and GEORGIA. More particular information relating to each of the operating affiliates is as follows: ALABAMA is a corporation organized under the laws of the State of Alabama on November 10, 1927, by the consolidation of a predecessor Alabama Power Company, Gulf Electric Company and Houston Power Company. The predecessor Alabama Power Company had had a continuous existence since its incorporation in 1906. GEORGIA was incorporated under the laws of the State of Georgia on June 26, 1930, and admitted to do business in Alabama on September 15, 1948. GULF is a corporation which was organized under the laws of the State of Maine on November 2, 1925, and admitted to do business in Florida on January 15, 1926, in Mississippi on October 25, 1976 and in Georgia on November 20, 1984. MISSISSIPPI was incorporated under the laws of the State of Mississippi on July 12, 1972, was admitted to do business in Alabama on November 28, 1972, and effective December 21, 1972, by the merger into it of the predecessor Mississippi Power Company, succeeded to the business and properties of the latter company. The predecessor Mississippi Power Company was incorporated under the laws of the State of Maine on November 24, 1924, and was admitted to do business in Mississippi on December 23, 1924, and in Alabama on December 7, 1962. SAVANNAH is a corporation existing under the laws of the State of Georgia; its charter was granted by the Secretary of State on August 5, 1921. SOUTHERN also owns all the outstanding common stock of SEI, Communications, Southern Nuclear, SCS (the system service company), Southern Development and other direct and indirect subsidiaries. SEI designs, builds, owns and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. A further description of SEI's business and organization follows later in this section under "New Business Development." Communications provides digital wireless communications services to SOUTHERN's operating affiliates and also markets these services to the public within the Southeast. Southern Nuclear provides services to the Southern electric system's nuclear plants. Southern Development explores, develops and markets energy management services and other business lines relating to SOUTHERN's core business of generating and distributing energy. SEGCO owns electric generating units with an aggregate capacity of 1,019,680 kilowatts at Plant Gaston on the Coosa River near Wilsonville, Alabama, and ALABAMA and GEORGIA are each entitled to one-half of SEGCO's capacity and energy. ALABAMA acts as SEGCO's agent in the operation of SEGCO's units and furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000 volt transmission lines extending from Plant Gaston to the Georgia state line at which point connection is made with the GEORGIA transmission line system. The SOUTHERN System The transmission facilities of each of the operating affiliates and SEGCO are connected to the respective company's own generating plants and other sources of power and are interconnected with the transmission facilities of the other operating affiliates and SEGCO by means of heavy-duty high voltage lines. (In the case of GEORGIA's integrated transmission system, see Item 1 - BUSINESS - "Territory Served" herein.) Operating contracts covering arrangements in effect with principal neighboring utility systems provide for capacity exchanges, capacity purchases and sales, transfers of economy energy and other similar transactions. I-1
Additionally, the operating affiliates have entered into voluntary reliability agreements with the subsidiaries of Entergy Corporation, Florida Electric Power Coordinating Group and TVA and with Carolina Power & Light Company, Duke Power Company, South Carolina Electric & Gas Company and Virginia Electric and Power Company, each of which provides for the establishment and periodic review of principles and procedures for planning and operation of generation and transmission facilities, maintenance schedules, load retention programs, emergency operations, and other matters affecting the reliability of bulk power supply. The operating affiliates have joined with other utilities in the Southeast (including those referred to above) to form the SERC to augment further the reliability and adequacy of bulk power supply. Through the SERC, the operating affiliates are represented on the National Electric Reliability Council. An intra-system interchange agreement provides for coordinating operations of the power producing facilities of the operating affiliates and SEGCO and the capacities available to such companies from non-affiliated sources and for the pooling of surplus energy available for interchange. Coordinated operation of the entire interconnected system is conducted through a central power supply coordination office maintained by SCS. The available sources of energy are allocated to the operating affiliates to provide the most economical sources of power consistent with good operation. The resulting benefits and savings are apportioned among the operating affiliates. SCS has contracted with SOUTHERN, each operating affiliate, SEI, various of the other subsidiaries, Southern Nuclear and SEGCO to furnish, at cost and upon request, the following services: general executive and advisory services, power pool operations, general engineering, design engineering, purchasing, accounting, finance and treasury, taxes, insurance and pensions, corporate, rates, budgeting, public relations, employee relations, systems and procedures and other services with respect to business and operations. SEI, Southern Development and Communications have also secured from the operating affiliates certain services which are furnished at cost. Southern Nuclear has contracted with ALABAMA to operate its Farley Nuclear Plant, as authorized by amendments to the plant operating licenses. Southern Nuclear also has a contract to provide GEORGIA with technical and other services to support GEORGIA's operation of plants Hatch and Vogtle. Applications are now pending before the NRC for amendments to the Hatch and Vogtle operating licenses which, if approved, would authorize Southern Nuclear to become the operator. See Item 1 - BUSINESS "Regulation - Atomic Energy Act of 1954" herein. New Business Development SOUTHERN continues to consider new business opportunities, particularly those which allow use of the expertise and resources developed through its regulated utility experience. These endeavors began in 1981 and are conducted through SEI and other subsidiaries. SEI's primary business focus is international and domestic cogeneration, the independent power market, and the privatization and development of generation, transmission and distribution facilities in the international market. During 1995, SEI also entered the business of power marketing. Reference is made to Note 15 to the financial statements of SOUTHERN in Item 8 herein for additional information regarding SOUTHERN's business segments and geographic areas. In September 1995, SOUTHERN acquired SWEB, one of the United Kingdom's 12 regional electric distribution companies, for approximately $1.8 billion. SWEB's main business is the distribution of electricity to customers in the Southwest of England. Based in Bristol, SWEB serves approximately 1.3 million customers in an area roughly the size of Connecticut, with almost 2 million residents. SWEB is also a supplier of electricity to franchise customers in its authorized area and to customers in the competitive second-tier market. Through its 7.7% equity investment in Teesside Power Limited, a combined cycle gas turbine plant with a capacity of 1,875 megawatts, SWEB is involved in power generation. In addition, SWEB is involved in certain non-regulated activities which include gas supply and telecommunications. For additional information regarding the acquisition of SWEB, reference is made to Note 14 to SOUTHERN's financial statements in Item 8 herein. I-2
See Item 2 - PROPERTIES - "Other Electric Generation Facilities" herein for additional information regarding SEI projects. SEI and Southern Development render consulting services and market SOUTHERN system expertise in the United States and throughout the world. They contract with other public utilities, commercial concerns and government agencies for the rendition of services and the licensing of intellectual property. More specifically, Southern Development is focusing on new and existing programs to enhance customer satisfaction and efficiency and stockholder value, such as: Good Cents, an energy efficiency program for electric utility customers; EnerLink, a group of energy management products and services for large commercial and industrial electricity users; Flywheel, an energy storage device; PowerCall Security, a home security system; other energy management programs under development; and telecommunications operations related to energy management programs. By the end of 1995, the construction of Communications' wireless communications system was essentially complete, and Communications began serving SOUTHERN's operating affiliates and marketing its services to non-affiliates within the Southeast. The system covers 122,000 square miles and combines the functions of two-way radio dispatch, cellular phone, short text and numeric messaging and wireless data transfer. These continuing efforts to invest in and develop new business opportunities offer the potential of earning returns which may exceed those of rate-regulated operations. However, these activities also involve a higher degree of risk. SOUTHERN expects to make substantial investments over the period 1996-1998 in these and other new businesses. Certain Factors Affecting the Industry Various factors are currently affecting the electric utility industry in general, including increasing competition and the regulatory changes related thereto, costs required to comply with environmental regulations, and the potential for new business opportunities (with their associated risks) outside of traditional rate-regulated operations. The effects of these and other factors on the SOUTHERN system are described herein; particular reference is made to Item 1 - BUSINESS - "New Business Development," "Competition" and "Environmental Regulation." Construction Programs The subsidiary companies of SOUTHERN are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. Construction additions or acquisitions of property during 1996 through 1998 by the operating affiliates, SEGCO, SCS, Southern Nuclear, Communications and SEI are estimated as follows: (in millions) --------------------------------------------------------- 1996 1997 1998 -------- --------- --------- ALABAMA $ 491 $ 446 $ 479 GEORGIA 530 537 529 GULF 71 67 71 MISSISSIPPI 67 62 53 SAVANNAH 33 30 23 SEGCO 13 6 7 SCS 29 16 10 Southern Nuclear 1 1 1 Communications 26 48 6 SEI* 213 218 123 ======================================================== SOUTHERN system $1,474 $1,431 $1,302 ======================================================== *These construction estimates do not include amounts which may be expended by SEI on future power production projects or by any subsidiaries created to effect such future projects. Reference is made to Note 4 to the financial statements of each registrant (except GULF) in Item 8 herein for the amounts of AFUDC included in the above estimates. GULF's estimates include AFUDC of $75,000 in 1996 and no AFUDC in 1997 and 1998. (See also Item 1 - BUSINESS - "Financing Programs" herein.) I-3
<TABLE> Estimated construction costs in 1996 are expected to be apportioned approximately as follows: (in millions) ================================================================================================= SOUTHERN system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH - - ------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Combustion turbines $ 24 $ 9 $ 15 $ - $- $ - Other generating facilities including associated plant substations 332 90 85 19 9 10 New business 343 136 162 21 11 13 Transmission 147 62 60 2 22 1 Joint line and substation 29 - 24 4 1 - Distribution 237 62 39 9 15 5 Nuclear fuel 133 72 61 - - - General plant 229 60 84 16 9 4 - - ------------------------------------------------------------------------------------------------- $1,474 $491 $530 $71 $67 $33 ================================================================================================= </TABLE> *Communications, SCS and Southern Nuclear plan capital additions to general plant in 1996 of $26 million, $29 million and $1 million, respectively, while SEGCO plans capital additions of $13 million to generating facilities. SEI plans capital additions of $106 million to generating facilities and $107 million to distribution facilities. These estimates do not reflect the possibility of SEI's securing a contract(s) to buy or build additional generating facilities. The construction programs are subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load projections; changes in environmental regulations; changes in existing nuclear plants to meet new regulatory requirements; increasing costs of labor, equipment and materials; and cost of capital. The operating affiliates do not have any new baseload generating plants under construction. However, within the service area, the construction of combustion turbine peaking units with an aggregate capacity of approximately 600 megawatts is planned to be completed by 1998. In addition, significant construction related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants will continue. In 1991, the Georgia legislature passed legislation which requires GEORGIA and SAVANNAH each to file an Integrated Resource Plan for approval by the Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the construction of new power plants. (See Item 1 - BUSINESS - "Rate Matters - Integrated Resource Planning" herein.) See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for information with respect to certain existing and proposed environmental requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for additional information concerning ALABAMA's and GEORGIA's joint ownership of certain generating units and related facilities with certain non-affiliated utilities. Rocky Mountain Hydroelectric Plant For information regarding GEORGIA's Rocky Mountain Plant, including a joint ownership agreement with OPC and the uncertain recovery of GEORGIA's costs in this plant, reference is made to Note 3 to SOUTHERN's and to GEORGIA's financial statements in Item 8 herein. I-4
Financing Programs SOUTHERN may require additional equity capital in 1996. The amount and timing of additional equity capital to be raised in 1996, as well as subsequent years, will be contingent on SOUTHERN's investment opportunities, primarily through SEI. Equity capital can be provided from any combination of public offerings, private placements, or SOUTHERN's stock plans. The operating affiliates' construction programs are expected to be financed primarily from internal sources. Short-term debt will be utilized as appropriate at SOUTHERN and the operating affiliates. The operating affiliates may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities if market conditions permit. In order to issue first mortgage bonds and preferred stock, each of the operating affiliates must comply with earnings coverage requirements contained in its respective mortgage and charter. These provisions require, for the issuance of additional first mortgage bonds, a minimum, before income tax, earnings coverage of twice the pro forma annual interest charges on first mortgage bonds and indebtedness secured by prior or equal ranking lien and, for the issuance of additional preferred stock, a minimum, after income tax, earnings coverage of one and one-half times pro forma annual interest charges and preferred stock dividends, in each case for a period of twelve consecutive calendar months within the fifteen calendar months immediately preceding the proposed new issue. The ability to issue securities in the future will depend on coverages at that time. Currently each of the operating affiliates expects to have adequate coverage ratios for anticipated requirements through at least 1998. The amounts of securities representing short-term unsecured indebtedness allowable under the respective charters, and the maximum amounts of short-term or term-loan indebtedness authorized by the appropriate regulatory authorities, are shown in the following table: ====================================================== Short-Term Unsecured Indebtedness ------------------------------------------------------ Allowable Under Charter at December 31, 1995 Percent of Secured Indebtedness and Other Amount Capital (2) ------------- ------------------- (Millions) ALABAMA $ 1,123 20% GEORGIA 1,677 20 GULF 88 10 MISSISSIPPI 149 20 SAVANNAH 68 20 SOUTHERN (1) (1) ------------------------------------------------------ ====================================================== Short-Term or Term-Loan Indebtedness ------------------------------------------------------ Maximum Regulatory Authorization Outstanding at Amount December 31, 1995 ------------ --------------------- (Millions) ALABAMA $ 750 (3) $390 GEORGIA 1,700 (4) 400 GULF 150 (3) 118 MISSISSIPPI 350 (3) 55 SAVANNAH 90 (4) 4 SOUTHERN 2,000 (3) 619 -------------------------------------------------------- Notes: (1) No limitation. (2) Under the provisions of the respective charters, GEORGIA's, MISSISSIPPI's and SAVANNAH's preferred stockholders have approved increases in the amounts of securities representing short-term unsecured indebtedness which the companies may have outstanding until July 1 in 2003, 1999 and 1999, respectively. Such limitations were increased from 10% of secured indebtedness and other capital to 20% thereof. These approved increases are reflected in the above table. I-5
(3) ALABAMA's authority is based on authorization received from the Alabama PSC, which expires December 31, 1998. No SEC authorization is required for ALABAMA. GULF, MISSISSIPPI and SOUTHERN have received SEC authorization to issue from time to time short-term and/or term-loan notes to banks and commercial paper to dealers in the amounts shown through December 31, 1996, December 31, 2002 and March 31, 2001, respectively. (4) GEORGIA and SAVANNAH have received SEC authorization to issue from time to time short-term and term-loan notes to banks and commercial paper to dealers in the amounts shown through December 31, 2002. Authorization for term-loan indebtedness is also required by and has been received from the Georgia PSC. Currently, GEORGIA and SAVANNAH have remaining authority from the Georgia PSC of $809 million and $40 million expiring December 31, 1996 and June 30, 1996, respectively. Reference is made to Note 5 to the financial statements for SOUTHERN, ALABAMA, GULF, MISSISSIPPI and SAVANNAH and Note 9 to the financial statements for GEORGIA in Item 8 herein for information regarding the registrants' credit arrangements. I-6
Fuel Supply The operating affiliates' and SEGCO's supply of electricity is derived predominantly from coal. The sources of generation for the years 1993 through 1995 and the estimates for 1996 are shown below: Oil and ALABAMA Coal Nuclear Hydro Gas ---------------------------------------- 1993 70% 22% 8% *% 1994 68 23 9 * 1995 73 19 8 * 1996 73 20 7 * GEORGIA 1993 77 20 3 * 1994 75 22 3 * 1995 74 22 3 1 1996 76 21 2 1 GULF 1993 99 ** ** 1 1994 100 ** ** * 1995 99 ** ** 1 1996 99 ** ** 1 MISSISSIPPI 1993 90 ** ** 10 1994 85 ** ** 15 1995 79 ** ** 21 1996 81 ** ** 19 SAVANNAH 1993 83 ** ** 17 1994 91 ** ** 9 1995 80 ** ** 20 1996 83 ** ** 17 SEGCO 1993 100 ** ** * 1994 100 ** ** * 1995 100 ** ** * 1996 100 ** ** * SOUTHERN system*** 1993 78 17 4 1 1994 75 19 5 1 1995 77 17 4 2 1996 78 17 4 1 --------------------------------------------------------- *Less than 0.5%. **Not applicable. ***Amounts shown for the SOUTHERN system are weighted averages of the operating affiliates and SEGCO. The average costs of fuel in cents per net kilowatt-hour generated for 1993 through 1995 are shown below: Oil and Weighted ALABAMA Coal Nuclear Gas Average ---------------------------------------------- 1993 2.11 0.51 * 1.73 1994 1.92 0.49 * 1.56 1995 1.71 0.50 * 1.48 GEORGIA 1993 1.75 0.58 * 1.52 1994 1.67 0.63 * 1.44 1995 1.67 0.60 * 1.44 GULF 1993 2.03 ** 4.50 2.05 1994 2.00 ** * 2.01 1995 2.08 ** 3.56 2.09 MISSISSIPPI 1993 1.66 ** 2.97 1.71 1994 1.67 ** 2.60 1.71 1995 1.58 ** 2.33 1.64 SAVANNAH 1993 2.02 ** 4.70 2.49 1994 2.19 ** 4.72 2.42 1995 1.77 ** 3.80 2.18 SEGCO 1993 1.80 ** * 1.81 1994 1.83 ** * 1.83 1995 1.87 ** * 1.87 SOUTHERN system*** 1993 1.90 0.54 4.34 1.67 1994 1.80 0.56 3.99 1.56 1995 1.73 0.56 3.37 1.53 --------------------------------------------------------------- *Not meaningful because of minimal generation from fuel source. **Not applicable. ***Amounts shown for the SOUTHERN system are weighted averages of the operating affiliates and SEGCO. See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source of energy supply. I-7
As of February 23, 1996, the operating affiliates and SEGCO had stockpiles of coal on hand at their respective coal-fired plants which represented an estimated 29 days of recoverable supply for bituminous coal and 32 days for sub-bituminous coal. It is estimated that approximately 58.2 million tons of coal will be consumed in 1996 by the operating affiliates and SEGCO (including those units GEORGIA owns jointly with OPC, MEAG and Dalton and operates for FP&L and JEA and the units ALABAMA owns jointly with AEC). The operating affiliates and SEGCO currently have 38 coal contracts. These contracts cover remaining terms of up to 17 years. Approximately 20% of 1996 estimated coal requirements will be purchased in the spot market. Management has set a goal whereby the spot market should be utilized, absent the transition from coal contract expirations, for 20 to 30% of the SOUTHERN system's coal supply. Additionally, it has been determined that approximately 34 days of recoverable supply is the appropriate level for coal stockpiles. During 1995, the operating affiliates' and SEGCO's average price of coal delivered was approximately $40 per ton. The typical sulfur content of coal purchased under contracts ranges from approximately 0.49% to 2.76% sulfur by weight. Fuel sulfur restrictions and other environmental limitations have increased significantly and may increase further the difficulty and cost of obtaining an adequate coal supply. See Item 1 - - - BUSINESS - "Regulation - Environmental Regulation" herein. Changes in fuel prices are generally reflected in fuel adjustment clauses contained in rate schedules. See Item 1 - BUSINESS - "Rate Matters - Rate Structure" herein. ALABAMA owns coal lands and mineral rights in the Warrior Coal Field, located northwest of Birmingham in the vicinity of its Gorgas Steam Plant. SEGCO also owns coal reserves in the Warrior Coal Field and in the Cahaba Coal Field, which is located southwest of Birmingham. ALABAMA has agreements with non-affiliated industrial and mining firms to mine coal from ALABAMA's reserves, as well as their own reserves, for supply to ALABAMA's generating units. The operating affiliates have renegotiated, bought out or otherwise terminated various coal supply contracts. For more information on certain of these transactions, see Note 5 to the financial statements of GULF and MISSISSIPPI in Item 8 herein. ALABAMA and GEORGIA have numerous contracts covering a portion of their nuclear fuel needs for uranium, conversion services, enrichment services and fuel fabrication. These contracts have varying expiration dates and most are short to medium term (less than 10 years). Management believes that sufficient capacity for nuclear fuel supplies and processing exists to preclude the impairment of normal operations of the SOUTHERN system's nuclear generating units. ALABAMA and GEORGIA have contracts with the DOE that provide for the permanent disposal of spent nuclear fuel. Although disposal was scheduled to begin in 1998, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. The Energy Act imposed upon utilities with nuclear plants, including ALABAMA and GEORGIA, obligations for the decontamination and decommissioning of federal nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein. Territory Served The territory in which the operating affiliates provide electric service comprises most of the states of Alabama and Georgia together with the northwestern portion of Florida and southeastern Mississippi. In this territory there are non-affiliated electric distribution systems which obtain some or all of their power requirements either directly or indirectly from the operating affiliates. The territory has an area of approximately 120,000 square miles and an estimated population of approximately 11 million. ALABAMA is engaged, within the State of Alabama, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in over 1,000 communities (including Anniston, Birmingham, Gadsden, I-8
Mobile, Montgomery and Tuscaloosa) and at wholesale to 15 municipally-owned electric distribution systems, 11 of which are served indirectly through sales to AMEA, and two rural distributing cooperative associations. ALABAMA also supplies steam service in downtown Birmingham. ALABAMA owns coal reserves near its steam-electric generating plant at Gorgas and uses the output of coal from these reserves in some of its generating plants. ALABAMA also sells, and cooperates with dealers in promoting the sale of, electric appliances. GEORGIA is engaged in the generation and purchase of electricity and the distribution and sale of such electricity within the State of Georgia at retail in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon, Rome and Valdosta), as well as in rural areas, and at wholesale currently to 39 electric cooperative associations through OPC, a corporate cooperative of electric membership cooperatives in Georgia, and to 50 municipalities, 48 of which are served through MEAG, a public corporation and an instrumentality of the State of Georgia. GULF is engaged, within the northwestern portion of Florida, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in 71 communities (including Pensacola, Panama City and Fort Walton Beach), as well as in rural areas, and at wholesale to a non-affiliated utility and a municipality. GULF also sells electric appliances. MISSISSIPPI is engaged in the generation and purchase of electricity and the distribution and sale of such energy within the 23 counties of southeastern Mississippi, at retail in 123 communities (including Biloxi, Gulfport, Hattiesburg, Laurel, Meridian and Pascagoula), as well as in rural areas, and at wholesale to one municipality, six rural electric distribution cooperative associations and one generating and transmitting cooperative. SAVANNAH is engaged, within a five-county area in eastern Georgia, in the generation and purchase of electricity and the distribution and sale of such electricity at retail and, as a member of the SOUTHERN system power pool, the transmission and sale of wholesale energy. The sources of revenues for the SOUTHERN system and each of SOUTHERN's operating affiliates are shown in Item 6 herein. For the year ended December 31, 1995, the registrants derived their respective industrial revenues as shown in the following table. <TABLE> ======================================================================================== SOUTHERN system ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH - - ---------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Textiles 13% 10% 18% *% 3% *% Chemical 11 15 6 21 14 32 Paper 10 10 11 12 5 34 Primary metal 7 14 5 1 2 * Stone, clay, glass and concrete 7 7 8 2 1 4 Utility services 8 8 9 3 9 5 Food 5 4 6 1 5 9 Government 5 2 5 39 10 * Transportation equipment 3 1 4 1 7 10 Lumber and wood products 4 5 3 2 8 2 Other** 27 24 25 18 36 4 - - --------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% ======================================================================================= *Less than 0.5%. ** Other major sources (5% or more) of industrial revenues were: ALABAMA, coal mining (5%); GULF, oil and gas extraction (9%); and MISSISSIPPI, petroleum refining (20%) and electric machinery (6%). </TABLE> I-9
A portion of the area served by SOUTHERN's operating affiliates adjoins the area served by TVA and its municipal and cooperative distributors. An Act of Congress limits the distribution of TVA power, unless otherwise authorized by Congress, to specified areas or customers which generally were those served on July 1, 1957. On January 12, 1996, ALABAMA, GEORGIA and MISSISSIPPI filed a lawsuit against TVA for violation of this Act. See Item 3 - LEGAL PROCEEDINGS herein for additional information. The RUS has authority to make loans to cooperative associations or corporations to enable them to provide electric service to customers in rural sections of the country. There are 71 electric cooperative organizations operating in the territory in which the operating affiliates provide electric service at retail or wholesale. One of these, AEC, is a generating and transmitting cooperative selling power to several distributing cooperatives, municipal systems and other customers in south Alabama and northwest Florida. AEC owns generating units with approximately 840 megawatts of nameplate capacity, including an undivided ownership interest in ALABAMA's Plant Miller Units 1 and 2. AEC's facilities were financed with RUS loans secured by long-term contracts requiring distributing cooperatives to take their requirements from AEC to the extent such energy is available. Two of the 14 distributing cooperatives operating in ALABAMA's service territory obtain a portion of their power requirements directly from ALABAMA. Four electric cooperative associations, financed by the RUS, operate within GULF's service area. These cooperatives purchase their full requirements from AEC and SEPA. A non-affiliated utility also operates within GULF's service area and purchases a portion of its requirements from GULF. ALABAMA and GULF have entered into separate agreements with AEC involving interconnection between the respective systems and, in the case of ALABAMA, the delivery of capacity and energy from AEC to certain distributing cooperatives. The rates for the various services provided by ALABAMA and GULF to AEC are based on formulary approaches which result in the charges by each company being updated annually, subject to FERC approval. See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for details of ALABAMA's joint-ownership with AEC of a portion of Plant Miller. Another of the 71 electric cooperatives is SMEPA, also a generating and transmitting cooperative. SMEPA has a generating capacity of 739,000 kilowatts and a transmission system estimated to be 1,357 miles in length. MISSISSIPPI has an interchange agreement with SMEPA pursuant to which various services are provided, including the furnishing of protective capacity by MISSISSIPPI to SMEPA. There are 43 electric cooperative organizations operating in, or in areas adjoining, territory in the State of Georgia in which GEORGIA provides electric service at retail or wholesale. Three of these organizations obtain their power from TVA and one from other sources. Since July 1, 1975, OPC has supplied the requirements of the remaining 39 of these cooperative organizations from self-owned generation acquired from GEORGIA and, until September 1991, through partial requirements purchases from GEORGIA. GEORGIA entered into an agreement with OPC pursuant to which, effective in September 1991, OPC ceased to be a partial requirements wholesale customer of GEORGIA. Instead, OPC began the purchase of 1,250 megawatts of capacity from GEORGIA through 1999, subject to reduction or extension by OPC, and may satisfy the balance of its needs through purchases from others. During 1994 and 1995, OPC gave GEORGIA notice of its intent to decrease its purchases of capacity by 250 megawatts in September 1996 and an additional 250 megawatts in September 1997. There are 65 municipally-owned electric distribution systems operating in the territory in which SOUTHERN's operating affiliates provide electric service at retail or wholesale. AMEA was organized under an act of the Alabama legislature and is comprised of 11 municipalities. In 1986, ALABAMA entered into a firm power purchase contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum of 100 megawatts) for a period of 15 years commencing September 1, 1986. In October 1991, ALABAMA entered into a second firm power purchase contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 I-10
megawatts) for a period of 15 years beginning October 1, 1991. In both contracts the power is being sold to AMEA for its member municipalities that previously were served directly by ALABAMA as wholesale customers. Under the terms of the contracts, ALABAMA received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements. See Note 7 to ALABAMA's financial statements in Item 8 herein for further information on these contracts. Forty-seven municipally-owned electric distribution systems formerly served on a full requirements wholesale basis by GEORGIA and one county-owned system now receive their requirements through MEAG, which was established by a state statute in 1975. MEAG serves these requirements from self-owned generation facilities acquired from GEORGIA and through purchases of capacity and energy from GEORGIA under partial requirements rates. Similarly, since 1977 Dalton has filled its requirements from generation facilities acquired from GEORGIA and through partial requirements purchases. One municipally-owned electric distribution system is still served on a full requirements wholesale basis by GEORGIA. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) GULF and MISSISSIPPI provide wholesale requirements for one municipal system each. GEORGIA has entered into substantially similar agreements with OPC, MEAG and Dalton providing for the establishment of an integrated transmission system to carry the power and energy of each. The agreements require an investment by each party in the integrated transmission system in proportion to its respective share of the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) ALABAMA, GEORGIA, GULF and MISSISSIPPI also have contracts with SEPA (a federal power marketing agency) providing for the use of those companies' facilities at government expense to deliver to certain cooperatives and municipalities, entitled by federal statute to preference in the purchase of power from SEPA, quantities of power equivalent to the amounts of power allocated to them by SEPA from certain United States Government hydroelectric projects. The retail service rights of all electric suppliers in the State of Georgia are regulated by the 1973 State Territorial Electric Service Act. Pursuant to the provisions of this Act, all areas within existing municipal limits were assigned to the primary electric supplier therein on March 29, 1973 (451 municipalities, including Atlanta, Columbus, Macon, Augusta, Athens, Rome and Valdosta, to GEORGIA; 115 to electric cooperatives; and 50 to publicly-owned systems). Areas outside of such municipal limits were either to be assigned or to be declared open for customer choice of supplier by action of the Georgia PSC pursuant to standards set forth in the Act. Consistent with such standards, the Georgia PSC has assigned substantially all of the land area in the state to a supplier. Notwithstanding such assignments, the Act provides that any new customer locating outside of 1973 municipal limits and having a connected load of at least 900 kilowatts may receive electric service from the supplier of its choice. (See also Item 1 - BUSINESS - "Competition" herein.) Under and subject to the provisions of its franchises and concessions and the 1973 State Territorial Electric Service Act, SAVANNAH has the full but nonexclusive right to serve the City of Savannah, the Towns of Bloomingdale, Pooler, Garden City, Guyton, Newington, Oliver, Port Wentworth, Rincon, Tybee Island, Springfield, Thunderbolt, Vernonburg, and in conjunction with a secondary supplier, the Town of Richmond Hill. In addition, SAVANNAH has been assigned certain unincorporated areas in Chatham, Effingham, Bryan, Bulloch and Screven Counties by the Georgia PSC. (See also Item 1 - BUSINESS - "Competition" herein.) Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of convenience and necessity to MISSISSIPPI and to six distribution rural cooperatives operating in southeastern Mississippi, then served in whole or in part by MISSISSIPPI, authorizing them to distribute electricity in certain specified geographically described areas of the state. The six cooperatives serve approximately 300,000 retail customers in a certificated area of approximately 10,300 square miles. In areas included in a "Grandfather Certificate," the utility holding such certificate may, without I-11
further certification, extend its lines up to five miles; other extensions within that area by such utility, or by other utilities, may not be made except upon a showing of, and a grant of a certificate of, public convenience and necessity. Areas included in such a certificate which are subsequently annexed to municipalities may continue to be served by the holder of the certificate, irrespective of whether it has a franchise in the annexing municipality. On the other hand, the holder of the municipal franchise may not extend service into such newly annexed area without authorization by the Mississippi PSC. Long-Term Power Sales Agreements Reference is made to Note 7 to the financial statements for SOUTHERN, ALABAMA, GEORGIA, GULF and MISSISSIPPI and Note 6 to the financial statements for SAVANNAH in Item 8 herein for information regarding contracts for the sales of capacity and energy to non-territorial customers. Competition The electric utility industry in general has become, and is expected to continue to be, increasingly competitive as the result of factors including regulatory and technological developments. The Energy Act, enacted in 1992, was intended to foster competition in the wholesale market by, among other things, facilitating participation by independent power producers. The Energy Act includes provisions authorizing the FERC under certain conditions to order utilities owning transmission facilities to provide wholesale transmission services for other utilities or entities that generate energy. As a result of the foregoing factors, SOUTHERN has experienced increasing competition for available off-system sales of capacity and energy from neighboring utilities and alternative sources of energy. Additionally, the future effect of cogeneration and small-power production facilities on the SOUTHERN system cannot currently be determined but may be adverse. ALABAMA currently has cogeneration contracts in effect with nine industrial customers. Under the terms of these contracts, ALABAMA purchases excess generation of such companies. During 1995, ALABAMA purchased approximately 115 million kilowatt-hours from such companies at a cost of $1.8 million. GEORGIA currently has cogeneration contracts in effect with seven industrial customers. Under the terms of these contracts, GEORGIA purchases excess generation of such companies. During 1995, GEORGIA purchased 4 million kilowatt-hours from such companies at a cost of $78,000. GEORGIA has entered into a 30-year purchase power agreement, scheduled to begin in June 1998, for electricity during peaking periods from a planned 300-megawatt cogeneration facility. Payments are subject to reductions for failure to meet minimum capacity output. GULF currently has cogeneration agreements for "as available" energy in effect with two industrial customers. During 1995, GULF purchased 214 million kilowatt-hours from such companies for $3.6 million. SAVANNAH currently has cogeneration contracts in effect with four industrial customers. Under the terms of these contracts, SAVANNAH purchases excess generation of such companies. During 1995, SAVANNAH purchased 1.5 million kilowatt-hours from such companies at a cost of $34,000. The competition for retail energy sales among competing suppliers of energy is influenced by various factors, including price, availability, technological advancements and reliability. These factors are, in turn, affected by, among other influences, regulatory, political and environmental considerations, taxation and supply. The operating affiliates have experienced, and expect to continue to experience, competition in their respective retail service territories in varying degrees as the result of self-generation (as described above) and fuel switching by customers and other factors. (See also Item 1 - BUSINESS - "Territory Served" herein for information concerning suppliers of electricity operating within or near the areas served at retail by the operating affiliates.) I-12
In addition, while the Energy Act does not provide for "retail wheeling" (i.e., the transmission and distribution by an electric utility to retail customers within its service territory of energy produced by another entity), applicable legislative and regulatory bodies may consider imposing such a requirement in the future, the effect of which may be adverse or, conversely, prove to be beneficial. New federal legislation is being discussed, and legislation allowing customer choice has been introduced in Alabama, Florida and Georgia. Some form of retail wheeling has been mandated in states such as California and Michigan. Any form of retail wheeling which may be adopted would need to address a variety of complex issues, including stranded investments and the utility's obligation to serve a particular customer or customers. Reference is made to each registrant's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein for further discussion of competition. In order to adapt to the increasingly competitive environment in which they operate, SOUTHERN and the operating affiliates will evaluate and consider a wide array of potential business strategies. These may include business combinations or acquisitions involving other utility or non-utility businesses or properties, internal restructurings or reorganizations involving SOUTHERN, the operating affiliates or some combination thereof or dispositions of currently owned properties or currently operated business units. In addition, SOUTHERN and the operating affiliates may engage in new business ventures, such as power marketing, which arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations and financial condition of SOUTHERN and the operating affiliates. Regulation State Commissions The operating affiliates and SEGCO are subject to the jurisdiction of their respective state regulatory commissions, which have broad powers of supervision and regulation over public utilities operating in the respective states, including their rates, service regulations, sales of securities (except for the Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and "Territory Served" herein.) Holding Company Act SOUTHERN is registered as a holding company under the Holding Company Act, and it and its subsidiary companies are subject to the regulatory provisions of said Act, including provisions relating to the issuance of securities, sales and acquisitions of securities and utility assets, services performed by SCS and Southern Nuclear, and the activities of certain of SOUTHERN's special purpose subsidiaries. In June 1995, the Division of Investment Management of the SEC issued a report on its study of the regulation of public-utility holding companies. Concluding that significant changes in the current regulatory system are needed, the report offers various legislative and administrative recommendations for reform. The legislative option preferred by the Division in the report is repeal of the Holding Company Act coupled with new provisions for state access to books and records of holding company system companies and for federal audit authority and oversight of intrasystem transactions. However, the prospects for further legislative reform of the Holding Company Act are uncertain at this time. Federal Power Act The Federal Power Act subjects the operating affiliates and SEGCO to regulation by the FERC as companies engaged in the transmission or sale at wholesale of electric energy in interstate commerce, including regulation of accounting policies and practices. ALABAMA and GEORGIA are also subject to the provisions of the Federal Power Act or the earlier Federal Water Power Act applicable to licensees with respect to their hydroelectric developments. Among the hydroelectric projects subject to licensing by the FERC are 14 existing ALABAMA generating stations having an aggregate installed capacity of 1,582,725 kilowatts and 18 existing GEORGIA generating stations having an aggregate installed capacity of 1,074,696 kilowatts. I-13
In December 1991, ALABAMA and GEORGIA filed with the FERC their applications for new licenses on six of their existing hydroelectric projects. The six projects, ALABAMA's Yates and Thurlow and GEORGIA's Lloyd Shoals, Langdale, Riverview and North Georgia, totaling 272,340 kilowatts of capacity, had licenses that expired December 31, 1993. Although the possibility of competition existed for these licenses, no competing applications were filed prior to the filing deadline of December 31, 1991. The Lloyd Shoals, Langdale and Riverview projects were granted new 30-year licenses that expire on January 1, 2024. The North Georgia project is operating on an annual license under the same terms and conditions as its original license. Additionally, the FERC has issued an order granting a combined, 40-year license for the Yates and Thurlow projects. As a part of the application for the combined, 40-year license for the Yates and Thurlow projects, ALABAMA agreed to expand the capacity of these units by a total of approximately 10 megawatts. In August 1995, GEORGIA filed with the FERC its application for a new license for its Sinclair Project which has 45,000 kilowatts of capacity. GEORGIA's current license for this project expires September 1, 1997. Certain environmental issues raised during the licensing process may result in the FERC including license terms and conditions that could have a substantial effect on the peaking capability of the project. In July 1994, flooding of the Flint River in and around Albany, Georgia and the Flint River Project (5,400 kilowatts of capacity) resulted in substantial damage to the dam and power house. Under the FERC oversight, GEORGIA has made repairs to the facilities. In the event GEORGIA elects to file for a new license for the Flint River Project, it is required to file a notice of intent with the FERC by September 1996. GEORGIA will then be required to file an application for a new license for such project by September 1999. GEORGIA and OPC also have a license, expiring in 2027, for the Rocky Mountain Plant, a pure pumped storage facility of 847,800 kilowatt capacity which began commercial operation in 1995. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein and Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for additional information.) Licenses for all projects, excluding those discussed above, expire in the period 2007-2023 in the case of ALABAMA's projects and in the period 2005-2020 in the case of GEORGIA's projects. Upon or after the expiration of each license, the United States Government, by act of Congress, may take over the project, or the FERC may relicense the project either to the original licensee or to a new licensee. In the event of takeover or relicensing to another, the original licensee is to be compensated in accordance with the provisions of the Federal Power Act, such compensation to reflect the net investment of the licensee in the project, not in excess of the fair value of the property taken, plus reasonable damages to other property of the licensee resulting from the severance therefrom of the property taken. Atomic Energy Act of 1954 ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over the construction and operation of nuclear reactors, particularly with regard to certain public health and safety and antitrust matters. The National Environmental Policy Act has been construed to expand the jurisdiction of the NRC to consider the environmental impact of a facility licensed under the Atomic Energy Act of 1954, as amended. Reference is made to Notes 1 and 13 to SOUTHERN's, Notes 1 and 11 to ALABAMA's and Notes 1 and 5 to GEORGIA's financial statements in Item 8 herein for information on nuclear decommissioning costs and nuclear insurance. Additionally, Note 3 to GEORGIA's financial statements contains information regarding nuclear performance standards imposed by the Georgia PSC that may impact retail rates. Environmental Regulation The operating affiliates and SEGCO are subject to federal, state and local environmental requirements which, among other things, control emissions of particulates, sulfur dioxide and nitrogen oxides into the air; the use, transportation, storage and disposal of hazardous and toxic waste; and discharges of pollutants, including thermal discharges, into waters of the I-14
United States. The operating affiliates and SEGCO expect to comply with such requirements, which generally are becoming increasingly stringent, through technical improvements, the use of appropriate combinations of low-sulfur fuel and chemicals, addition of environmental control facilities, changes in control techniques and reduction of the operating levels of generating facilities. Failure to comply with such requirements could result in the complete shutdown of individual facilities not in compliance as well as the imposition of civil and criminal penalties. Reference is made to each registrant's "Management's Discussion and Analysis" in Item 7 herein for a discussion of the Clean Air Act and other environmental legislation and proceedings. Possible adverse health effects of EMFs from various sources, including transmission and distribution lines, have been the subject of a number of studies and increasing public discussion. The scientific research currently is inconclusive as to whether EMFs may cause adverse health effects. However, there is the possibility of passage of legislation and promulgation of rulemaking that would require measures to mitigate EMFs, with resulting increases in capital and operating costs. In addition, the potential exists for public liability with respect to lawsuits brought by plaintiffs alleging damages caused by EMFs. The operating affiliates' and SEGCO's estimated capital expenditures for environmental quality control facilities for the years 1996, 1997 and 1998 are as follows: (in millions) ------------------------------------------------------- 1996 1997 1998 ----------------------------------- ALABAMA $29.8 $31.0 $30.3 GEORGIA 19.4 21.9 25.4 GULF 1.9 5.8 4.1 MISSISSIPPI 1.1 1.5 2.7 SAVANNAH 2.1 0.8 1.3 SEGCO 8.5 1.0 - ----------------------------------- SOUTHERN system $62.8 $62.0 $63.8 ======================================================= *The foregoing estimates are included in the current construction programs. (See Item 1 - BUSINESS - "Construction Programs" herein.) Additionally, each operating affiliate and SEGCO have incurred costs for environmental remediation of various sites. Reference is made to each registrant's "Management's Discussion and Analysis" in Item 7 herein for information regarding the registrants' environmental remediation efforts. Also, see Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for information regarding the identification of sites that may require environmental remediation by GEORGIA and Note 3 to MISSISSIPPI's financial statements in Item 8 herein for information regarding a site that may require environmental remediation by MISSISSIPPI. The operating affiliates and SEGCO are unable to predict at this time what additional steps they may be required to take as a result of the implementation of existing or future quality control requirements for air, water and hazardous or toxic materials, but such steps could adversely affect system operations and result in substantial additional costs. The outcome of the matters mentioned above under "Regulation" cannot now be determined, except that these developments may result in delays in obtaining appropriate licenses for generating facilities, increased construction and operating costs, or reduced generation, the nature and extent of which, while not determinable at this time, could be substantial. Rate Matters Rate Structure The rates and service regulations of the operating affiliates are uniform for each class of service throughout their respective service areas. Rates for residential electric service are generally of the block type based upon kilowatt-hours used and include minimum charges. Residential and other rates contain separate customer charges. Rates for commercial service are presently of the block type and, for large customers, the billing demand is generally used to determine capacity and minimum bill charges. These large customers' rates are generally based upon usage by the customer including those with special features to encourage off-peak usage. Additionally, I-15
the operating affiliates are allowed by their respective PSCs to negotiate the terms and compensation of service to large customers. Such terms and compensation of service, however, are subject to final PSC approval. With respect to MISSISSIPPI's retail rates, fuel and purchased power costs above base levels included in the various rate schedules are billed to such customers under the fuel and energy adjustment clause. GULF recovers from retail customers fuel and net purchased power costs through provisions which are adjusted to reflect increases or decreases in such costs. ALABAMA, GEORGIA and SAVANNAH are allowed by state law to recover fuel and net purchased energy costs through fuel cost recovery provisions which are adjusted to reflect increases or decreases in such costs. GULF's recovery of fuel costs is based upon a projection for six-months; any over/under recovery during such period is reflected in a subsequent six-month period with interest. GULF's recovery of purchased power capacity costs is based upon an annual projection; any over/under recovery during such period is reflected in a subsequent annual period with interest. The adjustment factors for MISSISSIPPI's retail and wholesale rates are levelized based on the estimated energy cost for the year, adjusted for any actual over/under collection from the previous year. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. Rate Proceedings Reference is made to Note 3 to each registrant's financial statements in Item 8 herein for a discussion of rate matters. For each registrant (except SAVANNAH), such Note 3 includes a discussion of proceedings initiated by the FERC concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on equity of 13.75% or greater. In 1995, GULF filed a petition with the Florida PSC seeking approval for an optional rate rider, which would be applicable to GULF's largest and most at-risk customers. For additional information, reference is made to GULF's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein. Integrated Resource Planning In 1991, the Georgia legislature passed certain legislation under which both GEORGIA and SAVANNAH must file Integrated Resource Plans for approval by the Georgia PSC. The plans must specify how GEORGIA and SAVANNAH each intends to meet the future electrical needs of their customers through a combination of demand-side and supply-side resources. The Georgia PSC must pre-certify these new resources. Once certified, all prudently incurred construction costs will be recoverable through rates. By orders issued in 1992 and by amended orders issued in 1995, the Georgia PSC approved Integrated Resource Plans for both GEORGIA and SAVANNAH. (See Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for information regarding GEORGIA's demand-side option programs and Note 3 to SAVANNAH's financial statements for information regarding SAVANNAH's demand-side option programs.) The Florida PSC has set energy conservation goals for GULF, which became effective in 1995, that require programs to reduce 154 megawatts of summer peak demand and 65,000 kilowatt-hours of sales by the year 2004. For additional information, reference is made to GULF's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein. Environmental Cost Recovery Plans GULF and MISSISSIPPI both have retail rate mechanisms that provide for recovery of environmental compliance costs. For a description of these plans, see Note 3 to GULF's and MISSISSIPPI's financial statements in Item 8 herein. I-16
Employee Relations The companies of the SOUTHERN system had a total of 31,882 employees on their payrolls at December 31, 1995. ------------------------------------------------- Employees at December 31, 1995 ----------------------- ALABAMA 7,261 GEORGIA 11,061 GULF 1,501 MISSISSIPPI 1,421 SAVANNAH 584 SCS 3,207 Southern Nuclear 1,298 Communications 78 Southern Development 41 SEI* 5,430 ------------------------------------------------- Total 31,882 ================================================= *Includes 4,977 employees on international payrolls. The operating affiliates have separate agreements with local unions of the IBEW generally covering wages, working conditions and procedures for handling grievances and arbitration. These agreements apply with certain exceptions to operating, maintenance and construction employees. ALABAMA has agreements with the IBEW on a three-year contract extending to August 15, 1998. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. GEORGIA has an agreement with the IBEW covering wages and working conditions, which is in effect through June 30, 1996, and is currently in negotiations with respect to such agreement. GEORGIA also has a contract with the United Plant Guard Workers of America with respect to Plant Hatch which extends through September 30, 1998. GULF has an agreement with the IBEW on a three-year contract extending to August 15, 1998. In July 1995, MISSISSIPPI and the IBEW began negotiating changes to the contract which extended to August 16, 1995. Due to ongoing negotiations, the parties agreed to extend the contract beyond August 16, 1995. Discussions continued into 1996, with union ratification in March. Southern Nuclear has an agreement with the IBEW on a three-year contract extending to August 15, 1998. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. The agreements also subject the terms of the pension plans for the companies discussed above to collective bargaining with the unions at five-year intervals. SAVANNAH has three-year labor agreements with the IBEW and the Office and Professional Employees International Union that expire April 16, 1996 and December 1, 1996, respectively. SAVANNAH is currently in negotiations with the IBEW. SEI has agreements with local unions of the IBEW and the United Paperworkers International Union which covers employees of Mobile Energy. These agreements extend to May 31, 1997. I-17
Item 2. PROPERTIES Electric Properties The operating affiliates and SEGCO, at December 31, 1995, operated 33 hydroelectric generating stations, 32 fossil fuel generating stations and three nuclear generating stations. The amounts of capacity owned by each company are shown in the table below. ------------------------------------------------------------ Nameplate Generating Station Location Capacity (1) ------------------------------------------------------------ (Kilowatts) Fossil Steam Gadsden Gadsden, AL 120,000 Gorgas Jasper, AL 1,221,250 Barry Mobile, AL 1,525,000 Chickasaw Chickasaw, AL 40,000 Greene County Demopolis, AL 300,000 (2) Gaston Unit 5 Wilsonville, AL 880,000 Miller Birmingham, AL 2,532,288 (3) --------- ALABAMA Total 6,618,538 --------- Arkwright Macon, GA 160,000 Atkinson Atlanta, GA 180,000 Bowen Cartersville, GA 3,160,000 Branch Milledgeville, GA 1,539,700 Hammond Rome, GA 800,000 McDonough Atlanta, GA 490,000 McManus Brunswick, GA 115,000 Mitchell Albany, GA 170,000 Scherer Macon, GA 750,924 (4) Wansley Carrollton, GA 925,550 (5) Yates Newnan, GA 1,250,000 --------- GEORGIA Total 9,541,174 --------- Crist Pensacola, FL 1,045,000 Lansing Smith Panama City, FL 305,000 Scholz Chattahoochee, FL 80,000 Daniel Pascagoula, MS 500,000 (6) Scherer Unit 3 Macon, GA 204,500 (4) --------- GULF Total 2,134,500 --------- Eaton Hattiesburg, MS 67,500 Sweatt Meridian, MS 80,000 Watson Gulfport, MS 1,012,000 Daniel Pascagoula, MS 500,000 (6) Greene County Demopolis, AL 200,000 (2) ----------- MISSISSIPPI Total 1,859,500 ----------- ---------------------------------------------------------------- ---------------------------------------------------------------- Nameplate Generating Station Location Capacity ---------------------------------------------------------------- (Kilowatts) McIntosh Effingham County, GA 163,117 Kraft Port Wentworth, GA 281,136 Riverside Savannah, GA 102,278 ------------ SAVANNAH Total 546,531 ------------ Gaston Units 1-4 Wilsonville, AL (SEGCO) 1,000,000 (7) ------------ Total Fossil Steam 21,700,243 ------------ Nuclear Steam Farley Dothan, AL (ALABAMA) 1,720,000 ------------ Hatch Baxley, GA 816,630 (8) Vogtle Augusta, GA 1,060,240 (9) ------------ GEORGIA Total 1,876,870 ------------ Total Nuclear Steam 3,596,870 ------------ Combustion Turbines Greene County Demopolis, AL (ALABAMA) 400,000 ----------- Arkwright Macon, GA 30,580 Atkinson Atlanta, GA 78,720 Bowen Cartersville, GA 39,400 McDonough Atlanta, GA 78,800 McIntosh Units 1,2,3,4,7,8 Effingham County, GA 480,000 McManus Brunswick, GA 481,700 Mitchell Albany, GA 118,200 Robins Warner Robins, GA 160,000 Wilson Augusta, GA 354,100 Wansley Carrollton, GA 26,322 (5) ----------- GEORGIA Total 1,847,822 ----------- Lansing Smith Unit A (GULF) Panama City, FL 39,400 Chevron Cogenerating Station Pascagoula, MS 147,292 (10) Sweatt Meridian, MS 39,400 Watson Gulfport, MS 39,360 ----------- MISSISSIPPI Total 226,052 ----------- Boulevard Savannah, GA 59,100 Kraft Port Wentworth, GA 22,000 McIntosh Units 5&6 Effingham County, GA 160,000 ----------- SAVANNAH Total 241,100 ----------- ---------------------------------------------------------------- I-18
---------------------------------------------------------------- Nameplate Generating Station Location Capacity ---------------------------------------------------------------- (Kilowatts) Gaston (SEGCO) Wilsonville, AL 19,680 (7) ----------- Total Combustion Turbines 2,774,054 ----------- Hydroelectric Facilities Weiss Leesburg, AL 87,750 Henry Ohatchee, AL 72,900 Logan Martin Vincent, AL 128,250 Lay Clanton, AL 177,000 Mitchell Verbena, AL 170,000 Jordan Wetumpka, AL 100,000 Bouldin Wetumpka, AL 225,000 Harris Wedowee, AL 135,000 Martin Dadeville, AL 154,200 Yates Tallassee, AL 32,000 Thurlow Tallassee, AL 58,000 Lewis Smith Jasper, AL 157,500 Bankhead Holt, AL 45,125 Holt Holt, AL 40,000 ---------- ALABAMA Total 1,582,725 ---------- Barnett Shoals (Leased) Athens, GA 2,800 Bartletts Ferry Columbus, GA 173,000 Goat Rock Columbus, GA 26,000 Lloyd Shoals Jackson, GA 14,400 Morgan Falls Atlanta, GA 16,800 North Highlands Columbus, GA 29,600 Oliver Dam Columbus, GA 60,000 Rocky Mountain Rome, GA 215,256 (11) Sinclair Dam Milledgeville, GA 45,000 Tallulah Falls Clayton, GA 72,000 Terrora Clayton, GA 16,000 Tugalo Clayton, GA 45,000 Wallace Dam Eatonton, GA 321,300 Yonah Toccoa, GA 22,500 6 Other Plants 18,080 ----------- GEORGIA Total 1,077,736 ----------- Total Hydroelectric Facilities 2,660,461 ----------- Total Generating Capacity 30,731,628 =========== --------------------------------------------------------------- Notes: (1) For additional information regarding facilities jointly-owned with non-affiliated parties, see Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein. (2) Owned by ALABAMA and MISSISSIPPI as tenants in common in the proportions of 60% and 40%, respectively. (3) Excludes the capacity owned by AEC. (4) Capacity shown for GEORGIA is 8.4% of Units 1 and 2 and 75% of Unit 3. Capacity shown for GULF is 25% of Unit 3. (5) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity. (6) Represents 50% of the plant which is owned as tenants in common by GULF and MISSISSIPPI. (7) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS herein.) (8) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity. (9) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity. (10) Generation is dedicated to a single industrial customer. (11) Capacity shown is GEORGIA's portion (25.4%) of total plant capacity. OPC operates the plant. Except as discussed below under "Titles to Property," the principal plants and other important units of the SOUTHERN system are owned in fee by the operating affiliates and SEGCO. It is the opinion of management of each such company that its operating properties are adequately maintained and are substantially in good operating condition. MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is leased to Gulf States. The line, completed in 1984, extends from Plant Daniel to the Louisiana state line. Gulf States is paying a use fee over a forty-year period covering all expenses and the amortization of the original $57 million cost of the line. The all-time maximum demand on the SOUTHERN system was 27,419,700 kilowatts and occurred in August 1995. This amount excludes demand served by capacity retained by MEAG and Dalton and excludes demand associated with power purchased from OPC and SEPA by its preference customers. At that time, 29,596,100 kilowatts were supplied by SOUTHERN system generation and 2,176,400 kilowatts (net) were sold to other parties through net purchased and interchanged power. The reserve margin for the Southern electric system at that time was 9.4%. For additional information on peak demands, reference is made to Item 6 SELECTED FINANCIAL DATA herein. I-19
ALABAMA and GEORGIA will incur significant costs in decommissioning their nuclear units at the end of their useful lives. (See Item 1 - BUSINESS "Regulation - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein.) Other Electric Generation Facilities Through special purpose subsidiaries, SOUTHERN owns interests in or operates independent power production facilities and foreign utility companies. The generating capacity of these utilities (or facilities) at December 31, 1995, was as follows: <TABLE> <CAPTION> Facilities in Operation - - -------------------------------------------------------------------------------------------------------------- Megawatts of Capacity ------------------------ Percent Facility Location Units Owned Operated Ownership Type - - ----------------- ---------------------- ------- ----------- ------------ ------------- ----------------- <S> <C> <C> <C> <C> <C> <C> Alicura Argentina 4 551 (1) 1,000 55.14 (1) Hydro Edelnor Chile 27 55 86 65.00 Oil Edelnor Chile 2 7 10 65.00 Hydro Freeport Grand Bahamas 5 56 113 50.00 Oil & Gas Goodyear New York 1 - 50 - Coal (2) Kalaeloa Hawaii 1 60 180 33.33 Oil (2) Las Vegas Nevada 1 - 50 - Gas (2) Mobile Energy Alabama 3 111 111 100.00 Waste/Biomass (2) Penal Trinidad and Tobago 5 92 236 39.00 Gas Port of Spain Trinidad and Tobago 6 120 308 39.00 Gas Pt. Lisas Trinidad and Tobago 10 247 634 39.00 Gas SWEB United Kingdom 8 144 - 7.70 Gas SWEB United Kingdom 13 19 19 100.00 Oil & Gas SWEB United Kingdom 3 8 8 38.27 Wind ============================================================================================================== Total Capacity 1,470 2,805 ============================================================================================================== </TABLE> <TABLE> <CAPTION> Facilities Under Development - - -------------------------------------------------------------------------------------------------------------- Megawatts of Capacity ------------------------- Percent Facility Location Own Operate Ownership Type - - ----------------- ----------------------- ------------ ------------ ---------------- ----------------- <S> <C> <C> <C> <C> <C> Birchwood Virginia 110 220 50.00 Coal (2) Edelnor Chile 208 320 65.00 Coal ============================================================================================================== Total Capacity 318 540 ============================================================================================================== Notes: (1) Represents megawatts of capacity under a concession agreement expiring in the year 2023. (2) Cogeneration facility. </TABLE> I-20
Jointly-Owned Facilities ALABAMA and GEORGIA have sold and GEORGIA has purchased undivided interests in certain generating plants and other related facilities to or from non-affiliated parties. The percentages of ownership resulting from these transactions are as follows: <TABLE> <CAPTION> Percentage Ownership Total ------------------------------------------------- Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FPC ----------- ------------------------------------------------- (Megawatts) <S> <C> <C> <C> <C> <C> <C> <C> <C> Plant Miller Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -% Plant Hatch 1,630 - - 50.1 30.0 17.7 2.2 - Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 - Plant Scherer Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 - Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 - Rocky Mountain 848 - - 25.4 74.6 - - - Intercession City, FL 150 - - 33.3* - - - 66.7 - - ----------------------------------------------------------------------------------- *Estimated ownership at completion. </TABLE> ALABAMA and GEORGIA have contracted to operate and maintain the respective units in which each has an interest (other than Rocky Mountain and Intercession City, as described below) as agent for the joint owners. In connection with the joint ownership arrangements for Plant Vogtle, GEORGIA has remaining commitments to purchase declining fractions of MEAG's capacity and energy until December 1996 for Unit 2 and, with regard to a portion of a 5% interest owned by MEAG, until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether any capacity is available. The energy cost is a function of each unit's variable operating costs. Except for the portion of the capacity payments related to the 1987 and 1990 write-offs of Plant Vogtle costs, the cost of such capacity and energy is included in purchased power from non-affiliates in GEORGIA's Statements of Income in Item 8 herein. In December 1988, GEORGIA and OPC entered into a joint ownership agreement for the Rocky Mountain plant under which GEORGIA agreed to retain its present investment in the project and OPC agreed to finance, complete and operate the facility. The plant went into commercial operation in 1995. GEORGIA's net investment in the plant is approximately $190 million, and GEORGIA's ownership is 25.4 percent. Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for additional information regarding the Rocky Mountain plant. In 1994, GEORGIA and FPC entered into a joint ownership agreement regarding the Intercession City combustion turbine unit. The unit is scheduled to be in commercial operation by the end of 1996, and will be constructed, operated, and maintained by FPC. GEORGIA will have a one-third interest in the 150-megawatt unit, with use of 100% of the capacity from June through September. FPC will have the capacity the remainder of the year. GEORGIA's investment in the unit at completion is estimated to be $14 million. Also, GEORGIA entered into a separate four-year purchase power contract with FPC. Beginning in 1996, GEORGIA will purchase 400 megawatts of capacity. In 1998, this amount will decline to 200 megawatts for the remaining two years. Sale of Property Reference is made to Note 6 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for information regarding the sale completed in 1995 of GEORGIA's remaining ownership interest in Plant Scherer Unit 4. I-21
Titles to Property The operating affiliates' and SEGCO's interests in the principal plants (other than certain pollution control facilities, one small hydroelectric generating station leased by GEORGIA and the land on which four combustion turbine generators of MISSISSIPPI are located, which is held by easement) and other important units of the respective companies are owned in fee by such companies, subject only to the liens of applicable mortgage indentures (except for SEGCO) and to excepted encumbrances as defined therein. The operating affiliates own the fee interests in certain of their principal plants as tenants in common. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) Properties such as electric transmission and distribution lines and steam heating mains are constructed principally on rights-of-way which are maintained under franchise or are held by easement only. A substantial portion of lands submerged by reservoirs is held under flood right easements. In substantially all of its coal reserve lands, SEGCO owns or will own the coal only, with adequate rights for the mining and removal thereof. Property Additions and Retirements During the period from January 1, 1991 to December 31, 1995, the operating affiliates, SEGCO, SCS, Southern Nuclear, Communications and SEI recorded gross property additions and retirements as follows: ================================================== Gross Property Additions Retirements --------------- ------------- (in millions) ALABAMA (1) $2,290 $ 357 GEORGIA (2) 2,850 1,864 GULF 350 125 MISSISSIPPI 433 82 SAVANNAH 179 16 SEGCO 60 14 SCS 111 122 Southern Nuclear 17 4 Communications 162 - SEI 154 6 - - -------------------------------------------------- SOUTHERN system $6,606 $2,590 ================================================== Notes: (1) Includes approximately $62 million attributable to sale of 8.2% interest in Plant Miller Units 1 and 2 to AEC in 1992. (2) Includes approximately $691 million attributable to 1991 through 1995 sales of Plant Scherer Unit 4 to FP&L and JEA. I-22
Item 3. LEGAL PROCEEDINGS (1) Stepak v. certain SOUTHERN officials (U.S. District Court for the Southern District of Georgia) Reference is made to Note 3 to SOUTHERN's financial statements in Item 8 herein under the caption "Stockholder Suit." (2) SOUTHERN and Subsidiaries v. Commissioner of the IRS (U.S. Tax Court) In June 1994, a tax deficiency notice was received from the IRS for the years 1984 through 1987 with regard to the tax accounting by GEORGIA for the sale in 1984 of an interest in Plant Vogtle and related capacity and energy buyback commitments. The potential tax deficiency and interest arising from this issue currently amount to approximately $25 million and $31 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid; therefore, only the interest portion could affect future income. Management believes that the IRS position is incorrect, and GEORGIA has filed a petition with the U.S. Tax Court challenging the IRS's position. In order to minimize additional interest charges should the IRS's position prevail, GEORGIA made a payment to the IRS related to the potential tax deficiency in September 1994. (3) ALABAMA, GEORGIA and MISSISSIPPI v. TVA, et al. (U.S. District Court for the Northern District of Alabama) On January 12, 1996, ALABAMA, GEORGIA and MISSISSIPPI filed an action seeking to enjoin the TVA from violating a 1959 act which prohibits the TVA from selling power outside the area that was being served by it in 1957. LG&E Power Marketing, Inc. (LPM), also a defendant, has entered into an agreement with TVA for the sale of power purchased by LPM from TVA to organizations outside the TVA's statutorily defined service territory, which the plaintiffs contend is in violation of the 1959 act. (4) GEORGIA has been designated as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act with respect to a site in Brunswick, Georgia. Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein under the captions "Georgia Power Potentially Responsible Party Status" and "Certain Environmental Contingencies," respectively. See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation - - - Federal Power Act" and "Rate Matters" as well as Note 3 to each registrant's financial statements in Item 8 herein for a description of certain other administrative and legal proceedings discussed therein. Additionally, each of the operating affiliates, SEI, SCS, Southern Nuclear, Southern Development and Communications are, in the normal course of business, engaged in litigation or administrative proceedings that include, but are not limited to, acquisition of property, injuries and damages claims, and complaints by present and former employees. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. I-23
EXECUTIVE OFFICERS OF SOUTHERN (Identification of executive officers of SOUTHERN is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 1995. A. W. Dahlberg Chairman, President and Chief Executive Officer Age 55 Elected in 1985; President and Chief Executive Officer of GEORGIA from 1988 through 1993. He was elected Executive Vice President of SOUTHERN in 1991. He was elected President of SOUTHERN effective January 1994. He was elected Chairman and Chief Executive Officer effective March 1995. Paul J. DeNicola Executive Vice President and Director Age 47 Elected in 1989; Executive Vice President of SOUTHERN since 1991. Elected President and Chief Executive Officer of SCS effective January 1994. He previously served as Executive Vice President of SCS from 1991 to 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. H. Allen Franklin Executive Vice President and Director Age 51 Elected in 1988; President and Chief Executive Officer of SCS from 1988 through 1993 and, beginning 1991, Executive Vice President of SOUTHERN. He was elected President and Chief Executive Officer of GEORGIA effective January 1994. Elmer B. Harris Executive Vice President and Director Age 56 Elected in 1989; President and Chief Executive Officer of ALABAMA since 1989 and, beginning 1991, Executive Vice President of SOUTHERN. David M. Ratcliffe Senior Vice President Age 47 Elected in 1995; President and Chief Executive Officer of MISSISSIPPI from 1991 to 1995. He also serves as Executive Vice President of SCS beginning in 1995 and previously held that position from 1989 to 1991. W. L. Westbrook Financial Vice President, Chief Financial Officer and Treasurer Age 56 Elected in 1986; responsible primarily for all aspects of financing for SOUTHERN. He has served as Executive Vice President of SCS since 1986. Thomas G. Boren Vice President Age 46 Elected in 1995; President and Chief Executive Officer of SEI since 1992. He previously served as Senior Vice President of GEORGIA from 1989 to 1992. Bill M. Guthrie Vice President Age 62 Elected in 1991; serves as Chief Production Officer for the SOUTHERN system. Senior Executive Vice President of SCS effective January 1994 and Executive Vice President of ALABAMA since 1988. He also serves as Executive Vice President of GEORGIA and Vice President of GULF, MISSISSIPPI and SAVANNAH. W. G. Hairston, III Age 51 President and Chief Executive Officer of Southern Nuclear since 1993. He has also served as Executive Vice President of GEORGIA since 1989. Each of the above is currently an officer of SOUTHERN, except Mr. Hairston, serving a term running from the last annual meeting of the directors (July 17, 1995) for one year until the next annual meeting or until his successor is elected and qualified. I-24
PART II Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The common stock of SOUTHERN is listed and traded on the New York Stock Exchange. The stock is also traded on regional exchanges across the United States. High and low stock prices, per the New York Stock Exchange Composite Tape and as adjusted to reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994, during each quarter for the past two years were as follows: ------------------------------------------ High Low ----------- -------- 1995 First Quarter $21-1/2 $19-3/8 Second Quarter 22-7/8 20-1/8 Third Quarter 24 21-1/8 Fourth Quarter 25 22-3/4 1994 First Quarter $22 $18-1/2 Second Quarter 20-1/2 17-3/4 Third Quarter 20 17 Fourth Quarter 21 18-1/4 ------------------------------------------- There is no market for the other registrants' common stock, all of which is owned by SOUTHERN. On February 29, 1996, the closing price of SOUTHERN's common stock was $23-7/8. (b) Number of SOUTHERN's common stockholders at December 31, 1995: 225,739 Each of the other registrants have one common stockholder, SOUTHERN. (c) Dividends on each registrant's common stock are payable at the discretion of their respective board of directors. The dividends on common stock paid and/or declared by SOUTHERN and the operating affiliates to their stockholder(s) for the past two years were as follows: (in thousands) ---------------------------------------------------- Registrant Quarter 1995 1994 ---------------------------------------------------- SOUTHERN First $201,866 $191,262 Second 203,060 191,262 Third 203,061 191,475 Fourth 203,178 192,758 ALABAMA First 71,900 66,500 Second 69,500 67,000 Third 69,300 66,900 Fourth 74,300 67,600 GEORGIA First 113,900 106,600 Second 110,200 107,200 Third 109,700 107,200 Fourth 117,700 108,300 GULF First 11,700 10,900 Second 11,300 11,000 Third 11,300 11,000 Fourth 12,100 11,100 MISSISSIPPI First 9,900 8,500 Second 9,600 8,500 Third 9,600 8,500 Fourth 10,300 8,600 SAVANNAH First 4,400 4,100 Second 4,300 4,100 Third 4,300 4,100 Fourth 4,600 4,000 ---------------------------------------------------- In January 1994, SOUTHERN's board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price have been adjusted to reflect the stock distribution. II-1
The dividend paid per share by SOUTHERN was 29.5(cent) for each quarter of 1994 and 30.5(cent) for each quarter of 1995. The dividend paid on SOUTHERN's common stock for the first quarter of 1996 was raised to 31.5(cent) per share. The amount of dividends on their common stock that may be paid by the subsidiary registrants is restricted in accordance with their respective first mortgage bond indenture and charter. The amounts of earnings retained in the business and the amounts restricted against the payment of cash dividends on common stock at December 31, 1995, were as follows: - - --------------------------------------------- Retained Restricted Earnings Amount -------------------------- (in millions) ALABAMA $1,161 $ 807 GEORGIA 1,570 897 GULF 180 101 MISSISSIPPI 157 118 SAVANNAH 105 62 Consolidated 3,483 1,990 - - --------------------------------------------- Item 6. SELECTED FINANCIAL DATA SOUTHERN. Reference is made to information under the heading "Selected Consolidated Financial and Operating Data," contained herein at pages II-39 through II-50. ALABAMA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-79 through II-92. GEORGIA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-126 through II-140. GULF. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-170 through II-183. MISSISSIPPI. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-210 through II-223. SAVANNAH. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-246 through II-258. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SOUTHERN. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-8 through II-15. ALABAMA. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-54 through II-60. GEORGIA. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-96 through II-103. GULF. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-144 through II-151. MISSISSIPPI. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-187 through II-193. SAVANNAH. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-227 through II-232. II-2
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO 1995 FINANCIAL STATEMENTS <TABLE> <S> <C> Page The Southern Company and Subsidiary Companies: Report of Independent Public Accountants................................................................................ II-7 Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993.................................. II-16 Consolidated Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993...................................................................................... II-16 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993.............................. II-17 Consolidated Balance Sheets at December 31, 1995 and 1994............................................................... II-18 Consolidated Statements of Capitalization at December 31, 1995 and 1994................................................. II-20 Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1995, 1994 and 1993......................... II-21 Notes to Financial Statements........................................................................................... II-22 ALABAMA: Report of Independent Public Accountants .............................................................................. II-53 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................... II-61 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................... II-62 Balance Sheets at December 31, 1995 and 1994............................................................................ II-63 Statements of Capitalization at December 31, 1995 and 1994.............................................................. II-65 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993.................................... II-66 Notes to Financial Statements........................................................................................... II-67 GEORGIA: Report of Independent Public Accountants................................................................................ II-95 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................... II-104 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................... II-105 Balance Sheets at December 31, 1995 and 1994............................................................................ II-106 Statements of Capitalization at December 31, 1995 and 1994.............................................................. II-108 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993.................................... II-109 Statements of Paid-In Capital for the Years Ended December 31, 1995, 1994 and 1993...................................... II-109 Notes to Financial Statements........................................................................................... II-110 GULF: Report of Independent Public Accountants................................................................................ II-143 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................... II-152 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................... II-153 Balance Sheets at December 31, 1995 and 1994............................................................................ II-154 Statements of Capitalization at December 31, 1995 and 1994.............................................................. II-156 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993.................................... II-158 Statements of Paid-In Capital for the Years Ended December 31, 1995, 1994 and 1993...................................... II-158 Notes to Financial Statements........................................................................................... II-159 II-3
Page MISSISSIPPI: Report of Independent Public Accountants................................................................................ II-186 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................... II-194 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................... II-195 Balance Sheets at December 31, 1995 and 1994............................................................................ II-196 Statements of Capitalization at December 31, 1995 and 1994.............................................................. II-198 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993.................................... II-199 Statements of Paid-In Capital for the Years Ended December 31, 1995, 1994 and 1993...................................... II-199 Notes to Financial Statements........................................................................................... II-200 SAVANNAH: Report of Independent Public Accountants................................................................................ II-226 Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................... II-233 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993.................................... II-233 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................... II-234 Balance Sheets at December 31, 1995 and 1994............................................................................ II-235 Statements of Capitalization at December 31, 1995 and 1994.............................................................. II-237 Notes to Financial Statements........................................................................................... II-238 </TABLE> Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-4
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES FINANCIAL SECTION II-5
MANAGEMENT'S REPORT The Southern Company and Subsidiary Companies 1995 Annual Report The management of The Southern Company has prepared -- and is responsible for -- the consolidated financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The company's system of internal accounting controls is evaluated on an ongoing basis by the company's internal audit staff. The company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of five directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the company's operations are conducted according to a high standard of business ethics. In management's opinion, the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of The Southern Company and its subsidiary companies in conformity with generally accepted accounting principles. /s/ A. W. Dahlberg A. W. Dahlberg Chairman, President, and Chief Executive Officer /s/ W. L. Westbrook W. L. Westbrook Financial Vice President, Chief Financial Officer, and Treasurer February 21, 1996 II-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and to the Stockholders of The Southern Company: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of The Southern Company (a Delaware corporation) and subsidiary companies as of December 31, 1995 and 1994, and the related consolidated statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-16 through II-38) referred to above present fairly, in all material respects, the financial position of The Southern Company and subsidiary companies as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Southern Company and Subsidiary Companies 1995 Annual Report RESULTS OF OPERATIONS Earnings and Dividends This year's financial performance continues to support The Southern Company's goal to become America's Best Diversified Utility. The core business of selling electricity in the Southeast remained strong, while the non-core business expanded both internationally and domestically. The financial results for 1995 demonstrate a very successful year with several records being set. Net income of $1.1 billion and earnings per share of $1.66 for 1995 both established record highs. Southern Company common stock reached an all-time high closing price of 24 5/8, surpassing the previous record of 23 3/8 set in 1993. Continued cost controls and the strong demand for electricity were the dominant forces that favorably affected earnings in 1995. Costs related to the work force reduction programs implemented in 1995 and 1994 decreased earnings by 2 cents and 9 cents per share, respectively. These costs are expected to be recovered through future savings in approximately two years following each program's implementation. Additional non-operating or non-recurring items affected earnings in 1995 and 1994. After excluding these items in both years, 1995 earnings from operations were $1.1 billion -- or $1.71 per share -- an increase of $108 million compared with 1994. The non-operating items that affected earnings were as follows: Consolidated Earnings Net Income Per Share --------------- ---------------- 1995 1994 1995 1994 --------------- ---------------- (in millions) Earnings as reported $1,103 $ 989 $1.66 $1.52 - - --------------------------------------------------------------------- Work force reduction programs 17 61 .02 .09 Sale of facilities (12) (28) (.02) (.04) Demand-side costs 17 - .03 - Environmental cleanup 5 5 .01 .01 Miscellaneous 5 - .01 - - - --------------------------------------------------------------------- Total non-operating 32 38 .05 .06 - - --------------------------------------------------------------------- Earnings from operations $1,135 $1,027 $1.71 $1.58 ===================================================================== Amount and percent change $108 10.6% $0.13 8.2% - - --------------------------------------------------------------------- In 1995, non-operating items -- both positive and negative -- had an impact on earnings, which resulted in a net reduction of $32 million. These items were: (1) Costs associated with work force reduction programs implemented primarily in 1995 decreased earnings. (2) The last in a series of four separate transactions to sell Plant Scherer Unit 4 to two Florida utilities increased earnings. (3) Georgia Power's demand-side conservation costs that were not recovered from customers decreased earnings. (4) Environmental-cleanup costs decreased earnings. In 1994, earnings were $989 million or $1.52 per share -- down 5 cents from the per share amount reported in 1993. Earnings in 1994 were significantly affected by costs related to work force reduction programs and milder than normal temperatures. Dividends paid on common stock during 1995 were $1.22 per share or 30 1/2 cents per quarter. During 1994 and 1993, dividends paid per share were $1.18 and $1.14, respectively. In January 1996, The Southern Company board of directors raised the quarterly dividend to 31 1/2 cents per share or an annual rate of $1.26 per share. Acquisitions Southern Electric International (Southern Electric) owns and manages international and domestic non-core businesses for The Southern Company. Southern Electric acquired several businesses in late 1994 and in 1995. These businesses have been included in the consolidated statements of income since the date of acquisition and not reflected in prior periods. These acquisitions account for a significant portion of the amount of change in revenues and certain expenses from year to year. Therefore to facilitate discussing the results of operations, Southern Electric's 1995 variances are shown separately. These variances are predominantly acquisition related and require no further explanation. II-8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Revenues Operating revenues increased in 1995 and decreased in 1994 as a result of the following factors: Increase (Decrease) From Prior Year ------------------------------ 1995 1994 1993 ------------------------------ Retail -- (in millions) Change in base rates $ - $ 3 $ 3 Sales growth 177 153 104 Weather 143 (177) 198 Fuel cost recovery and other 134 (107) 199 ------------------------------------------------------------- Total retail 454 (128) 504 ------------------------------------------------------------- Sales for resale -- Within service area 39 (87) 38 Outside service area (90) (108) (184) ------------------------------------------------------------- Total sales for resale (51) (195) (146) Southern Electric 458 131 54 Other operating revenues 22 - 4 ------------------------------------------------------------- Total operating revenues $883 $(192) $ 416 ============================================================= Percent change 10.6% (2.3)% 5.2% ------------------------------------------------------------- Retail revenues of $7.6 billion in 1995 increased 6.4 percent from last year, compared with a decrease of 1.8 percent in 1994. Under fuel cost recovery provisions, fuel revenues generally equal fuel expense -- including the fuel component of purchased energy -- and do not affect net income. Sales for resale revenues within the service area were $399 million in 1995, up 11 percent from the prior year. This increase resulted primarily from the prolonged hot summer weather, which increased the demand for electricity. Revenues from sales for resale within the service area were $360 million in 1994, down 19 percent from the prior year. The decrease resulted from certain municipalities and cooperatives in the service area retaining more of their own generation at facilities jointly owned with Georgia Power. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. 1995 1994 1993 --------------------------------- (in millions) Capacity $237 $276 $350 Energy 151 176 230 ------------------------------------------------------ Total $388 $452 $580 ====================================================== Capacity revenues decreased in 1995 and 1994 because the amount of capacity under contract declined, as scheduled, by some 100 megawatts and 400 megawatts, respectively. Additional declines in capacity are not scheduled until after 1999. Changes in revenues are influenced heavily by the amount of energy sold each year. Kilowatt-hour sales for 1995 and the percent change by year were as follows: Percent Change ---------------------------- (billions of Amount kilowatt-hours) 1995 1995 1994 1993 ------------- ---------------------------- Residential 39.1 9.2% (2.6)% 9.5% Commercial 35.9 5.5 3.8 5.9 Industrial 51.7 2.7 3.2 1.9 Other 0.9 2.1 3.8 4.6 ----------- Total retail 127.6 5.4 1.6 5.3 Sales for resale -- Within service area 9.5 16.2 (38.5) 9.5 Outside service area 9.1 (15.1) (13.5) (25.2) ----------- Total 146.2 4.4 (3.4) 2.1 =================================================================== The rate of increase in 1995 retail energy sales was fostered by the impact of weather. Residential energy sales surged upward as a result of hotter-than-normal summer weather in 1995, compared with the extremely mild summer of 1994. Commercial and industrial sales continue to show moderate gains in excess of the national average. This reflects the strength of business and economic conditions in The Southern Company's service area. Energy sales to retail customers are projected to increase at an average annual rate of 1.9 percent during the period 1996 through 2006. Energy sales for resale outside the service area are predominantly unit power sales under long-term contracts to Florida utilities. Economy sales and amounts sold under short-term contracts are also sold for resale outside the service area. Sales to customers outside the service area continued to decrease in 1995 and 1994, primarily as a result of the scheduled decline in megawatts of capacity under contract. II-9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Expenses Total operating expenses of $7.3 billion for 1995 increased $712 million compared with the prior year. Core business expenses increased $322 million, and Southern Electric comprised the remainder. The costs to produce and deliver electricity for the core business in 1995 increased by $120 million to meet higher energy demands. Depreciation expenses and property taxes increased by $78 million as a result of additional utility plant being placed into service. The amortization of deferred expenses related to Plant Vogtle increased by $49 million in 1995 when compared with the prior year. For additional information concerning Plant Vogtle, see Note 1 to the financial statements under "Plant Vogtle Phase-In Plans." In 1994, operating expenses of $6.6 billion declined 2.1 percent compared with 1993. The decrease was attributable to less energy being sold. Total production costs were down $297 million. However, costs related to the 1994 work force reduction programs increased operating expenses by $100 million. Also, a $39 million increase in the amortization of deferred Plant Vogtle expenses compared with the amount in 1993 contributed to offset the decrease in operating expenses. Fuel costs constitute the single largest expense for The Southern Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated -- within the core business service area -- were as follows: 1995 1994 1993 --------------------------- Total generation (billions of kilowatt-hours) 147 142 144 Sources of generation (percent) -- Coal 77 75 78 Nuclear 17 19 17 Hydro 4 5 4 Oil and gas 2 1 1 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.73 1.80 1.90 Nuclear 0.56 0.56 0.54 Oil and gas 3.37 3.99 4.34 Total 1.53 1.56 1.67 - - -------------------------------------------------------------- Fuel and purchased power costs of $2.6 billion in 1995 increased $282 million compared with 1994. Core business increased $73 million and Southern Electric increased $209 million. The operating companies' customer demand for electricity rose by 4.7 billion kilowatt-hours more than in 1994. The additional cost to meet the demand was offset slightly by a lower average cost of fuel per net kilowatt-hour generated. Fuel and purchased power expenses of $2.3 billion in 1994 decreased 10 percent compared with the prior year because of lower energy demands and a lower average cost of fuel per net kilowatt-hour generated. For 1995, income taxes increased $84 million compared with the prior year. Core business income taxes increased $65 million, and Southern Electric accounted for the remainder. The increase was attributable to additional taxable income from operations. For 1994, income taxes rose $8 million or 1.3 percent above the amount reported for 1993. The increase resulted primarily from the sale of interests in generating plant facilities. Total gross interest charges and preferred stock dividends increased $39 million from amounts reported in the previous year. These costs for core business continued to decline by $12 million, but Southern Electric interest charges increased by $51 million. The decline is attributable to lower interest rates and continued refinancing activities in 1995. In 1994, these costs were $765 million -- down $66 million or 8.0 percent. As a result of favorable market conditions, $1.1 billion in 1995, $1.0 billion in 1994, and $3.0 billion in 1993 of senior securities were issued for the primary purpose of retiring higher-cost securities. Effects of Inflation The Southern Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on The Southern Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. II-10
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated more competitive environment, with non-core business becoming more significant. Work force reduction programs were implemented in 1995 and 1994 that reduced earnings by $17 million and $61 million, respectively. These actions will assist in efforts to control growth in future operating expenses. Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Southern Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The Southern Company is aggressively working to maintain and expand its share of wholesale sales in the Southeastern power markets. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. New federal legislation is being discussed, and legislation allowing customer choice has already been introduced in Florida and Georgia. In order to address these initiatives, numerous questions must be resolved, with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless The Southern Company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability by seeking new markets that evolve with the changing regulation. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA). The amendment allows holding companies to form exempt wholesale generators and foreign utility companies to sell power largely free of regulation under PUHCA. These entities are able to sell power to affiliates -- under certain restrictions -- and to own and operate power generating facilities in other domestic and international markets. To take advantage of these opportunities, Southern Electric -- founded in 1981 -- is focusing on international and domestic cogeneration, the independent power market, and the privatization of generating and distribution facilities in the international market. In late 1995, South Western Electricity (SWEB) was acquired for approximately $1.8 billion. For additional information on this acquisition, see Note 14 to the financial statements. This British electric distribution utility and other investments made by Southern Electric should increase the opportunities for future earnings growth. At December 31, 1995, Southern Electric's total assets amounted to $5.0 billion. Demand-side options -- programs that enable customers to lower or alter their peak energy requirements -- have been implemented by some of the system operating companies and are a significant part of integrated resource planning. See Note 3 to the financial statements under "Georgia Power Demand-Side Conservation Programs" for information concerning the recovery of certain costs. Customers can receive cash incentives for participating in these programs as well as reduce their energy requirements. Besides promoting energy efficiency, another benefit of these programs could be the ability to defer the need to construct costly baseload generating facilities further into the future. Rates to retail customers served by the system operating companies are regulated by the respective state public service commissions in Alabama, Florida, Georgia, and Mississippi. Rates for Alabama Power and Mississippi Power are adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. See Note 3 to the financial statements for information about other retail and wholesale regulatory matters. II-11
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including The Southern Company's -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the Financial Accounting Standards Board (FASB) has decided to review the accounting for liabilities related to closure and removal of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of closing and removing The Southern Company's nuclear and other facilities may be required to be recorded as liabilities in the Consolidated Balance Sheets. Also, the annual provisions for such costs could increase. Because of the company's current ability to recover closure and removal costs through rates, these changes would not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. The Southern Company is involved in various matters being litigated. See Note 3 to the financial statements for information regarding material issues that could possibly affect future earnings. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The operating companies are subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of a company's operations is no longer subject to these provisions, the company would be required to write off related regulatory assets and liabilities, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Southern Company adopted the new rules January 1, 1996, with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in the utility industry. The FASB has issued Statement No. 123, Accounting for Stock-Based Compensation. This statement establishes a fair value based method of accounting for employee stock options. This method provides for a compensation cost to be charged to results of operations at the grant date. However, the statement allows companies to continue following the accounting prescribed by Accounting Principles Bulletin Opinion No. 25. Opinion No. 25 generally requires compensation cost to be recognized only for the excess of the quoted market price at the grant date over the price that an employee must pay to acquire the stock. The Southern Company has elected to continue with Opinion No. 25. FINANCIAL CONDITION Overview The Southern Company's financial condition continues to remain strong. Both earnings per share and market price per share set new record levels in 1995. Earnings from operations continued to increase in 1995 and exceeded $1.1 billion. Based on this performance, in January 1996, The Southern Company board of directors increased the common stock dividend for the fifth consecutive year. In 1995, Southern Electric acquired SWEB for approximately $1.8 billion. For more information on the purchase of this British electric distribution utility, see Note 14 to the financial statements. Another major change in The Southern Company's financial condition was gross property additions of $1.4 billion to utility plant. The majority of funds needed for gross property additions since 1992 have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Consolidated Statements of Cash Flows provide additional details. The Southern Company has a policy that financial derivatives are to be used only to mitigate business risks and not for speculative purposes. Derivatives have been used by the company on a very limited basis. At December 31, 1995, the credit risk for derivatives outstanding was not material. See Note 1 to the financial statements under "Financial Instruments" for additional information. II-12
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Capital Structure The Southern Company achieved a ratio of common equity to total capitalization - - -- including short-term debt -- of 42.4 percent in 1995, compared with 44.4 percent in 1994, and 43.8 percent in 1993. The company's goal is to maintain the common equity ratio generally within a range of 40 percent to 45 percent. During 1995, the subsidiary companies sold $375 million of first mortgage bonds and, through public authorities, $732 million of pollution control revenue bonds. The companies continued to reduce financing costs by retiring higher-cost bonds. Retirements, including maturities, of bonds totaled $1.3 billion during 1995, $973 million during 1994, and $2.5 billion during 1993. Retirements of preferred stock totaled $1 million a year during 1995 and 1994 and $516 million during 1993. As a result, the composite interest rate on long-term debt decreased from 8.2 percent at December 31, 1992, to 7.1 percent at December 31, 1995. During this same period, the composite dividend rate on preferred stock declined from 7.3 percent to 6.5 percent. In 1995, The Southern Company raised $174 million from the issuance of new common stock under the company's various stock plans. An additional $103 million of new common stock was issued through a public offering in early 1995. At the close of 1995, the company's common stock had a market value of 24 5/8 per share, compared with a book value of $13.10 per share. The market-to-book value ratio was 188 percent at the end of 1995, compared with 160 percent at year-end 1994 and 184 percent at year-end 1993. Capital Requirements for Construction The construction program of The Southern Company is budgeted at $1.5 billion for 1996, $1.4 billion for 1997, and $1.3 billion for 1998. The total is $4.2 billion for the three years. Actual construction costs may vary from this estimate because of changes in such factors as: business conditions; environmental regulations; nuclear plant regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures for the operating companies will be fully recovered. The operating companies do not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload facilities until well into the future. However, within the service area, the construction of combustion turbine peaking units of approximately 600 megawatts of capacity is planned to be completed by 1998 to meet increased peak-hour demands. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will be continuing. Other Capital Requirements In addition to the funds needed for the construction program, approximately $996 million will be required by the end of 1998 for present sinking fund requirements and maturities of long-term debt. Also, the subsidiaries will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- has significantly impacted The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and initially affected 28 generating units of The Southern Company. As a result of the company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. II-13
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report The Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by the installation of new control equipment at 22 of the original 28 affected generating units. Construction expenditures for Phase I compliance totaled approximately $320 million through 1995. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired units as required to meet Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy could require total estimated construction expenditures of approximately $150 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 1 percent in revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. A significant portion of costs related to the acid rain provision of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules - - -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state issued rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules required nitrogen oxide controls, above Title IV requirements, on some Georgia Power plants. The EPA along with 37 states is conducting studies to evaluate the benefits of regional controls in meeting the ozone standards. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions to meet the 1999 deadline in Atlanta or as part of any regional controls if enacted. A decision on new requirements is expected in 1997. Compliance with any new rules could result in significant additional costs. The actual impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study during 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Southern Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the subsidiaries could incur substantial costs to clean up properties. The subsidiaries conduct studies to determine the extent of II-14
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1995 Annual Report any required cleanup costs and have recognized in their respective financial statements costs to clean up known sites. These costs for The Southern Company amounted to $8 million, $8 million, and $41 million in 1995, 1994, and 1993, respectively. Additional sites may require environmental remediation for which the subsidiaries may be liable for a portion or all required cleanup costs. See Note 3 to the financial statements for information regarding Georgia Power's potentially responsible party status at a site in Bruswick, Georgia. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of The Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern Company. The impact of new legislation - - -- if any --will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital The Southern Company may require additional equity capital in 1996. The amount and timing of additional equity capital to be raised in 1996 -- as well as in subsequent years -- will be contingent on The Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. Any portion of the common stock required during 1996 for the company's stock plans that is not provided from the issuance of new stock will be acquired on the open market in accordance with the terms of such plans. The operating companies plan to obtain the funds required for construction and other purposes from sources similar to those used in the past, which was primarily from internal sources. However, the type and timing of any financings - - -- if needed -- will depend on market conditions and regulatory approval. To meet short-term cash needs and contingencies, The Southern Company had approximately $772 million of cash and cash equivalents and $2.8 billion of unused credit arrangements with banks at the beginning of 1996. To issue additional first mortgage bonds and preferred stock, the operating companies must comply with certain earnings coverage requirements designated in their mortgage indentures and corporate charters. The ability to issue securities in the future will depend on coverages at that time. Currently, each of the operating companies expects to have adequate coverage ratios for anticipated requirements through at least 1998. II-15
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> ==================================================================================================================== 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------- (in millions) Operating Revenues $9,180 $8,297 $8,489 - - -------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,126 2,058 2,265 Purchased power 491 277 336 Other 1,626 1,505 1,445 Maintenance 683 660 653 Depreciation and amortization 904 821 793 Amortization of deferred Plant Vogtle costs, net (Note 1) 124 75 36 Taxes other than income taxes 535 475 462 Federal and state income taxes 805 711 734 - - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 7,294 6,582 6,724 - - -------------------------------------------------------------------------------------------------------------------- Operating Income 1,886 1,715 1,765 Other Income: Allowance for equity funds used during construction 5 11 9 Interest income 38 32 30 Other, net (65) (28) (34) Income taxes applicable to other income 36 26 57 - - -------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,900 1,756 1,827 - - -------------------------------------------------------------------------------------------------------------------- Interest Charges and Other: Interest on long-term debt 557 568 595 Allowance for debt funds used during construction (20) (18) (13) Interest on notes payable 63 33 30 Amortization of debt discount, premium, and expense, net 44 30 26 Other interest charges 52 47 87 Minority interest in subsidiaries 13 20 7 Preferred dividends of subsidiary companies 88 87 93 - - -------------------------------------------------------------------------------------------------------------------- Net interest charges and other, net 797 767 825 - - -------------------------------------------------------------------------------------------------------------------- Consolidated Net Income $1,103 $ 989 $1,002 ==================================================================================================================== Common Stock Data: Average number of shares of common stock outstanding (in millions) 665 650 637 Earnings per share of common stock $1.66 $1.52 $1.57 Cash dividends paid per share of common stock $1.22 $1.18 $1.14 - - -------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------- (in millions) Balance at Beginning of Year $3,191 $2,968 $2,721 Consolidated net income 1,103 989 1,002 - - -------------------------------------------------------------------------------------------------------------------- 4,294 3,957 3,723 Cash dividends on common stock 811 766 726 Capital and preferred stock transactions, net - - 29 - - -------------------------------------------------------------------------------------------------------------------- Balance at End of Year (Note 9) $3,483 $3,191 $2,968 ==================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-16
