======================================================================================================================
UNITED STATES
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, 1997
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) 257-1000
1-6468 Georgia Power Company 58-0257110
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
(404) 526-6526
0-2429 Gulf Power Company 59-0276810
(A Maine Corporation)
500 Bayfront Parkway
Pensacola, Florida 32501
(850) 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 East Bay Street
Savannah, Georgia 31401
(912) 644-7171
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Securities registered pursuant to Section 12(b) of the Act:1
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
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Cumulative Quarterly Income Preferred Securities 2
-------------------------------------------------
Class A preferred, cumulative, $25 stated capital Alabama Power Company
6.80% Series Adjustable Rate (1993 Series)
6.40% Series
Senior Notes
7 1/8% Series A
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.375% Trust Preferred Securities3
7.60% Trust Originated Preferred Securities4
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Class A preferred stock, cumulative, $25 stated value Georgia Power Company
Adjustable Rate (First 1993 Series)
Adjustable Rate (Second 1993 Series)
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
9% Monthly Income Preferred Securities, Series A5 7.75% Trust Preferred Securities6
7.60% Trust Preferred Securities7 7.75% Quarterly Income Preferred Securities8
First mortgage bonds
6 1/8% Series due 1999 6 7/8% Series due 2002
----------------------------------------------------
1 As of December 31, 1997.
2 Issued by Southern Company Capital Trust III and guaranteed by The Southern Company.
3 Issued by Alabama Power Capital Trust I and guaranteed by Alabama Power Company.
4 Issued by Alabama Power Capital Trust II and guaranteed by Alabama Power Company.
5 Issued by Georgia Power Capital, L.P. and guaranteed by Georgia Power Company.
6 Issued by Georgia Power Capital Trust I and guaranteed by Georgia Power Company.
7 Issued by Georgia Power Capital Trust II and guaranteed by Georgia Power Company.
8 Issued by Georgia Power Capital Trust III and guaranteed by Georgia Power Company.
Company obligated mandatorily redeemable Gulf Power Company
preferred securities, $25 liquidation amount
7.625% Quarterly Income Preferred Securities9
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Depositary preferred shares, each representing one-fourth Mississippi Power Company
of a share of preferred stock, cumulative, $100 par value
6.32% Series 6.65% Series
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Trust Originated Preferred Securities10
-------------------------------------------------
Preferred stock, cumulative, $25 par value Savannah Electric and Power Company
6.64% Series
Securities registered pursuant to Section 12(g) of the Act:11
Title of each class Registrant
Preferred stock, cumulative, $100 par value Alabama Power Company
4.20% Series 4.60% Series 4.72% Series
4.52% Series 4.64% 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)
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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
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9 Issued by Gulf Power Capital Trust I and guaranteed by Gulf Power Company.
10 Issued by Mississippi Power Capital Trust I and guaranteed by Misissippi Power Company.
11 As of December 31, 1997.
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Preferred stock, cumulative, $100 par value Gulf Power Company
4.64% Series 5.44% Series
5.16% Series
Class A preferred, cumulative, $10 par value, $25 stated capital
6.72% Series Adjustable Rate (1993 Series)
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Preferred stock, cumulative, $100 par value Mississippi Power Company
4.40% Series 4.60% Series
4.72% Series 7.00% Series
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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. ( )
Aggregate market value of voting stock held by non-affiliates of
The Southern Company at February 28, 1998: $17.1 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:
Description of Shares Outstanding
Registrant Common Stock at February 28, 1998
The Southern Company Par Value $5 Per Share 694,327,636
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
Documents incorporated by reference: specified portionsof The Southern Company's Proxy Statement relating to the
1998 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.
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Table of Contents
Page
PART I
Item 1 Business
The SOUTHERN System.................................................................................. I-1
Traditional Business................................................................................. I-1
Non-Traditional Business............................................................................. I-2
Certain Factors Affecting the Industry............................................................... I-3
Construction Programs................................................................................ I-4
Financing Programs................................................................................... I-6
Fuel Supply.......................................................................................... I-7
Territory Served By Operating Affiliates............................................................. I-8
Competition.......................................................................................... I-11
Regulation........................................................................................... I-13
Rate Matters......................................................................................... I-15
Employee Relations................................................................................... I-16
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 7A Quantitative and Qualitative Disclosures about Market Risk............................................. 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
CEPA.......................................... Consolidated Electric Power Asia
Clean Air Act................................. Clean Air Act Amendments of 1990
Dalton........................................ City of Dalton, Georgia
DOE........................................... United States Department of Energy
Edelnor....................................... Empresa Electrica del Norte Grande, S.A. (Chile)
EMF........................................... Electromagnetic field
Energy Act.................................... Energy Policy Act of 1992
Energy Solutions.............................. Southern Company Energy Solutions, Inc. (formerly The Southern
Development and Investment Group, Inc.)
Entergy Gulf States........................... Entergy Gulf States Utilities Company
EPA........................................... United States Environmental Protection Agency
EWG........................................... Exempt wholesale generator
FERC.......................................... Federal Energy Regulatory Commission
FPC........................................... Florida Power Corporation
FP&L.......................................... Florida Power & Light Company
Freeport...................................... Freeport Power Company (Bahamas)
FUCO.......................................... Foreign utility company
GEORGIA....................................... Georgia Power Company
GULF.......................................... Gulf Power 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
SEPA.......................................... Southeastern Power Administration
SERC.......................................... Southeastern Electric Reliability Council
SMEPA......................................... South Mississippi Electric Power Association
SOUTHERN...................................... The Southern Company
Southern Communications....................... Southern Communications Services, Inc.
Southern Energy............................... Southern Energy, Inc. (formerly Southern Electric
International, Inc.)
Southern Nuclear.............................. Southern Nuclear Operating Company, Inc.
SOUTHERN system............................... SOUTHERN, the operating affiliates, SEGCO, Southern Energy,
Southern Nuclear, SCS, Southern Communications,
Energy Solutions and other subsidiaries
SWEB.......................................... South Western Electricity plc (United Kingdom)
TVA........................................... Tennessee Valley Authority
ii
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K includes forward-looking statements in
addition to historical information. The registrants caution that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the electric utility industry; the extent and timing of the
entry of additional competition in the markets of SOUTHERN's subsidiaries;
potential business strategies, including acquisitions or dispositions of assets
or internal restructuring, that may be pursued by the registrants; state and
federal rate regulation in the United States; changes in or application of
environmental and other laws and regulations to which SOUTHERN and its
subsidiaries are subject; political, legal and economic conditions and
developments in the United States and in foreign countries in which the
subsidiaries operate; financial market conditions and the results of financing
efforts; changes in commodity prices and interest rates; weather and other
natural phenomena; the performance of projects undertaken by the non-traditional
business and the success of efforts to invest in and develop new opportunities;
and other factors discussed elsewhere herein and in other reports filed from
time to time by the registrants with the SEC.
iii
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 Southern Energy,
Southern Communications, Southern Nuclear, SCS (the system service company),
Energy Solutions and other direct and indirect subsidiaries. Southern Energy is
focused on several key international and domestic business lines, including
energy distribution, integrated utilities, stand-alone generation, and other
energy-related products and services. A further description of Southern Energy's
business and organization follows later in this section under "Non-Traditional
Business." Southern 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. Energy Solutions develops new
business opportunities related to energy products and services.
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
Traditional Business
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 By Operating Affiliates" herein.)
I-1
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.
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 Energy
Corporation, 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, Southern Energy,
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. Southern
Energy, Energy Solutions and Southern 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. Effective
March 22, 1997, Southern Nuclear, pursuant to a contract with GEORGIA, assumed
responsibility for the operation of plants Hatch and Vogtle, as authorized by
amendments to the operating licenses for both plants. See Item 1 BUSINESS -
"Regulation - Atomic Energy Act of 1954" herein.
Non-Traditional Business
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
Southern Energy and other subsidiaries. SOUTHERN presently has authorization
from the SEC (the "SEC Order") which in effect will allow it to use the proceeds
from financings for investment in EWGs and FUCOs up to an amount not exceeding
100% of SOUTHERN's consolidated retained earnings. A consumer group that had
sought to intervene in the SEC proceeding has filed an appeal, which remains
pending, with U.S. Court of Appeals for the 11th Circuit seeking judicial review
of the SEC Order. At December 31, 1997, SOUTHERN's consolidated retained
earnings amounted to $3,842 million and its aggregate investment in EWGs and
FUCOs amounted to $2,795 million.
Worldwide, Southern Energy develops and manages electricity and other energy
related projects, including domestic energy trading and marketing.
Reference is made to Note 15 to the financial statements of SOUTHERN in Item
8 herein for additional information regarding SOUTHERN's segment and related
information.
In 1995, SOUTHERN acquired SWEB, one of the United Kingdom's 12 regional
electric distribution companies, for approximately $1.8 billion. In July 1996, a
25 percent interest in SWEB was sold. SWEB is, to some extent, involved in power
generation and certain non-regulated activities which include gas marketing and
telecommunications. In mid-1997, the acquisition of all interest in CEPA was
completed for a total net investment of $2.1 billion. CEPA is engaged in the
business of developing, constructing, owning and operating electric power
I-2
generation facilities. Its current operations include installed operating
capacity of approximately 3,306 megawatts, with projects either completed or
under development in the Philippines, the People's Republic of China, and
Pakistan. In September 1997, Southern Energy acquired a 26% interest in a German
utility for approximately $820 million. For additional information regarding the
acquisitions of SWEB and CEPA, reference is made to Note 14 to SOUTHERN's
financial statements in Item 8 herein.
See Item 2 - PROPERTIES - "Other Electric Generation Facilities" herein for
additional information regarding Southern Energy projects.
As the energy marketplace evolves, Southern Energy is positioning SOUTHERN
to become a major competitor in energy trading and marketing activities. As part
of this strategy, Southern Energy entered into a joint venture with Vastar
Resources effective in January 1998. The two companies combined their energy
trading and marketing operations to form a new full-service energy provider,
Southern Company Energy Marketing. Southern Company Energy Marketing holds a top
10 position in the United States in both natural gas and power marketing.
Southern Energy and Energy Solutions 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, Energy Solutions 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; Energy Services, providing
total energy solutions to industrial and commercial customers; other energy
management programs under development; and telecommunications operations related
to energy management programs.
In 1995, Southern 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 1998-2000 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 - "Non-Traditional Business," "Competition" and "Environmental
Regulation."
I-3
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 1998 through
2000 by the operating affiliates, SEGCO, SCS, Southern Communications and
Southern Energy are estimated as follows: (in millions)
---------------------------------------------------------
1998 1999 2000
----------------------------
ALABAMA $ 615 $ 723 $ 524
GEORGIA 506 561 549
GULF 68 62 62
MISSISSIPPI 67 92 291
SAVANNAH 22 23 21
SEGCO 3 8 1
SCS 7 15 6
Southern
Communications 67 20 18
Southern Energy* 629 493 78
Other 19 13 18
=========================================================
SOUTHERN system $2,003 $2,010 $1,568
=========================================================
*These construction estimates do not include amounts which may be expended
by Southern Energy on future power production projects or by any subsidiaries
created to effect such future projects. (See Item 1 - BUSINESS -
"Non-Traditional Business" herein.)
I-4
Estimated construction costs in 1998 are expected to be apportioned approximately as follows: (in millions)
-------------------------------------------------------------------------------------------------------------------------------
SOUTHERN
system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
-----------------------------------------------------------------------------------------------
Combustion turbines $109 $ 99 $ 1 $ 1 $ 8 $ -
Other generating
facilities including
associated plant 850 169 78 23 20 2
substations
New business 326 129 151 21 14 11
Transmission 147 64 69 3 9 2
Joint line and substation 31 - 28 3 - -
Distribution 225 70 54 11 12 5
Nuclear fuel 97 40 57 - - -
General plant 218 44 68 6 4 2
-----------------------------------------------------------------------------------------------
$2,003 $615 $506 $68 $67 $22
===============================================================================================
*Southern Communications, SCS and Southern Nuclear plan capital additions to
general plant in 1998 of $67 million, $7 million and $400 thousand,
respectively, while SEGCO plans capital additions of $3 million to generating
facilities. Southern Energy plans capital additions of $555 million to
generating facilities, $73 million to distribution facilities, and $1 million to
general plant. These estimates do not reflect the possibility of Southern
Energy's securing a contract(s) to buy or build additional generating
facilities. Other non-traditional capital additions planned for 1998 are
approximately $19 million. (See Item 1 - BUSINESS - "Non-Traditional Business"
herein.)
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.
The operating affiliates have approximately 1,600 megawatts of combined
cycle generation scheduled to be placed in service by 2001. In addition,
significant construction will continue related to transmission and distribution
facilities and the upgrading of generating plants . (See Item 2 - PROPERTIES -
"Other Electric Generation Facilities" herein for additional information
relating to facilities under development.)
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 and new purchase power contracts. (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.
I-5
Financing Programs
In 1997, SOUTHERN raised $360 million from the issuance of new common stock
under SOUTHERN's various stock plans. Also in 1997, SOUTHERN issued a total of
$600 million in trust and capital preferred securities for the direct benefit of
SOUTHERN. SOUTHERN plans to issue additional equity capital in 1998. The amount
and timing of additional equity capital to be raised in 1998, as well as
subsequent years, will be contingent on SOUTHERN's investment opportunities.
Equity capital can be provided from any combination of public offerings, private
placements, or SOUTHERN's stock plans. Any portion of the common stock required
during 1998 for SOUTHERN'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 affiliates 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.
Historically the operating affiliates have relied on issuances of first mortgage
bonds and preferred stock, in addition to pollution control revenue bonds issued
for their benefit by public authorities, to meet their long-term external
financing requirements. Recently, financings have consisted of unsecured debt
and trust preferred securities. In this regard, the operating affiliates --
except SAVANNAH -- sought and obtained stockholder approval in 1997 to amend
their respective corporate charters eliminating restrictions on the amount of
unsecured indebtedness they may incur.