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994, and 1993 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> ========================================================================================================================== 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------------- (in millions) Operating Activities: Consolidated net income $ 1,103 $ 989 $ 1,002 Adjustments to reconcile consolidated net income to net cash provided by operating activities -- Depreciation and amortization 1,134 1,050 1,011 Deferred income taxes and investment tax credits 117 (4) 189 Allowance for equity funds used during construction (5) (11) (9) Amortization of deferred Plant Vogtle costs (Note 1) 124 75 36 Gain on asset sales (33) (52) (36) Other, net (52) 45 (9) Changes in certain current assets and liabilities -- Receivables, net (109) 114 (55) Fossil fuel stock 28 (110) 138 Materials and supplies 11 (18) (2) Accounts payable (138) 81 43 Other 135 (48) (61) - - -------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 2,315 2,111 2,247 - - -------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,401) (1,536) (1,441) Southern Electric business acquisitions (1,416) (405) (465) Sales of property 287 171 262 Other 153 (87) (37) - - ------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (2,377) (1,857) (1,681) - - -------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds -- Common stock 277 279 205 Preferred stock - - 426 Preferred securities - 100 - First mortgage bonds 375 185 2,185 Other long-term debt 1,805 1,188 592 Retirements -- Preferred stock (1) (1) (516) First mortgage bonds (538) (241) (2,178) Other long-term debt (902) (1,039) (450) Increase in notes payable, net 727 37 114 Payment of common stock dividends (811) (766) (726) Miscellaneous (237) (35) (137) - - -------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 695 (293) (485) - - -------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 633 (39) 81 Cash and Cash Equivalents at Beginning of Year 139 178 97 - - -------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 772 $ 139 $ 178 ========================================================================================================================== Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $622 $618 $673 Income taxes $645 $716 $530 - - -------------------------------------------------------------------------------------------------------------------------- Business acquisitions -- Fair value of assets acquired $2,745 $604 $465 Less cash paid for common stock 1,416 405 465 - - -------------------------------------------------------------------------------------------------------------------------- Liabilities assumed $1,329 $199 $ - ========================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-17
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS At December 31, 1995 and 1994 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> ======================================================================================================== Assets 1995 1994 - - -------------------------------------------------------------------------------------------------------- (in millions) Utility Plant: Plant in service (Note 1) $31,878 $29,209 Less accumulated provision for depreciation 10,067 9,577 - - -------------------------------------------------------------------------------------------------------- 21,811 19,632 Nuclear fuel, at amortized cost 225 238 Construction work in progress (Note 4) 990 1,247 - - -------------------------------------------------------------------------------------------------------- Total 23,026 21,117 - - -------------------------------------------------------------------------------------------------------- Other Property and Investments: Argentine operating concession, being amortized 431 446 Goodwill (Note 14) 344 12 Nuclear decommissioning trusts 201 125 Miscellaneous 317 224 - - -------------------------------------------------------------------------------------------------------- Total 1,293 807 - - -------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 772 139 Special deposits 156 36 Receivables, less accumulated provisions for uncollectible accounts of $37 million in 1995 and $9 million in 1994 1,363 1,022 Fossil fuel stock, at average cost 327 354 Materials and supplies, at average cost 552 553 Prepayments 266 194 Vacation pay deferred 74 70 - - -------------------------------------------------------------------------------------------------------- Total 3,510 2,368 - - -------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 1,386 1,454 Deferred Plant Vogtle costs (Note 1) 308 432 Debt expense, being amortized 100 48 Premium on reacquired debt, being amortized 295 298 Miscellaneous 636 518 - - -------------------------------------------------------------------------------------------------------- Total 2,725 2,750 - - -------------------------------------------------------------------------------------------------------- Total Assets $30,554 $27,042 ======================================================================================================== The accompanying notes are an integral part of these balance sheets. </TABLE> II-18
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS At December 31, 1995 and 1994 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> ======================================================================================================== Capitalization and Liabilities 1995 1994 - - -------------------------------------------------------------------------------------------------------- (in millions) Capitalization (See(Seeoaccompanyingtstatements): Common stock equity $ 8,772 $ 8,186 Preferred stock of subsidiaries 1,332 1,332 Subsidiary obligated mandatorily redeemable preferred securities 100 100 Long-term debt 8,306 7,593 - - -------------------------------------------------------------------------------------------------------- Total 18,510 17,211 - - -------------------------------------------------------------------------------------------------------- Current Liabilities: Amount of debt due within one year 509 229 Notes payable 1,670 978 Accounts payable 785 806 Customer deposits 216 102 Taxes accrued- Federal and state income 93 - Other 179 153 Interest accrued 199 190 Vacation pay accrued 100 87 Miscellaneous 530 233 - - -------------------------------------------------------------------------------------------------------- Total 4,281 2,778 - - -------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 4,611 4,007 Deferred credits related to income taxes (Note 8) 936 987 Accumulated deferred investment tax credits 820 858 Minority interest 231 267 Prepaid capacity revenues 131 138 Department of Energy assessments 86 92 Disallowed Plant Vogtle capacity buyback costs 59 60 Storm damage reserves 31 53 Miscellaneous 858 591 - - -------------------------------------------------------------------------------------------------------- Total 7,763 7,053 - - -------------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 6, 7, and 14) Total Capitalization and Liabilities $30,554 $27,042 ======================================================================================================== The accompanying notes are an integral part of these balance sheets. </TABLE> II-19
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> <C> ============================================================================================================== 1995 1994 1995 1994 - - -------------------------------------------------------------------------------------------------------------- (in millions) (percent of total) Common Stock Equity: Common stock, par value $5 per share -- Authorized -- 1 billion shares Outstanding -- 1995: 670 million shares, -- 1994: 657 million shares (Note 9) $3,348 $3,283 Paid-in capital 1,941 1,712 Retained earnings (Note 9) 3,483 3,191 - - -------------------------------------------------------------------------------------------------------------- Total common stock equity 8,772 8,186 47.4% 47.6% - - -------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock of Subsidiaries: $100 par or stated value -- 4.20% to 5.96% 199 199 6.32% to 7.88% 205 205 $25 par or stated value -- $1.90 to $2.125 295 295 6.40% to 7.60% 323 323 Auction rates -- at January 1, 1996: 4.43% to 4.53% 70 70 Adjustable rates -- January 1, 1996: 4.67% to 5.27% 240 240 - - -------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $86 million) 1,332 1,332 7.2 7.7 - - -------------------------------------------------------------------------------------------------------------- Subsidiary Obligated Mandatorily Redeemable Preferred Securities (Note 10): $25 stated value -- 9% 100 100 - - -------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $9 million) 100 100 0.5 0.6 - - -------------------------------------------------------------------------------------------------------------- </TABLE> II-20
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued) At December 31, 1995 and 1994 The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> <C> <C> =========================================================================================================================== 1995 1994 1995 1994 - - --------------------------------------------------------------------------------------------------------------------------- (in millions) (percent of total) Long-Term Debt of Subsidiaries: First mortgage bonds -- Maturity Interest Rates 1995 5 1/8 % - 130 1996 4 1/2 % 60 60 1996 4 3/4 % 150 150 1997 5 7/8 % 25 25 1998 5% to 5.55% 230 230 1999 6 1/8% to 6 3/8% 365 365 2000 6% to 7% 340 340 2001 through 2005 6 1/8% to 7% 910 910 2006 through 2010 6 7/8% to 9% 226 228 2016 through 2020 8.665% to 9 1/4% 255 65 2021 through 2025 7.3% to 9 3/8% 1,900 1,921 2032 Variable rates - 200 - - --------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 4,461 4,624 Other long-term debt (Note 11) 4,403 3,261 Unamortized debt premium (discount), net (49) (63) - - --------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $626 million) 8,815 7,822 Less amount due within one year (Note 12) 509 229 - - --------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 8,306 7,593 44.9 44.1 - - --------------------------------------------------------------------------------------------------------------------------- Total Capitalization $18,510 $17,211 100.0% 100.0% =========================================================================================================================== CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1995, 1994, and 1993 =========================================================================================================================== 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------------------- (in millions) Balance at Beginning of Year $1,712 $1,503 $2,931 Proceeds from sales of common stock over the par value -- 13.0 million, 13.9 million, and 9.7 million shares in 1995, 1994, and 1993, respectively 212 209 179 Two-for-one stock split (Note 9) - - (1,607) Miscellaneous 17 - - - - --------------------------------------------------------------------------------------------------------------------------- Balance at End of Year $1,941 $1,712 $1,503 =========================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-21
NOTES TO FINANCIAL STATEMENTS The Southern Company and Subsidiary Companies 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Southern Company is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The operating companies also are subject to regulation by the FERC and their respective state regulatory commissions. The companies follow generally accepted accounting principles and comply with the accounting policies and practices prescribed by their respective commissions. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates, and the actual results may differ from those estimates. All material intercompany items have been eliminated in consolidation. Certain prior years' data presented in the consolidated financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The operating companies are subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the operating companies associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Consolidated Balance Sheets at December 31 relate to: 1995 1994 ------------------------ (in millions) Deferred income taxes $1,386 $1,454 Deferred Plant Vogtle costs 308 432 Premium on reacquired debt 295 298 Demand-side programs 79 97 Department of Energy assessments 73 79 Vacation pay 74 70 Deferred fuel charges 49 51 Postretirement benefits 53 41 Work force reduction costs 56 15 Deferred income tax credits (936) (987) Storm damage reserves (23) (53) Other, net 98 108 - - ----------------------------------------------------------------- Total $1,512 $1,605 ================================================================= In the event that a portion of the operating companies' operations is no longer subject to the provisions of Statement No. 71, the companies would be required to write off related regulatory assets and liabilities. In addition, the operating companies would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The operating companies accrue revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The operating companies' electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. The company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average less than 1 percent of revenues. II-22
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $140 million in 1995, $152 million in 1994, and $137 million in 1993. Alabama Power and Georgia Power have contracts with the U.S. Department of Energy (DOE) that provide for the permanent disposal of spent nuclear fuel. Although disposal was scheduled to begin in 1998, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This assessment will be paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. Alabama Power and Georgia Power -- based on its ownership interests -- estimate their respective remaining liability at December 31, 1995, under this law to be approximately $40 million and $31 million, respectively. These obligations are recorded in the Consolidated Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.3 percent in 1995, 3.2 percent in 1994, and 3.3 percent in 1993. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected costs of decommissioning nuclear facilities and removal of other facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring all licensees operating commercial power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. Alabama Power and Georgia Power have external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over set periods of time as approved by the respective state public service commissions. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. Alabama Power and Georgia Power have filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Site study cost is the estimate to decommission a specific facility as of the site study year, and ultimate cost is the estimate to decommission a specific facility as of retirement date. The estimated costs of decommissioning - - -- both site study costs and ultimate costs -- at December 31, 1995, for Alabama Power's Plant Farley and Georgia Power's ownership interests in plants Hatch and Vogtle were as follows: Plant Plant Plant Farley Hatch Vogtle ------------------------------- Site study basis (year) 1993 1994 1994 Decommissioning periods: Beginning year 2017 2014 2027 Completion year 2029 2027 2038 - - -------------------------------------------------------------------- (in millions) Site study costs: Radiated structures $489 $294 $233 Non-radiated structures 89 41 52 - - -------------------------------------------------------------------- Total $578 $335 $285 ==================================================================== (in millions) Ultimate costs: Radiated structures $1,504 $781 $1,018 Non-radiated structures 274 111 230 - - -------------------------------------------------------------------- Total $1,778 $892 $1,248 ==================================================================== II-23
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Plant Plant Plant Farley Hatch Vogtle ---------------------------- (in millions) Amount expensed in 1995 $18 $11 $9 Accumulated provisions: Balance in external trust funds $108 $56 $36 Balance in internal reserves 49 30 13 - - ----------------------------------------------------------------- Total $157 $86 $49 ================================================================= Significant assumptions: Inflation rate 4.5% 4.4% 4.4% Trust earning rate 7.0 6.0 6.0 - - ----------------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the respective state public service commissions. All of Alabama Power's decommissioning costs are approved for ratemaking. For Georgia Power, only the costs to decommission the radioactive portion of the plants are included in cost of service. Alabama Power and Georgia Power expect their respective state public service commission to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making estimates. Income Taxes The Southern Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Plant Vogtle Phase-In Plans In 1987 and 1989, the Georgia Public Service Commission (GPSC) ordered that the allowed costs of Plant Vogtle, a two-unit nuclear facility of which Georgia Power owns 45.7 percent, be phased into rates under plans that meet the requirements of FASB Statement No. 92, Accounting for Phase-In Plans. Under these plans, Georgia Power deferred financing costs and depreciation expense until the allowed investment was fully reflected in rates as of October 1991. In 1991, the GPSC modified the Plant Vogtle phase-in plan to begin earlier amortization of the costs deferred under the plan. Also, the GPSC levelized capacity buyback expense from co-owners of Plant Vogtle. Previously, pursuant to two separate interim accounting orders by the GPSC, Georgia Power deferred substantially all operating expenses and financing costs related to Plant Vogtle. Each GPSC order called for recovery of deferred costs within 10 years. Under phase-in plans and accounting orders from the GPSC, Georgia Power deferred and began amortizing the costs -- recovered through rates -- related to Plant Vogtle as follows: 1995 1994 1993 ------------------------------ (in millions) Deferred capacity buybacks $ - $ 10 $ 38 Amortization of deferred costs (124) (85) (74) - - ----------------------------------------------------------------- Net amortization (124) (75) (36) Effect of adoption of FASB Statement No. 109 - - 160 Deferred costs at beginning of year 432 507 383 - - ----------------------------------------------------------------- Deferred costs at end of year $308 $432 $507 ================================================================= In 1991, the GPSC ordered that the Plant Vogtle capacity buyback expense be levelized over a six-year period. The amounts deferred and not expensed in the year paid totaled $38 million in 1993. In 1995 and 1994, the amount deferred was exceeded by the amortization of amounts previously deferred by $50 million and $1 million, respectively. The projected net amortization of the deferred expense is $62 million in 1996 and $57 million in 1997. II-24
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used by the operating companies to calculate AFUDC during the years 1993 through 1995 ranged from a before-income-tax rate of 3.6 percent to 9.8 percent. AFUDC, net of income tax, as a percent of consolidated net income was 1.6 percent in 1995, 2.3 percent in 1994, and 1.7 percent in 1993. Utility Plant Utility plant is stated at original cost less regulatory disallowances. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents For purposes of the Consolidated Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments Derivative financial instruments are used by The Southern Company to manage its interest rate and foreign currency exposures. Gains and losses arising from effective hedges of existing assets, liabilities, or firm commitments are deferred and recognized when the offsetting gains and losses are recognized on the related hedged items. Losses realized on termination of interest rate swap contracts are deferred and amortized over the terms of the related new debt agreements. At December 31, 1995, the credit risk for derivatives outstanding was not material. The Southern Company hedges its exposure to fluctuations in interest rates by entering into swap agreements that allow the company to effectively convert its outstanding variable-rate debt into fixed rates. During 1995, the company terminated the swap contracts in place at December 31, 1994, incurring a loss on termination of approximately $32 million, which is being amortized over the life of the related new fixed-rate debt agreements. At December 31, 1995, six interest rate swap agreements were in place. The Southern Company hedges its net investment in South Western Electricity (SWEB) through forward contracts involving Pounds Sterling. The company regularly monitors its foreign currency exposure, and ensures that hedge contract amounts do not exceed the amount of the underlying exposure. At December 31, 1995, the status of outstanding derivative contracts was as follows: Year Of Maturity or Notional Unrealized Type Termination Amount Gain (Loss) - - --------------------- -------------- --------------------------- (in millions) Interest rate swaps 1999-2006 $308 $(9) Foreign currency forwards 1996 389 - - - ----------------------------------------------------------------------- In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, The Southern Company's financial instruments that the carrying amount did not approximate fair value at December 31 were as follows: Carrying Fair Amount Value -------------------------- (in millions) Long-term debt: At December 31, 1995 $8,668 $8,935 At December 31, 1994 7,674 7,373 Preferred securities: At December 31, 1995 100 114 - - ----------------------------------------------------------------- The fair value for long-term debt and preferred securities were based on either closing market price or closing price of comparable instruments. II-25
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. 2. RETIREMENT BENEFITS Pension Plan The system companies have defined benefit, trusteed, pension plans that cover substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat-dollar benefit. Primarily, the companies use the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits In the United States, The Southern Company provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Trusts are funded to the extent deductible under federal income tax regulations or to the extent required by the operating companies' respective regulatory commissions. Amounts funded are primarily invested in debt and equity securities. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." In October 1993, the GPSC ordered Georgia Power to phase in the adoption of Statement No. 106 to cost of service over a five-year period, whereby one-fifth of the additional costs was expensed in 1993 and the remaining costs were deferred. An additional one-fifth of the costs is being expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The costs deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. For the other operating companies, the cost of postretirement benefits is reflected in rates on a current basis. Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ----------------------- 1995 1994 ----------------------- (in millions) Actuarial present value of benefit obligation: Vested benefits $2,643 $1,593 Non-vested benefits 97 68 - - ------------------------------------------------------------------ Accumulated benefit obligation 2,740 1,661 Additional amounts related to projected salary increases 705 638 - - ------------------------------------------------------------------ Projected benefit obligation 3,445 2,299 Less: Fair value of plan assets 4,725 3,171 Unrecognized net gain (1,025) (789) Unrecognized prior service cost 60 64 Unrecognized transition asset (126) (139) - - ------------------------------------------------------------------ Prepaid asset recognized in the Consolidated Balance Sheets $ 189 $ 8 ================================================================== Postretirement Benefits ---------------------------- 1995 1994 ---------------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $394 $375 Employees eligible to retire 63 40 Other employees 392 459 - - ------------------------------------------------------------------ Accumulated benefit obligation 849 874 Less: Fair value of plan assets 205 140 Unrecognized net loss (gain) 85 3 Unrecognized prior service cost (4) - Unrecognized transition obligation 292 500 - - ------------------------------------------------------------------ Accrued liability recognized in the Consolidated Balance Sheets $271 $231 ================================================================== In 1995, the system companies announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the companies II-26
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report will pay to provide future retiree postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $186 million. The weighted average rates assumed in the actuarial calculations were: 1995 1994 1993 -------------------------------- Discount 7.3% 8.0% 7.5% Annual salary increase 4.8 5.5 5.0 Long-term return on plan assets 8.5 8.5 8.5 - - --------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation at December 31, 1995, by $73 million and the aggregate of the service and interest cost components of the net retiree cost by $16 million. Components of the plans' net costs are shown below: Pension ----------------------------- 1995 1994 1993 ----------------------------- (in millions) Benefits earned during the year $ 79 $ 77 $ 76 Interest cost on projected benefit obligation 193 160 156 Actual (return) loss on plan assets (730) 75 (432) Net amortization and deferral 412 (351) 186 - - -------------------------------------------------------------------- Net pension cost (income) $ (46) $(39) $(14) ==================================================================== Of the above net pension income, $30 million in 1995, $29 million in 1994, and $9 million in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Benefits --------------------------- 1995 1994 1993 --------------------------- (in millions) Benefits earned during the year $ 28 $ 31 $ 27 Interest cost on accumulated benefit obligation 67 64 56 Amortization of transition obligation 27 27 28 Actual (return) loss on plan assets assets (23) 2 (12) Net amortization and deferral 12 (10) 5 - - ------------------------------------------------------------------ Net postretirement costs $111 $114 $104 ================================================================== Of the above net postretirement costs, $78 million in 1995, $77 million in 1994, and $64 million in 1993 were charged to operating expenses. In addition, $11 million in 1995, $18 million in 1994, and $21 million in 1993 were deferred, and the remainder was charged to construction and other accounts. Work Force Reduction Programs The system companies have incurred additional costs for work force reduction programs. The costs related to these programs were $42 million, $112 million, and $35 million for the years 1995, 1994, and 1993, respectively. In addition, certain costs of these programs were deferred and are being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $56 million at December 31, 1995. 3. LITIGATION AND REGULATORY MATTERS Stockholder Suit In April 1991, two Southern Company stockholders filed a derivative action suit in the U.S. District Court for the Southern District of Georgia against certain current and former directors and officers of The Southern Company. The suit alleges violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) by officers and breaches of fiduciary duty and gross negligence by all defendants resulting from alleged fraudulent accounting for spare parts, illegal political campaign contributions, violations of federal securities laws involving misrepresentations and omissions in SEC filings, and concealment of the foregoing acts. The complaint seeks damages -- including treble damages pursuant to RICO -- in an unspecified amount, which if awarded, would be payable to The Southern Company. The plaintiffs' amended complaint was dismissed by the court in March 1992. The court ruled the plaintiffs had failed to present II-27
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report adequately their allegation that The Southern Company board of directors' refusal of an earlier demand by the plaintiffs was wrongful. In April 1994, the U.S. Court of Appeals for the 11th Circuit reversed the dismissal and remanded the case to the trial court, finding that allegations by the plaintiffs created a reasonable doubt that the board validly exercised its business judgment in refusing the earlier demand. In June 1995, for the second time, the trial court dismissed the suit. The plaintiffs once again have filed an appeal. This action is still pending. Georgia Power Potentially Responsible Party Status In January 1995, Georgia Power and four other unrelated entities were notified by the Environmental Protection Agency (EPA) that they have been designated as potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As of December 31, 1995, Georgia Power had recorded approximately $4 million in expenses associated with the site. While Georgia Power believes that the total amount of costs required for the cleanup of this site may be substantial, it is unable at this time to estimate either such total or the portion for which Georgia Power may be ultimately responsible. However, based on the nature and extent of Georgia Power's activities relating to the site, management believes that the company's portion of these costs should not be material. Georgia Power Investment in Rocky Mountain In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric plant in 1991 as then planned was not economically justifiable and reasonable and withheld authorization for Georgia Power to spend funds from approved securities issuances on that plant. In 1988, Georgia Power and Oglethorpe Power Corporation (OPC) entered into a joint ownership agreement for OPC to assume responsibility for the construction and operation of the plant. However, full recovery of Georgia Power's costs depends on the GPSC's treatment of the plant's costs and the disposition of the plant's capacity output. In the event the GPSC does not allow full recovery of the plant costs, then the portion not allowed may have to be written off. In 1995, the plant went into commercial operation. At December 31, 1995, Georgia Power's net investment in the plant was approximately $190 million. The final outcome of this matter cannot now be determined. Accordingly, no provision for any write-down of the investment in the plant has been made. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the operating companies' wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds was substantially from October 1994 through December 1995. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore, no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter is pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings, and refunds were ordered, the amount of refunds could range up to approximately $120 million at December 31, 1995. However, management believes that rates are not excessive and that refunds are not justified. Alabama Power Rate Adjustment Procedures In November 1982, the Alabama Public Service Commission (APSC) adopted rates that provide for periodic adjustments based upon Alabama Power's earned return on end-of-period retail common equity. The rates also provide for adjustments to recognize the placing of new generating facilities in retail service. Both increases and decreases have been placed into effect since the adoption of these rates. The rate adjustment procedures allow a return on common equity range of 13.0 percent to 14.5 percent and limit increases or decreases in rates to 4 percent in any calendar year. II-28
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report In June 1995, the APSC issued a rate order granting Alabama Power's request for gradual adjustments to move toward parity among customer classes. This order also calls for a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing Alabama Power to reduce balance sheet items -- such as plant and deferred charges -- at any time the company's actual base rate revenues exceed the budgeted revenues. In accordance with this order, Alabama Power reduced the unamortized balance of premium on reacquired debt by $10 million in 1995. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. Georgia Power Retail Rate Plan On February 16, 1996, the GPSC approved a rate plan recommended by the GPSC staff that concludes the GPSC's review of Georgia Power's earnings initiated in early 1995 and addressed the company's proposed alternative retail rate plan. Under the three-year plan, effective January 1, 1996, Georgia Power's earnings will be evaluated against a retail return on common equity range of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent will be used to accelerate the amortization of regulatory assets or accelerate the depreciation of electric plant. At its option, Georgia Power may also accelerate amortization or depreciation of assets while within the allowed return on common equity range. The company is required to absorb cost increases of approximately $29 million annually during the plan's three-year operation, including $14 million annually of accelerated depreciation of electric plant. During the plan's operation, Georgia Power will not file for a general base rate increase unless its projected retail return on equity falls below 10 percent. On July 1, 1998, Georgia Power is required to file a general rate case. In response, the GPSC would be expected to either continue the rate plan or adopt a different one. Georgia Power Demand-Side Conservation Programs In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of Georgia Power's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. Georgia Power suspended collection of the demand-side conservation costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved Georgia Power's request for an accounting order allowing Georgia Power to defer all current unrecovered and future costs related to these programs, pending the resolution of the recovery of such costs. After the Georgia Court of Appeals upheld the legality of the rate riders, Georgia Power resumed collection under the riders in December 1994. In August 1995, the GPSC ordered Georgia Power to discontinue the demand-side conservation programs by the end of 1995. However, Georgia Power's rate riders will continue in effect until costs deferred are collected. Under the new retail rate plan, approved February 16, 1996, Georgia Power will expense approximately $29 million of deferred program costs over a three-year period that will not be recovered under the rate riders. 4. CONSTRUCTION PROGRAM The system companies are engaged in continuous construction programs, currently estimated to total some $1.5 billion in 1996, $1.4 billion in 1997, and $1.3 billion in 1998. These estimates include AFUDC of $22 million in 1996, $22 million in 1997, and $25 million in 1998. The construction programs are subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; changes in existing nuclear plants to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 1995, significant purchase commitments were outstanding in connection with the construction program. The operating companies do not have any new baseload generating plants under construction. However, within the service area, the construction of combustion turbine peaking units of approximately 600 megawatts is planned to be completed by 1998. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. II-29
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report See Management's Discussion and Analysis under "Environmental Matters" for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. 5. FINANCING, INVESTMENTS, AND COMMITMENTS General The Southern Company may require additional equity capital in 1996. The amount and timing of additional equity capital to be raised in 1996 -- as well as in subsequent years -- will be contingent on The Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. The operating companies' construction programs are expected to be financed primarily from internal sources. Short-term debt is often utilized and the amounts available are discussed below. The companies may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities if market conditions permit. Southern Electric Investments Southern Electric has substantial investments in production and delivery facilities in the United States and various international markets. The most recent acquisition was SWEB, and for additional information see Note 14. Southern Electric's total assets were $5.0 billion at December 31, 1995. The consolidated financial statements reflect investments in majority-owned or controlled subsidiaries on a consolidated basis and other investments on an equity basis. Bank Credit Arrangements At the beginning of 1996, unused credit arrangements with banks totaled $2.8 billion, of which approximately $1.5 billion expires at various times during 1996 and 1997; $16 million expires in February 1998; $73 million expires in May 1998; $400 million expires in June 1998; $300 million expires in July 1998; $300 million expires in November 1998; and $56 million expires in December 1998. Also, $136 million expires in the years 1999 through 2002. Georgia Power's revolving credit agreements of $60 million, all of which remained unused as of December 31, 1995, expire May 1, 1998. During the term of these agreements, Georgia Power may convert short-term borrowings into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Georgia Power's option. In connection with these credit arrangements, Georgia Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Gulf Power's revolving credit agreements of $20 million, of which $13 million remained unused as of December 31, 1995, expire May 31, 1998. These agreements allow short-term and/or term borrowings with various terms and conditions regarding repayment. In connection with these credit arrangements, Gulf Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. The $400 million expiring June 30, 1998, is under revolving credit arrangements with several banks that provide The Southern Company, Alabama Power, and Georgia Power up to the total credit amount of $400 million. To provide liquidity support to commercial paper programs, $100 million, $135 million, and $165 million available credit are currently dedicated to the exclusive use of The Southern Company, Alabama Power, and Georgia Power, respectively. During the term of these agreements, short-term borrowings may be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. The Southern Company has $300 million of revolving credit agreements expiring July 1, 1998, and $300 million of revolving credit agreements expiring November 30, 1998, all of which remained unused at December 31, 1995. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at The Southern Company's option. In connection with these credit arrangements, The Southern Company agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. II-30
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Mississippi Power's revolving credit agreements of $40 million, all of which remained unused as of December 31, 1995, expire December 1, 1998. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Mississippi Power's option. In connection with these credit arrangements, Mississippi Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Savannah Electric's revolving credit arrangements of $20 million, of which $16 million remained unused as of December 31, 1995, expire December 31, 1998. These agreements allow short-term borrowings to be converted into terms loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Savannah Electric's option. In connection with these credit arrangements, Savannah Electric agrees to pay commitment fees based on the unused portions of the commitments. Southern Electric's revolving credit agreements of $212 million, of which $151 million remained unused as of December 31, 1995, expire at various times from 1998 through 2002. These agreements allow for short-term borrowings with various terms and conditions. These agreements require payment of commitment fees based on the unused portions of the commitments. A portion of the $2.8 billion unused credit arrangements with banks -- discussed earlier -- is allocated to provide liquidity support to the companies' variable rate pollution control bonds. At December 31, 1995, the amount of credit lines allocated was $692 million. In connection with all other lines of credit, the companies have the option of paying fees or maintaining compensating balances, which are substantially all the cash of the companies except for daily working funds and similar items These balances are not legally restricted from withdrawal. In addition, the companies from time to time borrow under uncommitted lines of credit with banks and in the case of The Southern Company, Alabama Power, and Georgia Power, through commercial paper programs that have the liquidity support of committed bank credit arrangements. Assets Subject to Lien Each of The Southern Company's subsidiaries is organized as a legal entity, separate, and apart from The Southern Company and its other subsidiaries. The subsidiary companies' mortgages, which secure the first mortgage bonds issued by the companies, constitute a direct first lien on substantially all of the companies' respective fixed property and franchises. There are no agreements or other arrangements among the subsidiary companies under which the assets of one company have been pledged or otherwise made available to satisfy obligations of The Southern Company or any of its subsidiaries. Fuel and Purchase Power Commitments To supply a portion of the fuel requirements of the generating plants, The Southern Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Also, The Southern Company has entered into various long-term commitments for the purchase of electricity. Total estimated long-term obligations at December 31, 1995, were as follows: Purchased Year Fuel Power - - ----------- ----------------------------- (in millions) 1996 $ 1,914 $ 495 1997 1,656 427 1998 1,482 155 1999 1,093 161 2000 728 166 2001 and thereafter 6,078 1,943 - - ------------------------------------------------------------- Total commitments $12,951 $3,347 ============================================================= II-31
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Operating Leases The Southern Company has operating lease agreements with various terms and expiration dates. These expenses totaled $17 million, $15 million, and $11 million for 1995, 1994, and 1993, respectively. At December 31, 1995, estimated minimum rental commitments for noncancelable operating leases were as follows: Year Amounts - - -------- ---------------- (in millions) 1996 $ 22 1997 20 1998 19 1999 19 2000 20 2001 and thereafter 252 - - --------------------------------------------------------------- Total minimum payments $352 =============================================================== 6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS In 1992, Alabama Power sold an undivided interest in units 1 and 2 of Plant Miller and related facilities to Alabama Electric Cooperative, Inc. Since 1975, Georgia Power has sold undivided interests in plants Vogtle, Hatch, Scherer, and Wansley in varying amounts, together with transmission facilities, to OPC, the Municipal Electric Authority of Georgia, and the city of Dalton, Georgia. In addition, Georgia Power has joint ownership agreements with OPC for the Rocky Mountain project and with Florida Power Corporation (FPC) for a combustion turbine unit at Intercession City, Florida. In 1995, Georgia Power completed the sale of Unit 4 of Plant Scherer to Florida Power & Light Company (FP&L) and Jacksonville Electric Authority (JEA). FP&L owns approximately 76.4 percent of the unit, with JEA owning the remainder. Georgia Power operates and maintains the unit. At December 31, 1995, Alabama Power's and Georgia Power's ownership and investment (exclusive of nuclear fuel) in jointly owned facilities with the above entities were as follows: Jointly Owned Facilities ------------------------------------------------ Percent Amount of Accumulated Ownership Investment Depreciation ---------------- ------------------------------ Plant Vogtle (in millions) (nuclear) 45.7% $3,295 $730 Plant Hatch (nuclear) 50.1 842 394 Plant Miller (coal) Units 1 and 2 91.8 712 281 Plant Scherer (coal) Units 1 and 2 8.4 112 39 Plant Wansley (coal) 53.5 297 132 Rocky Mountain (pumped storage) 25.4 200 10 - - ------------------------------------------------------------------ In 1994, Georgia Power and FPC entered into a joint ownership agreement regarding the Intercession City combustion turbine unit. The unit is scheduled to be in commercial operation by the end of 1996, and will be constructed, operated, and maintained by FPC. Georgia Power will have an approximate interest of 33 percent in the 150-megawatt unit, with retention of 100 percent of the capacity from June through September. FPC will have the capacity the remainder of the year. Georgia Power's investment in the unit at completion is estimated to be $14 million. Alabama Power and Georgia Power have contracted to operate and maintain the jointly owned facilities -- except for the Rocky Mountain project and Intercession City -- as agents for their respective co-owners. The companies' proportionate share of their plant operating expenses is included in the corresponding operating expenses in the Consolidated Statements of Income. 7. LONG-TERM POWER SALES AGREEMENTS The operating companies have long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. Other agreements --expiring at various dates discussed below -- are firm and pertain to capacity related to specific generating units. Because the energy is II-32
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The capacity revenues have been as follows: Unit Other Year Power Long-Term Total ---- ------------------------------------ (in millions) 1995 $237 $ - $237 1994 257 19 276 1993 312 38 350 In 1994, long-term non-firm power of 200 megawatts was sold to FPC under a contract that expired at year-end. In January 1995, the amount of unit power sales to FPC increased by 200 megawatts. Unit power from specific generating plants is currently being sold to FP&L, FPC, JEA, and the city of Tallahassee, Florida. Under these agreements, approximately 1,600 megawatts of capacity is scheduled to be sold annually through 1999. Thereafter, these sales will decline to some 1,500 megawatts and remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. 8. INCOME TAXES Effective January 1, 1993, The Southern Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax- related regulatory assets and liabilities were $1.4 billion and $936 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 1995 1994 1993 --------------------------- (in millions) Total provision for income taxes: Federal -- Currently payable $567 $598 $421 Deferred -- current year 184 67 224 -- reversal of prior years (111) (75) (51) Deferred investment tax credits 1 - (20) - - ------------------------------------------------------------------- 641 590 574 - - ------------------------------------------------------------------- State -- Currently payable 90 86 64 Deferred -- current year 26 15 39 -- reversal of prior years (12) (11) (3) - - ------------------------------------------------------------------- 104 90 100 - - ------------------------------------------------------------------- International 24 5 3 - - ------------------------------------------------------------------- Total 769 685 677 Less income taxes charged (credited) to other income (36) (26) (57) - - ------------------------------------------------------------------- Federal and state income taxes charged to operations $805 $711 $734 =================================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 1995 1994 ----------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $2,795 $2,637 Property basis differences 2,175 1,647 Deferred plant costs 100 141 Other 247 271 - - ------------------------------------------------------------------- Total 5,317 4,696 - - ------------------------------------------------------------------- Deferred tax assets: Federal effect of state deferred taxes 107 104 Other property basis differences 273 278 Deferred costs 118 79 Pension and other benefits 66 63 Other 192 225 - - ------------------------------------------------------------------- Total 756 749 - - ------------------------------------------------------------------- Net deferred tax liabilities 4,561 3,947 Portion included in current assets, net 50 60 - - ------------------------------------------------------------------- Accumulated deferred income taxes in the Consolidated Balance Sheet $4,611 $4,007 =================================================================== II-33
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Consolidated Statements of Income. Credits amortized in this manner amounted to $38 million in 1995, $42 million in 1994, and $36 million in 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1995 1994 1993 ------------------------------ Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 3.4 3.3 3.7 Non-deductible book depreciation 1.6 1.8 1.9 Difference in prior years' deferred and current tax rate (1.1) (1.5) (1.3) Other 0.3 0.3 (1.1) - - ---------------------------------------------------------------------- Effective income tax rate 39.2% 38.9% 38.2% ====================================================================== The Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. COMMON STOCK Stock Distribution In January 1994, The Southern Company board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price reflect the stock distribution. Shares Reserved At December 31, 1995, a total of 69 million shares was reserved for issuance pursuant to the Dividend Reinvestment and Stock Purchase Plan, the Employee Savings Plan, the Outside Directors Stock Plan, and the Executive Stock Option Plan. Executive Stock Option Plan The Southern Company's Executive Stock Option Plan authorizes the granting of non-qualified stock options to key employees of The Southern Company, including officers. As of December 31, 1995, some 200 current and former employees participated in the plan. The maximum number of shares of common stock that may be issued under the Executive Stock Option Plan may not exceed 6 million. The price of options granted to date has been at the fair market value of the shares on the date of grant. Options granted to date become exercisable pro rata over a maximum period of four years from the date of grant. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the board of directors in accordance with the plan. Stock option activity in 1994 and 1995 is summarized below: Shares Average Subject Option Price To Option Per Share ----------------------------------- Balance at December 31, 1993 1,364,810 $16.77 Options granted 446,443 18.88 Options canceled -- -- Options exercised (74,649) 14.81 - - --------------------------------------------------------------------- Balance at December 31, 1994 1,736,604 17.39 Options granted 1,161,174 21.63 Options canceled (8,088) 21.63 Options exercised (413,391) 14.34 - - --------------------------------------------------------------------- Balance at December 31, 1995 2,476,299 $19.87 ===================================================================== Shares reserved for future grants: At December 31, 1993 3,714,444 At December 31, 1994 3,268,001 At December 31, 1995 2,114,915 - - --------------------------------------------------------------------- Options exercisable: At December 31, 1994 793,989 At December 31, 1995 831,227 - - --------------------------------------------------------------------- Common Stock Dividend Restrictions The income of The Southern Company is derived primarily from equity in earnings of its subsidiaries. At December 31, 1995, consolidated retained earnings included $3.1 billion of undistributed retained earnings of the subsidiaries. Of this amount, $2.0 billion was restricted against the payment by the subsidiary companies of cash dividends on common stock under terms of bond indentures or charters. II-34
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report 10. PREFERRED SECURITIES In December 1994, Georgia Power Capital, L.P., of which Georgia Power is the sole general partner, issued $100 million of 9 percent mandatorily redeemable preferred securities. The sole asset of Georgia Power Capital is $103 million aggregate principal amount of Georgia Power's 9 percent Junior Subordinated Deferrable Interest Debentures due December 19, 2024. Georgia Power considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by Georgia Power of Georgia Power Capital's payment obligations with respect to the preferred securities. 11. OTHER LONG-TERM DEBT Details of other long-term debt at December 31 are as follows: 1995 1994 -------------------- (in millions) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized -- 4.375% to 9.375% due 2000-2025 $1,466 $1,179 Variable rates (3.5% to 6.1% at 1/1/96) due 2011-2025 639 412 Non-collateralized -- 7.25% due 2003 1 1 6.75% to 10.6% due 2015-2020 277 828 5.8% due 2022 10 10 Variable rates (3.25% to 3.75% at 1/1/96) due 2019-2022 132 85 - - ---------------------------------------------------------------- 2,525 2,515 - - ---------------------------------------------------------------- Capitalized lease obligations 147 148 - - ---------------------------------------------------------------- Notes payable: 4.15% to 13% due 1995-1998 107 179 6.31% to 11% due 1999-2008 404 170 Adjustable rates (4% to 7% at 1/1/96) due 1995-1998 129 119 Adjustable rates (7.5% to 9.18% at 1/1/96) due 1999-2000 165 130 Adjustable rate (7.7 % at 1/1/96) due 2000 926 - - - ---------------------------------------------------------------- 1,731 598 - - ----------------------------------------------------- ---------- Total $4,403 $3,261 ================================================================ With respect to the collateralized pollution control revenue bonds, the operating companies have authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under installment sale or loan agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. Assets acquired under capital leases are recorded as utility plant in service, and the related obligation is classified as other long-term debt. The net book value of capitalized leases was $122 million and $126 million at December 31, 1995 and 1994, respectively. At December 31, 1995, the composite interest rates for buildings and other were 9.7 percent and 11.3 percent, respectively. Sinking fund requirements and/or serial maturities through 2000 applicable to other long-term debt are as follows: $264 million in 1996; $99 million in 1997; $42 million in 1998; $23 million in 1999; and $56 million in 2000. 12. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 1995 1994 ----------------- (in millions) Bond improvement fund requirements $ 43 $ 48 Less: Portion to be satisfied by certifying property additions 18 46 Reacquired bonds - - - - ------------------------------------------------------------------ Cash sinking fund requirements 25 2 First mortgage bond maturities and redemptions 220 130 Other long-term debt maturities (Note 11) 264 97 - - ------------------------------------------------------------------ Total $509 $229 ================================================================== The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the indentures prior to January 1 of each year, other than those issued to collateralize pollution control and other obligations. The requirements may be satisfied by depositing cash or reacquiring bonds, or by pledging additional property equal to 166 2/3 percent of such requirements. II-35
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report 13. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power maintain agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the companies' nuclear power plants. The act provides funds up to $8.9 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback interests -- is $159 million and $162 million, respectively, per incident but not more than an aggregate of $20 million per company to be paid for each incident in any one year. Alabama Power and Georgia Power are members of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. Alabama Power's and Georgia Power's maximum annual assessments are limited to $10 million and $12 million, respectively, under current policies. Additionally, both companies have policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 21 weeks after the outage -- for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The maximum annual assessments under current policies for Alabama Power and Georgia Power for excess property damage would be $21 million and $24 million, respectively. The maximum replacement power assessments are $8 million for Alabama Power and $13 million for Georgia Power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. Alabama Power and Georgia Power participate in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, Alabama Power and Georgia Power could be subject to a maximum total assessment of approximately $6 million each. All retrospective assessments -- whether generated for liability, property, or replacement power -- may be subject to applicable state premium taxes. II-36
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report 14. ACQUISITION In 1995, Southern Electric acquired SWEB for approximately $1.8 billion. This British utility distributes electricity to some 1.3 million customers. The acquisition has been accounted for under the purchase method of accounting. The acquisition cost exceeded the preliminary estimate of the fair market value of net assets by $333 million. This amount is considered goodwill and will be amortized on a straight-line basis over 40 years. The preliminary estimate of net assets may be revised in 1996. SWEB has been included in the consolidated financial statements since September 1995. The following unaudited pro forma results of operations for the years 1995 and 1994 have been prepared assuming the acquisition of SWEB, effective January 1994, and assuming 100 percent short-term debt financing. Eventually, the short-term borrowings will be replaced by a combination of long-term debt and equity. The pro forma results are not necessarily indicative of the actual results that would have been realized had the acquisition occurred on the assumed date, nor are they necessarily indicative of future results. Pro forma operating results are for information purposes only and are as follows: <TABLE> <CAPTION> <S> <C> <C> <C> <C> 1995 1994 -------------------------------------------------- As Pro As Pro Reported Forma Reported Forma ----------- --------- ---------- -------- Operating revenues (in millions) $9,180 $10,013 $8,297 $9,493 Consolidated net income (in millions) $1,103 $1,144 $989 $1,053 Earnings per share $1.66 $1.72 $1.52 $1.62 </TABLE> 15. SEGMENT INFORMATION The Southern Company's principal business segment -- or its core business -- is the five electric utility operating companies, which provide electric service in four Southeastern states. The other reportable business segment is Southern Electric, which owns and operates power production and delivery facilities in the United States and various international markets. Financial data for business segments and geographic areas are as follows: Business Segments <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> Gross Depreciation Operating Operating Total Property and Year Revenues Income Assets Additions Amortization - - --------------- --------------------------------------------------------------------------- (in millions) 1995 - - ---- Core business $8,537 $1,781 $25,532 $1,265 $1,075 Southern Electric 643 105 5,022 136 59 - - --------------------------------------------------------------------------------------------------------- Consolidated $9,180 $1,886 $30,554 $1,401 $1,134 ========================================================================================================= 1994 - - ---- Core business $8,112 $1,678 $25,466 $1,529 $1,026 Southern Electric 185 37 1,576 7 24 - - --------------------------------------------------------------------------------------------------------- Consolidated $8,297 $1,715 $27,042 $1,536 $1,050 ========================================================================================================= 1993 - - ---- Core business $8,435 $1,754 $25,131 $1,430 $ 999 Southern Electric 54 11 780 11 12 - - --------------------------------------------------------------------------------------------------------- Consolidated $8,489 $1,765 $25,911 $1,441 $1,011 ========================================================================================================= </TABLE> II-37
NOTES (continued) The Southern Company and Subsidiary Companies 1995 Annual Report Geographic Areas <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> Gross Depreciation Operating Operating Total Property and Year Revenues Income Assets Additions Amortization - - ---------------- ---------------------------------------------------------------------- (in millions) 1995 - - ---- Domestic $8,619 $1,813 $26,049 $1,278 $1,087 International 561 73 4,505 123 47 - - --------------------------------------------------------------------------------------------------- Total $9,180 $1,886 $30,554 $1,401 $1,134 =================================================================================================== 1994 - - ---- Domestic $8,116 $1,679 $25,875 $1,531 $1,028 International 181 36 1,167 5 22 - - --------------------------------------------------------------------------------------------------- Total $8,297 $1,715 $27,042 $1,536 $1,050 =================================================================================================== 1993 - - ---- Domestic $8,435 $1,754 $25,178 $1,435 $1,002 International 54 11 733 6 9 - - --------------------------------------------------------------------------------------------------- Total $8,489 $1,765 $25,911 $1,441 $1,011 =================================================================================================== </TABLE> <TABLE> <CAPTION> 16. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1995 and 1994 are as follows: <S> <C> <C> <C> <C> <C> <C> <C> Per Common Share ----------------------------------------------------- Operating Operating Consolidated Price Range Quarter Ended Revenues Income Net Income Earnings Dividends High Low --------------- ------------------------------------------ ------------------------------------------------------ (in millions) March 1995 $1,929 $385 $206 $0.31 $0.305 21 1/2 19 3/8 June 1995 2,184 454 268 0.40 0.305 22 7/8 20 1/8 September 1995 2,759 673 469 0.71 0.305 24 21 1/8 December 1995 2,308 374 160 0.24 0.305 25 22 3/4 March 1994 $1,932 $330 $142 $0.22 $0.295 22 18 1/2 June 1994 2,069 440 256 0.39 0.295 20 1/2 17 3/4 September 1994 2,381 607 416 0.64 0.295 20 17 December 1994 1,915 338 175 0.27 0.295 21 18 1/4 --------------------------------------------------------------------------------------------------------------------------------- Earnings for 1994 declined by $61 million or 9 cents per share as a result of work force reduction programs primarily recorded in the first quarter. The company's business is influenced by seasonal weather conditions. </TABLE> II-38
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> ===================================================================================================== 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $9,180 $8,297 $8,489 Consolidated Net Income (in millions) $1,103 $989 $1,002 Earnings Per Share of Common Stock $1.66 $1.52 $1.57 Cash Dividends Paid Per Share of Common Stock $1.22 $1.18 $1.14 Return on Average Common Equity (percent) 13.01 12.47 13.43 Total Assets (in millions) $30,554 $27,042 $25,911 Gross Property Additions (in millions) $1,401 $1,536 $1,441 - - ----------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $8,772 $8,186 $7,684 Preferred stock 1,432 1,432 1,333 Long-term debt 8,306 7,593 7,412 - - ----------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $18,510 $17,211 $16,429 ===================================================================================================== Capitalization Ratios (per(percent): Common stock equity 47.4 47.6 46.8 Preferred stock 7.7 8.3 8.1 Long-term debt 44.9 44.1 45.1 - - ----------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 ===================================================================================================== Other Common Stock Data: Book value per share (year-end) $13.10 $12.47 $11.96 Market price per share: High 25 22 23 5/8 Low 19 3/8 17 18 3/8 Close 24 5/8 20 22 Market-to-book ratio (year-end) (percent) 188.0 160.4 183.9 Price-earnings ratio (year-end) (times) 14.8 13.2 14.0 Dividends paid (in millions) $811 $766 $726 Dividend yield (year-end) (percent) 5.0 5.9 5.2 Dividend payout ratio (percent) 73.5 77.5 72.4 Cash coverage of dividends (year-end)(times) 2.9 2.7 2.9 Proceeds from sales of stock (in millions) $277 $279 $204 Shares outstanding (in thousands): Average 665,064 649,927 637,319 Year-end 669,543 656,528 642,662 Stockholders of record (year-end) 225,739 234,927 237,105 - - ----------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $375 $185 $2,185 Retired 538 241 2,178 Preferred Stock (in millions):Issued $-- $100 $426 Retired 1 1 516 - - ----------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 3,100 3,046 2,996 Commercial 450 439 427 Industrial 17 17 18 Other 5 5 4 - - ----------------------------------------------------------------------------------------------------- Total 3,572 3,507 3,445 ===================================================================================================== Employees (year-end): Core business 26,452 27,480 28,516 Southern Electric 5,430 1,400 745 - - ----------------------------------------------------------------------------------------------------- Total 31,882 28,880 29,261 ===================================================================================================== </TABLE> II-39
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> <C> =============================================================================================================== 1992 1991 1990 1989 - - --------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $8,073 $8,050 $8,053 $7,620 Consolidated Net Income (in millions) $953 $876 $604 $846 Earnings Per Share of Common Stock $1.51 $1.39 $0.96 $1.34 Cash Dividends Paid Per Share of Common Stock $1.10 $1.07 $1.07 $1.07 Return on Average Common Equity (percent) 13.42 12.74 8.85 12.49 Total Assets (in millions) $20,038 $19,863 $19,955 $20,092 Gross Property Additions (in millions) $1,105 $1,123 $1,185 $1,346 - - --------------------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $7,234 $6,976 $6,783 $6,861 Preferred stock 1,359 1,333 1,358 1,400 Long-term debt 7,241 7,992 8,458 8,575 - - --------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $15,834 $16,301 $16,599 $16,836 =============================================================================================================== Capitalization Ratios (per(percent): Common stock equity 45.7 42.8 40.9 40.8 Preferred stock 8.6 8.2 8.2 8.3 Long-term debt 45.7 49.0 50.9 50.9 - - --------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 100.0 =============================================================================================================== Other Common Stock Data: Book value per share (year-end) $11.43 $11.05 $10.74 $10.87 Market price per share: High 19 1/2 17 3/8 14 5/8 14 7/8 Low 15 1/8 12 7/8 11 1/2 11 Close 19 1/4 17 1/8 13 7/8 14 1/2 Market-to-book ratio (year-end) (percent) 168.4 155.5 129.7 134.0 Price-earnings ratio (year-end) (times) 12.7 12.4 14.6 10.9 Dividends paid (in millions) $695 $676 $676 $675 Dividend yield (year-end) (percent) 5.7 6.2 7.7 7.3 Dividend payout ratio (percent) 72.9 77.1 111.8 79.8 Cash coverage of dividends (year-end) (times) 2.8 2.5 2.8 2.6 Proceeds from sales of stock (in millions) $30 $-- $-- $4 Shares outstanding (in thousands): Average 631,844 631,307 631,307 631,303 Year-end 632,917 631,307 631,307 631,307 Stockholders of record (year-end) 247,378 254,568 263,046 273,751 - - --------------------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $1,815 $380 $300 $280 Retired 2,575 881 146 201 Preferred Stock (in millions): Issued $410 $100 $-- $-- Retired 326 125 96 21 - - --------------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 2,950 2,903 2,865 2,824 Commercial 414 403 396 392 Industrial 18 18 18 18 Other 4 4 4 4 - - --------------------------------------------------------------------------------------------------------------- Total 3,386 3,328 3,283 3,238 =============================================================================================================== Employees (year-end): Core business 28,872 30,144 30,087 30,368 Southern Electric 213 258 176 162 - - --------------------------------------------------------------------------------------------------------------- Total 29,085 30,402 30,263 30,530 =============================================================================================================== </TABLE> II-40A
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> <C> =============================================================================================================== 1988 1987 1986 1985 - - --------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $7,287 $7,204 $7,033 $6,999 Consolidated Net Income (in millions) $846 $577 $903 $845 Earnings Per Share of Common Stock $1.36 $0.96 $1.56 $1.56 Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.0325 $0.975 Return on Average Common Equity (percent) 13.03 9.27 15.61 16.59 Total Asset (in millions) $19,731 19,518 $18,483 $16,855 Gross Property Additions (in millions) $1,754 $1,853 $2,367 $2,242 - - --------------------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $6,686 $6,307 $6,133 $5,443 Preferred stock 1,465 1,363 1,392 1,308 Long-term debt 8,433 8,333 7,812 7,220 - - --------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $16,584 $16,003 $15,337 $13,971 =============================================================================================================== Capitalization Ratios (per(percent): Common stock equity 40.3 39.4 40.0 38.9 Preferred stock 8.8 8.5 9.1 9.4 Long-term debt 50.9 52.1 50.9 51.7 - - --------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 100.0 =============================================================================================================== Other Common Stock Data: Book value per share (year-end) $10.60 $10.28 $10.35 $9.72 Market price per share: High 12 1/8 14 1/2 13 5/8 11 5/8 Low 10 1/8 8 7/8 10 1/8 8 7/8 Close 11 1/8 11 1/8 12 5/8 11 1/8 Market-to-book ratio (year-end)(percent) 105.5 108.8 122.5 114.5 Price-earnings ratio (year-end) (times) 8.2 11.7 8.2 7.1 Dividends paid (in millions) $661 $628 $583 $512 Dividend yield (year-end) (percent) 9.6 9.6 8.4 9.2 Dividend payout ratio (percent) 78.1 108.9 64.6 60.6 Cash coverage of dividends (year-end) (times) 2.3 2.0 2.7 2.6 Proceeds from sales of stock (in millions) $194 $247 $379 $373 Shares outstanding (in thousands): Average 622,292 601,390 580,252 541,244 Year-end 630,898 613,565 592,364 560,063 Stockholders of record (year-end) 290,725 296,079 297,302 318,221 - - --------------------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $335 $700 $735 $20 Retired 273 369 875 69 Preferred Stock (in millions): Issued $120 $125 $100 $150 Retired 10 160 53 6 - - --------------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 2,781 2,733 2,675 2,611 Commercial 384 374 362 348 Industrial 18 18 17 17 Other 4 4 4 4 - - --------------------------------------------------------------------------------------------------------------- Total 3,187 3,129 3,058 2,980 =============================================================================================================== Employees (year-end): Core business 32,366 32,557 32,321 32,335 Southern Electric 157 55 37 19 - - --------------------------------------------------------------------------------------------------------------- Total 32,523 32,612 32,358 32,354 =============================================================================================================== </TABLE> II-40B
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> ============================================================================================== 1995 1994 1993 - - ---------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,840 $2,560 $2,696 Commercial 2,485 2,357 2,313 Industrial 2,206 2,162 2,200 Other 72 70 68 - - ---------------------------------------------------------------------------------------------- Total retail 7,603 7,149 7,277 Sales for resale within service area 399 360 447 Sales for resale outside service area 415 505 613 - - ---------------------------------------------------------------------------------------------- Total revenues from sales of electricity 8,417 8,014 8,337 Other revenues 763 283 152 - - ---------------------------------------------------------------------------------------------- Total $9,180 $8,297 $8,489 ============================================================================================== Kilowatt-Hour Sales (in millions): Residential 39,147 35,836 36,807 Commercial 35,938 34,080 32,847 Industrial 51,644 50,311 48,738 Other 863 844 814 - - ---------------------------------------------------------------------------------------------- Total retail 127,592 121,071 119,206 Sales for resale within service area 9,472 8,151 13,258 Sales for resale outside service area 9,143 10,769 12,445 - - ---------------------------------------------------------------------------------------------- Total 146,207 139,991 144,909 ============================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.25 7.14 7.32 Commercial 6.91 6.92 7.04 Industrial 4.27 4.30 4.51 Total retail 5.96 5.90 6.10 Sales for resale 4.38 4.57 4.12 Total sales 5.76 5.72 5.75 Average Annual Kilowatt-Hour Use Per Residential Customer 12,722 11,851 12,378 Average Annual Revenue Per Residential Customer $922.83 $846.48 $906.60 Plant Nameplate Capacity Ratings (year-end)(megawatts) 30,733 29,932 29,513 Maximum Peak-Hour Demand (megawatts): Winter 21,422 22,254 19,432 Summer 27,420 24,546 25,937 System Reserve Margin (at peak) (percent) 9.4 19.3 13.2 Annual Load Factor (percent) 59.5 63.5 59.4 Plant Availability (percent): Fossil-steam 86.7 85.2 87.9 Nuclear 88.3 89.8 85.9 - - ---------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 72.5 70.8 73.0 Nuclear 16.4 17.9 16.3 Hydro 4.1 4.7 3.9 Oil and gas 1.7 0.9 0.9 Purchased power 5.3 5.7 5.9 - - ---------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,099 10,010 9,994 Cost of fuel per million BTU (cents) 151.70 155.81 166.85 Average cost of fuel per net kilowatt-hour generated (cents) 1.53 1.56 1.67 - - ---------------------------------------------------------------------------------------------- </TABLE> II-41
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> =================================================================================================================== 1992 1991 1990 1989 - - ------------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,402 $2,391 $2,342 $2,194 Commercial 2,181 2,122 2,062 1,965 Industrial 2,126 2,088 2,085 2,011 Other 64 65 64 60 - - ------------------------------------------------------------------------------------------------------------------- Total retail 6,773 6,666 6,553 6,230 Sales for resale within service area 409 417 412 401 Sales for resale outside service area 797 884 977 928 - - ------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 7,979 7,967 7,942 7,559 Other revenues 94 83 111 161 - - ------------------------------------------------------------------------------------------------------------------- Total $8,073 $8,050 $8,053 $7,620 =================================================================================================================== Kilowatt-Hour Sales (in millions): Residential 33,627 33,622 33,118 31,627 Commercial 31,025 30,379 29,658 28,454 Industrial 47,816 46,050 45,974 45,022 Other 777 817 806 787 - - ------------------------------------------------------------------------------------------------------------------- Total retail 113,245 110,868 109,556 105,890 Sales for resale within service area 12,107 12,320 11,134 11,419 Sales for resale outside service area 16,632 19,839 24,402 24,228 - - ------------------------------------------------------------------------------------------------------------------- Total 141,984 143,027 145,092 141,537 =================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.14 7.11 7.07 6.94 Commercial 7.03 6.99 6.96 6.91 Industrial 4.45 4.53 4.53 4.47 Total retail 5.98 6.01 5.98 5.88 Sales for resale 4.20 4.05 3.91 3.73 Total sales 5.62 5.57 5.47 5.34 Average Annual Kilowatt-Hour Use Per Residential Customer 11,490 11,659 11,637 11,287 Average Annual Revenue Per Residential Customer $820.67 $829.18 $822.93 $782.90 Plant Nameplate Capacity Ratings (year-end)(megawatts) 29,830 29,915 29,532 29,532 Maximum Peak-Hour Demand (megawatts): Winter 19,121 19,166 17,629 20,772 Summer 24,146 25,261 25,981 24,399 System Reserve Margin (at peak) (percent) 14.3 16.5 14.0 21.0 Annual Load Factor (percent) 60.3 58.3 56.6 58.6 Plant Availability (percent): Fossil-steam 88.6 91.3 91.9 92.2 Nuclear 85.2 83.4 83.0 87.0 - - ------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 71.7 72.6 72.1 71.5 Nuclear 16.2 16.2 15.6 15.7 Hydro 4.6 4.4 4.4 5.2 Oil and gas 0.5 0.6 1.3 1.1 Purchased power 7.0 6.2 6.6 6.5 - - ------------------------------------------------------------------------------------------------------------------- 100.0 100.0 100.0 100.0 Total =================================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,976 10,022 10,065 10,086 Cost of fuel per million BTU (cents) 162.58 168.28 172.81 171.00 Average cost of fuel per net kilowatt-hour generated (cents) 1.62 1.69 1.74 1.72 - - ------------------------------------------------------------------------------------------------------------------- </TABLE> II-42A
<TABLE> <CAPTION> SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1995 Annual Report <S> <C> <C> <C> <C> ================================================================================================================= 1988 1987 1986 1985 - - ----------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,103 $2,042 $1,996 $1,825 Commercial 1,835 1,692 1,613 1,512 Industrial 1,945 1,870 1,845 1,830 Other 56 54 52 50 - - ----------------------------------------------------------------------------------------------------------------- Total retail 5,939 5,658 5,506 5,217 Sales for resale within service area 480 461 511 436 Sales for resale outside service area 777 1,028 957 1,289 - - ----------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 7,196 7,147 6,974 6,942 Other revenues 91 57 59 57 - - ----------------------------------------------------------------------------------------------------------------- Total $7,287 $7,204 $7,033 $6,999 ================================================================================================================= Kilowatt-Hour Sales (in millions): Residential 31,041 30,583 29,501 27,088 Commercial 27,005 25,593 24,166 22,512 Industrial 43,675 42,113 40,503 39,804 Other 763 737 723 713 - - ----------------------------------------------------------------------------------------------------------------- Total retail 102,484 99,026 94,893 90,117 Sales for resale within service area 14,806 13,282 14,347 11,079 Sales for resale outside service area 15,860 22,905 16,909 27,881 - - ----------------------------------------------------------------------------------------------------------------- Total 133,150 135,213 126,149 129,077 ================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.77 6.68 6.77 6.74 Commercial 6.79 6.61 6.67 6.71 Industrial 4.45 4.44 4.56 4.60 Total retail 5.80 5.71 5.80 5.79 Sales for resale 4.10 4.11 4.69 4.43 Total sales 5.40 5.29 5.53 5.38 Average Annual Kilowatt-Hour Use Per Residential Customer 11,255 11,307 11,157 10,515 Average Annual Revenue Per Residential Customer $762.42 $754.96 $754.93 $708.46 Plant Nameplate Capacity Ratings (year-end) (megawatts) 27,552 27,610 26,262 26,262 Maximum Peak-Hour Demand megawatts): Winter 18,685 18,185 19,665 19,347 Summer 23,641 23,194 23,255 21,778 System Reserve Margin (at peak) (percent) 15.0 16.2 11.4 17.6 Annual Load Factor (percent) 59.8 58.7 57.2 57.4 Plant Availability (percent): Fossil-steam 91.3 91.2 90.3 90.5 Nuclear 78.4 84.5 74.2 80.3 - - ----------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 77.7 77.8 79.4 78.5 Nuclear 14.5 13.1 11.5 12.0 Hydro 2.3 3.3 2.2 3.1 Oil and gas 0.7 0.6 0.9 0.3 Purchased power 4.8 5.2 6.0 6.1 - - ----------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 ================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,094 10,122 10,171 10,193 Cost of fuel per million BTU (cents) 170.36 176.64 185.89 191.24 Average cost of fuel per net kilowatt-hour generated (cents) 1.72 1.78 1.89 1.95 - - ----------------------------------------------------------------------------------------------------------------- </TABLE> II-42B
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies ============================================================================================== For the Years Ended December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> - - ---------------------------------------------------------------------------------------------- Operating Revenues $ 9,180 $ 8,297 $ 8,489 - - ---------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,126 2,058 2,265 Purchased power 491 277 336 Proceeds from settlement of disputed contracts - - (3) Other 1,626 1,505 1,448 Maintenance 683 660 653 Depreciation and amortization 904 821 793 Amortization of deferred Plant Vogtle cost, net 124 75 36 Taxes other than income taxes 535 475 462 Federal and state income taxes 805 711 734 - - ---------------------------------------------------------------------------------------------- Total operating expenses 7,294 6,582 6,724 - - ---------------------------------------------------------------------------------------------- Operating Income 1,886 1,715 1,765 Other Income (Expense): Allowance for equity funds used during construction 5 11 9 Deferred return on Plant Vogtle - - - Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 38 32 30 Other, net (65) (28) (34) Income taxes applicable to other income 36 26 57 - - ---------------------------------------------------------------------------------------------- Income Before Interest Charges 1,900 1,756 1,827 - - ---------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 557 568 595 Allowance for debt funds used during construction (20) (18) (13) Interest on interim obligations 63 33 30 Amortization of debt discount, premium, and expense, net 44 30 26 Other interest charges 52 47 87 Minority interest in subsidiaries 13 20 7 Preferred and preference dividends of subsidiary companies 88 87 93 - - ---------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 797 767 825 - - ---------------------------------------------------------------------------------------------- Consolidated Net Income $ 1,103 $ 989 $ 1,002 - - ---------------------------------------------------------------------------------------------- Earnings Per Share of Common Stock $1.66 $1.52 $1.57 Average Number of Shares of Common Stock Outstanding (Thousands) 665,064 649,927 637,319 ============================================================================================== </TABLE> II-43
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies ============================================================================================== For the Years Ended December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> - - ---------------------------------------------------------------------------------------------- Operating Revenues $ 8,073 $ 8,050 $ 8,053 - - ---------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,114 2,237 2,327 Purchased power 454 468 642 Proceeds from settlement of disputed contracts (7) (181) - Other 1,317 1,321 1,161 Maintenance 613 637 602 Depreciation and amortization 768 763 749 Amortization of deferred Plant Vogtle cost, net (31) 16 31 Taxes other than income taxes 436 432 397 Federal and state income taxes 647 618 520 - - ---------------------------------------------------------------------------------------------- Total operating expenses 6,311 6,311 6,429 - - ---------------------------------------------------------------------------------------------- Operating Income 1,762 1,739 1,624 Other Income (Expense): Allowance for equity funds used during construction 10 13 33 Deferred return on Plant Vogtle - 35 83 Write-off of Plant Vogtle costs - - (281) Income tax reduction for write-off of Plant Vogtle costs - - 63 Interest income 32 30 28 Other, net (50) (57) (55) Income taxes applicable to other income 39 21 36 - - ---------------------------------------------------------------------------------------------- Income Before Interest Charges 1,793 1,781 1,531 - - ---------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 684 757 788 Allowance for debt funds used during construction (12) (18) (34) Interest on interim obligations 16 20 22 Amortization of debt discount, premium, and expense, net 14 9 10 Other interest charges 34 29 26 Minority interest in subsidiaries - - - Preferred and preference dividends of subsidiary companies 104 108 115 - - ---------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 840 905 927 - - ---------------------------------------------------------------------------------------------- Consolidated Net Income $ 953 $ 876 $ 604 ============================================================================================== Earnings Per Share of Common Stock $1.51 $1.39 $0.96 Average Number of Shares of Common Stock Outstanding (Thousands) 631,844 631,307 631,307 ============================================================================================== </TABLE> II-44A
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies ============================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> - - ---------------------------------------------------------------------------------------------- Operating Revenues $ 7,620 $ 7,287 $ 7,204 - - ---------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,241 2,213 2,303 Purchased power 575 562 552 Proceeds from settlement of disputed contracts - - - Other 1,103 1,167 1,219 Maintenance 542 547 574 Depreciation and amortization 698 632 563 Amortization of deferred Plant Vogtle cost, net (39) (8) (142) Taxes other than income taxes 356 362 349 Federal and state income taxes 525 412 517 - - ---------------------------------------------------------------------------------------------- Total operating expenses 6,001 5,887 5,935 - - ---------------------------------------------------------------------------------------------- Operating Income 1,619 1,400 1,269 Other Income (Expense): Allowance for equity funds used during construction 71 138 190 Deferred return on Plant Vogtle 48 107 115 Write-off of Plant Vogtle costs - - (358) Income tax reduction for write-off of Plant Vogtle costs - - 129 Interest income 28 46 77 Other, net (50) (30) (59) Income taxes applicable to other income 30 23 19 - - ---------------------------------------------------------------------------------------------- Income Before Interest Charges 1,746 1,684 1,382 - - ---------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 791 784 776 Allowance for debt funds used during construction (63) (130) (157) Interest on interim obligations 12 22 24 Amortization of debt discount, premium, and expense, net 11 10 8 Other interest charges 26 32 29 Minority interest in subsidiaries - - - Preferred and preference dividends of subsidiary companies 123 120 125 - - ---------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 900 838 805 - - ---------------------------------------------------------------------------------------------- Consolidated Net Income $ 846 $ 846 $ 577 ============================================================================================== Earnings Per Share of Common Stock $1.34 $1.36 $0.96 Average Number of Shares of Common Stock Outstanding (Thousands) 631,303 622,292 601,390 ============================================================================================== </TABLE> II-44B
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies =================================================================================== For the Years Ended December 31, 1986 1985 - - ----------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> - - ----------------------------------------------------------------------------------- Operating Revenues $ 7,033 $ 6,999 - - ----------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,316 2,431 Purchased power 386 456 Proceeds from settlement of disputed contracts - - Other 1,045 941 Maintenance 576 562 Depreciation and amortization 510 471 Amortization of deferred Plant Vogtle cost, net - - Taxes other than income taxes 315 303 Federal and state income taxes 672 649 - - ----------------------------------------------------------------------------------- Total operating expenses 5,820 5,813 - - ----------------------------------------------------------------------------------- Operating Income 1,213 1,186 Other Income (Expense): Allowance for equity funds used during construction 312 269 Deferred return on Plant Vogtle - - Write-off of Plant Vogtle costs - - Income tax reduction for write-off of Plant Vogtle costs - - Interest income 66 70 Other, net (20) - Income taxes applicable to other income - (19) - - ----------------------------------------------------------------------------------- Income Before Interest Charges 1,571 1,506 - - ----------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 782 755 Allowance for debt funds used during construction (260) (254) Interest on interim obligations 4 21 Amortization of debt discount, premium, and expense, net 6 3 Other interest charges 15 17 Minority interest in subsidiaries - - Preferred and preference dividends of subsidiary companies 121 119 - - ----------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 668 661 - - ----------------------------------------------------------------------------------- Consolidated Net Income $ 903 $ 845 =================================================================================== Earnings Per Share of Common Stock $1.56 $1.56 Average Number of Shares of Common Stock Outstanding (Thousands) 580,252 541,244 =================================================================================== </TABLE> II-44C
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies ================================================================================================ For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------ (Millions of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 1,103 $ 989 $ 1,002 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 1,134 1,050 1,011 Deferred income taxes, net 116 (3) 209 Deferred investment tax credits, net 1 (1) (20) Allowance for equity funds used during construction (5) (11) (9) Amortization of deferred Plant Vogtle costs 124 75 36 Write-off of Plant Vogtle costs - - - Non-cash proceeds from settlement of disputed contracts - - - Other, net (85) (7) (45) Changes in certain current assets and liabilities -- Receivables (109) 114 (55) Inventories 39 (128) 136 Payables (138) 81 43 Taxes accrued - - 3 Other 135 (48) (64) - - ------------------------------------------------------------------------------------------------- Net cash provided from operating activities 2,315 2,111 2,247 - - ------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,401) (1,536) (1,441) Foreign utility operations (1,416) (405) (465) Sales of property 287 171 262 Other 153 (87) (37) - - ------------------------------------------------------------------------------------------------- Net cash used for investing activities (2,377) (1,857) (1,681) - - ------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Common stock 277 279 205 Preferred securities - 100 - Preferred stock - - 426 First mortgage bonds 375 185 2,185 Pollution control bonds 731 749 386 Other long-term debt 1,074 439 206 Prepaid capacity revenues - - - Retirements: Preferred and preference stock (1) (1) (516) First mortgage bonds (538) (241) (2,178) Pollution control bonds (721) (732) (351) Other long-term debt (181) (307) (99) Interim obligations, net 727 37 114 Payment of common stock dividends (811) (766) (726) Miscellaneous (237) (35) (137) - - ------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 695 (293) (485) - - ------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 633 (39) 81 Cash and Cash Equivalents at Beginning of Year 139 178 97 - - ------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 772 $ 139 $ 178 ================================================================================================= ( ) Denotes use of cash. </TABLE> II-45
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies ================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - -------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 953 $ 876 $ 604 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 969 968 982 Deferred income taxes, net 221 26 158 Deferred investment tax credits, net (6) (11) - Allowance for equity funds used during construction (10) (13) (33) Amortization of deferred Plant Vogtle costs (31) (19) (52) Write-off of Plant Vogtle costs - - 281 Non-cash proceeds from settlement of disputed contracts (7) (141) - Other, net (25) 45 (10) Changes in certain current assets and liabilities -- Receivables (10) 68 8 Inventories (23) 20 (82) Payables 35 (13) (41) Taxes accrued (62) 107 (5) Other (9) (46) (34) - - -------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,995 1,867 1,776 - - -------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,105) (1,123) (1,185) Foreign utility operations - - - Sales of property 44 291 35 Other 61 (45) 14 - - -------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,000) (877) (1,136) - - -------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Common stock 30 - - Preferred securities - - - Preferred stock 410 100 - First mortgage bonds 1,815 380 300 Pollution control bonds 208 126 - Other long-term debt 48 14 74 Prepaid capacity revenues - 53 - Retirements: Preferred and preference stock (326) (125) (96) First mortgage bonds (2,575) (881) (146) Pollution control bonds (208) (130) (3) Other long-term debt (88) (70) (207) Interim obligations, net 525 180 78 Payment of common stock dividends (695) (676) (676) Miscellaneous (148) (41) (8) - - -------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (1,004) (1,070) (684) - - -------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (9) (80) (44) Cash and Cash Equivalents at Beginning of Year 106 186 230 - - -------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 97 $ 106 $ 186 ================================================================================================== ( ) Denotes use of cash. </TABLE> II-46A
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies ========================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 846 $ 846 $ 577 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 951 837 742 Deferred income taxes, net 225 206 198 Deferred investment tax credits, net (1) 27 20 Allowance for equity funds used during construction (71) (138) (190) Amortization of deferred Plant Vogtle costs (87) (115) (257) Write-off of Plant Vogtle costs - - 358 Non-cash proceeds from settlement of disputed contracts - - - Other, net (28) 46 87 Changes in certain current assets and liabilities -- Receivables (123) (21) (113) Inventories 6 (47) (62) Payables (23) (6) 125 Taxes accrued (15) 29 (34) Other 156 (40) 42 - - ---------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,836 1,624 1,493 - - ---------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,346) (1,754) (1,853) Foreign utility operations - - - Sales of property - - 12 Other 54 (2) 64 - - ---------------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,292) (1,756) (1,777) - - ---------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Common stock 4 194 247 Preferred securities - - - Preferred stock - 120 125 First mortgage bonds 280 335 700 Pollution control bonds 104 73 228 Other long-term debt 74 68 81 Prepaid capacity revenues - - - Retirements: Preferred and preference stock (21) (10) (160) First mortgage bonds (201) (273) (369) Pollution control bonds (55) (1) (122) Other long-term debt (83) (108) (56) Interim obligations, net 27 (300) 313 Payment of common stock dividends (675) (661) (628) Miscellaneous (10) (20) (58) - - ---------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (556) (583) 301 - - ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (12) (715) 17 Cash and Cash Equivalents at Beginning of Year 242 957 940 - - ---------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 230 $ 242 $ 957 ========================================================================================================== ( ) Denotes use of cash. </TABLE> II-46B
<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies ======================================================================================== For the Years Ended December 31, 1986 1985 - - ---------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> Operating Activities: Net income $ 903 $ 845 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 674 623 Deferred income taxes, net 465 242 Deferred investment tax credits, net 132 184 Allowance for equity funds used during construction (312) (269) Amortization of deferred Plant Vogtle costs - - Write-off of Plant Vogtle costs - - Non-cash proceeds from settlement of disputed contracts - - Other, net 15 17 Changes in certain current assets and liabilities -- Receivables 38 (89) Inventories (37) 127 Payables 48 38 Taxes accrued 24 (65) Other (56) 84 - - ---------------------------------------------------------------------------------------- Net cash provided from operating activities 1,894 1,737 - - ---------------------------------------------------------------------------------------- Investing Activities: Gross property additions (2,367) (2,242) Foreign utility operations - - Sales of property - 1 Other 46 126 - - ---------------------------------------------------------------------------------------- Net cash used for investing activities (2,321) (2,115) - - ---------------------------------------------------------------------------------------- Financing Activities: Proceeds: Common stock 379 373 Preferred securities - - Preferred stock 100 150 First mortgage bonds 735 20 Pollution control bonds 386 635 Other long-term debt 367 68 Prepaid capacity revenues 100 - Retirements: Preferred and preference stock (53) (6) First mortgage bonds (875) (69) Pollution control bonds (21) - Other long-term debt (55) (54) Interim obligations, net (37) (77) Payment of common stock dividends (583) (512) Miscellaneous (82) (24) - - ---------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 361 504 - - ---------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (66) 126 Cash and Cash Equivalents at Beginning of Year 1,006 880 - - ---------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 940 $ 1,006 ======================================================================================== ( ) Denotes use of cash. </TABLE> II-46C
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 8,533 $ 8,778 $ 8,006 Nuclear 5,956 5,942 5,930 Hydro 1,477 1,341 1,263 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 15,966 16,061 15,199 Transmission 3,452 3,504 3,224 Distribution 7,583 7,243 6,848 General 2,436 2,380 2,395 SEI utility plant 2,420 - - Construction work in progress 990 1,247 1,031 Nuclear fuel, at amortized cost 225 238 229 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 33,072 30,673 28,926 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant 21 21 21 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 33,093 30,694 28,947 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 10,056 9,567 8,924 Steam heat 11 10 10 - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 10,067 9,577 8,934 - - ---------------------------------------------------------------------------------------------------------------------------- Total 23,026 21,117 20,013 - - ---------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total 23,026 21,117 20,013 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Argentine operating concession, being amortized 431 446 469 Nuclear decommissioning trusts 201 125 88 Miscellaneous 661 236 179 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,293 807 736 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 772 139 178 Investment securities - - - Receivables, net 1,172 840 962 Accrued utility revenues 347 218 185 Fossil fuel stock, at average cost 327 354 254 Materials and supplies, at average cost 552 553 535 Prepayments 266 194 148 Vacation pay deferred 74 70 73 - - ---------------------------------------------------------------------------------------------------------------------------- Total 3,510 2,368 2,335 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 1,386 1,454 1,546 Deferred Plant Vogtle costs 308 432 507 Deferred fuel charges 34 47 70 Debt expense, being amortized 100 48 33 Premium on reacquired debt, being amortized 295 298 288 Miscellaneous 602 471 383 - - ---------------------------------------------------------------------------------------------------------------------------- Total 2,725 2,750 2,827 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 30,554 $ 27,042 $ 25,911 ============================================================================================================================ </TABLE> II-47
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 8,033 $ 7,997 $ 7,661 Nuclear 5,912 5,902 5,820 Hydro 1,253 1,247 1,222 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 15,198 15,146 14,703 Transmission 3,093 2,955 2,824 Distribution 6,430 6,092 5,738 General 2,291 2,196 2,078 SEI utility plant - - - Construction work in progress 665 603 1,092 Nuclear fuel, at amortized cost 257 301 354 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 27,934 27,293 26,789 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant 21 20 20 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 27,955 27,313 26,809 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 8,271 7,676 7,079 Steam heat 9 8 8 - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 8,280 7,684 7,087 - - ---------------------------------------------------------------------------------------------------------------------------- Total 19,675 19,629 19,722 - - ---------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 3,186 3,020 2,911 - - ---------------------------------------------------------------------------------------------------------------------------- Total 16,489 16,609 16,811 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - 202 - Argentine operating concession, being amortized - - - Nuclear decommissioning trusts 52 26 2 Miscellaneous 75 83 83 - - ---------------------------------------------------------------------------------------------------------------------------- Total 127 311 85 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 97 106 186 Investment securities 199 - - Receivables, net 742 723 793 Accrued utility revenues 177 160 151 Fossil fuel stock, at average cost 392 445 467 Materials and supplies, at average cost 533 457 456 Prepayments 220 222 193 Vacation pay deferred 70 70 64 - - ---------------------------------------------------------------------------------------------------------------------------- Total 2,430 2,183 2,310 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Deferred Plant Vogtle costs 383 375 364 Deferred fuel charges 89 106 126 Debt expense, being amortized 28 23 23 Premium on reacquired debt, being amortized 222 126 99 Miscellaneous 270 130 137 - - ---------------------------------------------------------------------------------------------------------------------------- Total 992 760 749 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 20,038 $ 19,863 $ 19,955 ============================================================================================================================ </TABLE> II-48A
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 7,565 $ 6,226 $ 6,157 Nuclear 5,976 4,995 4,987 Hydro 1,215 1,197 1,192 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 14,756 12,418 12,336 Transmission 2,683 2,500 2,388 Distribution 5,365 4,944 4,510 General 2,026 1,865 1,674 SEI utility plant - - - Construction work in progress 1,006 3,071 2,519 Nuclear fuel, at amortized cost 402 481 479 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 26,238 25,279 23,906 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant 20 20 20 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 26,258 25,299 23,926 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 6,492 5,885 5,355 Steam heat 7 6 6 - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 6,499 5,891 5,361 - - ---------------------------------------------------------------------------------------------------------------------------- Total 19,759 19,408 18,565 - - ---------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 2,759 2,559 2,371 - - ---------------------------------------------------------------------------------------------------------------------------- Total 17,000 16,849 16,194 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Argentine operating concession, being amortized - - - Nuclear decommissioning trusts - - - Miscellaneous 85 88 70 - - ---------------------------------------------------------------------------------------------------------------------------- Total 85 88 70 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 230 242 957 Investment securities - - - Receivables, net 765 687 687 Accrued utility revenues 189 148 139 Fossil fuel stock, at average cost 427 490 513 Materials and supplies, at average cost 413 348 278 Prepayments 192 174 136 Vacation pay deferred 65 63 59 - - ---------------------------------------------------------------------------------------------------------------------------- Total 2,281 2,152 2,769 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Deferred Plant Vogtle costs 322 270 173 Deferred fuel charges 143 157 112 Debt expense, being amortized 24 24 25 Premium on reacquired debt, being amortized 103 102 95 Miscellaneous 134 89 80 - - ---------------------------------------------------------------------------------------------------------------------------- Total 726 642 485 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 20,092 $ 19,731 $ 19,518 ============================================================================================================================ </TABLE> II-48B
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies =========================================================================================================== At December 31, 1986 1985 - - ----------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> ASSETS Electric Plant: Production- Fossil $ 5,415 $ 5,274 Nuclear 2,490 2,341 Hydro 1,184 1,162 - - ----------------------------------------------------------------------------------------------------------- Total production 9,089 8,777 Transmission 2,254 2,001 Distribution 4,131 3,793 General 1,504 1,243 SEI utility plant - - Construction work in progress 5,162 4,278 Nuclear fuel, at amortized cost 520 497 - - ----------------------------------------------------------------------------------------------------------- Total electric plant 22,660 20,589 - - ----------------------------------------------------------------------------------------------------------- Steam Heat Plant 35 32 - - ----------------------------------------------------------------------------------------------------------- Total utility plant 22,695 20,621 - - ----------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 4,879 4,472 Steam heat 13 11 - - ----------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 4,892 4,483 - - ----------------------------------------------------------------------------------------------------------- Total 17,803 16,138 - - ----------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 2,212 1,976 - - ----------------------------------------------------------------------------------------------------------- Total 15,591 14,162 - - ----------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - Argentine operating concession, being amortized - - Nuclear decommissioning trusts - - Miscellaneous 69 36 - - ----------------------------------------------------------------------------------------------------------- Total 69 36 - - ----------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 940 1,006 Investment securities - - Receivables, net 657 685 Accrued utility revenues 83 92 Fossil fuel stock, at average cost 501 503 Materials and supplies, at average cost 228 188 Prepayments 70 22 Vacation pay deferred 56 53 - - ----------------------------------------------------------------------------------------------------------- Total 2,535 2,549 - - ----------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - Deferred Plant Vogtle costs - - Deferred fuel charges 121 - Debt expense, being amortized 24 24 Premium on reacquired debt, being amortized 70 - Miscellaneous 73 84 - - ----------------------------------------------------------------------------------------------------------- Total 288 108 - - ----------------------------------------------------------------------------------------------------------- Total Assets $ 18,483 $ 16,855 =========================================================================================================== </TABLE> II-48C
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 3,348 $ 3,283 $ 3,213 Paid-in capital 1,940 1,711 1,502 Premium on preferred stock 1 1 1 Retained Earnings 3,483 3,191 2,968 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 8,772 8,186 7,684 Preferred stock 1,332 1,332 1,332 Preferred stock subject to mandatory redemption - - 1 Subsidiary obligated mandatorily redeemable preferred securities 100 100 - Long-term debt 8,306 7,593 7,412 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 18,510 17,211 16,429 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 445 575 865 Commercial paper 1,225 403 76 Preferred stock due within one year - 1 1 Long-term debt due within one year 509 228 156 Accounts payable 785 806 698 Customer deposits 216 102 103 Taxes accrued 272 153 206 Interest accrued 199 190 186 Vacation pay accrued 100 87 90 Miscellaneous 530 233 190 - - ---------------------------------------------------------------------------------------------------------------------------- Total 4,281 2,778 2,571 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,611 4,007 3,979 Deferred credits related to income taxes 936 987 1,051 Accumulated deferred investment tax credits 820 858 900 Minority interest 231 267 - Prepaid capacity revenues, net 131 138 144 Disallowed Plant Vogtle capacity buyback costs 59 60 63 Miscellaneous 975 736 774 - - ---------------------------------------------------------------------------------------------------------------------------- Total 7,763 7,053 6,911 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 30,554 $ 27,042 $ 25,911 ============================================================================================================================ </TABLE> II-49
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 1,582 $ 1,578 $ 1,578 Paid-in capital 2,929 2,906 2,906 Premium on preferred stock 2 2 3 Retained Earnings 2,721 2,490 2,296 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 7,234 6,976 6,783 Preferred stock 1,351 1,207 1,207 Preferred stock subject to mandatory redemption 8 126 151 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 7,241 7,992 8,458 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 15,834 16,301 16,599 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 567 302 122 Commercial paper 260 - - Preferred stock due within one year 65 7 7 Long-term debt due within one year 188 217 308 Accounts payable 646 585 616 Customer deposits 99 95 91 Taxes accrued 172 215 144 Interest accrued 191 221 246 Vacation pay accrued 86 84 75 Miscellaneous 242 229 233 - - ---------------------------------------------------------------------------------------------------------------------------- Total 2,516 1,955 1,842 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Deferred credits related to income taxes - - - Accumulated deferred investment tax credits 957 1,004 1,063 Minority interest - - - Prepaid capacity revenues, net 148 149 100 Disallowed Plant Vogtle capacity buyback costs 72 110 136 Miscellaneous 511 344 215 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,688 1,607 1,514 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 20,038 $ 19,863 $ 19,955 ============================================================================================================================ </TABLE> II-50A
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies ============================================================================================================================ At December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 1,578 $ 1,577 $ 1,534 Paid-in capital 2,906 2,903 2,752 Premium on preferred stock 3 3 3 Retained Earnings 2,374 2,203 2,018 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 6,861 6,686 6,307 Preferred stock 1,209 1,259 1,139 Preferred stock subject to mandatory redemption 191 206 224 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 8,575 8,433 8,333 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 16,836 16,584 16,003 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 44 17 317 Commercial paper - - - Preferred stock due within one year 61 17 9 Long-term debt due within one year 169 190 192 Accounts payable 676 728 747 Customer deposits 89 83 86 Taxes accrued 181 203 221 Interest accrued 233 240 233 Vacation pay accrued 75 74 68 Miscellaneous 252 104 110 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,780 1,656 1,983 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Deferred credits related to income taxes - - - Accumulated deferred investment tax credits 1,111 1,161 1,180 Minority interest - - - Prepaid capacity revenues, net 102 81 104 Disallowed Plant Vogtle capacity buyback costs 73 104 79 Miscellaneous 190 145 169 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,476 1,491 1,532 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 20,092 $ 19,731 $ 19,518 ============================================================================================================================ </TABLE> II-50B
<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies =========================================================================================================== At December 31, 1986 1985 - - ----------------------------------------------------------------------------------------------------------- (Millions of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 1,481 $ 1,400 Paid-in capital 2,558 2,259 Premium on preferred stock 5 7 Retained Earnings 2,089 1,777 - - ----------------------------------------------------------------------------------------------------------- Total common equity 6,133 5,443 Preferred stock 1,214 1,114 Preferred stock subject to mandatory redemption 177 194 Subsidiary obligated mandatorily redeemable preferred securities - - Long-term debt 7,813 7,220 - - ----------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 15,337 13,971 - - ----------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 4 41 Commercial paper - - Preferred stock due within one year 15 51 Long-term debt due within one year 251 303 Accounts payable 737 689 Customer deposits 82 80 Taxes accrued 259 144 Interest accrued 221 226 Vacation pay accrued 66 63 Miscellaneous 111 117 - - ----------------------------------------------------------------------------------------------------------- Total 1,746 1,714 - - ----------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - Deferred credits related to income taxes - - Accumulated deferred investment tax credits 1,208 1,114 Minority interest - - Prepaid capacity revenues, net 101 - Disallowed Plant Vogtle capacity buyback costs - - Miscellaneous 91 56 - - ----------------------------------------------------------------------------------------------------------- Total 1,400 1,170 - - ----------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 18,483 $ 16,855 =========================================================================================================== </TABLE> II-50C
ALABAMA POWER COMPANY FINANCIAL SECTION II-51
Management's Report Alabama Power Company 1995 Annual Report The management of Alabama Power Company has prepared -- and is responsible for - - -- the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the books and records reflect only authorized transactions of the company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The company's system of internal accounting controls is evaluated on an ongoing basis by the company's internal audit staff. The company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Alabama Power Company in conformity with generally accepted accounting principles. /s/ Elmer B. Harris Elmer B. Harris President and Chief Executive Officer /s/ William B. Hutchins, III William B. Hutchins, III Executive Vice President and Chief Financial Officer February 21, 1996 II-52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Alabama Power Company: We have audited the accompanying balance sheets and statements of capitalization of Alabama Power Company (an Alabama corporation and wholly owned subsidiary of The Southern Company) as of December 31, 1995 and 1994, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-61 through II-78) referred to above present fairly, in all material respects, the financial position of Alabama Power Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Birmingham, Alabama February 21, 1996 II-53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Alabama Power Company 1995 Annual Report RESULTS OF OPERATIONS Earnings Alabama Power Company's 1995 net income after dividends on preferred stock was $361 million, representing a $4.6 million (1.3 percent) increase from the prior year. This improvement can be attributed to an increase in retail energy sales of 4.7 percent from 1994 levels. This was primarily due to the extreme summer weather during 1995, especially when compared to the mild weather of 1994. This improvement was partially offset by a 2.6 percent increase in operating costs. In 1994, earnings were $356 million, representing a 2.8 percent increase from the prior year. This increase was due to lower operating expenses which decreased 3.0 percent from the previous year. This improvement was partially offset by reduced capacity sales to nonterritorial utilities. Net income was also impacted by the mild weather in 1994. The return on average common equity for 1995 was 13.61 percent compared to 13.86 percent in 1994, and 13.94 percent in 1993. Revenues Total revenues for 1995 were $3.0 billion, reflecting a 3.1 percent increase from 1994. The following table summarizes the principal factors that affected operating revenues for the past three years: Increase (Decrease) From Prior Year ---------------------------------------- 1995 1994 1993 ------------- ------------ ------------- (in thousands) Retail -- Change in base rates $ 990 $ -- $ -- Unbilled adjustment -- 28,000 -- Sales growth 18,174 45,304 24,960 Weather 54,888 (39,964) 58,536 Fuel cost recovery and other 35,235 (84,344) 96,437 --------------------------------------------------------------- Total retail 109,287 (51,004) 179,933 --------------------------------------------------------------- Sales for Resale -- Non-affiliates 15,380 (9,345) (43,686) Affiliates (37,032) (17,213) 23,887 --------------------------------------------------------------- Total sales for resale (21,652) (26,558) (19,799) Other operating revenues 1,997 5,095 635 --------------------------------------------------------------- Total operating revenues $89,632 $(72,467) $160,769 --------------------------------------------------------------- Percent change 3.1% (2.4)% 5.6% --------------------------------------------------------------- Retail revenues of $2.5 billion in 1995 increased $109 million (4.6 percent) from the prior year, compared with a decrease of $51 million (2.1 percent) in 1994. The hot weather during the summer of 1995 and higher fuel cost recovery were the primary reasons for the increase in retail revenues over 1994. The mild weather during 1994 and lower fuel cost recovery contributed to the decrease in retail revenues from 1993. Fuel revenues, which increased in 1995, generally represent the direct recovery of fuel expense, including the fuel component of purchased energy, and therefore have no effect on net income. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the II-54