Short-term debt is often utilized as appropriate at SOUTHERN and the
operating affiliates. The amount of securities representing short-term unsecured
indebtedness allowable under SAVANNAH's charter at December 31, 1997 was $71
million (20% of secured indebtedness and other capital). Under the provisions of
SAVANNAH's charter, this percentage will be reduced to 10% on July 1, 1999. In
the case of ALABAMA, GEORGIA, GULF and MISSISSIPPI, preferred shareholders
approved the removal of restrictions on unsecured indebtedness under the
respective charters. SOUTHERN does not have a charter limitation on short-term
unsecured indebtedness.
The maximum amounts of short-term or term-loan indebtedness authorized by
the appropriate regulatory authorities are shown on the following table:
Outstanding at
Amount December 31, 1997
------------ ---------------------
(in millions)
ALABAMA $ 750 (1) $306.9
GEORGIA 1,700 (2) 366.2
GULF 300(1) 82.3
MISSISSIPPI 350(1) 80.0
SAVANNAH 90(2) 30.0
SOUTHERN 2,000(1) 768.7
------------------------------------------------------
Notes:
(1) 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, 2003, December 31,
2002 and March 31, 2001, respectively.
(2) 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
$1.4 billion and $96.1 million, respectively, expiring December 31, 1998.
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.
New projects undertaken by subsidiaries of Southern Energy are generally
financed through a combination of equity funds
provided by SOUTHERN and non-recourse debt incurred on a project-specific basis.
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 1995 through
1997 and the estimates for 1998 are shown below:
Oil and
ALABAMA Coal Nuclear Hydro Gas
--------- ---------- --------- ---------
1995 73% 19% 8% *
1996 72 20 8 *
1997 72 19 8 1
1998 74 18 7 1
GEORGIA
1995 74 22 3 1
1996 74 22 3 1
1997 75 22 2 1
1998 75 21 3 1
GULF
1995 99 ** ** 1
1996 99 ** ** 1
1997 100 ** ** *
1998 99 ** ** 1
MISSISSIPPI
1995 79 ** ** 21
1996 85 ** ** 15
1997 85 ** ** 15
1998 85 ** ** 15
SAVANNAH
1995 80 ** ** 20
1996 90 ** ** 10
1997 87 ** ** 13
1998 88 ** ** 12
SEGCO
1995 100 ** ** *
1996 100 ** ** *
1997 100 ** ** *
1998 100 ** ** *
SOUTHERN system***
1995 77 17 4 2
1996 77 17 4 2
1997 77 17 4 2
1998 79 16 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 1995
through 1997 are shown below:
Oil and Weighted
ALABAMA Coal Nuclear Gas Average
--------- ---------- ----------- -----------
1995 1.71 0.50 * 1.48
1996 1.71 0.50 * 1.46
1997 1.73 0.54 * 1.49
GEORGIA
1995 1.67 0.60 4.68 1.44
1996 1.55 0.55 5.50 1.35
1997 1.53 0.52 5.19 1.32
GULF
1995 2.08 ** 3.56 2.09
1996 1.99 ** 6.41 2.02
1997 1.97 ** 5.59 1.99
MISSISSIPPI
1995 1.58 ** 2.33 1.64
1996 1.43 ** 4.32 1.57
1997 1.44 ** 3.54 1.57
SAVANNAH
1995 1.77 ** 3.80 2.18
1996 1.76 ** 8.41 2.42
1997 1.91 ** 4.63 2.27
SEGCO
1995 1.87 ** * 1.87
1996 1.72 ** * 1.72
1997 1.51 ** * 1.51
SOUTHERN system***
1995 1.73 0.56 3.37 1.53
1996 1.65 0.52 5.20 1.48
1997 1.63 0.53 4.38 1.46
----------------------------------------------------------------
* 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 13, 1998, the operating affiliates and SEGCO had stockpiles
of coal on hand at their respective coal-fired plants which represented an
estimated 23 days of recoverable supply for bituminous coal and 27 days for
sub-bituminous coal. It is estimated that approximately 66.6 million tons of
coal will be consumed in 1998 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 31 coal contracts. These contracts cover remaining
terms of up to 14 years. Approximately 16% of 1998 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 30 days of recoverable supply is the appropriate
level for coal stockpiles. During 1997, the operating affiliates' and SEGCO's
average price of coal delivered was approximately $36.8 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 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 2008 at Plant Vogtle, and into 2010 and 2013 at Plant Farley units 1
and 2, respectively. Activities for adding dry cask storage capacity at Plant
Hatch by as early as 1999 are in progress.
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 By Operating Affiliates
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 a power supply arrangement with OPC, a
corporate cooperative of electric membership cooperatives in Georgia, and to 50
municipalities, 48 of which are served through a power supply arrangement with
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.
For information relating to kilowatt-hour sales by classification for each
registrant, reference is made to "Management's Discussion and Analysis-Revenues"
in Item 7 herein. Also, for information relating to the sources of revenues for
the Southern system and each of the operating affiliates, reference is made to
Item 6 herein.
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.
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.
I-9
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. OPC decreased its purchases of capacity by 250 megawatts
each in September 1996 and 1997 and has notified GEORGIA of its intent to
decrease purchases of capacity by an additional 250 megawatts in September 1998
and 1999. Under the amended 1995 Integrated Resource Plan approved by the
Georgia PSC in March 1997, the resources associated with the decreased purchases
in 1996, 1997 and 1998 will be used to meet the needs of GEORGIA's retail
customers through 2004.
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
megawatts) for a period of 15 years commencing October 1, 1991. In both
contracts the power will be 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 and one
county-owned system 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 purchases from
others. In August 1997, a new power supply contract was implemented between
GEORGIA and MEAG that replaced the partial requirements tariff pursuant to which
GEORGIA previously sold wholesale energy to MEAG. Since 1977 Dalton has filled
its requirements from generation facilities acquired from GEORGIA and through
partial requirements purchases. One municipally-owned electric distribution
system's full requirements are served under a market-based contract 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 Georgia
Transmission Corporation (formerly OPC's transmission division), 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.)
I-10
SCS, acting on behalf of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH,
also has a contract 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 public 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
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 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 the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). 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 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. SOUTHERN is
I-11
aggressively working to maintain and expand its share of wholesale sales in the
Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of an operating company to recover its investments, including the
regulatory assets described in Note 1 to each registrant's respective financial
statements, could have a material adverse effect on the financial condition of
that operating company. The operating companies are attempting to minimize or
reduce their cost exposure. Reference is made to Note 3 to the financial
statements for SOUTHERN for information regarding these efforts.
Continuing to be a low-cost producer could provide opportunities to
increase market share and profitability in markets that evolve with changing
regulation. Conversely, unless SOUTHERN 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. 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 a less regulated, more competitive environment,
SOUTHERN continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, SOUTHERN may engage in other new business ventures that 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. (See Item 1 - BUSINESS
- - "Non-Traditional Business" herein.)
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 1997, ALABAMA purchased approximately 57
million kilowatt-hours from such companies at a cost of $1.0 million.
GEORGIA currently has cogeneration contracts in effect with six industrial
customers. Under the terms of these contracts, GEORGIA purchases excess
generation of such companies. During 1997, GEORGIA purchased 5.3 million
kilowatt-hours from such companies at a cost of $117,304. GEORGIA has entered
into a 30-year purchase power agreement, scheduled to begin in June 1998, for
electricity from a 300-megawatt cogeneration facility. Payments are subject to
reductions for failure to meet minimum capacity output. Reference is made to
Note 4 to the financial statements for GEORGIA in Item 8 herein for information
regarding purchase power commitments.
GULF currently has cogeneration agreements for "as available" energy in
effect with two industrial customers. During 1997, GULF purchased 98 million
kilowatt-hours from such companies for $2 million.
MISSISSIPPI entered into agreements to purchase options for summer peaking
power for the years 1997 through 2000. Also, the Company has purchased options
from power marketers. Reference is made to Note 5 to the financial statements
for MISSISSIPPI in Item 8 herein for information regarding fuel and purchased
power commitments.
I-12
SAVANNAH currently has cogeneration contracts in effect with five industrial
customers. Under the terms of these contracts, SAVANNAH purchases excess
generation of such companies. During 1997, SAVANNAH purchased 1 million
kilowatt-hours from such companies at a cost of $19,000.
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 By Operating Affiliates" herein for information concerning
suppliers of electricity operating within or near the areas served at retail by
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 By Operating Affiliates" 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.
While various proposals have been introduced in Congress regarding the
Holding Company Act, the prospects for legislative reform or repeal 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.
Reference is made to Note 3 to each registrant's financial statements
(except SAVANNAH) in Item 8 herein for further information regarding FERC
reviews of equity returns.
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.
GEORGIA filed, in September, 1996, with the FERC, a notice of its intent to
seek a new license for the Flint River Project. GEORGIA must file a new license
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 2005-2036
in the case of GEORGIA's projects.
I-13
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 12 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
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 1998, 1999 and 2000 are
as follows: (in millions)
---------------- -- ------------ ------------ -----------
1998 1999 2000
------------ ------------ -----------
ALABAMA $18.3 $63.8 $19.6
GEORGIA 13.0 14.0 1.0
GULF 9.3 1.9 0.1
MISSISSIPPI 15.0 6.0 -
SAVANNAH - - -
SEGCO 0.7 7.6 0.5
------------ ------------ -----------
SOUTHERN
system $56.3 $93.3 $21.2
================ == ============ ============ ===========
*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
I-14
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,
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. ALABAMA and
GEORGIA 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 and SAVANNAH recover from retail customers fuel
and net purchased power costs through 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. 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. The
adjustment factors for MISSISSIPPI's retail and wholesale rates are generally
levelized based on the estimated energy cost for the year, adjusted for any
actual over/under collection from the previous year. However, in January 1998,
MISSISSIPPI received approval from the MPSC to change its Fuel Adjustment Clause
and to levelize and fix its Fuel Adjustment Factors for January 1998 through
December 2000. 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.
For information regarding GEORGIA's Rocky Mountain Plant, including a joint
ownership agreement with OPC and a January 14, 1998, GPSC order relating to the
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.
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
I-15
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 and
purchased power 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.
In March 1997, the Georgia PSC approved amendments to GEORGIA's 1995
Integrated Resource Plan. Pursuant to the amended plan, the Georgia PSC
certified a five-year purchase power agreement scheduled to begin in June 2000
for approximately 215 megawatts. Capacity and fixed operation and maintenance
payments over the five-year period are estimated to be approximately $39
million.
The Florida PSC set conservation goals and approved programs to accomplish
the goals beginning in 1995. The goals require conservation programs which
reduce 154 megawatts of summer peak demand and 65 million 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.
Employee Relations
The companies of the SOUTHERN system had a total of 30,756 employees on their
payrolls at December 31, 1997.
------------------------------ --- -------------------------
Employees
at
December 31, 1997
-------------------------
ALABAMA 6,531
GEORGIA 8,354
GULF 1,328
MISSISSIPPI 1,245
SAVANNAH 535
SCS 3,222
Southern Energy* 6,089
Southern Nuclear 3,070
Other 382
------------------------------ --- -------------------------
Total 30,756
============================== === =========================
*Includes 5,709 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, 1999.
GULF 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.
MISSISSIPPI has an agreement with the IBEW on a three-year contract
extending to August 16, 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.
I-16
SAVANNAH has three-year labor agreements with the IBEW and the Office and
Professional Employees International Union that expire April 16, 1999 and
December 1, 1999, respectively.
Southern Energy has a 5-year labor agreement with the IBEW extending to
October 31, 2002, and the United Paperworkers International Union extending to
June 1, 2002, covering employees of Mobile Energy. At its State Line facility in
Hammond, Indiana, Southern Energy has a labor contract with the United Steel
Workers that extends to January 1, 2004.
Southern Nuclear has agreements with the IBEW on separate three-year
contracts extending to August 15, 1998 for Plant Farley and to July 1, 1999 for
Plants Hatch and Vogtle. Upon notice given at least 60 days prior to these
dates, negotiations may be initiated with respect to agreement terms to be
effective after such dates.
Southern Nuclear also has an agreement with the United Plant Guard Workers
of America for security officers at Plant Hatch extending to September 3, 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.
I-17
Item 2. PROPERTIES
Electric Properties
The operating affiliates and SEGCO, at December 31, 1997, 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 Total 1,000,000 (7)
-----------
Total Fossil Steam 21,700,243
-----------
Nuclear Steam
Farley Dothan, AL
ALABAMA Total 1,720,000
-----------
Hatch Baxley, GA 862,669 (8)
Vogtle Augusta, GA 1,060,240 (9)
-----------
GEORGIA Total 1,922,909
----------
Total Nuclear Steam 3,642,909
-----------
Combustion Turbines
Greene County Demopolis, AL
ALABAMA Total 720,000
-----------
Arkwright Macon, GA 30,580
Atkinson Atlanta, GA 78,720
Bowen Cartersville, GA 39,400
Intercession City Intercession City, FL 47,333 (10)
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 1,895,155
---------
Lansing Smith
Unit A (GULF) Panama City, FL 39,400
Chevron Cogenerating
Station Pascagoula, MS 147,292 (11)
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 3,141,387
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 (12)
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 31,145,000
---------------------------------------------- -----------------
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) Capacity shown represents 33-1/3% of total plant capacity. GEORGIA
owns a 1/3 interest in the unit with 100% use of the
unit from June through September. FPC operates the unit.
(11) Generation is dedicated to a single industrial customer.
(12) 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 operating affiliates and SEGCO are owned in fee
by the respective companies. 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 Entergy Gulf States. The line, completed in 1984, extends from Plant
Daniel to the Louisiana state line. Entergy 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. At December 31, 1997, the unamortized portion of
this cost was $38 million.