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report contracts. Energy is generally sold at variable cost. These capacity and energy components, as well as the components of the sales to affiliated companies, were: 1995 1994 1993 ------------------------------------------- (in thousands) Capacity $158,825 $165,063 $187,062 Energy 209,376 222,579 233,253 ---------------------------------------------------------- Total $368,201 $387,642 $420,315 ---------------------------------------------------------- Capacity revenues from non-affiliates remained relatively constant in 1995 and 1994. Capacity revenues from sales to affiliates decreased $22 million in 1994. Sales to affiliated companies within the Southern electric system will vary from year to year depending on demand, the availability, and the variable production cost of generating resources at each company. Kilowatt-hour (KWH) sales for 1995 and the percent change by year were as follows: KWH Percent Change ------------------------------------------- 1995 1995 1994 1993 ------------------------------------------- (millions) Residential 14,383 9.1% (1.7)% 9.2% Commercial 10,043 4.1 3.4 6.4 Industrial 19,863 2.0 3.2 1.8 Other 187 0.5 1.1 2.8 ---------- Total retail 44,476 4.7 3.3 5.1 Sales for resale - Non-affiliates 8,046 18.8 (5.2) (14.8) Affiliates 6,705 (20.5) 4.3 12.1 ---------- Total 59,227 2.6% 2.4% 3.0% - - ----------------------------------------------------------------- The rate of increase in 1995 retail energy sales was fostered by the impact of weather. Residential energy sales surged upward as a result of hotter-than-normal summer weather in 1995, compared with the mild summer of 1994. The gains in commercial and industrial sales reflect the strength of business and economic conditions in the company's service area. Expenses Total operating expenses of $2.4 billion for 1995 were up $60 million or 2.6 percent compared with 1994. The major components of this increase include $27 million in purchased power, $43 million in other operation expenses, $11 million in depreciation and amortization, and $7 million in income taxes offset by decreases in fuel costs and maintenance expenses of $10 million and $19 million, respectively. Total operating expenses of $2.3 billion for 1994 were down 3.0 percent compared with the prior year. The decrease was mainly due to less coal-fired generation and a lower average cost of fuel consumed. Coal-fired generation decreased because it was displaced with lower cost nuclear and hydro generation. Fuel costs constitute the single largest expense for the company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: -------------------------- 1995 1994 1993 ------------------------- Total generation (billions of kilowatt-hours) 58 57 55 Sources of generation (percent) -- Coal 73 68 70 Nuclear 19 23 22 Hydro 8 9 8 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.71 1.92 2.11 Nuclear 0.50 0.49 0.51 Total 1.48 1.56 1.73 - - -------------------------------------------------------------- Note: Oil & Gas comprise less than 0.5% of generation. Fuel expense decreased in 1995 by $10 million or 1.3 percent. This decrease resulted from lower average cost of fuel consumed. Fuel expense decreased in 1994 by $75 million (8.6 percent) from the previous year. This decrease is attributable to the increase in availability of nuclear and hydro generation and a decrease in the cost of fuel. The increase in purchased power is primarily attributable to the exceptionally hot summer weather. Purchased power consists primarily of purchases from the affiliates of the Southern electric system. Purchased power II-55
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report transactions among the company and its affiliates will vary from period to period depending on demand, the availability, and the variable production cost of generating resources at each company. KWH purchases from affiliates increased 18 percent from the prior year. Other operation expenses increased 9.4 percent in 1995 following a 2.5 percent decrease in 1994. This increase over 1994 is primarily attributable to the 1995 expenses not reflecting the positive impact of the amortization of the Gulf States Utilities settlement which expired in 1994. The decrease in maintenance expenses for 1995 reflects the establishment in September 1994 of a Natural Disaster Reserve. This also caused the increase in 1994 maintenance expenses over 1993. See Note 1 to the financial statements under "Natural Disaster Reserve" for additional information. Depreciation and amortization expense increased 3.6 percent in 1995. This increase reflects additions to utility plant. The amount for 1994 was virtually unchanged from the previous year because of lower average depreciation rates effective January 1994 and offsetting growth in depreciable plant in service. Income tax expense increased 3.0 percent and 8.2 percent in 1995 and 1994, respectively. These increases are primarily attributable to higher taxable income. The company contributed $11.5 million to the Alabama Power Foundation, Inc. in 1995, which represents a decrease of $2.0 million from the previous year. The Foundation makes distributions to qualified entities which are organized exclusively for charitable, educational, literary, and scientific purposes. Total net interest charges and preferred stock dividends rose in 1995 to $265 million, an increase of 12.2 percent. This increase results from (i) interest on interim obligations which rose due to higher average interest rates on an increased average amount of short-term debt outstanding and (ii) amortization of debt discount, premium, and expense, net pursuant to an APSC order. See Note 3 to the financial statements under "Retail Rate Adjustment Procedures" for additional details. The decline in net interest charges in 1994 by $23 million (9.0 percent) reflects the benefits from refinancing. Effects of Inflation The company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated more competitive environment. Future earnings in the near term will depend upon growth in electric sales, which are subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power II-56
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report marketers and brokers. The company is aggressively working to maintain and expand its share of wholesale sales in the Southeastern power markets. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. New federal legislation is being discussed, and legislation allowing customer choice has already been introduced in Florida and Georgia. In order to address these initiatives, numerous questions must be resolved, with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability by seeking new markets that evolve with the changing regulation. The addition of four combustion turbine generating units in 1996 will increase related operation and maintenance expenses and depreciation expenses. These additions are to ensure reliable service to its customers during critical peak times. Rates to retail customers served by the company are regulated by the Alabama Public Service Commission (APSC). Rates for the company can be adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. In June 1995, the APSC issued an order granting the company's request for gradual adjustments to move toward parity among customer classes. This order also calls for a moratorium on any periodic retail rate increases (but not decreases) until 2001. In December 1995, the APSC issued an order authorizing the company to reduce balance sheet items - - -- such as plant and deferred charges -- at any time the company's actual base rate revenues exceed the budgeted revenues. See Note 3 to the financial statements for information about this and other regulatory matters. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the Financial Accounting Standards Board (FASB) has decided to review the accounting for liabilities related to closure and removal of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of closing and removing the company's nuclear and other facilities may be required to be recorded as liabilities in the Balance Sheets. Also, the annual provisions for such costs could increase. Because of the company's current ability to recover closure and removal costs through rates, these changes should not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The company is subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the company's operations is no longer subject to these provisions, the company would be required to write off related regulatory assets and liabilities, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The company adopted the new rules January 1, 1996, with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in the utility industry. II-57
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report FINANCIAL CONDITION Overview The company's financial condition remained stable in 1995. This stability is the continuation over recent years of growth in energy sales and cost control measures combined with a significant lowering of the cost of capital, achieved through the refinancing and/or redemption of higher-cost long-term debt and preferred stock. The company had gross property additions of $552 million in 1995. The majority of funds needed for gross property additions for the last several years have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Statements of Cash Flows provide additional details. Capital Structure The company's ratio of common equity to total capitalization -- including short-term debt -- was 45.0 percent in 1995, compared with 45.9 percent in 1994, and 46.5 percent in 1993. In 1995, the company issued through public authorities, $131.5 million of pollution control revenue refunding bonds. Composite financing rates as of year-end for 1993 through 1995 were as follows: 1995 1994 1993 -------------------------------- Composite interest rate on long-term debt 7.02% 7.39% 7.35% Composite dividend rate on preferred stock 6.04% 6.23% 5.80% ---------------------------------------------------------------- The company's current securities ratings are as follows: Duff & Standard Phelps Moody's & Poor's ---------------------------------- First Mortgage Bonds A+ A1 A+ Preferred Stock A a2 A ------------------------------------------------------------ Capital Requirements Capital expenditures are estimated to be $491 million for 1996, $446 million for 1997, and $479 million for 1998. The total is $1.4 billion for the three years. Actual capital costs may vary from this estimate because of factors such as changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing cost of labor, equipment, and materials; and cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. The company does not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload generating units until well into the future. However, the addition of combustion turbine peaking units of approximately 320 megawatts of capacity is planned in 1996 to meet increased peak-hour demands. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will continue. Other Capital Requirements In addition to the funds needed for the capital budget, approximately $110 million will be required by the end of 1998 for maturities of first mortgage bonds. Also, the company will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- has significantly impacted the Southern electric system. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and affected 28 generating units in the Southern electric system. As a result of The Southern Company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants will be affected. II-58
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by the installation of new control equipment at 22 of the original 28 affected generating units. Construction expenditures for Phase I compliance totaled approximately $320 million through 1995 for The Southern Company, of which the company's portion was approximately $32 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy could require total estimated construction expenditures of approximately $150 million for The Southern Company, of which the company's portion is approximately $96 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 1 percent in annual revenue requirements from customers could be necessary to fully recover the company's cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. A significant portion of costs related to the acid rain provision of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study during 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial II-59
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1995 Annual Report additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the company could incur costs to clean up properties. The company conducts studies to determine the extent of any required cleanup costs and has recognized in the financial statements costs to clean up known sites. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of The Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Southern electric system. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital It is anticipated that the funds required will be derived from sources in form and quantity similar to those used in the past. To issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements designated in its mortgage indenture and corporate charter. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. As required by the Nuclear Regulatory Commission and as ordered by the APSC, the company has established external trust funds for nuclear decommissioning costs. In 1994, the company also established an external trust fund for postretirement benefits as ordered by the APSC. The cumulative effect of funding these items over a long period will diminish internally funded capital and may require capital from other sources. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." II-60
<TABLE> <CAPTION> STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 Alabama Power Company 1995 Annual Report - - -------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Revenues (Notes 1, 3 and 7): Revenues $ 2,897,044 $ 2,770,380 $ 2,825,634 Revenues from affiliates 127,730 164,762 181,975 - - -------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 3,024,774 2,935,142 3,007,609 - - -------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 791,819 801,948 877,099 Purchased power from non-affiliates 30,065 15,158 15,230 Purchased power from affiliates 112,826 100,888 120,330 Other 501,876 458,917 470,815 Maintenance 243,218 262,102 252,506 Depreciation and amortization 303,050 292,420 290,310 Taxes other than income taxes 185,620 183,425 178,997 Federal and state income taxes (Note 8) 230,982 224,280 207,210 - - -------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,399,456 2,339,138 2,412,497 - - -------------------------------------------------------------------------------------------------------------------------------- Operating Income 625,318 596,004 595,112 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 1,649 3,239 3,260 Income from subsidiary (Note 6) 4,051 3,588 4,127 Charitable foundation (11,542) (13,500) (3,000) Interest income 13,768 16,944 20,775 Other, net (21,536) (30,569) (24,420) Income taxes applicable to other income 14,142 16,834 10,239 - - -------------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 625,850 592,540 606,093 - - -------------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 180,714 178,045 184,861 Allowance for debt funds used during construction (Note 1) (7,067) (3,548) (2,992) Interest on interim obligations 16,917 5,939 3,760 Amortization of debt discount, premium, and expense, net 20,259 9,623 8,937 Other interest charges 27,064 19,908 35,474 - - -------------------------------------------------------------------------------------------------------------------------------- Net interest charges 237,887 209,967 230,040 - - -------------------------------------------------------------------------------------------------------------------------------- Net Income 387,963 382,573 376,053 Dividends on Preferred Stock 27,069 26,235 29,559 - - -------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 360,894 $ 356,338 $ 346,494 ================================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-61
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994, and 1993 Alabama Power Company 1995 Annual Report ================================================================================================================================ 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Activities: Net income $ 387,963 $ 382,573 $ 376,053 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 371,382 359,791 356,499 Deferred income taxes and investment tax credits 32,627 (32,613) 32,994 Allowance for equity funds used during construction (1,649) (3,239) (3,260) Other, net 33,244 28,656 36,493 Changes in certain current assets and liabilities -- Receivables, net (54,209) 19,390 19,215 Inventories 18,425 (38,946) 51,630 Payables (63,656) (21,240) 31,544 Taxes accrued 551 6,856 (9,959) Energy cost recovery, retail 1,177 16,907 (56,128) Other (15,895) (14,235) (21,110) - - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 709,960 703,900 813,971 - - -------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (551,781) (536,785) (435,843) Other (53,321) (26,632) (741) - - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (605,102) (563,417) (436,584) - - -------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - 158,000 First mortgage bonds - 150,000 860,000 Other long-term debt 131,500 208,720 180,314 Retirements: Preferred stock - - (207,000) First mortgage bonds - (20,387) (699,788) Other long-term debt (132,291) (305,380) (181,329) Interim obligations, net 210,134 139,882 (156,917) Payment of preferred stock dividends (27,118) (25,431) (32,099) Payment of common stock dividends (285,000) (268,000) (252,900) Miscellaneous (4,143) (8,444) (56,064) - - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (106,918) (129,040) (387,783) - - -------------------------------------------------------------------------------------------------------------------------------- Net Change in Cash (2,060) 11,443 (10,396) Cash at Beginning of Year 14,676 3,233 13,629 - - -------------------------------------------------------------------------------------------------------------------------------- Cash at End of Year $ 12,616 $ 14,676 $ 3,233 ================================================================================================================================ Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) 189,268 $ 183,445 $ 176,805 Income taxes 172,777 231,831 175,591 - - -------------------------------------------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements. </TABLE> II-62
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Alabama Power Company 1995 Annual Report ================================================================================================================================ ASSETS 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) Utility Plant: <S> <C> <C> Plant in service, at original cost (Note 1) $10,430,792 $10,052,772 Less accumulated provision for depreciation 3,838,093 3,598,604 - - -------------------------------------------------------------------------------------------------------------------------------- 6,592,699 6,454,168 Nuclear fuel, at amortized cost 100,537 101,630 Construction work in progress 362,768 317,779 - - -------------------------------------------------------------------------------------------------------------------------------- Total 7,056,004 6,873,577 - - -------------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Southern Electric Generating Company, at equity (Note 6) 27,232 26,985 Nuclear decommissioning trusts (Note 1) 108,368 71,014 Miscellaneous 19,156 16,970 - - -------------------------------------------------------------------------------------------------------------------------------- Total 154,756 114,969 - - -------------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash 12,616 14,676 Receivables- Customer accounts receivable 355,833 308,561 Other accounts and notes receivable 28,082 22,547 Affiliated companies 41,819 29,303 Accumulated provision for uncollectible accounts (1,212) (2,297) Refundable income taxes 2,635 16,011 Fossil fuel stock, at average cost 106,627 119,555 Materials and supplies, at average cost 179,103 184,600 Prepayments- Income taxes - 19,196 Other 116,331 84,354 Vacation pay deferred 29,458 20,442 - - -------------------------------------------------------------------------------------------------------------------------------- Total 871,292 816,948 - - -------------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 436,837 451,886 Debt expense, being amortized 7,648 7,370 Premium on reacquired debt, being amortized 89,967 101,851 Uranium enrichment decontamination and decommissioning fund (Note 1) 40,282 42,996 Miscellaneous 87,574 49,620 - - -------------------------------------------------------------------------------------------------------------------------------- Total 662,308 653,723 - - -------------------------------------------------------------------------------------------------------------------------------- Total Assets $8,744,360 $8,459,217 ================================================================================================================================ The accompanying notes are an integral part of these balance sheets. </TABLE> II-63
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Alabama Power Company 1995 Annual Report ================================================================================================================================ CAPITALIZATION AND LIABILITIES 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): <S> <C> <C> Common stock equity $2,690,374 $2,614,405 Preferred stock 440,400 440,400 Long-term debt 2,374,948 2,455,013 - - -------------------------------------------------------------------------------------------------------------------------------- Total 5,505,722 5,509,818 - - -------------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 10) 84,682 796 Commercial paper 390,016 179,882 Accounts payable- Affiliated companies 76,326 60,334 Other 182,401 258,657 Customer deposits 30,353 30,245 Taxes accrued- Federal and state income 13,599 6,848 Other 18,158 15,589 Interest accrued 53,527 52,516 Vacation pay accrued 29,458 20,442 Miscellaneous 70,543 57,047 - - -------------------------------------------------------------------------------------------------------------------------------- Total 949,063 682,356 - - -------------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 1,191,591 1,181,342 Accumulated deferred investment tax credits 305,372 317,018 Prepaid capacity revenues, net (Note 7) 131,186 138,421 Uranium enrichment decontamination and decommissioning fund (Note 1) 36,620 39,413 Deferred credits related to income taxes (Note 8) 386,038 405,256 Natural disaster reserve (Note 1) 17,959 28,750 Miscellaneous 220,809 156,843 - - -------------------------------------------------------------------------------------------------------------------------------- Total 2,289,575 2,267,043 - - -------------------------------------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 11) Total Capitalization and Liabilities $8,744,360 $8,459,217 ================================================================================================================================ The accompanying notes are an integral part of these balance sheets. </TABLE> II-64
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 Alabama Power Company 1995 Annual Report ================================================================================================================================ 1995 1994 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) <S> <C> <C> Common Stock Equity: Common stock, par value $40 per share-- Authorized -- 6,000,000 shares Outstanding -- 5,608,955 shares in 1995 and 1994 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 146 146 Retained earnings (Note 12) 1,161,225 1,085,256 - - -------------------------------------------------------------------------------------------------------------------------------- Total common stock equity 2,690,374 2,614,405 48.9% 47.4% - - -------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $1 par value-- Authorized -- 27,500,000 shares Outstanding -- 12,020,200 shares $25 stated capital -- 6.40% 50,000 50,000 6.80% 38,000 38,000 7.60% 150,000 150,000 Adjustable rate 4.82% - at January 1, 1996 50,000 50,000 $100 stated capital -- Auction rate - at January 1, 1996: 4.43% 50,000 50,000 $100,000 stated capital -- Auction rate - at January 1, 1996: 4.53% 20,000 20,000 $100 par value -- Authorized -- 3,850,000 shares Outstanding -- 824,000 shares 4.20% to 4.52% 41,400 41,400 4.60% to 4.92% 29,000 29,000 5.96% to 6.88% 12,000 12,000 - - -------------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $26,599,000) 440,400 440,400 8.0 8.0 - - -------------------------------------------------------------------------------------------------------------------------------- Long-Term Debt: First Mortgage bonds -- Maturity Interest Rates March 1, 1996 4 1/2% 60,000 60,000 February 1, 1998 5 1/2% 50,000 50,000 August 1, 1999 6 3/8% 170,000 170,000 March 1, 2000 6% 100,000 100,000 2003 through 2007 6 3/4% to 7 1/4% 575,000 575,000 2021 through 2024 7.30% to 9 1/4% 1,044,856 1,044,856 - - -------------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 1,999,856 1,999,856 Pollution control obligations 476,140 476,140 Other long-term debt 8,963 9,754 Unamortized debt premium (discount), net (25,329) (29,941) - - -------------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $174,568,000) 2,459,630 2,455,809 Less amount due within one year (Note 10) 84,682 796 - - -------------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 2,374,948 2,455,013 43.1 44.6 - - -------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 5,505,722 $ 5,509,818 100.0% 100.0% ================================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-65
<TABLE> <CAPTION> STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 Alabama Power Company 1995 Annual Report ================================================================================================================================ 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Year $ 1,085,256 $ 997,199 $ 914,148 Net income after dividends on preferred stock 360,894 356,338 346,494 Cash dividends on common stock (285,000) (268,000) (252,900) Preferred stock transactions, net - (118) (10,587) Other adjustments to retained earnings 75 (163) 44 - - -------------------------------------------------------------------------------------------------------------------------------- Balance at End of Year (Note 12) $ 1,161,225 $ 1,085,256 $ 997,199 ================================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-66
NOTES TO FINANCIAL STATEMENTS Alabama Power Company 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Alabama Power Company (the company) is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly-owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The company is also subject to regulation by the FERC and the Alabama Public Service Commission (APSC). The company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective regulatory commissions. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates, and the actual results may differ from those estimates. Regulatory Assets and Liabilities The company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: 1995 1994 ----------------------- (in thousands) Deferred income taxes $436,837 $451,886 Premium on reacquired debt 89,967 101,620 Department of Energy assessments 40,282 42,996 Vacation pay 29,458 20,442 Work force reduction costs 48,402 3,664 Deferred income tax credits (386,038) (405,256) Natural disaster reserve (17,959) (28,750) Other, net 39,172 45,956 ================================================================ Total $280,121 $232,558 ================================================================ In the event that a portion of the company's operations is no longer subject to the provisions of Statement No. 71, the company would be required to write off related regulatory assets and liabilities. In addition, the company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The company accrues revenues for services rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. II-67
NOTES (continued) Alabama Power Company 1995 Annual Report The company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average less than 1 percent of revenues. Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $54 million in 1995, $65 million in 1994, and $62 million in 1993. The company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel. Although disposal was scheduled to begin in 1998, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This assessment will be paid over a 15- year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The company estimates its remaining liability at December 31, 1995, under this law to be approximately $40 million. This obligation is recognized in the accompanying Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.2 percent in 1995 and 1994, and 3.3 percent in 1993. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of decommissioning nuclear facilities and removal of other facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring all licensees operating commercial power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. The company has established external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over set periods of time as approved by the APSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. The company has filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Site study cost is the estimate to decommission the facility as of the site study year, and ultimate cost is the estimate to decommission the facility as of retirement date. The estimated costs of decommissioning -- both site study costs and ultimate costs -- at December 31, 1995, for Plant Farley were as follows: Plant Farley ---------------- Site study basis (year) 1993 Decommissioning periods: Beginning year 2017 Completion year 2029 ----------------------------------------------------------- (in millions) Site study costs: Radiated structures $ 489 Non-radiated structures 89 =========================================================== Total $ 578 =========================================================== (in millions) Ultimate costs: Radiated structures $ 1,504 Non-radiated structures 274 =========================================================== Total $ 1,778 =========================================================== II-68
NOTES (continued) Alabama Power Company 1995 Annual Report (in millions) Amount expensed in 1995 $ 18 ----------------------------------------------------------- Accumulated provisions: Balance in external trust funds $108 Balance in internal reserves 49 =========================================================== Total $157 =========================================================== Assumed in ultimate costs: Inflation rate 4.5% Trust earning rate 7.0 ----------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the APSC. The decommissioning costs approved for ratemaking are $578 million for Plant Farley. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making estimates. Income Taxes The company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance For Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rate used to determine the amount of allowance was 7.1 percent in 1995, 7.9 percent in 1994, and 7.8 percent in 1993. AFUDC, net of income tax, as a percent of net income after dividends on preferred stock was 1.7 percent in 1995 and 1.5 percent in both 1994 and 1993. Utility Plant Utility plant is stated at original cost. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the company's only financial instrument for which the carrying amount did not approximate fair value at December 31 was as follows: Long-Term Debt ------------------------- Carrying Fair Year Amount Value ----------- ---------- (in millions) 1995 $2,451 $2,577 1994 2,446 2,323 ------------------------------------------------------------ The fair value for long-term debt was based on either closing market price or closing price of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Natural Disaster Reserve In September 1994, in response to a request by the company, the APSC issued an order allowing the company to establish a Natural Disaster Reserve. As of December 31, 1995, the accumulated provision amounted to $18.0 million. This balance is down from the December 31, 1994 balance of $28.8 million, due to charges related primarily to Hurricane Opal, somewhat offset by a $10 million accrual to partially replenish the reserve. Regulatory treatment allows the II-69
NOTES (continued) Alabama Power Company 1995 Annual Report company to accrue $250 thousand per month, until the maximum accumulated provision of $32 million is attained. However, in December 1995, the APSC approved higher accruals to restore the reserve to its authorized level whenever the balance in the reserve declines below $22.4 million. 2. RETIREMENT BENEFITS Pension Plan The company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat-dollar benefit. Primarily, the company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Amounts funded are primarily invested in debt and equity securities. In December 1993, the APSC issued an accounting policy statement which requires the company to externally fund net annual postretirement benefits. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ----------------------- 1995 1994 ------------- --------- (in millions) Actuarial present value of benefit obligations: Vested benefits $ 604 $ 522 Non-vested benefits 25 18 - - ------------------------------------------------------------------ Accumulated benefit obligation 629 540 Additional amounts related to projected salary increases 173 174 - - ------------------------------------------------------------------ Projected benefit obligation 802 714 Less: Fair value of plan assets 1,256 1,059 Unrecognized net gain (331) (251) Unrecognized prior service cost 21 23 Unrecognized transition asset (45) (51) - - ------------------------------------------------------------------ Prepaid asset recognized in the Balance Sheets $ 99 $ 66 ================================================================== Postretirement Benefits ---------------------- 1995 1994 ---------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $ 103 $ 96 Employees eligible to retire 31 22 Other employees 104 119 ----------------------------------------------------------- Accumulated benefit obligation 238 237 Less: Fair value of plan assets 89 61 Unrecognized net loss 23 - Unrecognized transition obligation 72 120 ----------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 54 $ 56 =========================================================== In 1995, the system companies announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the company will pay to provide future retiree postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $41 million. II-70
NOTES (continued) Alabama Power Company 1995 Annual Report The weighted average rates assumed in the actuarial calculations were: 1995 1994 1993 ------------------------------- Discount 7.3% 8.0% 7.5% Annual salary increase 4.8 5.5 5.0 Long-term return on plan assets 8.5 8.5 8.5 ---------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation as of December 31, 1995, by $20 million and the aggregate of the service and interest cost components of the net retiree cost by $4 million. Components of the plans' net income are shown below: Pension -------------------------------------------------------------- 1995 1994 1993 ----------------------------- (in millions) Benefits earned during the year $ 21.2 $ 20.8 $ 20.6 Interest cost on projected benefit obligation 54.3 51.2 50.4 Actual (return) loss on plan assets (236.3) 23.5 (146.3) Net amortization and deferral 136.9 (116.2) 63.3 ============================================================== Net pension income $(23.9) $(20.7) $(12.0) ============================================================== Of the above net pension income, $(17.1) million in 1995, $(15.7) million in 1994, and $(8.9) million in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Benefits -------------------- 1995 1994 1993 -------------------- (in millions) Benefits earned during the year $ 7 $ 8 $ 7 Interest cost on accumulated benefit obligation 18 18 16 Amortization of transition obligation 7 6 6 Actual (return) loss on plan assets (10) 1 (5) Net amortization and deferral 5 (4) 2 ============================================================= Net postretirement costs $ 27 $ 29 $ 26 ============================================================= Of the above net postretirement costs recorded, $22.7 million in 1995, $23 million in 1994, and $22 million in 1993 were charged to operating expenses and the remainder was charged to construction and other accounts. Work Force Reduction Programs The company has incurred additional costs for work force reduction programs. The costs related to these programs were $14.3 million, $8.2 million and $16.1 million for the years 1995, 1994 and 1993, respectively. In addition, certain costs of these programs were deferred and are being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $48.4 million at December 31, 1995. 3. LITIGATION AND REGULATORY MATTERS Retail Rate Adjustment Procedures In November 1982, the APSC adopted rates that provide for periodic adjustments based upon the company's earned return on end-of-period retail common equity. The rates also provide for adjustments to recognize the placing of new generating facilities in retail service. Both increases and decreases have been placed into effect since the adoption of these rates. The rate adjustment procedures allow a return on common equity range of 13.0 percent to 14.5 percent and limit increases or decreases in rates to 4 percent in any calendar year. In June 1995, the APSC issued a rate order granting the company's request for gradual adjustments to move toward parity among customer classes. This order II-71
NOTES (continued) Alabama Power Company 1995 Annual Report also calls for a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing the company to reduce balance sheet items -- such as plant and deferred charges -- at any time the company's actual base rate revenues exceed the budgeted revenues. In accordance with this order, the company reduced the unamortized balance of Premium on reacquired debt by $10 million in 1995. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the operating companies' wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds was substantially from October 1994 through December 1995. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore, no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter is pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings, and refunds were ordered, the amount of refunds could range up to approximately $120 million at December 31, 1995 for the Southern Company, of which the company's portion would be approximately $53 million. However, management believes that rates are not excessive, and that refunds are not justified. 4. CAPITAL BUDGET The company's capital expenditures are currently estimated to total $491 million in 1996, $446 million in 1997, and $479 million in 1998. The estimates include AFUDC of $7 million in 1996, $6 million in 1997, and $9 million in 1998. The capital budget is subject to periodic review and revision, and actual capital cost incurred may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 1995, significant purchase commitments were outstanding in connection with the construction program. The company does not have any new baseload generating plants under construction. However, the construction of combustion turbine peaking units of approximately 320 megawatts is planned to be completed in 1996. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 5. FINANCING, INVESTMENT, AND COMMITMENTS General To the extent possible, the company's construction program is expected to be financed primarily from internal sources. Short-term debt will be utilized at appropriate levels. The amounts available are discussed below. The company may issue additional long-term debt and preferred stock for the purposes of debt maturities, redeeming higher-cost securities, and meeting additional capital requirements. II-72
NOTES (continued) Alabama Power Company 1995 Annual Report Financing The ability of the company to finance its capital budget depends on the amount of funds generated internally and the funds it can raise by external financing. The company's primary sources of external financing are sales of first mortgage bonds and preferred stock to the public and receipt of additional paid-in capital from The Southern Company. In order to issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements contained in its mortgage indenture and corporate charter. The most restrictive of these provisions requires, for the issuance of additional first mortgage bonds, that before-income-tax earnings, as defined, cover pro forma annual interest charges on outstanding first mortgage bonds at least twice; and for the issuance of additional preferred stock, that gross income available for interest cover pro forma annual interest charges and preferred stock dividends at least one and one-half times. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. Bank Credit Arrangements The company, along with The Southern Company and Georgia Power Company, has entered into agreements with several banks outside the service area to provide $400 million of revolving credit to the companies through June 30, 1998. To provide liquidity support for commercial paper programs, the company and Georgia Power Company have exclusive right to $135 million and $165 million, respectively, of the available credit. The companies have the option of converting the short-term borrowings into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Additionally, the company maintains committed lines of credit in the amount of $353.5 million which expire at various times during 1996 and, in certain cases, provide for average annual compensating balances. Because the arrangements are based on an average balance, the company does not consider any of its cash balances to be restricted as of any specific date. Moreover, the company borrows from time to time pursuant to arrangements with banks for uncommitted lines of credit. At December 31, 1995, the company had regulatory approval to have outstanding up to $530 million of short-term borrowings. In February 1996, such regulatory approval was increased to $750 million. Assets Subject to Lien The company's mortgage, as amended and supplemented, securing the first mortgage bonds issued by the company, constitutes a direct lien on substantially all of the company's fixed property and franchises. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels and other financial commitments. Total estimated long-term obligations at December 31, 1995, were as follows: Year Amounts - - ---- -------------- (in millions) 1996 $ 866 1997 852 1998 853 1999 672 2000 402 2001 - 2013 3,790 ========================================================= Total commitments $7,435 ========================================================= Operating Leases The company has entered into coal rail car rental agreements with various terms and expiration dates. At December 31, 1995, estimated minimum rental commitments for noncancellable operating leases were as follows: II-73
NOTES (continued) Alabama Power Company 1995 Annual Report Year Amounts - - ---- -------------------- (in millions) 1996 $ 2.8 1997 2.8 1998 2.9 1999 2.9 2000 2.9 2001 and thereafter 56.5 =============================================================== Total minimum payments $70.8 =============================================================== 6. JOINT OWNERSHIP AGREEMENTS The company and Georgia Power Company own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which owns electric generating units with a total rated capacity of 1,019,680 kilowatts, together with associated transmission facilities. The capacity of these units is sold equally to the company and Georgia Power Company under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, interest expense and a return on equity, whether or not SEGCO has any capacity and energy available. The company's share of expenses totaled $71 million in 1995, $74 million in 1994 and $86 million in 1993, and is included in "Purchased power from affiliates" in the Statements of Income. In addition, the company has guaranteed unconditionally the obligation of SEGCO under an installment sale agreement for the purchase of certain pollution control facilities at SEGCO's generating units, pursuant to which $24.5 million principal amount of pollution control revenue bonds are outstanding. Georgia Power Company has agreed to reimburse the company for the pro rata portion of such obligation corresponding to its then proportionate ownership of stock of SEGCO if the company is called upon to make such payment under its guaranty. At December 31, 1995, the capitalization of SEGCO consisted of $54 million of equity and $78 million of long-term debt on which the annual interest requirement is $5.0 million. SEGCO paid dividends totaling $7.6 million in 1995, $11.6 million in 1994, and $11.3 million in 1993, of which one-half of each was paid to the company. SEGCO's net income was $8.1 million, $7.2 million, and $8.3 million for 1995, 1994 and 1993, respectively. The company's percentage ownership and investment in jointly-owned generating plants at December 31, 1995, follows: Total Megawatt Company Facility (Type) Capacity Ownership ------------------- ------------ ------------- Greene County 500 60.00% (1) (coal) Plant Miller Units 1 and 2 1,320 91.84% (2) (coal) ------------------------------------------------------ (1) Jointly owned with an affiliate, Mississippi Power Company. (2) Jointly owned with Alabama Electric Cooperative, Inc. Company Accumulated Facility Investment Depreciation - - --------------------- -------------- ----------------- (in millions) Greene County $ 90 $ 41 Plant Miller Units 1 and 2 712 281 - - ------------------------------------------------------------- 7. LONG-TERM POWER SALES AGREEMENTS General The company and the operating affiliates of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. Other agreements -- expiring at various dates discussed below -- are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The company's capacity revenues have been as follows: Unit Other Year Power Long-Term Total ---------------------------------------------------------- (in millions) 1995 $ 157 $ - $ 157 1994 152 7 159 1993 144 15 159 ---------------------------------------------------------- Unit power from Plant Miller is being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA) and the City of Tallahassee, Florida. Under these agreements, II-74
NOTES (continued) Alabama Power Company 1995 Annual Report approximately 1,200 megawatts of capacity is scheduled to be sold through 1999. Thereafter, these sales will remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. Alabama Municipal Electric Authority (AMEA) Capacity Contracts In August 1986, the company entered into a firm power purchase contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for a period of 15 years commencing September 1, 1986 (1986 Contract). In October 1991, the company entered into a second firm power purchase contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract). In both contracts the power will be sold to AMEA for its member municipalities that previously were served directly by the company as wholesale customers. Under the terms of the contracts, the company received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements, discounted at effective annual rates of 9.96 percent and 11.19 percent for the 1986 and 1991 contracts, respectively. These payments are being recognized as operating revenues and the discounts are being amortized to other interest expense as scheduled capacity is made available over the terms of the contracts. In order to secure AMEA's advance payments and the company's performance obligation under the contracts, the company issued and delivered to an escrow agent first mortgage bonds representing the maximum amount of liquidated damages payable by the company in the event of a default under the contracts. No principal or interest is payable on such bonds unless and until a default by the company occurs. As the liquidated damages decline under the contracts, a portion of the bonds equal to the decreases are returned to the company. At December 31, 1995, $137.5 million of such bonds was held by the escrow agent under the contracts. 8. INCOME TAXES Effective January 1, 1993, the company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax-related regulatory assets and liabilities were $437 million and $386 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 1995 1994 1993 -------------------------------- (in thousands) Total provision for income taxes: Federal -- Currently payable $166,105 $219,494 $149,680 Deferred -- current year 43,493 (48,153) 9,636 reversal of prior years (15,817) 15,932 19,653 Deferred investment tax credits (75) (1) (2,106) ---------------------------------------------------------------- 193,706 187,272 176,863 ---------------------------------------------------------------- State -- Currently payable 18,108 20,565 14,297 Deferred -- current year 5,117 (4,067) 1,898 reversal of prior years (91) 3,676 3,913 ---------------------------------------------------------------- 23,134 20,174 20,108 ---------------------------------------------------------------- Total 216,840 207,446 196,971 Less income taxes credited to other income (14,142) (16,834) (10,239) ---------------------------------------------------------------- Federal and state income taxes charged to operations $230,982 $224,280 $207,210 ================================================================ The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: II-75
NOTES (continued) Alabama Power Company 1995 Annual Report 1995 1994 - - -------------------------------------------------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $ 780 $734 Property basis differences 491 513 Premium on reacquired debt 31 38 Fuel clause underrecovered 5 4 Other 37 26 - - -------------------------------------------------------------- Total 1,344 1,315 - - -------------------------------------------------------------- Deferred tax assets: Capacity prepayments 35 36 Other deferred costs 26 27 Postretirement benefits 25 24 Accrued nuclear outage costs - 7 Unbilled revenue 13 13 Other 43 44 - - -------------------------------------------------------------- Total 142 151 - - -------------------------------------------------------------- Net deferred tax liabilities 1,202 1,164 Portion included in current assets (liabilities), net (10) 17 - - -------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $1,192 $1,181 ============================================================== Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $12 million in 1995 and $13 million in 1994 and 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1995 1994 1993 -------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 2.5 2.2 2.3 Non-deductible book depreciation 1.6 1.6 1.6 Differences in prior years' deferred and current tax rates (1.8) (2.9) (1.6) Other (1.4) (0.7) (2.9) ============================================================== Effective income tax rate 35.9% 35.2% 34.4% ============================================================== The Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. OTHER LONG-TERM DEBT Details of other long-term debt at December 31 are as follows: 1995 1994 -------------------------- (in thousands) Obligations incurred in connection with the sale of tax-exempt pollution control revenue bonds by public authorities- Collateralized - 5.5% to 6.5 % due 2023-2024 $223,040 $223,040 Variable rates (5.0% to 6.0% at 1/1/96) due 2015-2017 89,800 89,800 Non-collateralized - 7.25% due 2003 1,000 1,000 7.4% to 9.375% due 2014-2016 21,000 152,500 5.8% due 2022 9,800 9,800 Variable rates (5.3% to 6.0% at 1/1/96) due 2022 131,500 - - - ------------------------------------------------------------- 476,140 476,140 Capitalized lease obligations 8,963 9,754 ============================================================= Total $485,103 $485,894 ============================================================= Pollution control obligations represent installment purchases of pollution control facilities financed by funds derived from sales by public authorities of revenue bonds. The company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. With respect to $312.8 million of such pollution control obligations, the company has authenticated and delivered to the trustees a like principal amount of first mortgage bonds as security for its obligations under the installment purchase agreements. No principal or interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase agreements. II-76
NOTES (continued) Alabama Power Company 1995 Annual Report The company has capitalized certain office building leases and a street light lease. In December 1994, the company discontinued capital leases pertaining to nuclear fuel. The net book value of capitalized leases included in utility plant in service was $5.6 million and $6.2 million at December 31, 1995 and 1994, respectively. The estimated aggregate annual maturities of other long-term debt through 2000 are as follows: $0.9 million in 1996, $1.0 million in 1997, $1.0 million in 1998, $1.2 million in 1999 and $1.1 million in 2000. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 1995 1994 ---------------------- (in thousands) Bond improvement fund requirements $20,047 $ 20,047 Less: Portion to be satisfied by certifying property additions - 20,047 ------------------------------------------------------------ Cash sinking fund requirements $20,047 $ - First mortgage bond maturities and redemptions 63,750 - Other long-term debt maturities (Note 9) 885 796 ============================================================ Total $84,682 $ 796 ============================================================ The annual first mortgage bond improvement fund requirement is 1 percent of the aggregate principal amount of bonds of each series authenticated, so long as a portion of that series is outstanding, and may be satisfied by the deposit of cash and/or reacquired bonds, the certification of unfunded property additions or a combination thereof. The 1996 requirement of $20.0 million was satisfied by the deposit of cash in 1996. Also in 1996 are first mortgage bond maturities and redemptions of $64 million and maturities of $885 thousand consisting primarily of capitalized office building leases and a street light lease. 11. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988 (Act), the company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at Plant Farley. The Act provides funds up to $8.9 billion for public liability claims that could arise from a single nuclear incident. Plant Farley is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums which could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for the company is $159 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. The company's maximum annual assessment per incident is limited to $10 million under the current policy. Additionally, the company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. NEIL also covers the additional cost that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased cost of replacement power in an amount up to $3.5 million per week (starting 21 weeks after the outage) for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under II-77
NOTES (continued) Alabama Power Company 1995 Annual Report that policy. The maximum annual assessments per incident under current policies for the company would be $21 million for excess property damage and $8 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. The company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the company could be subject to a maximum total assessment of $6 million. All retrospective assessments, whether generated for liability, property or replacement power may be subject to applicable state premium taxes. 12. COMMON STOCK DIVIDEND RESTRICTIONS The company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 1995, retained earnings of $807 million was restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. 13. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1995 and 1994 are as follows: Net Income After Dividends Quarter Operating Operating on Preferred Ended Revenues Income Stock ---------------- ---------------------------------------------- (in thousands) March 1995 $646,771 $122,949 $ 65,328 June 1995 753,053 157,685 88,926 September 1995 938,284 233,322 167,938 December 1995 686,666 111,362 38,702 March 1994 $686,847 $128,623 $ 72,031 June 1994 759,399 162,696 98,668 September 1994 838,927 199,736 141,214 December 1994 649,969 104,949 44,425 ---------------------------------------------------------------- The company's business is influenced by seasonal weather conditions. II-78
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1995 Annual Report =================================================================================================================================== 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $3,024,774 $2,935,142 $3,007,609 Net Income after Dividends on Preferred Stock (in thousands) $360,894 $356,338 $346,494 Cash Dividends on Common Stock (in thousands) $285,000 $268,000 $252,900 Return on Average Common Equity (percent) 13.61 13.86 13.94 Total Assets (in thousands) $8,744,360 $8,459,217 $8,248,683 Gross Property Additions (in thousands) $551,781 $536,785 $435,843 - - ----------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,690,374 $2,614,405 $2,526,348 Preferred stock 440,400 440,400 440,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,374,948 2,455,013 2,362,852 - - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,505,722 $5,509,818 $5,329,600 =================================================================================================================================== Capitalization Ratios (percent): Common stock equity 48.9 47.4 47.4 Preferred stock 8.0 8.0 8.3 Long-term debt 43.1 44.6 44.3 - - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =================================================================================================================================== First Mortgage Bonds (in thousands): Issued - 150,000 860,000 Retired - 20,387 699,788 Preferred Stock (in thousands): Issued - - 158,000 Retired - - 207,000 - - ----------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A A Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A A- A- Duff & Phelps A A- A- - - ----------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,058,197 1,042,974 1,027,130 Commercial 166,480 162,239 157,337 Industrial 5,338 5,341 5,391 Other 725 716 713 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 1,230,740 1,211,270 1,190,571 =================================================================================================================================== Employees (year-end) 7,261 7,996 8,009 </TABLE> II-79
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1995 Annual Report =================================================================================================================================== 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $2,846,840 $2,846,794 $2,722,424 Net Income after Dividends on Preferred Stock (in thousands) $338,555 $339,666 $312,803 Cash Dividends on Common Stock (in thousands) $273,300 $232,900 $220,800 Return on Average Common Equity (percent) 14.02 14.55 14.00 Total Assets (in thousands) $6,593,618 $6,549,462 $6,362,293 Gross Property Additions (in thousands) $367,463 $397,011 $444,680 - - ----------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,443,493 $2,387,198 $2,280,590 Preferred stock 489,400 484,400 484,400 Preferred stock subject to mandatory redemption - - 12,500 Long-term debt 2,202,473 2,382,635 2,397,931 - - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,135,366 $5,254,233 $5,175,421 =================================================================================================================================== Capitalization Ratios (percent): Common stock equity 47.6 45.4 44.1 Preferred stock 9.5 9.2 9.6 Long-term debt 42.9 45.4 46.3 - - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =================================================================================================================================== First Mortgage Bonds (in thousands): Issued 745,000 250,000 - Retired 931,797 227,695 33,122 Preferred Stock (in thousands): Issued 150,000 - - Retired 145,000 17,500 5,000 - - ----------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A A A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- A- - - ----------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,012,294 997,585 985,566 Commercial 152,530 148,228 144,340 Industrial 5,434 5,496 5,322 Other 704 697 690 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 1,170,962 1,152,006 1,135,918 =================================================================================================================================== Employees (year-end) 8,116 8,513 9,473 </TABLE> II-80A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1995 Annual Report ================================================================================================================================= 1989 1988 1987 - - --------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $2,629,354 $2,476,626 $2,574,634 Net Income after Dividends on Preferred Stock (in thousands) $311,146 $283,475 $257,239 Cash Dividends on Common Stock (in thousands) $217,300 $212,700 $201,100 Return on Average Common Equity (percent) 14.53 14.03 13.56 Total Assets (in thousands) $6,279,431 $6,180,945 $5,912,000 Gross Property Additions (in thousands) $459,199 $643,892 $600,589 - - --------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,188,811 $2,094,815 $1,946,747 Preferred stock 484,400 484,400 384,400 Preferred stock subject to mandatory redemption 17,500 22,500 27,500 Long-term debt 2,435,129 2,496,492 2,386,258 - - --------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,125,840 $5,098,207 $4,744,905 ================================================================================================================================= Capitalization Ratios (percent): Common stock equity 42.7 41.1 41.0 Preferred stock 9.8 9.9 8.7 Long-term debt 47.5 49.0 50.3 - - --------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================================= First Mortgage Bonds (in thousands): Issued - 150,000 200,000 Retired 75,650 42,445 108,082 Preferred Stock (in thousands): Issued - 100,000 - Retired 5,000 2,500 5,000 - - --------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A 6 6 Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- 7 7 - - --------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 974,622 964,581 950,101 Commercial 141,265 137,955 134,533 Industrial 5,200 5,120 4,955 Other 684 678 713 - - --------------------------------------------------------------------------------------------------------------------------------- Total 1,121,771 1,108,334 1,090,302 ================================================================================================================================= Employees (year-end) 9,698 10,302 10,457 </TABLE> II-80B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1995 Annual Report =========================================================================================================================== 1986 1985 - - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands) $2,549,574 $2,518,699 Net Income after Dividends on Preferred Stock (in thousands) $273,456 $264,562 Cash Dividends on Common Stock (in thousands) $191,300 $185,700 Return on Average Common Equity (percent) 15.12 15.41 Total Assets (in thousands) $5,570,653 $5,722,263 Gross Property Additions (in thousands) $553,767 $568,073 - - --------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $1,847,608 $1,770,156 Preferred stock 384,400 384,400 Preferred stock subject to mandatory redemption 30,000 35,000 Long-term debt 2,210,108 2,349,373 - - --------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $4,472,116 $4,538,929 =========================================================================================================================== Capitalization Ratios (percent): Common stock equity 41.3 39.0 Preferred stock 9.3 9.3 Long-term debt 49.4 51.7 - - --------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 =========================================================================================================================== First Mortgage Bonds (in thousands): Issued 125,000 - Retired 405,765 39,460 Preferred Stock (in thousands): Issued - - Retired 42,224 - - - --------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A A Duff & Phelps 6 6 Preferred Stock - Moody's a2 a2 Standard and Poor's A- A- Duff & Phelps 7 7 - - --------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 934,798 918,777 Commercial 130,540 126,644 Industrial 4,725 4,619 Other 697 755 - - --------------------------------------------------------------------------------------------------------------------------- Total 1,070,760 1,050,795 =========================================================================================================================== Employees (year-end) 10,367 10,212 </TABLE> II-80C
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1995 Annual Report =================================================================================================================================== 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $997,069 $913,146 $947,277 Commercial 670,453 647,202 634,895 Industrial 805,596 803,587 832,938 Other 13,619 13,515 13,344 - - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 2,486,737 2,377,450 2,428,454 Sales for resale - non-affiliates 370,140 354,760 364,105 Sales for resale - affiliates 127,730 164,762 181,975 - - ----------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,984,607 2,896,972 2,974,534 Other revenues 40,167 38,170 33,075 - - ----------------------------------------------------------------------------------------------------------------------------------- Total $3,024,774 $2,935,142 $3,007,609 =================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 14,383,231 13,183,147 13,185,062 Commercial 10,043,220 9,645,798 9,185,462 Industrial 19,862,577 19,479,364 18,595,237 Other 186,848 185,876 181,673 - - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 44,475,876 42,494,185 41,147,434 Sales for resale - non-affiliates 8,046,189 6,775,176 7,143,672 Sales for resale - affiliates 6,705,174 8,432,533 8,081,324 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 59,227,239 57,701,894 56,372,430 =================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.93 6.93 7.18 Commercial 6.68 6.71 6.91 Industrial 4.06 4.13 4.48 Total retail 5.59 5.59 5.90 Sales for resale 3.38 3.42 3.59 Total sales 5.04 5.02 5.28 Residential Average Annual Kilowatt-Hour Use Per Customer 13,686 12,746 12,936 Residential Average Annual Revenue Per Customer $948.71 $882.88 $929.36 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 10,831 10,431 10,431 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 7,958 8,217 7,152 Summer 10,090 9,028 9,457 Annual Load Factor (percent) (Note 2) 59.2 62.2 58.6 Plant Availability (percent): Fossil-steam 88.3 86.9 89.7 Nuclear 81.1 92.5 86.6 - - ----------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 67.1 62.9 63.9 Nuclear 17.1 21.7 20.1 Hydro 7.0 8.4 6.9 Oil and gas 0.4 * * Purchased power - From non-affiliates 2.7 1.3 1.1 From affiliates 5.7 5.7 8.0 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,025 9,961 10,003 Cost of fuel per million BTU (cents) 148.68 157.62 173.66 Average cost of fuel per net kilowatt-hour generated (cents) 1.49 1.57 1.74 =================================================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent. </TABLE> II-81
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1995 Annual Report =================================================================================================================================== 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $845,660 $864,347 $825,645 Commercial 589,816 582,730 551,634 Industrial 800,311 790,224 777,580 Other 12,734 12,662 12,103 - - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 2,248,521 2,249,963 2,166,962 Sales for resale - non-affiliates 407,791 407,912 434,996 Sales for resale - affiliates 158,088 159,375 93,473 - - ----------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,814,400 2,817,250 2,695,431 Other revenues 32,440 29,544 26,993 - - ----------------------------------------------------------------------------------------------------------------------------------- Total $2,846,840 $2,846,794 $2,722,424 =================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 12,069,268 12,324,898 11,996,794 Commercial 8,629,869 8,526,131 8,201,534 Industrial 18,260,274 17,511,579 17,713,153 Other 176,798 174,760 170,420 - - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 39,136,209 38,537,368 38,081,901 Sales for resale - non-affiliates 8,382,571 8,810,442 10,277,060 Sales for resale - affiliates 7,210,697 7,784,285 4,519,275 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 54,729,477 55,132,095 52,878,236 =================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.01 7.01 6.88 Commercial 6.83 6.83 6.73 Industrial 4.38 4.51 4.39 Total retail 5.75 5.84 5.69 Sales for resale 3.63 3.42 3.57 Total sales 5.14 5.11 5.10 Residential Average Annual Kilowatt-Hour Use Per Customer 12,017 12,435 12,256 Residential Average Annual Revenue Per Customer $842.00 $872.04 $843.50 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 10,431 10,539 9,879 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 7,077 6,586 6,293 Summer 8,801 8,627 8,878 Annual Load Factor (percent) (Note 2) 59.6 59.9 57.4 Plant Availability (percent): Fossil-steam 88.9 93.1 92.2 Nuclear 80.2 87.0 86.5 - - ----------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 64.3 61.5 57.0 Nuclear 19.0 20.8 21.6 Hydro 8.5 8.2 8.7 Oil and gas * * 0.1 Purchased power - From non-affiliates 1.2 1.6 0.9 From affiliates 7.0 7.9 11.7 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,000 9,985 10,072 Cost of fuel per million BTU (cents) 164.57 170.49 171.55 Average cost of fuel per net kilowatt-hour generated (cents) 1.65 1.70 1.73 =================================================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent. </TABLE> II-82A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1995 Annual Report ================================================================================================================================ 1989 1988 1987 - - -------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $781,982 $761,805 $759,957 Commercial 533,487 510,910 501,088 Industrial 762,274 738,755 721,298 Other 11,743 11,255 10,968 - - -------------------------------------------------------------------------------------------------------------------------------- Total retail 2,089,486 2,022,725 1,993,311 Sales for resale - non-affiliates 409,202 355,362 443,880 Sales for resale - affiliates 104,488 76,691 118,746 - - -------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,603,176 2,454,778 2,555,937 Other revenues 26,178 21,848 18,697 - - -------------------------------------------------------------------------------------------------------------------------------- Total $2,629,354 $2,476,626 $2,574,634 ================================================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 11,346,736 11,332,285 11,149,225 Commercial 7,915,685 7,711,092 7,476,924 Industrial 17,360,791 16,881,342 15,969,075 Other 166,485 165,122 159,422 - - -------------------------------------------------------------------------------------------------------------------------------- Total retail 36,789,697 36,089,841 34,754,646 Sales for resale - non-affiliates 10,292,329 7,905,750 10,523,554 Sales for resale - affiliates 5,048,743 3,551,142 4,963,997 - - -------------------------------------------------------------------------------------------------------------------------------- Total 52,130,769 47,546,733 50,242,197 ================================================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 6.89 6.72 6.82 Commercial 6.74 6.63 6.70 Industrial 4.39 4.38 4.52 Total retail 5.68 5.60 5.74 Sales for resale 3.35 3.77 3.63 Total sales 4.99 5.16 5.09 Residential Average Annual Kilowatt-Hour Use Per Customer 11,717 11,839 11,848 Residential Average Annual Revenue Per Customer $807.50 $795.84 $807.61 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,879 9,279 9,337 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 7,264 6,377 6,138 Summer 8,256 7,991 7,886 Annual Load Factor (percent) (Note 2) 59.5 59.6 58.3 Plant Availability (percent): Fossil-steam 90.7 91.3 90.2 Nuclear 83.1 91.9 83.3 - - -------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 54.1 53.9 52.5 Nuclear 21.0 26.1 21.7 Hydro 11.0 4.8 6.3 Oil and gas 0.1 0.1 0.2 Purchased power - From non-affiliates 1.8 0.5 0.2 From affiliates 12.0 14.6 19.1 - - -------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================================ Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,061 10,137 10,214 Cost of fuel per million BTU (cents) 172.20 168.21 176.72 Average cost of fuel per net kilowatt-hour generated (cents) 1.73 1.71 1.80 ================================================================================================================================ Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent. </TABLE> II-82B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1995 Annual Report =========================================================================================================================== 1986 1985 - - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands): Residential $738,864 $684,970 Commercial 481,676 453,651 Industrial 705,395 717,078 Other 10,811 10,129 - - --------------------------------------------------------------------------------------------------------------------------- Total retail 1,936,746 1,865,828 Sales for resale - non-affiliates 472,938 539,343 Sales for resale - affiliates 120,911 95,733 - - --------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,530,595 2,500,904 Other revenues 18,979 17,795 - - --------------------------------------------------------------------------------------------------------------------------- Total $2,549,574 $2,518,699 =========================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 10,606,698 9,814,814 Commercial 7,015,589 6,593,645 Industrial 15,025,806 15,215,276 Other 153,282 146,119 - - --------------------------------------------------------------------------------------------------------------------------- Total retail 32,801,375 31,769,854 Sales for resale - non-affiliates 9,064,049 12,158,464 Sales for resale - affiliates 4,456,360 3,588,338 - - --------------------------------------------------------------------------------------------------------------------------- Total 46,321,784 47,516,656 =========================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.97 6.98 Commercial 6.87 6.88 Industrial 4.69 4.71 Total retail 5.90 5.87 Sales for resale 4.39 4.03 Total sales 5.46 5.26 Residential Average Annual Kilowatt-Hour Use Per Customer 11,457 10,781 Residential Average Annual Revenue Per Customer $798.09 $752.43 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,337 9,337 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,257 6,191 Summer 7,892 7,570 Annual Load Factor (percent) (Note 2) 56.2 57.2 Plant Availability (percent): Fossil-steam 88.5 90.5 Nuclear 83.8 81.0 - - --------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 58.8 55.7 Nuclear 23.8 22.4 Hydro 4.2 6.2 Oil and gas 0.1 0.1 Purchased power - From non-affiliates 2.0 1.7 From affiliates 11.1 13.9 - - --------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 =========================================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,209 10,229 Cost of fuel per million BTU (cents) 179.65 185.74 Average cost of fuel per net kilowatt-hour generated (cents) 1.83 1.90 =========================================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent. </TABLE> II-82C
<TABLE> <CAPTION> STATEMENTS OF INCOME Alabama Power Company ================================================================================================================================ For the Years Ended December 31, 1995* 1994* 1993* - - -------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 2,897,044 $ 2,770,380 $ 2,825,634 Revenues from affiliates 127,730 164,762 181,975 - - -------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 3,024,774 2,935,142 3,007,609 - - -------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 791,819 801,948 877,099 Purchased power from non-affiliates 30,065 15,158 15,230 Purchased power from affiliates 112,826 100,888 120,330 Proceeds from settlement of disputed contracts - - (2,568) Other 501,876 458,917 473,383 Maintenance 243,218 262,102 252,506 Depreciation and amortization 303,050 292,420 290,310 Taxes other than income taxes 185,620 183,425 178,997 Federal and state income taxes 230,982 224,280 207,210 - - -------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,399,456 2,339,138 2,412,497 - - -------------------------------------------------------------------------------------------------------------------------------- Operating Income 625,318 596,004 595,112 Other Income (Expense): Allowance for equity funds used during construction 1,649 3,239 3,260 Income from subsidiary 4,051 3,588 4,127 Charitable foundation (11,542) (13,500) (3,000) Interest income 13,768 16,944 20,775 Other, net (21,536) (30,569) (24,420) Income taxes applicable to other income 14,142 16,834 10,239 - - -------------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 625,850 592,540 606,093 - - -------------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 180,714 178,045 184,861 Allowance for debt funds used during construction (7,067) (3,548) (2,992) Interest on interim obligations 16,917 5,939 3,760 Amortization of debt discount, premium, and expense, net 20,259 9,623 8,937 Other interest charges 27,064 19,908 35,474 - - -------------------------------------------------------------------------------------------------------------------------------- Net interest charges 237,887 209,967 230,040 - - -------------------------------------------------------------------------------------------------------------------------------- Net Income 387,963 382,573 376,053 Dividends on Preferred Stock 27,069 26,235 29,559 - - -------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 360,894 $ 356,338 $ 346,494 ================================================================================================================================ * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-83
<TABLE> <CAPTION> STATEMENTS OF INCOME Alabama Power Company ============================================================================================================================ For the Years Ended December 31, 1992* 1991* 1990* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 2,688,752 $ 2,687,419 $ 2,628,951 Revenues from affiliates 158,088 159,375 93,473 - - ---------------------------------------------------------------------------------------------------------------------------- Total operating revenues 2,846,840 2,846,794 2,722,424 - - ---------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 794,438 812,667 756,501 Purchased power from non-affiliates 14,242 21,080 11,185 Purchased power from affiliates 107,230 119,602 165,982 Proceeds from settlement of disputed contracts (641) (14,819) - Other 446,477 435,908 411,559 Maintenance 237,071 229,114 215,304 Depreciation and amortization 280,881 271,433 262,817 Taxes other than income taxes 172,095 169,639 163,567 Federal and state income taxes 201,925 200,612 185,954 - - ---------------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,253,718 2,245,236 2,172,869 - - ---------------------------------------------------------------------------------------------------------------------------- Operating Income 593,122 601,558 549,555 Other Income (Expense): Allowance for equity funds used during construction 2,071 2,368 25,487 Income from subsidiary 4,635 4,576 4,182 Charitable foundation (6,887) (6,500) (17,500) Interest income 14,804 14,356 12,006 Other, net (11,019) (9,926) (8,235) Income taxes applicable to other income 8,947 7,523 11,081 - - ---------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 605,673 613,955 576,576 - - ---------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 206,871 214,107 221,527 Allowance for debt funds used during construction (2,416) (6,903) (23,339) Interest on interim obligations 3,704 13,385 10,252 Amortization of debt discount, premium, and expense, net 4,392 2,634 3,706 Other interest charges 19,381 14,927 13,115 - - ---------------------------------------------------------------------------------------------------------------------------- Net interest charges 231,932 238,150 225,261 - - ---------------------------------------------------------------------------------------------------------------------------- Net Income 373,741 375,805 351,315 Dividends on Preferred Stock 35,186 36,139 38,512 - - ---------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 338,555 $ 339,666 $ 312,803 ============================================================================================================================ * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-84A
<TABLE> <CAPTION> STATEMENTS OF INCOME Alabama Power Company ============================================================================================================================ For the Years Ended December 31, 1989* 1988* 1987* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 2,524,866 $ 2,399,935 $ 2,455,888 Revenues from affiliates 104,488 76,691 118,746 - - ---------------------------------------------------------------------------------------------------------------------------- Total operating revenues 2,629,354 2,476,626 2,574,634 - - ---------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 712,453 676,423 696,763 Purchased power from non-affiliates 28,272 8,407 6,703 Purchased power from affiliates 163,267 185,390 257,052 Proceeds from settlement of disputed contracts - - - Other 380,536 400,879 410,575 Maintenance 202,633 197,225 199,617 Depreciation and amortization 247,973 225,123 212,072 Taxes other than income taxes 154,398 148,681 141,422 Federal and state income taxes 188,507 143,614 190,575 - - ---------------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,078,039 1,985,742 2,114,779 - - ---------------------------------------------------------------------------------------------------------------------------- Operating Income 551,315 490,884 459,855 Other Income (Expense): Allowance for equity funds used during construction 29,515 39,047 27,663 Income from subsidiary 3,750 3,302 3,440 Charitable foundation (25,000) - - Interest income 10,871 9,914 7,044 Other, net (4,313) (13,694) (816) Income taxes applicable to other income 13,629 8,034 849 - - ---------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 579,767 537,487 498,035 - - ---------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 230,046 225,522 205,824 Allowance for debt funds used during construction (27,627) (31,830) (24,235) Interest on interim obligations 9,098 5,714 7,221 Amortization of debt discount, premium, and expense, net 4,469 4,411 4,405 Other interest charges 13,112 13,715 14,662 - - ---------------------------------------------------------------------------------------------------------------------------- Net interest charges 229,098 217,532 207,877 - - ---------------------------------------------------------------------------------------------------------------------------- Net Income 350,669 319,955 290,158 Dividends on Preferred Stock 39,523 36,480 32,919 - - ---------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 311,146 $ 283,475 $ 257,239 ============================================================================================================================ * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-84B
<TABLE> <CAPTION> STATEMENTS OF INCOME Alabama Power Company ============================================================================================================= For the Years Ended December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Revenues: Revenues $ 2,428,663 $ 2,422,966 Revenues from affiliates 120,911 95,733 - - ------------------------------------------------------------------------------------------------------------- Total operating revenues 2,549,574 2,518,699 - - ------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 738,367 743,463 Purchased power from non-affiliates 23,889 25,990 Purchased power from affiliates 156,091 187,041 Proceeds from settlement of disputed contracts - - Other 350,671 308,437 Maintenance 203,972 210,143 Depreciation and amortization 201,803 183,779 Taxes other than income taxes 135,248 128,648 Federal and state income taxes 255,400 248,774 - - ------------------------------------------------------------------------------------------------------------- Total operating expenses 2,065,441 2,036,275 - - ------------------------------------------------------------------------------------------------------------- Operating Income 484,133 482,424 Other Income (Expense): Allowance for equity funds used during construction 27,455 32,985 Income from subsidiary 2,967 3,417 Charitable foundation - - Interest income 11,422 20,874 Other, net (3,738) (4,447) Income taxes applicable to other income 185 (4,941) - - ------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 522,424 530,312 - - ------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 226,110 248,073 Allowance for debt funds used during construction (24,334) (29,048) Interest on interim obligations 1,159 - Amortization of debt discount, premium, and expense, net 3,313 1,145 Other interest charges 8,695 4,234 - - ------------------------------------------------------------------------------------------------------------- Net interest charges 214,943 224,404 - - ------------------------------------------------------------------------------------------------------------- Net Income 307,481 305,908 Dividends on Preferred Stock 34,025 41,346 - - ------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 273,456 $ 264,562 ============================================================================================================= </TABLE> II-84C
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Alabama Power Company ============================================================================================================================== For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 387,963 $ 382,573 $ 376,053 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 371,382 359,791 356,499 Deferred income taxes, net 32,702 (32,612) 35,100 Deferred investment tax credits, net (75) (1) (2,106) Allowance for equity funds used during construction (1,649) (3,239) (3,260) Non-cash proceeds from settlement of disputed contracts - - - Other, net 33,244 28,656 36,493 Changes in certain current assets and liabilities -- Receivables, net (54,209) 19,390 19,215 Inventories 18,425 (38,946) 51,630 Payables (63,656) (21,240) 31,544 Taxes accrued 551 6,856 (9,959) Energy cost recovery, retail 1,177 16,907 (56,128) Other (15,895) (14,235) (21,110) - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 709,960 703,900 813,971 - - ------------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (551,781) (536,785) (435,843) Sales of property - - - Other (53,321) (26,632) (741) - - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (605,102) (563,417) (436,584) - - ------------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - - 158,000 First mortgage bonds - 150,000 860,000 Pollution control bonds 131,500 179,750 144,436 Other long-term debt - 28,970 35,878 Capital contributions from parent company - - - Prepaid capacity revenues - - - Retirements: Preferred stock - - (207,000) First mortgage bonds - (20,387) (699,788) Pollution control bonds (131,500) (179,750) (135,315) Other long-term debt (791) (125,630) (46,014) Interim obligations, net 210,134 139,882 (156,917) Payment of preferred stock dividends (27,118) (25,431) (32,099) Payment of common stock dividends (285,000) (268,000) (252,900) Miscellaneous (4,143) (8,444) (56,064) - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (106,918) (129,040) (387,783) - - ------------------------------------------------------------------------------------------------------------------------------ Net Change in Cash (2,060) 11,443 (10,396) Cash at Beginning of Year 14,676 3,233 13,629 - - ------------------------------------------------------------------------------------------------------------------------------ Cash at End of Year $ 12,616 $ 14,676 $ 3,233 ============================================================================================================================== ( ) Denotes use of cash. </TABLE> II-85
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Alabama Power Company ============================================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 373,741 $ 375,805 $ 351,315 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 338,421 337,978 331,858 Deferred income taxes, net 23,514 (5,779) 64,480 Deferred investment tax credits, net - (1,089) 132 Allowance for equity funds used during construction (2,071) (2,368) (25,487) Non-cash proceeds from settlement of disputed contracts (641) (13,750) - Other, net (2,657) 26,614 19,899 Changes in certain current assets and liabilities -- Receivables, net (11,010) 9,178 12,005 Inventories 12,704 (17,374) (40,901) Payables 2,158 28,889 6,597 Taxes accrued (21,120) 24,828 (6,167) Energy cost recovery, retail 45,509 (12,304) (42,535) Other 10,629 (37,906) 14,144 - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 769,177 712,722 685,340 - - ------------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (367,463) (397,011) (444,680) Sales of property 43,556 - - Other (13,379) (36,083) 6,935 - - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (337,286) (433,094) (437,745) - - ------------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock 150,000 - - First mortgage bonds 745,000 250,000 - Pollution control bonds - - - Other long-term debt 48,382 12,906 54,831 Capital contributions from parent company - - - Prepaid capacity revenues - 52,900 - Retirements: Preferred stock (145,000) (17,500) (5,000) First mortgage bonds (931,797) (227,695) (33,122) Pollution control bonds (335) (250) (250) Other long-term debt (53,888) (48,428) (56,895) Interim obligations, net 120,917 (13,500) 59,500 Payment of preferred stock dividends (35,704) (36,829) (38,245) Payment of common stock dividends (273,300) (232,900) (220,800) Miscellaneous (53,697) (17,732) (293) - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (429,422) (279,028) (240,274) - - ------------------------------------------------------------------------------------------------------------------------------ Net Change in Cash 2,469 600 7,321 Cash at Beginning of Year 11,160 10,560 3,239 - - ------------------------------------------------------------------------------------------------------------------------------ Cash at End of Year $ 13,629 $ 11,160 $ 10,560 ============================================================================================================================== ( ) Denotes use of cash. </TABLE> II-86A
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Alabama Power Company ============================================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 350,669 $ 319,955 $ 290,158 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 322,042 296,234 270,492 Deferred income taxes, net 31,715 37,952 107,824 Deferred investment tax credits, net 6,917 15,019 23,477 Allowance for equity funds used during construction (29,515) (39,047) (27,663) Non-cash proceeds from settlement of disputed contracts - - - Other, net (5,297) 16,106 67,445 Changes in certain current assets and liabilities -- Receivables, net (10,436) 8,822 (133,468) Inventories 20,408 (23,182) (26,255) Payables 16,259 (12,957) 39,645 Taxes accrued 1,547 (7,754) 516 Energy cost recovery, retail 39,164 - - Other 28,701 (18,658) 4,464 - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 772,174 592,490 616,635 - - ------------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (459,199) (643,892) (600,589) Sales of property - - - Other 3,768 23,161 17,010 - - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (455,431) (620,731) (583,579) - - ------------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - 100,000 - First mortgage bonds - 150,000 200,000 Pollution control bonds 53,700 - 432 Other long-term debt 55,176 62,515 69,786 Capital contributions from parent company - 79,500 43,000 Prepaid capacity revenues - - - Retirements: Preferred stock (5,000) (2,500) (5,000) First mortgage bonds (75,650) (42,445) (108,082) Pollution control bonds (53,950) - - Other long-term debt (57,316) (56,748) (32,500) Interim obligations, net 30,000 (15,000) 15,000 Payment of preferred stock dividends (40,105) (35,362) (32,837) Payment of common stock dividends (217,300) (212,700) (201,100) Miscellaneous (4,576) (5,581) (2,581) - - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (315,021) 21,679 (53,882) - - ------------------------------------------------------------------------------------------------------------------------------ Net Change in Cash 1,722 (6,562) (20,826) Cash at Beginning of Year 1,517 8,079 28,905 - - ------------------------------------------------------------------------------------------------------------------------------ Cash at End of Year $ 3,239 $ 1,517 $ 8,079 ============================================================================================================================== ( ) Denotes use of cash. </TABLE> II-86B
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Alabama Power Company ============================================================================================================== For the Years Ended December 31, 1986 1985 - - -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Activities: Net income $ 307,481 $ 305,908 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 292,569 266,657 Deferred income taxes, net 135,364 104,259 Deferred investment tax credits, net 19,736 57,096 Allowance for equity funds used during construction (27,455) (32,985) Non-cash proceeds from settlement of disputed contracts - - Other, net 4,251 (18,971) Changes in certain current assets and liabilities -- Receivables, net 15,238 (13,531) Inventories (2,040) 29,823 Payables (56,720) 26,360 Taxes accrued (1,487) (6,325) Energy cost recovery, retail - - Other (35,293) 4,358 - - -------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 651,644 722,649 - - -------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (553,767) (568,073) Sales of property - - Other 10,115 22,028 - - -------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (543,652) (546,045) - - -------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - First mortgage bonds 125,000 - Pollution control bonds 26,232 115,577 Other long-term debt 95,017 12,998 Capital contributions from parent company - 27,000 Prepaid capacity revenues 100,000 - Retirements: Preferred stock (42,224) - First mortgage bonds (405,765) (39,460) Pollution control bonds (21,000) - Other long-term debt (43,561) (35,023) Interim obligations, net - - Payment of preferred stock dividends (36,014) (41,566) Payment of common stock dividends (191,300) (185,700) Miscellaneous (38,052) (4,438) - - -------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (431,667) (150,612) - - -------------------------------------------------------------------------------------------------------------- Net Change in Cash (323,675) 25,992 Cash at Beginning of Year 352,580 326,588 - - -------------------------------------------------------------------------------------------------------------- Cash at End of Year $ 28,905 $ 352,580 ============================================================================================================== ( ) Denotes use of cash. </TABLE> II-86C
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ======================================================================================================================= At December 31, 1995* 1994* 1993* - - ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 3,221,250 $ 3,027,956 $ 2,987,010 Nuclear 1,874,111 1,866,750 1,860,842 Hydro 834,790 836,256 819,848 - - ----------------------------------------------------------------------------------------------------------------------- Total production 5,930,151 5,730,962 5,667,700 Transmission 1,132,336 1,087,452 1,051,130 Distribution 2,522,051 2,366,477 2,206,834 General 825,417 847,111 810,551 Construction work in progress 362,722 317,745 225,743 Nuclear fuel, at amortized cost 100,537 101,630 93,551 - - ----------------------------------------------------------------------------------------------------------------------- Total electric plant 10,873,214 10,451,377 10,055,509 - - ----------------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,837 20,770 20,926 Construction work in progress 46 34 43 - - ----------------------------------------------------------------------------------------------------------------------- Total steam heat plant 20,883 20,804 20,969 - - ----------------------------------------------------------------------------------------------------------------------- Total utility plant 10,894,097 10,472,181 10,076,478 - - ----------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 3,827,123 3,588,363 3,374,310 Steam heat 10,970 10,241 9,846 - - ----------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 3,838,093 3,598,604 3,384,156 - - ----------------------------------------------------------------------------------------------------------------------- Total 7,056,004 6,873,577 6,692,322 Less property-related accumulated deferred income taxes - - - - - ----------------------------------------------------------------------------------------------------------------------- Total 7,056,004 6,873,577 6,692,322 - - ----------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts 108,368 71,014 49,550 Miscellaneous 46,388 43,955 49,635 - - ----------------------------------------------------------------------------------------------------------------------- Total 154,756 114,969 99,185 - - ----------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 12,616 14,676 3,233 Investment securities - - - Receivables, net 427,157 374,125 410,422 Fossil fuel stock, at average cost 106,627 119,555 88,481 Materials and supplies, at average cost 179,103 184,600 176,728 Prepayments 116,331 103,550 79,207 Vacation pay deferred 29,458 20,442 22,680 - - ----------------------------------------------------------------------------------------------------------------------- Total 871,292 816,948 780,751 - - ----------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 436,837 451,886 469,010 Debt expense, being amortized 7,648 7,370 7,064 Premium on reacquired debt, being amortized 89,967 101,851 102,634 Uranium enrichment decontamination and decommissioning fund 40,282 42,996 45,554 Miscellaneous 87,574 49,620 52,163 - - ----------------------------------------------------------------------------------------------------------------------- Total 662,308 653,723 676,425 - - ----------------------------------------------------------------------------------------------------------------------- Total Assets $ 8,744,360 $ 8,459,217 $ 8,248,683 ======================================================================================================================= *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-87
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================================ At December 31, 1992* 1991* 1990* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 2,953,683 $ 2,991,876 $ 2,462,100 Nuclear 1,860,832 1,851,317 1,794,540 Hydro 818,363 814,301 809,578 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 5,632,878 5,657,494 5,066,218 Transmission 1,013,464 977,239 925,368 Distribution 2,072,165 1,947,972 1,815,265 General 751,652 713,948 660,217 Construction work in progress 164,555 148,564 654,055 Nuclear fuel, at amortized cost 101,128 109,259 143,711 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 9,735,842 9,554,476 9,264,834 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,924 20,214 20,091 Construction work in progress 33 181 74 - - ---------------------------------------------------------------------------------------------------------------------------- Total steam heat plant 20,957 20,395 20,165 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 9,756,799 9,574,871 9,284,999 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 3,122,332 2,913,385 2,676,957 Steam heat 9,211 8,492 7,861 - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 3,131,543 2,921,877 2,684,818 - - ---------------------------------------------------------------------------------------------------------------------------- Total 6,625,256 6,652,994 6,600,181 Less property-related accumulated deferred income taxes 1,170,982 1,140,303 1,106,664 - - ---------------------------------------------------------------------------------------------------------------------------- Total 5,454,274 5,512,691 5,493,517 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - 69,550 - Nuclear decommissioning trusts 32,390 15,864 - Miscellaneous 49,892 48,254 40,604 - - ---------------------------------------------------------------------------------------------------------------------------- Total 82,282 133,668 40,604 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 13,629 11,160 10,560 Investment securities 64,832 - - Receivables, net 344,934 349,599 346,473 Fossil fuel stock, at average cost 134,328 154,798 144,960 Materials and supplies, at average cost 182,511 174,745 167,209 Prepayments 108,254 95,832 50,364 Vacation pay deferred 21,879 21,691 22,845 - - ---------------------------------------------------------------------------------------------------------------------------- Total 870,367 807,825 742,411 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Debt expense, being amortized 6,118 5,957 6,083 Premium on reacquired debt, being amortized 74,835 40,174 26,504 Uranium enrichment decontamination and decommissioning fund 47,730 - - Miscellaneous 58,012 49,147 53,174 - - ---------------------------------------------------------------------------------------------------------------------------- Total 186,695 95,278 85,761 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 6,593,618 $ 6,549,462 $ 6,362,293 ============================================================================================================================ *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-88A
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================================ At December 31, 1989* 1988* 1987* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 2,428,146 $ 1,820,966 $ 1,787,979 Nuclear 1,786,877 1,769,093 1,765,854 Hydro 803,901 789,617 788,046 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 5,018,924 4,379,676 4,341,879 Transmission 882,933 844,003 817,065 Distribution 1,692,426 1,587,690 1,481,845 General 646,523 613,498 535,148 Construction work in progress 557,150 1,023,019 750,907 Nuclear fuel, at amortized cost 147,997 174,130 191,493 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 8,945,953 8,622,016 8,118,337 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,083 20,076 20,217 Construction work in progress 71 58 89 - - ---------------------------------------------------------------------------------------------------------------------------- Total steam heat plant 20,154 20,134 20,306 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 8,966,107 8,642,150 8,138,643 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 2,458,747 2,257,696 2,068,176 Steam heat 7,154 6,456 5,938 - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,465,901 2,264,152 2,074,114 - - ---------------------------------------------------------------------------------------------------------------------------- Total 6,500,206 6,377,998 6,064,529 Less property-related accumulated deferred income taxes 1,051,877 1,001,173 933,932 - - ---------------------------------------------------------------------------------------------------------------------------- Total 5,448,329 5,376,825 5,130,597 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts - - - Miscellaneous 34,710 29,677 31,402 - - ---------------------------------------------------------------------------------------------------------------------------- Total 34,710 29,677 31,402 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 3,239 1,517 8,079 Investment securities - - - Receivables, net 355,107 344,671 353,493 Fossil fuel stock, at average cost 131,942 173,858 164,671 Materials and supplies, at average cost 139,326 117,818 103,823 Prepayments 54,613 28,412 10,595 Vacation pay deferred 22,021 21,871 21,317 - - ---------------------------------------------------------------------------------------------------------------------------- Total 706,248 688,147 661,978 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Debt expense, being amortized 6,491 6,831 6,695 Premium on reacquired debt, being amortized 28,778 27,329 30,767 Uranium enrichment decontamination and decommissioning fund - - - Miscellaneous 54,875 52,136 50,561 - - ---------------------------------------------------------------------------------------------------------------------------- Total 90,144 86,296 88,023 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 6,279,431 $ 6,180,945 $ 5,912,000 ============================================================================================================================ *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-88B
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================= At December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> ASSETS Electric Plant: Production- Fossil $ 1,748,226 $ 1,678,117 Nuclear 1,749,981 1,687,766 Hydro 784,445 773,682 - - ------------------------------------------------------------------------------------------------------------- Total production 4,282,652 4,139,565 Transmission 773,142 699,980 Distribution 1,384,576 1,295,930 General 506,228 349,249 Construction work in progress 497,491 502,455 Nuclear fuel, at amortized cost 205,768 243,468 - - ------------------------------------------------------------------------------------------------------------- Total electric plant 7,649,857 7,230,647 - - ------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 19,508 17,056 Construction work in progress 123 64 - - ------------------------------------------------------------------------------------------------------------- Total steam heat plant 19,631 17,120 - - ------------------------------------------------------------------------------------------------------------- Total utility plant 7,669,488 7,247,767 - - ------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 1,877,124 1,697,547 Steam heat 5,261 3,874 - - ------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 1,882,385 1,701,421 - - ------------------------------------------------------------------------------------------------------------- Total 5,787,103 5,546,346 Less property-related accumulated deferred income taxes 857,081 758,150 - - ------------------------------------------------------------------------------------------------------------- Total 4,930,022 4,788,196 - - ------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - Nuclear decommissioning trusts - - Miscellaneous 30,735 24,849 - - ------------------------------------------------------------------------------------------------------------- Total 30,735 24,849 - - ------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 28,905 352,580 Investment securities - - Receivables, net 220,025 235,263 Fossil fuel stock, at average cost 152,640 163,899 Materials and supplies, at average cost 89,599 76,300 Prepayments 12,320 9,741 Vacation pay deferred 20,002 18,859 - - ------------------------------------------------------------------------------------------------------------- Total 523,491 856,642 - - ------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - Debt expense, being amortized 6,308 6,607 Premium on reacquired debt, being amortized 34,170 524 Uranium enrichment decontamination and decommissioning fund - - Miscellaneous 45,927 45,445 - - ------------------------------------------------------------------------------------------------------------- Total 86,405 52,576 - - ------------------------------------------------------------------------------------------------------------- Total Assets $ 5,570,653 $ 5,722,263 ============================================================================================================= </TABLE> II-88C
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ========================================================================================================================= At December 31, 1995* 1994* 1993* - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 1,304,645 Premium on preferred stock 146 146 146 Earnings retained in the business 1,161,225 1,085,256 997,199 - - ------------------------------------------------------------------------------------------------------------------------- Total common equity 2,690,374 2,614,405 2,526,348 Preferred stock 440,400 440,400 440,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,374,948 2,455,013 2,362,852 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 5,505,722 5,509,818 5,329,600 - - ------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - 40,000 Commercial paper 390,016 179,882 - Preferred stock due within one year - - - Long-term debt due within one year 84,682 796 58,998 Accounts payable 258,727 318,991 334,998 Customer deposits 30,353 30,245 31,198 Taxes accrued 31,757 22,437 40,144 Interest accrued 53,527 52,516 52,809 Vacation pay accrued 29,458 20,442 22,680 Miscellaneous 70,543 57,047 50,426 - - ------------------------------------------------------------------------------------------------------------------------- Total 949,063 682,356 631,253 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,191,591 1,181,342 1,165,127 Accumulated deferred investment tax credits 305,372 317,018 329,909 Prepaid capacity revenues, net 131,186 138,421 143,762 Deferred revenues from settlement of disputed contracts - - 19,871 Uranium enrichment decontamination and decommissioning fund 36,620 39,413 39,644 Deferred credits related to income taxes 386,038 405,256 440,945 Natural disaster reserve 17,959 28,750 - Miscellaneous 220,809 156,843 148,572 - - ------------------------------------------------------------------------------------------------------------------------- Total 2,289,575 2,267,043 2,287,830 - - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 8,744,360 $ 8,459,217 $ 8,248,683 ========================================================================================================================= *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-89
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================================ At December 31, 1992* 1991* 1990* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 1,304,645 Premium on preferred stock 342 461 461 Earnings retained in the business 914,148 857,734 751,126 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 2,443,493 2,387,198 2,280,590 Preferred stock 489,400 484,400 484,400 Preferred stock subject to mandatory redemption - - 12,500 Long-term debt 2,202,473 2,382,635 2,397,931 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 5,135,366 5,254,233 5,175,421 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 71,000 76,000 89,500 Commercial paper 125,917 - - Preferred stock due within one year - - 5,000 Long-term debt due within one year 67,379 85,077 83,989 Accounts payable 296,731 295,333 271,776 Customer deposits 31,286 30,165 29,571 Taxes accrued 24,373 45,493 20,665 Interest accrued 41,675 49,288 49,820 Vacation pay accrued 21,879 21,691 22,845 Miscellaneous 93,836 37,699 64,547 - - ---------------------------------------------------------------------------------------------------------------------------- Total 774,076 640,746 637,713 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 344,707 362,672 379,990 Prepaid capacity revenues, net 147,658 149,534 99,835 Deferred revenues from settlement of disputed contracts 46,721 59,937 - Uranium enrichment decontamination and decommissioning fund 44,548 - - Deferred credits related to income taxes - - - Natural disaster reserve - - - Miscellaneous 100,542 82,340 69,334 - - ---------------------------------------------------------------------------------------------------------------------------- Total 684,176 654,483 549,159 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 6,593,618 $ 6,549,462 $ 6,362,293 ============================================================================================================================ *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-90A
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================================ At December 31, 1989* 1988* 1987* - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 1,225,145 Premium on preferred stock 461 461 461 Earnings retained in the business 659,347 565,351 496,783 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 2,188,811 2,094,815 1,946,747 Preferred stock 484,400 484,400 384,400 Preferred stock subject to mandatory redemption 17,500 22,500 27,500 Long-term debt 2,435,129 2,496,492 2,386,258 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 5,125,840 5,098,207 4,744,905 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 30,000 - 15,000 Commercial paper - - - Preferred stock due within one year 5,000 5,000 2,500 Long-term debt due within one year 81,031 96,242 95,140 Accounts payable 267,645 259,443 273,613 Customer deposits 28,450 25,964 32,220 Taxes accrued 26,832 25,285 72,118 Interest accrued 49,926 50,174 49,489 Vacation pay accrued 22,021 21,871 21,317 Miscellaneous 91,022 28,944 24,660 - - ---------------------------------------------------------------------------------------------------------------------------- Total 601,927 512,923 586,057 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 399,097 412,771 418,370 Prepaid capacity revenues, net 102,346 104,211 103,947 Deferred revenues from settlement of disputed contracts - - - Uranium enrichment decontamination and decommissioning fund - - - Deferred credits related to income taxes - - - Natural disaster reserve - - - Miscellaneous 50,221 52,833 58,721 - - ---------------------------------------------------------------------------------------------------------------------------- Total 551,664 569,815 581,038 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 6,279,431 $ 6,180,945 $ 5,912,000 ============================================================================================================================ *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. </TABLE> II-90B
<TABLE> <CAPTION> BALANCE SHEETS Alabama Power Company ============================================================================================================= At December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 Paid-in capital 1,182,145 1,182,145 Premium on preferred stock 461 1,937 Earnings retained in the business 440,644 361,716 - - ------------------------------------------------------------------------------------------------------------- Total common equity 1,847,608 1,770,156 Preferred stock 384,400 384,400 Preferred stock subject to mandatory redemption 30,000 35,000 Long-term debt 2,210,108 2,349,373 - - ------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 4,472,116 4,538,929 - - ------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - Commercial paper - - Preferred stock due within one year 5,000 42,224 Long-term debt due within one year 142,394 224,918 Accounts payable 238,606 295,326 Customer deposits 30,333 29,436 Taxes accrued 50,757 27,368 Interest accrued 47,648 66,193 Vacation pay accrued 20,002 18,859 Miscellaneous 25,567 42,622 - - ------------------------------------------------------------------------------------------------------------- Total 560,307 746,946 - - ------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - Accumulated deferred investment tax credits 418,275 418,222 Prepaid capacity revenues, net 101,143 - Deferred revenues from settlement of disputed contracts - - Uranium enrichment decontamination and decommissioning fund - - Deferred credits related to income taxes - - Natural disaster reserve - - Miscellaneous 18,812 18,166 - - ------------------------------------------------------------------------------------------------------------- Total 538,230 436,388 - - ------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 5,570,653 $ 5,722,263 ============================================================================================================= </TABLE> II-90C
ALABAMA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 60,000 4-1/2% $ 60,000 3/1/96 1993 50,000 5-1/2% 50,000 2/1/98 1992 170,000 6-3/8% 170,000 8/1/99 1993 100,000 6% 100,000 3/1/00 1992 100,000 6.85% 100,000 8/1/02 1993 125,000 7% 125,000 1/1/03 1993 175,000 6-3/4% 175,000 2/1/03 1992 175,000 7-1/4% 175,000 8/1/07 1991 100,000 9-1/4% 98,748 5/1/21 1991 150,000 8-3/4% 148,500 12/1/21 1992 200,000 8-1/2% 198,000 5/1/22 1992 100,000 8.30% 99,608 7/1/22 1993 100,000 7-3/4% 100,000 2/1/23 1993 150,000 7.45% 150,000 7/1/23 1993 100,000 7.30% 100,000 11/1/23 1994 150,000 9% 150,000 12/1/24 ============= ============== $ 2,005,000 $ 1,999,856 ============= ============== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1978 $ 5,600 7-1/4% $ 1,000 5/1/03 1986 21,000 7.40% 21,000 11/1/16 1993 12,100 Variable 12,100 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 96,990 6.05% 96,990 5/1/23 1993 9,800 5.80% 9,800 6/1/22 1994 24,400 5-1/2% 24,400 1/1/24 1994 53,700 Variable 53,700 6/1/15 1994 101,650 6-1/2% 101,650 9/1/23 1995 50,000 Variable 50,000 5/1/22 1995 81,500 Variable 81,500 10/1/22 ============= ============== $ 480,740 $ 476,140 ============= ============== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding - - --------------------------------------------------------------- (Thousands) 1946-1952 364,000 4.20% $ 36,400 1950 100,000 4.60% 10,000 1961 80,000 4.92% 8,000 1963 50,000 4.52% 5,000 1964 60,000 4.64% 6,000 1965 50,000 4.72% 5,000 1966 70,000 5.96% 7,000 1968 50,000 6.88% 5,000 1988 500,000 Auction 50,000 1992 4,000,000 7.60% 100,000 1992 2,000,000 7.60% 50,000 1993 1,520,000 6.80% 38,000 1993 2,000,000 6.40% 50,000 1993 200 Auction 20,000 1993 2,000,000 Adjustable 50,000 ============= ============== $ 12,844,200 $ 440,400 ============= ============== II-91
ALABAMA POWER COMPANY SECURITIES RETIRED DURING 1995 Pollution Control Bonds Principal Interest Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1985 $ 50,000 9-3/8% 1985 81,500 9-1/4% =========== $ 131,500 =========== II-92
GEORGIA POWER COMPANY FINANCIAL SECTION II-93
MANAGEMENT'S REPORT Georgia Power Company 1995 Annual Report The management of Georgia Power Company has prepared this annual report and is responsible for the financial statements and related information. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances, and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls based upon the recognition that the cost of the system should not exceed its benefits. The Company believes that its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, which is composed of six directors who are not employees, provides a broad overview of management's financial reporting and control functions. At least three times a year this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal control and financial reporting matters. The internal auditors and the independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted with a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Georgia Power Company in conformity with generally accepted accounting principles. /s/ H. Allen Franklin H. Allen Franklin President and Chief Executive Officer /s/ Warren Y. Jobe Warren Y. Jobe Executive Vice President, Treasurer and Chief Financial Officer February 21, 1996 II-94
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Georgia Power Company: We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (a Georgia corporation and wholly owned subsidiary of The Southern Company) as of December 31, 1995 and 1994, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-104 through II-125) referred to above present fairly, in all material respects, the financial position of Georgia Power Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-95
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Georgia Power Company 1995 Annual Report RESULTS OF OPERATIONS Earnings Georgia Power Company's 1995 earnings totaled $609 million, representing an $83 million (15.9 percent) increase over 1994. Earnings for 1994 were reduced by a $55 million after-tax charge related to work force reduction programs. Excluding the charge related to the 1994 work force reduction programs, earnings for 1995 increased 4.8 percent over 1994 primarily due to higher retail energy sales and lower interest charges, partially offset by higher operating expenses. Earnings for 1994 declined from the prior year not only because of the work force reduction charge but also because of lower retail energy sales due to mild weather. The summer of 1993 was exceptionally hot in comparison. Revenues The following table summarizes the factors impacting operating revenues for the 1993-1995 period: Increase (Decrease) From Prior Year ----------------------------------- 1995 1994 1993 ----------------------------------- Retail - (in millions) Sales growth $110 $ 67 $ 45 Weather 69 (128) 126 Fuel cost recovery 66 (35) 76 Demand-side programs 36 (12) 15 ----------------------------------------------------------------- Total retail 281 (108) 262 - - ------------------------------------------------------------------ Sales for resale - Non-affiliates (61) (183) (106) Affiliates 16 (1) (6) - - ------------------------------------------------------------------ Total sales for resale (45) (184) (112) - - ------------------------------------------------------------------ Other operating revenues 7 3 4 - - ------------------------------------------------------------------ Total operating revenues $243 ($289) $154 - - ------------------------------------------------------------------ Percent change 5.8% (6.5)% 3.6% - - ------------------------------------------------------------------ Retail revenues of $4.0 billion in 1995 increased $281 million (7.6 percent) over the prior year, compared with a decrease of $108 million (2.8 percent) in 1994. Sales growth, reflecting continued expansion of Georgia's economy, and the hot summer of 1995, compared to the milder-than-normal weather during the summer of 1994, were the primary reasons for the increase in retail revenues. Retail revenues were down in 1994 from the prior year primarily due to hot summer weather in 1993. Fuel revenues generally represent the direct recovery of fuel expense, including the fuel component of purchased energy, and do not affect net income. Revenues from demand-side option programs generally represent the direct recovery of program costs. See Note 3 to the financial statements under "Demand-Side Conservation Programs" for further information on these programs. Revenues from sales to non-affiliated utilities decreased in both 1995 and 1994. Revenues from sales to non-affiliated utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components were as follows: 1995 1994 1993 ------------------------------- (in millions) Capacity $53 $ 84 $152 Energy 45 82 113 - - -------------------------------------------------------------- Total $98 $166 $265 ============================================================== Contractual unit power sales to Florida utilities for 1995 and 1994 are down primarily due to scheduled reductions that corresponded with the sales to these utilities of portions of Plant Scherer Unit 4 in June 1995 and June 1994. The amount of capacity under these contracts declined by 155 megawatts and 427 megawatts in 1995 and 1994, respectively. In 1996, the contracted capacity will decline another 75 megawatts. Sales to municipalities and cooperatives in Georgia increased in 1995 due to higher summer demand resulting from the hot weather; however, such sales decreased in 1994 as these customers retained more of their own generation at jointly owned facilities, and as a result of a new agreement with territorial wholesale customers. Revenues from sales to affiliated companies within the Southern electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. Sales to affiliated companies do not have a significant impact on earnings. II-96
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report Kilowatt-hour (KWH) sales for 1995 and the percent change by year were as follows: Percent Change ---------------------------- 1995 KWH 1995 1994 1993 ---------------------------------------- (in billions) Residential 17.3 10.4% (5.8)% 11.5% Commercial 19.8 5.9 2.5 5.9 Industrial 25.3 3.9 3.0 2.9 Other 0.5 2.0 5.0 5.7 ------- Total retail 62.9 6.2 0.4 6.1 ------- Sales for resale - Non-affiliates 6.6 (17.3) (44.3) (9.8) Affiliates 2.8 (10.4) 0.9 (8.8) ------- Total sales for resale 9.4 (15.4) (36.4) (9.7) ------- Total sales 72.3 2.8 (8.0) 2.1 ======= - - ----------------------------------------------------------------- Residential, commercial and industrial energy sales growth in 1995 reflected continued expansion of Georgia's economy, hot summer weather, and an increase in customers served. The 1994 sales decline in the residential class was primarily the result of milder-than-normal summer weather in 1994. However in 1994, industrial and commercial sales were positively impacted by continued improvement in economic conditions. Assuming normal weather, sales to retail customers are projected to grow approximately 2 percent annually on average during 1996 through 1998. Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: 1995 1994 1993 --------------------------- Total generation (billions of kilowatt-hours) 64 62 64 Sources of generation (percent) -- Coal 73.7 74.8 76.9 Nuclear 22.6 21.9 20.0 Hydro 3.0 3.1 2.8 Oil and gas 0.7 0.2 0.3 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.67 1.67 1.75 Nuclear 0.60 0.63 0.58 Oil and gas * * * Total 1.44 1.44 1.52 - - --------------------------------------------------------------- * Not meaningful because of minimal generation from fuel source. Fuel expense increased 3.5 percent in 1995 because of higher generation which stemmed from greater demand. Fuel expense decreased 8.5 percent in 1994 due to lower fuel costs, lower generation, and the displacement of coal-fired generation with lower cost nuclear generation. Purchased power expense has decreased significantly since 1993, reflecting declining contractual capacity purchases from the co-owners of Plant Vogtle. Purchased power expense decreased $36 million in 1995 and $156 million in 1994. The declines in 1995 and 1994 also resulted from decreased purchases from affiliated companies, and in 1994 from decreased energy purchases from territorial wholesale customers. The declines in Plant Vogtle contractual capacity purchases did not have a significant impact on earnings in 1995 and 1994 since these costs are being levelized over six years under the terms of the 1991 Georgia Public Service Commission II-97
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report (GPSC) retail rate order. The levelization is reflected in the amortization of deferred Plant Vogtle costs in the Statements of Income. See Note 3 to the financial statements under "Plant Vogtle Phase-In Plans" for additional information. The Company has incurred expenses for separation benefits associated with its work force reduction programs. These expenses were $11 million in 1995 and $82 million in 1994. Other operation and maintenance (O&M) expenses increased 12.2 percent in 1995 primarily as a result of the recognition of costs associated with demand-side option programs and increased maintenance expenses. The demand-side option program costs were offset in part by increases in retail revenues. During 1995, the Company expensed an additional $58 million of demand-side option program and other related costs, as compared to 1994, of which approximately $29 million was not collected through rate riders. See Note 3 to the financial statements under "Demand-Side Conservation Programs" for additional information on the recovery of these program costs. Other O&M expenses decreased 4.5 percent in 1994 primarily due to environmental remediation costs at various sites of $32 million in 1993 compared to $8 million in 1994; recognition in 1993 of the one-time cost of an automotive fleet reduction program; and lower maintenance and pension costs during 1994. Depreciation and amortization increased $43 million in 1995 primarily due to additional plant investment, accelerated amortization of software costs, and an increase in nuclear decommissioning expenses. Taxes other than income taxes increased 5.2 percent in 1995 and 1.0 percent in 1994, reflecting primarily higher ad valorem taxes and in 1995, higher franchise taxes paid to municipalities as a result of increased sales. Income tax expense fluctuates directly with earnings. Other income (expense), net decreased in 1995 primarily due to an increase in charitable contributions. Interest expense decreased $51 million (14.6 percent) and $61 million (14.7 percent) in 1995 and 1994, respectively, due primarily to refinancing of long-term debt. The Company refinanced $505 million and $510 million of securities in 1995 and 1994, respectively. The Company also retired $264 million of long-term debt with the proceeds from the 1995 and 1994 Plant Scherer Unit 4 sales. Other interest charges in 1993 include interest related to the settlement of an Internal Revenue Service (IRS) audit. The settlement had no effect on 1993 net income. The Company has deferred certain expenses and recorded a deferred return related to Plant Vogtle under phase-in plans. See Note 3 to the financial statements under "Plant Vogtle Phase-In Plans" for information regarding the deferral and subsequent amortization of costs related to Plant Vogtle. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize either this economic loss or the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings. The level of future earnings depends on numerous factors including energy sales and regulatory matters. Beginning January 1, 1996, the Company will operate under a three-year retail rate plan. The plan, which was approved by the GPSC on February 16, 1996, concludes a GPSC review of the Company's earnings and addresses an alternative rate plan proposed by the Company. Under the plan, the Company's earnings will be evaluated against a retail return on common equity range of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent will be used to accelerate the amortization of regulatory assets or depreciation of electric plant. At its II-98
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report option, the Company may also recognize accelerated amortization or depreciation of assets within the allowed return on common equity range. The Company is required to absorb cost increases of approximately $29 million annually during the plan's three-year operation, including $14 million annually of accelerated depreciation of electric plant. During the plan's operation, the Company will not file for a general base rate increase unless its projected retail return on common equity falls below 10 percent. Under the approved plan, on July 1, 1998 the Company will make a general rate case filing in response to which the GPSC would be expected either to continue the rate plan or adopt a different one. Growth in energy sales is subject to a number of factors which traditionally have included: changes in contracts with neighboring utilities; energy conservation practiced by customers; the elasticity of demand; weather; competition; and the rate of economic growth in the Company's service area. Assuming normal weather, retail sales growth is projected to be approximately 2 percent annually on average during 1996 through 1998. The addition of four combustion turbine generating units and the Rocky Mountain pumped storage hydroelectric plant in 1995 and the scheduled addition of one jointly owned combustion turbine unit in 1996, will increase related O&M and depreciation expenses. In addition, the Company has entered into a four-year purchase power agreement to meet peaking needs whereby the Company will purchase 400 megawatts of capacity beginning in 1996 and declining to 200 megawatts of capacity in 1998. Capacity payments are projected to be $6 million in 1996 and 1997 and $3 million in 1998 and 1999. The Company has also entered into a 30-year purchase power agreement whereby the Company will buy electricity during peak periods from a planned 300 megawatt cogeneration facility starting in June 1998. Capacity and fixed O&M payments are projected to be $13 million in 1998. Work force reduction programs implemented in 1994 and 1995 will assist in efforts to control growth in future operating expenses. As discussed in Note 3 to the financial statements, regulatory uncertainties exist related to the Rocky Mountain pumped storage hydroelectric plant. In the event the GPSC does not allow full recovery of the plant's costs, then the portion not allowed may have to be written off. The Company's net investment in the plant is approximately $190 million. See Note 3 to the financial statements for information regarding proceedings with respect to the Company's recovery of demand-side conservation program costs. During 1995, the Company sold its remaining interest in Unit 4 of Plant Scherer to two Florida utilities. This transaction coincided with scheduled reductions in capacity revenues from Florida utilities under contractual unit power sales contracts of approximately $22 million in 1995 and an additional $7 million in 1996. See Notes 6 and 7 to the financial statements for additional information. During 1994 and 1995, Oglethorpe Power Corporation (OPC) gave the Company notice of its intent to decrease its purchases of capacity under a power supply agreement by 250 megawatts in September 1996 and an additional 250 megawatts in September 1997. As a result, the Company's capacity revenues from OPC will decline approximately $8 million in 1996, an additional $25 million in 1997, and an additional $18 million in 1998. OPC and the Municipal Electric Authority of Georgia (MEAG) have filed joint complaints in two separate venues seeking to recover from the Company approximately $16.5 million in alleged overcharges, plus approximately $6.3 million in interest. See Note 3 to the financial statements under "Wholesale Litigation" for further discussion of this matter. The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that the Company has with its sales for resale customers. The FERC currently is reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Review of Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could affect earnings if such costs are not fully recovered. The Clean Air II-99
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report Act and other environmental issues are discussed later under "Environmental Issues." The Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is posturing the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The Company is aggressively working to maintain and expand its share of wholesale sales in the Southeastern power markets. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. New federal legislation is being discussed and legislation allowing customer choice has been introduced in Georgia. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. The Company continues to compete with other electric suppliers within the state. In Georgia, most new retail customers with at least 900 kilowatts of connected load may choose their electricity supplier. In addition, the bulk power market has become very competitive as utilities, IPPs and cogenerators seek to supply future capacity needs. Competition can create new business opportunities, but it increases risk and has the potential to adversely affect earnings. The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the Company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the FASB has decided to review the accounting for liabilities related to closure and removal of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of closing and removing the Company's nuclear and other facilities may be required to be recorded as liabilities in the Balance Sheets. Also, the annual provisions for such costs could increase. Because of the Company's current ability to recover closure and removal costs through rates, these changes would not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company adopted this standard January 1, 1996 with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in this industry. II-100
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report FINANCIAL CONDITION Overview The principal changes in the Company's financial condition in 1995 were gross utility plant additions of $480 million, which included the commercial operation of four combustion turbine units (cumulatively, 320 megawatts of capacity) and all three units of the Rocky Mountain pumped storage hydroelectric plant (the Company's ownership interest is approximately 70 megawatts of capacity per unit). In addition, the cost of capital was lowered through the refinancing or retirement of $1.0 billion of long-term debt. The funds needed for gross property additions are currently provided from operations. The Statements of Cash Flows provide additional details. Financing Activities In 1995, the Company continued to lower its financing costs by refinancing higher-cost issues. New issues during 1993 through 1995 totaled $2.7 billion and retirement or repayment of securities totaled $3.4 billion. The retirements included the redemption of $131 million, $133 million, and $253 million in 1995, 1994, and 1993, respectively, of first mortgage bonds with the proceeds from the Plant Scherer Unit 4 sales. Composite financing rates for long-term debt and preferred stock for the years 1993 through 1995, as of year-end, were as follows: 1995 1994 1993 --------------------------------- Composite interest rate on long-term debt 6.57% 7.14% 7.86% Composite preferred stock dividend rate 6.73 7.11 6.76 - - ---------------------------------------------------------------- The Company's current securities ratings are as follows: Duff & Standard & Phelps Moody's Poor's ------------------------------------ First Mortgage Bonds AA- A1 A+ Preferred Stock A a2 A Unsecured Bonds A+ A2 A Commercial Paper D1+ P1 A1 - - ----------------------------------------------------------------- Liquidity and Capital Requirements Cash provided from operations increased by $281 million in 1995, primarily due to increased revenues and a decrease in interest payments. The Company estimates that construction expenditures for the years 1996 through 1998 will total $530 million, $537 million and $529 million, respectively. Investments in transmission and distribution facilities, enhancements to existing generating plants, and additions of a combustion turbine generating plant and equipment to comply with the provisions of the Clean Air Act are planned. Cash requirements for sinking fund requirements, redemptions announced, and maturities of long-term debt are expected to total $283 million during 1996 through 1998. As a result of requirements by the Nuclear Regulatory Commission, the Company has established external trust funds for the purpose of funding nuclear decommissioning costs. For 1996 through 1998, the amount to be funded totals $24 million annually. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." As a result of the Energy Policy Act of 1992, the Company is required to pay a special assessment over a 15-year period beginning in 1993 into a fund which will be used by the U. S. Department of Energy for the decontamination and decommissioning of its nuclear enrichment facilities. The Company estimates its remaining liability to be approximately $31 million as of December 31, 1995. See Note 1 to the financial statements under "Revenues and Fuel Costs" for additional information. Sources of Capital The Company expects to meet future capital requirements primarily using funds generated from operations and, if needed, by the issuance of new debt and equity securities, term loans, and short-term borrowings. To meet short-term cash needs and contingencies, the Company had approximately $975 million of unused credit II-101
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report arrangements with banks at the beginning of 1996. See Note 9 to the financial statements under "Bank Credit Arrangements" for additional information. The Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's ability to satisfy all coverage requirements is such that it could issue new first mortgage bonds and preferred stock to provide sufficient funds for all anticipated requirements. Environmental Issues In November 1990, the Clean Air Act was amended by Congress. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- is having a significant impact on the operating companies of The Southern Company, including Georgia Power. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and initially affected 28 generating units in the Southern electric system. As a result of The Southern Company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company achieved Phase I sulfur dioxide compliance at the affected units by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by the installation of new control equipment at 22 of the original 28 affected generating units. Construction expenditures for Georgia Power's Phase I compliance totaled approximately $165 million through 1995. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. During the period 1996 to 2000, current compliance strategy could require total estimated Georgia Power construction expenditures of approximately $45 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 1 percent in Georgia Power's annual revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. A significant portion of costs related to the acid rain provision of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules - - -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state issued rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules require II-102
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1995 Annual Report nitrogen oxide controls, above Title IV requirements, on some of the Company's plants. The EPA along with 37 states is conducting studies to evaluate the benefits of regional controls in meeting the ozone standards. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions to meet the 1999 deadline or as part of any regional controls if enacted. A decision on new requirements is expected in 1997. Compliance with any new rules could result in significant additional costs. The actual impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study during 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean-up properties currently or previously owned. The Company conducts studies to determine the extent of any required clean-up costs and has recognized in the financial statements costs to clean up known sites. These costs for the Company amounted to $8 million in 1995 and 1994, and $32 million in 1993. Additional sites may require environmental remediation for which the Company may be liable for a portion of or all required cleanup costs. See Note 3 to the financial statements under "Certain Environmental Contingencies" for information regarding the Company's potentially responsible party status at a site in Brunswick, Georgia and the status of sites listed on the State of Georgia's hazardous site inventory. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. II-103
<TABLE> <CAPTION> STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 Georgia Power Company 1995 Annual Report ========================================================================================================================== 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Revenues: Revenues $4,328,432 $4,101,504 $4,389,513 Revenues from affiliates 76,906 60,899 61,668 - - -------------------------------------------------------------------------------------------------------------------------- Total operating revenues 4,405,338 4,162,403 4,451,181 - - -------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 900,973 870,653 951,507 Purchased power from non-affiliates 183,009 193,130 313,170 Purchased power from affiliates 131,740 158,063 194,024 Provision for separation benefits 10,607 82,238 - Other 735,918 643,375 675,284 Maintenance 292,029 272,818 284,521 Depreciation and amortization 421,850 379,158 379,425 Amortization of deferred Plant Vogtle costs, net (Note 3) 124,454 74,888 36,284 Taxes other than income taxes 204,675 194,566 192,671 Federal and state income taxes 449,204 399,413 452,122 - - -------------------------------------------------------------------------------------------------------------------------- Total operating expenses 3,454,459 3,268,302 3,479,008 - - -------------------------------------------------------------------------------------------------------------------------- Operating Income 950,879 894,101 972,173 Other Income (Expense): Allowance for equity funds used during construction 2,734 5,663 3,168 Equity in earnings of unconsolidated subsidiary (Note 4) 4,051 3,588 4,127 Interest income 5,524 3,254 3,806 Other, net (8,973) 10,626 11,902 Income taxes applicable to other income 3,022 7,975 37,661 - - -------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 957,237 925,207 1,032,837 - - -------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 254,607 306,473 343,634 Allowance for debt funds used during construction (12,081) (11,571) (8,271) Interest on interim obligations 21,463 17,529 15,530 Amortization of debt discount, premium, and expense, net 15,835 15,743 14,024 Other interest charges 20,399 23,483 47,393 - - -------------------------------------------------------------------------------------------------------------------------- Net interest charges 300,223 351,657 412,310 - - -------------------------------------------------------------------------------------------------------------------------- Net Income 657,014 573,550 620,527 Dividends on Preferred Stock 48,152 48,006 50,674 ========================================================================================================================== Net Income After Dividends on Preferred Stock $ 608,862 $ 525,544 $ 569,853 ========================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-104
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994, and 1993 Georgia Power Company 1995 Annual Report =========================================================================================================================== 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Activities: Net income $ 657,014 $ 573,550 $ 620,527 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 527,310 484,032 475,152 Deferred income taxes and investment tax credits, net 37,150 33,567 150,735 Allowance for equity funds used during construction (2,734) (5,663) (3,168) Amortization of deferred Plant Vogtle costs, net 124,454 74,888 36,284 Non-cash portion of separation benefits - 68,599 - Gain on asset sales (23,588) (22,717) (35,514) Other, net 23,722 (72,597) (10,713) Changes in certain current assets and liabilities -- Receivables, net (59,370) 67,218 27,088 Inventories 30,761 (63,545) 82,433 Payables 45,882 5,409 17,364 Taxes accrued 11,373 (60,474) 15,377 Energy cost recovery, retail 42,576 55,505 (74,260) Other 3,473 (706) (35,691) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,418,023 1,137,066 1,265,614 - - --------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (480,449) (638,426) (674,432) Sales of property 131,099 132,644 261,687 Other (42,579) (41,273) (43,154) - - --------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (391,929) (547,055) (455,899) - - --------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds -- Preferred securities - 100,000 - Preferred stock - - 175,000 First mortgage bonds 75,000 - 1,135,000 Pollution control bonds 504,700 527,210 145,425 Long-term notes - - 37,000 Retirements -- Preferred stock - - (245,005) First mortgage bonds (505,789) (133,559) (1,337,822) Pollution control bonds (504,810) (510,320) (145,465) Other long-term debt (37,000) (10,187) (19,451) Interim obligations, net (24,472) (57,425) (51,444) Payment of preferred stock dividends (48,419) (47,147) (53,123) Payment of common stock dividends (451,500) (429,300) (402,400) Miscellaneous (17,413) (22,640) (63,648) - - --------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (1,009,703) (583,368) (825,933) - - --------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 16,391 6,643 (16,218) Cash and Cash Equivalents at Beginning of Year 12,539 5,896 22,114 - - --------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 28,930 $ 12,539 $ 5,896 =========================================================================================================================== Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $ 298,482 $ 336,155 $ 420,107 Income taxes 404,129 386,653 275,867 - - --------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. </TABLE> II-105
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Georgia Power Company 1995 Annual Report ===================================================================================== ASSETS 1995 1994 - - ------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> Utility Plant: Plant in service $ 14,538,595 $14,054,917 Less accumulated provision for depreciation 4,417,120 4,054,986 - - ------------------------------------------------------------------------------------- 10,121,475 9,999,931 Nuclear fuel, at amortized cost 124,849 136,425 Construction work in progress (Note 4) 236,715 541,889 - - ------------------------------------------------------------------------------------- Total 10,483,039 10,678,245 - - ------------------------------------------------------------------------------------- Other Property and Investments: Southern Electric Generating Company, at equity (Note 4) 27,232 26,985 Nuclear decommissioning trusts, at market 92,273 54,297 Miscellaneous 120,383 89,542 - - ------------------------------------------------------------------------------------- Total 239,888 170,824 - - ------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 28,930 12,539 Receivables- Customer accounts receivable 418,749 377,570 Other accounts receivable 102,953 104,989 Affiliated companies 15,482 14,443 Accumulated provision for uncollectible accounts (5,000) (4,500) Fossil fuel stock, at average cost 145,151 169,252 Materials and supplies, at average cost 286,804 293,464 Prepayments 107,764 55,383 Vacation pay deferred 35,543 40,823 - - ------------------------------------------------------------------------------------- Total 1,136,376 1,063,963 - - ------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 871,783 919,750 Deferred Plant Vogtle costs (Note 3) 307,638 432,092 Premium on reacquired debt, being amortized 174,018 164,676 Debt expense, being amortized 27,227 26,223 Miscellaneous 230,306 256,885 - - ------------------------------------------------------------------------------------- Total 1,610,972 1,799,626 - - ------------------------------------------------------------------------------------- Total Assets $13,470,275 $13,712,658 ===================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-106
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Georgia Power Company 1995 Annual Report ================================================================================================= CAPITALIZATION AND LIABILITIES 1995 1994 - - ------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> Capitalization (See accompanying statements): Common stock equity $ 4,299,012 $4,141,554 Preferred stock 692,787 692,787 Subsidiary obligated mandatorily redeemable preferred securities 100,000 100,000 Long-term debt 3,315,460 3,757,823 - - ------------------------------------------------------------------------------------------------- Total 8,407,259 8,692,164 - - ------------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 9) 150,446 167,420 Notes payable to banks (Note 9) 178,000 202,200 Commercial paper (Note 9) 222,330 222,602 Accounts payable- Affiliated companies 72,878 41,760 Other 316,278 313,307 Customer deposits 53,145 47,017 Taxes accrued- Federal and state income 7,759 2,856 Other 96,633 90,163 Interest accrued 96,162 110,256 Vacation pay accrued 34,233 39,720 Miscellaneous 137,184 70,006 - - ------------------------------------------------------------------------------------------------- Total 1,365,048 1,307,307 - - ------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 2,510,458 2,477,661 Accumulated deferred investment tax credits 432,184 453,121 Deferred credits related to income taxes (Note 8) 410,016 433,334 Disallowed Plant Vogtle capacity buyback costs (Note 4) 58,514 60,490 Miscellaneous 286,796 288,581 - - ------------------------------------------------------------------------------------------------- Total 3,697,968 3,713,187 - - ------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 6, and 7) Total Capitalization and Liabilities $13,470,275 $13,712,658 ================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-107
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1995 1994 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) <S> <C> <C> Common Stock Equity: Common stock, without par value -- Authorized -- 15,000,000 shares Outstanding -- 7,761,500 shares $ 344,250 $ 344,250 Paid-in capital 2,384,444 2,384,348 Premium on preferred stock 413 413 Retained earnings (Note 9) 1,569,905 1,412,543 - - ---------------------------------------------------------------------------------------------------------------------------------- Total common stock equity 4,299,012 4,141,554 51.1% 47.6% - - ---------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock, without par value: Authorized -- 55,000,000 shares Outstanding -- 21,027,864 shares $100 stated value -- 4.60% to 6.60% 117,787 117,787 7.72% to 7.80% 105,000 105,000 $25 stated value -- $1.90 to $2.125 295,000 295,000 Adjustable rate -- at January 1, 1996: 4.85% 100,000 100,000 5.27% 75,000 75,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $46,608,000) 692,787 692,787 8.2 8.0 - - ---------------------------------------------------------------------------------------------------------------------------------- Subsidiary Obligated Mandatorily Redeemable Preferred Securities (Note 9): $25 stated value -- 9% 100,000 100,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $9,000,000) 100,000 100,000 1.2 1.2 - - ---------------------------------------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates September 1, 1995 5 1/8% - 130,000 March 1, 1996 4 3/4% 150,000 150,000 April 1, 1998 5 1/2% 100,000 100,000 September 1, 1999 6 1/8% 195,000 195,000 2000 through 2003 6% to 7% 625,000 625,000 2008 6 7/8% 50,000 50,000 2019 9.23% - 36,157 2022 through 2025 7.55% to 8 3/4% 595,368 660,000 2032 variable rates - 200,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 1,715,368 2,146,157 Pollution control obligations (Note 9) 1,678,030 1,678,140 Other long-term debt (Note 9) 87,400 124,686 Unamortized debt premium (discount), net (14,892) (23,740) - - ---------------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $228,539,000) 3,465,906 3,925,243 Less amount due within one year (Note 9) 150,446 167,420 - - ---------------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 3,315,460 3,757,823 39.5 43.2 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 8,407,259 $ 8,692,164 100.0% 100.0% ================================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-108
<TABLE> <CAPTION> STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Period $ 1,412,543 $ 1,316,447 $ 1,159,380 Net income after dividends on preferred stock 608,862 525,544 569,853 Cash dividends on common stock (451,500) (429,300) (402,400) Preferred stock transactions, net - (148) (10,386) ================================================================================================================================== Balance at End of Period (Note 9) $ 1,569,905 $ 1,412,543 $ 1,316,447 ================================================================================================================================== </TABLE> <TABLE> <CAPTION> STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1995, 1994, and 1993 Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Period $ 2,384,348 $ 2,384,348 $ 2,384,140 Contributions to capital by parent company 96 - 208 ================================================================================================================================== Balance at End of Period $ 2,384,444 $ 2,384,348 $ 2,384,348 ================================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-109
NOTES TO FINANCIAL STATEMENTS Georgia Power Company 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). SCS provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of this act. The Company is also subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows generally accepted accounting principles (GAAP) and complies with the accounting policies and practices prescribed by the respective regulatory commissions. The preparation of financial statements in conformity with GAAP requires the use of estimates, and the actual results may differ from these estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Company's Balance Sheets at December 31 relate to the following: 1995 1994 -------------------- (in millions) Deferred income taxes $ 872 $ 920 Deferred income tax credits (410) (433) Deferred Plant Vogtle costs 308 432 Premium on reacquired debt 174 165 Demand-side program costs 79 97 Corporate building lease 49 48 Postretirement benefits 53 41 Vacation pay 36 41 Inventory conversions (31) (39) Department of Energy assessments 33 36 Other, net 36 52 ============================================================== Total $1,199 $1,360 ============================================================== In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. II-110
NOTES (continued) Georgia Power Company 1995 Annual Report Revenues and Fuel Costs The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average less than 1 percent of revenues. Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $86 million in 1995, $87 million in 1994, and $75 million in 1993. The Company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel, which was scheduled to begin in 1998. However, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch and into 2009 at Plant Vogtle. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The assessment will be paid over a 15-year period, which began in 1993. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The Company -- based on its ownership interests -- estimates its remaining liability under this law at December 31, 1995, to be approximately $31 million. This obligation is recorded in the accompanying Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.2 percent in 1995 and 3.1 percent in 1994 and 1993. See Note 3 under "Retail Rate Plan" for additional information. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected costs of decommissioning nuclear facilities and removal of other facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring all licensees operating commercial nuclear power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. The Company has established external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over a set period of time as approved by the GPSC. Earnings on the trust funds are considered in determining decommissioning expense. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. The Company has filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. The site study cost is the estimate to decommission the facility as of the site study year, and ultimate cost is the estimate to decommission the facility as of the retirement II-111
NOTES (continued) Georgia Power Company 1995 Annual Report date. The estimated costs of decommissioning -- both site study costs and ultimate costs at December 31, 1995 -- based on the Company's ownership interests -- were as follows: Plant Plant Hatch Vogtle -------------------- Site study basis (year) 1994 1994 Decommissioning periods: Beginning year 2014 2027 Completion year 2027 2038 - - ------------------------------------------------------------ (in millions) Site study costs: Radiated structures $294 $233 Non-radiated structures 41 52 ============================================================ Total $335 $285 ============================================================ (in millions) Ultimate costs: Radiated structures $781 $1,018 Non-radiated structures 111 230 - - ------------------------------------------------------------ Total $892 $1,248 ============================================================ (in millions) Amount expensed in 1995 $11 $ 9 Accumulated provisions: Balance in external trust funds $56 $36 Balance in internal reserves 30 13 ============================================================ Total $86 $49 ============================================================ Significant assumptions: Inflation rate 4.4% 4.4% Trust earnings rate 6.0 6.0 - - ------------------------------------------------------------ Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the GPSC. The decommissioning costs included in cost of service are based on the higher of the costs to decommission the radioactive portions of the plants based on 1994 site studies or the NRC minimum funding requirements. The Company expects the GPSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of: changes in the assumed date of decommissioning; changes in NRC requirements; changes in the assumptions used in making estimates; changes in regulatory requirements; changes in technology; and changes in costs of labor, materials, and equipment. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Plant Vogtle Phase-In Plans In 1987 and 1989, the GPSC ordered that the allowed costs of Plant Vogtle, a two-unit nuclear facility of which Georgia Power owns 45.7 percent, be phased into rates under plans that meet the requirements of FASB Statement No. 92, Accounting for Phase-In Plans. In 1991, the GPSC modified the phase-in plans. In addition, the Company deferred certain Plant Vogtle operating expenses and financing costs under accounting orders issued by the GPSC. See Note 3 for further information. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. For the years 1995, 1994 and 1993, the average AFUDC rates were 6.53 percent, 6.18 percent and 4.96 percent, respectively. The increase in 1994 is primarily the result of the higher short-term borrowing rates. AFUDC, net of taxes, as a percentage of net income after dividends on preferred stock, was less than 2.5 percent for 1995, 1994, and 1993. II-112
NOTES (continued) Georgia Power Company 1995 Annual Report Utility Plant Utility plant is stated at original cost with the exception of Plant Vogtle, which is stated at cost less regulatory disallowances. Original cost includes: materials; labor; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the Company's financial instruments for which the carrying amounts did not approximate fair value at December 31 are as follows: Carrying Fair Amount Value -------------------------- Long-term debt: (in millions) At December 31, 1995 $3,378 $3,487 At December 31, 1994 3,838 3,697 Preferred Securities: At December 31, 1995 100 114 - - --------------------------------------------------------------- The fair values for securities were based on either closing market prices or closing prices of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan covering substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The Company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Qualified trusts are funded to the extent deductible under federal income tax regulations and to the extent required by the GPSC and the FERC. During 1995 and 1994, the Company funded $21 million and $22 million, respectively, to the qualified trusts. Amounts funded are primarily invested in debt and equity securities. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." In October 1993, the GPSC ordered the Company to phase in the adoption of Statement No. 106 to cost of service over a five-year period, whereby one-fifth of the additional cost was expensed in 1993, and the remaining additional costs were deferred. An additional one-fifth of the costs will be expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The cost deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. As a result of the regulatory treatment allowed by the GPSC, the adoption of Statement No. 106 did not have a material impact on net income. II-113
NOTES (continued) Georgia Power Company 1995 Annual Report Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension --------------------- 1995 1994 --------------------- Actuarial present value of (in millions) benefit obligations: Vested benefits $ 830 $ 689 Non-vested benefits 43 32 - - --------------------------------------------------------------- Accumulated benefit obligation 873 721 Additional amounts related to projected salary increases 290 294 - - --------------------------------------------------------------- Projected benefit obligation 1,163 1,015 Less: Fair value of plan assets 1,688 1,419 Unrecognized net gain (465) (371) Unrecognized prior service cost 26 28 Unrecognized transition asset (52) (58) =============================================================== Prepaid asset recognized in the Balance Sheets $ 34 $ 3 =============================================================== Postretirement Benefits --------------------- 1995 1994 --------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $214 $203 Employees eligible to retire 16 7 Other employees 188 229 - - --------------------------------------------------------------- Accumulated benefit obligation 418 439 Less: Fair value of plan assets 81 52 Unrecognized net loss (gain) 44 (1) Unrecognized transition obligation 186 301 =============================================================== Accrued liability recognized in the Balance Sheets $107 $ 87 =============================================================== In 1995, the Company announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the Company will pay to provide future postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $97 million. The weighted average rates used in actuarial calculations were: 1995 1994 1993 ------------------------------- Discount 7.3% 8.0% 7.5% Annual salary increase 4.8 5.5 5.0 Long-term return on plan assets 8.5 8.5 8.5 - - --------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation as of December 31, 1995, by $39 million and the aggregate of the service and interest cost components of the net postretirement cost by $8 million. The components of the plans' net costs are shown below: Pension ----------------------------- 1995 1994 1993 ----------------------------- (in millions) Benefits earned during the year $ 33 $ 34 $ 33 Interest cost on projected benefit obligation 78 71 69 Actual (return) loss on plan assets (317) 35 (194) Net amortization and deferral 185 (160) 84 ================================================================ Net pension cost $ (21) $ (20) $ (8) ================================================================ Net pension costs were negative in 1995, 1994 and 1993. Of net pension amounts recorded, $15 million in 1995 and 1994, and $6 million in 1993 were recorded as a II-114
NOTES (continued) Georgia Power Company 1995 Annual Report reduction to operating expense, and the remainder was recorded as a reduction to construction and other accounts. Postretirement Benefits -------------------------- 1995 1994 1993 -------------------------- (in millions) Benefits earned during the year $13 $15 $14 Interest cost on accumulated benefit obligation 34 33 29 Amortization of transition obligation 16 15 15 Actual (return) loss on plan assets (8) 1 (4) Net amortization and deferral 4 (3) 2 ================================================================== Net postretirement cost $59 $61 $56 ================================================================== Of the above net postretirement benefit costs recorded, $33 million in 1995, $28 million in 1994, and $21 million in 1993 were charged to operating expenses. In addition, $11 million in 1995, $18 million in 1994, and $21 million in 1993 were deferred, and the remainder was charged to construction and other accounts. Work Force Reduction Programs The Company has incurred additional costs for work force reduction programs. The costs related to these programs were $11 million and $82 million for the years 1995 and 1994, respectively. Additionally, in 1994, the Company recognized $8 million for its share of costs associated with SCS's work force reduction program. 3. REGULATORY AND LITIGATION MATTERS Retail Rate Plan On February 16, 1996, the GPSC approved a rate plan recommended by the Commission staff which concludes the GPSC's review of the Company's earnings initiated in early 1995 and addresses the Company's proposed alternative retail rate plan. Under the three-year plan effective January 1, 1996, the Company's earnings will be evaluated against a retail return on common equity range of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent will be used to accelerate the amortization of regulatory assets or depreciation of electric plant. At its option, the Company may also recognize accelerated amortization or depreciation of assets within the allowed return on common equity range. The Company is required to absorb cost increases of approximately $29 million annually during the plan's three-year operation, including $14 million annually of accelerated depreciation of electric plant. During the plan's operation, the Company will not file for a general base rate increase unless its projected retail return on common equity falls below 10 percent. Under the approved plan, on July 1, 1998 the Company will make a general rate case filing in response to which the GPSC would be expected either to continue the rate plan or adopt a different one. Rocky Mountain Plant Status In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric plant in 1991, as then planned, was not economically justifiable and reasonable and withheld authorization for the Company to spend funds from approved securities issuances on that plant. In 1988, the Company and OPC entered into a joint ownership agreement for OPC to assume responsibility for the construction and operation of the plant, as discussed in Note 6. However, full recovery of the Company's costs depends on the GPSC's treatment of the plant's costs and disposition of the plant's capacity output. In the event the GPSC does not allow full recovery of the plant's costs, then the portion not allowed may have to be written off. AFUDC accrued on the Rocky Mountain plant was not credited to income or included in the plant's cost since December 1985. In 1995, the plant went into commercial operation. At December 31, 1995, the Company's net investment in the plant was approximately $190 million, and the Company's ownership was 25.4 percent. The final outcome of this matter cannot now be determined. Accordingly, no provision for any write-down of the investment in the plant has been made. Demand-Side Conservation Programs In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of the Company's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. The Company suspended collection of the demand-side conservation II-115
NOTES (continued) Georgia Power Company 1995 Annual Report costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved the Company's request for an accounting order allowing the Company to defer all current unrecovered and future costs related to these programs until the Superior Court's decision is reversed or until the next general rate case proceedings. After the Georgia Court of Appeals upheld the legality of the rate riders, the Company resumed collection under the rate riders in December 1994. In August 1995, the GPSC ordered the Company to discontinue its current demand-side conservation programs by the end of 1995. The rate riders will remain in effect until costs deferred are collected. Under the Retail Rate Plan approved February 16, 1996, the Company will recognize approximately $29 million of deferred program costs over a three-year period which will not be recovered through the riders. FERC Review of Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any change in the rate of return on common equity that could potentially require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and ended in December 1995. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $49 million at December 31, 1995. However, management believes that rates are not excessive, and that refunds are not justified. Certain Environmental Contingencies In January 1995, the Company and four other unrelated entities were notified by the EPA that they have been designated as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act with respect to a site in Brunswick, Georgia. As of December 31, 1995, the Company has recognized $3.5 million in expenses associated with this site. While the Company believes that the total amount of costs required for the clean up of this site may be substantial, it is unable at this time to estimate either such total or the portion for which the Company may ultimately be responsible. The final outcome of this matter cannot now be determined. However, based on the nature and extent of the Company's activities relating to the site, management believes that the Company's portion of these costs should not be material. In compliance with the Georgia Hazardous Site Response Act of 1993, the State of Georgia was required to compile an inventory of all known or suspected sites where hazardous wastes, constituents or substances have been disposed of or released in quantities deemed reportable by the State. In developing this list, the State identified several hundred properties throughout the State, including 24 sites which may require environmental remediation by the Company. The majority of these 24 sites are electrical power substations and power generation facilities. The Company has recognized $10 million in expenses through December 31, 1995 for the anticipated clean-up cost for 18 sites that the Company plans II-116
NOTES (continued) Georgia Power Company 1995 Annual Report to remediate. The Company will conduct studies at each of the remaining sites to determine the extent of remediation and associated clean-up costs, if any, that may be required. The Company has recognized $2.4 million in expenses for the anticipated cost of completing such studies. Any cost of remediating the remaining sites cannot presently be determined until such studies are completed for each site and the State of Georgia determines whether remediation is required. If all listed sites were required to be remediated, the Company could incur expenses of up to approximately $15 million in additional clean-up costs and construction expenditures of up to approximately $100 million to develop new waste management facilities or install additional pollution control devices. Wholesale Litigation In July 1994, Oglethorpe Power Corporation (OPC) and the Municipal Electric Authority of Georgia (MEAG) filed a joint complaint with the FERC seeking to recover from the Company an aggregate of approximately $16.5 million in alleged partial requirements rates overcharges, plus approximately $6.3 million in interest. OPC and MEAG claimed that the Company improperly reflected in such rates costs associated with capacity that had previously been sold to Gulf States pursuant to a unit power sales contract or, alternatively, that they should be allocated a portion of the proceeds received by the Company as a result of a settlement with Gulf States of litigation arising out of such contract. The Company's response sought dismissal of the complaint by the FERC. Dismissal was ordered in November 1994. OPC and MEAG filed a request for rehearing in December 1994, and the FERC denied such request in July 1995. In September 1995, OPC appealed the FERC's decision on this issue to the Court of Appeals for the District of Columbia Circuit. In August 1994, OPC and MEAG also filed a complaint in the Superior Court of Fulton County, Georgia, urging substantially the same claims and asking the court to hear the matter in the event the FERC declines jurisdiction. Such court proceeding was subsequently stayed pending resolution of the FERC filing. Plant Vogtle Phase-In Plans Pursuant to orders from the GPSC, the Company recorded a deferred return under phase-in plans for Plant Vogtle Units 1 and 2 until October 1991 when the allowed investment was fully reflected in rates. In addition, the GPSC issued two separate accounting orders that required the Company to defer substantially all operating and financing costs related to both units until rate orders addressed these costs. These GPSC orders provide for the recovery of deferred costs within 10 years. The GPSC modified the phase-in plans in 1991 to accelerate the recognition of costs previously deferred under the Plant Vogtle Unit 2 phase-in plan and to levelize the remaining Plant Vogtle declining capacity buyback expenses. Under these orders, the Company has deferred and amortized these costs (as recovered through rates) as follows: 1995 1994 1993 ----------------------------- (in millions) Deferred costs at beginning of year $432 $507 $383 - - ---------------------------------------------------------------- Deferred capacity buyback expenses - 10 38 Amortization of previously deferred costs (124) (85) (74) - - ---------------------------------------------------------------- Net amortization (124) (75) (36) - - ---------------------------------------------------------------- Effect of adoption of FASB Statement No. 109 - - 160 ================================================================ Deferred costs at end of year $308 $432 $507 ================================================================ Nuclear Performance Standards In October 1989, the GPSC adopted a nuclear performance standard for the Company's nuclear generating units under which the performance of plants Hatch and Vogtle will be evaluated every three years. The performance standard is based on each unit's capacity factor as compared to the average of all U.S. nuclear units operating at a capacity factor of 50 percent or higher during the three-year period of evaluation. Depending on the performance of the units, the Company could receive a monetary reward or penalty under the performance standards criteria. The first evaluation was conducted in 1993 for performance during the 1990-92 period. During this three-year period, the Company's units performed at an average capacity factor of 81 percent compared to an industry II-117
NOTES (continued) Georgia Power Company 1995 Annual Report average of approximately 73 percent. Based on these results, the GPSC approved a performance reward of approximately $8.5 million for the Company. This reward is being collected through the retail fuel cost recovery provision and recognized in income over a 36-month period beginning November 1993. At December 31, 1995, the remaining amount to be collected was $2.4 million. 4. COMMITMENTS Construction Program While the Company has no new baseload generating plants under construction, the construction of one jointly owned combustion turbine peaking unit is planned to be completed in 1996. In addition, significant construction of transmission and distribution facilities, and projects to upgrade and extend the useful life of generating plants will continue. The Company currently estimates property additions to be approximately $530 million in 1996, $537 million in 1997, and $529 million in 1998. These estimated additions include AFUDC of $12 million in 1996, $14 million in 1997, and $15 million in 1998. The estimates for property additions for the three-year period include $67 million committed to meeting the requirements of the Clean Air Act. The construction program is subject to periodic review and revision, and actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, load growth estimates, environmental regulations, and regulatory requirements. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels and other financial commitments. Total estimated long-term fossil and nuclear fuel commitments at December 31, 1995 were as follows: Minimum Year Obligations ---------------------- (in millions) 1996 $ 831 1997 678 1998 534 1999 321 2000 231 2001 through 2010 1,624 =============================================================== Total minimum obligations $4,219 =============================================================== Additional commitments for coal and for nuclear fuel will be required in the future to supply the Company's fuel needs. Purchase Power Commitments In connection with the joint ownership arrangement for Plant Vogtle, discussed in Note 6, the Company has made commitments to purchase declining fractions of OPC's and MEAG's capacity and energy from this plant. These commitments are in effect during periods of up to 10 years following commercial operation (and with regard to a portion of a 5 percent interest in Plant Vogtle owned by MEAG, until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest). The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Except as noted below, the cost of such capacity and energy is included in purchased power from non-affiliates in the Company's Statements of Income. Capacity payments totaled $76 million, $129 million and $183 million in 1995, 1994, and 1993, respectively. The current projected Plant Vogtle capacity payments for the next five years are: $70 million in 1996, $59 million per year in 1997 through 1999, and $60 million in 2000. Portions of the payments noted above relate to costs in excess of Plant Vogtle's allowed investment for ratemaking purposes. The present value of these portions was written off in 1987 and 1990. II-118
NOTES (continued) Georgia Power Company 1995 Annual Report As discussed in Note 3, the Plant Vogtle declining capacity buyback expense is being levelized over a six-year period which began in October 1991. The Company and an affiliate, Alabama Power Company, own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which owns electric generating units with a total rated capacity of 1,020 megawatts, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, debt service and return on investment, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses included in purchased power from affiliates in the Statements of Income, is as follows: 1995 1994 1993 --------------------------------- (in millions) Energy $44 $43 $60 Capacity 29 33 30 ============================================================== Total $73 $76 $90 ============================================================== Kilowatt-hours 2,391 2,429 3,352 - - -------------------------------------------------------------- At December 31, 1995, the capitalization of SEGCO consisted of $54 million of equity and $78 million of long-term debt on which the annual interest requirement is $5 million. The Company has entered into a 30-year purchase power agreement, scheduled to begin in June 1998, for electricity during peaking periods from a planned 300 megawatt cogeneration facility. Payments are subject to reductions for failure to meet minimum capacity output. Total estimated capacity and fixed operation and maintenance (O&M) payments are as follows: Fixed Year Capacity O&M Total ----------------------------------------- (in millions) 1998 $ 10 $ 3 $ 13 1999 11 4 15 2000 11 4 15 2001 and beyond 178 157 335 ================================================================ Total $210 $168 $378 ================================================================ Operating Leases The Company has entered into coal rail car rental agreements with various terms and expiration dates. These expenses totaled $12 million, $13 million, and $8 million for 1995, 1994, and 1993, respectively. At December 31, 1995, estimated minimum rental commitments for noncancelable operating leases were as follows: Year Amounts ------------------- (in millions) 1996 $ 11 1997 10 1998 10 1999 10 2000 10 2001 and beyond 126 ========================================================= Total minimum payments $177 ========================================================= 5. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988, the Company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident II-119
NOTES (continued) Georgia Power Company 1995 Annual Report occurring at the Company's nuclear power plants. The act provides funds up to $8.9 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. The Company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment for the Company, excluding any applicable state premium taxes, -- based on its ownership and buyback interests - - -- is $162 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The Company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. The Company's maximum annual assessment is limited to $12 million under current policies. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 21 weeks after the outage -- for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The maximum annual assessments under the current policies for the Company would be $24 million for excess property damage and $13 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. The Company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the Company could be subject to a maximum total assessment of $6 million. All retrospective assessments, whether generated for liability, property or replacement power, may be subject to applicable state premium taxes. 6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS The Company has sold undivided interests in plants Hatch, Wansley, Vogtle, and Scherer Units 1 and 2, together with transmission facilities, to OPC, an electric membership generation and transmission corporation; MEAG, a public corporation and an instrumentality of the state of Georgia; and the City of Dalton, Georgia. The Company has sold an interest in Plant Scherer Unit 3 to Gulf Power Company, an affiliate. Additionally, in 1995 the Company completed the last of four separate transactions to sell Unit 4 of Plant Scherer to Florida Power & Light Company (FP&L) and Jacksonville Electric Authority (JEA) for a total price of approximately $808 million. FP&L now owns approximately 76.4 percent of the unit, with JEA owning the remainder. II-120
NOTES (continued) Georgia Power Company 1995 Annual Report The Scherer Unit 4 transactions were as follows: Closing Date Percent After-Tax Capacity Ownership Amount Gain - - --------------------------------------------------------------- (in megawatts) (in millions) July 1991 290 35.46% $291 $14 June 1993 258 31.44 253 18 June 1994 135 16.55 133 11 June 1995 135 16.55 131 12 =============================================================== Total 818 100.00% $808 $55 =============================================================== Except as otherwise noted, the Company has contracted to operate and maintain all jointly owned facilities. The Company includes its proportionate share of plant operating expenses in the corresponding operating expenses in the Statements of Income. As discussed in Note 3, the Company owns 25.4 percent of the Rocky Mountain pumped storage hydroelectric plant, which began commercial operation in 1995. OPC owns the remainder, and is the operator of the plant. The Company owns six of eight 80 megawatt combustion turbine generating units and 75 percent of the related common facilities at Plant McIntosh. Savannah Electric and Power Company, an affiliate, owns the remainder and operates the plant. Four of the Company's six units began commercial operation during 1994, and the remaining two units began commercial operation in 1995. In 1994, the Company and Florida Power Corporation (FPC) entered into a joint ownership agreement regarding a 150 megawatt combustion turbine unit to be constructed at Intercession City, Florida, near Orlando. The unit is scheduled to begin commercial operation by the end of 1996, and will be constructed, operated, and maintained by FPC. The Company will have a one-third interest in the unit, with use of 100 percent of the unit's capacity from June through September. FPC will have the capacity the remainder of the year. The Company's investment in the project is expected to be approximately $14 million at completion. At December 31, 1995, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation, were as follows: Total Nameplate Company Facility (Type) Capacity Ownership - - ----------------------------------------------------------------- (megawatts) Plant Vogtle (nuclear) 2,320 45.7% Plant Hatch (nuclear) 1,630 50.1 Plant Wansley (coal) 1,779 53.5 Plant Scherer (coal) Units 1 and 2 1,636 8.4 Unit 3 818 75.0 Plant McIntosh Common Facilities N/A 75.0 (combustion-turbine) Rocky Mountain 848 25.4 (pumped storage) - - ----------------------------------------------------------------- Accumulated Facility (Type) Investment Depreciation - - ----------------------------------------------------------------- (in millions) Plant Vogtle (nuclear) $3,295* $730 Plant Hatch (nuclear) 842 394 Plant Wansley (coal) 297 132 Plant Scherer (coal) Units 1 and 2 112 39 Unit 3 541 135 Plant McIntosh Common Facilities (combustion-turbine) 19 ** Rocky Mountain (pumped storage) 200 10 - - ---------------------------------------------------------------- * Investment net of write-offs. ** Less than $1 million. II-121
NOTES (continued) Georgia Power Company 1995 Annual Report 7. LONG-TERM POWER SALES AGREEMENTS The Company and the operating subsidiaries of The Southern Company have long-term contractual agreements for the sale of capacity and energy to non-affiliated utilities located outside the system's service area. These agreements consist of firm unit power sales pertaining to capacity from specific generating units. The Company also had agreements for non-firm sales, which expired in 1994, based on the capacity of the Southern system. Because energy is generally sold at cost under these agreements, it is primarily the capacity revenues that affect the Company's profitability. The Company's capacity revenues have been as follows: Year Unit Power Sales Non-firm Sales - - ----------------------------------------------------------------- (in millions) (megawatts) (in millions) (megawatts) 1995 $ 53 248 $ - - 1994 75 403 9 101 1993 135 830 17 200 - - ----------------------------------------------------------------- Unit power from specific generating plants is being sold to FP&L, FPC, JEA, and the City of Tallahassee, Florida. Under these agreements, the Company sold approximately 248 megawatts of capacity in 1995 and is scheduled to sell approximately 173 megawatts of capacity in 1996. Thereafter, these sales will decline to an estimated 159 megawatts and remain at that level through 1999. After 2000, capacity sales will decline to approximately 103 megawatts -- unless reduced by FP&L, FPC, and JEA -- until the expiration of the contracts in 2010. Long-term non-firm power of 200 megawatts was sold by the Southern system in 1994 to FPC, of which the Company's share was 101 megawatts, under a contract that expired at the end of 1994. Sales under these long-term non-firm power sales agreements were made from available power pool energy, and the revenues from the sales were shared by the operating affiliates. 8. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax-related regulatory assets were $872 million and the tax-related regulatory liabilities were $410 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 1995 1994 1993 ------------------------------ Total provision for income taxes: (in millions) Federal: Currently payable $349 $306 $223 Deferred - Current year 84 86 181 Reversal of prior years (55) (57) (40) Deferred investment tax credits 1 (1) (18) - - ----------------------------------------------------------------- 379 334 346 - - ----------------------------------------------------------------- State: Currently payable 60 52 41 Deferred - Current year 15 15 31 Reversal of prior years (8) (10) (3) - - ----------------------------------------------------------------- 67 57 69 - - ----------------------------------------------------------------- Total 446 391 415 - - ------------------------------------------------------------------ Less: Income taxes charged (credited) to other income (3) (8) (37) ================================================================= Federal and state income taxes charged to operations $449 $399 $452 ================================================================= II-122
NOTES (continued) Georgia Power Company 1995 Annual Report The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 1995 1994 -------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $1,630 $1,541 Property basis differences 1,074 1,085 Deferred Plant Vogtle costs 100 141 Premium on reacquired debt 70 68 Deferred regulatory costs 38 48 Fuel clause underrecovered - 9 Other 29 23 - - ------------------------------------------------------------------ Total 2,941 2,915 - - ------------------------------------------------------------------ Deferred tax assets: Other property basis differences 239 250 Federal effect of state deferred taxes 97 94 Other deferred costs 83 79 Disallowed Plant Vogtle buybacks 25 26 Accrued interest 13 10 Fuel clause overrecovered 6 - Other 18 13 - - ------------------------------------------------------------------ Total 481 472 - - ------------------------------------------------------------------ Net deferred tax liabilities 2,460 2,443 Portion included in current assets 51 35 ================================================================== Accumulated deferred income taxes in the Balance Sheets $2,511 $2,478 ================================================================== Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $22 million in 1995, $25 million in 1994, and $19 million in 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory tax rate to the effective income tax rate is as follows: 1995 1994 1993 ----------------------------- Federal statutory rate 35% 35% 35% State income tax, net of federal deduction 4 4 4 Non-deductible book depreciation 2 3 3 Difference in prior years' deferred and current tax rate (1) (1) (1) Other - - (1) ================================================================ Effective income tax rate 40% 41% 40% ================================================================ The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. CAPITALIZATION Common Stock Dividend Restrictions The Company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 1995, retained earnings of $897 million were restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. The Company's charter limits cash dividends on common stock to the lesser of the retained earnings balance or 75 percent of net income available for such stock during a prior period of 12 months if the ratio of common stock equity to total capitalization, including retained earnings, adjusted to reflect the payment of the proposed dividend, is below 25 percent, and to 50 percent of such net income if such ratio is less than 20 percent. At December 31, 1995, the ratio as defined was 50.2 percent. II-123
NOTES (continued) Georgia Power Company 1995 Annual Report Preferred Securities In December 1994, Georgia Power Capital, L.P., of which the Company is the sole general partner, issued $100 million of 9 percent mandatory redeemable preferred securities. The sole asset of Georgia Power Capital is $103 million aggregate principal amount of Georgia Power's 9 percent Junior Subordinated Deferrable Interest Debentures due December 19, 2024. The Company considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by the Company of Georgia Power Capital's payment obligations with respect to the preferred securities. Pollution Control Bonds The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control and industrial development revenue bonds. The Company has authenticated and delivered to trustees an aggregate of $1.5 billion of its first mortgage bonds, which are pledged as security for its obligations under pollution control and industrial development contracts. No interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase or loan agreements. An aggregate of approximately $146 million of the pollution control and industrial development bonds is secured by a subordinated interest in specific property of the Company. Details of pollution control bonds are as follows: Maturity Interest Rates 1995 1994 - - -------------------------------------------------------------- (in millions) 2000 4.375% $ 50 $ - 2004-2005 5% to 5.70% 143 85 2006-2008 6.375% to 6.75% 12 12 2011-2015 10.125% to 10.6% & Variable 10 515 2016-2019 6% to 9.375% 282 282 2021-2025 5.40% to 7.25% & Variable 1,181 784 ============================================================== Total pollution control bonds $ 1,678 $1,678 ============================================================== Bank Credit Arrangements At the beginning of 1996, the Company had unused credit arrangements with banks totaling $975 million, of which $514.7 million expires at various times during 1996, $60.3 million expires at May 1, 1998, and $400 million expires at June 30, 1998. The $400 million expiring June 30, 1998, is under revolving credit arrangements with several banks providing the Company, Alabama Power Company, and The Southern Company up to a total credit amount of $400 million. To provide liquidity support for commercial paper programs, $165 million, $135 million, and $100 million are currently dedicated to the Company, Alabama Power Company, and The Southern Company, respectively. However, the allocations can be changed among the borrowers by notifying the respective banks. During the term of the agreements expiring in 1998, short-term borrowings may be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Of the Company's total $975 million in unused credit arrangements, a portion of the lines are dedicated to provide liquidity support to variable rate pollution control bonds. The credit lines dedicated as of December 31, 1995, were $475 million. In connection with all other lines of credit, the Company has the option of paying fees or maintaining compensating balances. These balances are not legally restricted from withdrawal. In addition, the Company borrows under uncommitted lines of credit with banks and through a $225 million commercial paper program that has the liquidity support of committed bank credit arrangements. Average compensating balances held under these committed facilities were not material in 1995. Other Long-Term Debt Assets acquired under capital leases are recorded in the Balance Sheets as utility plant in service, and the related obligations are classified as II-124
NOTES (continued) Georgia Power Company 1995 Annual Report long-term debt. At December 31, 1995 and 1994, the Company had a capitalized lease obligation for its corporate headquarters building of $87 million and $88 million, respectively, with an interest rate of 8.1 percent. The maturity of this capital lease obligation through 2000 is approximately as follows: $336 thousand in 1996, $365 thousand in 1997, $395 thousand in 1998, $429 thousand in 1999, and $672 thousand in 2000. The lease agreement for the corporate headquarters building provides for payments that are minimal in early years and escalate through the first 21 years of the lease. For ratemaking purposes, the GPSC has treated the lease as an operating lease and has allowed only the lease payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes is being deferred as a cost to be recovered in the future as ordered by the GPSC. At December 31, 1995, and 1994, the interest and lease amortization deferred on the Balance Sheets are $49 million and $48 million, respectively. Assets Subject to Lien The Company's mortgage dated as of March 1, 1941, as amended and supplemented, securing the first mortgage bonds issued by the Company, constitutes a direct lien on substantially all of the Company's fixed property and franchises. Long-Term Debt Due Within One Year The current portion of the Company's long-term debt is as follows: 1995 1994 ----------------- (in millions) First mortgage bond maturity $150 $130 Other long-term debt - 37 ================================================================ Total $150 $167 ================================================================ The Company's first mortgage bond indenture includes an improvement fund requirement that amounts to 1 percent of each outstanding series of bonds authenticated under the indenture prior to January 1 of each year, other than those issued to collateralize pollution control obligations. The requirement may be satisfied by June 1 of each year by depositing cash, reacquiring bonds, or by pledging additional property equal to 1 2/3 times the requirement. The Company currently plans to satisfy its 1996 improvement fund requirement by depositing cash with the trustee or by pledging additional property. Redemption of Securities The Company plans to continue a program of redeeming or replacing debt and preferred stock in cases where opportunities exist to reduce financing costs. Issues may be repurchased in the open market or called at premiums as specified under terms of the issue. They may also be redeemed at face value to meet improvement fund and sinking fund requirements, to meet replacement provisions of the mortgage, or through use of proceeds from the sale of property pledged under the mortgage. In general, for the first five years a series is outstanding the Company is prohibited from redeeming for improvement fund purposes more than 1 percent annually of the original issue amount. 10. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial information for 1995 and 1994 is as follows: Net Income After Dividends on Operating Operating Preferred Quarter Ended Revenues Income Stock - - ------------------------------------------------------------------- (in millions) March 1995 $ 974 $207 $ 116 June 1995 1,075 230 149 September 1995 1,374 337 245 December 1995 982 177 99 March 1994 $ 992 $157 $ 58 June 1994 1,030 227 140 September 1994 1,213 331 233 December 1994 927 179 95 - - ------------------------------------------------------------------- Earnings in 1994 declined by $55 million as a result of work force reduction programs recorded primarily in the first quarter. The Company's business is influenced by seasonal weather conditions. II-125
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $4,405,338 $4,162,403 $4,451,181 Net Income after Dividends on Preferred Stock (in thousands) $608,862 $525,544 $569,853 Cash Dividends on Common Stock (in thousands) $451,500 $429,300 $402,400 Return on Average Common Equity (percent) 14.43 12.84 14.37 Total Assets (in thousands) $13,470,275 $13,712,658 $13,736,110 Gross Property Additions (in thousands) $480,449 $638,426 $674,432 - - ---------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $4,299,012 $4,141,554 $4,045,458 Preferred stock 692,787 692,787 692,787 Preferred stock subject to mandatory redemption - - - Subsidiary obligated mandatorily redeemable preferred securities 100,000 100,000 - Long-term debt 3,315,460 3,757,823 4,031,387 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $8,407,259 $8,692,164 $8,769,632 ================================================================================================================================== Capitalization Ratios (percent): Common stock equity 51.1 47.6 46.1 Preferred stock 8.2 8.0 7.9 Subsidiary obligated mandatorily redeemable preferred securities 1.2 1.2 - Long-term debt 39.5 43.2 46.0 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================================== First Mortgage Bonds (in thousands): Issued 75,000 - 1,135,000 Retired 505,789 133,559 1,337,822 Preferred Stock (in thousands): Issued - - 175,000 Retired - - 245,005 Subsidiary Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - 100,000 - - - ---------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A2 A3 Standard and Poor's A+ A A- Duff & Phelps AA- A+ A+ Preferred Stock - Moody's a2 a3 baa1 Standard and Poor's A A- BBB+ Duff & Phelps A A- A- - - ---------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,500,024 1,466,382 1,441,972 Commercial 198,624 193,648 188,820 Industrial 10,796 10,976 11,217 Other 2,568 2,426 2,322 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 1,712,012 1,673,432 1,644,331 ================================================================================================================================== Employees (year-end) 11,061 11,765 12,528 </TABLE> II-126
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $4,297,436 $4,301,428 $4,445,809 Net Income after Dividends on Preferred Stock (in thousands) $520,538 $474,855 $208,066 Cash Dividends on Common Stock (in thousands) $384,000 $375,200 $389,600 Return on Average Common Equity (percent) 13.60 12.76 5.52 Total Assets (in thousands) $10,964,442 $10,842,538 $11,176,619 Gross Property Additions (in thousands) $508,444 $548,051 $558,727 - - ---------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,888,237 $3,766,551 $3,673,913 Preferred stock 692,792 607,796 607,796 Preferred stock subject to mandatory redemption 6,250 118,750 125,000 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 4,131,016 4,553,189 5,000,225 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $8,718,295 $9,046,286 $9,406,934 ================================================================================================================================== Capitalization Ratios (percent): Common stock equity 44.6 41.7 39.1 Preferred stock 8.0 8.0 7.8 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 47.4 50.3 53.1 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================================== First Mortgage Bonds (in thousands): Issued 975,000 - 300,000 Retired 1,381,300 598,384 91,117 Preferred Stock (in thousands): Issued 195,000 100,000 - Retired 165,004 100,000 83,750 Subsidiary Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - - - - ---------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A3 Baa1 Baa1 Standard and Poor's A- BBB+ BBB+ Duff & Phelps A- BBB+ BBB Preferred Stock - Moody's baa1 baa1 baa1 Standard and Poor's BBB+ BBB BBB Duff & Phelps BBB BBB- BBB- - - ---------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,421,175 1,397,682 1,378,888 Commercial 183,784 179,933 178,391 Industrial 11,479 11,946 12,115 Other 2,269 2,190 2,114 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 1,618,707 1,591,751 1,571,508 ================================================================================================================================== Employees (year-end) 12,600 13,700 13,746 </TABLE> II-127A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $4,145,240 $3,897,479 $3,786,485 Net Income after Dividends on Preferred Stock (in thousands) $449,099 $479,532 $240,057 Cash Dividends on Common Stock (in thousands) $394,500 $386,600 $377,800 Return on Average Common Equity (percent) 11.72 13.06 6.85 Total Assets (in thousands) $11,372,346 $11,130,539 $11,197,494 Gross Property Additions (in thousands) $727,631 $929,019 $1,034,059 - - ---------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,860,657 $3,806,070 $3,538,182 Preferred stock 607,844 657,844 657,844 Preferred stock subject to mandatory redemption 155,000 162,500 166,250 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 5,054,001 4,861,378 4,825,760 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $9,677,502 $9,487,792 $9,188,036 ================================================================================================================================== Capitalization Ratios (percent): Common stock equity 39.9 40.1 38.5 Preferred stock 7.9 8.6 9.0 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 52.2 51.3 52.5 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================================== First Mortgage Bonds (in thousands): Issued 250,000 150,000 500,000 Retired 91,516 206,677 217,949 Preferred Stock (in thousands): Issued - - 125,000 Retired 7,500 3,750 150,000 Subsidiary Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - - - - ---------------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Baa2 Baa2 Baa2 Standard and Poor's BBB+ BBB BBB Duff & Phelps BBB 9 9 Preferred Stock - Moody's baa2 baa2 baa2 Standard and Poor's BBB BBB- BBB- Duff & Phelps BBB- 10 10 - - ---------------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,355,211 1,329,173 1,303,721 Commercial 177,814 174,147 169,014 Industrial 12,311 12,353 12,307 Other 2,050 1,993 1,858 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 1,547,386 1,517,666 1,486,900 ================================================================================================================================== Employees (year-end) 13,900 15,110 14,924 </TABLE> II-127B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1995 Annual Report - - ----------------------------------------------------------------------------------------------------------------------- 1986 1985 - - ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands) $3,561,603 $3,609,140 Net Income after Dividends on Preferred Stock (in thousands) $535,003 $493,717 Cash Dividends on Common Stock (in thousands) $325,500 $277,500 Return on Average Common Equity (percent) 16.51 17.95 Total Assets (in thousands) $10,465,063 $9,030,618 Gross Property Additions (in thousands) $1,598,309 $1,384,182 - - ----------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,469,201 $3,013,707 Preferred stock 732,844 632,844 Preferred stock subject to mandatory redemption 112,500 120,000 Subsidiary obligated mandatorily redeemable preferred securities - - Long-term debt 4,464,857 3,878,066 - - ----------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $8,779,402 $7,644,617 ======================================================================================================================= Capitalization Ratios (percent): Common stock equity 39.5 39.4 Preferred stock 9.6 9.9 Subsidiary obligated mandatorily redeemable preferred securities - - Long-term debt 50.9 50.7 - - ----------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ======================================================================================================================= First Mortgage Bonds (in thousands): Issued 500,000 - Retired 377,538 17,738 Preferred Stock (in thousands): Issued 100,000 150,000 Retired 7,500 3,750 Subsidiary Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - - - ----------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Baa1 Baa1 Standard and Poor's BBB+ BBB+ Duff & Phelps 9 9 Preferred Stock - Moody's baa1 baa1 Standard and Poor's BBB BBB Duff & Phelps 10 10 - - ----------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,268,983 1,231,140 Commercial 162,258 155,399 Industrial 12,315 12,309 Other 1,816 1,789 - - ----------------------------------------------------------------------------------------------------------------------- Total 1,445,372 1,400,637 ======================================================================================================================= Employees (year-end) 14,773 14,947 </TABLE> II-127C
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $1,337,060 $1,180,358 $1,291,035 Commercial 1,449,108 1,367,315 1,354,130 Industrial 1,141,766 1,100,995 1,113,067 Other 44,255 42,983 41,399 - - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 3,972,189 3,691,651 3,799,631 Sales for resale - non-affiliates 290,302 351,591 534,370 Sales for resale - affiliates 76,906 60,899 61,668 - - ---------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 4,339,397 4,104,141 4,395,669 Other revenues 65,941 58,262 55,512 - - ---------------------------------------------------------------------------------------------------------------------------------- Total $4,405,338 $4,162,403 $4,451,181 ================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 17,307,399 15,680,709 16,649,859 Commercial 19,844,999 18,738,461 18,278,508 Industrial 25,286,340 24,337,632 23,635,363 Other 493,720 484,009 460,801 - - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 62,932,458 59,240,811 59,024,531 Sales for resale - non-affiliates 6,591,841 7,968,475 14,307,030 Sales for resale - affiliates 2,738,947 3,056,050 3,027,733 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 72,263,246 70,265,336 76,359,294 ================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.73 7.53 7.75 Commercial 7.30 7.30 7.41 Industrial 4.52 4.52 4.71 Total retail 6.31 6.23 6.44 Sales for resale 3.94 3.74 3.44 Total sales 6.00 5.84 5.76 Residential Average Annual Kilowatt-Hour Use Per Customer 11,654 10,766 11,630 Residential Average Annual Revenue Per Customer $900.28 $810.39 $901.79 Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,344 13,943 13,759 Maximum Peak-Hour Demand (megawatts) (Note): Winter 9,819 10,509 9,067 Summer 12,828 11,758 12,573 Annual Load Factor (percent) 59.6 63.0 58.5 Plant Availability (percent): Fossil-steam 85.8 83.1 85.9 Nuclear 91.8 88.4 85.5 - - ---------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.0 61.3 62.1 Nuclear 19.3 18.0 16.2 Hydro 2.5 2.6 2.3 Oil and gas 0.6 0.1 0.2 Purchased power - From non-affiliates 7.7 9.7 10.2 From affiliates 6.9 8.3 9.0 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,039 9,915 9,912 Cost of fuel per million BTU (cents) 143.85 145.33 153.62 Average cost of fuel per net kilowatt-hour generated (cents) 1.44 1.44 1.52 ================================================================================================================================== Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent. </TABLE> II-128
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $1,128,396 $1,111,358 $1,109,165 Commercial 1,285,681 1,243,067 1,218,441 Industrial 1,083,856 1,057,702 1,061,830 Other 39,504 37,861 36,773 - - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 3,537,437 3,449,988 3,426,209 Sales for resale - non-affiliates 640,308 736,643 784,086 Sales for resale - affiliates 67,835 65,586 168,251 - - ---------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 4,245,580 4,252,217 4,378,546 Other revenues 51,856 49,211 67,263 - - ---------------------------------------------------------------------------------------------------------------------------------- Total $4,297,436 $4,301,428 $4,445,809 ================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 14,939,172 14,815,089 14,771,648 Commercial 17,260,614 16,885,833 16,627,128 Industrial 22,978,312 22,298,062 22,126,604 Other 436,144 429,016 428,459 - - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 55,614,242 54,428,000 53,953,839 Sales for resale - non-affiliates 15,870,222 18,719,924 20,158,681 Sales for resale - affiliates 3,320,060 3,885,892 8,272,528 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 74,804,524 77,033,816 82,385,048 ================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.55 7.50 7.51 Commercial 7.45 7.36 7.33 Industrial 4.72 4.74 4.80 Total retail 6.36 6.34 6.35 Sales for resale 3.69 3.55 3.35 Total sales 5.68 5.52 5.31 Residential Average Annual Kilowatt-Hour Use Per Customer 10,603 10,675 10,795 Residential Average Annual Revenue Per Customer $800.88 $800.78 $810.56 Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,076 14,076 14,366 Maximum Peak-Hour Demand (megawatts) (Note): Winter 8,938 10,001 8,977 Summer 11,448 13,090 13,196 Annual Load Factor (percent) 60.5 55.2 55.5 Plant Availability (percent): Fossil-steam 86.6 93.3 92.5 Nuclear 87.7 81.6 81.3 - - ---------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 61.4 63.6 65.1 Nuclear 17.0 15.3 13.7 Hydro 2.5 2.3 2.2 Oil and gas * * 0.1 Purchased power - From non-affiliates 12.2 10.3 11.0 From affiliates 6.9 8.5 7.9 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,900 9,960 9,939 Cost of fuel per million BTU (cents) 153.08 157.97 166.22 Average cost of fuel per net kilowatt-hour generated (cents) 1.52 1.57 1.65 ================================================================================================================================== Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent. </TABLE> II-129A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1995 Annual Report - - -------------------------------------------------------------------------------------------------------------------------------- 1989 1988 1987 - - -------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $1,022,781 $979,047 $904,218 Commercial 1,143,727 1,054,995 915,540 Industrial 1,006,416 983,822 911,933 Other 34,775 31,743 29,350 - - -------------------------------------------------------------------------------------------------------------------------------- Total retail 3,207,699 3,049,607 2,761,041 Sales for resale - non-affiliates 760,809 707,076 822,696 Sales for resale - affiliates 150,394 86,751 159,998 - - -------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 4,118,902 3,843,434 3,743,735 Other revenues 26,338 54,045 42,750 - - -------------------------------------------------------------------------------------------------------------------------------- Total $4,145,240 $3,897,479 $3,786,485 ================================================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 14,134,195 13,800,038 13,675,730 Commercial 15,843,181 14,790,561 13,799,379 Industrial 21,801,404 21,412,845 20,884,454 Other 414,107 397,669 385,514 - - -------------------------------------------------------------------------------------------------------------------------------- Total retail 52,192,887 50,401,113 48,745,077 Sales for resale - non-affiliates 20,479,412 18,544,705 20,910,185 Sales for resale - affiliates 7,489,948 3,327,814 6,032,889 - - -------------------------------------------------------------------------------------------------------------------------------- Total 80,162,247 72,273,632 75,688,151 ================================================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 7.24 7.09 6.61 Commercial 7.22 7.13 6.63 Industrial 4.62 4.59 4.37 Total retail 6.15 6.05 5.66 Sales for resale 3.26 3.63 3.65 Total sales 5.14 5.32 4.95 Residential Average Annual Kilowatt-Hour Use Per Customer 10,530 10,484 10,623 Residential Average Annual Revenue Per Customer $761.96 $743.82 $702.36 Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,366 13,018 13,018 Maximum Peak-Hour Demand (megawatts) (Note): Winter 10,101 9,866 9,446 Summer 12,735 12,295 12,390 Annual Load Factor (percent) 56.3 59.1 56.1 Plant Availability (percent): Fossil-steam 93.0 94.5 92.7 Nuclear 89.2 69.4 85.4 - - -------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 64.0 72.0 70.9 Nuclear 14.1 9.6 9.1 Hydro 2.1 1.2 1.7 Oil and gas 0.1 0.1 0.1 Purchased power - From non-affiliates 10.2 8.2 8.5 From affiliates 9.5 8.9 9.7 - - -------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,020 9,969 9,932 Cost of fuel per million BTU (cents) 164.27 166.28 168.81 Average cost of fuel per net kilowatt-hour generated (cents) 1.65 1.66 1.68 ================================================================================================================================ Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent. </TABLE> II-129B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1995 Annual Report - - ----------------------------------------------------------------------------------------------------------------------- 1986 1985 - - ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands): Residential $874,231 $786,500 Commercial 854,755 797,540 Industrial 897,646 873,554 Other 27,948 26,766 - - ----------------------------------------------------------------------------------------------------------------------- Total retail 2,654,580 2,484,360 Sales for resale - non-affiliates 780,049 941,743 Sales for resale - affiliates 91,753 149,463 - - ----------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 3,526,382 3,575,566 Other revenues 35,221 33,574 - - ----------------------------------------------------------------------------------------------------------------------- Total $3,561,603 $3,609,140 ======================================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 13,234,248 12,006,462 Commercial 12,945,926 11,945,938 Industrial 20,339,235 19,517,543 Other 381,917 382,238 - - ----------------------------------------------------------------------------------------------------------------------- Total retail 46,901,326 43,852,181 Sales for resale - non-affiliates 18,198,186 21,526,865 Sales for resale - affiliates 3,160,242 5,999,834 - - ----------------------------------------------------------------------------------------------------------------------- Total 68,259,754 71,378,880 ======================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.61 6.55 Commercial 6.60 6.68 Industrial 4.41 4.48 Total retail 5.66 5.67 Sales for resale 4.08 3.96 Total sales 5.17 5.01 Residential Average Annual Kilowatt-Hour Use Per Customer 10,577 9,923 Residential Average Annual Revenue Per Customer $698.72 $650.01 Plant Nameplate Capacity Ratings (year-end) (megawatts) 11,875 11,875 Maximum Peak-Hour Demand (megawatts) (Note): Winter 10,551 10,049 Summer 11,910 11,079 Annual Load Factor (percent) 57.5 56.3 Plant Availability (percent): Fossil-steam 91.2 91.2 Nuclear 64.7 79.5 - - ----------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 74.6 72.7 Nuclear 5.0 6.7 Hydro 1.2 1.5 Oil and gas 0.6 * Purchased power - From non-affiliates 8.9 9.4 From affiliates 9.7 9.7 - - ----------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 ======================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,016 10,089 Cost of fuel per million BTU (cents) 175.81 178.11 Average cost of fuel per net kilowatt-hour generated (cents) 1.76 1.80 ======================================================================================================================= Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent. </TABLE> II-129C
<TABLE> <CAPTION> STATEMENTS OF INCOME Georgia Power Company ============================================================================================================================== For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 4,328,432 $ 4,101,504 $ 4,389,513 Revenues from affiliates 76,906 60,899 61,668 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 4,405,338 4,162,403 4,451,181 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 900,973 870,653 951,507 Purchased power from non-affiliates 183,009 193,130 313,170 Purchased power from affiliates 131,740 158,063 194,024 Provision for separation benefits 10,607 82,238 - Proceeds from settlement of disputed contracts - - - Other 735,918 643,375 675,284 Maintenance 292,029 272,818 284,521 Depreciation and amortization 421,850 379,158 379,425 Deferred Plant Vogtle expenses, net 124,454 74,888 36,284 Taxes other than income taxes 204,675 194,566 192,671 Federal and state income taxes 449,204 399,413 452,122 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 3,454,459 3,268,302 3,479,008 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 950,879 894,101 972,173 Other Income (Expense): Allowance for equity funds used during construction 2,734 5,663 3,168 Equity in earnings of unconsolidated subsidiary 4,051 3,588 4,127 Deferred return on Plant Vogtle - - - Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 5,524 3,254 3,806 Other, net (See note) (8,973) 10,626 11,902 Income taxes applicable to other income 3,022 7,975 37,661 - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 957,237 925,207 1,032,837 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 254,607 306,473 343,634 Allowance for debt funds used during construction (12,081) (11,571) (8,271) Interest on interim obligations 21,463 17,529 15,530 Amortization of debt discount, premium, and expense, net 15,835 15,743 14,024 Other interest charges 20,399 23,483 47,393 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 300,223 351,657 412,310 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 657,014 573,550 620,527 Dividends on Preferred Stock 48,152 48,006 50,674 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 608,862 $ 525,544 $ 569,853 ============================================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, and $3,851,000 in 1987. </TABLE> II-130
<TABLE> <CAPTION> STATEMENTS OF INCOME Georgia Power Company ============================================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 4,229,601 $ 4,235,842 $ 4,277,558 Revenues from affiliates 67,835 65,586 168,251 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 4,297,436 4,301,428 4,445,809 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 929,780 998,701 1,120,933 Purchased power from non-affiliates 436,761 444,920 626,989 Purchased power from affiliates 158,306 193,114 173,716 Provision for separation benefits 9,778 52,952 - Proceeds from settlement of disputed contracts (4,982) (142,183) - Other 616,116 596,565 524,665 Maintenance 264,757 295,012 280,304 Depreciation and amortization 375,460 382,549 380,394 Deferred Plant Vogtle expenses, net (30,804) 16,008 31,146 Taxes other than income taxes 179,460 172,893 151,124 Federal and state income taxes 377,542 349,284 270,561 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 3,312,174 3,359,815 3,559,832 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 985,262 941,613 885,977 Other Income (Expense): Allowance for equity funds used during construction 5,855 9,083 6,985 Equity in earnings of unconsolidated subsidiary 4,635 4,576 4,182 Deferred return on Plant Vogtle - 34,549 82,721 Write-off of Plant Vogtle costs - - (281,254) Income tax reduction for write-off of Plant Vogtle costs - - 63,231 Interest income 12,475 10,563 7,552 Other, net (See note) (30,527) 13,551 (21,199) Income taxes applicable to other income 25,163 (7,522) 20,859 - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 1,002,863 1,006,413 769,054 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 402,541 459,184 480,174 Allowance for debt funds used during construction (8,310) (10,385) (9,325) Interest on interim obligations 9,694 4,906 8,512 Amortization of debt discount, premium, and expense, net 8,033 6,214 6,100 Other interest charges 12,425 9,938 9,404 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 424,383 469,857 494,865 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 578,480 536,556 274,189 Dividends on Preferred Stock 57,942 61,701 66,123 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 520,538 $ 474,855 $ 208,066 ============================================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, and $3,851,000 in 1987. </TABLE> II-131A
<TABLE> <CAPTION> STATEMENTS OF INCOME Georgia Power Company ============================================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 3,994,846 $ 3,810,728 $ 3,626,487 Revenues from affiliates 150,394 86,751 159,998 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 4,145,240 3,897,479 3,786,485 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 1,078,586 1,023,173 1,064,552 Purchased power from non-affiliates 543,448 546,511 530,051 Purchased power from affiliates 195,355 164,873 199,831 Provision for separation benefits - - - Proceeds from settlement of disputed contracts - - - Other 504,743 541,975 575,182 Maintenance 233,680 246,877 274,672 Depreciation and amortization 346,091 306,492 254,929 Deferred Plant Vogtle expenses, net (39,211) (8,333) (141,977) Taxes other than income taxes 128,518 146,759 143,289 Federal and state income taxes 273,287 204,222 250,093 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 3,264,497 3,172,549 3,150,622 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 880,743 724,930 635,863 Other Income (Expense): Allowance for equity funds used during construction 40,525 96,530 159,414 Equity in earnings of unconsolidated subsidiary 3,750 3,302 3,440 Deferred return on Plant Vogtle 48,096 107,310 115,028 Write-off of Plant Vogtle costs - - (357,821) Income tax reduction for write-off of Plant Vogtle costs - - 128,923 Interest income 10,333 28,445 55,388 Other, net (See note) (20,603) (3,746) (55,081) Income taxes applicable to other income 15,573 6,583 17,344 - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 978,417 963,354 702,498 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 475,991 471,897 480,519 Allowance for debt funds used during construction (34,244) (95,818) (130,756) Interest on interim obligations 1,059 15,084 16,362 Amortization of debt discount, premium, and expense, net 5,865 5,466 3,573 Other interest charges 8,868 14,556 12,239 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 457,539 411,185 381,937 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 520,878 552,169 320,561 Dividends on Preferred Stock 71,779 72,637 80,504 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 449,099 $ 479,532 $ 240,057 ============================================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, and $3,851,000 in 1987. </TABLE> II-131B
<TABLE> <CAPTION> STATEMENTS OF INCOME Georgia Power Company ============================================================================================================== For the Years Ended December 31, 1986 1985 - - -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Revenues: Revenues $ 3,469,850 $ 3,459,677 Revenues from affiliates 91,753 149,463 - - -------------------------------------------------------------------------------------------------------------- Total operating revenues 3,561,603 3,609,140 - - -------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 1,012,949 1,077,092 Purchased power from non-affiliates 344,708 415,406 Purchased power from affiliates 192,297 204,848 Provision for separation benefits - - Proceeds from settlement of disputed contracts - - Other 513,974 482,468 Maintenance 275,533 254,510 Depreciation and amortization 215,763 201,524 Deferred Plant Vogtle expenses, net - - Taxes other than income taxes 119,768 120,320 Federal and state income taxes 319,374 311,151 - - -------------------------------------------------------------------------------------------------------------- Total operating expenses 2,994,366 3,067,319 - - -------------------------------------------------------------------------------------------------------------- Operating Income 567,237 541,821 Other Income (Expense): Allowance for equity funds used during construction 275,183 227,950 Equity in earnings of unconsolidated subsidiary 2,967 3,417 Deferred return on Plant Vogtle - - Write-off of Plant Vogtle costs - - Income tax reduction for write-off of Plant Vogtle costs - - Interest income 44,615 41,546 Other, net (See note) (28,464) (6,815) Income taxes applicable to other income 5,154 (9,114) - - -------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 866,692 798,805 - - -------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 472,744 421,764 Allowance for debt funds used during construction (225,897) (216,233) Interest on interim obligations 1,954 20,516 Amortization of debt discount, premium, and expense, net 2,681 2,335 Other interest charges 4,610 10,593 - - -------------------------------------------------------------------------------------------------------------- Net interest charges 256,092 238,975 - - -------------------------------------------------------------------------------------------------------------- Net Income 610,600 559,830 Dividends on Preferred Stock 75,597 66,113 - - -------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 535,003 $ 493,717 ============================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, and $3,851,000 in 1987. </TABLE> II-131C
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Georgia Power Company =========================================================================================================================== For the Years Ended December 31, 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 657,014 $ 573,550 $ 620,527 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 527,310 484,032 475,152 Deferred income taxes, net 37,150 33,567 169,009 Deferred investment tax credits, net - - (18,274) Allowance for equity funds used during construction (2,734) (5,663) (3,168) Amortization of deferred Plant Vogtle costs, net 124,454 74,888 36,284 Write-off of Plant Vogtle costs - - - Non-cash portion of separation benefits - 68,599 - Non-cash proceeds from settlement of disputed contracts - - - Other, net 134 (95,314) (46,227) Changes in certain current assets and liabilities: Receivables, net (59,370) 67,218 27,088 Inventories 30,761 (63,545) 82,433 Payables 45,882 5,409 17,364 Other 57,422 (5,675) (94,574) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,418,023 1,137,066 1,265,614 - - --------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (480,449) (638,426) (674,432) Sales of property 131,099 132,644 261,687 Other (42,579) (41,273) (43,154) - - --------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (391,929) (547,055) (455,899) - - --------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred securities - 100,000 - Preferred stock - - 175,000 First mortgage bonds 75,000 - 1,135,000 Pollution control bonds 504,700 527,210 145,425 Other long-term debt - - 37,000 Capital contributions from parent company - - - Retirements: Preferred stock - - (245,005) First mortgage bonds (505,789) (133,559) (1,337,822) Pollution control bonds (504,810) (510,320) (145,465) Other long-term debt (37,000) (10,187) (19,451) Interim obligations, net (24,472) (57,425) (51,444) Payment of preferred stock dividends (48,419) (47,147) (53,123) Payment of common stock dividends (451,500) (429,300) (402,400) Miscellaneous (17,413) (22,640) (63,648) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (1,009,703) (583,368) (825,933) - - --------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 16,391 6,643 (16,218) Cash and Cash Equivalents at Beginning of Year 12,539 5,896 22,114 Cash and Cash Equivalents at End of Year $ 28,930 $ 12,539 $ 5,896 =========================================================================================================================== ( ) Denotes use of cash. </TABLE> II-132
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Georgia Power Company ========================================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - --------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 578,480 $ 536,556 $ 274,189 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 471,014 480,318 502,098 Deferred income taxes, net 194,955 53,219 88,667 Deferred investment tax credits, net (5,704) (9,524) (52) Allowance for equity funds used during construction (5,855) (9,083) (6,985) Amortization of deferred Plant Vogtle costs, net (30,804) (18,541) (51,575) Write-off of Plant Vogtle costs - - 281,254 Non-cash portion of separation benefits - - - Non-cash proceeds from settlement of disputed contracts (4,982) (103,846) - Other, net (9,768) (26,024) (50,804) Changes in certain current assets and liabilities: Receivables, net (31,348) 23,920 1,444 Inventories (65,621) 24,130 (23,498) Payables 25,303 (23,075) (43,470) Other (85,961) 54,777 (9,991) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,029,709 982,827 961,277 - - --------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (508,444) (548,051) (558,727) Sales of property 46 291,075 34,573 Other 42,892 931 1,937 - - --------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (465,506) (256,045) (522,217) - - --------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred securities - - - Preferred stock 195,000 100,000 - First mortgage bonds 975,000 - 300,000 Pollution control bonds 161,955 80,420 - Other long-term debt - - - Capital contributions from parent company - - - Retirements: Preferred stock (165,004) (100,000) (83,750) First mortgage bonds (1,381,300) (598,384) (91,117) Pollution control bonds (160,205) (83,265) (535) Other long-term debt (567) (1,130) (114,452) Interim obligations, net 334,671 199,000 - Payment of preferred stock dividends (60,475) (60,766) (67,757) Payment of common stock dividends (384,000) (375,200) (389,600) Miscellaneous (70,986) (17,613) (7,663) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (555,911) (856,938) (454,874) - - --------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 8,292 (130,156) (15,814) Cash and Cash Equivalents at Beginning of Year 13,822 143,978 159,792 Cash and Cash Equivalents at End of Year $ 22,114 $ 13,822 $ 143,978 =========================================================================================================================== ( ) Denotes use of cash. </TABLE> II-133A