The all-time maximum demand on the operating affiliates and SEGCO 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 operating affiliates and SEGCO at
I-19
that time was 9.4%. For additional information on peak demands, reference is
made to Item 6 - SELECTED FINANCIAL DATA herein.
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, 1997, was
as follows:
Facilities in Operation
-------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Units Owned Operated Ownership Type
------------------- --------------------------- --------- ------------ ------------------------------------------------------
Alicura Argentina 4 551 (1) 1,000 55.14 (1) Hydro
BEWAG Germany 18 443 1,702 26.00 Coal
BEWAG Germany 17 375 1,444 26.00 Oil & Gas
Birchwood Virginia 1 111 222 50.00 Coal (2)
CEPA China 3 634 - (3) 32.00 Coal
CEPA Philippines 2 641 735 87.22 Coal
CEPA Philippines 3 126 210 60.10 Oil
CEPA Philippines 13 381 381 100.00 Oil
Edelnor Chile 1 111 166 67.00 Coal
Edelnor Chile 37 77 115 67.00 Oil
Edelnor Chile 2 7 10 67.00 Hydro
Freeport Grand Bahamas 8 80 127 62.50 Oil & Gas
UDG-Niagara New York 1 - 50 - Coal (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
State Line Indiana 2 490 490 100.00 Coal
SWEB United Kingdom 8 144 - (3) 7.69 Gas
SWEB United Kingdom 12 15 15 100.00 Oil & Gas
SWEB United Kingdom 3 7 - (3) 38.00 Wind
SWEB United Kingdom 3 1 - 25.00 Landfill Gas
==========================================================================================================================
Total Capacity 4,764 7,942 (3)
===========================================================================================================================
Notes: (1) Represents megawatts of capacity under a concession agreement expiring in the year 2023.
(2) Cogeneration facility.
(3) Does not include Shajiao C (1,980 MW) or UK power plants (150 MW) that are partially owned but not operated by
CEPA and SWEB, respectively.
I-20
Facilities Under Development
-------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Own Operate Ownership Type
------------------- --------------------------- ------------ ------------------------------ -----------------------
CEPA Philippines 1,200* 1,200 92.00 Coal
Edelnor Chile 104 160 67.00 Coal
-------------------------------------------------------------------------------------------------------------------------------
Total Capacity 1,304 1,360
===============================================================================================================================
* Percentage owned will ultimately be 91.91% upon completion, with the owned capacity reduced to 1,103 MW.
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:
Percentage Ownership
Total ---------------- -------- ------------ -------- --------- ------------ --------
Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FPC
-------------- ---------------- -------- ------------ -------- --------- ------------ --------
(Megawatts)
Plant Miller
Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -%
Plant Hatch 1,722 - - 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 142 - - 33.3 - - - 66.7
--------------------------- -------------- -- ---------------- -------- ------------ -------- --------- ------------ --------
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 made commitments to purchase portions of OPC's and MEAG's capacity and
energy from this plant. Declining commitments were in effect during periods of
up to seven years following commercial operation and ended in 1996. In addition,
the Company has commitments regarding a portion of a 5 percent interest in Plant
Vogtle owned by MEAG that are in effect until the later of 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. In 1995, the plant went into commercial operation. GEORGIA's ownership
is 25.4 percent. On January 14, 1998, the GPSC ordered that the Company be
allowed approximately $108 million of its $143 million investment in the plant
in rate base as of December 31, 1998. GEORGIA has appealed the GPSC's order. If
I-21
such order is ultimately upheld, GEORGIA will be required to record a charge to
earnings currently estimated at approximately $29 million, after taxes.
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 began commercial
operation in January 1997, and is operated by FPC. GEORGIA owns a one-third
interest in the unit, with use of 100% of the capacity from June through
September. FPC has the capacity the remainder of the year.
Sale of Property
Reference is made to Note 6 to 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.
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 five 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, 1993 to December 31, 1997, the operating
affiliates, SEGCO, SCS, Southern Nuclear, Southern Communications and Southern
Energy recorded gross property additions and retirements as follows:
----------------------- ------------------- --- ----------
Gross Property
Additions Retirements
--------------- -------------
(in millions)
ALABAMA $2,402 $ 415
GEORGIA (1) 2,697 1,534
GULF 336 138
MISSISSIPPI 428 91
SAVANNAH 178 17
SEGCO 29 8
SCS 99 131
Southern Nuclear 6 7
Southern
Communications 246 -
Southern Energy 1,039 38
Other 6 -
==========================================================
SOUTHERN system $7,466 $2,379
==========================================================
Notes:
(1) Includes approximately $446 million attributable to 1993 through 1997
sales of Plant Scherer Unit 4 to FP&L and JEA.
I-22
Item 3. LEGAL PROCEEDINGS
(1) SOUTHERN and Subsidiaries v. Commissioner of the IRS
(U.S. Tax Court)
Reference is made to Note 3 to SOUTHERN's, ALABAMA's, and GEORGIA's
financial statements in Item 8 herein under the captions "Southern
Company Tax Litigation", "Tax Litigation", and "Tax Litigation",
respectively.
(2) Frost v. ALABAMA
(Circuit Court of Jefferson County, Alabama)
Reference is made to Note 3 to SOUTHERN's and ALABAMA's financial
statements in Item 8 herein under the captions "Alabama Power Appliance
Warranty Litigation" and "Appliance Warranty Litigation", respectively.
(3) 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, Southern Energy, SCS,
Southern Nuclear, Energy Solutions and Southern 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
ALABAMA, GEORGIA, GULF AND MISSISSIPPI each held special meetings of their
shareholders on December 10, 1997, for the purpose of amending their respective
charters. The amendments eliminate restrictions on each of these registrant's
ability to (1) issue unsecured indebtedness, (2) sell assets, merge or
consolidate without preferred shareholder approval under certain circumstances,
and (3) pay dividends on common stock.
The vote in connection with such matters was as follows:
FOR ABSTAINED from or AGAINST
ALABAMA 2,373,283 85,507
GEORGIA 2,601,807 52,487
GULF 437,296 5,394
MISSISSIPPI 328,961 16,340
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, 1997.
A. W. Dahlberg
Chairman, President and Chief Executive Officer
Age 57
Elected in 1985; President and Chief Executive
Officer of GEORGIA from 1988 through 1993. 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 49
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.
H. Allen Franklin
Executive Vice President and Director
Age 53
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 58
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 49
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.
Effective March 1, 1998, elected Executive Vice President and Treasurer of
GEORGIA.
W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
Age 58
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 48
Elected in 1995; President and Chief Executive Officer of Southern Energy since
1992.
Bill M. Guthrie
Vice President
Age 64
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 53
President and Chief Executive Officer of Southern Nuclear since 1993. He
previously served as Executive Vice President of GEORGIA from 1989 to March
1997.
Stephen A. Wakefield
Senior Vice President and General Counsel
Age 57
Elected in 1997. Previously, he was a partner at the firm of Akin, Gump,
Strauss, Hauer & Feld, LLP from July 1991 through August 10, 1997.