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Georgia Power Company =========================================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - --------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 520,878 $ 552,169 $ 320,561 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 484,870 400,665 336,647 Deferred income taxes, net 184,490 160,774 76,445 Deferred investment tax credits, net (8,017) 11,605 (5,075) Allowance for equity funds used during construction (40,525) (96,530) (159,414) Amortization of deferred Plant Vogtle costs, net (87,307) (115,643) (257,005) Write-off of Plant Vogtle costs - - 357,821 Non-cash portion of separation benefits - - - Non-cash proceeds from settlement of disputed contracts - - - Other, net (38,046) 6,983 (759) Changes in certain current assets and liabilities: Receivables, net (59,035) 11,225 (6,880) Inventories (33,123) (10,044) (72,540) Payables (38,976) (2,065) 74,341 Other 36,015 1,161 2,751 - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 921,224 920,300 666,893 - - --------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (727,631) (929,019) (1,034,059) Sales of property - - 12,276 Other 47,260 35,328 45,801 - - --------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (680,371) (893,691) (975,982) - - --------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred securities - - - Preferred stock - - 125,000 First mortgage bonds 250,000 150,000 500,000 Pollution control bonds 50,000 69,526 191,736 Other long-term debt - - - Capital contributions from parent company - 175,000 228,000 Retirements: Preferred stock (7,500) (3,750) (150,000) First mortgage bonds (91,516) (206,677) (217,949) Pollution control bonds (505) (475) (90,000) Other long-term debt (3,806) (2,878) (2,824) Interim obligations, net - (302,261) 302,261 Payment of preferred stock dividends (72,259) (72,931) (80,420) Payment of common stock dividends (394,500) (386,600) (377,800) Miscellaneous (4,742) (13,440) (51,745) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (274,828) (594,486) 376,259 - - --------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (33,975) (567,877) 67,170 Cash and Cash Equivalents at Beginning of Year 193,767 761,644 694,474 Cash and Cash Equivalents at End of Year $ 159,792 $ 193,767 $ 761,644 =========================================================================================================================== ( ) Denotes use of cash. </TABLE> II-133B
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Georgia Power Company ========================================================================================================= For the Years Ended December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Activities: Net income $ 610,600 $ 559,830 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 260,945 248,256 Deferred income taxes, net 236,822 104,102 Deferred investment tax credits, net 106,407 115,144 Allowance for equity funds used during construction (275,183) (227,950) Amortization of deferred Plant Vogtle costs, net - - Write-off of Plant Vogtle costs - - Non-cash portion of separation benefits - - Non-cash proceeds from settlement of disputed contracts - - Other, net 5,554 34,311 Changes in certain current assets and liabilities: Receivables, net (7,474) (27,928) Inventories (26,863) 77,667 Payables 133,044 (9,182) Other 19,682 21,289 - - --------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,063,534 895,539 - - --------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,598,309) (1,384,182) Sales of property - - Other 168,518 92,826 - - --------------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,429,791) (1,291,356) - - --------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred securities - - Preferred stock 100,000 150,000 First mortgage bonds 500,000 - Pollution control bonds 350,001 500,962 Other long-term debt 113,000 - Capital contributions from parent company 250,000 315,000 Retirements: Preferred stock (7,500) (3,750) First mortgage bonds (377,538) (17,738) Pollution control bonds - - Other long-term debt (108) (843) Interim obligations, net (36,715) (72,956) Payment of preferred stock dividends (73,665) (62,337) Payment of common stock dividends (325,500) (277,500) Miscellaneous (33,773) (17,503) - - --------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 458,202 513,335 - - --------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 91,945 117,518 Cash and Cash Equivalents at Beginning of Year 602,529 485,011 Cash and Cash Equivalents at End of Year $ 694,474 $ 602,529 ========================================================================================================= ( ) Denotes use of cash. </TABLE> II-133C
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ============================================================================================================================ At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 3,105,165 $ 3,077,470 $ 2,976,806 Nuclear 4,082,098 4,075,339 4,069,299 Hydro 642,237 443,466 442,888 - - ---------------------------------------------------------------------------------------------------------------------------- Total production 7,829,500 7,596,275 7,488,993 Transmission 1,822,778 1,754,945 1,713,122 Distribution 3,949,238 3,777,279 3,600,115 General 937,079 926,418 941,291 Construction work in progress 236,715 541,889 584,013 Nuclear fuel, at amortized cost 124,849 136,425 135,742 - - ---------------------------------------------------------------------------------------------------------------------------- Total electric plant 14,900,159 14,733,231 14,463,276 - - ---------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 14,900,159 14,733,231 14,463,276 - - ---------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 4,417,120 4,054,986 3,822,344 Steam heat - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 4,417,120 4,054,986 3,822,344 - - ---------------------------------------------------------------------------------------------------------------------------- Total 10,483,039 10,678,245 10,640,932 - - ---------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total 10,483,039 10,678,245 10,640,932 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts 92,273 54,297 37,937 Miscellaneous 147,615 116,527 61,142 - - ---------------------------------------------------------------------------------------------------------------------------- Total 239,888 170,824 99,079 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 28,930 12,539 5,896 Investment securities - - - Receivables, net 411,038 389,279 515,178 Accrued utility revenues 121,146 103,223 99,550 Fossil fuel stock, at average cost 145,151 169,252 111,620 Materials and supplies, at average cost 286,804 293,464 287,551 Prepayments 107,764 55,383 65,269 Vacation pay deferred 35,543 40,823 41,575 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,136,376 1,063,963 1,126,639 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 871,783 919,750 992,510 Deferred Plant Vogtle costs 307,638 432,092 506,980 Debt expense, being amortized 27,227 26,223 20,730 Premium on reacquired debt, being amortized 174,018 164,676 153,146 Miscellaneous 230,306 256,885 196,094 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,610,972 1,799,626 1,869,460 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 13,470,275 $ 13,712,658 $ 13,736,110 ============================================================================================================================ </TABLE> II-134
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ========================================================================================================================== At December 31, 1992 1991 1990 - - -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 3,144,405 $ 3,128,594 $ 3,350,018 Nuclear 4,051,020 4,051,043 4,025,862 Hydro 434,341 432,674 412,157 - - -------------------------------------------------------------------------------------------------------------------------- Total production 7,629,766 7,612,311 7,788,037 Transmission 1,646,904 1,566,173 1,522,157 Distribution 3,413,681 3,252,111 3,056,825 General 923,010 896,477 876,989 Construction work in progress 405,606 390,437 370,243 Nuclear fuel, at amortized cost 155,194 191,726 210,320 - - -------------------------------------------------------------------------------------------------------------------------- Total electric plant 14,174,161 13,909,235 13,824,571 - - -------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant - - - - - -------------------------------------------------------------------------------------------------------------------------- Total utility plant 14,174,161 13,909,235 13,824,571 - - -------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 3,569,717 3,315,247 3,040,298 Steam heat - - - - - -------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 3,569,717 3,315,247 3,040,298 - - -------------------------------------------------------------------------------------------------------------------------- Total 10,604,444 10,593,988 10,784,273 - - -------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 1,589,743 1,465,408 1,397,647 - - -------------------------------------------------------------------------------------------------------------------------- Total 9,014,701 9,128,580 9,386,626 - - -------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - 107,993 - Nuclear decommissioning trusts 20,311 10,007 - Miscellaneous 55,463 71,880 78,895 - - -------------------------------------------------------------------------------------------------------------------------- Total 75,774 189,880 78,895 - - -------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 22,114 13,822 143,978 Investment securities 108,206 - - Receivables, net 385,227 330,411 356,236 Accrued utility revenues 88,164 79,099 78,067 Fossil fuel stock, at average cost 197,332 200,248 225,966 Materials and supplies, at average cost 284,272 215,735 220,103 Prepayments 91,447 96,750 121,646 Vacation pay deferred 40,169 39,769 33,677 - - -------------------------------------------------------------------------------------------------------------------------- Total 1,216,931 975,834 1,179,673 - - -------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Deferred Plant Vogtle costs 383,025 375,028 364,446 Debt expense, being amortized 17,719 12,368 12,708 Premium on reacquired debt, being amortized 116,940 70,855 60,653 Miscellaneous 139,352 89,993 93,618 - - -------------------------------------------------------------------------------------------------------------------------- Total 657,036 548,244 531,425 - - -------------------------------------------------------------------------------------------------------------------------- Total Assets $ 10,964,442 $ 10,842,538 $ 11,176,619 ========================================================================================================================== </TABLE> II-135A
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ========================================================================================================================= At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Electric Plant: Production- Fossil $ 3,319,876 $ 2,638,725 $ 2,616,741 Nuclear 4,189,723 3,225,945 3,220,632 Hydro 411,235 407,771 404,291 - - ------------------------------------------------------------------------------------------------------------------------- Total production 7,920,834 6,272,441 6,241,664 Transmission 1,431,485 1,322,034 1,248,976 Distribution 2,863,011 2,598,714 2,318,185 General 859,013 737,621 657,258 Construction work in progress 403,365 1,963,283 1,710,769 Nuclear fuel, at amortized cost 254,101 307,109 287,492 - - ------------------------------------------------------------------------------------------------------------------------- Total electric plant 13,731,809 13,201,202 12,464,344 - - ------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant - - 7 - - ------------------------------------------------------------------------------------------------------------------------- Total utility plant 13,731,809 13,201,202 12,464,351 - - ------------------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 2,762,937 2,445,404 2,193,395 Steam heat - - (5) - - ------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,762,937 2,445,404 2,193,390 - - ------------------------------------------------------------------------------------------------------------------------- Total 10,968,872 10,755,798 10,270,961 - - ------------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 1,313,626 1,178,291 1,077,747 - - ------------------------------------------------------------------------------------------------------------------------- Total 9,655,246 9,577,507 9,193,214 - - ------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts - - - Miscellaneous 69,839 66,677 54,148 - - ------------------------------------------------------------------------------------------------------------------------- Total 69,839 66,677 54,148 - - ------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 159,792 193,767 761,644 Investment securities - - - Receivables, net 347,899 320,018 342,315 Accrued utility revenues 93,786 66,265 68,370 Fossil fuel stock, at average cost 214,487 225,274 262,752 Materials and supplies, at average cost 208,084 164,174 116,652 Prepayments 116,342 121,840 113,381 Vacation pay deferred 35,238 34,418 30,100 - - ------------------------------------------------------------------------------------------------------------------------- Total 1,175,628 1,125,756 1,695,214 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Deferred Plant Vogtle costs 322,116 269,958 172,990 Debt expense, being amortized 13,032 12,476 12,985 Premium on reacquired debt, being amortized 61,889 62,352 51,509 Miscellaneous 74,596 15,813 17,434 - - ------------------------------------------------------------------------------------------------------------------------- Total 471,633 360,599 254,918 - - ------------------------------------------------------------------------------------------------------------------------- Total Assets $ 11,372,346 $ 11,130,539 $ 11,197,494 ========================================================================================================================= </TABLE> II-135B
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ================================================================================================================ At December 31, 1986 1985 - - ---------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> ASSETS Electric Plant: Production- Fossil $ 2,138,511 $ 2,118,863 Nuclear 739,835 652,756 Hydro 399,120 388,832 - - ---------------------------------------------------------------------------------------------------------------- Total production 3,277,466 3,160,451 Transmission 1,176,479 1,004,329 Distribution 2,096,498 1,892,127 General 578,236 501,477 Construction work in progress 4,430,152 3,581,065 Nuclear fuel, at amortized cost 314,225 253,418 - - ---------------------------------------------------------------------------------------------------------------- Total electric plant 11,873,056 10,392,867 - - ---------------------------------------------------------------------------------------------------------------- Steam Heat Plant 15,266 14,709 - - ---------------------------------------------------------------------------------------------------------------- Total utility plant 11,888,322 10,407,576 - - ---------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 2,001,605 1,851,649 Steam heat 7,841 7,517 - - ---------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,009,446 1,859,166 - - ---------------------------------------------------------------------------------------------------------------- Total 9,878,876 8,548,410 - - ---------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 1,020,271 920,047 - - ---------------------------------------------------------------------------------------------------------------- Total 8,858,605 7,628,363 - - ---------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - Nuclear decommissioning trusts - - Miscellaneous 50,749 39,357 - - ---------------------------------------------------------------------------------------------------------------- Total 50,749 39,357 - - ---------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 694,474 602,529 Investment securities - - Receivables, net 374,590 367,226 Accrued utility revenues 55,513 55,403 Fossil fuel stock, at average cost 220,206 210,604 Materials and supplies, at average cost 86,658 69,397 Prepayments 44,800 8,506 Vacation pay deferred 29,800 28,700 - - ---------------------------------------------------------------------------------------------------------------- Total 1,506,041 1,342,365 - - ---------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - Deferred Plant Vogtle costs - - Debt expense, being amortized 12,860 12,450 Premium on reacquired debt, being amortized 26,914 - Miscellaneous 9,894 8,083 - - ---------------------------------------------------------------------------------------------------------------- Total 49,668 20,533 - - ---------------------------------------------------------------------------------------------------------------- Total Assets $ 10,465,063 $ 9,030,618 ================================================================================================================ </TABLE> II-135C
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ================================================================================================================================== At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,384,444 2,384,348 2,384,348 Premium on preferred stock 413 413 413 Earnings retained in the business 1,569,905 1,412,543 1,316,447 - - ---------------------------------------------------------------------------------------------------------------------------------- Total common equity 4,299,012 4,141,554 4,045,458 Preferred stock 692,787 692,787 692,787 Preferred stock subject to mandatory redemption - - - Subsidiary obligated mandatorily redeemable preferred securities 100,000 100,000 - Long-term debt 3,315,460 3,757,823 4,031,387 - - ---------------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 8,407,259 8,692,164 8,769,632 - - ---------------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 178,000 202,200 406,700 Commercial paper 222,330 222,602 75,527 Preferred stock due within one year - - - Long-term debt due within one year 150,446 167,420 10,543 Accounts payable 389,156 355,067 324,044 Customer deposits 53,145 47,017 45,922 Taxes accrued 104,392 93,019 153,493 Interest accrued 96,162 110,256 110,497 Vacation pay accrued 34,233 39,720 40,060 Miscellaneous 137,184 70,006 64,527 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 1,365,048 1,307,307 1,231,313 - - ---------------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 2,510,458 2,477,661 2,479,720 Accumulated deferred investment tax credits 432,184 453,121 478,334 Disallowed Plant Vogtle capacity buyback costs 58,514 60,490 63,067 Deferred credits related to income taxes 410,016 433,334 452,819 Miscellaneous 286,796 288,581 261,225 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 3,697,968 3,713,187 3,735,165 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 13,470,275 $ 13,712,658 $ 13,736,110 ================================================================================================================================== </TABLE> II-136
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ================================================================================================================================ At December 31, 1992 1991 1990 - - -------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,384,140 2,383,800 2,383,800 Premium on preferred stock 467 489 1,089 Earnings retained in the business 1,159,380 1,038,012 944,774 - - -------------------------------------------------------------------------------------------------------------------------------- Total common equity 3,888,237 3,766,551 3,673,913 Preferred stock 692,792 607,796 607,796 Preferred stock subject to mandatory redemption 6,250 118,750 125,000 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 4,131,016 4,553,189 5,000,225 - - -------------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 8,718,295 9,046,286 9,406,934 - - -------------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 400,200 199,000 - Commercial paper 133,471 - - Preferred stock due within one year 63,750 6,250 - Long-term debt due within one year 95,823 54,976 204,906 Accounts payable 317,351 275,932 310,676 Customer deposits 45,145 41,623 38,144 Taxes accrued 138,289 161,117 84,185 Interest accrued 132,319 151,171 175,959 Vacation pay accrued 38,694 38,531 33,677 Miscellaneous 89,355 106,810 135,392 - - -------------------------------------------------------------------------------------------------------------------------------- Total 1,454,397 1,035,410 982,939 - - -------------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 515,539 540,134 576,837 Disallowed Plant Vogtle capacity buyback costs 72,201 109,537 135,926 Deferred credits related to income taxes - - - Miscellaneous 204,010 111,171 73,983 - - -------------------------------------------------------------------------------------------------------------------------------- Total 791,750 760,842 786,746 - - -------------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 10,964,442 $ 10,842,538 $ 11,176,619 ================================================================================================================================ </TABLE> II-137A
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ============================================================================================================================== At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,383,800 2,383,800 2,208,800 Premium on preferred stock 1,089 1,089 1,089 Earnings retained in the business 1,131,518 1,076,931 984,043 - - ------------------------------------------------------------------------------------------------------------------------------ Total common equity 3,860,657 3,806,070 3,538,182 Preferred stock 607,844 657,844 657,844 Preferred stock subject to mandatory redemption 155,000 162,500 166,250 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 5,054,001 4,861,378 4,825,760 - - ------------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 9,677,502 9,487,792 9,188,036 - - ------------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks - - 302,261 Commercial paper - - - Preferred stock due within one year 53,750 3,750 3,750 Long-term debt due within one year 54,712 42,001 65,774 Accounts payable 372,968 429,807 446,004 Customer deposits 36,255 34,221 31,106 Taxes accrued 91,424 130,686 114,947 Interest accrued 162,513 170,090 162,439 Vacation pay accrued 35,238 34,418 30,100 Miscellaneous 130,546 51,289 62,364 - - ------------------------------------------------------------------------------------------------------------------------------ Total 937,406 896,262 1,218,745 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 601,248 632,111 640,694 Disallowed Plant Vogtle capacity buyback costs 73,111 80,585 79,376 Deferred credits related to income taxes - - - Miscellaneous 83,079 33,789 70,643 - - ------------------------------------------------------------------------------------------------------------------------------ Total 757,438 746,485 790,713 - - ------------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 11,372,346 $ 11,130,539 $ 11,197,494 ============================================================================================================================== </TABLE> II-137B
<TABLE> <CAPTION> BALANCE SHEETS Georgia Power Company ================================================================================================================ At December 31, 1986 1985 - - ---------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 Paid-in capital 1,980,800 1,730,800 Premium on preferred stock 3,074 3,074 Earnings retained in the business 1,141,077 935,583 - - ---------------------------------------------------------------------------------------------------------------- Total common equity 3,469,201 3,013,707 Preferred stock 732,844 632,844 Preferred stock subject to mandatory redemption 112,500 120,000 Subsidiary obligated mandatorily redeemable preferred securities - - Long-term debt 4,464,857 3,878,066 - - ---------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 8,779,402 7,644,617 - - ---------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - 36,400 Commercial paper - - Preferred stock due within one year 7,500 7,500 Long-term debt due within one year 47,683 48,229 Accounts payable 488,910 355,866 Customer deposits 29,520 29,752 Taxes accrued 140,968 92,028 Interest accrued 150,145 136,279 Vacation pay accrued 29,800 28,700 Miscellaneous 70,595 60,965 - - ---------------------------------------------------------------------------------------------------------------- Total 965,121 795,719 - - ---------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - Accumulated deferred investment tax credits 665,447 572,509 Disallowed Plant Vogtle capacity buyback costs - - Deferred credits related to income taxes - - Miscellaneous 55,093 17,773 - - ---------------------------------------------------------------------------------------------------------------- Total 720,540 590,282 - - ---------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 10,465,063 $ 9,030,618 ================================================================================================================ </TABLE> II-137C
GEORGIA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 150,000 4-3/4% $ 150,000 3/1/96 1993 100,000 5-1/2% 100,000 4/1/98 1992 195,000 6-1/8% 195,000 9/1/99 1993 100,000 6% 100,000 3/1/00 1992 100,000 7% 100,000 10/1/00 1992 150,000 6-7/8% 150,000 9/1/02 1993 200,000 6-5/8% 200,000 4/1/03 1993 75,000 6.35% 75,000 8/1/03 1993 50,000 6-7/8% 50,000 4/1/08 1992 100,000 8-5/8% 60,368 6/1/22 1993 160,000 7.95% 160,000 2/1/23 1993 100,000 7-5/8% 100,000 3/1/23 1993 75,000 7-3/4% 75,000 4/1/23 1993 125,000 7.55% 125,000 8/1/23 1995 75,000 7.70% 75,000 5/1/25 ============= ============== $ 1,755,000 $ 1,715,368 ============= ============== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1995 $ 50,000 4-3/8% $ 50,000 11/1/00 1992 38,800 5.70% 38,800 9/1/04 1993 46,790 5-3/8% 46,790 3/1/05 1995 57,000 5% 57,000 9/1/05 1976 40,800 6-3/4% 1,920 11/1/06 1977 24,100 6.40% 1,940 6/1/07 1978 21,600 6-3/8% 8,060 4/1/08 1991 10,450 Variable 10,450 7/1/11 1986 56,400 8% 56,400 10/1/16 1987 90,000 8-3/8% 90,000 7/1/17 1987 50,000 9-3/8% 50,000 12/1/17 1993 26,700 6% 26,700 3/1/18 1989 50,000 6.35% 50,000 5/1/19 1991 8,500 6.25% 8,500 7/1/19 1991 51,345 7.25% 51,345 7/1/21 1991 10,125 6.25% 10,125 7/1/21 1992 13,155 Variable 13,155 5/1/22 1992 75,000 6.20% 75,000 8/1/22 1992 35,000 6.20% 35,000 9/1/22 1993 11,935 5-3/4% 11,935 9/1/23 1993 60,000 5-3/4% 60,000 9/1/23 1994 28,065 5.40% 28,065 1/1/24 1994 175,000 Variable 175,000 7/1/24 1994 125,000 6.60% 125,000 7/1/24 1994 60,000 6-3/8% 60,000 8/1/24 1994 43,420 6-3/4% 43,420 10/1/24 1994 20,000 Variable 20,000 10/1/24 1994 20,000 Variable 20,000 10/1/24 1994 38,725 6-5/8% 38,725 10/1/24 1994 10,000 5.90% 10,000 12/1/24 1994 7,000 5.90% 7,000 12/1/24 1995 73,535 6.10% 73,535 4/1/25 1995 75,000 Variable 75,000 4/1/25 1995 45,000 Variable 45,000 7/1/25 1995 40,000 Variable 40,000 7/1/25 1995 71,580 6% 71,580 7/1/25 1995 35,585 Variable 35,585 9/1/25 1995 30,000 Variable 30,000 9/1/25 1995 27,000 Variable 27,000 9/1/25 ============= ============== $ 1,752,610 $ 1,678,030 ============= ============== II-138
GEORGIA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 (Continued) Subsidiary Obligated Mandatorily Redeemable Preferred Securities(1) Preferred Securities Interest Amount Series Outstanding Rate Outstanding - - -------------------------------------------------------------------------------- (Thousands) 1994 4,000,000 9% $ 100,000 Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding - - -------------------------------------------------------------------------------- (Thousands) (2) 14,090 $5.00 $ 1,409 1953 100,000 $4.92 10,000 1954 433,774 $4.60 43,378 1961 70,000 $4.96 7,000 1962 70,000 $4.60 7,000 1963 70,000 $4.60 7,000 1964 50,000 $4.60 5,000 1965 60,000 $4.72 6,000 1966 90,000 $5.64 9,000 1967 120,000 $6.48 12,000 1968 100,000 $6.60 10,000 1971 300,000 $7.72 30,000 1972 750,000 $7.80 75,000 1991 4,000,000 $2.125 100,000 1992 2,000,000 $1.90 50,000 1992 2,200,000 $1.9875 55,000 1992 2,400,000 $1.9375 60,000 1992 1,200,000 $1.925 30,000 1993 3,000,000 Adjustable 75,000 1993 4,000,000 Adjustable 100,000 ------------- ------------ 21,027,864 $ 692,787 ============= ============ (1) Issued by Georgia Power Capital, L.P., and guaranteed to the extent Georgia Power Capital has funds by GEORGIA. (2) Issued in exchange for $5.00 preferred outstanding at the time of company formation. II-139
GEORGIA POWER COMPANY SECURITIES RETIRED DURING 1995 First Mortgage Bonds Principal Interest Series Amount Rate - - ------------------------------------------------------------------------------ (Thousands) 1989 $ 36,157 9.23% 1992 130,000 5-1/8% 1992 100,000 8-3/4% 1992 39,632 8-5/8% 1992 100,000 Variable 1992 100,000 Variable =========== $ 505,789 =========== Pollution Control Bonds Principal Interest Series Amount Rate - - ------------------------------------------------------------------------------ (Thousands) 1976 $ 20 6-3/4% 1977 20 6.40% 1978 70 6-3/8% 1985 148,535 10-1/8% 1985 156,580 10-1/2% 1985 100,000 10.60% 1985 99,585 10-1/2% ----------- $ 504,810 =========== II-140
GULF POWER COMPANY FINANCIAL SECTION II-141
MANAGEMENT'S REPORT Gulf Power Company 1995 Annual Report The management of Gulf Power Company has prepared -- and is responsible for -- the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of five directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Gulf Power Company in conformity with generally accepted accounting principles. /s/ Travis J. Bowden Travis J. Bowden President and Chief Executive Officer /s/ Arlan E. Scarbrough Arlan E. Scarbrough Chief Financial Officer February 21, 1996 II-142
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Gulf Power Company: We have audited the accompanying balance sheets and statements of capitalization of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of The Southern Company) as of December 31, 1995 and 1994, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-152 through II-169) referred to above present fairly, in all material respects, the financial position of Gulf Power Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-143
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Gulf Power Company 1995 Annual Report RESULTS OF OPERATIONS Earnings Gulf Power Company's 1995 net income after dividends on preferred stock was $57.2 million, an increase of $2 million over the prior year. This improvement is primarily attributable to higher retail revenues due to exceptionally hot summer weather and lower interest charges on long-term debt. This improvement was partially offset by higher maintenance expenses and reduced capacity revenues from non-affiliated utilities under long-term contracts. Costs related to a work force reduction program implemented in the fourth quarter of 1995 decreased earnings by $4.3 million. These costs are expected to be recovered through future savings over approximately two years. In 1994, earnings were $55.2 million, representing an increase of $0.9 million compared to the prior year. Earnings in 1994 were significantly affected by lower financing costs, an increase in customers, and milder than normal temperatures. Also, earnings decreased approximately $3.0 million, reflecting the first full year of lower industrial sales due to the Company's largest industrial customer, Monsanto, installing its own cogeneration facility in August, 1993. The return on average common equity for 1995 was 13.27 percent, a slight increase from the 13.15 percent return earned in 1994. Revenues Operating revenues increased in 1995 and decreased in 1994 as a result of the following factors: Increase (Decrease) From Prior Year ------------------------------------- 1995 1994 1993 ------------------------------------- (in thousands) Retail -- Change in base rates $ - $ - $ 1,571 Sales growth 3,647 7,126 7,671 Weather 9,749 (4,631) 4,049 Regulatory cost recovery and other 22,502 8,938 (3,079) - - ----------------------------------------------------------------- Total retail 35,898 11,433 10,212 - - ----------------------------------------------------------------- Sales for resale-- Non-affiliates (5,698) (6,098) 2,131 Affiliates 1,266 (5,813) (909) - - ----------------------------------------------------------------- Total sales for resale (4,432) (11,911) 1,222 Other operating revenues 8,798 (3,851) 806 - - ----------------------------------------------------------------- Total operating revenues $40,264 $(4,329) $12,240 ================================================================= Percent change 7.0% (0.7)% 2.1% - - ----------------------------------------------------------------- Retail revenues of $519 million in 1995 increased $35.9 million or 7.4 percent from last year, compared with an increase of 2.4 percent in 1994 and 2.2 percent in 1993. Residential and commercial revenues surged upward as a result of hotter-than-normal summer weather in 1995, compared with the extremely mild summer of 1994. The Company set an all-time peak demand for energy in 1995. The increase in regulatory cost recovery and other retail revenue is primarily attributable to the recovery of increased fuel costs. Regulatory cost recovery and other includes recovery provisions for fuel expense and the energy component of purchased power costs; energy conservation costs; purchased power capacity costs; and environmental compliance costs. The recovery provisions equal the related expenses and have no material effect on net income. See Notes 1 and 3 to the financial statements under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery," respectively, for further information. II-144
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report Sales for resale were $79 million in 1995, decreasing $4.4 million or 5.3 percent from 1994. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components under these long-term contracts were as follows: 1995 1994 1993 ---------------------------------------- (in thousands) Capacity $25,870 $30,926 $33,805 Energy 18,598 18,456 21,202 ============================================================ Total $44,468 $49,382 $55,007 ============================================================ Capacity revenues decreased in 1995 and 1994, reflecting the scheduled decline in capacity under long-term contracts. Sales to affiliated companies vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have little impact on earnings. The increase in other operating revenues for 1995 is primarily due to increased amounts collected to recover newly-imposed county franchise fees. These collections are also included in taxes other than income taxes and have no impact on earnings. Other changes for 1995 and the change in 1994 are primarily attributable to adjustments in the regulatory cost recovery clauses for differences between recoverable costs and the amounts actually reflected in revenues. See Notes 1 and 3 to the financial statements under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery," respectively, for further discussion. Kilowatt-hour sales for 1995 and percent changes in sales since 1993 are reported below. KWH Percent Change ------------ --------------------------- 1995 1995 1994 1993 ------------ --------------------------- (millions) Residential 4,014 7.0% 1.1% 3.2% Commercial 2,708 6.3 4.8 2.7 Industrial 1,795 (2.8) (9.0) (6.9) Other 17 (0.1) - - ------------ Total retail 8,534 4.5 (0.3) 0.4 Sales for resale Non-affiliates 1,397 (1.6) (2.8) 2.0 Affiliates 759 (13.1) (15.2) (14.8) ------------ Total 10,690 2.2 (2.1) (1.1) ================================================================== Retail sales increased in 1995 due to hot summer weather, a 0.9 percent increase in residential customers, and a 2.2 percent increase in commercial customers. Industrial sales were lower due to the reclassification of a major customer from the industrial to commercial class and temporary production delays of other industrial customers. In 1994, retail sales decreased from the prior year primarily due to mild summer weather and a decline in sales in the industrial class, which reflected the loss of Monsanto and a lengthy shutdown of another major customer. In 1995, energy sales for resale to non-affiliates decreased 1.6 percent and are predominantly related to unit power sales under long-term contracts to Florida utilities. Energy sales to affiliated companies vary from year to year as mentioned previously. Expenses Total operating expenses for 1995 increased $41.3 million or 8.5 percent from 1994. The increase is due to higher fuel and purchased power expenses, higher maintenance expenses, and higher taxes other than income taxes, offset by lower depreciation and amortization expenses. In 1994, total operating expenses decreased $4.0 million or 0.8 percent from 1993 primarily due to decreased fuel and purchased power expenses, offset by an increase in other operation expenses and taxes. Fuel and purchased power expenses for 1995 increased $30.1 million or 15.5 percent from 1994. The change reflects the increase in generation due to the extreme weather conditions during the summer of 1995 and slightly higher fuel II-145
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report costs. In 1994, fuel and purchased power expenses declined $13.4 million or 6.5 percent from 1993 reflecting the decrease in generation due to the mild weather and the lower cost of fuel. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: 1995 1994 1993 ----------------------------- Total generation (millions of kilowatt-hours) 9,828 9,559 9,558 Sources of generation (percent) Coal 99.5 99.8 99.4 Oil and gas .5 .2 .6 Average cost of fuel per net kilowatt-hour generated (cents) Coal 2.08 2.00 2.03 Oil and gas 3.56 6.93 4.50 Total 2.09 2.01 2.05 - - ------------------------------------------------------------------ In 1995, other operation expenses decreased $0.5 million or 0.4 percent from the 1994 level. The decrease is primarily attributable to a $9.4 million reduction in the amortization costs of coal buyouts and renegotiation of coal supply contracts. This was offset by a $7 million accrual for benefits to be provided by the Company under a work force reduction program implemented during the fourth quarter of 1995. These costs are further discussed in Notes 2 and 5 to the financial statements under "Work Force Reduction Programs" and "Fuel Commitments," respectively. In 1994, other operation expenses increased $4.7 million due to additional costs related to the buyouts and renegotiation of coal supply contracts and the Company's pro rata share of affiliated companies' work force reduction costs. Maintenance expense in 1995 increased $5.2 million or 11.2 percent from the prior year. This is attributable to higher power production maintenance related to non-recurring items and higher distribution maintenance. In 1994, maintenance expense remained relatively flat reflecting no major changes in the scheduling of maintenance of production facilities. Depreciation and amortization expenses decreased $1.5 million or 2.7 percent from 1994. The change is attributable to property which was fully amortized by December 1994. Refer to Note 1 to the financial statements under "Depreciation and Amortization" for further discussion. Federal and state income taxes increased $0.1 million or 0.3 percent in 1995 due to a slight increase in taxable income. Taxes other than income taxes increased $7.9 million or 18.9 percent due to an increase in county franchise fees as mentioned previously. In 1994, federal income taxes increased $1.2 million due to an increase in taxable income. Other taxes increased $1.5 million or 3.7 percent due to higher property taxes, gross receipt taxes, and franchise fee collections. Changes in gross receipt taxes and franchise fee collections, which are collected from customers, have no impact on earnings. In 1995, interest expense decreased $2.5 million or 7.8 percent below the prior year. The decline is mainly attributable to lower interest on long-term debt reflecting a lower average principal balance outstanding. The decrease in interest on long-term debt was partially offset by an increase in interest on notes payable as a result of a higher average amount of short-term notes outstanding. Interest expense in 1994 decreased $3.8 million or 10.5 percent under the prior year. The decrease was a result of refinancing some of the Company's higher-cost securities. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its cost of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. II-146
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated more competitive environment. A work force reduction program was implemented in the fourth quarter of 1995 that reduced earnings by $4.3 million. This action will assist in efforts to control growth in future operating expenses. The Florida Public Service Commission (FPSC) approved the Company's request in December to increase the amount of its annual accrual to the accumulated provision for property damage account from $1.2 million to $3.5 million due to significant hurricane-related charges to the account during 1995. The approved accrual increase is intended to restore the account balance to a reasonable level within five years. Refer to Note 1 to the financial statements under "Provision for Property Damage" for further discussion. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access the Company's transmission network in order to sell electricity to other utilities. This may enhance the incentive for IPPs to build cogeneration plants for industrial and commercial customers and sell excess energy generation to utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The Company is aggressively working to maintain and expand its share of wholesale sales in the Southeastern power markets. Currently, Florida law does not permit retail wheeling. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. Potential new federal legislation is being discussed, and legislation allowing customer choice has already been introduced in Florida. In order to address these initiatives, numerous questions must be resolved, with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability by seeking new markets that evolve with the changing regulation. The future effect of cogeneration and small-power production facilities cannot be fully determined at this time. One effect of cogeneration which the Company has experienced was the loss in 1993 of its largest industrial customer, Monsanto, which is discussed in "Earnings." The Company's strategy is to identify and pursue profitable cogeneration projects in Northwest Florida. The FPSC has set conservation goals for the Company, beginning in 1995, which require programs to reduce 154 megawatts of summer peak demand and 65,000 KWH of sales by the year 2004. In 1995, the FPSC approved the Company's programs to accomplish these goals. The Company can experience net growth as long as the filed programs achieve the intended reductions in peak demand and KWH sales. In response to these goals and seeking to remain competitive with other electric utilities, the Company has developed initiatives which emphasize price flexibility and competitive offering of energy efficiency products and services. These initiatives will enable customers to lower or alter their peak energy requirements. Besides promoting energy efficiency, another benefit of these initiatives could be the ability to defer the need to construct some generating facilities further into the future. II-147
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report On September 27, 1995, the Company filed a petition with the FPSC which seeks approval for a new optional Commercial/Industrial Service (CIS) rider, which would be applicable to the rate schedules serving the Company's largest and most at-risk customers who are able to show they have viable alternatives for electric power supply. The CIS rider would provide the flexibility needed to enable the Company to offer its services in a more competitive manner to these customers. The FPSC approval process is expected to take approximately 8 months. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." Also, state of Florida legislation adopted in 1993 that provides for recovery of prudent environmental compliance costs is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company adopted the new rules January 1, 1996, with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in the utility industry. FINANCIAL CONDITION Overview The principal changes in the Company's financial condition during 1995 were gross property additions of $63.1 million and an increase of $27 million in notes payable. Funds for the property additions were provided by internal sources. The increase in short-term notes payable is primarily attributable to a $22 million note issued in relation to a payment made to a coal supplier for a new arrangement under an existing coal contract. See the Statements of Cash Flows and Note 5 to the financial statements under "Fuel Commitments" for further details. Financing Activities The Company continued to lower its financing costs by retiring issues in 1995. Retirements, including maturities during 1995, totaled $1.8 million of first mortgage bonds, $0.1 million of pollution control bonds, $13.3 million of bank notes and other long-term debt, and $1 million of preferred stock. (See the Statements of Cash Flows for further details.) Composite financing rates for the years 1993 through 1995 as of year end were as follows: 1995 1994 1993 ------------------------------ Composite interest rate on long-term debt 6.5% 6.5% 7.1% Composite preferred stock dividend rate 6.4% 6.6% 6.5% - - ---------------------------------------------------------------- The composite interest rate on long-term debt remained constant at 6.5% from 1994 primarily due to no new issues or refinancings during 1995. The decrease in the composite interest rate from 1993 to 1994 reflects the Company's efforts to refinance higher-cost debt. The decrease in the composite preferred dividend rate in 1995 is primarily due to a decrease in dividends on the Company's adjustable rate preferred stock, reflecting lower interest rates. II-148
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report Capital Requirements for Construction The Company's gross property additions, including those amounts related to environmental compliance, are budgeted at $209 million for the three years beginning in 1996 ($71 million in 1996, $67 million in 1997, and $71 million in 1998). The estimates of property additions for the three-year period include $9 million committed to meeting the requirements of the Clean Air Act, the cost of which is expected to be recovered through the Environmental Cost Recovery Clause (ECRC), which is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." Actual construction costs may vary from this estimate because of factors such as changes in business conditions; changes in environmental regulations; revised load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures for the Company will be fully recovered. The Company does not have any baseload generating plants under construction, and current energy demand forecasts do not indicate a need for any additional baseload facilities until well into the future. However, significant construction related to maintaining and upgrading transmission and distribution facilities and generating plants will continue. Other Capital Requirements In addition to the funds needed for the construction program, approximately $109 million will be required by the end of 1998 in connection with maturities of long-term debt. Also, the Company plans to continue a program to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital as market conditions and terms of the instruments permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- has significantly impacted the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and initially affected 28 generating units of The Southern Company. As a result of The Southern Company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required by 2000, and all fossil-fired generating plants will be affected. In 1993, the Florida Legislature adopted legislation that allows a utility to petition the FPSC for recovery of prudent environmental compliance costs that are not being recovered through base rates or any other recovery mechanism. The legislation is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." Substantially all of the costs for the Clean Air Act and other new legislation discussed below is expected to be recovered through the ECRC. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by the installation of new control equipment at 22 generating units. Construction expenditures for Phase I compliance totaled approximately $320 million for The Southern Company, including approximately $50 million for the Company through 1995. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired units as required to meet Phase II limits. Therefore, during the period 1996 to 2000, the current compliance strategy could II-149
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report require total construction expenditures of approximately $150 million for The Southern Company, including approximately $10 million for the Company. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. Following adoption of legislation in April of 1992 allowing electric utilities in Florida to seek FPSC approval of their Clean Air Act Compliance Plans, the Company filed its petition for approval. The FPSC approved the Company's plan for Phase I compliance, deferring until a later date approval of its Phase II Plan. An average increase of up to 2 percent in revenue requirements from the Company's customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study in 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean up properties currently or previously owned. The Company conducts studies to determine the extent of any required cleanup costs and has recognized in the financial statements costs to clean up known sites. Additional sites may require environmental remediation for which the Company may be liable for a portion or all required cleanup costs. For additional information, see Note 3 to the financial statements under "Environmental Cost Recovery." Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any - - -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. II-150
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1995 Annual Report Sources of Capital At December 31, 1995, the Company had $0.7 million of cash and cash equivalents and $25 million of unused committed lines of credit with banks to meet its short-term cash needs. See Note 5 to the financial statements under "Bank Credit Arrangements" for additional information. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations; the sale of additional first mortgage bonds, pollution control bonds, and preferred stock; bank notes; and capital contributions from The Southern Company. The Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficient to permit, at present interest and preferred dividend levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-151
<TABLE> <CAPTION> STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 Gulf Power Company 1995 Annual Report ================================================================================================= 1995 1994 1993 - - ------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Revenues: Revenues $600,458 $561,460 $559,976 Revenues from affiliates 18,619 17,353 23,166 - - ------------------------------------------------------------------------------------------------- Total operating revenues 619,077 578,813 583,142 - - ------------------------------------------------------------------------------------------------- Operating Expenses: Operation- Fuel 185,274 161,168 170,485 Purchased power from non-affiliates 8,594 6,761 4,386 Purchased power from affiliates 29,966 25,819 32,273 Other 113,397 113,879 109,164 Maintenance 51,917 46,700 46,004 Depreciation and amortization 55,104 56,615 55,309 Taxes other than income taxes 49,598 41,701 40,204 Federal and state income taxes (Note 8) 34,065 33,957 32,730 - - ------------------------------------------------------------------------------------------------- Total operating expenses 527,915 486,600 490,555 - - ------------------------------------------------------------------------------------------------- Operating Income 91,162 92,213 92,587 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 36 450 512 Interest income 2,877 1,429 1,328 Other, net (1,261) (780) (1,238) Gain on sale of investment securities - - 3,820 Income taxes applicable to other income (121) 95 (921) - - ------------------------------------------------------------------------------------------------- Income Before Interest Charges 92,693 93,407 96,088 - - ------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 23,294 27,124 31,344 Other interest charges 1,674 2,442 2,877 Interest on notes payable 2,931 1,509 870 Amortization of debt discount, premium, and expense, net 2,014 1,834 1,412 Allowance for debt funds used during construction (Note 1) (187) (656) (454) - - ------------------------------------------------------------------------------------------------- Net interest charges 29,726 32,253 36,049 - - ------------------------------------------------------------------------------------------------- Net Income 62,967 61,154 60,039 Dividends on Preferred Stock 5,813 5,925 5,728 - - ------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 57,154 $ 55,229 $ 54,311 ================================================================================================= The accompanying notes are an integral part of these statements. </TABLE> II-152
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994, and 1993 Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ============================================================================================================= 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 62,967 $ 61,154 $ 60,039 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 75,293 86,098 72,111 Deferred income taxes and investment tax credits 390 (6,986) 5,347 Allowance for equity funds used during construction (36) (450) (512) Accumulated provision for property damage (19,024) 1,013 817 Deferred costs of 1995 coal contract renegotiation (12,177) - - Other, net 4,664 3,885 (1,681) Changes in certain current assets and liabilities -- Receivables, net (12,210) 3,540 12,867 Inventories (618) (13,901) 5,574 Payables 18,258 (10,159) 5,386 Taxes accrued (2,803) 2,548 (3,280) Current costs of 1995 coal contract renegotiation (9,859) - - Other (4,894) (1,938) (6,224) - - ------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 99,951 124,804 150,444 - - ------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (63,113) (78,869) (78,562) Other 4,401 (3,493) (5,328) - - ------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (58,712) (82,362) (83,890) - - ------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - 35,000 First mortgage bonds - - 75,000 Pollution control bonds - 42,000 53,425 Capital contributions from parent 58 98 11 Other long-term debt - 32,108 25,000 Retirements: Preferred stock (1,000) (1,000) (21,060) First mortgage bonds (1,750) (48,856) (88,809) Pollution control bonds (125) (42,100) (40,650) Other long-term debt (13,314) (24,240) (7,736) Notes payable, net 27,000 47,447 (37,947) Payment of preferred stock dividends (5,813) (5,925) (5,728) Payment of common stock dividends (46,400) (44,000) (41,800) Miscellaneous (117) (2,648) (6,888) - - ------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (41,461) (47,116) (62,182) - - ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (222) (4,674) 4,372 Cash and Cash Equivalents at Beginning of Year 902 5,576 1,204 - - ------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 680 $ 902 $ 5,576 ============================================================================================================= Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $26,161 $30,139 $28,470 Income taxes $38,537 $43,089 $27,865 - - ------------------------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements. </TABLE> II-153
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Gulf Power Company 1995 Annual Report <S> <C> <C> Utility Plant: ================================================================================ ASSETS 1995 1994 - - -------------------------------------------------------------------------------- (in thousands) Plant in service (Notes 1 and 6) $1,695,814 $1,656,367 Less accumulated provision for depreciation 658,806 622,911 - - -------------------------------------------------------------------------------- 1,037,008 1,033,456 Construction work in progress 26,301 24,288 - - -------------------------------------------------------------------------------- Total 1,063,309 1,057,744 - - -------------------------------------------------------------------------------- Other Property and Investments 740 7,997 - - -------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 680 902 Receivables- Customer accounts receivable 69,166 57,637 Other accounts and notes receivable 3,393 2,268 Affiliated companies 802 1,079 Accumulated provision for uncollectible accounts (768) (600) Fossil fuel stock, at average cost 37,875 35,686 Materials and supplies, at average cost 33,686 35,257 Current portion of deferred coal contract costs (Note 5) 12,767 2,521 Regulatory clauses under recovery (Note 1) 3,432 5,002 Prepaid income taxes (Note 8) 4,232 - Other prepayments 8,000 4,354 Vacation pay deferred 4,419 4,172 - - -------------------------------------------------------------------------------- Total 177,684 148,278 - - -------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 29,093 30,433 Debt expense and loss, being amortized 20,459 22,119 Deferred coal contract costs (Note 5) 33,768 38,169 Deferred storm charges (Note 1) 7,502 - Miscellaneous 9,304 10,802 - - -------------------------------------------------------------------------------- Total 100,126 101,523 - - -------------------------------------------------------------------------------- Total Assets $1,341,859 $1,315,542 ================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-154
<TABLE> <CAPTION> BALANCE SHEETS (continued) At December 31, 1995 and 1994 Gulf Power Company 1995 Annual Report <S> <C> <C> ======================================================================================== CAPITALIZATION AND LIABILITIES 1995 1994 - - ---------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity (Note 11) $ 436,242 $ 425,472 Preferred stock 89,602 89,602 Long-term debt 323,376 356,393 - - ---------------------------------------------------------------------------------------- Total 849,220 871,467 - - ---------------------------------------------------------------------------------------- Current Liabilities: Preferred stock due within one year - 1,000 Long-term debt due within one year (Note 10) 31,548 13,439 Notes payable 80,500 53,500 Accounts payable- Affiliated companies 14,447 9,132 Other 27,196 14,524 Customer deposits 13,195 13,609 Taxes accrued- Federal and state income - 5,990 Other 9,547 7,475 Interest accrued 5,719 6,106 Regulatory clauses over recovery (Note 1) 2,800 3,960 Vacation pay accrued 4,419 4,172 Miscellaneous 7,356 7,828 - - ---------------------------------------------------------------------------------------- Total 196,727 140,735 - - ---------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 162,345 151,681 Deferred credits related to income taxes (Note 8) 67,481 71,964 Accumulated deferred investment tax credits 36,052 38,391 Accumulated provision for property damage (Note 1) - 11,522 Accumulated provision for postretirement benefits (Note 2) 16,301 13,680 Miscellaneous 13,733 16,102 - - ---------------------------------------------------------------------------------------- Total 295,912 303,340 - - ---------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7) Total Capitalization and Liabilities $1,341,859 $1,315,542 ======================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-155
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 Gulf Power Company 1995 Annual Report <S> <C> <C> <C> <C> ================================================================================================== 1995 1994 1995 1994 - - -------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, without par value -- Authorized and outstanding -- 992,717 shares in 1995 and 1994 $ 38,060 $ 38,060 Paid-in capital 218,438 218,380 Premium on preferred stock 81 81 Retained earnings (Note 11) 179,663 168,951 - - -------------------------------------------------------------------------------------------------- Total common stock equity 436,242 425,472 51.4% 48.8% - - -------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $10 par value -- Authorized -- 10,000,000 shares, Outstanding -- 2,580,000 shares at December 31, 1995 $25 stated capital -- 6.72% 20,000 20,000 7.00% 14,500 14,500 7.30% 15,000 15,000 Adjustable Rate -- at January 1, 1996: 4.67% 15,000 15,000 $100 par value -- Authorized -- 801,626 shares Outstanding -- 251,026 shares at December 31, 1995 4.64% 5,102 5,102 5.16% 5,000 5,000 5.44% 5,000 5,000 7.52% 5,000 5,000 7.88% 5,000 5,000 - - -------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $5,691,300) 89,602 89,602 10.5 10.3 - - -------------------------------------------------------------------------------------------------- Cumulative Preferred Stock Subject to Mandatory Redemption: $100 par value -- Authorized -- 0 shares Outstanding -- 0 shares at December 31, 1995 11.36% Series - 1,000 - - -------------------------------------------------------------------------------------------------- Total - 1,000 - - -------------------------------------------------------------------------------------------------- Less amount due within one year - 1,000 - - -------------------------------------------------------------------------------------------------- Total excluding amount due within one year - - - - - - -------------------------------------------------------------------------------------------------- </TABLE> II-156
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION (continued) At December 31, 1995 and 1994 Gulf Power Company 1995 Annual Report <S> <C> <C> <C> <C> <C> ============================================================================================================================ 1995 1994 1995 1994 - - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) First mortgage bonds -- Maturity Interest Rates August 1, 1997 5.875% 25,000 25,000 April 1, 1998 5.55% 15,000 15,000 July 1, 1998 5.00% 30,000 30,000 July 1, 2003 6.125% 30,000 30,000 September 1, 2008 9.00% 930 2,680 December 1, 2021 8.75% 50,000 50,000 - - ---------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 150,930 152,680 Pollution control obligations (Note 9) 169,630 169,755 Other long-term debt (Note 9) 37,074 50,388 Unamortized debt premium (discount), net (2,710) (2,991) - - ---------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $23,154,000) 354,924 369,832 Less amount due within one year (Note 10) 31,548 13,439 - - ---------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 323,376 356,393 38.1 40.9 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 849,220 $ 871,467 100.0% 100.0% ============================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-157
<TABLE> <CAPTION> STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 Gulf Power Company 1995 Annual Report <S> <C> <C> <C> =========================================================================================================================== 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Year $168,951 $157,773 $146,771 Net income after dividends on preferred stock 57,154 55,229 54,311 Cash dividends on common stock (46,400) (44,000) (41,800) Preferred stock transactions, net (42) (51) (1,509) - - --------------------------------------------------------------------------------------------------------------------------- Balance at End of Year (Note 11) $179,663 $168,951 $157,773 =========================================================================================================================== STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1995, 1994, and 1993 Gulf Power Company 1995 Annual Report =========================================================================================================================== 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Year $218,380 $218,282 $218,271 Contributions to capital by parent company 58 98 11 - - --------------------------------------------------------------------------------------------------------------------------- Balance at End of Year $218,438 $218,380 $218,282 =========================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-158
NOTES TO FINANCIAL STATEMENTS Gulf Power Company 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Gulf Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Gulf Power Company provides electric service to the Northwest Panhandle of Florida. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Florida Public Service Commission (FPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the FPSC. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates, and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: 1995 1994 ------------------------ (in thousands) Current & deferred coal contract costs $ 46,535 $ 40,690 Deferred income taxes 29,093 30,433 Deferred loss on reacquired debt 17,015 18,494 Environmental remediation 5,789 7,800 Vacation pay 4,419 4,172 Regulatory clauses under recovery, net 632 1,042 Deferred income tax credits (67,481) (71,964) Deferred storm charges 7,502 - Accumulated provision for property damage - (11,522) Other, net (1,510) (2,691) - - ---------------------------------------------------------------- Total $ 41,994 $ 16,454 ================================================================ In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair values. II-159
NOTES (continued) Gulf Power Company 1995 Annual Report Revenues and Regulatory Cost Recovery Clauses The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's electric rates include provisions to periodically adjust billings for fluctuations in fuel and the energy component of purchased power costs. The Company also has similar cost recovery clauses for energy conservation costs, purchased power capacity costs, and environmental compliance costs. Revenues are adjusted monthly for differences between recoverable costs and amounts actually reflected in current rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average significantly less than 1 percent of revenues. Depreciation and Amortization Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.6 percent in 1995 and 3.8 percent in 1994 and 1993. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Also, the provision for depreciation expense includes an amount for the expected cost of removal of facilities. The decrease in 1995 is attributable to property which was fully amortized by December 1994. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. The Company is included in the consolidated federal income tax return of The Southern Company. See Note 8 for further information related to income taxes. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The FPSC-approved composite rate used to calculate AFUDC was 7.27 percent for 1995, 1994, and the second half of 1993 and 8.03 percent for the first half of 1993. AFUDC amounts for 1995, 1994, and 1993 were $223 thousand, $1.1 million, and $966 thousand, respectively. The decrease in 1995 is primarily due to the completion of major construction projects at Plant Daniel at the end of 1994. Utility Plant Utility plant is stated at original cost. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. II-160
NOTES (continued) Gulf Power Company 1995 Annual Report Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Values of Financial Instruments, financial instruments of the Company, for which the carrying amounts do not approximate fair value, are shown in the table below as of December 31: 1995 ---------------------------- Carrying Fair Amount Value ---------------------------- (in thousands) Long-term debt $354,924 $365,305 - - ------------------------------------------------------------- 1994 ---------------------------- Carrying Fair Amount Value ---------------------------- (in thousands) Long-term debt $369,832 $355,019 Preferred stock subject to mandatory redemption 1,000 1,030 - - ------------------------------------------------------------- The fair values for long-term debt and preferred stock subject to mandatory redemption were based on either closing market prices or closing prices of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Provision for Injuries and Damages The Company is subject to claims and suits arising in the ordinary course of business. As permitted by regulatory authorities, the Company provides for the uninsured costs of injuries and damages by charges to income amounting to $1.2 million annually. The expense of settling claims is charged to the provision to the extent available. The accumulated provision of $1.7 million and $2.5 million at December 31, 1995 and 1994, respectively, is included in miscellaneous current liabilities in the accompanying Balance Sheets. Provision for Property Damage The Company is self-insured for the full cost of storm and other damage to its transmission and distribution property. At December 31, 1995, in accordance with the FPSC's order, the accumulated provision for property damage had a negative balance of $7.5 million as the result of charges for expenses relating to Hurricanes Erin and Opal. The negative balance was reclassified to deferred storm charges in the accompanying Balance Sheets. The FPSC approved the Company's request in December to increase the amount of its annual accrual to the accumulated provision for property damage account from $1.2 million to $3.5 million, effective October 1, 1995. The approved accrual increase is intended to restore the account balance to a reasonable level within five years. The FPSC also ordered the Company to file within six months a study addressing the appropriate accumulated provision account balance and annual accrual amount. At December 31, 1994, the accumulated provision for property damage amounted to $11.5 million. The expense of repairing damages from major storms and other uninsured property damages are charged to the provision account. 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. II-161
NOTES (continued) Gulf Power Company 1995 Annual Report Postretirement Benefits The Company provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Trusts are funded to the extent deductible under federal income tax regulations or to the extent required by the Company's regulatory commissions. Amounts funded are primarily invested in equity and fixed-income securities. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ------------------------- 1995 1994 ------------------------- (in thousands) Actuarial present value of benefit obligation: Vested benefits $ 87,652 $ 73,552 Non-vested benefits 4,284 3,016 - - ------------------------------------------------------------------ Accumulated benefit obligation 91,936 76,568 Additional amounts related to projected salary increases 29,073 29,451 - - ------------------------------------------------------------------ Projected benefit obligation 121,009 106,019 Less: Fair value of plan assets 180,980 151,337 Unrecognized net gain (48,438) (36,599) Unrecognized prior service cost 2,578 2,802 Unrecognized transition asset (7,187) (8,034) - - ------------------------------------------------------------------ Prepaid asset recognized in the Balance Sheets $ 6,924 $ 3,487 ================================================================== Postretirement Benefits --------------------------- 1995 1994 --------------------------- (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $ 9,759 $10,800 Employees eligible to retire 4,921 4,043 Other employees 17,646 19,639 - - ---------------------------------------------------------------- Accumulated benefit obligation 32,326 34,482 Less: Fair value of plan assets 7,050 5,740 Unrecognized net loss (gain) 1,538 (458) Unrecognized transition obligation 7,437 15,520 - - ---------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $16,301 $13,680 ================================================================ In 1995, the Company announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the Company will pay to provide future retiree postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $7.1 million. The weighted average rates assumed in the actuarial calculations were: 1995 1994 1993 ----------------------------- Discount 7.3% 8.0% 7.5% Annual salary increase 4.8% 5.5% 5.0% Long-term return on plan assets 8.5% 8.5% 8.5% - - --------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation at December 31, 1995, by $2.5 million and the aggregate of the service and interest cost components of the net retiree cost by $610 thousand. II-162
NOTES (continued) Gulf Power Company 1995 Annual Report Components of the plans' net costs are shown below: Pension ------------------------------------ 1995 1994 1993 ------------------------------------ (in thousands) Benefits earned during the year $ 3,867 $ 3,775 $ 3,710 Interest cost on projected benefit obligation 8,042 7,484 7,319 Actual (return) loss on plan assets (33,853) 3,721 (20,672) Net amortization and deferral 19,619 (17,054) 8,853 - - ------------------------------------------------------------------ Net pension cost (income) $ (2,325) $(2,074) $ (790) ================================================================== Of the above net pension amounts, pension income of $1.8 million in 1995, $1.5 million in 1994, and $601 thousand in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Benefits -------------------------------- 1995 1994 1993 -------------------------------- (in thousands) Benefits earned during the year $1,259 $1,362 $1,166 Interest cost on accumulated benefit obligation 2,520 2,535 2,339 Amortization of transition obligation 853 854 854 Actual (return) loss on plan (1,268) 129 (731) assets Net amortization and deferral 742 (591) 310 - - ------------------------------------------------------------------- Net postretirement cost $4,106 $4,289 $3,938 =================================================================== Of the above net postretirement costs recorded, $3.1 million in 1995 and 1994 and $3.0 million in 1993 were charged to operating expenses, and the remainder was recorded in construction and other accounts. Work Force Reduction Programs The Company implemented a voluntary work force reduction program in the fourth quarter of 1995 and recorded $7 million in December for the total cost related to the program. These costs are expected to be recovered through future savings over approximately two years. The Company has also incurred its pro rata share for the costs of affiliated companies' programs. The costs related to these programs were $1 million, $1.3 million, and $109 thousand for the years 1995, 1994, and 1993, respectively. 3. LITIGATION AND REGULATORY MATTERS FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the operating companies' wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds was substantially from October 1994 through December 1995. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore, no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $120 million for The Southern Company, including approximately $8 million for the Company at December 31, 1995. However, management believes that rates are not excessive and that refunds are not justified. II-163
NOTES (continued) Gulf Power Company 1995 Annual Report FPSC Review of Earnings As a result of an investigation of Gulf's 1995 earnings by the FPSC, Gulf presented a 1995 earnings proposal, which required deferring any jurisdictional revenues contributing to annual earnings in excess of a 12.75% jurisdictional-adjusted return on equity. The proposal was approved by the FPSC in August 1995. Gulf was to petition the FPSC to determine the disposition of any deferred revenues by April 1996. Based on 1995 actual results, no revenues were deferred. Environmental Cost Recovery In April 1993, the Florida Legislature adopted legislation for an Environmental Cost Recovery Clause (ECRC), which allows a utility to petition the FPSC for recovery of all prudent environmental compliance costs that are not being recovered through base rates or any other recovery mechanism. Such environmental costs include operation and maintenance expense, emission allowance expense, depreciation, and a return on invested capital. On January 12, 1994, the FPSC approved the Company's initial petition under the ECRC for recovery of environmental costs that were projected to be incurred from July 1993 through September 1994. Since this initial period, recovery under the ECRC has been determined semi-annually and includes a true-up of the prior period and a projection of the ensuing six month period. During 1995 and 1994, the Company recorded ECRC revenues of $11.8 million and $7.2 million, respectively. At December 31, 1995, the Company's liability for the estimated costs of environmental remediation projects for known sites was $5.8 million. These estimated costs are expected to be expended during the period 1996 to 1999. These projects have been approved by the FPSC for recovery through the ECRC discussed above. Therefore, the Company recorded $2.0 million in current assets and $3.8 million in deferred charges representing the future recoverability of these costs. 4. CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program, the cost of which is currently estimated to total $71 million in 1996, $67 million in 1997, and $71 million in 1998. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment and materials; and cost of capital. At December 31, 1995, significant purchase commitments were outstanding in connection with the construction program. The Company does not have any new baseload generating plants under construction. However, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. See Management's Discussion and Analysis under "Environmental Matters" for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. 5. FINANCING AND COMMITMENTS General Current projections indicate that funds required for construction and other purposes, including compliance with environmental regulations, will be derived primarily from internal sources. Requirements not met from internal sources will be financed from the sale of additional first mortgage bonds, pollution control bonds, and preferred stock; bank notes; and capital contributions from The Southern Company. In addition, the Company may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and redemptions of higher-cost securities. If the attractiveness of current short-term interest rates continues, the Company may maintain a higher level of short-term indebtedness than has historically been true. Bank Credit Arrangements At December 31, 1995, the Company had $20 million in revolving credit lines that expire May 31, 1998, $5 million in revolving credit lines subject to renewal June 1, 1997, and $21.5 million of lines of credit with banks subject to renewal June 1 of each year, of which $25 million remained unused. In connection with these credit lines, the Company has agreed to pay commitment fees and/or to II-164
NOTES (continued) Gulf Power Company 1995 Annual Report maintain compensating balances with the banks. The compensating balances, which represent substantially all of the cash of the Company except for daily working funds and like items, are not legally restricted from withdrawal. In addition, the Company has bid-loan facilities with fourteen major money center banks that total $250 million, of which $37 million was committed at December 31, 1995. Assets Subject to Lien The Company's mortgage, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all of the Company's fixed property and franchises. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into long-term commitments for the procurement of fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Total estimated long-term obligations at December 31, 1995, were as follows: Year Fuel ------- --------------- (in millions) 1996 $ 125 1997 126 1998 95 1999 86 2000 80 2001 - 2007 557 ------------------------------------------------------- Total commitments $1,069 ======================================================= To take advantage of lower-cost coal supplies, agreements were reached in 1986 to terminate two long-term contracts for the supply of coal to Plant Daniel, which is jointly owned by the Company and Mississippi Power, an operating affiliate. The Company's portion of this payment was $60 million. This amount is being amortized to expense on a per ton basis over a nine-year period. The remaining unamortized amount was $1.5 million at December 31, 1995. In 1988, the Company made an advance payment of $60 million to another coal supplier under an arrangement to lower the cost of future coal purchased under an existing contract. This amount is being amortized to expense on a per ton basis over a ten-year period. The remaining unamortized amount was $23 million at December 31, 1995. In 1993, the Company made a payment of $16.4 million to a coal supplier under an arrangement to suspend the purchase of coal under an existing contract for one year. This amount was amortized to expense on a per ton basis during 1993, 1994, and the first quarter of 1995. In December 1995, the Company made a payment of $22 million to a coal supplier under an arrangement to lower the cost of future coal and/or to suspend the purchase of coal under an existing contract for 25 months. This amount is to be amortized to expense on a per ton basis during 1996, 1997, and the first quarter of 1998. The amortization expense of these contract buyouts and renegotiations is being recovered through the fuel cost recovery clause discussed under "Revenues and Regulatory Cost Recovery Clauses" in Note 1. Lease Agreements In 1989, the Company and Mississippi Power jointly entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars. In 1994, a second lease agreement for the use of 250 additional aluminum railcars was entered into for twenty-two years. Both of these leases are for the transportation of coal to Plant Daniel. The Company, as a joint owner of Plant Daniel, is responsible for one half of the lease costs. The lease costs are charged to fuel inventory and are allocated to fuel expense as the fuel is used. The Company's share of the lease costs charged to fuel inventory was $1.7 million in 1995 and $1.2 million in 1994 and 1993. The Company's annual lease payments for 1996 through 2000 will be approximately $1.7 million and after 2000, lease payments total approximately $22.4 million. The Company has the option after three years from the date of the original contract on the second lease agreement to purchase the railcars at the greater of the termination value or the fair market value. Additionally, at the end of each lease term, the Company has the option to renew the lease. II-165
NOTES (continued) Gulf Power Company 1995 Annual Report 6. JOINT OWNERSHIP AGREEMENTS The Company and Mississippi Power jointly own Plant Daniel, a steam-electric generating plant, located in Jackson County, Mississippi. In accordance with an operating agreement, Mississippi Power acts as the Company's agent with respect to the construction, operation, and maintenance of the plant. The Company and Georgia Power, an operating affiliate, jointly own Plant Scherer Unit No. 3. Plant Scherer is a steam-electric generating plant located near Forsyth, Georgia. In accordance with an operating agreement, Georgia Power acts as the Company's agent with respect to the construction, operation, and maintenance of the unit. The Company's pro rata share of expenses related to both plants is included in the corresponding operating expense accounts in the Statements of Income. At December 31, 1995, the Company's percentage ownership and its investment in these jointly owned facilities were as follows: Plant Scherer Plant Unit No. 3 Daniel (coal-fired) (coal-fired) ------------------------------ (in thousands) Plant In Service $185,755(1) $222,515 Accumulated Depreciation $49,982 $97,033 Construction Work in Progress $288 $683 Nameplate Capacity (2) (megawatts) 205 500 Ownership 25% 50% - - ----------------------------------------------------------------- (1) Includes net plant acquisition adjustment. (2) Total megawatt nameplate capacity: Plant Scherer Unit No. 3: 818 Plant Daniel: 1,000 7. LONG-TERM POWER SALES AGREEMENTS The Company and the other operating affiliates have long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. The unit power sales agreements, expiring at various dates discussed below, are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The Company's capacity revenues have been as follows: Other Unit Long- Year Power Term Total - - ---------- ------------------------------------ (in thousands) 1995 $25,870 $ - $25,870 1994 29,653 1,273 30,926 1993 31,162 2,643 33,805 - - ---------------------------------------------------------- Unit power from specific generating plants of The Southern Company is currently being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA), and the city of Tallahassee, Florida. Under these agreements, 210 megawatts of net dependable capacity were sold by the Company during 1995, and sales will remain at that level until the expiration of the contracts in 2010, unless reduced by FPC, FP&L and JEA after 1999. Capacity and energy sales to FP&L, the Company's largest single customer, provided revenues of $25.4 million in 1995, $29.3 million in 1994, and $39.5 million in 1993, or 4.1 percent, 5.1 percent, and 6.8 percent of operating revenues, respectively. II-166
NOTES (continued) Gulf Power Company 1995 Annual Report 8. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax-related regulatory assets to be recovered from customers were $29.1 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. At December 31, 1995, the tax-related regulatory liabilities to be refunded to customers were $67.5 million. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. At December 31, 1995, the Company's current federal and state income taxes accrued, including the current portion of deferred income taxes, were equal to a debit balance of $4.2 million as a result of the early settlement of taxes owed. This amount was reclassified to current assets to reflect the tax prepayment and will be used to satisfy taxes accrued during 1996. Details of the federal and state income tax provisions are as follows: 1995 1994 1993 ---------------------------------- (in thousands) Total provision for income taxes: Federal-- Currently payable $29,018 $34,941 $24,354 Deferred--current year 23,172 18,556 26,396 --reversal of prior years (23,116) (24,787) (22,102) - - ------------------------------------------------------------------ 29,074 28,710 28,648 - - ------------------------------------------------------------------ State-- Currently payable 4,778 5,907 3,950 Deferred--current year 3,313 2,549 3,838 --reversal of prior years (2,979) (3,304) (2,785) - - ------------------------------------------------------------------ 5,112 5,152 5,003 - - ------------------------------------------------------------------ Total 34,186 33,862 33,651 Less income taxes charged (credited) to other income 121 (95) 921 - - ------------------------------------------------------------------ Federal and state income taxes charged to operations $34,065 $33,957 $32,730 ================================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 1995 1994 ----------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $146,926 $146,686 Property basis differences 19,976 18,468 Coal contract buyouts 3,838 6,896 Property insurance 3,039 - Other 10,573 11,846 - - ------------------------------------------------------------------- Total 184,352 183,896 - - ------------------------------------------------------------------- Deferred tax assets: Federal effect of state deferred taxes 10,212 9,732 Postretirement benefits 5,494 4,383 Property insurance - 5,200 Other 6,313 7,566 - - ------------------------------------------------------------------- Total 22,019 26,881 - - ------------------------------------------------------------------- Net deferred tax liabilities 162,333 157,015 Less current portion, net (12) 5,334 - - ------------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $162,345 $151,681 =================================================================== Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $2.3 million in 1995, 1994 and 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1995 1994 1993 ----------------------------- Federal statutory rate 35% 35% 35% State income tax, net of federal deduction 4 4 3 Non-deductible book depreciation 1 1 1 Difference in prior years' deferred and current tax rate (3) (2) (2) Other (2) (2) (1) - - --------------------------------------------------------------- Effective income tax rate 35% 36% 36% =============================================================== The Company and the other subsidiaries of The Southern Company file a consolidated federal tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed II-167
NOTES (continued) Gulf Power Company 1995 Annual Report on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. POLLUTION CONTROL OBLIGATIONS AND OTHER LONG-TERM DEBT Details of pollution control bonds and other long-term debt at December 31 are as follows: 1995 1994 -------------------------- (in thousands) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized 6% due 2006* $ 12,075 $ 12,200 8.25% due 2017 32,000 32,000 7.125% due 2021 21,200 21,200 6.75% due 2022 8,930 8,930 5.70% due 2023 7,875 7,875 5.80% due 2023 32,550 32,550 6.20% due 2023 13,000 13,000 6.30% due 2024 22,000 22,000 Variable Rate Remarketable daily 20,000 20,000 - - --------------------------------------------------------------- $169,630 $169,755 - - --------------------------------------------------------------- Notes payable: 5.39% due 1995 - 4,500 5.72% due 1995 - 4,500 4.69% due 1996 25,000 25,000 6.44% due 1994-1998 12,074 16,388 - - --------------------------------------------------------------- 37,074 50,388 - - --------------------------------------------------------------- Total $206,704 $220,143 =============================================================== * Sinking fund requirement applicable to the 6 percent pollution control bonds is $200 thousand for 1996 with increasing increments periodically thereafter through 2005, with the remaining balance due in 2006. Pollution control obligations represent installment purchases of pollution control facilities financed by funds derived from sales by public authorities of revenue bonds. With respect to the collateralized pollution control revenue bonds, the Company has authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. The 5.39 percent and 5.72 percent notes payable were the Company's portion of notes payable issued in connection with the termination of Plant Daniel coal contracts (see Note 5 under "Fuel Commitments" for further information). The estimated annual maturities of the notes payable through 2000 are as follows: $29.6 million in 1996, $4.9 million in 1997, $2.6 million in 1998, and none in 1999 and 2000. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirement and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 1995 1994 ---------------------- (in thousands) Bond improvement fund requirement $ 1,750 $ 1,750 Less: Portion to be satisfied by cash or certifying property additions - 1,750 - - --------------------------------------------------------------- Cash sinking fund requirement 1,750 - Current portion of notes payable 29,598 13,314 (Note 9) Pollution control bond maturity 200 125 (Note 9) - - --------------------------------------------------------------- Total $31,548 $13,439 =============================================================== The first mortgage bond improvement (sinking) fund requirement amounts to 1 percent of each outstanding series of bonds authenticated under the indenture prior to January 1 of each year, other than those issued to collateralize pollution control obligations. The requirement may be satisfied by depositing cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3 times the requirement. II-168
NOTES (continued) Gulf Power Company 1995 Annual Report 11. COMMON STOCK DIVIDEND RESTRICTIONS The Company's first mortgage bond indenture contains various common stock dividend restrictions which remain in effect as long as the bonds are outstanding. At December 31, 1995, retained earnings of $101 million were restricted against the payment of cash dividends on common stock under the terms of the mortgage indenture. The Company's charter limits cash dividends on common stock to 50 percent of net income available for such stock during a prior period of 12 months if the capitalization ratio is below 20 percent and to 75 percent of such net income if such ratio is 20 percent or more but less than 25 percent. The capitalization ratio is defined as the ratio of common stock equity to total capitalization, including retained earnings, adjusted to reflect the payment of the proposed dividend. At December 31, 1995, the ratio was 48.7 percent. 12. QUARTERLY FINANCIAL DATA (Unaudited) Summarized quarterly financial data for 1995 and 1994 are as follows: Net Income After Dividends Operating Operating on Preferred Quarter Ended Revenues Income Stock - - ------------------------------------------------------------------ (in thousands) March 31, 1995 $140,918 $19,503 $10,880 June 30, 1995 153,057 23,390 14,096 Sept. 30, 1995 184,251 35,187 26,588 Dec. 31, 1995 140,851 13,082 5,590 March 31, 1994 $138,088 $19,154 $10,117 June 30, 1994 146,769 19,957 8,886 Sept. 30, 1994 162,143 31,123 21,831 Dec. 31, 1994 131,813 21,979 14,395 - - ------------------------------------------------------------------ The Company's business is influenced by seasonal weather conditions and the timing of rate changes, among other factors. II-169
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ========================================================================================================= 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $619,077 $578,813 $583,142 Net Income after Dividends on Preferred Stock (in thousands) $57,154 $55,229 $54,311 Cash Dividends on Common Stock (in thousands) $46,400 $44,000 $41,800 Return on Average Common Equity (percent) 13.27 13.15 13.29 Total Assets (in thousands) $1,341,859 $1,315,542 $1,307,809 Gross Property Additions (in thousands) $63,113 $78,869 $78,562 - - --------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $436,242 $425,472 $414,196 Preferred stock 89,602 89,602 89,602 Preferred stock subject to mandatory redemption - - 1,000 Long-term debt 323,376 356,393 369,259 - - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $849,220 $871,467 $874,057 - - --------------------------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 51.4 48.8 47.4 Preferred stock 10.5 10.3 10.4 Long-term debt 38.1 40.9 42.2 - - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ========================================================================================================= First Mortgage Bonds (in thousands): Issued - - 75,000 Retired 1,750 48,856 88,809 Preferred Stock (in thousands): Issued - - 35,000 Retired 1,000 1,000 21,060 - - --------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A2 A2 Standard and Poor's A+ A A Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A A- A- Duff & Phelps A A A - - --------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 283,421 280,859 274,194 Commercial 41,281 40,398 39,253 Industrial 278 283 274 Other 134 106 86 - - --------------------------------------------------------------------------------------------------------- Total 325,114 321,646 313,807 ========================================================================================================= Employees (year-end) 1,501 1,540 1,565 </TABLE> II-170
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ============================================================================================================= 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $570,902 $565,207 $567,825 Net Income after Dividends on Preferred Stock (in thousands) $54,090 $57,796 $38,714 Cash Dividends on Common Stock (in thousands) $39,900 $38,000 $37,000 Return on Average Common Equity (percent) 13.62 15.17 10.51 Total Assets (in thousands) $1,062,699 $1,095,736 $1,084,579 Gross Property Additions (in thousands) $64,671 $64,323 $62,462 - - ------------------------------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $403,190 $390,981 $371,185 Preferred stock 74,662 55,162 55,162 Preferred stock subject to mandatory redemption 2,000 7,500 9,250 Long-term debt 382,047 434,648 475,284 - - ------------------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $861,899 $888,291 $910,881 - - ------------------------------------------------------------------------------------------------------------ Capitalization Ratios (percent): Common stock equity 46.8 44.0 40.8 Preferred stock 8.9 7.1 7.1 Long-term debt 44.3 48.9 52.1 - - ------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================================ First Mortgage Bonds (in thousands): Issued 25,000 50,000 - Retired 117,693 32,807 6,455 Preferred Stock (in thousands): Issued 29,500 - - Retired 15,500 2,500 1,750 - - ------------------------------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's A2 A2 A2 Standard and Poor's A A A Duff & Phelps A A A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- A- - - ------------------------------------------------------------------------------------------------------------ Customers (year-end): Residential 267,591 261,210 256,111 Commercial 37,105 34,685 34,019 Industrial 270 264 252 Other 74 72 67 - - ------------------------------------------------------------------------------------------------------------ Total 305,040 296,231 290,449 ============================================================================================================ Employees (year-end) 1,613 1,598 1,615 </TABLE> II-171A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ============================================================================================================== 1989 1988 1987 - - -------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $527,821 $550,827 $587,860 Net Income after Dividends on Preferred Stock (in thousands) $37,361 $45,698 $42,217 Cash Dividends on Common Stock (in thousands) $37,200 $35,400 $34,200 Return on Average Common Equity (percent) 10.32 13.41 13.23 Total Assets (in thousands) $1,093,430 $1,097,225 $1,051,182 Gross Property Additions (in thousands) $70,726 $67,042 $97,511 - - -------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $365,471 $358,310 $323,012 Preferred stock 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 11,000 12,750 14,000 Long-term debt 484,608 497,069 474,640 - - -------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $916,241 $923,291 $866,814 - - -------------------------------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 39.9 38.8 37.2 Preferred stock 7.2 7.4 8.0 Long-term debt 52.9 53.8 54.8 - - -------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================================== First Mortgage Bonds (in thousands): Issued - 35,000 - Retired 9,344 9,369 - Preferred Stock (in thousands): Issued - - - Retired 1,250 1,750 2,500 - - -------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps AA- 4 4 Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A- A- A- Duff & Phelps A+ 5 5 - - -------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 251,341 246,450 241,138 Commercial 33,678 33,030 32,139 Industrial 240 206 206 Other 67 61 61 - - -------------------------------------------------------------------------------------------------------------- Total 285,326 279,747 273,544 ============================================================================================================== Employees (year-end) 1,614 1,601 1,603 </TABLE> II-171B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1995 Annual Report <S> <C> <C> ======================================================================================= 1986 1985 - - --------------------------------------------------------------------------------------- Operating Revenues (in thousands) $542,919 $562,068 Net Income after Dividends on Preferred Stock (in thousands) $46,421 $45,484 Cash Dividends on Common Stock (in thousands) $33,100 $30,800 Return on Average Common Equity (percent) 15.06 15.61 Total Assets (in thousands) $1,028,864 $921,635 Gross Property Additions (in thousands) $90,160 $92,541 - - --------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $314,995 $301,674 Preferred stock 55,162 55,162 Preferred stock subject to mandatory redemption 16,500 18,250 Long-term debt 482,869 410,917 - - --------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $869,526 $786,003 - - --------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 36.2 38.4 Preferred stock 8.3 9.3 Long-term debt 55.5 52.3 - - --------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ======================================================================================= First Mortgage Bonds (in thousands): Issued 50,000 - Retired 46,640 2,860 Preferred Stock (in thousands): Issued - - Retired 750 750 - - --------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A+ A+ Duff & Phelps 4 4 Preferred Stock - Moody's a1 a1 Standard and Poor's A A Duff & Phelps 5 5 - - --------------------------------------------------------------------------------------- Customers (year-end): Residential 235,329 227,845 Commercial 31,142 29,603 Industrial 197 183 Other 62 62 - - --------------------------------------------------------------------------------------- Total 266,730 257,693 ======================================================================================= Employees (year-end) 1,544 1,509 </TABLE> II-171C
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ========================================================================================================= 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $276,155 $252,598 $244,967 Commercial 159,260 146,394 137,308 Industrial 81,606 82,169 87,526 Other 1,993 1,955 1,882 - - --------------------------------------------------------------------------------------------------------- Total retail 519,014 483,116 471,683 Sales for resale - non-affiliates 60,413 66,111 72,209 Sales for resale - affiliates 18,619 17,353 23,166 - - --------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 598,046 566,580 567,058 Other revenues 21,031 12,233 16,084 - - --------------------------------------------------------------------------------------------------------- Total $619,077 $578,813 $583,142 ========================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 4,014,142 3,751,932 3,712,980 Commercial 2,708,243 2,548,846 2,433,382 Industrial 1,794,754 1,847,114 2,029,936 Other 17,345 17,354 16,944 - - --------------------------------------------------------------------------------------------------------- Total retail 8,534,484 8,165,246 8,193,242 Sales for resale - non-affiliates 1,396,474 1,418,977 1,460,105 Sales for resale - affiliates 759,341 874,050 1,029,787 - - --------------------------------------------------------------------------------------------------------- Total 10,690,299 10,458,273 10,683,134 ========================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.88 6.73 6.60 Commercial 5.88 5.74 5.64 Industrial 4.55 4.45 4.31 Total retail 6.08 5.92 5.76 Sales for resale 3.67 3.64 3.83 Total sales 5.59 5.42 5.31 Average Annual Kilowatt-Hour Use Per Residential Customer 14,148 13,486 13,671 Average Annual Revenue Per Residential Customer $973.35 $907.92 $901.96 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 1,732 1,801 1,571 Summer 2,040 1,795 1,898 Annual Load Factor (percent) 53.0 56.7 54.5 Plant Availability - Fossil-Steam (percent) 84.0 92.2 88.9 - - --------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 86.8 87.2 84.5 Oil and gas 0.4 0.2 0.5 Purchased power - From non-affiliates 4.0 2.8 1.5 From affiliates 8.8 9.8 13.5 - - --------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,609 10,614 10,390 Cost of fuel per million BTU (cents) 196.62 189.55 197.37 Average cost of fuel per net kilowatt-hour generated (cents) 2.09 2.01 2.05 ========================================================================================================= </TABLE> II-172
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1995 Annual Report <S> <C> <C> <C> =============================================================================================================== 1992 1991 1990 - - --------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $235,296 $231,220 $217,843 Commercial 133,071 130,691 124,066 Industrial 91,320 92,300 91,041 Other 1,784 1,860 1,805 - - --------------------------------------------------------------------------------------------------------------- Total retail 461,471 456,071 434,755 Sales for resale - non-affiliates 70,078 69,636 73,855 Sales for resale - affiliates 24,075 29,343 38,563 - - --------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 555,624 555,050 547,173 Other revenues 15,278 10,157 20,652 - - --------------------------------------------------------------------------------------------------------------- Total $570,902 $565,207 $567,825 =============================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 3,596,515 3,455,100 3,360,838 Commercial 2,369,236 2,272,690 2,217,568 Industrial 2,179,435 2,117,408 2,177,872 Other 16,649 17,118 18,866 - - --------------------------------------------------------------------------------------------------------------- Total retail 8,161,835 7,862,316 7,775,144 Sales for resale - non-affiliates 1,430,908 1,550,018 1,775,703 Sales for resale - affiliates 1,208,771 1,236,223 1,435,558 - - --------------------------------------------------------------------------------------------------------------- Total 10,801,514 10,648,557 10,986,405 =============================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.54 6.69 6.48 Commercial 5.62 5.75 5.59 Industrial 4.19 4.36 4.18 Total retail 5.65 5.80 5.59 Sales for resale 3.57 3.55 3.50 Total sales 5.14 5.21 4.98 Average Annual Kilowatt-Hour Use Per Residential Customer 13,553 13,320 13,173 Average Annual Revenue Per Residential Customer $886.66 $891.38 $853.86 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 1,533 1,418 1,310 Summer 1,828 1,740 1,778 Annual Load Factor (percent) 55.0 57.0 55.2 Plant Availability - Fossil-Steam (percent) 91.2 92.2 89.2 - - --------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 87.7 82.0 69.8 Oil and gas 0.1 0.1 0.5 Purchased power - From non-affiliates 0.8 0.5 0.6 From affiliates 11.4 17.4 29.1 - - --------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =============================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,347 10,636 10,765 Cost of fuel per million BTU (cents) 200.30 203.60 206.06 Average cost of fuel per net kilowatt-hour generated (cents) 2.07 2.17 2.22 =============================================================================================================== </TABLE> II-173A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1995 Annual Report <S> <C> <C> <C> ================================================================================================================ 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $203,781 $184,036 $199,701 Commercial 118,897 107,615 116,057 Industrial 84,671 72,634 80,295 Other 1,586 1,402 1,357 - - ---------------------------------------------------------------------------------------------------------------- Total retail 408,935 365,687 397,410 Sales for resale - non-affiliates 67,554 117,466 134,456 Sales for resale - affiliates 39,244 48,277 55,955 - - ---------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 515,733 531,430 587,821 Other revenues 12,088 19,397 39 - - ---------------------------------------------------------------------------------------------------------------- Total $527,821 $550,827 $587,860 ================================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 3,293,750 3,154,541 3,055,041 Commercial 2,169,497 2,088,598 1,986,332 Industrial 2,094,670 1,968,091 1,839,931 Other 17,209 16,257 15,241 - - ---------------------------------------------------------------------------------------------------------------- Total retail 7,575,126 7,227,487 6,896,545 Sales for resale - non-affiliates 1,640,355 1,911,759 2,138,390 Sales for resale - affiliates 1,461,036 2,326,238 2,689,487 - - ---------------------------------------------------------------------------------------------------------------- Total 10,676,517 11,465,484 11,724,422 ================================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 6.19 5.83 6.54 Commercial 5.48 5.15 5.84 Industrial 4.04 3.69 4.36 Total retail 5.40 5.06 5.76 Sales for resale 3.44 3.91 3.94 Total sales 4.83 4.64 5.01 Average Annual Kilowatt-Hour Use Per Residential Customer 13,173 12,883 12,763 Average Annual Revenue Per Residential Customer $815.00 $751.60 $834.31 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 1,814 1,395 1,354 Summer 1,691 1,613 1,617 Annual Load Factor (percent) 52.6 56.5 54.4 Plant Availability - Fossil-Steam (percent) 89.1 88.2 92.8 - - ---------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 78.3 93.2 93.5 Oil and gas 0.2 0.4 0.4 Purchased power - From non-affiliates 0.4 0.4 0.4 From affiliates 21.1 6.0 5.7 - - ---------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,621 10,461 10,512 Cost of fuel per million BTU (cents) 193.70 178.00 197.53 Average cost of fuel per net kilowatt-hour generated (cents) 2.06 1.86 2.08 ================================================================================================================ </TABLE> II-173B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1995 Annual Report <S> <C> <C> =========================================================================================== 1986 1985 - - ------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $200,725 $186,415 Commercial 116,253 109,631 Industrial 79,873 81,621 Other 1,343 1,346 - - ------------------------------------------------------------------------------------------ Total retail 398,194 379,013 Sales for resale - non-affiliates 106,892 126,789 Sales for resale - affiliates 27,113 43,844 - - ------------------------------------------------------------------------------------------ Total revenues from sales of electricity 532,199 549,646 Other revenues 10,720 12,422 - - ------------------------------------------------------------------------------------------ Total $542,919 $562,068 ========================================================================================== Kilowatt-Hour Sales (in thousands): Residential 2,963,502 2,736,432 Commercial 1,913,139 1,777,418 Industrial 1,745,074 1,770,587 Other 14,903 14,702 - - ------------------------------------------------------------------------------------------ Total retail 6,636,618 6,299,139 Sales for resale - non-affiliates 1,609,146 2,388,591 Sales for resale - affiliates 1,078,500 1,562,452 - - ------------------------------------------------------------------------------------------ Total 9,324,264 10,250,182 ========================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.77 6.81 Commercial 6.08 6.17 Industrial 4.58 4.61 Total retail 6.00 6.02 Sales for resale 4.99 4.32 Total sales 5.71 5.36 Average Annual Kilowatt-Hour Use Per Residential Customer 12,729 12,221 Average Annual Revenue Per Residential Customer $862.16 $832.55 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,969 1,969 Maximum Peak-Hour Demand (megawatts): Winter 1,406 1,517 Summer 1,678 1,448 Annual Load Factor (percent) 50.5 53.4 Plant Availability - Fossil-Steam (percent) 90.5 84.8 - - ------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 85.8 79.7 Oil and gas 0.5 0.2 Purchased power - From non-affiliates 1.9 0.4 From affiliates 11.8 19.7 - - ------------------------------------------------------------------------------------------ Total 100.0 100.0 ========================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,639 10,609 Cost of fuel per million BTU (cents) 239.26 254.53 Average cost of fuel per net kilowatt-hour generated (cents) 2.55 2.70 ========================================================================================== </TABLE> II-173C
<TABLE> <CAPTION> STATEMENTS OF INCOME Gulf Power Company ============================================================================================================================== For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 600,458 $ 561,460 $ 559,976 Revenues from affiliates 18,619 17,353 23,166 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 619,077 578,813 583,142 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 185,274 161,168 170,485 Purchased power from non-affiliates 8,594 6,761 4,386 Purchased power from affiliates 29,966 25,819 32,273 Proceeds from settlement of disputed contracts - - - Other 113,397 113,879 109,164 Maintenance 51,917 46,700 46,004 Depreciation and amortization 55,104 56,615 55,309 Taxes other than income taxes 49,598 41,701 40,204 Federal and state income taxes 34,065 33,957 32,730 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 527,915 486,600 490,555 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 91,162 92,213 92,587 Other Income (Expense): Allowance for equity funds used during construction 36 450 512 Interest income 2,877 1,429 1,328 Other, net (1,261) (780) (1,238) Gain on sale of investment securities - - 3,820 Income taxes applicable to other income (121) 95 (921) - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 92,693 93,407 96,088 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 23,294 27,124 31,344 Allowance for debt funds used during construction (187) (656) (454) Interest on notes payable 2,931 1,509 870 Amortization of debt discount, premium, and expense, net 2,014 1,834 1,412 Other interest charges 1,674 2,442 2,877 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 29,726 32,253 36,049 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 62,967 61,154 60,039 Dividends on Preferred Stock 5,813 5,925 5,728 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 57,154 $ 55,229 $ 54,311 ============================================================================================================================== </TABLE> II-174
<TABLE> <CAPTION> STATEMENTS OF INCOME Gulf Power Company ============================================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 546,827 $ 535,864 $ 529,262 Revenues from affiliates 24,075 29,343 38,563 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 570,902 565,207 567,825 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 182,754 176,038 156,712 Purchased power from non-affiliates 1,394 896 1,427 Purchased power from affiliates 26,788 32,579 67,729 Proceeds from settlement of disputed contracts (920) (20,385) - Other 98,230 94,411 90,045 Maintenance 41,947 45,468 45,491 Depreciation and amortization 53,758 52,195 50,899 Taxes other than income taxes 37,898 42,359 39,110 Federal and state income taxes 32,078 33,893 24,780 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 473,927 457,454 476,193 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 96,975 107,753 91,632 Other Income (Expense): Allowance for equity funds used during construction 14 54 - Interest income 2,733 2,427 4,508 Other, net (1,487) (3,484) (6,360) Gain on sale of investment securities - - - Income taxes applicable to other income 187 1,104 1,303 - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 98,422 107,854 91,083 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 35,792 41,665 43,215 Allowance for debt funds used during construction (46) (95) 1 Interest on notes payable 1,041 280 693 Amortization of debt discount, premium, and expense, net 1,032 699 603 Other interest charges 1,410 2,272 2,422 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 39,229 44,821 46,934 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 59,193 63,033 44,149 Dividends on Preferred Stock 5,103 5,237 5,435 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 54,090 $ 57,796 $ 38,714 ============================================================================================================================== </TABLE> II-175A
<TABLE> <CAPTION> STATEMENTS OF INCOME Gulf Power Company ============================================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 488,577 $ 502,550 $ 531,905 Revenues from affiliates 39,244 48,277 55,955 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating revenues 527,821 550,827 587,860 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 158,858 191,687 227,233 Purchased power from non-affiliates 1,251 1,468 1,792 Purchased power from affiliates 48,972 27,267 28,326 Proceeds from settlement of disputed contracts - - - Other 82,231 93,028 100,032 Maintenance 44,295 41,919 38,748 Depreciation and amortization 48,760 47,530 44,619 Taxes other than income taxes 30,718 27,087 26,246 Federal and state income taxes 23,621 26,239 31,703 - - ------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 438,706 456,225 498,699 - - ------------------------------------------------------------------------------------------------------------------------------ Operating Income 89,115 94,602 89,161 Other Income (Expense): Allowance for equity funds used during construction (446) 457 1,013 Interest income 3,271 2,858 4,507 Other, net (3,800) (3,491) (1,207) Gain on sale of investment securities - - - Income taxes applicable to other income 779 1,001 (642) - - ------------------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 88,919 95,427 92,832 - - ------------------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 43,265 42,538 43,689 Allowance for debt funds used during construction 242 (808) (1,004) Interest on notes payable 180 182 - Amortization of debt discount, premium, and expense, net 613 600 555 Other interest charges 1,636 1,456 1,350 - - ------------------------------------------------------------------------------------------------------------------------------ Net interest charges 45,936 43,968 44,590 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income 42,983 51,459 48,242 Dividends on Preferred Stock 5,622 5,761 6,025 - - ------------------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 37,361 $ 45,698 $ 42,217 ============================================================================================================================== </TABLE> II-175B
<TABLE> <CAPTION> STATEMENTS OF INCOME Gulf Power Company ============================================================================================================= For the Years Ended December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Revenues: Revenues $ 515,806 $ 518,224 Revenues from affiliates 27,113 43,844 - - ------------------------------------------------------------------------------------------------------------- Total operating revenues 542,919 562,068 - - ------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 215,262 230,944 Purchased power from non-affiliates 4,533 1,638 Purchased power from affiliates 37,172 55,119 Proceeds from settlement of disputed contracts - - Other 70,117 59,851 Maintenance 35,251 35,654 Depreciation and amortization 39,386 37,775 Taxes other than income taxes 24,854 22,886 Federal and state income taxes 39,948 40,061 - - ------------------------------------------------------------------------------------------------------------- Total operating expenses 466,523 483,928 - - ------------------------------------------------------------------------------------------------------------- Operating Income 76,396 78,140 Other Income (Expense): Allowance for equity funds used during construction 7,809 6,893 Interest income 2,445 3,235 Other, net (1,077) (1,131) Gain on sale of investment securities - - Income taxes applicable to other income (648) (862) - - ------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 84,925 86,275 - - ------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 39,479 40,769 Allowance for debt funds used during construction (8,651) (7,676) Interest on notes payable 106 - Amortization of debt discount, premium, and expense, net 488 287 Other interest charges 869 1,120 - - ------------------------------------------------------------------------------------------------------------- Net interest charges 32,291 34,500 - - ------------------------------------------------------------------------------------------------------------- Net Income 52,634 51,775 Dividends on Preferred Stock 6,213 6,291 - - ------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 46,421 $ 45,484 ============================================================================================================= </TABLE> II-175C
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Gulf Power Company ============================================================================================================================ For the Years Ended December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 62,967 $ 61,154 $ 60,039 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 75,293 86,098 72,111 Deferred income taxes, net 390 (6,986) 5,347 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (36) (450) (512) Non-cash proceeds from settlement of disputed contracts - - - Other, net (26,537) 4,898 (864) Changes in certain current assets and liabilities -- Receivables, net (12,210) 3,540 12,867 Inventories (618) (13,901) 5,574 Payables 18,258 (10,159) 5,386 Other (17,556) 610 (9,504) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 99,951 124,804 150,444 - - ---------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (63,113) (78,869) (78,562) Other 4,401 (3,493) (5,328) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (58,712) (82,362) (83,890) - - ---------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - 35,000 First mortgage bonds - - 75,000 Pollution control bonds - 42,000 53,425 Capital contributions from parent company 58 98 11 Other long-term debt - 32,108 25,000 Retirements: Preferred stock (1,000) (1,000) (21,060) First mortgage bonds (1,750) (48,856) (88,809) Pollution control bonds (125) (42,100) (40,650) Other long-term debt (13,314) (24,240) (7,736) Notes payable, net 27,000 47,447 (37,947) Payment of preferred stock dividends (5,813) (5,925) (5,728) Payment of common stock dividends (46,400) (44,000) (41,800) Miscellaneous (117) (2,648) (6,888) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (41,461) (47,116) (62,182) - - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (222) (4,674) 4,372 Cash and Cash Equivalents at Beginning of Year 902 5,576 1,204 - - ---------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 680 $ 902 $ 5,576 ============================================================================================================================ ( ) Denotes use of cash. </TABLE> II-176
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Gulf Power Company ============================================================================================================================ For the Years Ended December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 59,193 $ 63,033 $ 44,149 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 68,021 65,584 63,650 Deferred income taxes, net 3,322 (3,392) 1,837 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (14) (54) - Non-cash proceeds from settlement of disputed contracts (920) (19,734) - Other, net 185 3,079 1,544 Changes in certain current assets and liabilities -- Receivables, net (11,041) 12,421 (2,468) Inventories 23,560 (2,397) (11,807) Payables 1,580 (2,003) (3,440) Other (13,637) 8,012 5,781 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 130,249 124,549 99,246 - - ---------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (64,671) (64,323) (62,462) Other 3,970 (8,097) (1,597) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (60,701) (72,420) (64,059) - - ---------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock 29,500 - - First mortgage bonds 25,000 50,000 - Pollution control bonds 8,930 21,200 - Capital contributions from parent company 121 - 4,000 Other long-term debt - - - Retirements: Preferred stock (15,500) (2,500) (1,750) First mortgage bonds (117,693) (32,807) (6,455) Pollution control bonds (9,205) (21,250) (50) Other long-term debt (5,783) (7,981) (6,083) Notes payable, net 44,000 - - Payment of preferred stock dividends (5,103) (5,237) (5,435) Payment of common stock dividends (39,900) (38,000) (37,000) Miscellaneous (8,760) (3,715) 5 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (94,393) (40,290) (52,768) - - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (24,845) 11,839 (17,581) Cash and Cash Equivalents at Beginning of Year 26,049 14,210 31,791 - - ---------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,204 $ 26,049 $ 14,210 ============================================================================================================================ ( ) Denotes use of cash. </TABLE> II-177A
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Gulf Power Company ============================================================================================================================ For the Years Ended December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 42,983 $ 51,459 $ 48,242 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 59,955 56,260 51,672 Deferred income taxes, net 5,319 10,138 2,377 Deferred investment tax credits, net - - 868 Allowance for equity funds used during construction 446 (457) (1,013) Non-cash proceeds from settlement of disputed contracts - - - Other, net 3,827 11,449 12,913 Changes in certain current assets and liabilities -- Receivables, net 492 8,984 (8,849) Inventories 16,306 (16,160) 23,691 Payables 6,142 (5,340) 10,173 Other 4,466 (18,432) 6,208 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 139,936 97,901 146,282 - - ---------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (70,726) (67,042) (97,511) Other 419 (62,782) (692) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (70,307) (129,824) (98,203) - - ---------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - First mortgage bonds - 35,000 - Pollution control bonds - 3,677 35,996 Capital contributions from parent company 7,000 25,000 - Other long-term debt - - - Retirements: Preferred stock (1,250) (1,750) (2,500) First mortgage bonds (9,344) (9,369) - Pollution control bonds (50) (50) (32,050) Other long-term debt (5,611) (5,175) (4,774) Notes payable, net - - - Payment of preferred stock dividends (5,622) (5,761) (6,025) Payment of common stock dividends (37,200) (35,400) (34,200) Miscellaneous (3) (233) (1,632) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (52,080) 5,939 (45,185) - - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 17,549 (25,984) 2,894 Cash and Cash Equivalents at Beginning of Year 14,242 40,226 37,332 - - ---------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 31,791 $ 14,242 $ 40,226 ============================================================================================================================ ( ) Denotes use of cash. </TABLE> II-177B
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Gulf Power Company ========================================================================================================= For the Years Ended December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Activities: Net income $ 52,634 $ 51,775 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 41,619 39,595 Deferred income taxes, net 45,213 18,467 Deferred investment tax credits, net 1,634 5,716 Allowance for equity funds used during construction (7,809) (6,893) Non-cash proceeds from settlement of disputed contracts - - Other, net 5,860 (2,535) Changes in certain current assets and liabilities -- Receivables, net (6,012) (5,401) Inventories (1,342) 1,870 Payables 449 1,756 Other (113) (13,331) - - --------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 132,133 91,019 - - --------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (90,160) (92,541) Other (55,652) 7,693 - - --------------------------------------------------------------------------------------------------------- Net cash used for investing activities (145,812) (84,848) - - --------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - First mortgage bonds 50,000 - Pollution control bonds 9,900 18,776 Capital contributions from parent company - 6,000 Other long-term debt 60,663 - Retirements: Preferred stock (750) (750) First mortgage bonds (46,640) (2,860) Pollution control bonds (50) (50) Other long-term debt - - Notes payable, net - - Payment of preferred stock dividends (6,213) (6,291) Payment of common stock dividends (33,100) (30,800) Miscellaneous (6,064) (227) - - --------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 27,746 (16,202) - - --------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 14,067 (10,031) Cash and Cash Equivalents at Beginning of Year 23,265 33,296 - - --------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 37,332 $ 23,265 ========================================================================================================= ( ) Denotes use of cash. </TABLE> II-177C
<TABLE> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 905,784 $ 896,236 $ 863,223 Transmission 156,786 155,967 154,304 Distribution 512,184 487,986 464,182 General 121,060 116,178 129,995 Construction work in progress 26,301 24,288 34,591 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 1,722,115 1,680,655 1,646,295 Accumulated provision for depreciation 658,806 622,911 610,542 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,063,309 1,057,744 1,035,753 Less property-related accumulated deferred income taxes - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,063,309 1,057,744 1,035,753 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 740 7,997 13,242 - - ---------------------------------------------------------------------------------------------------------------------------- Total 740 7,997 13,242 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 680 902 5,576 Investment securities - - - Receivables, net 72,593 60,384 63,924 Fossil fuel stock, at average cost 37,875 35,686 20,652 Materials and supplies, at average cost 33,686 35,257 36,390 Current portion of deferred coal contract costs 12,767 2,521 12,535 Regulatory clauses under recovery 3,432 5,002 3,244 Prepayments 12,232 4,354 2,160 Vacation pay deferred 4,419 4,172 4,022 - - ---------------------------------------------------------------------------------------------------------------------------- Total 177,684 148,278 148,503 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 29,093 30,433 31,334 Debt expense, being amortized 3,444 3,625 3,693 Premium on reacquired debt, being amortized 17,015 18,494 17,554 Deferred coal contract costs 33,768 38,169 52,884 Miscellaneous 16,806 10,802 4,846 - - ---------------------------------------------------------------------------------------------------------------------------- Total 100,126 101,523 110,311 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 1,341,859 $ 1,315,542 $ 1,307,809 ============================================================================================================================ </TABLE> II-178
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 841,489 $ 837,712 $ 817,490 Transmission 148,824 143,275 136,813 Distribution 443,352 419,228 400,016 General 127,826 125,330 123,059 Construction work in progress 29,564 13,684 16,868 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 1,591,055 1,539,229 1,494,246 Accumulated provision for depreciation 578,851 535,408 501,739 - - ---------------------------------------------------------------------------------------------------------------------------- Total 1,012,204 1,003,821 992,507 Less property-related accumulated deferred income taxes 200,904 197,138 192,749 - - ---------------------------------------------------------------------------------------------------------------------------- Total 811,300 806,683 799,758 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - 19,938 - Miscellaneous 7,074 6,410 5,439 - - ---------------------------------------------------------------------------------------------------------------------------- Total 7,074 26,348 5,439 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,204 26,049 14,210 Investment securities 22,322 - - Receivables, net 60,047 49,006 61,427 Fossil fuel stock, at average cost 29,492 52,106 50,469 Materials and supplies, at average cost 33,124 34,070 33,310 Current portion of deferred coal contract costs 3,071 4,626 6,212 Regulatory clauses under recovery 1,680 - 7,008 Prepayments 1,395 1,410 2,168 Vacation pay deferred 3,779 3,776 3,631 - - ---------------------------------------------------------------------------------------------------------------------------- Total 156,114 171,043 178,435 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Debt expense, being amortized 3,253 3,232 2,954 Premium on reacquired debt, being amortized 15,319 8,855 6,256 Deferred coal contract costs 63,723 74,502 87,102 Miscellaneous 5,916 5,073 4,635 - - ---------------------------------------------------------------------------------------------------------------------------- Total 88,211 91,662 100,947 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $1,062,699 $ 1,095,736 $ 1,084,579 ============================================================================================================================ </TABLE> II-179A
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 807,546 $ 796,052 $ 801,600 Transmission 133,926 113,177 106,352 Distribution 375,521 343,421 325,037 General 119,779 115,273 102,664 Construction work in progress 10,166 29,572 10,113 - - ---------------------------------------------------------------------------------------------------------------------------- Total utility plant 1,446,938 1,397,495 1,345,766 Accumulated provision for depreciation 464,944 425,520 388,248 - - ---------------------------------------------------------------------------------------------------------------------------- Total 981,994 971,975 957,518 Less property-related accumulated deferred income taxes 186,084 178,657 166,707 - - ---------------------------------------------------------------------------------------------------------------------------- Total 795,910 793,318 790,811 - - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 6,933 6,756 2,932 - - ---------------------------------------------------------------------------------------------------------------------------- Total 6,933 6,756 2,932 - - ---------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 31,791 14,242 40,226 Investment securities - - - Receivables, net 58,959 59,451 68,435 Fossil fuel stock, at average cost 37,526 55,286 43,290 Materials and supplies, at average cost 34,446 32,992 28,828 Current portion of deferred coal contract costs 5,534 6,194 2,642 Regulatory clauses under recovery 4,503 1,218 - Prepayments 2,490 3,577 677 Vacation pay deferred 3,425 3,340 3,200 - - ---------------------------------------------------------------------------------------------------------------------------- Total 178,674 176,300 187,298 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Debt expense, being amortized 3,117 3,281 3,203 Premium on reacquired debt, being amortized 6,574 6,892 7,210 Deferred coal contract costs 97,833 106,263 55,889 Miscellaneous 4,389 4,415 3,839 - - ---------------------------------------------------------------------------------------------------------------------------- Total 111,913 120,851 70,141 - - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $1,093,430 $ 1,097,225 $ 1,051,182 ============================================================================================================================ </TABLE> II-179B
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ========================================================================================================= At December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> ASSETS Utility Plant: Production-fossil $ 608,340 $ 599,613 Transmission 99,507 98,683 Distribution 295,052 274,656 General 66,092 56,427 Construction work in progress 188,966 148,969 - - --------------------------------------------------------------------------------------------------------- Total utility plant 1,257,957 1,178,348 Accumulated provision for depreciation 350,117 318,308 - - --------------------------------------------------------------------------------------------------------- Total 907,840 860,040 Less property-related accumulated deferred income taxes 152,589 135,388 - - --------------------------------------------------------------------------------------------------------- Total 755,251 724,652 - - --------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - Miscellaneous 2,619 601 - - --------------------------------------------------------------------------------------------------------- Total 2,619 601 - - --------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 37,332 23,265 Investment securities - - Receivables, net 59,586 53,574 Fossil fuel stock, at average cost 69,785 73,890 Materials and supplies, at average cost 26,024 20,577 Current portion of deferred coal contract costs - - Regulatory clauses under recovery - - Prepayments 788 633 Vacation pay deferred 3,000 2,775 - - --------------------------------------------------------------------------------------------------------- Total 196,515 174,714 - - --------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - Debt expense, being amortized 2,736 2,768 Premium on reacquired debt, being amortized - - Deferred coal contract costs 60,663 - Miscellaneous 11,080 18,900 - - --------------------------------------------------------------------------------------------------------- Total 74,479 21,668 - - --------------------------------------------------------------------------------------------------------- Total Assets $1,028,864 $ 921,635 ========================================================================================================= </TABLE> II-179C
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 Paid-in capital 218,438 218,380 218,282 Premium on preferred stock 81 81 81 Earnings retained in the business 179,663 168,951 157,773 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 436,242 425,472 414,196 Preferred stock 89,602 89,602 89,602 Preferred stock subject to mandatory redemption - - 1,000 Long-term debt 323,376 356,393 369,259 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 849,220 871,467 874,057 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 80,500 53,500 6,053 Preferred stock due within one year - 1,000 1,000 Long-term debt due within one year 31,548 13,439 41,552 Accounts payable 41,643 23,656 38,699 Customer deposits 13,195 13,609 15,082 Taxes accrued 9,547 13,465 13,015 Interest accrued 5,719 6,106 5,420 Regulatory clauses over recovery 2,800 3,960 840 Vacation pay accrued 4,419 4,172 4,022 Miscellaneous 7,356 7,828 8,527 - - ---------------------------------------------------------------------------------------------------------------------------- Total 196,727 140,735 134,210 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 162,345 151,681 151,743 Deferred credits related to income taxes 67,481 71,964 76,876 Accumulated deferred investment tax credits 36,052 38,391 40,770 Miscellaneous 30,034 41,304 30,153 - - ---------------------------------------------------------------------------------------------------------------------------- Total 295,912 303,340 299,542 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 1,341,859 $ 1,315,542 $ 1,307,809 ============================================================================================================================ </TABLE> II-180
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 Paid-in capital 218,271 218,150 218,150 Premium on preferred stock 88 399 399 Earnings retained in the business 146,771 134,372 114,576 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 403,190 390,981 371,185 Preferred stock 74,662 55,162 55,162 Preferred stock subject to mandatory redemption 2,000 7,500 9,250 Long-term debt 382,047 434,648 475,284 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 861,899 888,291 910,881 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 44,000 - - Preferred stock due within one year 1,000 1,000 1,750 Long-term debt due within one year 13,820 59,111 9,452 Accounts payable 33,461 25,315 27,447 Customer deposits 15,532 15,513 15,551 Taxes accrued 11,419 19,274 19,610 Interest accrued 6,370 9,720 10,820 Regulatory clauses over recovery - 1,114 - Vacation pay accrued 3,779 3,776 3,631 Miscellaneous 3,950 3,545 12,177 - - ---------------------------------------------------------------------------------------------------------------------------- Total 133,331 138,368 100,438 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - 1,775 6,736 Deferred credits related to income taxes - - - Accumulated deferred investment tax credits 43,117 45,446 47,776 Miscellaneous 24,352 21,856 18,748 - - ---------------------------------------------------------------------------------------------------------------------------- Total 67,469 69,077 73,260 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $1,062,699 $ 1,095,736 $ 1,084,579 ============================================================================================================================ </TABLE> II-181A
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ============================================================================================================================ At December 31, 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 Paid-in capital 214,150 207,150 182,150 Premium on preferred stock 399 399 399 Earnings retained in the business 112,862 112,701 102,403 - - ---------------------------------------------------------------------------------------------------------------------------- Total common equity 365,471 358,310 323,012 Preferred stock 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 11,000 12,750 14,000 Long-term debt 484,608 497,069 474,640 - - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 916,241 923,291 866,814 - - ---------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - - Preferred stock due within one year 1,750 1,250 1,750 Long-term debt due within one year 12,588 15,005 13,225 Accounts payable 34,764 29,595 34,500 Customer deposits 15,752 15,316 15,565 Taxes accrued 12,388 10,683 7,850 Interest accrued 10,105 10,247 9,584 Regulatory clauses over recovery - - 9,330 Vacation pay accrued 3,425 3,340 3,200 Miscellaneous 7,759 2,748 2,144 - - ---------------------------------------------------------------------------------------------------------------------------- Total 98,531 88,184 97,148 - - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 13,381 17,678 22,992 Deferred credits related to income taxes - - - Accumulated deferred investment tax credits 50,109 52,451 54,597 Miscellaneous 15,168 15,621 9,631 - - ---------------------------------------------------------------------------------------------------------------------------- Total 78,658 85,750 87,220 - - ---------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 1,093,430 $ 1,097,225 $ 1,051,182 ============================================================================================================================ </TABLE> II-181B
<TABLE> <CAPTION> BALANCE SHEETS Gulf Power Company ========================================================================================================= At December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 Paid-in capital 182,150 182,150 Premium on preferred stock 399 399 Earnings retained in the business 94,386 81,065 - - --------------------------------------------------------------------------------------------------------- Total common equity 314,995 301,674 Preferred stock 55,162 55,162 Preferred stock subject to mandatory redemption 16,500 18,250 Long-term debt 482,869 410,917 - - --------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 869,526 786,003 - - --------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - Preferred stock due within one year 1,750 750 Long-term debt due within one year 4,823 2,910 Accounts payable 24,014 23,565 Customer deposits 14,715 13,753 Taxes accrued 10,986 13,240 Interest accrued 11,024 11,783 Regulatory clauses over recovery - - Vacation pay accrued 3,000 2,775 Miscellaneous 3,869 4,966 - - --------------------------------------------------------------------------------------------------------- Total 74,181 73,742 - - --------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 23,550 - Deferred credits related to income taxes - - Accumulated deferred investment tax credits 55,843 55,846 Miscellaneous 5,764 6,044 - - --------------------------------------------------------------------------------------------------------- Total 85,157 61,890 - - --------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 1,028,864 $ 921,635 ========================================================================================================= </TABLE> II-181C
GULF POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1992 $ 25,000 5-7/8% $ 25,000 8/1/97 1993 15,000 5.55% 15,000 4/1/98 1993 30,000 5% 30,000 7/1/98 1993 30,000 6-1/8% 30,000 7/1/03 1978 25,000 9% 930 9/1/08 1991 50,000 8-3/4% 50,000 12/1/21 ------------ ------------ $ 175,000 $ 150,930 ============ ============ Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1976 $ 12,500 6% $ 12,075 10/1/06 1987 32,000 8-1/4% 32,000 6/1/17 1991 21,200 7-1/8% 21,200 4/1/21 1992 8,930 6-3/4% 8,930 3/1/22 1993 13,000 6.20% 13,000 4/1/23 1993 32,550 5.80% 32,550 6/1/23 1993 7,875 5.70% 7,875 11/1/23 1994 22,000 6.30% 22,000 9/1/24 1994 20,000 Variable 20,000 9/1/24 ============ =========== $ 170,055 $ 169,630 ============ =========== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding - - -------------------------------------------------------------------- (Thousands) 1950 51,026 4.64% $ 5,102 1960 50,000 5.16% 5,000 1966 50,000 5.44% 5,000 1969 50,000 7.52% 5,000 1972 50,000 7.88% 5,000 1992 580,000 7% 14,500 1992 600,000 7.30% 15,000 1993 800,000 6.72% 20,000 1993 600,000 Adjustable 15,000 ============ =========== 2,831,026 $ 89,602 ============ =========== II-182
GULF POWER COMPANY SECURITIES RETIRED DURING 1995 First Mortgage Bonds Principal Interest Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1978 $ 1,750 9% Pollution Control Bonds Principal Interest Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1976 $ 125 6% Preferred Stock Principal Dividend Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1980 $ 1,000 11.36% II-183
MISSISSIPPI POWER COMPANY FINANCIAL SECTION II-184
MANAGEMENT'S REPORT Mississippi Power Company 1995 Annual Report The management of Mississippi Power Company has prepared--and is responsible for--the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based upon a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting control maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of four directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Mississippi Power Company in conformity with generally accepted accounting principles. /s/ Dwight H. Evans Dwight H. Evans President and Chief Executive Officer /s/ Michael W. Southern Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer February 21, 1996 II-185
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Mississippi Power Company: We have audited the accompanying balance sheets and statements of capitalization of Mississippi Power Company (a Mississippi corporation and a wholly owned subsidiary of The Southern Company) as of December 31, 1995 and 1994, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-194 through II-209) referred to above present fairly, in all material respects, the financial position of Mississippi Power Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-186
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Mississippi Power Company 1995 Annual Report RESULTS OF OPERATIONS Earnings Mississippi Power Company's net income after dividends on preferred stock for 1995 totaled $52.5 million, an increase of $3.4 million over the prior year. This improvement is attributable primarily to increased energy sales and a rate increase under the Environmental Compliance Overview Plan (ECO Plan) of $3.7 million annually which became effective in May 1995. A comparison of 1994 to 1993 reflects an increase in 1994 earnings of $6.7 million. Earnings in 1994 increased due to higher energy sales and increases in retail and wholesale rates. In July 1993, a retail rate increase of $6.4 million annually became effective under the Company's Performance Evaluation Plan (PEP). Effective April 1994, retail rates increased by $7.6 million annually under the ECO Plan. Also, effective in April 1994 was a $3.6 million wholesale rate increase. Revenues The following table summarizes the factors impacting operating revenues for the past three years: Increase (Decrease) from Prior Year ----------------------------------- 1995 1994 1993 ----------------------------------- (in thousands) Retail -- Change in base rates (PEP and ECO Plan) $ 2,694 $9,314 $ 5,079 Sales growth 4,045 9,560 5,606 Weather 4,513 1,752 4,735 Fuel cost recovery and other 3,806 6,594 15,028 ------------------------------------------------------------- Total retail 15,058 27,220 30,448 ------------------------------------------------------------- Sales for resale -- Non-affiliates 3,698 4,611 3,298 Affiliates (1,847) (5,981) 5,464 ------------------------------------------------------------- Total sales for resale 1,851 (1,370) 8,762 Other operating revenues 482 (1,571) 1,226 ------------------------------------------------------------- Total operating revenues $17,391 $24,279 $40,436 ============================================================= Percent change 3.5% 5.1% 9.3% ------------------------------------------------------------- Retail revenues of $410 million in 1995 increased 3.8 percent over the prior year, compared with increases of 7.4 percent and 9.0 percent in 1994 and 1993, respectively. The increase in retail revenues for 1995 was a result of growth in energy sales of 6.7% and 6.2% to commercial and residential customers, respectively, due to above normal summer temperatures. Additionally in 1995, an increase in the number of customers and a retail rate increase from the ECO Plan had a positive effect on retail revenues. A comparison of retail revenues of 1994 to 1993 reflects an increase resulting from growth in energy sales and customers and retail and wholesale rate increases. Changes in base rates reflect rate changes made under the PEP and ECO Plan. Under the fuel cost recovery provision, recorded fuel revenues are equal to recorded fuel expenses, including the fuel component and the operation and maintenance component of purchased energy. Therefore, changes in recoverable II-187
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report fuel expenses are offset with corresponding changes in fuel revenues and have no effect on net income. Included in sales for resale to non-affiliates are revenues from rural electric cooperative associations and municipalities located in southeastern Mississippi. Energy sales to these customers increased 13.1 percent in 1995 and 7.8 percent in 1994 with the related revenues rising 16.7 percent and 14.0 percent, respectively. The customer demand experienced by these utilities is determined by factors very similar to Mississippi Power's. Sales for resale to non-territorial utilities are primarily under long-term contracts consisting of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. Under these long-term contracts, the capacity and energy components were: 1995 1994 1993 ------------------------------------- (in thousands) Capacity $ 268 $ 1,965 $ 4,191 Energy 3,627 8,473 12,120 ========================================================== Total $3,895 $10,438 $16,311 ========================================================== Capacity revenues for Mississippi Power varied due to changes in the contracts and in the allocation of transmission capacity revenues throughout the Southern electric system. Most of the Company's capacity revenues are derived from transmission charges. Sales to affiliated companies within the Southern electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have no material impact on earnings. Below is a breakdown of kilowatt-hour sales for 1995 and the percent change for the last three years: Amount Percent Change (millions of ----------- ------------------------------ kilowatt-hours) 1995 1995 1994 1993 ---------- ------------------------------ Residential 2,041 6.2% (0.4)% 6.9% Commercial 2,242 6.7 8.6 6.8 Industrial 3,813 (0.9) 6.2 2.5 Other 39 1.1 (0.5) 0.3 ---------- Total retail 8,135 2.9 5.1 4.7 Sales for resale -- Non-affiliates 2,493 (2.4) 0.4 (5.3) Affiliates 244 39.7 (59.2) 52.2 ---------- Total 10,872 2.2% 1.3% 3.3% ================================================================ Total retail energy sales in 1995 increased, compared to the previous year, due to both weather influences and the continued improving economy within the Company's service area, related primarily to the casino industry. In 1994, the most notable factor that increased commercial energy sales above the 1993 level was the establishment of casinos within the Company's service area. While the Company expects the number of new casinos to slow appreciably, it anticipates continued growth in ancillary services such as lodging, food, transportation, etc. Also, energy demand is expected to grow as a result of a larger and more fully employed population. In addition to the previously discussed long-term contracts, energy sales to non-affiliates include economy sales and amounts sold under short-term contracts. Sales for resale to non-affiliates are influenced by those utilities' own customer demand, plant availability, and the cost of their predominant fuels - - -- oil and natural gas. Expenses Total operating expenses for 1995 increased from 1994 due to higher fuel expenses, increased other operation expenses and increased depreciation and amortization. Expenses in 1994 were higher than 1993 primarily because of higher taxes and an increase in maintenance expenses and depreciation and amortization. Fuel costs constitute the single largest expense for Mississippi Power. These costs increased in 1995 due to a 13.0% increase in generation caused by higher demand for energy throughout the Southern electric system. Further, this II-188
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report increased demand for energy resulted in higher purchased power costs from the non-affiliates and lower purchased power costs from the affiliates of the Southern electric system. Fuel expenses in 1994, compared to 1993, were lower due to decreased generation reflecting lower demand. Purchased power consists primarily of energy purchases from the affiliates of the Southern electric system. Purchased power transactions (both sales and purchases) among Mississippi Power and its affiliates will vary from period to period depending on demand and the availability and variable production cost at each generating unit in the Southern electric system. The amount and sources of energy supply, the average cost of fuel per net kilowatt-hour generated, and the total average cost of energy supply (including purchased power) were as follows: 1995 1994 1993 ------------------------------ Total generation (millions of kilowatt-hours) 8,368 7,408 7,836 Sources of generation generation (percent) -- Coal 58 56 64 Gas 15 10 7 Oil * * * Purchased Power 27 34 29 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.58 1.67 1.66 Gas 2.32 2.56 2.99 Oil 6.21 4.15 2.85 Total average cost of energy supply 1.53 1.55 1.58 - - -------------------------------------------------------------- * Not meaningful because of minimal generation from the fuel source. Other operation expenses increased in 1995 due to an increase in generation, emission allowance expenses of $2.6 million and an increase in costs associated with work force reduction programs. (See Note 2 to the financial statements for information on these work force reduction programs.) This increase in expenses was offset by a decrease in maintenance costs for 1995, when compared to 1994. In 1994, work force reduction programs contributed to the increase in other operation expenses above the recorded 1993 level. Depreciation and amortization increased in 1995, compared to 1994, due to additional plant investments. In 1994, depreciation and amortization expenses rose above 1993 primarily due to the addition in May 1994 of a 75 megawatt combustion turbine unit. In 1995, taxes other than income taxes rose above the amount recorded for 1994 due to higher municipal franchise taxes. Taxes other than income taxes increased in 1994, when compared to 1993, because of higher ad valorem taxes, which are property based, and municipal franchise taxes, which are revenue based. The change in income taxes between 1995 and 1994 reflects the change in operating income. The increase in income taxes in 1994 when compared to 1993 mirrored the increase in operating income. Effects of Inflation Mississippi Power is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical costs does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from regulatory matters to energy sales growth to a less regulated more competitive environment. Expenses are subject to constant review and cost control programs. Mississippi Power is also maximizing the utility of invested capital and minimizing the need for capital by refinancing, decreasing the average fuel stockpile, raising generating plant availability and II-189
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report efficiency, and aggressively controlling the construction budget. Operating revenues will be affected by any changes in rates under the PEP, the Company's performance based ratemaking plan, and the ECO Plan. PEP has proven to be a stabilizing force on electric rates, with only moderate changes in rates taking place. The ECO Plan, provides for recovery of costs associated with environmental projects approved by the Mississippi Public Service Commission (MPSC), most of which are required to comply with Clean Air Act Amendments of 1990 (Clean Air Act) regulations. The ECO Plan is operated independently of PEP. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that Mississippi Power has with its sales for resale customers. The FERC is currently reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. Further discussion of PEP, the ECO Plan, and proceedings before the FERC is made in Note 3 to the financial statements herein. Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in Mississippi Power's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Southern Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows Independent Power Producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This may enhance the incentive of IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless Mississippi Power remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. Mississippi Power is subject to the provisions of Financial Accounting Standards Board Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities," for additional information. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company adopted the new rules January 1, 1996, with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in the utility industry. II-190
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report FINANCIAL CONDITION Overview The principal changes in Mississippi Power's financial condition during 1995 were gross property additions to utility plant of $68 million. Funding for gross property additions and other capital requirements came primarily from earnings and other operating cash flows and from the sale of first mortgage bonds and pollution control bonds. The Statements of Cash Flows provide additional details. Financing Activity Mississippi sold $30 million of first mortgage bonds and $10.6 million of pollution control bonds during 1995. Retirements, including maturities during 1995, primarily related to other long-term debt, totaled some $42 million of securities. (See the Statements of Cash Flows for further details.) Composite financing rates for the years 1993 through 1995 as of year-end were as follows: 1995 1994 1993 ----------------------------- Composite interest rate on long-term debt 6.63% 6.44% 6.57% Composite preferred stock dividend rate 6.58% 6.58% 6.58% ----------------------------------------------------------- Capital Structure At year-end 1995, the Company's ratio of common equity to total capitalization, excluding long-term debt due within one year, was 50.8 percent, compared to 48.7 percent in 1994. The increase in equity ratio in 1995 is attributed to a decrease in long-term debt and additional retained earnings. Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $182 million ($67 million in 1996, $62 million in 1997, and $53 million in 1998). The major emphasis within the construction program will be on upgrading existing facilities. Also included in the estimates for property additions for the three-year period is $5.3 million committed to meeting the requirements of Clean Air Act regulations. Revisions may be necessary because of factors such as changes in business conditions, revised load projections, the availability and cost of capital, and changes in environmental regulations. Other Capital Requirements In addition to the funds required for the Company's construction program, approximately $92.3 million will be required by the end of 1998 for present sinking fund requirements and maturities of long-term debt. Mississippi Power plans to continue, when economically feasible, to retire higher cost debt and preferred stock and replace these obligations with lower-cost capital. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- has significantly impacted Mississippi Power and the other operating companies of The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and initially affected 28 generating plants in the Southern electric system. As a result of The Southern Company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as a compliance option. The Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy resulted in unused emission II-191
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by installation of new control equipment at 22 of the original 28 affected generating units. Construction expenditures for Phase I compliance totaled approximately $320 million through 1995 for The Southern Company, of which Mississippi Power's portion was approximately $65 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy for The Southern Company could require total estimated construction expenditures of approximately $150 million, of which Mississippi Power's portion is approximately $5 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 2 percent in revenue requirements from customers could be necessary to fully recover the Company's cost of compliance for both Phase I and II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Mississippi Power's ECO Plan is designed to allow recovery of costs of compliance with the Clean Air Act, as well as other environmental statutes and regulations. The MPSC reviews environmental projects and the Company's environmental policy through the ECO Plan. Under the ECO Plan, any increase in the annual revenue requirement is limited to 2 percent of retail revenues. However, the plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. Mississippi Power's management believes that the ECO Plan provides for recovery of the Clean Air Act costs. Under the ECO Plan, the Company had annual retail rate increases of $2.6 million, $7.6 million and $3.7 million in the years 1993, 1994 and 1995, respectively. On January 29, 1996, the Company filed the ECO Plan with the MPSC requesting an annual retail rate decrease of $3.0 million. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study during 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standard could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean up properties currently or previously owned. Upon identifying potential sites, the Company conducts studies, when possible, to determine the extent of any required cleanup costs. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. A currently owned site where manufactured gas plant operations were located prior to the Company's ownership was investigated for potential remediation. The remedial investigation has been concluded and is pending approval by the II-192
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1995 Annual Report Mississippi Department of Environmental Quality. In recognition of probable further study and remediation, the Company in 1995 recorded a liability and a deferred debit (regulatory asset) of $1.8 million, including feasibility study costs. The Company recognizes such costs as they are incurred and recovers them under the ECO Plan as provided in the Company's 1995 ECO order. If this site were required to be remediated, industry studies show the Company could incur cleanup costs ranging from $1.5 million to $10 million before giving consideration to possible recovery of clean-up costs from other parties. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital At December 31, 1995, the Company had $70 million of committed credit in revolving credit agreements and also had $27 million of committed short-term credit lines. The Company had no short-term notes payable outstanding at year end 1995. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations, the sale of additional first mortgage bonds, pollution control obligations, and preferred stock, and the receipt of additional capital contributions from The Southern Company. Mississippi Power is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficiently high enough to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-193
<TABLE> <CAPTION> STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Revenues (Notes 1 and 3): Revenues $ 508,862 $ 489,624 $ 459,364 Revenues from affiliates 7,691 9,538 15,519 - - ------------------------------------------------------------------------------------------------------------------- Total operating revenues 516,553 499,162 474,883 - - ------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 111,071 102,216 113,986 Purchased power from non-affiliates 6,019 2,711 2,198 Purchased power from affiliates 57,777 68,543 58,019 Other 107,296 97,988 100,381 Maintenance 39,627 45,785 44,001 Depreciation and amortization 39,224 35,716 33,099 Taxes other than income taxes 42,443 41,742 37,145 Federal and state income taxes (Note 8) 34,486 31,386 22,668 - - ------------------------------------------------------------------------------------------------------------------- Total operating expenses 437,943 426,087 411,497 - - ------------------------------------------------------------------------------------------------------------------- Operating Income 78,610 73,075 63,386 Other Income (Expense): Allowance for equity funds used during construction 366 1,099 1,010 Interest income 199 87 517 Other, net 4,596 2,033 3,971 Income taxes applicable to other income (1,006) (227) (1,158) - - ------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 82,765 76,067 67,726 - - ------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 21,898 19,725 17,688 Allowance for debt funds used during construction (399) (1,039) (788) Interest on notes payable 1,141 1,442 1,000 Amortization of debt discount, premium, and expense, net 1,510 1,479 1,262 Other interest charges 1,185 404 728 - - ------------------------------------------------------------------------------------------------------------------- Net interest charges 25,335 22,011 19,890 - - ------------------------------------------------------------------------------------------------------------------- Net Income 57,430 54,056 47,836 Dividends on Preferred Stock 4,899 4,899 5,400 - - ------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 52,531 $ 49,157 $ 42,436 =================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> 11-194
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS For the Years ended December 31, 1995, 1994, and 1993 Mississippi Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Operating Activities: Net income $ 57,430 $ 54,056 $ 47,836 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 51,588 47,827 45,660 Deferred income taxes (480) 1,563 5,039 Allowance for equity funds used during construction (366) (1,099) (1,010) Other, net 5,704 5,230 3,005 Changes in certain current assets and liabilities -- Receivables, net (8,758) 3,066 (4,347) Inventories 3,962 (9,856) 11,119 Payables 17,421 (8,754) 4,133 Other 681 3,334 (8,033) - - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 127,182 95,367 103,402 - - ---------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (67,570) (104,014) (139,976) Other (1,697) (14,087) 7,562 - - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (69,267) (118,101) (132,414) - - ---------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Capital contributions - 25,000 30,036 Preferred stock - - 23,404 First mortgage bonds 30,000 35,000 70,000 Pollution control bonds 10,600 - 38,875 Other long-term debt - 85,310 - Retirements: Preferred stock - - (23,404) First mortgage bonds (1,625) (32,628) (51,300) Pollution control bonds (10) (10) (25,885) Other long-term debt (40,689) (9,299) (8,170) Notes payable, net - (40,000) 9,000 Payment of preferred stock dividends (4,899) (4,899) (5,400) Payment of common stock dividends (39,400) (34,100) (29,000) Miscellaneous (568) (1,201) (5,683) - - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (46,591) 23,173 22,473 - - ---------------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 11,324 439 (6,539) Cash and Cash Equivalents at Beginning of Year 1,317 878 7,417 - - ----------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 12,641 $ 1,317 $ 878 ================================================================================================================================== Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $23,308 $19,196 $15,697 Income taxes 36,908 31,115 29,009 - - ---------------------------------------------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements. </TABLE> II-195
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Mississippi Power Company 1995 Annual Report - - -------------------------------------------------------------------------------------------------------------------------------- ASSETS 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> Utility Plant: Plant in service, at original cost (Notes 1 and 6) $ 1,434,327 $ 1,385,032 Less accumulated provision for depreciation 499,308 477,098 - - -------------------------------------------------------------------------------------------------------------------------------- 935,019 907,934 Construction work in progress 41,210 44,838 - - -------------------------------------------------------------------------------------------------------------------------------- Total 976,229 952,772 - - -------------------------------------------------------------------------------------------------------------------------------- Other Property and Investments 4,160 3,353 - - -------------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 12,641 1,317 Receivables- Customer accounts receivable 30,761 27,865 Other accounts and notes receivable 9,438 6,599 Affiliated companies 9,213 6,058 Accumulated provision for uncollectible accounts (802) (670) Fossil fuel stock, at average cost 15,666 16,885 Materials and supplies, at average cost 22,558 25,301 Current portion of deferred fuel charges (Note 5) 1,546 1,068 Current portion of accumulated deferred income taxes (Note 8) 5,180 5,410 Prepaid federal income taxes - 5,019 Prepayments 2,404 760 Vacation pay deferred 4,715 4,588 - - -------------------------------------------------------------------------------------------------------------------------------- Total 113,320 100,200 - - -------------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Debt expense and loss, being amortized 10,039 10,929 Deferred fuel charges (Note 5) - 9,000 Deferred charges related to income taxes (Note 8) 23,384 25,036 Deferred early retirement program costs (Note 2) 7,286 11,286 Miscellaneous 14,535 11,135 - - -------------------------------------------------------------------------------------------------------------------------------- Total 55,244 67,386 - - -------------------------------------------------------------------------------------------------------------------------------- Total Assets $ 1,148,953 $ 1,123,711 ================================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-196
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Mississippi Power Company 1995 Annual Report - - -------------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION AND LIABILITIES 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> Capitalization (See accompanying statements): Common stock equity $ 374,884 $ 361,753 Preferred stock 74,414 74,414 Long-term debt 288,820 306,522 - - -------------------------------------------------------------------------------------------------------------------------------- Total 738,118 742,689 - - -------------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 10) 57,229 41,199 Accounts payable- Affiliated companies 13,646 3,337 Other 37,129 31,144 Customer deposits 2,716 2,712 Taxes accrued- Federal and state income 97 433 Other 31,816 31,224 Interest accrued 4,701 4,427 Miscellaneous 13,453 14,613 - - -------------------------------------------------------------------------------------------------------------------------------- Total 160,787 129,089 - - -------------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 129,711 129,505 Accumulated deferred investment tax credits 29,773 31,228 Deferred credits related to income taxes (Note 8) 43,266 45,832 Accumulated provision for property damage (Note 1) 12,018 10,905 Miscellaneous 35,280 34,463 - - -------------------------------------------------------------------------------------------------------------------------------- Total 250,048 251,933 - - -------------------------------------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 2, 3, 4, and 5) Total Capitalization and Liabilities $ 1,148,953 $ 1,123,711 ================================================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-197
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 Mississippi Power Company 1995 Annual Report - - --------------------------------------------------------------------------------------------------------------------------- 1995 1994 1995 1994 - - --------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) <S> <C> <C> <C> <C> Common Stock Equity: Common stock, without par value -- Authorized -- 1,130,000 shares Outstanding -- 1,121,000 shares in 1995 and 1994 $ 37,691 $ 37,691 Paid-in capital 179,362 179,362 Premium on preferred stock 372 372 Retained earnings (Note 11) 157,459 144,328 - - --------------------------------------------------------------------------------------------------------------------------- Total common stock equity 374,884 361,753 50.8% 48.7% - - --------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $100 par value -- Authorized -- 1,244,139 shares Outstanding -- 744,139 shares in 1995 and 1994 4.40% 4,000 4,000 4.60% 2,010 2,010 4.72% 5,000 5,000 6.32% 15,000 15,000 6.65% 8,404 8,404 7.00% 5,000 5,000 7.25% 35,000 35,000 - - --------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $4,899,000) 74,414 74,414 10.1 10.0 - - --------------------------------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates March 1, 1998 5 3/8% 35,000 35,000 August 1, 2000 6 5/8% 40,000 40,000 March 1, 2004 6.60% 35,000 35,000 May 1, 2021 9 1/4% 45,447 47,072 June 1, 2023 7.45% 35,000 35,000 December 1, 2025 6 7/8% 30,000 - - - --------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 220,447 192,072 Pollution control obligations (Note 9) 73,745 63,155 Other long-term debt (Note 9) 55,000 95,689 Unamortized debt premium (discount), net (3,143) (3,195) - - --------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement--$23,135,000) 346,049 347,721 Less amount due within one year (Note 10) 57,229 41,199 - - --------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 288,820 306,522 39.1 41.3 - - --------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 738,118 $ 742,689 100.0% 100.0% =========================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-198
<TABLE> <CAPTION> STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 Mississippi Power Company 1995 Annual Report - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Period $ 144,328 $ 129,343 $ 118,429 Net income after dividends on preferred stock 52,531 49,157 42,436 Cash dividends on common stock (39,400) (34,100) (29,000) Preferred stock transactions and other, net - (72) (2,522) ================================================================================================================================== Balance at End of Period (Note 11) $ 157,459 $ 144,328 $ 129,343 ================================================================================================================================== </TABLE> <TABLE> <CAPTION> STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1995, 1994, and 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> Balance at Beginning of Period $ 179,362 $ 154,362 $ 124,326 Contributions to capital by parent company - 25,000 30,036 ================================================================================================================================== Balance at End of Period $ 179,362 $ 179,362 $ 154,362 ================================================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-199
NOTES TO FINANCIAL STATEMENTS Mississippi Power Company 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Mississippi Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four southeastern states. Contracts among the companies--dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power--are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission. SCS provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. Mississippi Power is also subject to regulation by the FERC and the Mississippi Public Service Commission (MPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective commissions. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities Mississippi Power is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets as of December 31 relate to: (in thousands) 1995 1994 ------------------------- Deferred income taxes $23,384 $25,036 Vacation pay 4,715 4,588 Work force reduction costs 7,286 11,286 Deferred fuel charges 1,546 10,068 Premium on reacquired debt 8,509 9,571 Deferred environmental costs 1,713 - Property damage reserve (12,018) (10,905) Deferred income tax credits (43,266) (45,832) Other, net (2,658) (3,383) ================================================================ Total $(10,789) $ 429 ================================================================ In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off the related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and, if impaired, to write down the assets to their fair value. Revenues Mississippi Power accrues revenues for service rendered but unbilled at the end of each fiscal period. The Company's retail and wholesale rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power. Retail rates also include provisions to adjust billings for II-200
NOTES (continued) Mississippi Power Company 1995 Annual Report fluctuations in costs for ad valorem taxes and certain qualifying environmental costs. Revenues are adjusted for differences between actual allowable amounts and the amounts included in rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average less than 1 percent of revenues. Depreciation Depreciation of the original cost of depreciable utility plant in service is provided by using composite straight-line rates which approximated 3.2 percent in 1995 and 1994, and 3.1 percent in 1993. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost - - -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of removal of other facilities. Income Taxes Mississippi Power uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used to capitalize the cost of funds devoted to construction were 8.0 percent in 1995, 6.9 percent in 1994, and 6.8 percent in 1993. AFUDC (net of income taxes), as a percent of net income after dividends on preferred stock, was 1.2 percent in 1995, and 3.5 percent in 1994 and 1993. Utility Plant Utility plant is stated at original cost. This cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense except for the maintenance of coal cars and a portion of the railway track maintenance, which are charged to fuel stock. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, all financial instruments of the Company for which the carrying amount does not approximate fair value, must be disclosed. At December 31, 1995, the fair value of long-term debt was $355 million and the carrying amount was $346 million. At December 31, 1994, the fair value of long-term debt was $331 million and the carrying amount was $348 million. The fair value for long-term debt was based on either closing market price or closing price of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when used or installed. II-201
NOTES (continued) Mississippi Power Company 1995 Annual Report Provision for Property Damage Mississippi Power is self-insured for the cost of storm, fire and other uninsured casualty damage to its property, including transmission and distribution facilities. As permitted by regulatory authorities, the Company provided for such costs by charges to income of $1.5 million in 1995, $1.1 million in 1994 and $1.5 million in 1993. The cost of repairing damage resulting from such events that individually exceed $50 thousand is charged to the accumulated provision to the extent it is available. Effective January 1995, regulatory treatment by the MPSC allowed a maximum accumulated provision of $18 million. As of December 31, 1995, the accumulated provision amounted to $12.0 million. 2. RETIREMENT BENEFITS Pension Plan Mississippi Power has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits Mississippi Power also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Trusts are funded to the extent required by the Company's regulatory commissions. Amounts funded are primarily invested in debt and equity securities. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." The cost of postretirement benefits is reflected in rates on a current basis. Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ------------------------ 1995 1994 ------------------------ (in thousands) Actuarial present value of benefit obligation: Vested benefits $91,322 $80,603 Non-vested benefits 4,264 2,966 -------------------------------------------------------------- Accumulated benefit obligation 95,586 83,569 Additional amounts related to projected salary increases 28,545 27,292 -------------------------------------------------------------- Projected benefit obligation 124,131 110,861 Less: Fair value of plan assets 170,481 145,598 Unrecognized net gain (47,034) (37,485) Unrecognized prior service cost 2,868 3,109 Unrecognized transition asset (6,001) (6,635) -------------------------------------------------------------- Prepaid asset (accrued liability) recognized in the Balance Sheets $(3,817) $(6,274) ============================================================== Postretirement Benefits ------------------------ 1995 1994 ------------------------ (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $22,575 $22,833 Employees eligible to retire 1,709 774 Other employees 17,908 22,851 ------------------------------------------------------------ Accumulated benefit obligation 42,192 46,458 Less: Fair value of plan assets 8,700 6,608 Unrecognized net loss (gain) 4,160 1,751 Unrecognized transition obligation 7,044 18,668 ------------------------------------------------------------ Accrued liability recognized in the Balance Sheets $22,288 $19,431 ============================================================ II-202
NOTES (continued) Mississippi Power Company 1995 Annual Report In 1995, The Southern Company's subsidiaries announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the companies will pay to provide future retiree postretirement benefits. This change reduced the Company's 1995 accumulated postretirement benefit obligation by approximately $10.5 million. The weighted average rates assumed in the above actuarial calculations were: 1995 1994 1993 --------------------------------- Discount 7.3% 8.0% 7.5% Annual salary increase 4.8 5.5 5.0 Long-term return on plan assets 8.5 8.5 8.5 ------------------------------------------------------------ An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation as of December 31, 1995, by $3.3 million and the aggregate of the service and interest cost components of the net retiree cost by $0.8 million. Components of the plans' net cost are shown below: Pension -------------------------------- 1995 1994 1993 -------------------------------- (in thousands) Benefits earned during the year $ 3,636 $ 3,780 $ 3,792 Interest cost on projected benefit obligation 8,434 7,503 7,296 Actual (return) loss on plan assets (32,232) 3,244 (20,017) Net amortization and deferral 18,650 (16,048) 8,741 ============================================================== Net pension income $ (1,512) $ (1,521) $ (188) ============================================================== Of the above net pension income, $(1.1) million in both 1995 and 1994, and $(170) thousand in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Benefits --------------------------------- 1995 1994 1993 --------------------------------- (in thousands) Benefits earned during the year $1,525 $1,760 $1,448 Interest cost on accumulated benefit obligation 3,442 3,251 2,811 Amortization of transition obligation over 20 years 1,027 1,043 1,051 Actual (return) loss on plan assets (1,436) 132 (814) Net amortization and deferral 851 (575) 343 ================================================================== Net postretirement costs $5,409 $5,611 $4,839 ================================================================== Of the above net postretirement costs recorded, $3.9 million in 1995, $4.4 million in 1994, and $3.9 million in 1993 were charged to operating expense. Work Force Reduction Programs During 1994, Mississippi Power and SCS instituted work force reduction programs. The costs of the SCS work force reduction program were apportioned among the various entities that form the Southern electric system, with the Company's portion amounting to $1.4 million. The Company instituted an early retirement incentive program in April 1994 and deferred the related costs of approximately $12.9 million. The Company received authority from the MPSC to defer these costs, as well as its portion of the costs of the SCS program, and to amortize over a period not to exceed 60 months, beginning no later than January 1995. The Company expensed $4.0 million and $3.0 million of the cost of these programs in 1995 and 1994, respectively. 3. LITIGATION AND REGULATORY MATTERS Retail Rate Adjustment Plans Mississippi Power's retail base rates are set under a Performance Evaluation Plan (PEP). In January 1994, the MPSC approved PEP-2. PEP-2 was designed with the MPSC objectives that the plan would reduce the impact of rate changes on the customer and provide incentives for Mississippi Power to keep customer prices low. PEP-2 includes a mechanism for sharing rate adjustments based on the Company's ability to maintain low rates for customers and on the Company's performance as measured by three indicators that emphasize price and service to the customer. PEP-2 provides for semiannual evaluations of Mississippi's II-203
NOTES (continued) Mississippi Power Company 1995 Annual Report performance-based return on investment. Any change in rates is limited to 2 percent of retail revenues per evaluation period. PEP-2 will remain in effect until the MPSC modifies or terminates the plan. During 1995 and 1994, there were no increases under PEP-2. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the operating companies' wholesale rate schedules and contracts that have a return on equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts, including the Company's Transmission Facilities Agreement (TFA) discussed in Note 5 under "Lease Agreements." Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds was from October 1994 through December 1995. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore, no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $2.0 million at December 31, 1995. However, management believes that rates are not excessive, and that refunds are not justified. Environmental Compliance Overview Plan The MPSC approved Mississippi Power's ECO Plan in 1992. The plan establishes procedures to facilitate the MPSC's overview of the Company's environmental strategy and provides for recovery of costs associated with environmental projects approved by the MPSC. In November 1995, the MPSC ordered a change in accounting treatment allowing emission allowance expenses to be recovered through the Company's fuel adjustment clause, and emission allowance inventory costs to be recovered through PEP-2 rather than through the ECO Plan. Under the ECO Plan any increase in the annual revenue requirement is limited to 2 percent of retail revenues. However, the plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. The ECO Plan has resulted in annual retail rate increases, the latest being an increase of $3.7 million, effective in May 1995 which included $1.6 million of 1994 carryover. On January 29, 1996, the Company filed the ECO Plan with the MPSC requesting an annual retail rate decrease of $3.0 million. Mississippi Power conducts studies, when possible, to determine the extent of any required clean-up costs. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. A currently owned site where manufactured gas plant operations were located prior to the Company's ownership was investigated for potential remediation. The remedial investigation has been concluded and is pending approval by the Mississippi Department of Environmental Quality. In recognition of probable further study and remediation, the Company in 1995 recorded a liability and a deferred debit (regulatory asset) of $1.8 million, including feasibility study costs. The Company recognizes such costs as they are incurred and recovers them under the ECO Plan as provided in the Company's 1995 ECO order. If this site were required to be remediated, industry studies show the Company could incur cleanup costs ranging from $1.5 million to $10 million before giving consideration to possible recovery of clean-up costs from other parties. 4. CONSTRUCTION PROGRAM Mississippi Power is engaged in continuous construction programs, the costs of which are currently estimated to total some $67 million in 1996, $62 million in 1997, and $53 million in 1998. These estimates include AFUDC of $1.3 million in II-204
NOTES (continued) Mississippi Power Company 1995 Annual Report 1996, and $0.3 million in both 1997 and 1998. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment and materials; and cost of capital. The Company does not have any new generating plants under construction. However, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 5. FINANCING AND COMMITMENTS Financing Mississippi Power's construction program is expected to be financed from internal and other sources, such as the issuance of additional long-term debt and preferred stock and the receipt of capital contributions from The Southern Company. The amounts of first mortgage bonds and preferred stock which can be issued in the future will be contingent upon market conditions, adequate earnings levels, regulatory authorizations and other factors. At December 31, 1995, Mississippi Power had unused committed credit agreements with banks for $27 million. Additionally, Mississippi Power had $70 million of unused committed credit agreements in the form of revolving credit agreements expiring at various dates during 1996 and in 1998. The agreements expiring December 1, 1998, for $40 million allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the Company's option. In connection with these credit arrangements, the Company agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. The Company had no short-term borrowings outstanding at year-end 1995. Assets Subject to Lien Mississippi Power's mortgage indenture dated as of September 1, 1941, as amended and supplemented, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all the Company's fixed property and franchises. Lease Agreements In 1984, Mississippi Power and Gulf States Utilities Company (Gulf States) entered into a forty-year transmission facilities agreement whereby Gulf States began paying a use fee to the Company covering all expenses relative to ownership and operation and maintenance of a 500 kV line, including amortization of its original $57 million cost. For the three years ended 1995 use fees collected under this agreement, net of related expenses, amounted to $3.8 million each year, and are included with other income, net, in the Statements of Income. For more information see Note 3 under "FERC Reviews Equity Returns." In 1989, Mississippi Power entered into a twenty-two year lease agreement for the use of 495 aluminum railcars. In 1994, a second lease agreement for the use of 250 additional aluminum railcars was also entered into for twenty-two years. Both of these leases, totaling 745 railcars, were for the transport of coal at Plant Daniel. Gulf Power, as joint owner of Plant Daniel, is responsible for one half of the lease cost. The Company's share (50%) of the leases is charged to fuel inventory and allocated to fuel expense as the fuel is consumed. The lease cost charged to inventory was $1.7 million in 1995 and $1.2 million in both 1994 and 1993. The Company's annual lease payments for 1996 through 2000 will be approximately $1.7 million and after 2000, lease payments total approximately $22.4 million. The Company has the option to purchase the 745 railcars at the greater of the termination value or the fair market value, or to renew the leases at the end of the lease term. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, Mississippi Power has entered into various long-term commitments for the procurement of fuel. In most cases, these contracts contain provisions for price escalations, minimum production levels, and other financial commitments. Total estimated obligations were approximately $227 million at December 31, 1995. II-205
NOTES (continued) Mississippi Power Company 1995 Annual Report Additional commitments for fuel will be required in the future to supply the Company's fuel needs. In order to take advantage of lower cost coal supplies, agreements were reached in 1986 to terminate two contracts for the supply of coal to Plant Daniel, which is jointly owned by Mississippi Power and Gulf Power, an operating affiliate. The Company's portion of this payment was about $60 million. In accordance with the ratemaking treatment, the cost to terminate the contracts is being amortized to match costs with the savings achieved. The remaining unamortized amount of Mississippi Power's share of payments to the suppliers totaled $1.5 million at December 31, 1995. 6. JOINT OWNERSHIP AGREEMENTS Mississippi Power and Alabama Power own as tenants in common Greene County Electric Generating Plant (coal) located in Alabama; and Mississippi Power and Gulf Power own as tenants in common Daniel Electric Generating Plant (coal) located in Mississippi. At December 31, 1995, Mississippi Power's percentage ownership and investment in these jointly owned facilities were as follows: Company's Generating Total Percent Gross Accumulated Plant Capacity Ownership Investment Depreciation --------------------------------------------------------------- (Megawatts) (in thousands) Greene County 500 40% $ 57,957 $ 31,201 Daniel 1,000 50% 222,367 94,172 --------------------------------------------------------------- Mississippi Power's share of plant operating expenses is included in the corresponding operating expenses in the Statements of Income. 7. LONG-TERM POWER SALES AGREEMENTS General Mississippi Power and the other operating affiliates of The Southern Company have long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. Some of these agreements (unit power sales) are firm commitments and pertain to capacity related to specific generating units. Mississippi Power's participation in firm production capacity unit power sales ended in 1989. However, the Company continues to participate in transmission and energy sales under the unit power sales agreements. Because the energy is generally sold at variable costs under these agreements, only revenues from capacity sales affect profitability. Off-system capacity revenues for the Company have been as follows: Other Year Unit Power Long-Term Total ------------------------------------------------------------ (in thousands) 1995 $ 268 $ - $ 268 1994 660 1,305 1,965 1993 1,571 2,620 4,191 In 1994, long-term non-firm power of 200 megawatts was sold by the Southern electric system to Florida Power Corporation (FPC) until the contract expired at year-end. 8. INCOME TAXES Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax-related regulatory assets to be recovered from customers were $23 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. At December 31, 1995, the tax-related regulatory liabilities to be refunded to customers were $43 million. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and unamortized investment tax credits. II-206
NOTES (continued) Mississippi Power Company 1995 Annual Report Details of the federal and state income tax provisions are shown below: 1995 1994 1993 --------------------------------- (in thousands) Total provision for income taxes Federal -- Currently payable $32,546 $26,072 $15,842 Deferred --current year 5,122 6,313 5,158 --reversal of prior years (7,039) (5,161) (820) --------------------------------------------------------------- 30,629 27,224 20,180 --------------------------------------------------------------- State -- Currently payable 3,426 3,978 2,945 Deferred --current 2,270 1,669 1,339 --reversal of prior years (833) (1,258) (638) -------------------------------------------------------------- 4,863 4,389 3,646 --------------------------------------------------------------- Total 35,492 31,613 23,826 Less income taxes charged to other income 1,006 227 1,158 --------------------------------------------------------------- Federal and state income taxes charged to operations $34,486 $31,386 $22,668 =============================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities are as follows: 1995 1994 ----------------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $145,093 $138,281 Basis differences 10,815 11,645 Coal contract buyouts 145 3,851 Other 16,478 17,908 ------------------------------------------------------------- Total 172,531 171,685 ------------------------------------------------------------- Deferred tax assets: Other property basis differences 25,951 27,375 Pension and other benefits 7,356 5,386 Property insurance 4,551 4,171 Unbilled fuel 3,039 3,649 Other 7,103 7,009 ------------------------------------------------------------- Total 48,000 47,590 ------------------------------------------------------------- Net deferred tax liabilities 124,531 124,095 Portion included in current assets, net 5,180 5,410 ------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $129,711 $129,505 ============================================================= In 1989, under order of the MPSC, Mississippi Power began amortizing deferred income taxes not covered by the Internal Revenue Service normalization requirements, that had been recorded at rates higher than those specified by the current statutory income tax rules. This amortization occurred over a 60-month period, the effect of which was a reduction of income tax expense of approximately $2.7 million per year. This tax rate differential has been fully amortized. Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $1.5 million in 1995, 1994 and 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. II-207
NOTES (continued) Mississippi Power Company 1995 Annual Report A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1995 1994 1993 ----------------------------- Total effective tax rate 38% 37% 33% State income tax, net of federal income tax benefit (3) (3)% (3) Tax rate differential - 1 4 Other - - 1 ------------------------------------------------------------- Statutory federal tax rate 35% 35% 35% ============================================================= Mississippi Power and the subsidiaries of The Southern Company file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. OTHER LONG-TERM DEBT Details of other long-term debt are as follows: December 31, 1995 1994 --------------------- (in thousands) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: 5.8$% due 2007 $ 970 $ 980 Variable rate due 2020 6,550 6,550 Variable rate due 2022 16,750 16,750 6.20% due 2023 13,000 13,000 5.65% due 2023 25,875 25,875 Variable due 2025 10,600 - ------------------------------------------------------------ 73,745 63,155 ------------------------------------------------------------ Notes payable: 4.15% to 7.50% due 1995 - 40,689 Variable rates (5.88% to 5.89% at 1/1/95) due 1995 - 20,000 Variable rates (5.85% to 6.015% at 1/1/96) due 1996 55,000 35,000 ------------------------------------------------------------ 55,000 95,689 ------------------------------------------------------------ Total $128,745 $158,844 ============================================================ Pollution control obligations represent installment or lease purchases of pollution control facilities financed by application of funds derived from sales by public authorities of tax-exempt revenue bonds. Mississippi Power has authenticated and delivered to the Trustee a like principal amount of first mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under these agreements. The 5.8% Series of pollution control obligations has a cash sinking fund requirement of $10 thousand annually through 1997 and $20 thousand annually in 1998, 1999 and 2000. The $55 million in notes payable is all due in 1996. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year is as follows: 1995 1994 -------------------- (in thousands) Bond improvement fund requirements $ 2,219 $ 1,931 Less: Portion to be satisfied by certifying property additions - 1,431 ------------------------------------------------------------- Cash improvement fund requirements 2,219 500 Pollution control bond cash sinking fund requirements (Note 9) 10 10 Current portion of notes payable (Note 9) 55,000 40,689 ============================================================= Total $57,229 $41,199 ============================================================= The first mortgage bond improvement fund requirement is one percent of each outstanding series authenticated under the indenture of Mississippi Power prior to January 1 of each year, other than first mortgage bonds issued as collateral security for certain pollution control obligations. The requirement must be satisfied by June 1 of each year by depositing cash or reacquiring bonds, or by pledging additional property equal to 166-2/3 percent of such requirement. 11. COMMON STOCK DIVIDEND RESTRICTIONS Mississippi Power's first mortgage bond indenture and the corporate charter contain various common stock dividend restrictions. At December 31, 1995, some $118 million of retained earnings was restricted against the payment of cash dividends on common stock under the most restrictive terms of the mortgage indenture or corporate charter. II-208
NOTES (continued) Mississippi Power Company 1995 Annual Report 12. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1995 and 1994 are as follows: Net Income After Dividends Quarter Operating Operating On Ended Revenues Income Preferred Stock ------------------------------------------------------------------- March 1995 $109,572 $15,729 $ 9,269 June 1995 128,504 22,193 14,737 September 1995 157,119 28,517 22,161 December 1995 121,358 12,171 6,364 March 1994 $114,134 $12,910 $ 8,266 June 1994 131,792 19,891 13,744 September 1994 142,340 26,212 21,357 December 1994 110,896 14,062 5,790 Mississippi Power's business is influenced by seasonal weather conditions and the timing of rate changes. II-209
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $516,553 $499,162 $474,883 Net Income after Dividends on Preferred Stock (in thousands) $52,531 $49,157 $42,436 Cash Dividends on Common Stock (in thousands) $39,400 $34,100 $29,000 Return on Average Common Equity (percent) 14.26 14.38 14.09 Total Assets (in thousands) $1,148,953 $1,123,711 $1,050,334 Gross Property Additions (in thousands) $67,570 $104,014 $139,976 - - ------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $374,884 $361,753 $321,768 Preferred stock 74,414 74,414 74,414 Preferred stock subject to mandatory redemption - - - Long-term debt 288,820 306,522 250,391 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $738,118 $742,689 $646,573 ========================================================================================================================= Capitalization Ratios (percent): Common stock equity 50.8 48.7 49.8 Preferred stock 10.1 10.0 11.5 Long-term debt 39.1 41.3 38.7 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ========================================================================================================================= First Mortgage Bonds (in thousands): Issued 30,000 35,000 70,000 Retired 1,625 32,628 51,300 Preferred Stock (in thousands): Issued - - 23,404 Retired - - 23,404 - - ------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Aa3 Aa3 A1 Standard and Poor's A+ A+ A+ Duff & Phelps AA- A+ A+ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A+ A A - - ------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 154,014 152,891 151,692 Commercial 29,903 29,276 28,648 Industrial 642 650 570 Other 194 189 190 - - ------------------------------------------------------------------------------------------------------------------------- Total 184,753 183,006 181,100 ========================================================================================================================= Employees (year-end) 1,421 1,535 1,586 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-210
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $434,447 $432,386 $446,871 Net Income after Dividends on Preferred Stock (in thousands) $36,790 $22,627 $34,176 Cash Dividends on Common Stock (in thousands) $28,000 $28,500 $27,500 Return on Average Common Equity (percent) 13.27 8.17 12.36 Total Assets (in thousands) $791,283 $790,641 $800,026 Gross Property Additions (in thousands) $68,189 $53,675 $49,009 - - ------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $280,640 $273,855 $279,833 Preferred stock 74,414 39,414 39,414 Preferred stock subject to mandatory redemption - - 3,750 Long-term debt 238,650 304,150 270,724 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $593,704 $617,419 $593,721 ========================================================================================================================= Capitalization Ratios (percent): Common stock equity 47.3 44.4 47.1 Preferred stock 12.5 6.4 7.3 Long-term debt 40.2 49.2 45.6 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ========================================================================================================================= First Mortgage Bonds (in thousands): Issued 40,000 50,000 - Retired 104,703 - 4,000 Preferred Stock (in thousands): Issued 35,000 - - Retired - 4,118 750 - - ------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A A A - - ------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 150,248 148,978 147,738 Commercial 28,056 27,441 27,134 Industrial 573 562 574 Other 189 400 411 - - ------------------------------------------------------------------------------------------------------------------------- Total 179,066 177,381 175,857 ========================================================================================================================= Employees (year-end) 1,619 1,630 1,842 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-211A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands) $442,650 $437,939 $455,843 Net Income after Dividends on Preferred Stock (in thousands) $38,576 $36,081 $35,200 Cash Dividends on Common Stock (in thousands) $27,000 $27,600 $24,700 Return on Average Common Equity (percent) 14.43 14.03 14.68 Total Assets (in thousands) $786,570 $779,319 $764,068 Gross Property Additions (in thousands) $43,916 $54,550 $53,288 - - ------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $273,157 $261,473 $252,992 Preferred stock 39,414 39,414 39,414 Preferred stock subject to mandatory redemption 4,500 5,250 6,750 Long-term debt 277,693 287,525 294,811 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $594,764 $593,662 $593,967 ========================================================================================================================= Capitalization Ratios (percent): Common stock equity 45.9 44.1 42.6 Preferred stock 7.4 7.5 7.8 Long-term debt 46.7 48.4 49.6 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ========================================================================================================================= First Mortgage Bonds (in thousands): Issued - - - Retired 3,823 - 29,701 Preferred Stock (in thousands): Issued - - - Retired 750 1,500 1,500 - - ------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps A+ 5 5 Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A 6 6 - - ------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 147,308 146,750 146,273 Commercial 26,867 26,751 26,342 Industrial 525 478 438 Other 404 399 389 - - ------------------------------------------------------------------------------------------------------------------------- Total 175,104 174,378 173,442 ========================================================================================================================= Employees (year-end) 1,750 1,831 1,898 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-211B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1995 Annual Report - - --------------------------------------------------------------------------------------------------------- 1986 1985 - - --------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands) $476,265 $475,610 Net Income after Dividends on Preferred Stock (in thousands) $33,814 $33,330 Cash Dividends on Common Stock (in thousands) $23,700 $22,600 Return on Average Common Equity (percent) 15.28 15.83 Total Assets (in thousands) $767,110 $679,577 Gross Property Additions (in thousands) $62,488 $57,791 - - --------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $226,601 $216,087 Preferred stock 39,414 39,414 Preferred stock subject to mandatory redemption 8,250 9,750 Long-term debt 299,684 261,594 - - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $573,949 $526,845 ========================================================================================================= Capitalization Ratios (percent): Common stock equity 39.5 41.0 Preferred stock 8.3 9.3 Long-term debt 52.2 49.7 - - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ========================================================================================================= First Mortgage Bonds (in thousands): Issued 35,000 - Retired 29,250 250 Preferred Stock (in thousands): Issued - - Retired 1,500 1,111 - - --------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A+ A Duff & Phelps 5 5 Preferred Stock - Moody's a1 a1 Standard and Poor's A A Duff & Phelps 6 6 - - --------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 145,809 145,071 Commercial 26,217 25,629 Industrial 393 371 Other 363 356 - - --------------------------------------------------------------------------------------------------------- Total 172,782 171,427 ========================================================================================================= Employees (year-end) 1,882 1,801 - - --------------------------------------------------------------------------------------------------------- </TABLE> II-211C
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $134,286 $124,257 $118,793 Commercial 131,034 124,716 115,152 Industrial 140,947 142,268 130,198 Other 3,914 3,882 3,760 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 410,181 395,123 367,903 Sales for resale - non-affiliates 91,820 88,122 83,511 Sales for resale - affiliates 7,691 9,538 15,519 - - ------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 509,692 492,783 466,933 Other revenues 6,861 6,379 7,950 - - ------------------------------------------------------------------------------------------------------------------------- Total $516,553 $499,162 $474,883 ========================================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 2,040,608 1,922,217 1,929,835 Commercial 2,242,163 2,100,625 1,933,685 Industrial 3,813,456 3,847,011 3,623,543 Other 38,559 38,147 38,357 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 8,134,786 7,908,000 7,525,420 Sales for resale - non-affiliates 2,493,519 2,555,914 2,544,982 Sales for resale - affiliates 243,554 174,342 426,919 - - ------------------------------------------------------------------------------------------------------------------------- Total 10,871,859 10,638,256 10,497,321 ========================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.58 6.46 6.16 Commercial 5.84 5.94 5.96 Industrial 3.70 3.70 3.59 Total retail 5.04 5.00 4.89 Total sales 4.69 4.63 4.45 Residential Average Annual Kilowatt-Hour Use Per Customer 13,307 12,611 12,780 Residential Average Annual Revenue Per Customer $875.69 $815.21 $786.71 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,011 Maximum Peak-Hour Demand (megawatts): Winter 1,637 1,636 1,401 Summer 2,095 1,874 1,872 Annual Load Factor (percent) 60.0 63.4 60.0 Plant Availability - Fossil-Steam (percent) 92.1 85.4 88.0 - - ------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 58.0 56.0 63.5 Oil and gas 15.2 10.2 7.6 Purchased power - From non-affiliates 2.4 1.2 1.3 From affiliates 24.4 32.6 27.6 - - ------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,249 10,295 10,075 Cost of fuel per million BTU (cents) 160.48 165.96 170.13 Average cost of fuel per net kilowatt-hour generated (cents) 1.64 1.71 1.71 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-212
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $109,781 $103,820 $102,243 Commercial 107,131 103,666 103,352 Industrial 117,010 116,972 123,754 Other 3,533 5,869 6,078 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 337,455 330,327 335,427 Sales for resale - non-affiliates 80,213 78,826 86,194 Sales for resale - affiliates 10,055 18,044 20,157 - - ------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 427,723 427,197 441,778 Other revenues 6,724 5,189 5,093 - - ------------------------------------------------------------------------------------------------------------------------- Total $434,447 $432,386 $446,871 ========================================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,804,858 1,832,266 1,804,838 Commercial 1,811,042 1,768,441 1,718,074 Industrial 3,536,634 3,297,247 3,311,460 Other 38,261 89,375 85,938 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 7,190,795 6,987,329 6,920,310 Sales for resale - non-affiliates 2,687,917 2,706,320 2,883,581 Sales for resale - affiliates 280,443 617,696 714,365 - - ------------------------------------------------------------------------------------------------------------------------- Total 10,159,155 10,311,345 10,518,256 ========================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.08 5.67 5.66 Commercial 5.92 5.86 6.02 Industrial 3.31 3.55 3.74 Total retail 4.69 4.73 4.85 Total sales 4.21 4.14 4.20 Residential Average Annual Kilowatt-Hour Use Per Customer 12,066 12,338 12,228 Residential Average Annual Revenue Per Customer $733.90 $699.11 $692.70 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,011 2,011 1,998 Maximum Peak-Hour Demand (megawatts): Winter 1,386 1,267 1,201 Summer 1,755 1,682 1,724 Annual Load Factor (percent) 60.8 61.5 59.0 Plant Availability - Fossil-Steam (percent) 92.0 89.8 93.3 - - ------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 60.4 64.1 62.6 Oil and gas 5.8 8.1 14.0 Purchased power - From non-affiliates 1.2 0.7 0.8 From affiliates 32.6 27.1 22.6 - - ------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,888 10,142 10,319 Cost of fuel per million BTU (cents) 162.27 177.52 183.27 Average cost of fuel per net kilowatt-hour generated (cents) 1.60 1.80 1.89 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-213A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1995 Annual Report - - ------------------------------------------------------------------------------------------------------------------------- 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Operating Revenues (in thousands): Residential $100,068 $96,711 $98,338 Commercial 103,403 98,772 98,669 Industrial 128,983 123,038 129,004 Other 5,992 5,874 5,723 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 338,446 324,395 331,734 Sales for resale - non-affiliates 82,111 75,525 88,060 Sales for resale - affiliates 16,938 33,747 31,278 - - ------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 437,495 433,667 451,072 Other revenues 5,155 4,272 4,771 - - ------------------------------------------------------------------------------------------------------------------------- Total $442,650 $437,939 $455,843 ========================================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,741,855 1,686,722 1,658,327 Commercial 1,686,302 1,607,988 1,555,044 Industrial 3,204,208 2,879,457 2,862,632 Other 87,611 86,049 81,153 - - ------------------------------------------------------------------------------------------------------------------------- Total retail 6,719,976 6,260,216 6,157,156 Sales for resale - non-affiliates 2,798,086 2,280,341 2,615,058 Sales for resale - affiliates 527,970 1,100,808 955,303 - - ------------------------------------------------------------------------------------------------------------------------- Total 10,046,032 9,641,365 9,727,517 ========================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 5.74 5.73 5.93 Commercial 6.13 6.14 6.35 Industrial 4.03 4.27 4.51 Total retail 5.04 5.18 5.39 Total sales 4.35 4.50 4.64 Residential Average Annual Kilowatt-Hour Use Per Customer 11,842 11,499 11,356 Residential Average Annual Revenue Per Customer $680.32 $659.30 $673.41 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,998 1,966 1,966 Maximum Peak-Hour Demand (megawatts): Winter 1,556 1,284 1,224 Summer 1,682 1,621 1,548 Annual Load Factor (percent) 58.8 57.6 59.0 Plant Availability - Fossil-Steam (percent) 94.0 93.0 93.5 - - ------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.4 86.3 79.4 Oil and gas 13.5 4.8 5.3 Purchased power - From non-affiliates 0.5 0.4 0.3 From affiliates 22.6 8.5 15.0 - - ------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,159 10,220 10,525 Cost of fuel per million BTU (cents) 178.38 185.13 194.46 Average cost of fuel per net kilowatt-hour generated (cents) 1.81 1.89 2.05 - - ------------------------------------------------------------------------------------------------------------------------- </TABLE> II-213B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1995 Annual Report - - --------------------------------------------------------------------------------------------------------- 1986 1985 - - --------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Revenues (in thousands): Residential $101,984 $96,878 Commercial 100,521 96,883 Industrial 134,501 129,495 Other 5,882 5,884 - - --------------------------------------------------------------------------------------------------------- Total retail 342,888 329,140 Sales for resale - non-affiliates 107,270 115,757 Sales for resale - affiliates 21,669 27,277 - - --------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 471,827 472,174 Other revenues 4,438 3,436 - - --------------------------------------------------------------------------------------------------------- Total $476,265 $475,610 ========================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,674,407 1,603,539 Commercial 1,544,899 1,500,972 Industrial 2,877,026 2,786,883 Other 81,352 83,142 - - --------------------------------------------------------------------------------------------------------- Total retail 6,177,684 5,974,536 Sales for resale - non-affiliates 2,382,443 2,819,439 Sales for resale - affiliates 704,461 733,142 - - --------------------------------------------------------------------------------------------------------- Total 9,264,588 9,527,117 ========================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.09 6.04 Commercial 6.51 6.45 Industrial 4.68 4.65 Total retail 5.55 5.51 Total sales 5.09 4.96 Residential Average Annual Kilowatt-Hour Use Per Customer 11,498 11,135 Residential Average Annual Revenue Per Customer $700.32 $672.71 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,966 1,966 Maximum Peak-Hour Demand (megawatts): Winter 1,208 1,310 Summer 1,612 1,444 Annual Load Factor (percent) 56.8 61.0 Plant Availability - Fossil-Steam (percent) 93.2 92.4 - - --------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 74.1 74.1 Oil and gas 5.1 2.8 Purchased power - From non-affiliates 2.0 0.4 From affiliates 18.8 22.7 - - --------------------------------------------------------------------------------------------------------- Total 100.0 100.0 ========================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,569 10,396 Cost of fuel per million BTU (cents) 224.63 235.24 Average cost of fuel per net kilowatt-hour generated (cents) 2.37 2.45 - - --------------------------------------------------------------------------------------------------------- </TABLE> II-213C
<TABLE> <CAPTION> STATEMENTS OF INCOME Mississippi Power Company =================================================================================================================================== For the Years Ended December 31, 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 508,862 $ 489,624 $ 459,364 Revenues from affiliates 7,691 9,538 15,519 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 516,553 499,162 474,883 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 111,071 102,216 113,986 Purchased power from non-affiliates 6,019 2,711 2,198 Purchased power from affiliates 57,777 68,543 58,019 Proceeds from settlement of disputed contracts - - - Other 107,296 97,988 100,381 Maintenance 39,627 45,785 44,001 Depreciation and amortization 39,224 35,716 33,099 Taxes other than income taxes 42,443 41,742 37,145 Federal and state income taxes 34,486 31,386 22,668 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 437,943 426,087 411,497 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Income 78,610 73,075 63,386 Other Income (Expense): Allowance for equity funds used during construction 366 1,099 1,010 Interest income 199 87 517 Other, net 4,596 2,033 3,971 Income taxes applicable to other income (1,006) (227) (1,158) - - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 82,765 76,067 67,726 - - ----------------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 21,898 19,725 17,688 Allowance for debt funds used during construction (399) (1,039) (788) Interest on notes payable 1,141 1,442 1,000 Amortization of debt discount, premium, and expense, net 1,510 1,479 1,262 Other interest charges 1,185 404 728 - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest charges 25,335 22,011 19,890 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 57,430 54,056 47,836 - - ----------------------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes - - - Loss on disposal of discontinued subsidiary, net of taxes - - - Net Loss From Discontinued Operations - - - - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 57,430 54,056 47,836 Dividends on Preferred Stock 4,899 4,899 5,400 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 52,531 $ 49,157 $ 42,436 =================================================================================================================================== </TABLE> II-214
<TABLE> <CAPTION> STATEMENTS OF INCOME Mississippi Power Company =================================================================================================================================== For the Years Ended December 31, 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 424,392 $ 414,342 $ 426,714 Revenues from affiliates 10,055 18,044 20,157 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 434,447 432,386 446,871 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 96,743 120,485 138,303 Purchased power from non-affiliates 1,337 851 1,406 Purchased power from affiliates 60,689 45,506 49,547 Proceeds from settlement of disputed contracts (189) (4,205) - Other 90,581 86,932 83,730 Maintenance 43,165 44,166 33,368 Depreciation and amortization 32,789 32,147 30,770 Taxes other than income taxes 34,664 35,414 32,709 Federal and state income taxes 16,378 13,976 17,144 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 376,157 375,272 386,977 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Income 58,290 57,114 59,894 Other Income (Expense): Allowance for equity funds used during construction 642 728 307 Interest income 766 1,093 829 Other, net 5,501 3,845 6,297 Income taxes applicable to other income (1,427) (863) (1,666) - - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 63,772 61,917 65,661 - - ----------------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 22,357 23,656 22,221 Allowance for debt funds used during construction (563) (584) (600) Interest on notes payable 362 603 1,142 Amortization of debt discount, premium, and expense, net 630 377 359 Other interest charges 339 285 333 - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest charges 23,125 24,337 23,455 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 40,647 37,580 42,206 - - ----------------------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes - (6,404) (4,669) Loss on disposal of discontinued subsidiary, net of taxes - (5,455) - Net Loss From Discontinued Operations - (11,859) (4,669) - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 40,647 25,721 37,537 Dividends on Preferred Stock 3,857 3,094 3,361 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 36,790 $ 22,627 $ 34,176 =================================================================================================================================== </TABLE> II-215A
<TABLE> <CAPTION> STATEMENTS OF INCOME Mississippi Power Company =================================================================================================================================== For the Years Ended December 31, 1989 1988 1987 - - ----------------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 425,712 $ 404,192 $ 424,565 Revenues from affiliates 16,938 33,747 31,278 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 442,650 437,939 455,843 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 133,671 165,912 167,165 Purchased power from non-affiliates 1,266 1,257 1,108 Purchased power from affiliates 47,066 19,270 36,114 Proceeds from settlement of disputed contracts - - - Other 84,820 83,542 81,331 Maintenance 35,658 33,412 33,974 Depreciation and amortization 28,001 26,610 26,210 Taxes other than income taxes 32,435 29,638 27,882 Federal and state income taxes 18,387 20,313 23,888 - - ----------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 381,304 379,954 397,672 - - ----------------------------------------------------------------------------------------------------------------------------------- Operating Income 61,346 57,985 58,171 Other Income (Expense): Allowance for equity funds used during construction 903 850 608 Interest income 1,096 1,030 1,121 Other, net 6,013 6,399 7,065 Income taxes applicable to other income (1,392) (1,148) (2,507) - - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 67,966 65,116 64,458 - - ----------------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 21,685 22,271 24,139 Allowance for debt funds used during construction (821) (595) (652) Interest on notes payable 689 341 558 Amortization of debt discount, premium, and expense, net 362 363 388 Other interest charges 566 522 601 - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest charges 22,481 22,902 25,034 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 45,485 42,214 39,424 - - ----------------------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes (3,459) (2,549) (487) Loss on disposal of discontinued subsidiary, net of taxes - - - Net Loss From Discontinued Operations (3,459) (2,549) (487) - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 42,026 39,665 38,937 Dividends on Preferred Stock 3,450 3,584 3,737 - - ----------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 38,576 $ 36,081 $ 35,200 =================================================================================================================================== </TABLE> II-215B
<TABLE> <CAPTION> STATEMENTS OF INCOME Mississippi Power Company ================================================================================================================== For the Years Ended December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> Operating Revenues: Revenues $ 454,596 $ 448,333 Revenues from affiliates 21,669 27,277 - - ------------------------------------------------------------------------------------------------------------------ Total operating revenues 476,265 475,610 - - ------------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 183,515 188,477 Purchased power from non-affiliates 4,671 1,807 Purchased power from affiliates 46,322 56,522 Proceeds from settlement of disputed contracts - - Other 70,009 58,528 Maintenance 31,368 39,509 Depreciation and amortization 30,293 25,412 Taxes other than income taxes 26,145 23,930 Federal and state income taxes 30,881 29,142 - - ------------------------------------------------------------------------------------------------------------------ Total operating expenses 423,204 423,327 - - ------------------------------------------------------------------------------------------------------------------ Operating Income 53,061 52,283 Other Income (Expense): Allowance for equity funds used during construction 1,030 693 Interest income 864 1,326 Other, net 8,983 9,867 Income taxes applicable to other income (3,517) (3,880) - - ------------------------------------------------------------------------------------------------------------------ Income Before Interest Charges 60,421 60,289 - - ------------------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 22,707 22,684 Allowance for debt funds used during construction (770) (434) Interest on notes payable 252 - Amortization of debt discount, premium, and expense, net 245 146 Other interest charges 283 562 - - ------------------------------------------------------------------------------------------------------------------ Net interest charges 22,717 22,958 - - ------------------------------------------------------------------------------------------------------------------ Net Income From Continuing Operations 37,704 37,331 - - ------------------------------------------------------------------------------------------------------------------ Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes - - Loss on disposal of discontinued subsidiary, net of taxes - - Net Loss From Discontinued Operations - - - - ------------------------------------------------------------------------------------------------------------------ Net Income 37,704 37,331 Dividends on Preferred Stock 3,890 4,001 - - ------------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 33,814 $ 33,330 ================================================================================================================== </TABLE> II-215C
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Mississippi Power Company ======================================================================================================================= For the Years Ended December 31, 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 57,430 $ 54,056 $ 47,836 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 51,588 47,827 45,660 Deferred income taxes, net (480) 1,563 5,039 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (366) (1,099) (1,010) Non-cash proceeds from settlement of disputed contracts - - - Other, net 5,704 5,230 3,005 Changes in certain current assets and liabilities -- Receivables, net (8,758) 3,066 (4,347) Inventories 3,962 (9,856) 11,119 Payables 17,421 (8,754) 4,133 Other 681 3,334 (8,033) - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 127,182 95,367 103,402 - - ----------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (67,570) (104,014) (139,976) Other (1,697) (14,087) 7,562 - - ----------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (69,267) (118,101) (132,414) - - ----------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - 23,404 First mortgage bonds 30,000 35,000 70,000 Pollution control bonds 10,600 - 38,875 Other long-term debt - 85,310 - Capital contributions - 25,000 30,036 Redemptions: Preferred stock - - (23,404) First mortgage bonds (1,625) (32,628) (51,300) Pollution control bonds (10) (10) (25,885) Other long-term debt (40,689) (9,299) (8,170) Notes payable, net - (40,000) 9,000 Payment of preferred stock dividends (4,899) (4,899) (5,400) Payment of common stock dividends (39,400) (34,100) (29,000) Miscellaneous (568) (1,201) (5,683) - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (46,591) 23,173 22,473 - - ----------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 11,324 439 (6,539) Cash and Cash Equivalents at Beginning of Year 1,317 878 7,417 - - ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 12,641 $ 1,317 $ 878 ======================================================================================================================= ( ) Denotes use of cash. </TABLE> II-216
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Mississippi Power Company ======================================================================================================================= For the Years Ended December 31, 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 40,647 $ 25,721 $ 37,537 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 41,472 41,773 41,079 Deferred income taxes, net (5,473) (11,869) 2,756 Deferred investment tax credits, net - (2) (26) Allowance for equity funds used during construction (642) (728) (307) Non-cash proceeds from settlement of disputed contracts (189) (4,071) - Other, net 8,093 (4,982) 7,257 Changes in certain current assets and liabilities -- Receivables, net 1,002 35,343 (6,252) Inventories 975 10,518 (8,922) Payables 460 (4,949) (5,552) Other 6,095 11,433 (1,461) - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 92,440 98,187 66,109 - - ----------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (68,189) (53,675) (49,009) Other 4,235 2,148 4,481 - - ----------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (63,954) (51,527) (44,528) - - ----------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock 35,000 - - First mortgage bonds 40,000 50,000 - Pollution control bonds 23,300 - - Other long-term debt - 844 - Capital contributions 26 - - Redemptions: Preferred stock - (4,118) (750) First mortgage bonds (104,703) - (4,000) Pollution control bonds (23,650) (300) (288) Other long-term debt (6,212) (8,958) (6,416) Notes payable, net 26,500 (25,603) 17,146 Payment of preferred stock dividends (3,857) (3,094) (3,361) Payment of common stock dividends (28,000) (28,500) (27,500) Miscellaneous (7,821) (839) 2 - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (49,417) (20,568) (25,167) - - ----------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (20,931) 26,092 (3,586) Cash and Cash Equivalents at Beginning of Year 28,348 2,256 5,842 - - ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 7,417 $ 28,348 $ 2,256 ======================================================================================================================= ( ) Denotes use of cash. </TABLE> II-217A
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Mississippi Power Company ======================================================================================================================= For the Years Ended December 31, 1989 1988 1987 - - ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 42,026 $ 39,665 $ 38,937 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 35,878 34,440 33,971 Deferred income taxes, net (294) (3,053) 10,035 Deferred investment tax credits, net (38) 571 896 Allowance for equity funds used during construction (903) (850) (608) Non-cash proceeds from settlement of disputed contracts - - - Other, net 4,306 3,503 1,965 Changes in certain current assets and liabilities -- Receivables, net (18,506) 816 12,000 Inventories 3,687 283 13,708 Payables 1,307 (5,241) 7,487 Other 2,172 (2,294) (9,342) - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 69,635 67,840 109,049 - - ----------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (43,916) (54,550) (53,288) Other 1,860 8,368 (1,461) - - ----------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (42,056) (46,182) (54,749) - - ----------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - First mortgage bonds - - - Pollution control bonds - - - Other long-term debt 844 - 130 Capital contributions - - 16,000 Redemptions: Preferred stock (750) (1,500) (1,500) First mortgage bonds (3,823) - (29,701) Pollution control bonds (62) (50) (50) Other long-term debt (5,919) (5,401) (4,974) Notes payable, net 6,457 6,500 - Payment of preferred stock dividends (3,450) (3,584) (3,737) Payment of common stock dividends (27,000) (27,600) (24,700) Miscellaneous - - (2,696) - - ----------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (33,703) (31,635) (51,228) - - ----------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (6,124) (9,977) 3,072 Cash and Cash Equivalents at Beginning of Year 11,966 21,943 18,871 - - ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 5,842 $ 11,966 $ 21,943 ======================================================================================================================= ( ) Denotes use of cash. </TABLE> II-217B