Each of the above is currently an officer of SOUTHERN, serving a term
running from the last annual meeting of the directors (May 28, 1997) for one
year until the next annual meeting or until his successor is elected and
qualified, except for Mr.Wakefield who was elected on August 11, 1997.
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 during each quarter for the past two years
were as follows:
---------------------- ----------- --------- --------
High Low
----------- --------
1997
First Quarter $23-3/8 $20-3/4
Second Quarter 22-1/4 19-7/8
Third Quarter 23 20-13/16
Fourth Quarter 26-1/4 22
1996
First Quarter $25-7/8 $22-3/8
Second Quarter 24-5/8 21-1/4
Third Quarter 24-5/8 21-3/4
Fourth Quarter 23-1/8 21-1/8
------------------ --------------- --- --------------
There is no market for the other registrants' common stock, all of
which is owned by SOUTHERN. On February 28, 1998, the closing price
of SOUTHERN's common stock was $24.6875.
(b) Number of SOUTHERN's common stockholders at December 31, 1997:
200,508
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 1997 1996
----------------- --------- ------------- ----------
SOUTHERN First $220,194 $211,081
Second 221,544 211,272
Third 222,980 212,200
Fourth 224,287 212,201
ALABAMA First 80,100 76,000
Second 85,600 76,400
Third 86,100 76,400
Fourth 87,800 118,700
GEORGIA First 122,700 121,500
Second 131,000 122,100
Third 131,800 122,100
Fourth 134,500 109,800
GULF First 12,900 12,300
Second 13,800 12,400
Third 13,800 12,400
Fourth 24,100 21,200
MISSISSIPPI First 11,300 10,600
Second 12,100 10,700
Third 12,200 10,600
Fourth 13,800 12,000
SAVANNAH First 5,100 4,800
Second 5,400 4,800
Third 5,500 4,800
Fourth 4,500 5,200
----------------- --------- ------------- ----------
The dividend paid per share by SOUTHERN was 31.5(cent) for each quarter of
1996 and 32.5(cent) for each quarter of 1997. The dividend paid on SOUTHERN's
common stock for the first quarter of 1998 was raised to 33.5(cent) per share.
II-1
The amount of dividends on their common stock that may be paid by the
subsidiary registrants is restricted in accordance with their first mortgage
bond indenture and, in the case of SAVANNAH, its 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, 1997, were as follows:
------------------ ------------------ --- --------------
Retained Restricted
Earnings Amount
------------------ --------------
(in millions)
ALABAMA $1,221 $ 796
GEORGIA 1,745 897
GULF 172 127
MISSISSIPPI 170 118
SAVANNAH 113 68
Consolidated 3,842 2,024
------------------ ------------------ --- --------------
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-41 through II-54.
ALABAMA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-83
through II-96.
GEORGIA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-129
through II-143.
GULF. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-172 through
II-185.
MISSISSIPPI. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-212
through II-225.
SAVANNAH. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-247
through II-259.
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-16.
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-58 through II-64.
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-100 through II-107.
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-147 through II-154.
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-189 through II-195.
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-229 through II-234.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to information in SOUTHERN's "Management's Discussion and
Analysis - Derivative Financial Instruments" and to Note 1 to SOUTHERN's
financial statements under the headings "Financial Instruments for Non-Trading"
and "Financial Instruments for Trading" contained herein on pages II-13 through
II-14; and pages II-26 through II-28, respectively.
II-2
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO 1997 FINANCIAL STATEMENTS
Page
The Southern Company and Subsidiary Companies:
Report of Independent Public Accountants................................................................................ II-7
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995.................................. II-17
Consolidated Statements of Retained Earnings for the Years Ended
December 31, 1997, 1996 and 1995.................................................................................... II-17
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.............................. II-18
Consolidated Balance Sheets at December 31, 1997 and 1996............................................................... II-19
Consolidated Statements of Capitalization at December 31, 1997 and 1996................................................. II-21
Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1997, 1996 and 1995......................... II-22
Notes to Financial Statements........................................................................................... II-23
ALABAMA:
Report of Independent Public Accountants .............................................................................. II-57
Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............................................... II-65
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........................................... II-66
Balance Sheets at December 31, 1997 and 1996 ........................................................................... II-67
Statements of Capitalization at December 31, 1997 and 1996 ............................................................. II-69
Statements of Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995.................................... II-70
Notes to Financial Statements........................................................................................... II-71
GEORGIA:
Report of Independent Public Accountants................................................................................ II-99
Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............................................... II-108
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........................................... II-109
Balance Sheets at December 31, 1997 and 1996 ........................................................................... II-110
Statements of Capitalization at December 31, 1997 and 1996 ............................................................. II-112
Statements of Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995.................................... II-113
Statements of Paid-In Capital for the Years Ended December 31, 1997, 1996 and 1995...................................... II-113
Notes to Financial Statements........................................................................................... II-114
GULF:
Report of Independent Public Accountants................................................................................ II-146
Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............................................... II-155
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........................................... II-156
Balance Sheets at December 31, 1997 and 1996 ........................................................................... II-157
Statements of Capitalization at December 31, 1997 and 1996 ............................................................. II-159
Statements of Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995.................................... II-161
Statements of Paid-In Capital for the Years Ended December 31, 1997, 1996 and 1995...................................... II-161
Notes to Financial Statements........................................................................................... II-162
II-3
Page
MISSISSIPPI:
Report of Independent Public Accountants................................................................................ II-188
Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............................................... II-196
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........................................... II-197
Balance Sheets at December 31, 1997 and 1996 ........................................................................... II-198
Statements of Capitalization at December 31, 1997 and 1996 ............................................................. II-200
Statements of Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995.................................... II-201
Statements of Paid-In Capital for the Years Ended December 31, 1997, 1996 and 1995...................................... II-201
Notes to Financial Statements........................................................................................... II-202
SAVANNAH:
Report of Independent Public Accountants................................................................................ II-228
Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............................................... II-235
Statements of Retained Earnings for the Years Ended December 31, 1997, 1996 and 1995.................................... II-235
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........................................... II-236
Balance Sheets at December 31, 1997 and 1996 ........................................................................... II-237
Statements of Capitalization at December 31, 1997 and 1996 ............................................................. II-239
Notes to Financial Statements........................................................................................... II-240
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
Southern Company and Subsidiary Companies 1997 Annual Report
The management of 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 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 11, 1998
II-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and to the Stockholders of Southern Company:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Southern Company (a Delaware corporation) and
subsidiary companies as of December 31, 1997 and 1996, 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, 1997. 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 consolidated financial statements (pages 11-17 through
11-40) referred to above present fairly, in all material respects, the financial
position of Southern Company and subsidiary companies as of December 31, 1997
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 11, 1998
II-7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Southern Company and Subsidiary Companies 1997 Annual Report
RESULTS OF OPERATIONS
Earnings and Dividends
Southern Company reported 1997 earnings of $972 million or $1.42 for both basic
and diluted earnings per share. The traditional core business of selling
electricity in the southeastern United States remained strong, while
non-traditional business results were adversely affected by a $111 million,
after taxes, windfall profits tax assessed against South Western Electricity
(SWEB) in the United Kingdom. SWEB is a subsidiary of Southern Energy, Inc.