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Mississippi Power Company ======================================================================================================= For the Years Ended December 31, 1986 1985 - - ------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Activities: Net income $ 37,704 $ 37,331 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 33,432 28,229 Deferred income taxes, net 41,059 11,246 Deferred investment tax credits, net 2,442 1,749 Allowance for equity funds used during construction (1,030) (693) Non-cash proceeds from settlement of disputed contracts - - Other, net (14,162) (2,709) Changes in certain current assets and liabilities -- Receivables, net (1,708) (5,050) Inventories (8,499) 12,281 Payables (14,502) 4,656 Other 11,546 (3,725) - - ------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 86,282 83,315 - - ------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (62,488) (57,791) Other (61,162) 3,825 - - ------------------------------------------------------------------------------------------------------- Net cash used for investing activities (123,650) (53,966) - - ------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - First mortgage bonds 35,000 - Pollution control bonds - - Other long-term debt 60,663 1,000 Capital contributions 400 400 Redemptions: Preferred stock (1,500) (1,111) First mortgage bonds (29,250) (250) Pollution control bonds (50) (50) Other long-term debt (200) - Notes payable, net - - Payment of preferred stock dividends (3,890) (4,001) Payment of common stock dividends (23,700) (22,600) Miscellaneous (2,929) (18) - - ------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 34,544 (26,630) - - ------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (2,824) 2,719 Cash and Cash Equivalents at Beginning of Year 21,695 18,976 - - ------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 18,871 $ 21,695 ======================================================================================================= ( ) Denotes use of cash. </TABLE> II-217C
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 717,055 $ 705,043 $ 597,425 Transmission 220,038 202,503 188,375 Distribution 335,163 313,345 295,799 General 162,071 164,141 157,248 Construction work in progress 41,210 44,838 108,063 - - ------------------------------------------------------------------------------------------------------------------------------ Total utility plant 1,475,537 1,429,870 1,346,910 Accumulated provision for depreciation 499,308 477,098 462,725 - - ------------------------------------------------------------------------------------------------------------------------------ Total 976,229 952,772 884,185 - - ------------------------------------------------------------------------------------------------------------------------------ Less property-related accumulated deferred income taxes - - - - - ------------------------------------------------------------------------------------------------------------------------------ Total 976,229 952,772 884,185 - - ------------------------------------------------------------------------------------------------------------------------------ Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 4,160 3,353 11,289 - - ------------------------------------------------------------------------------------------------------------------------------ Total 4,160 3,353 11,289 - - ------------------------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents 12,641 1,317 878 Investment securities - - - Receivables, net 36,228 25,424 28,021 Accrued utility revenues 12,382 14,428 14,897 Fossil fuel stock, at average cost 15,666 16,885 11,185 Materials and supplies, at average cost 22,558 25,301 21,145 Current portion of deferred fuel commitments 1,546 1,068 440 Prepayments 7,584 11,189 8,971 Vacation pay deferred 4,715 4,588 4,797 - - ------------------------------------------------------------------------------------------------------------------------------ Total 113,320 100,200 90,334 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Charges: Debt expense, being amortized 1,530 1,358 1,103 Premium on reacquired debt, being amortized 8,509 9,571 10,563 Deferred fuel commitments - 9,000 17,520 Deferred charges related to income taxes 23,384 25,036 25,267 Miscellaneous 21,821 22,421 10,073 - - ------------------------------------------------------------------------------------------------------------------------------ Total 55,244 67,386 64,526 - - ------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 1,148,953 $ 1,123,711 $ 1,050,334 ============================================================================================================================== </TABLE> II-218
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 576,848 $ 567,588 $ 560,537 Transmission 173,278 162,379 151,949 Distribution 279,335 259,929 247,705 General 151,044 141,564 136,815 Construction work in progress 41,692 33,078 26,816 - - ------------------------------------------------------------------------------------------------------------------------------ Total utility plant 1,222,197 1,164,538 1,123,822 Accumulated provision for depreciation 440,777 415,135 392,440 - - ------------------------------------------------------------------------------------------------------------------------------ Total 781,420 749,403 731,382 - - ------------------------------------------------------------------------------------------------------------------------------ Less property-related accumulated deferred income taxes 142,338 138,616 139,970 - - ------------------------------------------------------------------------------------------------------------------------------ Total 639,082 610,787 591,412 - - ------------------------------------------------------------------------------------------------------------------------------ Other Property and Investments: Securities received from settlement of disputed contracts - 4,113 - Miscellaneous 4,539 3,954 8,631 - - ------------------------------------------------------------------------------------------------------------------------------ Total 4,539 8,067 8,631 - - ------------------------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents 7,417 28,348 2,256 Investment securities 3,622 - - Receivables, net 20,219 27,152 67,734 Accrued utility revenues 14,898 12,420 10,797 Fossil fuel stock, at average cost 21,341 22,373 29,812 Materials and supplies, at average cost 22,108 22,051 25,130 Current portion of deferred fuel commitments 1,861 933 1,430 Prepayments 5,869 6,137 11,392 Vacation pay deferred 4,651 4,406 3,955 - - ------------------------------------------------------------------------------------------------------------------------------ Total 101,986 123,820 152,506 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Charges: Debt expense, being amortized 804 981 824 Premium on reacquired debt, being amortized 10,102 4,676 4,919 Deferred fuel commitments 25,255 31,039 39,020 Deferred charges related to income taxes - - - Miscellaneous 9,515 11,271 2,714 - - ------------------------------------------------------------------------------------------------------------------------------ Total 45,676 47,967 47,477 - - ------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 791,283 $ 790,641 $ 800,026 ============================================================================================================================== </TABLE> II-219A
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 547,946 $ 529,742 $ 524,198 Transmission 147,288 134,674 130,963 Distribution 229,238 221,327 207,810 General 133,361 137,333 127,690 Construction work in progress 27,057 35,204 27,755 - - ------------------------------------------------------------------------------------------------------------------------------ Total utility plant 1,084,890 1,058,280 1,018,416 Accumulated provision for depreciation 366,193 348,085 328,761 - - ------------------------------------------------------------------------------------------------------------------------------ Total 718,697 710,195 689,655 - - ------------------------------------------------------------------------------------------------------------------------------ Less property-related accumulated deferred income taxes 138,071 134,220 127,912 - - ------------------------------------------------------------------------------------------------------------------------------ Total 580,626 575,975 561,743 - - ------------------------------------------------------------------------------------------------------------------------------ Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 7,792 8,153 4,122 - - ------------------------------------------------------------------------------------------------------------------------------ Total 7,792 8,153 4,122 - - ------------------------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents 5,842 11,966 21,943 Investment securities - - - Receivables, net 58,425 43,246 42,218 Accrued utility revenues 13,854 10,527 12,371 Fossil fuel stock, at average cost 24,788 26,587 29,989 Materials and supplies, at average cost 21,232 23,120 20,001 Current portion of deferred fuel commitments 3,017 - - Prepayments 12,512 12,341 830 Vacation pay deferred 3,910 3,815 3,956 - - ------------------------------------------------------------------------------------------------------------------------------ Total 143,580 131,602 131,308 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Charges: Debt expense, being amortized 886 949 1,012 Premium on reacquired debt, being amortized 5,161 5,404 5,647 Deferred fuel commitments 45,103 50,714 55,889 Deferred charges related to income taxes - - - Miscellaneous 3,422 6,522 4,347 - - ------------------------------------------------------------------------------------------------------------------------------ Total 54,572 63,589 66,895 - - ------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 786,570 $ 779,319 $ 764,068 ============================================================================================================================== </TABLE> II-219B
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company =========================================================================================================== At December 31, 1986 1985 - - ----------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> ASSETS Utility Plant: Production-fossil $ 509,128 $ 485,665 Transmission 125,304 121,405 Distribution 195,042 183,003 General 114,042 99,788 Construction work in progress 33,544 34,862 - - ----------------------------------------------------------------------------------------------------------- Total utility plant 977,060 924,723 Accumulated provision for depreciation 312,571 293,167 - - ----------------------------------------------------------------------------------------------------------- Total 664,489 631,556 - - ----------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 120,990 107,633 - - ----------------------------------------------------------------------------------------------------------- Total 543,499 523,923 - - ----------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - Miscellaneous 1,738 641 - - ----------------------------------------------------------------------------------------------------------- Total 1,738 641 - - ----------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 18,871 21,695 Investment securities - - Receivables, net 48,158 42,407 Accrued utility revenues 18,431 22,474 Fossil fuel stock, at average cost 46,067 40,638 Materials and supplies, at average cost 17,631 14,561 Current portion of deferred fuel commitments - - Prepayments 973 805 Vacation pay deferred 3,559 3,337 - - ----------------------------------------------------------------------------------------------------------- Total 153,690 145,917 - - ----------------------------------------------------------------------------------------------------------- Deferred Charges: Debt expense, being amortized 1,212 1,208 Premium on reacquired debt, being amortized 2,800 - Deferred fuel commitments 60,663 - Deferred charges related to income taxes - - Miscellaneous 3,508 7,888 - - ----------------------------------------------------------------------------------------------------------- Total 68,183 9,096 - - ----------------------------------------------------------------------------------------------------------- Total Assets $ 767,110 $ 679,577 =========================================================================================================== </TABLE> II-219C
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 Paid-in capital 179,362 179,362 154,362 Premium on preferred stock 372 372 372 Earnings retained in the business 157,459 144,328 129,343 - - ------------------------------------------------------------------------------------------------------------------------------ Total common equity 374,884 361,753 321,768 Preferred stock 74,414 74,414 74,414 Preferred stock subject to mandatory redemption - - - Long-term debt 288,820 306,522 250,391 - - ------------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 738,118 742,689 646,573 - - ------------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks - - 40,000 Preferred stock due within one year - - - Long-term debt due within one year 57,229 41,199 19,345 Accounts payable 50,775 34,481 60,928 Customer deposits 2,716 2,712 2,786 Taxes accrued 31,913 31,657 27,138 Interest accrued 4,701 4,427 4,237 Vacation pay accrued 4,563 4,588 4,797 Miscellaneous 8,890 10,025 9,323 - - ------------------------------------------------------------------------------------------------------------------------------ Total 160,787 129,089 168,554 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 129,711 129,505 124,334 Accumulated deferred investment tax credits 29,773 31,228 32,710 Deferred credits related to income taxes 43,266 45,832 48,228 Miscellaneous 47,298 45,368 29,935 - - ------------------------------------------------------------------------------------------------------------------------------ Total 250,048 251,933 235,207 - - ------------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 1,148,953 $ 1,123,711 $ 1,050,334 ============================================================================================================================== </TABLE> II-220
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 Paid-in capital 124,326 124,300 124,300 Premium on preferred stock 194 194 299 Earnings retained in the business 118,429 111,670 117,543 - - ------------------------------------------------------------------------------------------------------------------------------ Total common equity 280,640 273,855 279,833 Preferred stock 74,414 39,414 39,414 Preferred stock subject to mandatory redemption - - 3,750 Long-term debt 238,650 304,150 270,724 - - ------------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 593,704 617,419 593,721 - - ------------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks 31,000 4,500 30,103 Preferred stock due within one year - - 368 Long-term debt due within one year 8,878 14,650 7,039 Accounts payable 43,550 38,213 45,763 Customer deposits 2,976 3,109 3,430 Taxes accrued 32,035 29,609 24,935 Interest accrued 3,961 4,602 4,315 Vacation pay accrued 4,651 4,406 3,955 Miscellaneous 10,963 10,236 6,833 - - ------------------------------------------------------------------------------------------------------------------------------ Total 138,014 109,325 126,741 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 169 4,117 18,992 Accumulated deferred investment tax credits 34,242 35,657 37,187 Deferred credits related to income taxes - - - Miscellaneous 25,154 24,123 23,385 - - ------------------------------------------------------------------------------------------------------------------------------ Total 59,565 63,897 79,564 - - ------------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 791,283 $ 790,641 $ 800,026 ============================================================================================================================== </TABLE> II-221A
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company ============================================================================================================================== At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 Paid-in capital 124,300 124,300 124,300 Premium on preferred stock 299 299 299 Earnings retained in the business 110,867 99,183 90,702 - - ------------------------------------------------------------------------------------------------------------------------------ Total common equity 273,157 261,473 252,992 Preferred stock 39,414 39,414 39,414 Preferred stock subject to mandatory redemption 4,500 5,250 6,750 Long-term debt 277,693 287,525 294,811 - - ------------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 594,764 593,662 593,967 - - ------------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks 12,957 6,500 - Preferred stock due within one year 368 368 368 Long-term debt due within one year 10,717 9,789 5,451 Accounts payable 47,019 46,937 45,659 Customer deposits 3,906 3,904 3,857 Taxes accrued 23,843 21,130 21,351 Interest accrued 4,280 4,016 4,474 Vacation pay accrued 3,910 3,815 3,956 Miscellaneous 7,746 9,347 6,005 - - ------------------------------------------------------------------------------------------------------------------------------ Total 114,746 105,806 91,121 - - ------------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 22,085 24,556 27,411 Accumulated deferred investment tax credits 38,752 40,435 41,427 Deferred credits related to income taxes - - - Miscellaneous 16,223 14,860 10,142 - - ------------------------------------------------------------------------------------------------------------------------------ Total 77,060 79,851 78,980 - - ------------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 786,570 $ 779,319 $ 764,068 ============================================================================================================================== </TABLE> II-221B
<TABLE> <CAPTION> BALANCE SHEETS Mississippi Power Company =========================================================================================================== At December 31, 1986 1985 - - ----------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 Paid-in capital 108,300 107,900 Premium on preferred stock 299 299 Earnings retained in the business 80,311 70,197 - - ----------------------------------------------------------------------------------------------------------- Total common equity 226,601 216,087 Preferred stock 39,414 39,414 Preferred stock subject to mandatory redemption 8,250 9,750 Long-term debt 299,684 261,594 - - ----------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 573,949 526,845 - - ----------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - Preferred stock due within one year 368 368 Long-term debt due within one year 34,724 6,532 Accounts payable 36,490 50,992 Customer deposits 3,720 3,521 Taxes accrued 29,029 32,015 Interest accrued 5,064 5,502 Vacation pay accrued 3,559 3,337 Miscellaneous 5,746 5,464 - - ----------------------------------------------------------------------------------------------------------- Total 118,700 107,731 - - ----------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 25,922 - Accumulated deferred investment tax credits 42,183 41,311 Deferred credits related to income taxes - - Miscellaneous 6,356 3,690 - - ----------------------------------------------------------------------------------------------------------- Total 74,461 45,001 - - ----------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 767,110 $ 679,577 =========================================================================================================== </TABLE> II-221C
MISSISSIPPI POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 35,000 5-3/8% $ 35,000 3/1/98 1992 40,000 6-5/8% 40,000 8/1/00 1994 35,000 6.60% 35,000 3/1/04 1991 50,000 9-1/4% 45,447 5/1/21 1993 35,000 7.45% 35,000 6/1/23 1995 30,000 6-7/8% 30,000 12/1/25 =========== =========== $ 225,000 $ 220,447 =========== =========== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1977 $ 1,000 5.80% $ 970 10/1/07 1992 6,550 Variable 6,550 12/1/20 1992 16,750 Variable 16,750 12/1/22 1993 13,000 6.20% 13,000 4/1/23 1993 25,875 5.65% 25,875 11/1/23 1995 10,600 Variable 10,600 7/1/25 =========== =========== $ 73,775 $ 73,745 =========== =========== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding - - ------------------------------------------------------------------- (Thousands) 1947 20,099 4.60% $ 2,010 1956 40,000 4.40% 4,000 1965 50,000 4.72% 5,000 1968 50,000 7.00% 5,000 1992 350,000 7.25% 35,000 1993 150,000 6.32% 15,000 1993 84,040 6.65% 8,404 ========= =========== 744,139 $ 74,414 ========= =========== II-222
MISSISSIPPI POWER COMPANY SECURITIES RETIRED DURING 1995 First Mortgage Bonds Principal Interest Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1991 $ 1,625 9-1/4% Pollution Control Bonds Principal Interest Series Amount Rate - - -------------------------------------------------------------------------------- (Thousands) 1977 $ 10 5.80% II-223
SAVANNAH ELECTRIC AND POWER COMPANY FINANCIAL SECTION II-224
MANAGEMENT'S REPORT Savannah Electric and Power Company 1995 Annual Report The management of Savannah Electric and Power Company has prepared--and is responsible for--the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of four directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls and financial reporting matters. The internal auditors and the independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Savannah Electric and Power Company in conformity with generally accepted accounting principles. /s/ Arthur M. Gignilliat, Jr. Arthur M. Gignilliat, Jr. President and Chief Executive Officer /s/ K. R. Willis K. R. Willis Vice-President Treasurer and Chief Financial Officer February 21, 1996 II-225
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Savannah Electric and Power Company: We have audited the accompanying balance sheets and statements of capitalization of Savannah Electric and Power Company (a Georgia corporation and a wholly owned subsidiary of The Southern Company) as of December 31, 1995 and 1994, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-233 through II-245) referred to above present fairly, in all material respects, the financial position of Savannah Electric and Power Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-226
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Savannah Electric and Power Company 1995 Annual Report RESULTS OF OPERATIONS Earnings Savannah Electric and Power Company's net income after dividends on preferred stock for 1995 totaled $23.4 million, representing a $1.3 million increase over the prior year. This 5.8 percent improvement in earnings over 1994 is principally the result of increased retail energy sales, primarily attributable to exceptionally hot summer weather. In 1994, earnings were $22.1 million, representing a $0.6 million (3.0 percent) increase from the prior year. This increase was primarily due to a decrease in operating expenses, offset somewhat by an increase in interest expense. Revenues Total revenues for 1995 were $225.7 million, reflecting a 6.6 percent increase compared to 1994. The following table summarizes revenue increases and decreases compared to prior years: Increase (Decrease) From Prior Years -------------------------------------- 1995 1994 1993 -------------------------------------- Retail -- (in thousands) Change in base rates $ - $ - $(1,450) Sales growth 1,068 7,884 5,980 Weather 6,232 (6,589) 4,567 Fuel cost recovery and other 6,177 (9,214) 12,404 ------------------------------------------------------------------- Total retail 13,477 (7,919) 21,501 ------------------------------------------------------------------- Sales for resale-- Non-affiliates (2,935) (1,235) (1,800) Affiliates 754 4,013 928 ------------------------------------------------------------------- Total sales for resale (2,181) 2,778 (872) ------------------------------------------------------------------- Other operating revenues 2,648 (1,516) 52 ------------------------------------------------------------------- Total operating revenues $13,944 $(6,657) $20,681 =================================================================== Percent change 6.6% (3.0)% 10.5% ------------------------------------------------------------------- Retail revenues increased 6.7 percent in 1995, compared to a decrease of 3.8 percent in 1994. The increase in 1995 retail revenues is attributable to hot summer weather, an increase in the number of customers served, higher demand in the industrial sector, and an increase in fuel cost recovery revenues. Industrial energy sales were higher primarily because a major customer performed maintenance on its cogeneration facility during 1995 and purchased replacement energy from the Company. Under the Company's fuel cost recovery provisions, fuel revenues--including purchased energy--generally equal fuel expense and have no effect on earnings. The $2.6 million increase in other operating revenues reflects a decrease in the demand-side management rider in October 1994 and an increase in demand-side management program costs during 1995. Revenues from demand-side management riders (included in retail revenues) recover demand-side management program costs and have little impact on earnings. See Note 3 to the financial statements for further information on the Company's demand-side management programs. The decrease in 1994 retail revenues as compared to 1993 resulted from mild summer weather, reduced industrial energy sales, and substantially lower fuel cost recovery revenues, offset somewhat by customer growth. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. Capacity and energy revenues continued to decrease in 1995 and 1994 primarily as a result of the scheduled decline in megawatts of capacity under contract. The capacity and energy components were as follows: 1995 1994 1993 ------------------------------------ (in thousands) Capacity $ 3 $ 448 $ 978 Energy 1,250 3,052 4,262 - - --------------------------------------------------------- Total $ 1,253 $3,500 $5,240 ========================================================= Sales to affiliated companies within the Southern electric system vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have little impact on earnings. II-227
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1995 Annual Report Changes in revenues are influenced heavily by the amount of energy sold each year. Kilowatt-hour sales for 1995 and the percent change by year were as follows: Percent Change ------------------------------ 1995 KWH 1995 1994 1993 --------- ------------------------------ (in millions) Residential 1,402 8.0% (2.3)% 9.2% Commercial 1,100 5.1 2.9 6.5 Industrial 887 11.0 (6.4) (0.8) Other 126 5.4 3.1 5.2 --------- Total retail 3,515 7.7 (1.6) 5.5 Sales for resale - Non-affiliates 87 (56.5) (18.4) (32.7) Affiliates 64 (31.5) 23.4 100.3 --------- Total 3,666 3.1% (2.2)% 2.6% ========= ================================================================= Expenses Total operating expenses for 1995 were $187.5 million, reflecting an $11.8 million increase over 1994. Major components of this increase include $6.8 million in fuel, $3.6 million in other operation, $1.1 million in maintenance, and $1.1 million in depreciation and amortization, partially offset by a $2.6 million reduction in purchased power from affiliates. The increase in fuel expense is primarily attributable to the exceptionally hot summer weather, which not only increased generation but also necessitated greater use of more costly gas-fired sources of generation. The increase in other operation expense is due to increased expenses related to demand-side management programs and employee incentive compensation programs. The increase in maintenance expense reflects maintenance performed at Plants Kraft and McIntosh during 1995, and the increase in depreciation and amortization reflects the completion in 1994 of two combustion turbine units. Total operating expenses for 1994 were $175.6 million, reflecting an $8.6 million decrease from 1993. This decrease includes a $5.8 million reduction in fuel and purchased power expenses, reflecting a decrease in total energy requirements. The $4.9 million reduction in 1994 in other operation and maintenance expenses reflects the $4.5 million work force reduction charge in 1993 and a $1.1 million reduction in power generation expenses in 1994. This was offset by an increase in depreciation expense because of additions to utility plant discussed above. Interest expense increased $1.9 million primarily due to the sale in June 1993 of $45 million of first mortgage bonds. Fuel and purchased power costs constitute the single largest expense for the Company. The mix of energy supply is determined primarily by system load, the unit cost of fuel consumed and the availability of units. The amount and sources of energy supply, the average cost of fuel per net kilowatt-hour generated, the average cost of purchased power per net kilowatt-hour, and the total average cost of energy supply were as follows: 1995 1994 1993 -------------------------- Total energy supply (millions of kilowatt-hours) 3,908 3,768 3,863 Sources of energy supply (percent) -- Coal 24 18 21 Oil - 1 2 Gas 6 1 3 Purchased Power 70 80 74 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.77 2.19 2.02 Oil 5.14 3.89 4.11 Gas 3.76 5.19 4.87 Average cost of purchased power per net kilowatt- hour (cents) 2.02 1.92 2.00 Total average cost of energy supply 2.07 2.02 2.12 =============================================================== Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of II-228
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1995 Annual Report the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. New federal legislation is being discussed, and legislation allowing customer choice has already been introduced in Georgia. In order to address these initiatives, numerous questions must be resolved, with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability by seeking new markets that evolve with the changing regulation. The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could affect earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." Rates to retail customers served by the Company are regulated by the Georgia Public Service Commission (GPSC). As part of the Company's most recent rate settlement in 1992, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. The Company is currently undergoing an earnings review by the GPSC, and to date, the GPSC has made no determination. In August 1995, the GPSC ordered the phase out of the Company's demand-side management programs effective December 31, 1995 and the elimination of demand-side management rate riders effective October 1, 1995. The Company will refund to customers approximately $0.2 million which had been overcollected from the rate riders as of December 31, 1995. New Accounting Standards The FASB has issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. This statement requires that long-lived assets be reviewed for impairment whenever events or II-229
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1995 Annual Report changes in circumstances indicate that the carrying amount for an asset may not be recoverable. This statement also imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company adopted the new rules January 1, 1996, with no material effect on the financial statements. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in the utility industry. FINANCIAL CONDITION Overview The principal change in the Company's financial condition in 1995 was the addition of $27 million to utility plant. The funds needed for gross property additions are currently provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. See Statements of Cash Flows for additional information. Capital Structure As of December 31, 1995, the Company's capital structure consisted of 47.1 percent common equity, 9.8 percent preferred stock and 43.1 percent long-term debt, excluding amounts due within one year. The Company's long-term financial objective for capitalization ratios is to maintain a capital structure of common equity at 48 percent, preferred stock at 10 percent and debt at 42 percent. In May 1995, the Company issued $15 million of first mortgage bonds maturing in 2025 and $20 million of term notes maturing in 1998. Maturities and retirements of long-term debt were $29 million in 1995, $5 million in 1994 and $4 million in 1993. The composite interest rates and dividend rate for the years 1993 through 1995 as of year-end were as follows: 1995 1994 1993 ------------------------------- Composite interest rates on long-term debt 7.5% 8.0% 8.0% Preferred stock dividend rate 6.6% 6.6% 6.6% =============================================================== The Company's current securities ratings are as follows: Standard Moody's & Poor's ------------------------ First Mortgage Bonds A1 A+ Preferred Stock "a2" A =============================================================== Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $86 million ($33 million in 1996, $30 million in 1997, and $23 million in 1998). Actual construction costs may vary from this estimate because of factors such as changes in: business conditions; environmental regulations; load projections; the cost and efficiency of construction labor, equipment and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Other Capital Requirements In addition to the funds needed for the construction program, approximately $21.7 million will be needed by the end of 1998 for maturities of long-term debt and present sinking fund requirements. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act--the acid rain compliance provision of the law--has significantly impacted the Company and other subsidiaries of The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and initially affected 28 generating units of The Southern Company. As a result of The Southern Company's compliance strategy, an additional 22 generating units, which included four of the Company's units, were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An II-230
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1995 Annual Report emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Compliance with nitrogen oxide emission limits was achieved by the installation of new control equipment at 22 of the original 28 affected generating units. Construction expenditures for Phase I compliance totaled approximately $320 million through 1995 for The Southern Company, of which the Company's portion was approximately $2 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy could require total estimated construction expenditures of approximately $150 million for The Southern Company, of which the Company's portion is approximately $4.1 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 0.7 percent in annual revenue requirements from customers could be necessary to fully recover the Company's costs of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. A significant portion of costs related to the acid rain provision of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study during 1996. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards--if any--will depend on the development and implementation of applicable regulations. The EPA is evaluating the need to revise the ambient air quality standards for particulate matter and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1996, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes--coal ash and other utility wastes--as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and II-231
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1995 Annual Report regulations, the Company could incur substantial costs to clean up properties currently or previously owned. The Company conducts studies to determine the extent of any required cleanup costs and will recognize in the financial statements any costs to clean up known sites. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of The Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern Company. The impact of new legislation--if any--will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital At December 31, 1995, the Company had $0.9 million of cash and $20.5 million of unused short-term credit arrangements with banks to meet its short-term cash needs. Revolving credit arrangements of $20 million, which expire December 31, 1998, are also used to meet short-term cash needs and to provide additional interim funding for the Company's construction program. Of the revolving credit arrangements, $16 million remained unused at December 31, 1995. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will also be derived from operations and the sale of additional first mortgage bonds and preferred stock and capital contributions from The Southern Company. The Company is required to meet certain earnings coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficiently high enough to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-232
<TABLE> <CAPTION> STATEMENTS OF INCOME For the Years Ended December 31, 1995, 1994, and 1993 Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ======================================================================================================== 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues (Notes 1, 3, and 6): Revenues $218,529 $205,339 $216,009 Revenues from affiliates 7,200 6,446 2,433 - - -------------------------------------------------------------------------------------------------------- Total operating revenues 225,729 211,785 218,442 - - -------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 25,386 18,555 24,976 Purchased power from non-affiliates 2,139 1,839 793 Purchased power from affiliates 53,252 55,822 56,274 Other (Notes 1 and 2) 45,214 41,623 45,610 Maintenance 13,668 12,560 13,516 Depreciation and amortization (Note 1) 18,949 17,854 16,467 Taxes other than income taxes 11,465 11,074 11,136 Federal and state income taxes (Notes 1 and 7) 17,378 16,289 15,436 - - -------------------------------------------------------------------------------------------------------- Total operating expenses 187,451 175,616 184,208 - - -------------------------------------------------------------------------------------------------------- Operating Income 38,278 36,169 34,234 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 163 831 958 Interest income 164 54 209 Other, net (Note 2) (618) (1,032) (1,841) Income taxes applicable to other income (Notes 1 and 7) 651 864 1,117 - - -------------------------------------------------------------------------------------------------------- Income Before Interest Charges 38,638 36,886 34,677 - - -------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 12,380 12,585 10,696 Allowance for debt funds used during construction (Note 1) (450) (1,225) (699) Interest on notes payable 135 205 240 Amortization of debt discount, premium, and expense, net 448 550 535 Other interest charges 406 337 340 - - -------------------------------------------------------------------------------------------------------- Net interest charges 12,919 12,452 11,112 - - -------------------------------------------------------------------------------------------------------- Net Income 25,719 24,434 23,565 Dividends on Preferred Stock 2,324 2,324 2,106 - - -------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 23,395 $ 22,110 $ 21,459 ======================================================================================================== STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994, and 1993 ======================================================================================================== 1995 1994 1993 - - -------------------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 99,216 $ 93,479 $ 95,155 Net income after dividends on preferred stock 23,395 22,110 21,459 Cash dividends on common stock (17,600) (16,300) (21,000) Preferred stock transactions, net 22 (73) (2,135) - - -------------------------------------------------------------------------------------------------------- Balance at End of Period (Note 11) $105,033 $ 99,216 $ 93,479 ======================================================================================================== The accompanying notes are an integral part of these statements. </TABLE> II-233
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994, and 1993 Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ============================================================================================================================ 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 25,719 $ 24,434 $ 23,565 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 20,535 19,353 17,482 Deferred income taxes and investment tax credits 4,359 1,625 607 Allowance for equity funds used during construction (163) (831) (958) Other, net 35 826 2,853 Changes in certain current assets and liabilities -- Receivables, net (6,241) 18,481 (16,839) Inventories 2,318 1,144 (3,947) Payables 2,213 (19,957) 18,742 Other (1,848) (117) 3,282 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 46,927 44,958 44,787 - - ---------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (26,503) (30,078) (72,858) Other 3,198 (841) 1,676 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (23,305) (30,919) (71,182) - - ---------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: First mortgage bonds 15,000 - 45,000 Preferred stock - - 35,000 Pollution control bonds - - 4,085 Other long-term debt 33,500 8,500 10,000 Retirements: Preferred stock - - (20,000) First mortgage bonds (29,250) (5,065) - Pollution control bonds - - (4,085) Other long-term debt (23,003) (823) (10,356) Notes payable, net 1,500 (500) (4,500) Payment of preferred stock dividends (2,324) (2,129) (2,222) Payment of common stock dividends (17,600) (16,300) (21,000) Miscellaneous (2,131) (74) (3,400) - - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (24,308) (16,391) 28,522 - - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (686) (2,352) 2,127 Cash and Cash Equivalents at Beginning of Year 1,563 3,915 1,788 - - ---------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 877 $ 1,563 $ 3,915 ============================================================================================================================ Supplemental Cash Flow Information: Cash paid during the year for- Interest (net of amount capitalized) $12,775 $11,579 $10,712 Income taxes 11,316 14,441 13,947 - - ----------------------------------------------------------------------------------------------------------------------------- () Denotes use of cash. The accompanying notes are an integral part of these statements. </TABLE> II-234
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> ============================================================================================================ Assets 1995 1994 - - ------------------------------------------------------------------------------------------------------------ (in thousands) Utility Plant: Plant in service, at original cost (Notes 1, 4, 5, and 9) $715,146 $693,432 Less accumulated provision for depreciation 287,004 267,590 - - ------------------------------------------------------------------------------------------------------------ 428,142 425,842 Construction work in progress 6,707 5,930 - - ------------------------------------------------------------------------------------------------------------ Total 434,849 431,772 - - ------------------------------------------------------------------------------------------------------------ Other Property and Investments 1,788 1,790 - - ------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents 877 1,563 Receivables- Customer accounts receivable 19,574 17,581 Other accounts and notes receivable 7,251 216 Affiliated companies 614 177 Accumulated provision for uncollectible accounts (983) (866) Fuel cost under recovery - 3,113 Fossil fuel stock, at average cost 6,076 7,557 Materials and supplies, at average cost (Note 1) 8,239 9,076 Prepayments 6,467 7,446 - - ------------------------------------------------------------------------------------------------------------ Total 48,115 45,863 - - ------------------------------------------------------------------------------------------------------------ Deferred Charges: Deferred charges related to income taxes (Note 7) 21,557 23,521 Premium on reacquired debt, being amortized 5,316 3,295 Cash surrender value of life insurance for deferred compensation plans 8,560 7,028 Miscellaneous 4,477 5,036 - - ------------------------------------------------------------------------------------------------------------ Total 39,910 38,880 - - ------------------------------------------------------------------------------------------------------------ Total Assets $524,662 $518,305 ============================================================================================================ The accompanying notes are an integral part of these statements. </TABLE> II-235
<TABLE> <CAPTION> BALANCE SHEETS At December 31, 1995 and 1994 Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> ======================================================================================================================= Capitalization and Liabilities 1995 1994 - - ----------------------------------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity $167,812 $161,581 Preferred stock 35,000 35,000 Long-term debt 153,679 155,922 - - ----------------------------------------------------------------------------------------------------------------------- Total 356,491 352,503 - - ----------------------------------------------------------------------------------------------------------------------- Current Liabilities: Amount of securities due within one year (Note 10) 1,407 2,579 Notes payable (Note 5) 4,000 2,500 Accounts payable- Affiliated companies 5,742 5,162 Other 5,620 3,829 Fuel cost over recovery 865 - Customer deposits 5,054 4,698 Taxes accrued- Federal and state income 570 272 Other 1,014 861 Interest accrued 6,331 6,830 Vacation pay accrued 1,916 1,823 Pensions accrued (Note 2) 685 4,783 Miscellaneous 5,185 3,499 - - ----------------------------------------------------------------------------------------------------------------------- Total 38,389 36,836 - - ----------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 7) 74,152 70,786 Accumulated deferred investment tax credits (Note 7) 13,934 14,637 Deferred credits related to income taxes (Note 7) 24,419 25,487 Deferred compensation plans 7,690 6,807 Deferred under-funded accrued benefit obligation (Note 2) 2,123 3,022 Postretirement benefits 4,728 3,808 Miscellaneous 2,736 4,419 - - ----------------------------------------------------------------------------------------------------------------------- Total 129,782 128,966 - - ----------------------------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 4, 5, and 9) Total Capitalization and Liabilities $524,662 $518,305 ======================================================================================================================= The accompanying notes are an integral part of these statements. </TABLE> II-236
<TABLE> <CAPTION> STATEMENTS OF CAPITALIZATION At December 31, 1995 and 1994 Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> <C> ========================================================================================================================= 1995 1994 1995 1994 - - ------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity (Notes 2 and 11): Common stock, par value $5 per share -- Authorized -- 16,000,000 shares Outstanding -- 10,844,635 shares in 1995 and 1994 $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 Additional minimum liability for under-funded pension obligations (132) (546) Retained earnings 105,033 99,216 - - ------------------------------------------------------------------------------------------------------------------------- Total common stock equity 167,812 161,581 47.1% 45.8% - - ------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock (Note 8): $25 par value -- Authorized -- 2,200,000 shares 6.64% Series -- Outstanding -- 1,400,000 shares 35,000 35,000 - - ------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $2,324,000) 35,000 35,000 9.8 9.9 - - ------------------------------------------------------------------------------------------------------------------------- Long-Term Debt (Note 9): First mortgage bonds -- Maturity Interest Rates July 1, 2003 6 3/8% 20,000 20,000 October 1, 2019 9 1/4% - 28,950 July 1, 2021 9 3/8% 29,400 29,700 July 1, 2022 8.30% 30,000 30,000 July 1, 2023 7.40% 25,000 25,000 May 1, 2025 7 7/8% 15,000 - - - ------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 119,400 133,650 Pollution control obligations (Note 9) 17,955 17,955 Other long-term debt (Note 9) 20,485 9,988 Unamortized debt premium (discount), net (2,754) (3,092) - - ------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $11,916,000) 155,086 158,501 Less amount due within one year (Note 10) 1,407 2,579 - - ------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 153,679 155,922 43.1 44.3 - - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization $356,491 $352,503 100.0% 100.0% ========================================================================================================================= The accompanying notes are an integral part of these statements. </TABLE> II-237
NOTES TO FINANCIAL STATEMENTS Savannah Electric and Power Company 1995 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Savannah Electric and Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development) and other direct and indirect subsidiaries. The operating companies provide electric service in four southeastern states. Contracts among the companies--dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power--are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production and delivery facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company also is subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the GPSC. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates, and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: 1995 1994 --------------------------- (in thousands) Deferred income taxes $ 21,557 $ 23,521 Premium on reacquired debt 5,316 3,295 Deferred income tax credits (24,419) (25,487) - - --------------------------------------------------------------- Total $ 2,454 $ 1,329 =============================================================== In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel and demand-side management program costs and amounts actually recovered in current rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1995, uncollectible accounts continued to average less than 1 percent of revenues. II-238
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report Depreciation and Amortization Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 2.9 percent in 1995, 1994 and 1993. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost--together with the cost of removal, less salvage--is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of removal of certain facilities. Income Taxes The Company, which is included in the consolidated federal income tax return filed by The Southern Company, uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used by the Company to calculate AFUDC were 7.42 percent in 1995, 8.04 percent in 1994 and 8.77 percent in 1993. Utility Plant Utility plant is stated at original cost, which includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and AFUDC. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the Company's financial instruments that the carrying amounts did not approximate fair value at December 31 were as follows: Long-Term Debt -------------------------- Carrying Fair Year Amount Value - - ---- -------------------------- (in millions) 1995 $154 $165 1994 157 153 ============================================================== The fair values for long-term debt were based on either closing market prices or closing prices of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Storm Damage Reserve In December 1995, in response to a request by the Company, the GPSC issued an order allowing the Company to establish a Storm Damage Reserve. As of December 31, 1995, the accumulated provision amounted to $0.3 million. Regulatory treatment by the GPSC allows the Company to accrue up to $0.6 million per year. II-239
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "projected unit credit" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The Company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Trusts are funded to the extent deductible under federal income tax regulations and to the extent required by the GPSC and the FERC. Amounts funded are primarily invested in debt and equity securities. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." The cost of postretirement benefits is reflected in rates on a current basis. Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ------------------------ 1995 1994 ------------------------ (in thousands) Actuarial present value of benefit obligation: Vested benefits $38,169 $35,227 Non-vested benefits 2,585 2,069 - - ---------------------------------------------------------------- Accumulated benefit obligation 40,754 37,296 Additional amounts related to projected salary increases 7,786 7,393 - - ---------------------------------------------------------------- Projected benefit obligation 48,540 44,689 Less: Fair value of plan assets 36,836 27,165 Unrecognized net loss 9,606 10,950 Unrecognized prior service cost 1,375 1,510 Unrecognized net transition obligation 532 621 Adjustment required to recognize additional minimum liability 3,727 5,688 - - ---------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 3,918 $10,131 ================================================================ The weighted average rates assumed in the actuarial calculations for the pension plan were: 1995 1994 1993 ------------------------ Discount 7.25% 8.00% 7.50% Annual salary increase 4.75 5.25 4.75 Long-term return on plan assets 8.75 9.00 9.25 ============================================================ In accordance with Statement No. 87, an additional liability related to under-funded accumulated benefit obligations was reflected at December 31, 1995 and December 31, 1994. Corresponding net-of-tax balances of $0.1 million and $0.5 million were recognized as separate components of Common Stock Equity in the 1995 and 1994 Statements of Capitalization. II-240
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report Postretirement Benefits ------------------------ 1995 1994 ------------------------ (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $13,560 $10,994 Employees eligible to retire 1,471 884 Other employees 5,966 8,485 - - ------------------------------------------------------------- Accumulated benefit obligation 20,997 20,363 Less: Fair value of plan assets 1,443 393 Unrecognized net loss 5,719 3,197 Unrecognized transition obligation 9,135 13,021 - - ------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 4,700 $ 3,752 ============================================================= In 1995, the Company announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the Company will pay to provide future retiree postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $3.1 million. The weighted average rates assumed in the actuarial calculations for the postretirement benefit plans were: 1995 1994 ------------------ Discount 7.25% 8.00% Annual salary increase 4.75 5.50 Long-term return on plan assets 8.50 8.50 =========================================================== An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.8 percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation at December 31, 1995, by $1.3 million and the aggregate of the service and interest cost components of the net postretirement cost by $0.2 million. Components of the plans' net costs are shown below: Pension ------------------------------ 1995 1994 1993 ------------------------------ (in thousands) Benefits earned during the year $1,188 $1,192 $1,188 Interest cost on projected benefit obligation 3,395 3,279 2,741 Actual (return) loss on plan assets (5,791) 27 (2,199) Net amortization and deferral 4,125 (1,474) 716 - - -------------------------------------------------------------------- Net pension cost $2,917 $3,024 $2,446 ==================================================================== Of the above net pension costs, $2.4 million in 1995, $2.6 million in 1994 and $2.0 million in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Benefits ------------------------------ 1995 1994 1993 ------------------------------ (in thousands) Benefits earned during the year $ 504 $ 632 $ 443 Interest cost on accumulated benefit obligation 1,638 1,492 1,134 Amortization of transition obligation 723 723 723 Actual (return) loss on plan assets (34) 6 - Net amortization and deferral 93 111 - - - -------------------------------------------------------------------- Net postretirement costs $2,924 $2,964 $2,300 ==================================================================== Of the above net postretirement costs, $2.4 million in 1995, $2.4 million in 1994 and $1.8 million in 1993 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. The Company has a supplemental retirement plan for certain executive employees. The plan is unfunded and payable from the general funds of the Company. The Company has purchased life insurance on participating executives, and plans to use these policies to satisfy this obligation. Benefit costs associated with this plan for 1995, 1994 and 1993 were $0.4 million, $0.4 million and $1.0 million, respectively. The 1993 benefit costs reflect a one-time expense related to employees who were part of the work force reduction program. II-241
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report Work Force Reduction Program In 1993, the Company incurred additional costs for a one-time charge related to the implementation of a work force reduction program. In 1993, $4.5 million was charged to operating expenses and $0.6 million was charged to other income (expense). 3. REGULATORY MATTERS Rates to retail customers served by the Company are regulated by the GPSC. As part of the Company's most recent rate settlement in 1992, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. The Company is currently undergoing an earnings review by the GPSC, and to date, the GPSC has made no determination. In August 1995, the GPSC ordered the phase out of the Company's demand-side management programs effective December 31, 1995 and the elimination of demand-side management rate riders effective October 1, 1995. The Company will refund to customers approximately $0.2 million which had been overcollected from the rate riders as of December 31, 1995. 4. CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program, currently estimated to total $33 million in 1996, $30 million in 1997 and $23 million in 1998. The estimates include AFUDC of $1.0 million in 1996, $0.9 million in 1997 and $0.2 million in 1998. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing cost of labor, equipment and materials; and changes in cost of capital. The construction of two combustion turbine peaking units totaling 160 megawatts was completed during 1994. The Company does not have any new baseload generating plants under construction. However, construction related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants will continue. 5. FINANCING AND COMMITMENTS General To the extent possible, the Company's construction program is expected to be financed from internal sources and from the issuance of additional long-term debt, preferred stock and capital contributions from The Southern Company. The amounts of long-term debt and preferred stock that can be issued in the future will be contingent on market conditions, the maintenance of adequate earnings levels, regulatory authorizations and other factors. Bank Credit Arrangements At the beginning of 1996, unused credit arrangements with five banks totaled $20.5 million and expire at various times during 1996. The Company's revolving credit arrangements of $20 million, of which $16 million remained unused as of December 31, 1995, expire December 31, 1998. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the Company's option. In connection with these credit arrangements, the Company agrees to pay commitment fees based on the unused portions of the commitments. Assets Subject to Lien As amended and supplemented, the Company's Indenture of Mortgage, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all of the Company's fixed property and franchises. II-242
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report Operating Leases The Company has rental agreements with various terms and expiration dates. Rental expenses totaled $1.3 million for 1995 and $1.5 million for 1994 and 1993. The Company entered into a 22.5 year lease agreement effective December 1, 1995 for 100 new aluminum rail cars at an annual cost of approximately $0.5 million. The rail cars are used to transport coal to the Company's generating plants. At December 31, 1995, estimated future minimum lease payments for non-cancelable operating leases were as follows: Amounts -------------------- (in millions) 1996 $1.6 1997 1.4 1998 1.1 1999 0.5 2000 0.5 2001 and thereafter 8.4 ============================================================= 6. LONG-TERM POWER SALES AGREEMENTS The operating subsidiaries of The Southern Company, including the Company, have long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. Other agreements are firm and pertain to capacity related to specific generating units. Because energy is generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The Company's portion of capacity revenues has been as follows: Unit Other Year Power Long-Term Total - - ----------- ----------------------------------------- (in thousands) 1995 $3 $ - $ 3 1994 3 445 448 1993 2 976 978 =============================================================== 7. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1995, the tax-related regulatory assets and liabilities were $22 million and $24 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 1995 1994 1993 -------------------------------- (in thousands) Total provision for income taxes Federal -- Currently payable $10,427 $11,736 $11,663 Deferred -- current year 5,290 2,106 1,906 -- reversal of prior years (1,661) (755) (1,383) - - ----------------------------------------------------------------- 14,056 13,087 12,186 - - ----------------------------------------------------------------- State -- Currently payable 1,941 2,064 2,049 Deferred -- current year 695 188 119 -- reversal of prior years 35 86 (35) - - ----------------------------------------------------------------- 2,671 2,338 2,133 - - ----------------------------------------------------------------- Total 16,727 15,425 14,319 Less income taxes charged (credited) to other income (651) (864) (1,117) - - ----------------------------------------------------------------- Federal and state income taxes charged to operations $17,378 $16,289 $15,436 ================================================================= The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: II-243
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report 1995 1994 --------- ---------- Deferred tax liabilities: (in thousands) Accelerated depreciation $62,822 $57,830 Property basis differences 11,330 12,956 Other 1,511 2,449 - - ---------------------------------------------------------------- Total 75,663 73,235 - - ---------------------------------------------------------------- Deferred tax assets: Pension and other benefits 3,660 4,816 Other 3,818 3,959 - - ---------------------------------------------------------------- Total 7,478 8,775 - - ---------------------------------------------------------------- Net deferred tax liabilities 68,185 64,460 Portions included in current assets, net 5,967 6,326 - - ---------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $74,152 $70,786 ================================================================ Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $0.7 million in 1995, 1994 and 1993. At December 31, 1995, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1995 1994 1993 ---------------------------- Federal statutory tax rate 35% 35% 35% State income tax, net of federal income tax benefit 4 4 4 Other - - (1) ------------------------------------------------------------- Effective income tax rate 39% 39% 38% ============================================================= The Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 8. CUMULATIVE PREFERRED STOCK In 1993, the Company issued 1,400,000 shares of 6.64% Series Preferred Stock which has redemption provisions of $26.66 per share plus accrued dividends if on or prior to November 1, 1998, and redemption provisions of $25 per share plus accrued dividends thereafter. Cumulative preferred stock dividends are preferential to the payment of dividends on common stock. 9. LONG-TERM DEBT The Company's Indenture related to its First Mortgage Bonds is unlimited as to the authorized amount of bonds which may be issued, provided that required property additions, earnings and other provisions of such Indenture are met. In May 1995, the Company issued $15 million of first mortgage bonds maturing in 2025 and $20 million of term notes maturing in 1998. Using the proceeds from such sales, the Company redeemed in June 1995 all of its remaining outstanding 9 1/4% Series First Mortgage Bonds due October 2019. The sinking fund requirements of first mortgage bonds were satisfied by cash redemption in 1994 and 1995. Sinking fund requirements and/or maturities through 2000 applicable to long-term debt are as follows: $1.4 million in 1996; $0.2 million in 1997; $20.1 million in 1998; and no requirements in 1999 and 2000. Details of pollution control obligations and other long-term debt at December 31 are as follows: 1995 1994 --------------------- (in thousands) Collateralized obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds -- Variable rate (5.15% at 1/1/96) due 2016 $ 4,085 $ 4,085 6 3/4% due 2022 13,870 13,870 Capital lease obligations -- Combustion turbine equipment - 980 Transportation fleet 485 508 Notes Payable -- 6.04% due 1995 - 3,500 6.035% due 1995 - 5,000 Variable rate (5.85% at 1/1/96) due 1998 15,000 Variable rate (5.84% at 1/1/96) due 1998 5,000 - - ---------------------------------------------------------------- Total $38,440 $27,943 ================================================================ II-244
NOTES (continued) Savannah Electric and Power Company 1995 Annual Report Assets acquired under capital leases are recorded as utility plant in service, and the related obligation is classified as other long-term debt. Leases are capitalized at the net present value of the future lease payments. However, for ratemaking purposes, these obligations are treated as operating leases, and as such, lease payments are charged to expense as incurred. The Company leased combustion turbine generating equipment under a non-cancelable lease that expired in 1995. In December 1995, the Company exercised its option to purchase this equipment. The Company currently leases a portion of its transportation fleet. Under the terms of these leases, the Company is responsible for taxes, insurance and other expenses. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the sinking fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 1995 1994 ---------------------- (in thousands) Bond sinking fund requirement $1,200 $1,350 Less: Portion to be satisfied by certifying property additions - - - - -------------------------------------------------------------------- Cash sinking fund requirement 1,200 1,350 Other long-term debt maturities (Note 9) 207 1,229 - - -------------------------------------------------------------------- Total $1,407 $2,579 ==================================================================== The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the Indenture prior to January 1 of each year, other than those issued to collateralize pollution control and other obligations. The requirements may be satisfied by depositing cash or reacquiring bonds, or by pledging additional property equal to 1 2/3 times the requirements. In January 1996, the Company satisfied its 1996 sinking fund requirement of $1.2 million by cash redemption. 11. COMMON STOCK DIVIDEND RESTRICTIONS The Company's Charter and Indenture contain certain limitations on the payment of cash dividends on preferred and common stocks. At December 31, 1995, approximately $62 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the Indenture. 12. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1995 and 1994 are as follows (in thousands): Net Income After Operating Operating Dividends on Quarter Ended Revenue Income Preferred Stock - - ------------------- ------------ ------------ ------------------- March 1995 $46,743 $ 6,468 $ 2,420 June 1995 57,673 9,920 6,041 September 1995 73,449 16,438 12,693 December 1995 47,864 5,452 2,241 March 1994 $46,717 $ 7,130 $ 3,898 June 1994 56,377 9,555 6,051 September 1994 63,674 13,495 9,547 December 1994 45,017 5,989 2,614 ================================================================= The Company's business is influenced by seasonal weather conditions and a seasonal rate structure, among other factors. II-245
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ================================================================================================================== 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $225,729 $211,785 $218,442 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $23,395 $22,110 $21,459 Cash Dividends on Common Stock (in thousands) $17,600 $16,300 $21,000 Return on Average Common Equity (percent) 14.20 14.00 13.73 Total Assets (in thousands) $524,662 $518,305 $527,187 Gross Property Additions (in thousands) $26,503 $30,078 $72,858 - - ----------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $167,812 $161,581 $154,269 Preferred stock 35,000 35,000 35,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 153,679 155,922 151,338 - - ----------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $356,491 $352,503 $340,607 ================================================================================================================= Capitalization Ratios (percent): Common stock equity 47.1 45.8 45.3 Preferred and preference stock 9.8 9.9 10.3 Long-term debt 43.1 44.3 44.4 - - ----------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================= First Mortgage Bonds (in thousands): Issued 15,000 - 45,000 Retired 29,250 5,065 - Preferred and Preference Stock (in thousands): Issued - - 35,000 Retired - - 20,000 - - ----------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A A Preferred Stock - Moody's "a2" "a2" "a2" Standard and Poor's A A- A- - - ----------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 104,624 103,199 101,032 Commercial 13,339 13,015 12,702 Industrial 65 65 69 Other 1,048 1,007 957 - - ----------------------------------------------------------------------------------------------------------------- Total 119,076 117,286 114,760 ================================================================================================================= Employees (year-end) 584 616 665 Note: NR = Not Rated </TABLE> II-246
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ================================================================================================================= 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $197,761 $189,646 $205,635 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $20,512 $24,030 $26,254 Cash Dividends on Common Stock (in thousands) $22,000 $22,000 $22,000 Return on Average Common Equity (percent) 12.89 15.13 16.85 Total Assets (in thousands) $352,175 $352,505 $340,050 Gross Property Additions (in thousands) $30,132 $19,478 $20,086 - - ----------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $158,376 $159,841 $157,811 Preferred stock 20,000 20,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 110,767 119,280 112,377 - - ----------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $289,143 $299,121 $290,188 ================================================================================================================= Capitalization Ratios (percent): Common stock equity 54.8 53.4 54.4 Preferred and preference stock 6.9 6.7 6.9 Long-term debt 38.3 39.9 38.7 - - ----------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================= First Mortgage Bonds (in thousands): Issued 30,000 30,000 - Retired 38,750 22,500 9,135 Preferred and Preference Stock (in thousands): Issued - - - Retired - - 5,374 - - ----------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Preferred Stock - Moody's "a2" "a2" "a2" Standard and Poor's A- A- A- - - ----------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 99,164 97,446 96,452 Commercial 12,416 12,153 12,045 Industrial 73 73 76 Other 940 897 867 - - ----------------------------------------------------------------------------------------------------------------- Total 112,593 110,569 109,440 ================================================================================================================= Employees (year-end) 688 672 648 Note: NR = Not Rated </TABLE> II-247A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ================================================================================================================ 1989 1988 1987 - - ---------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $201,799 $182,440 $174,707 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $25,535 $24,272 $22,086 Cash Dividends on Common Stock (in thousands) $20,000 $11,700 $10,741 Return on Average Common Equity (percent) 16.88 17.03 17.03 Total Assets (in thousands) $349,887 $347,051 $340,109 Gross Property Additions (in thousands) $18,831 $23,254 $32,276 - - ---------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $153,737 $148,883 $136,207 Preferred stock 22,300 22,300 2,300 Preferred and preference stock subject to mandatory redemption 2,884 3,075 9,665 Long-term debt 117,522 98,285 129,329 - - ---------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $296,443 $272,543 $277,501 ================================================================================================================ Capitalization Ratios (percent): Common stock equity 51.9 54.6 49.1 Preferred and preference stock 8.5 9.3 4.3 Long-term debt 39.6 36.1 46.6 - - ---------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================================ First Mortgage Bonds (in thousands): Issued 30,000 - - Retired 18,275 12,231 10,239 Preferred and Preference Stock (in thousands): Issued - 20,000 - Retired 6,591 553 588 - - ---------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A3 Standard and Poor's A A- A- Preferred Stock - Moody's "a2" "a2" NR Standard and Poor's A- BBB+ BBB+ - - ---------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 94,766 93,486 92,094 Commercial 12,298 12,135 11,812 Industrial 69 69 67 Other 856 828 762 - - ---------------------------------------------------------------------------------------------------------------- Total 107,989 106,518 104,735 ================================================================================================================ Employees (year-end) 643 655 655 Note: NR = Not Rated </TABLE> II-247B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> ================================================================================================ 1986 1985 - - ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $174,847 $158,643 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $20,452 $15,279 Cash Dividends on Common Stock (in thousands) $9,353 $8,387 Return on Average Common Equity (percent) 17.52 14.41 Total Assets (in thousands) $341,826 $323,686 Gross Property Additions (in thousands) $26,800 $30,700 - - ------------------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $123,133 $110,385 Preferred stock 2,300 2,300 Preferred and preference stock subject to mandatory redemption 10,256 10,848 Long-term debt 137,821 128,850 - - ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $273,510 $252,383 ================================================================================================ Capitalization Ratios (percent): Common stock equity 45.0 43.7 Preferred and preference stock 4.6 5.2 Long-term debt 50.4 51.1 - - ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) 100.0 100.0 ================================================================================================ First Mortgage Bonds (in thousands): Issued 25,000 20,000 Retired 10,160 5,592 Preferred and Preference Stock (in thousands): Issued - - Retired 610 588 - - ------------------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's A3 A3 Standard and Poor's A- A- Preferred Stock - Moody's NR NR Standard and Poor's BBB+ BBB+ - - ------------------------------------------------------------------------------------------------ Customers (year-end): Residential 89,951 88,101 Commercial 11,405 10,985 Industrial 67 66 Other 731 699 - - ------------------------------------------------------------------------------------------------ Total 102,154 99,851 ================================================================================================ Employees (year-end) 658 653 Note: NR = Not Rated </TABLE> II-247C
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> =============================================================================================================== 1995 1994 1993 - - --------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $95,208 $89,195 $93,883 Commercial 75,117 71,227 71,320 Industrial 36,040 32,906 36,180 Other 8,386 7,946 7,810 - - --------------------------------------------------------------------------------------------------------------- Total retail 214,751 201,274 209,193 Sales for resale - non-affiliates 1,851 4,786 6,021 Sales for resale - affiliates 7,200 6,446 2,433 - - --------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 223,802 212,506 217,647 Other revenues 1,927 (721) 795 - - --------------------------------------------------------------------------------------------------------------- Total $225,729 $211,785 $218,442 =============================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 1,402,148 1,298,122 1,329,362 Commercial 1,099,570 1,045,831 1,015,935 Industrial 887,141 799,543 854,324 Other 126,057 119,593 115,969 - - --------------------------------------------------------------------------------------------------------------- Total retail 3,514,916 3,263,089 3,315,590 Sales for resale - non-affiliates 87,747 201,716 247,203 Sales for resale - affiliates 63,731 93,001 75,384 - - --------------------------------------------------------------------------------------------------------------- Total 3,666,394 3,557,806 3,638,177 =============================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.79 6.87 7.06 Commercial 6.83 6.81 7.02 Industrial 4.06 4.12 4.23 Total retail 6.11 6.17 6.31 Sale for resale 5.98 3.81 2.62 Total sales 6.10 5.97 5.98 Residential Average Annual Kilowatt-Hour Use Per Customer 13,478 12,686 13,269 Residential Average Annual Revenue Per Customer $915.15 $871.68 $937.07 Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 788 628 Maximum Peak-Hour Demand (megawatts): Winter 630 617 524 Summer 811 729 747 Annual Load Factor (percent) 52.9 54.3 54.1 Plant Availability - Fossil-Steam (percent) 83.3 81.0 90.2 - - --------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 23.9 18.6 21.5 Oil and gas 5.9 1.8 4.5 Purchased power - From non-affiliates 2.3 1.5 0.9 From affiliates 67.9 78.1 73.1 - - --------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =============================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 12,146 11,786 11,515 Cost of fuel per million BTU (cents) 179.25 205.03 215.97 Average cost of fuel per net kilowatt-hour generated (cents) 2.18 2.42 2.49 =============================================================================================================== </TABLE> II-248
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ================================================================================================================= 1992 1991 1990 - - ----------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $82,670 $80,541 $87,063 Commercial 64,756 61,827 65,462 Industrial 33,171 30,492 30,237 Other 7,095 6,561 6,782 - - ----------------------------------------------------------------------------------------------------------------- Total retail 187,692 179,421 189,544 Sales for resale - non-affiliates 7,821 7,813 9,482 Sales for resale - affiliates 1,505 1,430 5,566 - - ----------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 197,018 188,664 204,592 Other revenues 743 982 1,043 - - ----------------------------------------------------------------------------------------------------------------- Total $197,761 $189,646 $205,635 ================================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,216,993 1,195,005 1,183,486 Commercial 953,840 925,757 892,931 Industrial 861,121 825,862 644,704 Other 110,270 106,683 103,539 - - ----------------------------------------------------------------------------------------------------------------- Total retail 3,142,224 3,053,307 2,824,660 Sales for resale - non-affiliates 367,066 372,085 441,090 Sales for resale - affiliates 37,632 32,581 294,042 - - ----------------------------------------------------------------------------------------------------------------- Total 3,546,922 3,457,973 3,559,792 ================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.79 6.74 7.36 Commercial 6.79 6.68 7.33 Industrial 3.85 3.69 4.69 Total retail 5.97 5.88 6.71 Sale for resale 2.30 2.28 2.05 Total sales 5.55 5.46 5.75 Residential Average Annual Kilowatt-Hour Use Per Customer 12,369 12,323 12,339 Residential Average Annual Revenue Per Customer $840.23 $830.54 $907.68 Plant Nameplate Capacity Ratings (year-end) (megawatts) 628 605 605 Maximum Peak-Hour Demand (megawatts): Winter 533 526 428 Summer 695 691 648 Annual Load Factor (percent) 55.0 54.1 53.2 Plant Availability - Fossil-Steam (percent) 89.1 76.9 89.6 - - ----------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 12.0 16.3 52.8 Oil and gas 2.9 1.7 3.4 Purchased power - From non-affiliates 1.0 0.4 0.8 From affiliates 84.1 81.6 43.0 - - ----------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ================================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 12,547 10,917 10,741 Cost of fuel per million BTU (cents) 201.50 199.42 188.18 Average cost of fuel per net kilowatt-hour generated (cents) 2.53 2.18 2.02 ================================================================================================================= </TABLE> II-249A
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> <C> ============================================================================================================= 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $85,113 $81,098 $79,785 Commercial 65,474 62,640 60,285 Industrial 28,304 26,865 27,422 Other 6,892 6,557 6,315 - - ------------------------------------------------------------------------------------------------------------- Total retail 185,783 177,160 173,807 Sales for resale - non-affiliates 8,814 808 - Sales for resale - affiliates 6,025 3,567 - - - ------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 200,622 181,535 173,807 Other revenues 1,177 905 900 - - ------------------------------------------------------------------------------------------------------------- Total $201,799 $182,440 $174,707 ============================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,109,976 1,067,411 1,044,554 Commercial 839,756 806,687 775,643 Industrial 561,063 533,604 557,281 Other 101,164 97,072 94,949 - - ------------------------------------------------------------------------------------------------------------- Total retail 2,611,959 2,504,774 2,472,427 Sales for resale - non-affiliates 437,943 24,168 - Sales for resale - affiliates 303,142 156,106 - - - ------------------------------------------------------------------------------------------------------------- Total 3,353,044 2,685,048 2,472,427 ============================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 7.67 7.60 7.64 Commercial 7.80 7.77 7.77 Industrial 5.04 5.03 4.92 Total retail 7.11 7.07 7.03 Sale for resale 2.00 2.43 - Total sales 5.98 6.76 7.03 Residential Average Annual Kilowatt-Hour Use Per Customer 11,781 11,489 11,481 Residential Average Annual Revenue Per Customer $903.37 $872.87 $876.95 Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605 Maximum Peak-Hour Demand (megawatts): Winter 548 471 414 Summer 613 574 562 Annual Load Factor (percent) 52.4 53.4 53.6 Plant Availability - Fossil-Steam (percent) 94.7 77.1 81.2 - - ------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.5 79.8 74.3 Oil and gas 1.4 5.4 4.4 Purchased power - From non-affiliates 1.5 5.9 19.9 From affiliates 33.6 8.9 1.4 - - ------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,611 10,683 10,551 Cost of fuel per million BTU (cents) 180.48 178.31 176.10 Average cost of fuel per net kilowatt-hour generated (cents) 1.92 1.90 1.86 ============================================================================================================= </TABLE> II-249B
<TABLE> <CAPTION> SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1995 Annual Report <S> <C> <C> ============================================================================================ 1986 1985 - - -------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $80,348 $70,377 Commercial 59,547 53,696 Industrial 27,694 28,335 Other 6,300 5,823 - - -------------------------------------------------------------------------------------------- Total retail 173,889 158,231 Sales for resale - non-affiliates - - Sales for resale - affiliates - - - - -------------------------------------------------------------------------------------------- Total revenues from sales of electricity 173,889 158,231 Other revenues 958 412 - - -------------------------------------------------------------------------------------------- Total $174,847 $158,643 ============================================================================================ Kilowatt-Hour Sales (in thousands): Residential 1,021,905 926,988 Commercial 746,133 694,168 Industrial 515,544 513,270 Other 92,471 87,238 - - -------------------------------------------------------------------------------------------- Total retail 2,376,053 2,221,664 Sales for resale - non-affiliates - - Sales for resale - affiliates - - - - -------------------------------------------------------------------------------------------- Total 2,376,053 2,221,664 ============================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 7.86 7.59 Commercial 7.98 7.74 Industrial 5.37 5.52 Total retail 7.32 7.12 Sale for resale - - Total sales 7.32 7.12 Residential Average Annual Kilowatt-Hour Use Per Customer 11,514 10,536 Residential Average Annual Revenue Per Customer $905.27 $799.90 Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 Maximum Peak-Hour Demand (megawatts): Winter 464 440 Summer 565 498 Annual Load Factor (percent) 51.1 54.7 Plant Availability - Fossil-Steam (percent) 86.9 92.0 - - -------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 81.9 87.5 Oil and gas 6.8 2.6 Purchased power - From non-affiliates 11.3 9.9 From affiliates - - - - -------------------------------------------------------------------------------------------- Total 100.0 100.0 ============================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,607 10,581 Cost of fuel per million BTU (cents) 186.30 198.80 Average cost of fuel per net kilowatt-hour generated (cents) 1.98 2.10 ============================================================================================ </TABLE> II-249C
<TABLE> <CAPTION> STATEMENTS OF INCOME Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 218,529 $ 205,339 $ 216,009 Revenues from affiliates 7,200 6,446 2,433 - - ------------------------------------------------------------------------------------------------------------------------- Total operating revenues 225,729 211,785 218,442 - - ------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 25,386 18,555 24,976 Purchased power from non-affiliates 2,139 1,839 793 Purchased power from affiliates 53,252 55,822 56,274 Other 45,214 41,623 45,610 Maintenance 13,668 12,560 13,516 Depreciation and amortization 18,949 17,854 16,467 Taxes other than income taxes 11,465 11,074 11,136 Federal and state income taxes 17,378 16,289 15,436 - - ------------------------------------------------------------------------------------------------------------------------- Total operating expenses 187,451 175,616 184,208 - - ------------------------------------------------------------------------------------------------------------------------- Operating Income 38,278 36,169 34,234 Other Income (Expense): Allowance for equity funds used during construction 163 831 958 Interest income 164 54 209 Other, net (618) (1,032) (1,841) Income taxes applicable to other income 651 864 1,117 - - ------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 38,638 36,886 34,677 - - ------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 12,380 12,585 10,696 Allowance for debt funds used during construction (450) (1,225) (699) Interest on notes payable 135 205 240 Amortization of debt discount, premium, and expense, net 448 550 535 Other interest charges 406 337 340 - - ------------------------------------------------------------------------------------------------------------------------- Net interest charges 12,919 12,452 11,112 - - ------------------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 25,719 24,434 23,565 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - - - ------------------------------------------------------------------------------------------------------------------------- Net Income 25,719 24,434 23,565 Dividends on Preferred and Preference Stock 2,324 2,324 2,106 - - ------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 23,395 $ 22,110 $ 21,459 ========================================================================================================================= Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 23,395 $ 22,110 $ 21,459 </TABLE> II-250
<TABLE> <CAPTION> STATEMENTS OF INCOME Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 196,256 $ 188,216 $ 200,069 Revenues from affiliates 1,505 1,430 5,566 - - ------------------------------------------------------------------------------------------------------------------------- Total operating revenues 197,761 189,646 205,635 - - ------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 14,162 14,415 42,630 Purchased power from non-affiliates 494 297 611 Purchased power from affiliates 56,492 49,007 34,648 Other 36,884 32,945 30,630 Maintenance 14,232 12,475 12,754 Depreciation and amortization 16,829 16,549 16,118 Taxes other than income taxes 10,231 10,122 9,798 Federal and state income taxes 14,566 16,195 17,611 - - ------------------------------------------------------------------------------------------------------------------------- Total operating expenses 163,890 152,005 164,800 - - ------------------------------------------------------------------------------------------------------------------------- Operating Income 33,871 37,641 40,835 Other Income (Expense): Allowance for equity funds used during construction 446 170 193 Interest income 276 589 741 Other, net (1,450) (879) (803) Income taxes applicable to other income 758 722 187 - - ------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 33,901 38,243 41,153 - - ------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 10,870 11,486 12,052 Allowance for debt funds used during construction (289) (103) (194) Interest on notes payable 15 25 116 Amortization of debt discount, premium, and expense, net 427 380 241 Other interest charges 466 525 665 - - ------------------------------------------------------------------------------------------------------------------------- Net interest charges 11,489 12,313 12,880 - - ------------------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 22,412 25,930 28,273 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - - - ------------------------------------------------------------------------------------------------------------------------- Net Income 22,412 25,930 28,273 Dividends on Preferred and Preference Stock 1,900 1,900 2,019 - - ------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 20,512 $ 24,030 $ 26,254 ========================================================================================================================= Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 20,512 $ 24,030 $ 26,254 </TABLE> II-251A
<TABLE> <CAPTION> STATEMENTS OF INCOME Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Revenues: Revenues $ 195,774 $ 178,873 $ 174,707 Revenues from affiliates 6,025 3,567 - - - ------------------------------------------------------------------------------------------------------------------------- Total operating revenues 201,799 182,440 174,707 - - ------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 44,224 46,578 38,597 Purchased power from non-affiliates 616 3,593 11,453 Purchased power from affiliates 26,361 6,586 1,186 Other 29,371 28,271 25,642 Maintenance 12,281 14,261 13,629 Depreciation and amortization 20,343 19,771 18,152 Taxes other than income taxes 9,152 9,209 9,088 Federal and state income taxes 17,571 14,017 16,969 - - ------------------------------------------------------------------------------------------------------------------------- Total operating expenses 159,919 142,286 134,716 - - ------------------------------------------------------------------------------------------------------------------------- Operating Income 41,880 40,154 39,991 Other Income (Expense): Allowance for equity funds used during construction - 273 512 Interest income 719 355 925 Other, net (672) (1,423) (464) Income taxes applicable to other income 192 459 (317) - - ------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 42,119 39,818 40,647 - - ------------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 12,287 15,603 17,127 Allowance for debt funds used during construction (112) (330) (459) Interest on notes payable 402 230 70 Amortization of debt discount, premium, and expense, net 274 196 237 Other interest charges 1,313 336 251 - - ------------------------------------------------------------------------------------------------------------------------- Net interest charges 14,164 16,035 17,226 - - ------------------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 27,955 23,783 23,421 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - 1,920 - - - ------------------------------------------------------------------------------------------------------------------------- Net Income 27,955 25,703 23,421 Dividends on Preferred and Preference Stock 2,420 1,431 1,335 - - ------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 25,535 $ 24,272 $ 22,086 ========================================================================================================================= Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 25,535 $ 22,352 $ 21,865 </TABLE> II-251B
<TABLE> <CAPTION> STATEMENTS OF INCOME Savannah Electric and Power Company ========================================================================================================= For the Years Ended December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Revenues: Revenues $ 174,847 $ 158,643 Revenues from affiliates - - - - --------------------------------------------------------------------------------------------------------- Total operating revenues 174,847 158,643 - - --------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 44,393 45,232 Purchased power from non-affiliates 6,069 7,577 Purchased power from affiliates 2,071 1,526 Other 24,114 20,292 Maintenance 12,591 12,029 Depreciation and amortization 16,443 15,798 Taxes other than income taxes 7,863 6,724 Federal and state income taxes 21,405 15,495 - - --------------------------------------------------------------------------------------------------------- Total operating expenses 134,949 124,673 - - --------------------------------------------------------------------------------------------------------- Operating Income 39,898 33,970 Other Income (Expense): Allowance for equity funds used during construction 27 646 Interest income 924 943 Other, net (553) (107) Income taxes applicable to other income (217) (389) - - --------------------------------------------------------------------------------------------------------- Income Before Interest Charges 40,079 35,063 - - --------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 17,415 18,089 Allowance for debt funds used during construction (73) (725) Interest on notes payable 315 437 Amortization of debt discount, premium, and expense, net 234 302 Other interest charges 335 213 - - --------------------------------------------------------------------------------------------------------- Net interest charges 18,226 18,316 - - --------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 21,853 16,747 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - - --------------------------------------------------------------------------------------------------------- Net Income 21,853 16,747 Dividends on Preferred and Preference Stock 1,401 1,468 - - --------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 20,452 $ 15,279 ========================================================================================================= Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 20,606 $ 15,744 </TABLE> II-251C
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 25,719 $ 24,434 $ 23,565 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 20,535 19,353 17,482 Deferred income taxes, net 4,359 1,625 607 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (163) (831) (958) Other, net 35 826 2,853 Changes in certain current assets and liabilities -- Receivables, net (6,241) 18,481 (16,839) Special deposits - - - Inventories 2,318 1,144 (3,947) Payables 2,213 (19,957) 18,742 Other (1,848) (117) 3,282 - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 46,927 44,958 44,787 - - ------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (26,503) (30,078) (72,858) Sales of property - - - Other 3,198 (841) 1,676 - - ------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (23,305) (30,919) (71,182) - - ------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - 35,000 First mortgage bonds 15,000 - 45,000 Pollution control bonds - - 4,085 Other long-term debt 33,500 8,500 10,000 Common stock - - - Retirements: Preferred and preference stock - - (20,000) First mortgage bonds (29,250) (5,065) - Pollution control bonds - - (4,085) Other long-term debt (23,003) (823) (10,356) Notes payable, net 1,500 (500) (4,500) Payment of preferred and preference stock dividends (2,324) (2,129) (2,222) Payment of common and class A stock dividends (17,600) (16,300) (21,000) Miscellaneous (2,131) (74) (3,400) - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (24,308) (16,391) 28,522 - - ------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (686) (2,352) 2,127 Cash and Cash Equivalents at Beginning of Year 1,563 3,915 1,788 - - ------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 877 $ 1,563 $ 3,915 ========================================================================================================================= ( ) Denotes use of cash. </TABLE> II-252
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 22,412 $ 25,930 $ 28,273 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 17,757 17,501 16,995 Deferred income taxes, net 5,947 1,601 2,782 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (446) (170) (193) Other, net (1,312) (1,876) 511 Changes in certain current assets and liabilities -- Receivables, net (4,107) 5,291 1,541 Special deposits 350 1,348 185 Inventories 4,435 (1,082) 1,246 Payables 351 568 (228) Other 2,083 3,710 (319) - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 47,470 52,821 50,793 - - ------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (30,132) (19,478) (20,086) Sales of property - - - Other (1,073) 407 (120) - - ------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (31,205) (19,071) (20,206) - - ------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - - First mortgage bonds 30,000 30,000 - Pollution control bonds 13,870 - - Other long-term debt - - - Common stock - - - Retirements: Preferred and preference stock - - (5,374) First mortgage bonds (38,750) (22,500) (9,135) Pollution control bonds (14,550) (515) (485) Other long-term debt (217) (275) (364) Notes payable, net 7,500 (1,500) 1,500 Payment of preferred and preference stock dividends (1,900) (1,900) (2,113) Payment of common and class A stock dividends (22,000) (22,000) (22,000) Miscellaneous (3,985) (477) 47 - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (30,032) (19,167) (37,924) - - ------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (13,767) 14,583 (7,337) Cash and Cash Equivalents at Beginning of Year 15,555 972 8,309 - - ------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,788 $ 15,555 $ 972 ========================================================================================================================= ( ) Denotes use of cash. </TABLE> II-253A
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Savannah Electric and Power Company ========================================================================================================================= For the Years Ended December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> Operating Activities: Net income $ 27,955 $ 25,703 $ 23,421 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 21,310 20,592 19,126 Deferred income taxes, net 3,476 3,568 925 Deferred investment tax credits, net - - (5) Allowance for equity funds used during construction - (273) (512) Other, net (775) 718 (1,016) Changes in certain current assets and liabilities -- Receivables, net (6,949) (7,062) 1,360 Special deposits 2,708 (558) (587) Inventories (1,503) 3,063 (503) Payables 1,086 (1,151) (78) Other 1,544 (1,684) (757) - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 48,852 42,916 41,374 - - ------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (18,831) (23,254) (32,276) Sales of property - - - Other 381 (4,042) 1,296 - - ------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (18,450) (27,296) (30,980) - - ------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - 20,000 - First mortgage bonds 30,000 - - Pollution control bonds - - - Other long-term debt - - - Common stock - 403 1,693 Retirements: Preferred and preference stock (6,591) (553) (588) First mortgage bonds (18,275) (12,231) (10,239) Pollution control bonds (455) (430) (405) Other long-term debt (7,656) (4,401) (3,954) Notes payable, net - - - Payment of preferred and preference stock dividends (2,318) (1,284) (1,351) Payment of common and class A stock dividends (20,000) (14,407) (10,383) Miscellaneous (1,071) (269) - - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (26,366) (13,172) (25,227) - - ------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 4,036 2,448 (14,833) Cash and Cash Equivalents at Beginning of Year 4,273 1,825 16,658 - - ------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 8,309 $ 4,273 $ 1,825 ========================================================================================================================= ( ) Denotes use of cash. </TABLE> II-253B
<TABLE> <CAPTION> STATEMENTS OF CASH FLOWS Savannah Electric and Power Company ========================================================================================================= For the Years Ended December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> Operating Activities: Net income $ 21,853 $ 16,747 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 16,855 16,484 Deferred income taxes, net 4,443 3,034 Deferred investment tax credits, net 489 3,084 Allowance for equity funds used during construction (27) (646) Other, net 474 (1,730) Changes in certain current assets and liabilities -- Receivables, net 1,456 (1,122) Special deposits (53) (916) Inventories 663 5,563 Payables (1,750) 2,135 Other 1,916 2 - - --------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 46,319 42,635 - - --------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (26,800) (30,700) Sales of property - 1,145 Other (824) 2,682 - - --------------------------------------------------------------------------------------------------------- Net cash used for investing activities (27,624) (26,873) - - --------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - First mortgage bonds 25,000 20,000 Pollution control bonds - - Other long-term debt - - Common stock 1,691 1,777 Retirements: Preferred and preference stock (610) (588) First mortgage bonds (10,160) (5,592) Pollution control bonds (380) (360) Other long-term debt (3,075) (17,721) Notes payable, net (4,500) (4,500) Payment of preferred and preference stock dividends (1,418) (1,485) Payment of common and class A stock dividends (9,114) (8,347) Miscellaneous (436) (383) - - --------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (3,002) (17,199) - - --------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 15,693 (1,437) Cash and Cash Equivalents at Beginning of Year 965 2,402 - - --------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 16,658 $ 965 ========================================================================================================= ( ) Denotes use of cash. </TABLE> II-253C
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 317,026 $ 312,215 $ 257,708 Transmission 102,129 100,956 99,791 Distribution 264,115 251,323 237,012 General 31,876 28,938 28,010 Construction work in progress 6,707 5,930 49,797 - - ------------------------------------------------------------------------------------------------------------------------- Total utility plant 721,853 699,362 672,318 Accumulated provision for depreciation 287,004 267,590 251,565 - - ------------------------------------------------------------------------------------------------------------------------- Total 434,849 431,772 420,753 Less property-related accumulated deferred income taxes - - - - - ------------------------------------------------------------------------------------------------------------------------- Total 434,849 431,772 420,753 - - ------------------------------------------------------------------------------------------------------------------------- Other Property and Investments 1,788 1,790 1,793 - - ------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 877 1,563 3,915 Receivables, net 21,346 12,328 27,714 Accrued unbilled revenues 5,110 4,780 3,789 Fuel cost under recovery - 3,113 7,112 Fossil fuel stock, at average cost 6,076 7,557 8,419 Materials and supplies, at average cost 8,239 9,076 9,358 Prepayments 6,467 7,446 4,849 - - ------------------------------------------------------------------------------------------------------------------------- Total 48,115 45,863 65,156 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 21,557 23,521 24,890 Miscellaneous 18,353 15,359 14,595 - - ------------------------------------------------------------------------------------------------------------------------- Total 39,910 38,880 39,485 - - ------------------------------------------------------------------------------------------------------------------------- Total Assets $ 524,662 $ 518,305 $ 527,187 ========================================================================================================================= </TABLE> II-254
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 258,539 $ 247,017 $ 246,278 Transmission 93,182 90,198 73,358 Distribution 222,024 212,576 217,913 General 25,851 24,283 22,990 Construction work in progress 5,966 4,211 1,354 - - ------------------------------------------------------------------------------------------------------------------------- Total utility plant 605,562 578,285 561,893 Accumulated provision for depreciation 240,094 225,605 211,725 - - ------------------------------------------------------------------------------------------------------------------------- Total 365,468 352,680 350,168 Less property-related accumulated deferred income taxes 65,725 62,737 58,106 - - ------------------------------------------------------------------------------------------------------------------------- Total 299,743 289,943 292,062 - - ------------------------------------------------------------------------------------------------------------------------- Other Property and Investments 1,795 39 39 - - ------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,788 15,555 972 Receivables, net 14,480 14,549 14,450 Accrued unbilled revenues 3,401 3,252 3,831 Fuel cost under recovery 3,895 - 5,662 Fossil fuel stock, at average cost 4,895 9,196 8,071 Materials and supplies, at average cost 8,935 9,069 9,112 Prepayments 1,599 4,544 1,492 - - ------------------------------------------------------------------------------------------------------------------------- Total 38,993 56,165 43,590 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Miscellaneous 11,644 6,358 4,359 - - ------------------------------------------------------------------------------------------------------------------------- Total 11,644 6,358 4,359 - - ------------------------------------------------------------------------------------------------------------------------- Total Assets $ 352,175 $ 352,505 340,050 ========================================================================================================================= </TABLE> II-255A
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> ASSETS Utility Plant: Production-fossil $ 242,988 $ 241,833 $ 236,587 Transmission 72,299 71,601 69,822 Distribution 204,611 192,335 177,163 General 22,482 21,686 17,513 Construction work in progress 2,880 1,684 7,214 - - ------------------------------------------------------------------------------------------------------------------------- Total utility plant 545,260 529,139 508,299 Accumulated provision for depreciation 198,228 178,888 161,531 - - ------------------------------------------------------------------------------------------------------------------------- Total 347,032 350,251 346,768 Less property-related accumulated deferred income taxes 54,418 51,487 49,255 - - ------------------------------------------------------------------------------------------------------------------------- Total 292,614 298,764 297,513 - - ------------------------------------------------------------------------------------------------------------------------- Other Property and Investments 49 49 49 - - ------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 8,309 4,273 1,825 Receivables, net 14,300 15,714 14,419 Accrued unbilled revenues 4,501 3,889 - Fuel cost under recovery 6,881 1,838 - Fossil fuel stock, at average cost 9,706 8,455 12,359 Materials and supplies, at average cost 8,723 8,471 7,630 Prepayments 585 1,240 2,786 - - ------------------------------------------------------------------------------------------------------------------------- Total 53,005 43,880 39,019 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - Miscellaneous 4,219 4,358 4,127 - - ------------------------------------------------------------------------------------------------------------------------- Total 4,219 4,358 4,127 - - ------------------------------------------------------------------------------------------------------------------------- Total Assets $ 349,887 $ 347,051 $ 340,708 ========================================================================================================================= </TABLE> II-255B
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================= At December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> ASSETS Utility Plant: Production-fossil $ 232,316 $ 229,765 Transmission 65,215 61,843 Distribution 160,346 147,563 General 14,838 13,153 Construction work in progress 5,270 1,915 - - --------------------------------------------------------------------------------------------------------- Total utility plant 477,985 454,239 Accumulated provision for depreciation 144,232 130,279 - - --------------------------------------------------------------------------------------------------------- Total 333,753 323,960 Less property-related accumulated deferred income taxes 46,496 41,026 - - --------------------------------------------------------------------------------------------------------- Total 287,257 282,934 - - --------------------------------------------------------------------------------------------------------- Other Property and Investments 39 39 - - --------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 16,658 965 Receivables, net 13,806 14,472 Accrued unbilled revenues - - Fuel cost under recovery 787 1,524 Fossil fuel stock, at average cost 12,642 13,615 Materials and supplies, at average cost 6,844 6,534 Prepayments 978 383 - - --------------------------------------------------------------------------------------------------------- Total 51,715 37,493 - - --------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - Miscellaneous 2,815 3,220 - - --------------------------------------------------------------------------------------------------------- Total 2,815 3,220 - - --------------------------------------------------------------------------------------------------------- Total Assets $ 341,826 $ 323,686 ========================================================================================================= </TABLE> II-255C
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,223 $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 8,688 Additional minimum liability for under-funded pension obligations (132) (546) (2,121) Retained Earnings 105,033 99,216 93,479 - - ------------------------------------------------------------------------------------------------------------------------- Total common equity 167,812 161,581 154,269 Preferred stock 35,000 35,000 35,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 153,679 155,922 151,338 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 356,491 352,503 340,607 - - ------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 4,000 2,500 3,000 Preferred and preference stock due within one year - - - Long-term debt due within one year 1,407 2,579 4,499 Accounts payable 11,362 8,991 30,442 Customer deposits 5,054 4,698 4,714 Fuel cost over recovery 865 - - Taxes accrued 1,584 1,133 1,529 Interest accrued 6,331 6,830 6,730 Vacation pay accrued 1,916 1,823 1,638 Miscellaneous 5,870 8,282 8,703 - - ------------------------------------------------------------------------------------------------------------------------- Total 38,389 36,836 61,255 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 74,152 70,786 66,947 Accumulated deferred investment tax credits 13,934 14,637 15,301 Deferred credits related to income taxes 24,419 25,487 26,173 Deferred under-funded accrued benefit obligation 2,123 3,022 5,855 Miscellaneous 15,154 15,034 11,049 - - ------------------------------------------------------------------------------------------------------------------------- Total 129,782 128,966 125,325 - - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 524,662 $ 518,305 $ 527,187 ========================================================================================================================= </TABLE> II-256
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1992 1991 1990 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,223 $ 54,223 $ 54,223 Paid-in capital 8,688 8,665 8,665 Additional minimum liability for under-funded pension obligations - - - Retained Earnings 95,465 96,953 94,923 - - ------------------------------------------------------------------------------------------------------------------------- Total common equity 158,376 159,841 157,811 Preferred stock 20,000 20,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 110,767 119,280 112,377 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 289,143 299,121 290,188 - - ------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 7,500 - 1,500 Preferred and preference stock due within one year - - - Long-term debt due within one year 1,319 2,442 2,358 Accounts payable 11,179 10,176 8,786 Customer deposits 4,541 4,528 4,472 Fuel cost over recovery - 1,603 - Taxes accrued 3,016 724 1,387 Interest accrued 5,733 4,657 3,415 Vacation pay accrued 1,790 1,672 1,604 Miscellaneous 5,025 4,823 3,398 - - ------------------------------------------------------------------------------------------------------------------------- Total 40,103 30,625 26,920 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 15,964 16,628 17,292 Deferred credits related to income taxes - - - Deferred under-funded accrued benefit obligation - - - Miscellaneous 6,965 6,131 5,650 - - ------------------------------------------------------------------------------------------------------------------------- Total 22,929 22,759 22,942 - - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 352,175 $ 352,505 $ 340,050 ========================================================================================================================= </TABLE> II-257A
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================================= At December 31, 1989 1988 1987 - - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,223 $ 54,223 $ 54,131 Paid-in capital 8,665 8,665 8,353 Additional minimum liability for under-funded pension obligations - - - Retained Earnings 90,849 85,995 73,723 - - ------------------------------------------------------------------------------------------------------------------------- Total common equity 153,737 148,883 136,207 Preferred stock 22,300 22,300 2,300 Preferred and preference stock subject to mandatory redemption 2,884 3,075 9,665 Long-term debt 117,522 98,285 129,329 - - ------------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 296,443 272,543 277,501 - - ------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - - Preferred and preference stock due within one year 190 6,590 553 Long-term debt due within one year 7,091 23,217 8,956 Accounts payable 9,078 7,950 9,427 Customer deposits 4,296 3,983 3,729 Fuel cost over recovery - - 599 Taxes accrued 1,749 1,899 3,713 Interest accrued 4,287 4,154 4,599 Vacation pay accrued 1,477 1,412 1,306 Miscellaneous 2,880 1,705 6,257 - - ------------------------------------------------------------------------------------------------------------------------- Total 31,048 50,910 39,139 - - ------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - Accumulated deferred investment tax credits 17,971 19,106 20,264 Deferred credits related to income taxes - - - Deferred under-funded accrued benefit obligation - - - Miscellaneous 4,425 4,492 3,804 - - ------------------------------------------------------------------------------------------------------------------------- Total 22,396 23,598 24,068 - - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 349,887 $ 347,051 $ 340,708 ========================================================================================================================= </TABLE> II-257B
<TABLE> <CAPTION> BALANCE SHEETS Savannah Electric and Power Company ========================================================================================================= At December 31, 1986 1985 - - --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) <S> <C> <C> CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 53,174 $ 52,332 Paid-in capital 7,623 6,774 Additional minimum liability for under-funded pension obligations - - Retained Earnings 62,336 51,279 - - --------------------------------------------------------------------------------------------------------- Total common equity 123,133 110,385 Preferred stock 2,300 2,300 Preferred and preference stock subject to mandatory redemption 10,256 10,848 Long-term debt 137,821 128,850 - - --------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 273,510 252,383 - - --------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - 4,500 Preferred and preference stock due within one year 550 568 Long-term debt due within one year 14,836 12,636 Accounts payable 10,329 12,584 Customer deposits 3,403 3,256 Fuel cost over recovery - - Taxes accrued 4,834 3,595 Interest accrued 4,906 4,984 Vacation pay accrued 1,255 1,150 Miscellaneous 3,650 3,356 - - --------------------------------------------------------------------------------------------------------- Total 43,763 46,629 - - --------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - Accumulated deferred investment tax credits 21,663 22,265 Deferred credits related to income taxes - - Deferred under-funded accrued benefit obligation - - Miscellaneous 2,890 2,409 - - --------------------------------------------------------------------------------------------------------- Total 24,553 24,674 - - --------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 341,826 $ 323,686 ========================================================================================================= </TABLE> II-257C
SAVANNAH ELECTRIC AND POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1995 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 20,000 6-3/8% $ 20,000 7/1/03 1991 30,000 9-3/8% 29,400 7/1/21 1992 30,000 8.30% 30,000 7/1/22 1993 25,000 7.40% 25,000 7/1/23 1995 15,000 7-7/8% 15,000 5/1/25 ============ =========== $ 120,000 $ 119,400 ============ =========== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity - - -------------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 4,085 Variable $ 4,085 1/1/16 1992 13,870 6-3/4% 13,870 2/1/22 ============ =========== $ 17,955 $ 17,955 ============ =========== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding - - ---------------------------------------------------------------------- (Thousands) 1993 1,400,000 6.64% $ 35,000 SECURITIES RETIRED DURING 1995 First Mortgage Bonds Principal Interest Series Amount Rate - - ---------------------------------------------------------------------- (Thousands) 1989 $ 28,950 9-1/4% 1991 300 9-3/8% ============ $ 29,250 ============ II-258
PART III Items 10, 11, 12 and 13 for SOUTHERN are incorporated by reference to ELECTION OF DIRECTORS in SOUTHERN's definitive Proxy Statement relating to the 1996 annual meeting of stockholders. The ages of directors and executive officers in Item 10 set forth below are as of December 31, 1995. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS ALABAMA Identification of directors of ALABAMA. Elmer B. Harris (1) President and Chief Executive Officer Age 56 Served as Director since 3-1-89 Bill M. Guthrie Executive Vice President Age 62 Served as Director since 12-16-88 Whit Armstrong (2) Age 48 Served as Director since 9-24-82 Philip E. Austin (2) Age 53 Served as Director since 1-25-91 Margaret A. Carpenter (2) Age 71 Served as Director since 2-26-93 A. W. Dahlberg (2) Age 55 Served as Director since 4-22-94 Peter V. Gregerson, Sr. (2) Age 67 Served as Director since 10-22-93 Carl E. Jones, Jr. (2) Age 55 Served as Director since 4-22-88 Wallace D. Malone, Jr. (2) Age 59 Served as Director since 6-22-90 William V. Muse (2) Age 56 Served as Director since 2-26-93 John T. Porter (2) Age 64 Served as Director since 10-22-93 Gerald H. Powell (2) Age 69 Served as Director since 2-28-86 Robert D. Powers (2) Age 45 Served as Director since 1-24-92 John W. Rouse (2) Age 58 Served as Director since 4-22-88 William J. Rushton, III (2) Age 66 Served as Director since 9-18-70 James H. Sanford (2) Age 51 Served as Director since 8-1-83 John C. Webb, IV (2) Age 53 Served as Director since 4-22-77 John W. Woods (2) Age 64 Served as Director since 4-20-73 (1) Previously served as Director of ALABAMA from 1980 to 1985. (2) No position other than Director. Each of the above is currently a director of ALABAMA, serving a term running from the last annual meeting of ALABAMA's stockholder (April 28, 1995) for one year until the next annual meeting or until a successor is elected and qualified. III-1
There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of ALABAMA acting solely in their capacities as such. Identification of executive officers of ALABAMA. Elmer B. Harris (1) President, Chief Executive Officer and Director Age 56 Served as Executive Officer since 3-1-89 Banks H. Farris Executive Vice President Age 60 Served as Executive Officer since 12-3-91 William B. Hutchins, III Executive Vice President and Chief Financial Officer Age 52 Served as Executive Officer since 12-3-91 Charles D. McCrary Executive Vice President Age 44 Served as Executive Officer since 1-1-91 (1) Previously served as executive officer of ALABAMA from 1979 to 1985. Each of the above is currently an executive officer of ALABAMA, serving a term running from the last annual meeting of the directors (April 28, 1995) for one year until the next annual meeting or until his successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of ALABAMA acting solely in their capacities as such. Identification of certain significant employees. None. Family relationships. None. Business experience. Elmer B. Harris - Elected in 1989; Chief Executive Officer. Director of SOUTHERN and AmSouth Bancorporation. Bill M. Guthrie - Elected in 1988; also served since 1991 as Chief Production Officer of SOUTHERN system and from 1991 to 1994 as Executive Vice President and Chief Production Officer of SCS. Elected Senior Executive Vice President and Chief Production Officer of SCS effective 1994. Also serves as Vice President of SOUTHERN, GULF, MISSISSIPPI and SAVANNAH and Executive Vice President of GEORGIA. Responsible primarily for providing overall management of materials management, fuel services, operating and planning services, fossil, hydro and bulk power operations of the Southern electric system. Whit Armstrong - President, Chairman and Chief Executive Officer of The Citizens Bank, Enterprise, Alabama. Also, President and Chairman of the Board of Enterprise Capital Corporation, Inc. Philip E. Austin - Chancellor, The University of Alabama System. Previously President and Chancellor of Colorado State University. Margaret A. Carpenter - President, Compos-it, Inc. (typographics), Montgomery, Alabama. A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN effective March 1, 1995. He previously served as President of SOUTHERN from 1994 to 1995 and President and Chief Executive Officer of GEORGIA from 1988 through 1993. Director of SOUTHERN, GEORGIA, Protective Life Corporation and Equifax, Inc. and a nominee for election as a director of SunTrust Banks, Inc. Peter V. Gregerson, Sr. - Chairman Emeritus of Gregerson's Foods, Inc. (retail groceries), Gadsden, Alabama. Carl E. Jones, Jr. - Chairman and Chief Executive Officer of First Alabama Bank, Mobile, Alabama. Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust Corporation, bank holding company, Birmingham, Alabama. III-2
William V. Muse - President of Auburn University. He previously served as President of the University of Akron from 1984 to 1992. Director of Alabama National Bancorporation, Shoal Creek, Alabama. John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama. Director of Citizen Federal Bank. Gerald H. Powell - President, Dixie Clay Company of Alabama, Inc. (refractory clay producer), Jacksonville, Alabama. Robert D. Powers - President, The Eufaula Agency, Inc. (real estate and insurance), Eufaula, Alabama. John W. Rouse - President and Chief Executive Officer of Southern Research Institute (non-profit research institute), Birmingham, Alabama. Director of Protective Life Corporation. William J. Rushton, III - Chairman Emeritus of the Board, Protective Life Corporation (insurance holding company), Birmingham, Alabama. Director of SOUTHERN. James H. Sanford - Chairman, HOME Place Farms Inc. (diversified farmers and ginners), Prattville, Alabama. John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber), Demopolis, Alabama. John W. Woods - Effective January 1996, Chairman, AmSouth Bancorporation (multi-bank holding company), Birmingham, Alabama. He previously served as Chairman and Chief Executive Officer of AmSouth Bancorporation. Director of Protective Life Corporation. Banks H. Farris - Elected in 1991; responsible primarily for providing the overall management of the Human Resources, Information Resources, Power Delivery and Marketing Departments and the six geographic divisions. He previously served as Senior Vice President from 1991 to 1994 and Vice President - Human Resources from 1989 to 1991. William B. Hutchins, III - Elected in 1991; Chief Financial Officer, responsible primarily for providing the overall management of accounting and financial planning activities. He previously served as Senior Vice President and Chief Financial Officer from 1991 to 1994 and Vice President and Treasurer from 1983 to 1991. Charles D. McCrary - Elected in 1991; responsible for the External Relations Department, Operating Services and Corporate Services. He previously served as Senior Vice President from 1991 to 1994 and Vice President of Administrative Services - Nuclear of SCS from 1988 to 1991. Involvement in certain legal proceedings. None. III-3
GEORGIA Identification of directors of GEORGIA. H. Allen Franklin President and Chief Executive Officer Age 51 Served as Director since 1-1-94 Warren Y. Jobe Executive Vice President, Treasurer and Chief Financial Officer Age 55 Served as Director since 8-1-82 Bennett A. Brown (1) Age 66 Served as Director since 5-15-80 A. W. Dahlberg (1) Age 55 Served as Director since 6-1-88 William A. Fickling, Jr. (1) Age 63 Served as Director since 4-18-73 L. G. Hardman III (1) Age 56 Served as Director since 6-25-79 James R. Lientz, Jr. (1) Age 52 Served as Director since 7-21-93 William A. Parker, Jr. (1) Age 68 Served as Director since 5-19-65 G. Joseph Prendergast (1) Age 50 Served as Director since 1-20-93 Herman J. Russell (1) Age 65 Served as Director since 5-18-88 Gloria M. Shatto (1) Age 64 Served as Director since 2-20-80 William Jerry Vereen (1) Age 55 Served as Director since 5-18-88 Carl Ware (1) (2) Age 52 Served as Director since 2-15-95 Thomas R. Williams (1) Age 67 Served as Director since 3-17-82 (1) No position other than Director. (2) Previously served as Director of GEORGIA from 1980 to 1991. Each of the above is currently a director of GEORGIA, serving a term running from the last annual meeting of GEORGIA's stockholder (May 17, 1995) for one year until the next annual meeting or until a successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he/she was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of GEORGIA acting solely in their capacities as such. Identification of executive officers of GEORGIA. H. Allen Franklin President, Chief Executive Officer and Director Age 51 Served as Executive Officer since 1-1-94 Warren Y. Jobe Executive Vice President, Treasurer, Chief Financial Officer and Director Age 55 Served as Executive Officer since 5-19-82 William C. Archer, III Executive Vice President - External Affairs Age 47 Served as Executive Officer since 4-6-95 III-4
W. G. Hairston, III Executive Vice President - Nuclear Age 51 Served as Executive Officer since 6-1-93 Gene R. Hodges Executive Vice President - Customer Operations Age 57 Served as Executive Officer since 11-19-86 William P. Bowers Senior Vice President - Marketing Age 39 Served as Executive Officer since 9-22-95 Wayne T. Dahlke Senior Vice President - Power Delivery Age 54 Served as Executive Officer since 4-19-89 James K. Davis Senior Vice President - Corporate Relations Age 55 Served as Executive Officer since 10-1-93 Robert H. Haubein Senior Vice President - Fossil/Hydro Power Age 55 Served as Executive Officer since 2-19-92 Fred D. Williams Senior Vice President - Wholesale Power Marketing Age 51 Served as Executive Officer since 11-18-92 Each of the above is currently an executive officer of GEORGIA, serving a term running from the last annual meeting of the directors (May 17, 1995) for one year until the next annual meeting or until his successor is elected and qualified, except for Mr. Bowers whose election was effective on the date indicated. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of GEORGIA acting solely in their capacities as such. Identification of certain significant employees. None. Family relationships. None. Business experience. H. Allen Franklin - President and Chief Executive Officer since 1994. He previously served as President and Chief Executive Officer of SCS from 1988 through 1993. Director of SOUTHERN and SouthTrust Corporation. Warren Y. Jobe - Executive Vice President and Chief Financial Officer since 1982 and Treasurer since 1992. Responsible for financial and accounting operations and planning, internal auditing, procurement, corporate services, corporate secretary and treasury operations. Bennett A. Brown - Retired as Chairman of the Board of NationsBank on December 31, 1992. Previously Chairman of the Board and Chief Executive Officer of C&S/Sovran Corporation. Director of Cousins Properties. A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN effective March 1, 1995. He previously served as President of SOUTHERN from 1994 to 1995 and President and Chief Executive Officer of GEORGIA from 1988 through 1993. Director of SOUTHERN, ALABAMA, Protective Life Corporation and Equifax, Inc. and a nominee for election as a director of SunTrust Banks, Inc. William A. Fickling, Jr. - Chairman of the Board, Chief Executive Officer and President of Beech Street Corporation (provider of managed care services). L. G. Hardman III - Chairman of the Board of The First National Bank of Commerce, Georgia and Chairman of the Board and Chief Executive Officer of First Commerce Bancorp, Inc. Chairman of the Board, President and Treasurer of Harmony Grove Mills, Inc. (real estate investments). Director of SOUTHERN. James R. Lientz, Jr. - President of NationsBank of Georgia since 1993. He previously served as President and Chief Executive Officer of former Citizens & Southern Bank of South Carolina (now NationsBank) from 1990 to 1993. III-5
William A. Parker, Jr. - Chairman of the Board, Seminole Investment Co., L.L.C. (private investments), Atlanta, Georgia. Director of SOUTHERN, Genuine Parts Company, Life Insurance Company of Georgia, Atlantic Realty Company, ING North America Insurance Company, Post Properties, Inc. and Haverty Furniture Companies, Inc. G. Joseph Prendergast - Chairman Wachovia Bank of Georgia, N.A. since 1994. Chairman, Wachovia Bank of South Carolina, and Director, Wachovia Bank of North Carolina. He previously served as President and Chief Executive Officer, Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A. from 1993 to 1994 and from 1988 to 1993 as Executive Vice President of Wachovia Corporation and President of Wachovia Corporate Services, Inc. Herman J. Russell - Chairman of the Board and Chief Executive Officer, H. J. Russell & Company (construction), Atlanta, Georgia. Chairman of the Board, Citizens Trust Bank, and Citizens Bancshares Corporation Atlanta, Georgia. Director of Wachovia Corporation and National Service Industries. Gloria M. Shatto - President, Berry College, Mount Berry, Georgia. Director of SOUTHERN, Becton Dickinson & Company, Kmart Corporation and Texas Instruments, Inc. William Jerry Vereen - President, Treasurer and Chief Executive Officer of Riverside Manufacturing Company (manufacture and sale of uniforms), Moultrie, Georgia. Director of Gerber Scientific, Inc., Textile Clothing Technology Group and Blue Cross/Blue Shield of Georgia. Carl Ware - President, Africa Group, Coca-Cola International; Senior Vice President, The Coca-Cola Co. Thomas R. Williams - President of The Wales Group, Inc. (investments), Atlanta, Georgia. Director of ConAgra, Inc., BellSouth Corporation, National Life Insurance Company of Vermont, AppleSouth, Inc., American Software, Inc. and The Fidelity Group of Funds. William C. Archer, III - Executive Vice President - External Affairs since September 1995. Senior Vice President - External Affairs from April 1995 to September 1995. Vice President - Human Resources for SCS from 1992 to 1995. Vice President - Northern Region from March 1992 to August 1992 and Vice President - Metro Region from 1990 to March 1992. W. G. Hairston, III - Executive Vice President - Nuclear since 1993. Also, he has served as President and Chief Operating Officer of Southern Nuclear since May 1993 and Chief Executive Officer since December 1993. Executive Vice President of Southern Nuclear from 1992 to 1993 and Senior Vice President of Southern Nuclear from 1990 to 1992. Gene R. Hodges - Executive Vice President - Customer Operations since 1992. Senior Vice President - Region/Land Operations from 1990 to 1992. William P. Bowers - Senior Vice President - Marketing since September 1995. Vice President - Retail Sales and Service from 1992 to 1995 and Vice President - Marketing from 1990 to 1992. Wayne T. Dahlke - Senior Vice President - Power Delivery since 1992. Senior Vice President - Marketing from 1989 to 1992. James K. Davis - Senior Vice President - Corporate Relations since 1993. Vice President of Corporate Relations from 1988 to 1993. Robert H. Haubein - Senior Vice President - Fossil/ Hydro Power since 1994. Senior Vice President Administrative Services from 1992 to 1994 and Vice President - Northern Region from 1990 to 1992. Fred D. Williams - Senior Vice President - Wholesale Power Marketing since August 1995. Senior Vice President Bulk Power Markets from 1992 to August 1995. Vice President - Bulk Power Markets from 1984 to 1992. In addition, he was elected Senior Vice President - Wholesale Power Marketing of SCS in August 1995 and Senior Vice President of ALABAMA in February 1996. Involvement in certain legal proceedings. None. III-6
GULF Identification of directors of GULF. Travis J. Bowden President and Chief Executive Officer Age 57 Served as Director since 2-1-94 Reed Bell, Sr., M.D. (1) Age 69 Served as Director since 1-17-86 Paul J. DeNicola (1) Age 47 Served as Director since 4-19-91 Fred C. Donovan (1) Age 55 Served as Director since 1-18-91 W. D. Hull, Jr. (1) Age 63 Served as Director since 10-14-83 C. W. Ruckel (1) Age 68 Served as Director since 4-20-62 J. K. Tannehill (1) Age 62 Served as Director since 7-19-85 (1) No position other than Director. Each of the above is currently a director of GULF, serving a term running from the last annual meeting of GULF's stockholder (June 27, 1995) for one year until the next annual meeting or until a successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of GULF acting solely in their capacities as such. Identification of executive officers of GULF. Travis J. Bowden President, Chief Executive Officer and Director Age 57 Served as Executive Officer since 2-1-94 F. M. Fisher, Jr. Vice President - Employee and External Relations Age 47 Served as Executive Officer since 5-19-89 John E. Hodges, Jr. Vice President - Customer Operations Age 52 Served as Executive Officer since 5-19-89 G. Edison Holland, Jr. Vice President - Power Generation/Transmission and Corporate Counsel Age 43 Served as Executive Officer since 4-25-92 A. E. Scarbrough Vice President - Finance Age 59 Served as Executive Officer since 9-21-77 Each of the above is currently an executive officer of GULF, serving a term running from the last annual meeting of the directors (July 21, 1995) for one year until the next annual meeting or until his successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of GULF acting solely in their capacities as such. Identification of certain significant employees. None. Family relationships. None. III-7
Business experience. Travis J. Bowden - Elected President effective February 1994 and, effective May 1994, Chief Executive Officer. He previously served as Executive Vice President of ALABAMA from 1985 to 1994. Reed Bell, Sr., M.D. - Medical Doctor and since 1989, employee of the State of Florida. He serves as Medical Director of Children's Medical Services, District 1. He previously served as Medical Director of the Escambia County Public Health Unit until 1992. Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994. He previously served as Executive Vice President of SCS from 1991 through 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, MISSISSIPPI and SAVANNAH. Fred C. Donovan - President of Baskerville - Donovan, Inc., Pensacola, Florida, an architectural and engineering firm. Director of Baptist Health Care, Inc. W. D. Hull, Jr. - Vice Chairman of the SunTrust Bank, West Florida, Panama City, Florida. He previously served as President and Chief Executive Officer and Director of the Sun Commercial Bank, Panama City, Florida from 1989 to 1992. C. W. Ruckel - Chairman of the Board of The Vanguard Bank and Trust Company, Valparaiso, Florida. President and owner of Ruckel Properties, Inc., Valparaiso, Florida. J. K. Tannehill - President and Chief Executive Officer of Merrick International Industries, Lynn Haven, Florida. He previously served as President and Chief Executive Officer of Stock Equipment Company, Chagrin Falls, Ohio, until 1991. Director of Florida First Bank, Panama City, Florida. F. M. Fisher, Jr. - Elected Vice President - Employee and External Relations in 1989. John E. Hodges, Jr. - Elected Vice President - Customer Operations in 1989. Director of Barnett Bank of West Florida, Pensacola, Florida. G. Edison Holland, Jr. - Elected Vice President and Corporate Counsel in 1992 and Vice President - Power Generation/Transmission and Corporate Counsel in March 1995; responsible for generation and transmission of electric energy, all legal matters associated with GULF and serves as compliance officer. Also serves, since 1982, as a partner in the law firm, Beggs & Lane. A. E. Scarbrough - Elected Vice President - Finance in 1980; responsible for all accounting and financial services of GULF. Involvement in certain legal proceedings. None. III-8
MISSISSIPPI Identification of directors of MISSISSIPPI. Dwight H. Evans President and Chief Executive Officer Age 47 Served as Director since 3-27-95 Paul J. DeNicola (1) Age 47 Served as Director since 5-1-89 Edwin E. Downer (1) Age 64 Served as Director since 4-24-84 Robert S. Gaddis (1) Age 64 Served as Director since 1-21-86 Walter H. Hurt, III (1) Age 60 Served as Director since 4-6-82 Aubrey K. Lucas (1) Age 61 Served as Director since 4-24-84 George A. Schloegel (1) Age 55 Served as Director since 7-26-95 Philip J. Terrell (1) Age 42 Served as Director since 2-22-95 N. Eugene Warr (1) Age 60 Served as Director since 1-21-86 (1) No position other than Director. Each of the above is currently a director of MISSISSIPPI, serving a term running from the last annual meeting of MISSISSIPPI's stockholder (April 4, 1995) for one year until the next annual meeting or until a successor is elected and qualified, except for Mr. Schloegel whose election was effective on the date indicated. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he or she was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of MISSISSIPPI acting solely in their capacities as such. Identification of executive officers of MISSISSIPPI. Dwight H. Evans President, Chief Executive Officer and Director Age 47 Served as Executive Officer since 3-27-95 H. E. Blakeslee Vice President - Customer Services and Marketing Age 55 Served as Executive Officer since 1-25-84 F. D. Kuester Vice President - Power Generation and Delivery Age 45 Served as Executive Officer since 3-28-94 Don E. Mason Vice President - External Affairs and Corporate Services Age 54 Served as Executive Officer since 7-27-83 Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer Age 43 Served as Executive Officer since 1-1-95 Each of the above is currently an executive officer of MISSISSIPPI, serving a term running from the last annual meeting of the directors (April 26, 1995) for one year until the next annual meeting or until a successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of MISSISSIPPI acting solely in their capacities as such. Identification of certain significant employees. None. III-9
Family relationships. None. Business experience. Dwight H. Evans - President and Chief Executive Officer since March 1995. He previously served as Executive Vice President of GEORGIA from 1989 to 1995. Paul J. DeNicola - President and Chief Executive Officer of SCS effective 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, SAVANNAH and GULF. Edwin E. Downer - Business consultant specializing in economic analysis, management controls and procedural studies. Robert S. Gaddis - President of the Trustmark National Bank, Laurel, Mississippi. Walter H. Hurt, III - President and Director of NPC Inc. (Investments). Vicar, All Saints Church, Inverness, Mississippi, and St. Thomas Church, Belzoni, Mississippi. Retired newspaper editor and publisher. Aubrey K. Lucas - President of the University of Southern Mississippi, Hattiesburg, Mississippi. George A. Schloegel - President of Hancock Bank and Hancock Bank Securities Corporation. Vice Chairman of Hancock Holding Company. Director of Hancock Bank - - - Mississippi, Hancock Bank - Louisiana and First National Bank of Denham Springs, Louisiana. Philip J. Terrell - Superintendent of Pass Christian Public School District and adjunct professor at William Carey College. N. Eugene Warr - Retailer (Biloxi and Gulfport, Mississippi). He previously served as Vice Chairman of the Board of SouthTrust Bank of Mississippi, formerly The Jefferson Bank, Biloxi, Mississippi, from 1977 to 1995. H. E. Blakeslee - Elected Vice President in 1984. Primarily responsible for business development, rates and wholesale marketing, technical research, district operations and the customer services center. F. D. Kuester - Elected Vice President in 1994. Primarily responsible for generating plants, environmental quality, fuel services, power generation technical services, distribution, transmission, system planning, bulk power contracts, system operations and control, system protection and real estate. He previously served as Manager of Business and New Project Design/Development of SCS from 1993 to 1994 and Vice President of SCS from 1990 to 1993. Don E. Mason - Elected Vice President in 1983. Primarily responsible for external affairs, corporate communications, security, risk management and general services, as well as the human resources function. Michael W. Southern - Elected Vice President, Secretary, Treasurer and Chief Financial Officer in 1995, responsible primarily for accounting, treasury, finance, materials and information resources. He previously served as Director of Corporate Finance of SCS from 1994 to 1995 and Director of Financial Planning of SCS from 1990 to 1994. Involvement in certain legal proceedings. None. III-10
SAVANNAH Identification of directors of SAVANNAH. Arthur M. Gignilliat, Jr. President and Chief Executive Officer Age 63 Served as Director since 9-1-82 Helen Quattlebaum Artley (1) Age 68 Served as Director since 5-17-77 Paul J. DeNicola (1) Age 47 Served as Director since 3-14-91 Brian R. Foster (1) Age 46 Served as Director since 5-16-89 Walter D. Gnann (1) Age 60 Served as Director since 5-17-83 Robert B. Miller, III (1) Age 50 Served as Director since 5-17-83 Arnold M. Tenenbaum (1) Age 59 Served as Director since 5-17-77 Frederick F. Williams, Jr. (1) Age 68 Served as Director since 7-2-75 (1) No Position other than Director. Each of the above is currently a director of SAVANNAH, serving a term running from the last annual meeting of SAVANNAH's stockholder (May 16, 1995) for one year until the next annual meeting or until a successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he/she was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of SAVANNAH acting solely in their capacities as such. Identification of executive officers of SAVANNAH. Arthur M. Gignilliat, Jr. President, Chief Executive Officer and Director Age 63 Served as Executive Officer since 2-15-72 W. Miles Greer Vice President - Marketing and Customer Services Age 52 Served as Executive Officer since 11-20-85 Larry M. Porter Vice President - Operations Age 50 Served as Executive Officer since 7-1-91 Kirby R. Willis Vice President, Treasurer and Chief Financial Officer Age 44 Served as Executive Officer since 1-1-94 Each of the above is currently an executive officer of SAVANNAH, serving a term running from the last annual meeting of the directors (July 19, 1995) for one year until the next annual meeting or until his successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of SAVANNAH acting solely in their capacities as such. Identification of certain significant employees. None. Family relationships. None. Business experience. Arthur M. Gignilliat, Jr. - Elected President and Chief Executive Officer in 1984. Director of Savannah Foods and Industries, Inc. Helen Quattlebaum Artley - Homemaker and Civic Worker. III-11
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, GULF and MISSISSIPPI. Brian R. Foster - President and Chief Executive Officer of NationsBank of Georgia, N.A., in Savannah since 1988. Walter D. Gnann - President of Walt's TV, Appliance and Furniture Co., Inc., Springfield, Georgia. Past Chairman of the Development Authority of Effingham County, Georgia. Robert B. Miller, III - President of American Building Systems, Inc. Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation. Director of First Union National Bank of Georgia and Savannah Foods and Industries, Inc. Frederick F. Williams, Jr. - Retired Partner and Consultant, Hilb, Rogal and Hamilton Employee Benefits, Incorporated (Insurance Brokers), formerly Jones, Hill & Mercer. W. Miles Greer - Vice President - Marketing and Customer Services effective 1994. Formerly served as Vice President - Economic Development and Corporate Services from 1989 through 1993. Larry M. Porter - Vice President - Operations since 1991. Responsible for managing the areas of fuel procurement, power production, transmission and distribution, engineering and system operation. Previously he served as Assistant Plant Manager of GEORGIA's Plant Scherer from 1984 to 1991. Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since 1994. Responsible for all financial activities, Information Resources, Human Resources, Corporate Services, and Environmental Affairs and Safety. He previously served as Treasurer, Controller and Assistant Secretary from 1991 to 1993 and Treasurer and Secretary from 1987 to 1991. Involvement in certain legal proceedings. None. III-12
ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Tables. The following tables set forth information concerning any Chief Executive Officer and the four most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 during 1995 for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH). <TABLE> <CAPTION> Key terms used in this Item will have the following meanings:- <S> <C> AME.........................................Above-market earnings on deferred compensation ESP.........................................Employee Savings Plan ESOP........................................Employee Stock Ownership Plan SBP.........................................Supplemental Benefit Plan ERISA.......................................Employee Retirement Income Security Act </TABLE> <TABLE> <CAPTION> ALABAMA SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Elmer B. Harris President, Chief Executive 1995 458,940 74,204 5,956 32,170 494,447 26,058 Officer, 1994 436,280 96,711 13,882 31,441 236,642 24,467 Director 1993 418,818 117,630 23,469 26,892 198,131 39,388 Banks H. Farris 1995 221,405 76,182 4,239 9,856 174,727 11,889 Executive Vice 1994 203,508 38,828 52,567 8,331 41,134 9,864 President 1993 176,041 17,642 24,222 6,302 28,394 27,418 Charles D. McCrary 1995 206,400 69,380 2,549 9,188 141,834 11,071 Executive Vice 1994 189,718 35,459 4,254 7,767 38,195 10,260 President 1993 163,832 16,103 16,612 5,874 24,928 26,713 See next page for footnotes. </TABLE> III-13
<TABLE> <CAPTION> ALABAMA SUMMARY COMPENSATION TABLE (Continued) ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> William B. Hutchins, III Executive Vice President, 1995 199,164 69,841 1,180 8,850 129,565 11,088 Chief Financial 1994 184,995 26,993 1,289 7,551 35,138 9,650 Officer 1993 164,972 16,103 14,791 5,896 26,429 26,817 - - -------------------- 1 Tax reimbursement by ALABAMA and certain personal benefits, including membership fee of $44,014 for Mr. Farris in 1994. 2 Payouts made in 1994, 1995 and 1996 for the four-year performance periods ending December 31, 1993, 1994 and 1995, respectively. 3 ALABAMA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP Elmer B. Harris $6,750 $1,151 $18,157 Banks H. Farris 6,750 1,151 3,988 Charles D. McCrary 6,750 1,151 3,170 William B. Hutchins, III 6,750 1,151 3,187 </TABLE> III-14
<TABLE> <CAPTION> GEORGIA SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> H. Allen Franklin President, 1995 456,366 82,935 3,936 31,960 561,024 25,493 Chief Executive 1994 415,954 87,763 30,078 31,386 203,201 100,201 Officer, Director 1993 365,000 73,584 16,438 23,408 140,650 37,298 William G. Hairston, III 1995 296,988 47,489 6,020 15,785 289,170 16,442 Executive 1994 287,831 44,521 3,225 15,725 81,662 14,593 Vice President 1993 234,454 53,202 15,925 11,782 54,126 30,475 Warren Y. Jobe Executive Vice President, Treasurer, 1995 220,152 31,000 1,994 9,710 141,834 12,248 Chief Financial 1994 215,809 27,579 2,744 8,610 56,635 11,736 Officer, Director 1993 210,200 27,038 15,645 7,480 48,282 29,258 Gene R. Hodges 1995 214,502 32,000 1,978 9,514 141,834 11,160 Executive 1994 204,190 27,579 4,601 8,196 52,188 11,093 Vice President 1993 206,727 (4) 28,228 14,903 6,878 35,285 30,629 Robert H. Haubein, Jr. 1995 199,759 34,000 1,623 8,871 129,565 10,825 Senior Vice 1994 184,470 32,391 3,115 7,165 34,836 9,924 President 1993 168,577 25,764 14,929 6,012 36,437 8,772 - - -------------------- 1 Tax reimbursement by GEORGIA on certain personal benefits. 2 Payouts made in 1994, 1995 and 1996 for the four-year performance periods ending December 31, 1993, 1994 and 1995, respectively. 3 GEORGIA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP H. Allen Franklin $6,750 $1,151 $17,592 William G. Hairston, III 6,750 1,151 8,541 Warren Y. Jobe 6,843 1,151 4,254 Gene R. Hodges 6,750 1,151 3,259 Robert H. Haubein, Jr. 6,750 1,151 2,924 4 Mr. Hodges' 1993 salary included a retroactive pay adjustment of $15,717 to correct underpayment of his 1992 salary. </TABLE> III-15
<TABLE> <CAPTION> GULF SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Travis J. Bowden President, 1995 289,749 29,077 4,663 15,464 233,237 16,679 Chief Executive 1994 282,513 42,849 42,015 15,134 86,730 115,241 Officer, Director 1993 257,089 23,161 16,118 12,238 61,524 31,271 G. Edison Holland, Jr. 1995 177,682 16,718 2,463 7,851 103,474 9,491 Vice President, 1994 172,092 21,352 1,512 6,893 18,888 9,307 Corporate Counsel 1993 162,651 20,934 9,504 5,840 - 21,015 Arlan E. Scarbrough 1995 167,568 16,718 722 7,398 94,553 8,556 Vice President 1994 163,548 19,511 1,185 - 25,889 8,612 1993 155,565 19,129 11,582 - 22,072 24,729 John E. Hodges, Jr. 1995 164,738 16,718 2,272 7,307 103,474 9,040 Vice President 1994 156,831 21,352 1,999 5,455 37,776 8,733 1993 147,144 20,934 9,726 4,578 32,206 24,327 Francis M. Fisher, Jr. 1995 141,389 16,718 510 5,603 94,553 7,694 Vice President 1994 135,307 17,812 586 - 23,635 5,576 1993 127,197 17,463 9,311 - 20,149 19,301 - - -------------------- 1 Tax reimbursement by GULF on certain personal benefits. 2 Payouts made in 1994, 1995 and 1996 for the four-year performance periods ending December 31, 1993, 1994 and 1995, respectively. 3 GULF contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP Travis J. Bowden $6,750 $1,151 $8,778 G. Edison Holland, Jr. 6,750 1,151 1,590 Arlan E. Scarbrough 6,731 1,151 674 John E. Hodges, Jr. 6,750 1,151 1,139 Francis M. Fisher, Jr. 6,363 1,151 180 </TABLE> III-16
<TABLE> <CAPTION> MISSISSIPPI SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Dwight H. Evans President, Chief 1995 233,069 42,965 2,746 10,486 141,834 34,139 Executive 1994 215,887 35,459 2,318 8,610 56,635 11,812 Officer, Director 1993 210,544 34,763 14,642 7,498 48,282 29,519 H. E. Blakeslee 1995 168,651 29,358 952 7,598 103,474 9,161 Vice President 1994 156,204 23,808 1,055 5,509 37,776 8,494 1993 154,332 15,271 3,528 4,768 32,206 15,650 Don E. Mason 1995 163,901 29,358 794 7,445 94,553 8,830 Vice President 1994 150,162 22,069 686 - 25,889 8,080 1993 148,305 11,016 4,321 - 22,072 15,409 Frederick D. 1995 136,723 24,467 714 4,779 73,989 7,300 Kuester (4) 1994 127,590 16,481 1,781 - 16,588 19,121 Vice President 1993 - - - - - - Michael W. Southern (5) Vice President, Chief Financial 1995 133,505 24,467 344 4,847 73,989 19,806 Officer, Secretary, 1994 - - - - - - Treasurer 1993 - - - - - - - - -------------------- 1 Tax reimbursement by MISSISSIPPI on certain personal benefits. 2 Payouts made in 1994, 1995 and 1996 for the four-year performance periods ending December 31, 1993, 1994 and 1995, respectively. 3 MISSISSIPPI contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP Dwight H. Evans $6,750 $1,151 $4,136 H. E. Blakeslee 6,750 1,151 1,260 Don E. Mason 6,750 1,151 929 Frederick D. Kuester 6,152 1,148 - Michael W. Southern 6,222 1,144 - Also included for Mr. Evans and Mr. Southern is a one-time lump-sum payment of $22,102 and $12,440, respectively, given in connection with their appointment to their current positions. 4 Mr. Kuester was named an executive officer effective March 28, 1994. 5 Mr. Southern was named an executive officer effective January 1, 1995. </TABLE> III-17
<TABLE> <CAPTION> SAVANNAH SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Arthur M. Gignilliat, Jr. President, 1995 211,385 31,847 492 9,327 170,305 21,323 Chief Executive 1994 206,964 37,384 194 8,253 76,164 18,617 Officer, Director 1993 202,259 26,470 12,231 7,198 64,932 31,512 Larry M. Porter 1995 134,687 18,100 256 4,701 73,989 8,718 Vice President 1994 130,619 15,249 198 - 15,070 7,561 1993 126,133 10,070 7,251 - 7,810 21,570 W. Miles Greer 1995 125,891 18,225 355 4,393 68,215 8,376 Vice President 1994 122,153 14,050 198 - 14,527 7,642 1993 117,766 10,337 7,458 - 12,202 21,881 Kirby R. Willis4 Vice President, 1995 115,632 18,225 256 4,038 68,215 7,444 Chief Financial 1994 111,653 14,207 46 - 8,257 6,840 Officer, Treasurer 1993 - - - - - - - - -------------------- 1 Tax reimbursement by SAVANNAH on certain personal benefits. 2 Payouts made in 1994, 1995 and 1996 for the four-year performance periods ending December 31, 1993, 1994 and 1995, respectively. 3 SAVANNAH contributions to the ESP, under Section 401(k) of the Internal Revenue Code, ESOP, and AME for the following:- Name ESP ESOP AME Arthur M. Gignilliat $6,750 $1,151 $13,422 Larry M. Porter 5,551 1,020 2,147 W. Miles Greer 5,130 1,031 2,215 Kirby R. Willis 4,736 865 1,843 4 Mr. Willis was named an executive officer effective in 1994. </TABLE> III-18
<TABLE> <CAPTION> STOCK OPTION GRANTS IN 1995 Stock Option Grants. The following table sets forth all stock option grants to the named executive officers of each operating subsidiary during the year ending December 31, 1995. Individual Grants Grant Date Value # of % of Total Securities Options Exercise Underlying Granted to or Options Employees in Base Price Expiration Grant Date Name Granted (1) Fiscal Year (2) ($/Sh)1 Date (1) Present Value($)3 ------------------------------------------------------------------------------------------------------------- ALABAMA <S> <C> <C> <C> <C> <C> Elmer B. Harris 32,170 2.8 21.6250 07/17/2005 91,685 Banks H. Farris 9,856 0.9 21.6250 06/01/2003 21,585 Charles D. McCrary 9,188 0.8 21.6250 07/17/2005 26,186 William B. Hutchins, III 8,850 0.8 21.6250 07/17/2005 25,223 GEORGIA H. Allen Franklin 31,960 2.8 21.6250 07/17/2005 91,086 William G. Hairston, III 15,785 1.4 21.6250 07/17/2005 44,987 Warren Y. Jobe 9,710 0.8 21.6250 07/17/2005 27,674 Gene R. Hodges 9,514 0.8 21.6250 07/17/2005 27,115 Robert H. Haubein, Jr. 8,871 0.8 21.6250 07/17/2005 25,282 GULF Travis J. Bowden 15,464 1.3 21.6250 07/17/2005 44,072 G. Edison Holland, Jr. 7,851 0.7 21.6250 07/17/2005 22,375 A. E. Scarbrough 7,398 0.6 21.6250 11/01/2004 20,936 John E. Hodges, Jr. 7,307 0.6 21.6250 07/17/2005 20,825 Francis M. Fisher, Jr. 5,603 0.5 21.6250 07/17/2005 15,969 See next page for footnotes. </TABLE> III-19
<TABLE> <CAPTION> STOCK OPTION GRANTS IN 1995 Individual Grants Grant Date Value # of % of Total Securities Options Exercise Underlying Granted to or Options Employees in Base Price Expiration Grant Date Name Granted (1) Fiscal Year (2) ($/Sh)1 Date (1) Present Value($)3 ----------------------------------------------------------------------------------------------------------- MISSISSIPPI <S> <C> <C> <C> <C> <C> Dwight H. Evans 10,486 0.9 21.6250 07/17/2005 29,885 H. E. Blakeslee 7,598 0.7 21.6250 07/17/2005 21,654 Don E. Mason 7,445 0.6 21.6250 07/17/2005 21,218 Frederick D. Kuester 4,779 0.4 21.6250 07/17/2005 13,620 Michael W. Southern 4,847 0.4 21.6250 07/17/2005 13,814 SAVANNAH Arthur M. Gignilliat, Jr. 9,327 0.8 21.6250 09/03/2000 24,343 Larry M. Porter 4,701 0.4 21.6250 07/17/2005 13,398 W. Miles Greer 4,393 0.4 21.6250 07/17/2005 12,520 Kirby R. Willis 4,038 0.4 21.6250 07/17/2005 11,508 - - -------------------- 1 Grants were made on July 17, 1995, and vest 25% per year on the anniversary date of the grant. Grants fully vest upon termination incident to death, disability, or retirement. The exercise price is the average of the high and low fair market value of SOUTHERN's common stock on the date granted. In accordance with the terms of the Executive Stock Plan, Mr. Farris' unexercised options expire on June 1, 2003, three years after his normal retirement date; Mr. Scarborough's unexercised options expire on November 1, 2004, three years after his normal retirement date; and Mr. Gignilliat's unexercised options expire on September 3, 2000, three years after his normal retirement date. 2 A total of 1,161,174 stock options were granted in 1995 to key executives participating in SOUTHERN's Executive Stock Plan. 3 Based on the Black-Scholes option valuation model. The actual value, if any, an executive officer may realize ultimately depends on the market value of SOUTHERN's common stock at a future date. This valuation is provided pursuant to SEC disclosure rules. There is no assurance that the value realized will be at or near the value estimated by the Black-Scholes model. Assumptions used to calculate this value: price volatility - 16.323%; risk-free rate of return - 6.28%; dividend yield - 5.64%; and time to exercise - 10 years. </TABLE> III-20
<TABLE> <CAPTION> AGGREGATED STOCK OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES Aggregated Stock Option Exercises. The following table sets forth information concerning options exercised during the year ending December 31, 1995, by the named executive officers and the value of unexercised options held by them as of December 31, 1995. Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Fiscal Fiscal Year-End (#) Year-End($)1 Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)2 Unexercisable Unexercisable - - --------------------------------------------------------------------------------------------------------------- ALABAMA <S> <C> <C> <C> <C> Elmer B. Harris - - 90,131/76,706 756,465/326,944 Banks H. Farris - - 10,412/20,983 56,530/115,888 Charles D. McCrary - - 9,024/19,333 48,243/80,094 William B. Hutchins, III - - 9,074/18,875 48,577/78,388 GEORGIA H. Allen Franklin - - 64,202/72,046 519,295/302,725 William G. Hairston, III 15,253 95,787 5,891/35,574 20,066/148,978 Warren Y. Jobe 5,437 40,648 12,734/22,017 80,956/92,777 Gene R. Hodges 5,908 38,672 9,473/20,903 58,796/87,377 Robert H. Haubein, Jr. - - 9,810/18,922 53,278/78,666 GULF Travis J. Bowden - - 37,205/36,335 302,024/154,715 G. Edison Holland, Jr. - - 8,835/17,339 47,228/72,357 Arlan E. Scarbrough - - 0/7,398 0/22,194 John E. Hodges, Jr. 13,232 142,984 7,450/14,954 40,440/61,515 Francis M. Fisher, Jr. - - 0/5,603 0/16,809 See next page for footnotes. </TABLE> III-21
<TABLE> <CAPTION> AGGREGATED STOCK OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Fiscal Fiscal Year-End (#) Year-End($)1 Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)2 Unexercisable Unexercisable - - ------------------------------------------------------------------------------------------------------------- MISSISSIPPI <S> <C> <C> <C> <C> Dwight H. Evans 4,495 34,347 12,564/22,797 79,095/95,103 H. E. Blakeslee 4,622 36,679 7,724/15,435 41,921/63,301 Don E. Mason - - 0/7,445 0/22,335 Frederick D. Kuester - - 0/4,779 0/14,337 Michael W. Southern - - 0/4,847 0/14,541 SAVANNAH Arthur M. Gignilliat, Jr. - - 34,551/21,145 317,335/89,084 Larry M. Porter - - 0/4,701 0/14,103 W. Miles Greer - - 0/4,393 0/13,179 Kirby R. Willis - - 0/4,038 0/12,114 - - -------------------- 1 This represents the excess of the fair market value of SOUTHERN's common stock of $24.625 per share, as of December 31, 1995, above the exercise price of the options. One column reports the "value" of options that are vested and therefore could be exercised; the other the "value" of options that are not vested and therefore could not be exercised as of December 31, 1995. 2 The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value of the shares at the time of exercise over the exercise price. </TABLE> III-22
<TABLE> <CAPTION> LONG-TERM INCENTIVE PLANS - AWARDS IN 1995 Long-Term Incentive Plans. The following table sets forth the long-term incentive plan awards made to the named executive officers for the performance period January 1, 1995 through December 31, 1998. Estimated Future Payouts under Non-Stock Price-Based Plans Performance or Other Period Number of Until Maturation Threshold Target Maximum Name Units (#)1 or Payout ($)2 ($)2 ($)2 - - ----------------------------------------------------------------------------------------------------------------- ALABAMA <S> <C> <C> <C> <C> <C> Elmer B. Harris 274,693 4 years 137,347 274,693 549,386 Banks H. Farris 97,070 4 years 48,535 97,070 194,140 Charles D. McCrary 78,797 4 years 39,399 78,797 157,594 William B. Hutchins, III 71,981 4 years 35,991 71,981 143,962 GEORGIA H. Allen Franklin 311,680 4 years 155,840 311,680 623,360 William G. Hairston, III 160,650 4 years 80,325 160,650 321,300 Warren Y. Jobe 78,797 4 years 39,399 78,797 157,594 Gene R. Hodges 78,797 4 years 39,399 78,797 157,594 Robert H. Haubein, Jr. 71,981 4 years 35,991 71,981 143,962 GULF Travis J. Bowden 129,576 4 years 64,788 129,576 259,152 G. Edison Holland, Jr. 57,485 4 years 28,743 57,485 114,970 Arlan E. Scarbrough 52,529 4 years 26,265 52,529 105,058 John E. Hodges, Jr. 57,485 4 years 28,743 57,485 114,970 Francis M. Fisher, Jr. 52,529 4 years 26,265 52,529 105,058 See next page for footnotes. </TABLE> III-23
<TABLE> <CAPTION> LONG-TERM INCENTIVE PLANS - AWARDS IN 1995 Estimated Future Payouts under Non-Stock Price-Based Plans Performance or Other Period Number of Until Maturation Threshold Target Maximum Name Units (#)1 or Payout ($)2 ($)2 ($)2 - - ----------------------------------------------------------------------------------------------------------------- MISSISSIPPI <S> <C> <C> <C> <C> <C> Dwight H. Evans 78,797 4 years 39,399 78,797 157,594 H. E. Blakeslee 57,485 4 years 28,743 57,485 114,970 Don E. Mason 52,529 4 years 26,265 52,529 105,058 Frederick D. Kuester 41,105 4 years 20,553 41,105 82,210 Michael W. Southern 41,105 4 years 20,553 41,105 82,210 SAVANNAH Arthur M. Gignilliat, Jr. 94,614 4 years 47,307 94,614 189,228 Larry M. Porter 41,105 4 years 20,553 41,105 82,210 W. Miles Greer 37,897 4 years 18,949 37,897 75,794 Kirby R. Willis 37,897 4 years 18,949 37,897 75,794 - - -------------------- 1 A performance unit is a method of assigning a dollar value to a performance award opportunity. The actual number of units granted to a participant will be based on an award percentage of an individual's base salary range control mid-point at the beginning of the performance period. 2 The threshold, target and maximum value of a unit is $0.50, $1.00, and $2.00, respectively, and can vary based on SOUTHERN's return on common equity relative to a selected group of electric and gas utilities in the Southeastern United States. If certain minimum performance relative to the selected group is not achieved, there will be no payout; nor is there a payout if the current earnings of SOUTHERN are not sufficient to fund the dividend rate paid in the last calendar year. All awards are payable in cash at the end of the performance period. </TABLE> III-24
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE Pension Plan Table. The following table sets forth the estimated combined annual pension benefits under the pension and supplemental defined benefit plans in effect during 1995 for ALABAMA, GEORGIA, GULF and MISSISSIPPI. Employee compensation covered by the pension and supplemental benefit plans for pension purposes is limited to the average of the highest three of the final 10 years' base salary and wages (reported under column titled "Salary" in the Summary Compensation Tables on pages III-13 through III-18). The amounts shown in the table were calculated according to the final average pay formula and are based on a single life annuity without reduction for joint and survivor annuities (although married employees are required to have their pension benefits paid in one of various joint and survivor annuity forms, unless the employee elects otherwise with the spouse's consent) or computation of the Social Security offset which would apply in most cases. This offset amounts to one-half of the estimated Social Security benefit (primary insurance amount) in excess of $3,000 per year times the number of years of accredited service, divided by the total possible years of accredited service to normal retirement age. <TABLE> <CAPTION> Years of Accredited Service Remuneration 15 20 25 30 35 40 - - ------------ ----------------------------------------------------------------- <C> <C> <C> <C> <C> <C> <C> $ 50,000 $ 12,750 $ 17,000 $ 21,250 $ 25,500 $ 29,750 $ 34,000 $100,000 25,500 34,000 42,500 51,000 59,500 68,000 $300,000 76,500 102,000 127,500 153,000 178,500 204,000 $500,000 127,500 170,000 212,500 255,000 297,500 340,000 $700,000 178,500 238,000 297,500 357,000 416,500 476,000 $800,000 204,000 272,000 340,000 408,000 476,000 544,000 </TABLE> As of December 31, 1995, the applicable compensation levels and years of accredited service are presented in the following tables: <TABLE> <CAPTION> ALABAMA Compensation Name Level Years of Service <S> <C> <C> Elmer B. Harris $442,020 37 Banks H. Farris 204,096 36 Charles D. McCrary 190,260 21 William B. Hutchins, III 186,096 26 </TABLE> III-25
<TABLE> <CAPTION> GEORGIA Compensation Name Level Years of Service <S> <C> <C> H. Allen Franklin $422,496 24 William G. Hairston, III 301,752 27 Warren Y. Jobe 216,444 24 Gene R. Hodges 205,800 31 Robert H. Haubein, Jr. 187,728 28 GULF Compensation Name Level Years of Service Travis J. Bowden $278,712 29 (1) G. Edison Holland, Jr. 172,464 13 (1) Arlan E. Scarbrough 163,560 32 John E. Hodges, Jr. 158,052 29 Francis M. Fisher, Jr. 136,128 24 MISSISSIPPI Compensation Name Level Years of Service Dwight H. Evans $222,504 24 H. E. Blakeslee 159,984 29 Don E. Mason 155,184 29 Frederick D. Kuester 133,020 23 Michael W. Southern 127,308 20 </TABLE> SAVANNAH has in effect a qualified, trusteed, noncontributory, defined benefit pension plan which provides pension benefits to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. The plan provides pension benefits under a formula which includes each participant's years of service with the Southern system and average annual earnings of the highest three of the final 10 years of service with the Southern system preceding retirement. Plan benefits are reduced by a portion of the benefits participants are entitled to receive under Social Security. The plan provides for reduced early retirement benefits at age 55 and a pension for the surviving spouse equal to one-half of the deceased retiree's pension. The following table sets forth the estimated annual pension benefits under the pension plan in effect during 1995 which are payable by SAVANNAH to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. - - -------------------- 1 The number of accredited years of service includes 10 years credited to both Mr. Bowden and Mr. Holland pursuant to individual supplemental pension agreements. III-26
<TABLE> <CAPTION> Average Annual Salary Annual Benefits Exclusive of Social Security (2) for Last 36 Months of Years of Service Employment 15 25 35 - - ------------------------ ------------------------------------------------- <S> <C> <C> <C> $ 90,000 $22,505 $ 37,508 $ 52,511 $120,000 30,006 50,010 70,014 $150,000 37,508 62,513 87,518 $180,000 45,009 75,015 105,021 $210,000 52,511 87,518 122,525 $250,000 62,513 104,188 145,863 </TABLE> As of December 31, 1995, the applicable compensation levels and years of accredited service are presented in the following table:- <TABLE> <CAPTION> SAVANNAH Compensation Name Level Years of Service <S> <C> <C> Arthur M. Gignilliat $184,696 37 Larry M. Porter 118,042 18 W. Miles Greer 113,901 11 Kirby R. Willis 99,952 21 </TABLE> Deferred Compensation Plan; Supplemental Executive Retirement Plan. SAVANNAH has in effect a voluntary deferred compensation plan for certain executive employees pursuant to which such employees may defer a portion of their respective annual salaries. In addition, SAVANNAH has a supplemental executive retirement plan for certain of its executive employees which became effective January 1, 1984. The deferred compensation plan is designed to provide supplemental retirement or survivor benefit payments. The supplemental executive retirement plan is also designed to provide retiring executives of SAVANNAH with a supplemental retirement benefit, which, in conjunction with social security and benefits under SAVANNAH's qualified pension plan, will equal 70 percent of the highest three of the final 10 years' average annual compensation (including deferrals under the deferred compensation plan). Both of these plans are unfunded and the liability is payable from general funds of SAVANNAH. The deferred compensation plan became effective December 1, 1983, and all of SAVANNAH's executive officers are participating in the plan. In addition, all executives are participating in the supplemental executive retirement plan. In order to provide for its liabilities under the deferred compensation plan and the supplemental executive retirement plan, SAVANNAH has purchased life insurance on participating executive employees in actuarially determined amounts which, based upon assumptions as to mortality experience, policy dividends, tax effects, and other factors which, if realized, along with compensation deferred by employees and the death benefits payable to SAVANNAH, are expected to cover all such insurance premium payments, and all benefit payments to participants, plus a factor for the cost of funds of SAVANNAH. - - -------------------- 2 The plan benefits are subject to the maximum benefit limitations set forth in Section 415 of the Internal Revenue Code. III-27
Compensation of Directors. Standard Arrangements. The following table presents compensation paid to the directors, during 1995 for service as a member of the board of directors and any board committee(s), except that employee directors received no fees or compensation for service as a member of the board of directors or any board committee. All or a portion of these fees may be deferred until membership on the board is terminated. <TABLE> <CAPTION> ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH <S> <C> <C> <C> <C> <C> Retainer Fee $20,000 $23,000 $12,000 $12,000 $12,000 Meeting Fee 900 900 750 750 750 Committees: Audit 900 900 750 750 750 Compensation 900 900 750 750 750 Executive 900 900 - - 750 Finance - 900 - 750 - Nominating 900 - - - - Nuclear Safety 900 - - - - Nuclear Operations Overview - 1,800 - - - </TABLE> ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH also provide retirement benefits to non-employee directors who are credited with a minimum of 60 months of service on the board of directors of one or more system companies, under the Outside Directors Pension Plan. Eligible directors are entitled to benefits under the Plan upon retirement from the board on the retirement date designated in the respective companies' by-laws. The annual benefit payable is based upon length of service and varies from 75 to 100 percent of the annual retainer fee in effect on the date of retirement. Payments continue for the greater of the lifetime of the participant or 10 years. Other Arrangements. No director received other compensation for services as a director during the year ending December 31, 1995 in addition to or in lieu of that specified by the standard arrangements specified above. Employment Contracts and Termination of Employment and Change in Control Arrangements. None. Report on Repricing of Options. None. III-28
Additional Information with Respect to Compensation Committee Interlocks and Insider Participation in Compensation Decisions. ALABAMA Elmer B. Harris serves on the Compensation Committee of AmSouth Bancorporation. John W. Woods, a director of ALABAMA, served as Chairman and Chief Executive Officer of AmSouth Bancorporation during 1995. III-29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security ownership of certain beneficial owners. SOUTHERN is the beneficial owner of 100% of the outstanding common stock of registrants: ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH. <TABLE> <CAPTION> Amount and Name and Address Nature of Percent of Beneficial Beneficial of Title of Class Owner Ownership Class <S> <C> <C> <C> Common Stock The Southern Company 100% 270 Peachtree Street, N.W. Atlanta, Georgia 30303 Registrants: ALABAMA 5,608,955 GEORGIA 7,761,500 GULF 992,717 MISSISSIPPI 1,121,000 SAVANNAH 10,844,635 </TABLE> Security ownership of management. The following table shows the number of shares of SOUTHERN common stock and operating subsidiary preferred stock owned by the directors, nominees and executive officers as of December 31, 1995. It is based on information furnished by the directors, nominees and executive officers. The shares owned by all directors, nominees and executive officers as a group constitute less than one percent of the total number of shares of the respective classes outstanding on December 31, 1995. <TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) ALABAMA <S> <C> <C> Whit Armstrong SOUTHERN Common 14,055 Philip E. Austin SOUTHERN Common 138 Margaret A. Carpenter SOUTHERN Common 138 A. William Dahlberg SOUTHERN Common 139,108 Peter V. Gregerson, Sr. SOUTHERN Common 138 Bill M. Guthrie SOUTHERN Common 110,654 </TABLE> III-30
<TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) <S> <C> <C> Elmer B. Harris SOUTHERN Common 138,012 Carl E. Jones, Jr. SOUTHERN Common 8,997 Wallace D. Malone SOUTHERN Common 133 William V. Muse SOUTHERN Common 138 John T. Porter SOUTHERN Common 221 Gerald H. Powell SOUTHERN Common 5,741 Robert Davis Powers SOUTHERN Common 138 John W. Rouse, Jr. SOUTHERN Common 7,741 William J. Rushton, III SOUTHERN Common 6,573 ALABAMA Preferred 20 James H. Sanford SOUTHERN Common 133 John C. Webb, IV SOUTHERN Common 12,172 ALABAMA Preferred 122 John W. Woods SOUTHERN Common 164 Banks H. Farris SOUTHERN Common 46,217 William B. Hutchins, III SOUTHERN Common 29,071 Charles D. McCrary SOUTHERN Common 16,145 The directors, nominees, and executive officers as a group SOUTHERN Common 535,827 ALABAMA Preferred 142 GEORGIA Bennett A. Brown SOUTHERN Common 9,169 A. William Dahlberg SOUTHERN Common 139,108 </TABLE> III-31
<TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) <S> <C> <C> W. A. Fickling, Jr. SOUTHERN Common 387 GEORGIA Preferred 50 H. Allen Franklin SOUTHERN Common 86,620 L. G. Hardman III SOUTHERN Common 7,494 Warren Y. Jobe SOUTHERN Common 40,766 GEORGIA Preferred 403 James R. Lientz, Jr. SOUTHERN Common 143 W. A. Parker, Jr. SOUTHERN Common 26,612 GEORGIA Preferred 2 G. Joseph Prendergast SOUTHERN Common 169 Herman J. Russell SOUTHERN Common 5,415 Gloria M. Shatto SOUTHERN Common 14,648 GEORGIA Preferred 1,200 W. J. Vereen SOUTHERN Common 5,231 GEORGIA Preferred 3,301 Carl Ware SOUTHERN Common 197 Thomas R. Williams SOUTHERN Common 101 GEORGIA Preferred 1,000 William G. Hairston, III SOUTHERN Common 22,875 Robert H. Haubein, Jr. SOUTHERN Common 18,179 Gene R. Hodges SOUTHERN Common 37,436 GEORGIA Preferred 800 The directors, nominees and executive officers as a group SOUTHERN Common 505,637 GEORGIA Preferred 6,756 </TABLE> III-32
<TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) GULF <S> <C> <C> Reed Bell, Sr., M.D. SOUTHERN Common 139 Travis J. Bowden SOUTHERN Common 65,518 Paul J. DeNicola SOUTHERN Common 62,502 Fred C. Donovan SOUTHERN Common 139 W. Deck Hull, Jr. SOUTHERN Common 2,333 C. Walter Ruckel SOUTHERN Common 139 Joseph K. Tannehill SOUTHERN Common 4,139 Francis M Fisher, Jr. SOUTHERN Common 4,603 GULF Preferred 2 John E. Hodges, Jr. SOUTHERN Common 28,067 GULF Preferred 3 G. Edison Holland, Jr. SOUTHERN Common 9,920 Arlan E. Scarbrough SOUTHERN Common 20,232 The directors, nominees and executive officers as a group SOUTHERN Common 197,731 GULF Preferred 5 MISSISSIPPI Paul J. DeNicola SOUTHERN Common 62,502 Edwin E. Downer SOUTHERN Common 1,447 Dwight H. Evans SOUTHERN Common 30,247 GEORGIA Preferred 300 Robert S. Gaddis SOUTHERN Common 3,483 </TABLE> III-33
<TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) <S> <C> <C> Walter H. Hurt, III SOUTHERN Common 986 MISSISSIPPI Preferred 33 Aubrey K. Lucas SOUTHERN Common 2,583 George A. Schloegel SOUTHERN Common 36 Philip J. Terrell SOUTHERN Common 91 N. Eugene Warr SOUTHERN Common 279 H. E. Blakeslee SOUTHERN Common 17,529 Frederick D. Kuester SOUTHERN Common 10,654 Don E. Mason SOUTHERN Common 19,283 Michael W. Southern SOUTHERN Common 4,254 The directors, nominees and executive officers as a group SOUTHERN Common 153,374 GEORGIA Preferred 300 MISSISSIPPI Preferred 33 SAVANNAH Helen Quattlebaum Artley SOUTHERN Common 2,557 Paul J. DeNicola SOUTHERN Common 62,502 Brian R. Foster SOUTHERN Common 139 Arthur M. Gignilliat, Jr. SOUTHERN Common 56,898 Walter D. Gnann SOUTHERN Common 1,448 Robert B. Miller, III SOUTHERN Common 2,220 Arnold M. Tenenbaum SOUTHERN Common 493 Fred F. Williams SOUTHERN Common 2,147 </TABLE> III-34
<TABLE> <CAPTION> Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1,2) <S> <C> <C> W. Miles Greer SOUTHERN Common 1,768 Larry M. Porter SOUTHERN Common 13,192 Kirby R. Willis SOUTHERN Common 4,017 The directors, nominees and executive officers as a group SOUTHERN Common 147,381 Changes in control. SOUTHERN and the operating affiliates know of no arrangements which may at a subsequent date result in any change in control. - - -------------------- 1 As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security and/or investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). 2 The shares shown include shares of SOUTHERN common stock of which certain directors and executive officers have the right to acquire beneficial ownership within 60 days pursuant to the Executive Stock Plan, as follows: Mr. Blakeslee, 7,724 shares; Mr. Bowden, 37,205 shares; Mr. Dahlberg, 83,184 shares; Mr. DeNicola, 30,918 shares; Mr. Evans, 12,564 shares; Mr. Farris, 10,412 shares; Mr. Franklin, 64,202 shares; Mr. Gignilliat, 34,551 shares; Mr. Guthrie, 59,311 shares; Mr. Hairston, 5,891 shares; Mr. Harris, 90,131 shares; Mr. Haubein, 9,810 shares; Mr. G. R. Hodges, 9,473 shares; Mr. J. E. Hodges, 7,450 shares; Mr. Holland, 8,835 shares; Mr. Hutchins, 9,074 shares; Mr. Jobe, 12,734 shares; and Mr. McCrary, 9,024 shares. Also included are shares of SOUTHERN common stock held by the spouses of the following directors: Mr. Hardman, 100 shares; Mr. Harris, 310 shares; Mr. Parker, 51 shares; Mr. Powers, 50 shares; and Dr. Shatto, 11,985 shares. Also included are 1,200 shares of GEORGIA preferred stock held by Dr. Shatto's spouse. </TABLE> III-35
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ALABAMA Transactions with management and others. Mr. Whit Armstrong is President, Chairman and Chief Executive Officer of The Citizens Bank, Enterprise, Alabama; Mr. Carl E. Jones, Jr. is Chairman and Chief Executive Officer of First Alabama Bank, Mobile, Alabama; Mr. Wallace D. Malone is Chairman and Chief Executive Officer of SouthTrust Corporation, Birmingham, Alabama, and Mr. John W. Woods is Chairman of AmSouth Bancorporation, Birmingham, Alabama, and during 1995, Mr. Woods also served as Chief Executive Officer of AmSouth Bancorporation. During 1995, these banks furnished a number of regular banking services in the ordinary course of business to ALABAMA. ALABAMA intends to maintain normal banking relations with all the aforesaid banks in the future. Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. GEORGIA Transactions with management and others. Mr. L. G. Hardman III is Chairman of the Board of The First National Bank of Commerce, Georgia; Mr. James R. Lientz, Jr. is President of NationsBank of Georgia, Atlanta, Georgia; Mr. G. Joseph Prendergast is Chairman of Wachovia Bank of Georgia, N.A., Atlanta, Georgia; and Mr. Herman J. Russell is Chairman of the Board of Citizens Trust Bank, Atlanta, Georgia. During 1995, these banks furnished a number of regular banking services in the ordinary course of business to GEORGIA. GEORGIA intends to maintain normal banking relations with all the aforesaid banks in the future. In 1995, GEORGIA leased a building from Riverside Manufacturing Co. for approximately $75,000. Mr. William J. Vereen is Chief Executive Officer, President, Treasurer and Director of Riverside Manufacturing Co. Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. GULF Transactions with management and others. Mr. W. D. Hull, Jr. is Vice Chairman of SunTrust Bank, West Florida, Panama City, Florida, and Mr. C. W. Ruckel is Chairman of the Board of The Vanguard Bank and Trust Company, Valparaiso, Florida. During 1995, these banks furnished a number of regular banking services in the ordinary course of business to GULF. GULF intends to maintain normal banking relations with the aforesaid banks in the future. The firm of Beggs & Lane, P.A. serves as local counsel for GULF and received from GULF approximately $1,034,573 for services rendered. Mr. G. Edison Holland, Jr. is a partner in the firm and also serves as Vice President - Power Generation/Transmission and Corporate Counsel of GULF. Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. MISSISSIPPI Transactions with management and others. Mr. Robert S. Gaddis is President of Trustmark National Bank, Laurel, Mississippi; Mr. George A. Schloegel is President of Hancock Bank, Gulfport, Mississippi; and during 1995, Mr. N. Eugene Warr served as Vice Chairman of the Board of SouthTrust Bank of Mississippi, Biloxi, Mississippi. During 1995, these banks furnished a number of regular banking services in the ordinary course of business to MISSISSIPPI. MISSISSIPPI intends to maintain normal banking relations with the aforesaid banks in the future. III-36
Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. SAVANNAH Transactions with management and others. Mr. Brian R. Foster is President and Chief Executive Officer of NationsBank of Georgia, N.A., in Savannah, Georgia. During 1995, this bank furnished a number of regular banking services in the ordinary course of business to SAVANNAH. SAVANNAH intends to maintain normal banking relations with the aforesaid bank in the future. Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. III-37
PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report on this Form 10-K: (1) Financial Statements: Reports of Independent Public Accountants on the financial statements for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed under Item 8 herein. The financial statements filed as a part of this report for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed under Item 8 herein. (2) Financial Statement Schedules: Reports of Independent Public Accountants as to Schedules for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are included herein on pages IV-12 through IV-17. Financial Statement Schedules for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the Index to the Financial Statement Schedules at page S-1. (3) Exhibits: Exhibits for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the Exhibit Index at page E-1. (b) Reports on Form 8-K: During the fourth quarter of 1995, SOUTHERN filed the following Current Reports on Form 8-K and Form 8-K/A: Form 8-K filed October 3, 1995: Items reported: Item 2 Item 7 Financial statements filed: SWEB Consolidated Balance Sheet at March 31, 1995 SWEB Consolidated Profit and Loss Account Statement for the Year Ended March 31, 1995 SWEB Consolidated Statement of Cash Flows for the Year Ended March 31, 1995 Form 8-K/A filed November 20, 1995: Item reported: Item 7 Financial statements filed: SOUTHERN and Subsidiary Companies Condensed Balance Sheet at September 30, 1995, incorporated by reference to Form 10-Q for the Quarter Ended September 30, 1995 SOUTHERN and Subsidiary Companies Pro Forma Condensed Consolidated Statements of Income (Unaudited) for the Nine Months Ended September 30, 1995 and for the Twelve Months Ended December 31, 1995 IV-1
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. THE SOUTHERN COMPANY By: A. W. Dahlberg, Chairman, President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. A. W. Dahlberg Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) W. L. Westbrook Financial Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Directors: John C. Adams Elmer B. Harris A. D. Correll William A. Parker, Jr. Paul J. DeNicola William J. Rushton, III Jack Edwards Gloria M. Shatto H. Allen Franklin Gerald J. St. Pe' Bruce S. Gordon Herbert Stockham L. G. Hardman III By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. ALABAMA POWER COMPANY By: Elmer B. Harris, President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Elmer B. Harris President, Chief Executive Officer and Director (Principal Executive Officer) William B. Hutchins, III Executive Vice President and Chief Financial Officer (Principal Financial Officer) David L. Whitson Vice President and Comptroller (Principal Accounting Officer) Directors: Whit Armstrong William V. Muse Philip E. Austin John T. Porter Margaret A. Carpenter Gerald H. Powell A. W. Dahlberg Robert D. Powers Peter V. Gregerson, Sr. John W. Rouse Bill M. Guthrie James H. Sanford Carl E. Jones, Jr. John Cox Webb, IV Wallace D. Malone, Jr. John W. Woods By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 IV-2
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GEORGIA POWER COMPANY By: H. Allen Franklin, President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. H. Allen Franklin President, Chief Executive Officer and Director (Principal Executive Officer) Warren Y. Jobe Executive Vice President, Treasurer, Chief Financial Officer and Director (Principal Financial Officer) Cliff S. Thrasher Vice President, Comptroller and Chief Accounting Officer (Principal Accounting Officer) Directors: Bennett A. Brown G. Joseph Prendergast A. W. Dahlberg Herman J. Russell William A. Fickling, Jr. Gloria M. Shatto L. G. Hardman III William Jerry Vereen James R. Lientz, Jr. Thomas R. Williams By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GULF POWER COMPANY By: Travis J. Bowden, President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Travis J. Bowden President, Chief Executive Officer and Director (Principal Executive Officer) A. E. Scarbrough Vice President - Finance (Principal Financial and Accounting Officer) Directors: Reed Bell, Sr., M.D. W. D. Hull, Jr. Paul J. DeNicola C. W. Ruckel Fred C. Donovan J. K. Tannehill By: /S/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 IV-3
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. MISSISSIPPI POWER COMPANY By: Dwight H. Evans, President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Dwight H. Evans President, Chief Executive Officer and Director (Principal Executive Officer) Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Paul J. DeNicola Aubrey K. Lucas Edwin E. Downer George A. Schloegel Robert S. Gaddis Philip J. Terrell Walter H. Hurt, III N. Eugene Warr By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr., President and Chief Executive Officer By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Arthur M. Gignilliat, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) Kirby R. Willis Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Helen Q. Artley Robert B. Miller, III Paul J. DeNicola Arnold M. Tenenbaum Brian R. Foster Frederick F. Williams, Jr. Walter D. Gnann By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 22, 1996 IV-4
Exhibit 21. Subsidiaries of the Registrants.* Jurisdiction of Name of Company Organization ------------------------------------------------ --------------------- Alabama Power Company Alabama Alabama Power Capital Trust I Delaware Alabama Property Company Alabama Southern Electric Generating Company Alabama Georgia Power Company Georgia Piedmont-Forrest Corporation Georgia Georgia Power L.P. Holdings Corp. Georgia Georgia Power Capital, L.P. Delaware Southern Electric Generating Company Alabama Gulf Power Company Maine Mississippi Power Company Mississippi Savannah Electric and Power Company Georgia SEI Holdings, Inc. Delaware ------------------------------------------------ --------------------- *This list omits certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K Item 601. IV-5
ARTHUR ANDERSEN LLP Exhibit 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of The Southern Company and its subsidiaries and the related financial statement schedules, included in this Form 10-K, into The Southern Company's previously filed Registration Statement File Nos. 2-78617, 33-3546, 33-23152, 33-30171, 33-51433, 33-54415, 33-57951, 33-58371, and 33-60427. /s/Arthur Andersen LLP Atlanta, Georgia March 20, 1996 IV-6
ARTHUR ANDERSEN LLP Exhibit 23(b) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of Alabama Power Company and the related financial statement schedules, included in this Form 10-K, into Alabama Power Company's previously filed Registration Statement File Nos. 33-49653 and 33-61845. /s/Arthur Andersen LLP Birmingham, Alabama March 20, 1996 IV-7
ARTHUR ANDERSEN LLP Exhibit 23(c) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of Georgia Power Company and the related financial statement schedules, included in this Form 10-K, into Georgia Power Company's previously filed Registration Statement File Nos. 33-49661 and 33-60345. /s/Arthur Andersen LLP Atlanta, Georgia March 20, 1996 IV-8
ARTHUR ANDERSEN LLP Exhibit 23(d) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of Gulf Power Company and the related financial statement schedules, included in this Form 10-K, into Gulf Power Company's previously filed Registration Statement File No. 33-50165. /s/Arthur Andersen LLP Atlanta, Georgia March 20, 1996 IV-9
ARTHUR ANDERSEN LLP Exhibit 23(e) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of Mississippi Power Company and the related financial statement schedules, included in this Form 10-K, into Mississippi Power Company's previously filed Registration Statement File Nos. 33-49320 and 33-49649. /s/Arthur Andersen LLP Atlanta, Georgia March 20, 1996 IV-10
ARTHUR ANDERSEN LLP Exhibit 23(f) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 21, 1996 on the financial statements of Savannah Electric and Power Company and the related financial statement schedules, included in this Form 10-K, into Savannah Electric and Power Company's previously filed Registration Statement File No. 33-52509. /s/Arthur Andersen LLP Atlanta, Georgia March 20, 1996 IV-11
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To The Southern Company: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of The Southern Company and its subsidiaries included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to The Southern Company and its subsidiaries (page S-2) is the responsibility of The Southern Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/Arthur Andersen LLP Atlanta, Georgia February 21, 1996 IV-12
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Alabama Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Alabama Power Company included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Alabama Power Company (page S-3) is the responsibility of Alabama Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP Birmingham, Alabama February 21, 1996 IV-13
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Georgia Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Georgia Power Company included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Georgia Power Company (page S-4) is the responsibility of Georgia Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP Atlanta, Georgia February 21, 1996 IV-14
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Gulf Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Gulf Power Company included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Gulf Power Company (page S-5) is the responsibility of Gulf Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP Atlanta, Georgia February 21, 1996 IV-15
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Mississippi Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Mississippi Power Company included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Mississippi Power Company (page S-6) is the responsibility of Mississippi Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP Atlanta, Georgia February 21, 1996 IV-16
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Savannah Electric and Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Savannah Electric and Power Company included in this Form 10-K, and have issued our report thereon dated February 21, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Savannah Electric and Power Company (page S-7) is the responsibility of Savannah Electric and Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP Atlanta, Georgia February 21, 1996 IV-17
INDEX TO FINANCIAL STATEMENT SCHEDULES Schedule Page II Valuation and Qualifying Accounts and Reserves 1995, 1994 and 1993 The Southern Company and Subsidiary Companies............ S-2 Alabama Power Company.................................... S-3 Georgia Power Company.................................... S-4 Gulf Power Company....................................... S-5 Mississippi Power Company................................ S-6 Savannah Electric and Power Company...................... S-7 Schedules I through V not listed above are omitted as not applicable or not required. Columns omitted from schedules filed have been omitted because the information is not applicable or not required. S-1
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions ---------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ----------------------------------- ------------------------ -------------- ------------------- --------------- ---------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $9,129 $30,445 $23,053 (1) $25,508 (2) $37,119 1994.......................... 9,067 23,322 8 23,268 (2) 9,129 1993.......................... 7,255 24,040 2 22,230 (2) 9,067 - - ------------------- Notes: (1) Includes the addition of a Purchased Reserve in the amount of $23,027 related to the acquisition of SWEB. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-2
ALABAMA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions ---------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ---------------------------------- -------------------------- --------------- ------------------ ----------------- --------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $2,297 $5,823 - $6,908 (Note) $1,212 1994.......................... 2,632 4,967 - 5,302 (Note) 2,297 1993.......................... 1,482 7,157 - 6,007 (Note) 2,632 - - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-3
GEORGIA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions --------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period - - --------------------------------- ----------------------- -------------- ------------------ ----------------- ---------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $4,500 $15,875 - $15,375 (Note) $5,000 1994.......................... 4,300 15,424 - 15,224 (Note) 4,500 1993.......................... 4,121 14,310 - 14,131 (Note) 4,300 - - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-4
GULF POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions ---------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period - - ---------------------------------- ------------------------ --------------- ------------------ ---------------- --------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $600 $1,612 $3 $1,447 (Note) $768 1994.......................... 447 1,195 9 1,051 (Note) 600 1993.......................... 356 875 - 784 (Note) 447 - - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-5
MISSISSIPPI POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions --------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period - - ---------------------------------- ------------------------- -------------- ------------------ ---------------- --------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $670 $1,602 $23 $1,493 (Note) $802 1994.......................... 737 1,234 (1) 1,300 (Note) 670 1993.......................... 508 1,326 2 1,099 (Note) 737 - - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-6
SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Stated in Thousands of Dollars) <TABLE> <CAPTION> Additions ------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period - - ------------------------------------ ---------------------- ------------ ------------------ --------------- ----------------- <S> <C> <C> <C> <C> <C> Provision for uncollectible accounts 1995.......................... $866 $439 - $322 (Note) $983 1994.......................... 762 419 - 315 (Note) 866 1993.......................... 536 330 - 104 (Note) 762 - - ------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off. </TABLE> S-7
EXHIBIT INDEX The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC, respectively, as the exhibits and in the file numbers indicated and are incorporated herein by reference. Reference is made to a duplicate list of exhibits being filed as a part of this Form 10-K, which list, prepared in accordance with Item 601 of Regulation S-K of the SEC, immediately precedes the exhibits being physically filed with this Form 10-K. (1) Underwriting Agreements GEORGIA * (c) - Distribution Agreement dated November 29, 1995 between GEORGIA and Lehman Brothers Inc.; Donaldson, Lufkin & Jenrette Securities Corporation; J. P. Morgan Securities Inc.; Salomon Brothers Inc and Smith Barney Inc. relating to $300,000,000 First Mortgage Bonds Secured Medium-Term Notes. (3) Articles of Incorporation and By-Laws SOUTHERN (a) 1 - Composite Certificate of Incorporation of SOUTHERN, reflecting all amendments thereto through January 5, 1994. (Designated in Registration No. 33-3546 as Exhibit 4(a), in Certificate of Notification, File No. 70-7341, as Exhibit A and in Certificate of Notification, File No. 70-8181, as Exhibit A.) (a) 2 - By-laws of SOUTHERN as amended effective October 21, 1991, and as presently in effect. (Designated in Form U-1, File No. 70-8181, as Exhibit A-2.) ALABAMA (b) 1 - Charter of ALABAMA and amendments thereto through October 14, 1994. (Designated in Registration Nos. 2-59634 as Exhibit 2(b), 2-60209 as Exhibit 2(c), 2-60484 as Exhibit 2(b), 2-70838 as Exhibit 4(a)-2, 2-85987 as Exhibit 4(a)-2, 33-25539 as Exhibit 4(a)-2, 33-43917 as Exhibit 4(a)-2, in Form 8-K dated February 5, 1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated July 8, 1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated October 27, 1993, File No. 1-3164, as Exhibits 4(a) and 4(b), in Form 8-K dated November 16, 1993, File No. 1-3164, as Exhibit 4(a) and in Certificate of Notification, File No. 70-8191, as Exhibit A.) (b) 2 - By-laws of ALABAMA as amended effective July 23, 1993, and as presently in effect. (Designated in Form U-1, File No. 70-8191, as Exhibit A-2.) GEORGIA (c) 1 - Charter of GEORGIA and amendments thereto through October 25, 1993. (Designated in Registration Nos. 2-63392 as Exhibit 2(a)-2, 2-78913 as Exhibits 4(a)-(2) and 4(a)-(3), 2-93039 as Exhibit 4(a)-(2), 2-96810 as Exhibit 4(a)-2, 33-141
as Exhibit 4(a)-(2), 33-1359 as Exhibit 4(a)(2), 33-5405 as Exhibit 4(b)(2), 33-14367 as Exhibits 4(b)-(2) and 4(b)-(3), 33-22504 as Exhibits 4(b)-(2), 4(b)-(3) and 4(b)-(4), in GEORGIA's Form 10-K for the year ended December 31, 1991, File No. 1-6468, as Exhibits 4(a)(2) and 4(a)(3), in Registration No. 33-48895 as Exhibits 4(b)-(2) and 4(b)-(3), in Form 8-K dated December 10, 1992, File No. 1-6468 as Exhibit 4(b), in Form 8-K dated June 17, 1993, File No. 1-6468, as Exhibit 4(b) and in Form 8-K dated October 20, 1993, File No. 1-6468, as Exhibit 4(b).) (c) 2 - By-laws of GEORGIA as amended effective July 18, 1990, and as presently in effect. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 3.) GULF (d) 1 - Restated Articles of Incorporation of GULF and amendments thereto through November 8, 1993. (Designated in Registration No. 33-43739 as Exhibit 4(b)-1, in Form 8-K dated January 15, 1992, File No. 0-2429, as Exhibit 1(b), in Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(b)-2, in Form 8-K dated September 22, 1993, File No. 0-2429, as Exhibit 4 and in Form 8-K dated November 3, 1993, File No. 0-2429, as Exhibit 4.) (d) 2 - By-laws of GULF as amended effective February 25, 1994, and as presently in effect. (Designated in GULF's Form 10-K for the year ended December 31, 1993, as Exhibit 3(d)2.) MISSISSIPPI (e) 1 - Articles of incorporation of MISSISSIPPI, articles of merger of Mississippi Power Company (a Maine corporation) into MISSISSIPPI and articles of amendment to the articles of incorporation of MISSISSIPPI through August 19, 1993. (Designated in Registration No. 2-71540 as Exhibit 4(a)-1, in Form U5S for 1987, File No. 30-222-2, as Exhibit B-10, in Registration No. 33-49320 as Exhibit 4(b)-(1), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibits 4(b)-2 and 4(b)-3, in Form 8-K dated August 4, 1993, File No. 0-6849, as Exhibit 4(b)-3 and in Form 8-K dated August 18, 1993, File No. 0-6849, as Exhibit 4(b)-3.) (e) 2 - By-laws of MISSISSIPPI as amended effective August 22, 1989, and as presently in effect. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1989, as Exhibit 3(b).) SAVANNAH (f) 1 - Charter of SAVANNAH and amendments thereto through November 10, 1993. (Designated in Registration Nos. 33-25183 as Exhibit 4(b)-(1), 33-45757 as Exhibit 4(b)-(2) and in Form 8-K dated November 9, 1993, File No. 1-5072, as Exhibit 4(b).) (f) 2 - By-laws of SAVANNAH as amended effective February 16, 1994, and as presently in effect. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1993, as Exhibit 3(f)2.)
(4) Instruments Describing Rights of Security Holders, Including Indentures ALABAMA (b) - Indenture dated as of January 1, 1942, between ALABAMA and Chemical Bank, as Trustee, and indentures supplemental thereto through that dated as of December 1, 1994. (Designated in Registration Nos. 2-59843 as Exhibit 2(a)-2, 2-60484 as Exhibits 2(a)-3 and 2(a)-4, 2-60716 as Exhibit 2(c), 2-67574 as Exhibit 2(c), 2-68687 as Exhibit 2(c), 2-69599 as Exhibit 4(a)-2, 2-71364 as Exhibit 4(a)-2, 2-73727 as Exhibit 4(a)-2, 33-5079 as Exhibit 4(a)-2, 33-17083 as Exhibit 4(a)-2, 33-22090 as Exhibit 4(a)-2, in ALABAMA's Form 10-K for the year ended December 31, 1990, File No. 1-3164, as Exhibit 4(c), in Registration Nos. 33-43917 as Exhibit 4(a)-2, 33-45492 as Exhibit 4(a)-2, 33-48885 as Exhibit 4(a)-2, 33-48917 as Exhibit 4(a)-2, in Form 8-K dated January 20, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated February 17, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated March 10, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Certificate of Notification, File No. 70-8069, as Exhibits A and B, in Form 8-K dated June 24, 1993, File No. 1-3436, as Exhibit 4, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Form 8-K dated November 16, 1993, File No. 1-3436, as Exhibit 4(b), in Certificate of Notification, File No. 70-8069, as Exhibits A and B, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Certificate of Notification, File No. 70-8069, as Exhibit A and in Form 8-K dated November 30, 1994, File No. 1-3436, as Exhibit 4.) GEORGIA (c) 1 - Indenture dated as of March 1, 1941, between GEORGIA and Chemical Bank, as Trustee, and indentures supplemental thereto dated as of March 1, 1941, March 3, 1941 (3 indentures), March 6, 1941 (139 indentures), March 1, 1946 (88 indentures) and December 1, 1947, through May 1, 1995. (Designated in Registration Nos. 2-4663 as Exhibits B-3 and B-3(a), 2-7299 as Exhibit 7(a)-2, 2-61116 as Exhibit 2(a)-3 and 2(a)-4, 2-62488 as Exhibit 2(a)-3, 2-63393 as Exhibit 2(a)-4, 2-63705 as Exhibit 2(a)-3, 2-68973 as Exhibit 2(a)-3, 2-70679 as Exhibit 4(a)-(2), 2-72324 as Exhibit 4(a)-2, 2-73987 as Exhibit 4(a)-(2), 2-77941 as Exhibits 4(a)-(2) and 4(a)-(3), 2-79336 as Exhibit 4(a)-(2), 2-81303 as Exhibit 4(a)-(2), 2-90105 as Exhibit 4(a)-(2), 33-5405 as Exhibit 4(a)-(2), 33-14367 as Exhibits 4(a)-(2) and 4(a)-(3), 33-22504 as Exhibits 4(a)-(2), 4(a)-(3) and 4(a)-(4), 33-32420 as Exhibit 4(a)-(2), 33-35683 as Exhibit 4(a)-(2), in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 4(a)(3), in Form 10-K for the year ended December 31, 1991, File No. 1-6468, as Exhibit 4(a)(5), in Registration No. 33-48895 as Exhibit 4(a)-(2), in Form 8-K dated August 26, 1992, File No. 1-6468, as Exhibit 4(a)-(3), in Form 8-K dated September 9, 1992, File No. 1-6468, as Exhibits 4(a)-(3) and 4(a)-(4), in Form 8-K dated September 23, 1992, File No. 1-6468, as Exhibit 4(a)-(3), in Form 8-A dated October 12, 1992, as Exhibit 2(b), in Form 8-K dated January 27, 1993, File No. 1-6468, as Exhibit 4(a)-(3), in Registration No. 33-49661 as Exhibit 4(a)-(2), in Form 8-K dated July 26, 1993, File No. 1-6468, as Exhibit 4, in Certificate of Notification, File No. 70-7832, as Exhibit M, in
Certificate of Notification, File No. 70-7832, as Exhibit C, in Certificate of Notification, File No. 70-7832, as Exhibits K and L, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit E, in Certificate of Notification, File No. 70-8443, as Exhibit E, in Certificate of Notification, File No. 70-8443, as Exhibit E, in GEORGIA's Form 10-K for the year ended December 31, 1994, File No. 1-6468, as Exhibits 4(c)2 and 4(c)3, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit C and in Form 8-K dated May 17, 1995, File No. 1-6468, as Exhibit 4.) * (c) 2 - Supplemental Indenture dated as of July 1, 1995, between GEORGIA and Chemical Bank, as Trustee. * (c) 3 - Second Supplemental Indenture dated as of July 1, 1995, between GEORGIA and Chemical Bank, as Trustee. * (c) 4 - Supplemental Indenture dated as of September 1, 1995, between GEORGIA and Chemical Bank, as Trustee. * (c) 5 - Second Supplemental Indenture dated as of September 1, 1995, between GEORGIA and Chemical Bank, as Trustee. * (c) 6 - Supplemental Indenture dated as of October 15, 1995, between GEORGIA and Chemical Bank, as Trustee. (c) 7 - Indenture dated as of December 1, 1994, between GEORGIA and Trust Company Bank, as Trustee and indentures supplemental thereto through that dated as of December 15, 1994. (Designated in Certificate of Notification, File No. 70-8461, as Exhibits E and F.) GULF (d) - Indenture dated as of September 1, 1941, between GULF and The Chase Manhattan Bank (National Association), as Trustee, and indentures supplemental thereto through February 1, 1996. (Designated in Registration Nos. 2-4833 as Exhibit B-3, 2-62319 as Exhibit 2(a)-3, 2-63765 as Exhibit 2(a)-3, 2-66260 as Exhibit 2(a)-3, 33-2809 as Exhibit 4(a)-2, 33-43739 as Exhibit 4(a)-2, in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 4(b), in Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(a)-3, in Registration No. 33-50165 as Exhibit 4(a)-2, in Form 8-K dated July 12, 1993, File No. 0-2429, as Exhibit 4, in Certificate of Notification, File No. 70-8229, as Exhibit A, in Certificate of Notification, File No. 70-8229, as Exhibits E and F, in Form 8-K dated January 17, 1996, File No. 0-2429, as Exhibit 4 and in Certificate of Notification, File No. 70-8229, as Exhibit A.) MISSISSIPPI (e) - Indenture dated as of September 1, 1941, between MISSISSIPPI and Bankers Trust Company, as Successor Trustee, and indentures supplemental thereto through December 1, 1995. (Designated in Registration Nos. 2-4834 as Exhibit B-3, 2-62965 as Exhibit 2(b)-2, 2-66845 as Exhibit 2(b)-2, 2-71537 as Exhibit 4(a)-(2),
33-5414 as Exhibit 4(a)-(2), 33-39833 as Exhibit 4(a)-2, in MISSISSIPPI's Form 10-K for the year ended December 31, 1991, File No. 0-6849, as Exhibit 4(b), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibit 4(a)-2, in Second Certificate of Notification, File No. 70-7941, as Exhibit I, in MISSISSIPPI's Form 8-K dated February 26, 1993, File No. 0-6849, as Exhibit 4(a)-2, in Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated June 22, 1993, File No. 0-6849, as Exhibit 1, in Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated March 8, 1994, File No. 0-6849, as Exhibit 4, in Certificate of Notification, File No. 70-8127, as Exhibit C and in Form 8-K dated December 5, 1995, File No. 0-6849, as Exhibit 4.) SAVANNAH (f) - Indenture dated as of March 1, 1945, between SAVANNAH and Bank of New York, New York, as Trustee, and indentures supplemental thereto through May 1, 1995. (Designated in Registration Nos. 33-25183 as Exhibit 4(a)-(1), 33-41496 as Exhibit 4(a)-(2), 33-45757 as Exhibit 4(a)-(2), in SAVANNAH's Form 10-K for the year ended December 31, 1991, File No. 1-5072, as Exhibit 4(b), in Form 8-K dated July 8, 1992, File No. 1-5072, as Exhibit 4(a)-3, in Registration No. 33-50587 as Exhibit 4(a)-(2), in Form 8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4 and in Form 8-K dated May 18, 1995, File No. 1-5072, as Exhibit 4.) (10) Material Contracts SOUTHERN (a) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(a) and in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(3).) (a) 2 - Service contract dated as of July 17, 1981, between SCS and SEI. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(2).) (a) 3 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1987, File No. 1-5072, as Exhibit 10-p.) (a) 4 - Service contract dated as of January 15, 1991, between SCS and Southern Nuclear. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1991, File No. 1-3526, as Exhibit 10(a)(4).) (a) 5 - Service Contract dated as of December 12, 1994, between SCS and Mobile Energy Services Company, Inc. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)58.)
(a) 6 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(b).) (a) 7 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. (Designated in Registration No. 2-59634 as Exhibit 5(c), in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(d)(2) and in ALABAMA's Form 10-K for the year ended December 31, 1994, File No. 1-3164, as Exhibit 10(b)18.) (a) 8 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. (Designated in Registration No. 2-61116 as Exhibit 5(d).) (a) 9 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975, between GEORGIA and OPC. (Designated in Form 8-K for January, 1975, File No. 1-6468, as Exhibit (b)(1).) (a) 10 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. (Designated in Form 8-K for January, 1975, File No. 1-6468, as Exhibit (b)(3).) (a) 11 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(g).) (a) 12 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit A.) (a) 13 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit B.) (a) 14 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(1).) (a) 15 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. (Designated in Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(2).)
(a) 16 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit B-1 and in Form 8-K for January 1977, File No. 1-6468, as Exhibit (B)(3).) (a) 17 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit B-2.) (a) 18 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption Agreement dated as of November 16, 1983, between GEORGIA and MEAG. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1983, File No. 1-6468, as Exhibit 10(k)(4).) (a) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(2).) (a) 20 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(4).) (a) 21 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(8).) (a) 22 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(4).) (a) 23 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between GEORGIA and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(3).) (a) 24 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(7).) (a) 25 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986, Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-3, in SOUTHERN's Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(2), in SOUTHERN's Form 10-K for the year ended December 31, 1989, File No. 1-3526, as Exhibit 10(n)(2) and in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)54.)
(a) 26 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-4, in SOUTHERN's Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(4) and in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)55.) (a) 27 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and MEAG. (Designated in Form U-1, File No. 70-6481, as Exhibit B-1.) (a) 28 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-2.) (a) 29 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-4, in SOUTHERN's Form 10-K for the year ended December 31, 1987, as Exhibit 10(o)(2) and in SOUTHERN's Form 10-K for the year ended December 31, 1989, as Exhibit 10(n)(2).) (a) 30 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-5.) (a) 31 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. (Designated in Form U-1, File No. 70-7843, as Exhibit B-1 and in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)60.) (a) 32 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. (Designated in Form U-1, File No. 70-7843, as Exhibit B-2 and in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)61.) (a) 33 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(c)(2) and in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(r)(3).)
(a) 34 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(s)(2), in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(r)(2) and in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(s)(2).) (a) 35 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(d).) (a) 36 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(e).) (a) 37 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(f).) (a) 38 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(x).) (a) 39 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(1).) (a) 40 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(m).) (a) 41 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(x).) (a) 42 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(y).)
(a) 43 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-1.) (a) 44 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-2.) (a) 45 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(f), in MISSISSIPPI's Form 10-K for the year ended December 31, 1982, File No. 0-6849, as Exhibit 10(f)(2) and in MISSISSIPPI's Form 10-K for the year ended December 31, 1983, File No. 0-6849, as Exhibit 10(f)(3).) (a) 46 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. (Designated in Form U-1, File No. 70-7738, as Exhibit A-5 and in Form U-1, File No. 70-7937, as A-5(b).) (a) 47 - Block Power Sale Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(cc).) (a) 48 - Coordination Services Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(dd).) (a) 49 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton dated as of July 1, 1993. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)49.) (a) 50 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(ff).) (a) 51 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(gg).) (a) 52 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(hh).)
(a) 53 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1992, File No. 1-3526, as Exhibit 10(a)53.) (a) 54 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)56.) (a) 55 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)57.) (a) 56 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)58.) (a) 57 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)59.) (a) 58 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of December 23, 1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-7.) (a) 59 - Nuclear Services Agreement between Southern Nuclear and GEORGIA dated as of October 31, 1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-6.) (a) 60 - Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG and Dalton dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(ee).) * (a) 61 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. * (a) 62 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. * (a) 63 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. * (a) 64 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. (a) 65 - Pension Plan For Employees of ALABAMA, Amended and Restated effective as of January 1, 1989. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)69.)
(a) 66 - Pension Plan For Employees of GEORGIA, Amended and Restated effective as of January 1, 1989. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)70.) (a) 67 - Pension Plan For Employees of SCS, Amended and Restated effective as of January 1, 1989. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)71.) * (a) 68 - First Amendment to the Pension Plan for Employees of SCS, effective as of January 1, 1995. (a) 69 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)72.) * (a) 70 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. * (a) 71 - Supplemental Benefit Plan for ALABAMA. * (a) 72 - Supplemental Benefit Plan for GEORGIA. * (a) 73 - Supplemental Benefit Plan for SCS and SEI. (a) 74 - The Deferred Compensation Plan for the Directors of The Southern Company. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)76.) * (a) 75 - First Amendment and Second Amendment to The Deferred Compensation Plan for the Directors of The Southern Company. (a) 76 - The Southern Company Outside Directors Pension Plan. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)77.) * (a) 77 - The Southern Company Deferred Compensation Plan. (a) 78 - The Southern Company Outside Directors Stock Plan. (Designated in Registration No. 33-54415 as Exhibit 4(c).) * (a) 79 - First Amendment to The Southern Company Outside Directors Stock Plan. * (a) 80 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. (a) 81 - The Southern Company Executive Stock Plan for the Southern Electric System and the First Amendment thereto. (Designated in Registration No. 33-30171 as Exhibit 4(c).)
* (a) 82 - Second Amendment to The Southern Company Executive Stock Plan for the Southern Electric System. ALABAMA (b) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (b) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein. (b) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7 herein. (b) 4 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (b) 5 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30, 1984 and Amendment No. 2, dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)34 herein. (b) 6 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (b) 7 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (b) 8 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (b) 9 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein. (b) 10 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (b) 11 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein.
(b) 12 - Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Certificate of Notification, File No. 70-7212, as Exhibit B.) (b) 13 - 1991 Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Form U-1, File No. 70-7873, as Exhibit B-1.) (b) 14 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)43 herein. (b) 15 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)44 herein. (b) 16 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. (b) 17 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)53 herein. (b) 18 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of December 23, 1991. See Exhibit 10(a)58 herein. * (b) 19 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. See Exhibit 10(a)61 herein. * (b) 20 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. See Exhibit 10(a)62 herein. * (b) 21 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. See Exhibit 10(a)63 herein. * (b) 22 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. See Exhibit 10(a)64 herein. (b) 23 - Pension Plan For Employees of ALABAMA, Amended and Restated effective as of January 1, 1989. See Exhibit 10(a)65 herein. (b) 24 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)69 herein. * (b) 25 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. See Exhibit 10(a)70 herein. * (b) 26 - Supplemental Benefit Plan for ALABAMA. See Exhibit 10(a)71 herein. * (b) 27 - The Southern Company Deferred Compensation Plan. See Exhibit 10(a)77 herein.
(b) 28 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)76 herein. * (b) 29 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See Exhibit 10(a)80 herein. GEORGIA (c) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (c) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein. (c) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7 herein. (c) 4 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)8 herein. (c) 5 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)9 herein. (c) 6 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)10 herein. (c) 7 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. See Exhibit 10(a)11 herein. (c) 8 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)12 herein. (c) 9 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)13 herein. (c) 10 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein. (c) 11 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit 10(a)15 herein. (c) 12 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)16 herein.
(c) 13 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)17 herein. (c) 14 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption Agreement dated as of November 16, 1983, between GEORGIA and MEAG. See Exhibit 10(a)18 herein. (c) 15 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)19 herein. (c) 16 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)20 herein. (c) 17 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. See Exhibit 10(a)21 herein. (c) 18 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)22 herein. (c) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)23 herein. (c) 20 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)24 herein. (c) 21 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986, Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)25 herein. (c) 22 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)26 herein. (c) 23 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and MEAG. See Exhibit 10(a)27 herein. (c) 24 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton. See Exhibit 10(a)28 herein. (c) 25 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit 10(a)29 herein.
(c) 26 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit 10(a)30 herein. (c) 27 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement by and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)31 herein. (c) 28 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)32 herein. (c) 29 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (c) 30 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)34 herein. (c) 31 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (c) 32 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (c) 33 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (c) 34 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein. (c) 35 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. See Exhibit 10(a)57 herein. (c) 36 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (c) 37 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein.
(c) 38 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)41 herein. (c) 39 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)42 herein. (c) 40 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. (c) 41 - Block Power Sale Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)47 herein. (c) 42 - Coordination Services Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)48 herein. (c) 43 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton dated as of July 1, 1993. See Exhibit 10(a)49 herein. (c) 44 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)50 herein. (c) 45 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. See Exhibit 10(a)51 herein. (c) 46 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. See Exhibit 10(a)52 herein. (c) 47 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. See Exhibit 10(a)54 herein. (c) 48 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)55 herein. (c) 49 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)56 herein. (c) 50 - Certificate of Limited Partnership of Georgia Power Capital. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit B.) (c) 51 - Amended and Restated Agreement of Limited Partnership of Georgia Power Capital, dated as of December 1, 1994. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit C.)
(c) 52 - Action of General Partner of Georgia Power Capital creating the Series A Preferred Securities. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit D.) (c) 53 - Guarantee Agreement of GEORGIA dated as of December 1, 1994, for the benefit of the holders from time to time of the Series A Preferred Securities. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit G.) (c) 54 - Nuclear Services Agreement between Southern Nuclear and GEORGIA dated as of October 31, 1991. See Exhibit 10(a)59 herein. (c) 55 - Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG and Dalton dated as of November 12, 1990. See Exhibit 10(a)60 herein. * (c) 56 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. See Exhibit 10(a)61 herein. * (c) 57 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. See Exhibit 10(a)62 herein. * (c) 58 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. See Exhibit 10(a)63 herein. * (c) 59 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. See Exhibit 10(a)64 herein. (c) 60 - Pension Plan For Employees of GEORGIA, Amended and Restated effective as of January 1, 1989. See Exhibit 10(a)66 herein. (c) 61 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)69 herein. * (c) 62 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. See Exhibit 10(a)70 herein. * (c) 63 - Supplemental Benefit Plan for GEORGIA. See Exhibit 10(a)72 herein. * (c) 64 - The Southern Company Deferred Compensation Plan. See Exhibit 10(a)77 herein. (c) 65 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)76 herein. * (c) 66 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See Exhibit 10(a)80 herein.
GULF (d) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (d) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein. (d) 3 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit 10(a)29 herein. (d) 4 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit 10(a)30 herein. (d) 5 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. See Exhibit 10(a)54 herein. (d) 6 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (d) 7 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)34 herein. (d) 8 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (d) 9 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (d) 10 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (d) 11 - Agreement between GULF and AEC, effective August 1, 1985. (Designated in GULF's Form 10-K for the year ended December 31, 1985, File No. 0-2429, as Exhibit 10(g).) (d) 12 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
(d) 13 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (d) 14 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. * (d) 15 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. See Exhibit 10(a)61 herein. * (d) 16 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. See Exhibit 10(a)62 herein. * (d) 17 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. See Exhibit 10(a)63 herein. * (d) 18 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. See Exhibit 10(a)64 herein. (d) 19 - Pension Plan For Employees of GULF, Amended and Restated effective as of January 1, 1989. (Designated in GULF's Form 10-K for the year ended December 31, 1994, File No. 0-2429, as Exhibit 10(d)18.) (d) 20 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)69 herein. * (d) 21 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. See Exhibit 10(a)70 herein. * (d) 22 - Supplemental Benefit Plan for GULF. * (d) 23 - The Southern Company Deferred Compensation Plan. See Exhibit 10(a)77 herein. (d) 24 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)76 herein. * (d) 25 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See Exhibit 10(a)80 herein. MISSISSIPPI (e) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein.
(e) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein. (e) 3 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (e) 4 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984, and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)34 herein. (e) 5 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (e) 6 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (e) 7 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (e) 8 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein. (e) 9 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (e) 10 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (e) 11 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. See Exhibit 10(a)45 herein. (e) 12 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. (e) 13 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA MISSISSIPPI and SCS. See Exhibit 10(a)53 herein. * (e) 14 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. See Exhibit 10(a)61 herein.
* (e) 15 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. See Exhibit 10(a)62 herein. * (e) 16 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. See Exhibit 10(a)63 herein. * (e) 17 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. See Exhibit 10(a)64 herein. (e) 18 - Pension Plan For Employees of MISSISSIPPI, Amended and Restated effective as of January 1, 1989. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1994, File No. 0-6849, as Exhibit 10(e)18.) (e) 19 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)69 herein. * (e) 20 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. See Exhibit 10(a)70 herein. * (e) 21 - Supplemental Benefit Plan for MISSISSIPPI. * (e) 22 - The Southern Company Deferred Compensation Plan. See Exhibit 10(a)77 herein. (e) 23 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)76 herein. * (e) 24 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See Exhibit 10(a)80 herein. SAVANNAH (f) 1 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. See Exhibit 10(a)3 herein. (f) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein. (f) 3 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (f) 4 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(f) 5 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (f) 6 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein. (f) 7 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (f) 8 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (f) 9 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)55 herein. (f) 10 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated December 15, 1992. See Exhibit 10(a)56 herein. * (f) 11 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1995. See Exhibit 10(a)61 herein. * (f) 12 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1995. See Exhibit 10(a)62 herein. * (f) 13 - The Southern Company Employee Savings Plan, Amended and Restated effective July 3, 1995 and First Amendment and Second Amendment thereto. See Exhibit 10(a)63 herein. * (f) 14 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective April 1, 1995 and First Amendment thereto. See Exhibit 10(a)64 herein. (f) 15 - Employees' Retirement Plan of SAVANNAH, Amended and Restated effective January 1, 1989. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1994, File No. 1-5072, as Exhibit 10(f)15.) * (f) 16 - First Amendment to the Employees' Retirement Plan of SAVANNAH. * (f) 17 - Supplemental Executive Retirement Plan of SAVANNAH, Amended and Restated effective January 1, 1996. (f) 18 - Deferred Compensation Plan for Key Employees of SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1994, File No. 1-5072, as Exhibit 10(f)17.)
* (f) 19 - First Amendment to the Deferred Compensation Plan for Key Employees of SAVANNAH. (f) 20 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)69 herein. * (f) 21 - First Amendment and Second Amendment to The Southern Company Performance Pay Plan. See Exhibit 10(a)70 herein. (f) 22 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)76 herein. (f) 23 - Deferred Compensation Plan for Directors of SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1994, File No. 1-5072, as Exhibit 10(f)20.) * (f) 24 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See Exhibit 10(a)80 herein. (21) *Subsidiaries of Registrants - Contained herein at page IV-5. (23) Consents of Experts and Counsel SOUTHERN * (a) - The consent of Arthur Andersen LLP is contained herein at page IV-6. ALABAMA * (b) - The consent of Arthur Andersen LLP is contained herein at page IV-7. GEORGIA * (c) - The consent of Arthur Andersen LLP is contained herein at page IV-8. GULF * (d) - The consent of Arthur Andersen LLP is contained herein at page IV-9. MISSISSIPPI * (e) - The consent of Arthur Andersen LLP is contained herein at page IV-10. SAVANNAH * (f) - The consent of Arthur Andersen LLP is contained herein at page IV-11.
(24) Powers of Attorney and Resolutions SOUTHERN * (a) - Power of Attorney and resolution. ALABAMA * (b) - Power of Attorney and resolution. GEORGIA * (c) - Power of Attorney and resolution. GULF * (d) - Power of Attorney and resolution. MISSISSIPPI * (e) - Power of Attorney and resolution. SAVANNAH * (f) - Power of Attorney and resolution. (27) Financial Data Schedule SOUTHERN (a) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 1-3526, as Exhibit 27.) ALABAMA (b) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 1-3164, as Exhibit 27.) GEORGIA (c) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 1-6468, as Exhibit 27.) GULF (d) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 0-2429, as Exhibit 27.)
MISSISSIPPI (e) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 0-6849, as Exhibit 27.) SAVANNAH (f) - Financial Data Schedule. (Designated in Form 8-K dated February 21, 1996, File No. 1-5072, as Exhibit 27.)