(Southern Energy). Excluding the windfall profits tax, Southern Energy's
earnings account for 10 percent of consolidated net income in 1997.
Consolidated net income decreased by $155 million compared with the amount
reported for 1996. Continued cost controls and steady demand for electricity
were offset by increased financing costs for the non-traditional business and
the windfall profits tax.
Costs related to work force reduction programs decreased earnings by $31
million or 5 cents per share and $53 million or 8 cents per share in 1997 and
1996, respectively. These costs are expected to be recovered through future
savings in approximately two years following each program's implementation.
In 1996, earnings were $1.1 billion or $1.68 for both basic and diluted
earnings per share -- up 2 cents from the per share amount reported in 1995.
Earnings in 1996, when compared with 1995 results, were affected by increased
energy sales and growth in the non-traditional business.
Dividends paid on common stock during 1997 were $1.30 per share or 321/2
cents per quarter. During 1996 and 1995, dividends paid per share were $1.26 and
$1.22, respectively. In January 1998, the Southern Company raised the quarterly
dividend to 331/2 cents per share or an annual rate of $1.34 per share.
Acquisitions
Southern Energy owns and manages international and domestic non-traditional
electric power production and delivery facilities for Southern Company. Southern
Energy's acquisitions of 100 percent of Consolidated Electric Power Asia (CEPA)
and a 26 percent interest in a German utility were completed in 1997. Also,
Southern Energy acquired SWEB in late 1995. These businesses have been included
in the consolidated financial statements since the dates of acquisition and are
not reflected in prior periods. As a result, changes in revenues and expenses
for Southern Energy in 1997 and 1996 reflect significant amounts related to
acquisitions, which were not fully reflected in each year being compared.
Therefore, to facilitate discussing the results of operations for business
segments, Southern Energy's variances are primarily driven by the above reason
unless otherwise noted.
Revenues
Operating revenues increased in 1997 and 1996 as a result of the following
factors:
Increase (Decrease)
From Prior Year
---------------------------------
1997 1996 1995
---------------------------------
Retail -- (in millions)
Growth and price
change $ 105 $ 124 $ 177
Weather (110) (64) 143
Fuel cost recovery and
other (13) 2 134
---------------------------------------------------------------
Total retail (18) 62 454
---------------------------------------------------------------
Sales for resale --
Within service area (28) 10 39
Outside service area 76 14 (90)
---------------------------------------------------------------
Total sales for resale 48 24 (51)
Southern Energy 2,154 1,040 458
Other operating revenues 69 52 22
---------------------------------------------------------------
Total operating revenues $2,253 $1,178 $ 883
===============================================================
Percent change 21.8% 12.8% 10.6%
---------------------------------------------------------------
Retail revenues of $7.6 billion declined slightly compared with last year.
Continued growth in the traditional service area was offset by the negative
impact of weather on energy sales and by industrial and commercial customers
taking advantage of lower load management rates. This trend will probably
continue as the utility industry becomes much more competitive. In 1996, retail
revenues barely increased by 0.8 percent compared with the year 1995. 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 $381 million in 1997,
down 7.1 percent from the prior year. This decrease resulted primarily from
supplying less electricity under contractual agreements with certain wholesale
customers in 1997. Revenues from sales for resale within the service area were
II-8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
$409 million in 1996, up 2.5 percent from the prior year.
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
were as follows:
1997 1996 1995
------------------------------------
(in millions)
Capacity $203 $217 $237
Energy 183 176 151
---------------------------------------------------------
Total $386 $393 $388
=========================================================
Capacity revenues decreased in 1997 and 1996 because the amount of capacity
under contract declined slightly during 1996. Additional declines in capacity
are not scheduled until after 1999.
Southern Energy's revenues have escalated to $3.8 billion and $1.7 billion
in 1997 and 1996, respectively. These rapid increases are primarily attributable
to the development and growth of energy trading and marketing activities,
primarily in 1997. Also, revenues have increased as a result of international
acquisitions. In 1997, energy trading and marketing revenues increased $1.9
billion compared with amounts recorded in 1996. However, these revenues were
substantially offset by purchased power expenses incurred in completing these
trading and marketing transactions. Energy trading and marketing -- similar to
other low margin sales activities -- is dependent on huge volumes for
profitability.
Changes in traditional core business revenues are influenced heavily by the
amount of energy sold each year. Kilowatt-hour sales for 1997 and the percent
change by year were as follows:
(billions of
kilowatt-hours) Amount Percent Change
---------- ----------------------------
1997 1997 1996 1995
---------- ----------------------------
Residential 39.2 (2.2)% 2.5% 9.2%
Commercial 38.9 2.5 5.7 5.5
Industrial 54.2 2.6 2.2 2.7
Other 0.9 (1.1) 5.7 2.1
----------
Total retail 133.2 1.1 3.3 5.4
Sales for resale --
Within service area 9.9 (9.6) 15.4 16.2
Outside service area 13.3 23.6 17.9 (15.1)
----------
Total 156.4 1.9 5.0 4.4
===================================================================
The rate of increase in 1997 retail energy sales was significantly lower
than the past two years. Although the total number of residential customers
served increased by 63,000 during the year, residential energy sales experienced
a decline as a result of milder weather in 1997, compared with closer to normal
weather in 1996. Commercial and industrial sales both in 1997 and 1996 continued
to show slight gains in excess of the national averages. This reflects the
strength of business and economic conditions in Southern Company's traditional
service area. Energy sales to retail customers are projected to increase at an
average annual rate of 2.1 percent during the period 1998 through 2008.
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 increased in both 1997
and 1996 and declined in 1995 when compared with the respective prior year.
However, these fluctuations in energy sales under long-term contracts have
minimal effect on earnings because Southern Company is paid for dedicating
specific amounts of its generating capacity to these utilities outside the
service area.
Expenses
Total operating expenses of $10.7 billion for 1997 increased $2.2 billion
compared with the prior year. Traditional core business expenses increased $69
million. Southern Energy's expenses increased almost $2.1 billion. The sharp
increase for Southern Energy resulted primarily from two factors. First, the
acquisition of CEPA is reflected only in 1997 expenses. Second, nearly $1.9
billion relates to energy trading and marketing activities, which is included in
purchased power expenses. The costs to produce and deliver electricity for the
traditional core business in 1997 increased by $37 million to meet higher energy
demands. Also, costs related to work force reduction programs decreased in 1997
by $35 million. Traditional core business depreciation expenses and taxes other
than income taxes increased by $158 million as a result of additional utility
plant being placed into service and increased accelerated depreciation of
certain assets.
In 1996, operating expenses of $8.5 billion increased 16.6 percent compared
with 1995. Traditional core business expenses increased $173 million. Southern
Energy's expenses increased $976 million. The large increase for Southern Energy
resulted primarily from SWEB, which was acquired in late 1995. The costs to
II-9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
produce and deliver electricity for the traditional core business in 1996
increased by $79 million to meet higher energy demands. Also, costs related to
work force reduction programs increased expenses by $58 million compared with
such expenses in 1995. Depreciation expense and taxes other than income taxes
increased $39 million.
Fuel costs constitute the single largest expense for Southern Company's
traditional core business. 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:
1997 1996 1995
--------------------------
Total generation
(billions of kilowatt-hours) 160 156 147
Sources of generation
(percent) --
Coal 77 77 77
Nuclear 17 17 17
Hydro 4 4 4
Oil and gas 2 2 2
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.63 1.65 1.73
Nuclear 0.53 0.52 0.56
Total 1.46 1.48 1.53
- --------------------------------------------------------------
Total fuel and purchased power expenses of $5.3 billion in 1997 increased
$2.0 billion compared with the prior year. These expenses for traditional core
business increased $32 million and, Southern Energy's portion increased $1.9
billion. The traditional core business's customer demand for electricity rose by
1.6 billion kilowatt-hours more than in 1996. The additional cost to meet the
demand was offset slightly by a lower average cost of fuel per net kilowatt-hour
generated. Southern Energy's increase in expenses escalated as a result of
energy trading and marketing activities discussed earlier. Fuel and purchased
power costs of $3.3 billion in 1996 increased $731 million compared with 1995.
Traditional core business increased $49 million and Southern Energy increased
$682 million because of the acquisition of SWEB in late 1995.
Excluding the windfall profits tax in the United Kingdom, total income taxes
in 1997 declined by $66 million compared with the amount in 1996. Southern
Energy's portion was a reduction of $37 million. For 1996, traditional core
business income taxes decreased $40 million, and Southern Energy increased $41
million.
Total net interest charges and capital and preferred stock expenses
increased $248 million from amounts reported in the previous year. These costs
for traditional core business overall netted out to be nearly flat compared with
the reported amounts in 1996. Southern Energy's costs increased $221 million
related primarily to financing acquisitions. In 1996, these same costs for
traditional core business declined by $69 million, but Southern Energy's
interest charges increased $85 million. The decline in costs for core business
was attributable to lower interest rates and continued refinancing activities in
1996. As a result of favorable market conditions, $1.7 billion in 1997, $574
million in 1996, and $1.1 billion in 1995 of traditional senior securities were
issued for the primary purpose of retiring higher-cost securities.
Effects of Inflation
Southern Company's traditional core business 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 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.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of Southern Company's future
earnings depends on numerous factors. Two major factors are: achieving energy
sales growth in a less regulated, more competitive environment; and operating
non-traditional business activities successfully.
II-10
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Southern Company continues to position its business to meet the challenges of
a new competitive environment. Work force reduction programs have reduced
earnings by $31 million, $53 million, and $17 million for the years 1997, 1996,
and 1995, respectively. These actions -- in conjunction with other cost
containment programs -- will assist efforts to continue being a low-cost
provider of electricity.
The operating companies currently operate as vertically integrated companies
providing electricity to customers within the traditional service area of the
southeastern United States. Prices for electricity provided by the operating
companies to retail customers are set by state public service commissions under
cost-based regulatory principles.
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. Georgia Power is required to file a general rate case by July
1, 1998. See Note 3 to the financial statements for information about other
retail and wholesale regulatory matters.
Future earnings for the operating companies in the near term will depend upon
growth in energy sales, which is subject to a number of factors. These factors
include 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.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). 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 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. 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 permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of an operating company to recover its investments, including the
regulatory assets described in Note 1 to the financial statements, could have a
material adverse effect on the financial condition of that operating company.
The operating companies are attempting to minimize or reduce their cost
exposure. See Note 3 to the financial statements for information regarding these
efforts.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, unless 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.
To adapt to a less regulated, more competitive environment, Southern Company
continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, Southern Company may engage in other new business ventures that
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 Company.
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 existing and
II-11
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
evolving opportunities, Southern Energy -- founded in 1981 -- is focused on
several key international and domestic business lines, including energy
distribution, integrated utilities, stand-alone generation, and other
energy-related products and services. As the energy marketplace evolves,
Southern Energy is positioning the company to become a major competitor in
energy trading and marketing activities. As part of this strategy, Southern
Energy entered into a joint venture with Vastar Resources effective in January
1998. The two companies combined their energy trading and marketing operations
to form a new full-service energy provider, Southern Company Energy Marketing.
Also, Southern Energy is expanding its international business through
acquisitions. In September 1997, Southern Energy acquired a 26 percent interest
in a German utility for approximately $820 million. Also, the acquisition of
CEPA for a total net investment of some $2.1 billion was completed in mid-1997.
In late 1995, SWEB was acquired for approximately $1.8 billion. In July 1996, a
25 percent interest in SWEB was sold. For additional information on
acquisitions, see Note 14 to the financial statements.
The CEPA acquisition has a slightly dilutive impact on earnings in the near
term. However, Southern Energy's investments should strengthen the opportunities
for Southern Company's long-term future earnings growth. At December 31, 1997,
Southern Energy's total assets amounted to $11 billion.
The depreciation of southeast Asian currencies is likely to increase the
cost of electricity that nationally owned utilities purchase from independent
power projects relative to the prices received by those utilities from their
customers. This could cause a deterioration in the financial condition of
nationally owned utilities, which could potentially impact these
utilities' ability to meet their obligations under existing contracts and could
reduce the near-term opportunities for greenfield independent power projects in
the region. However, fewer greenfield opportunities may, to some extent, be
offset by increased opportunities for CEPA to acquire projects from regional
developers who have been adversely affected by the financial crisis, and also
by a possible increase in the pace of privatizations by regional governments
needing to raise capital.
Also during 1997, there was a substantial depreciation of the Philippine
peso relative to the U.S. dollar. However, the long-term power sales contracts
that govern CEPA's revenues from existing projects in the Philippines provide
for U.S. dollar payments, or indexing to the U.S. dollar. This should
sufficiently cover foreign currency costs of operation, including debt service
and return on and of capital. The National Power Corporation, whose obligations
are guaranteed by the Republic of the Philippines, is the counterparty to these
contracts.
The staff of the Securities and Exchange Commission (SEC) has questioned
certain of the current accounting practices of the electric utility industry --
including 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 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 change. 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.
Southern Company is heavily dependent upon complex computer systems for all
phases of its operations. The year 2000 issue --common to most corporations --
concerns the inability of certain software and databases to properly recognize
date-sensitive information related to the year 2000 and thereafter. This problem
could result in a material disruption to the company's operations, if not
corrected. Southern Company has assessed and developed a detailed strategy to
prevent or at least minimize problems related to the year 2000 issue. In 1997,
resources were committed and implementation began to modify the affected
information systems. Total costs related to the project are estimated to be
approximately $85 million, of which $8 million was spent in 1997. Most all
remaining costs will be expensed in 1998. Implementation is currently on
schedule. Although the degree of success of this project cannot be determined at
this time, management believes there will be no significant effect on the
company's operations.
II-12
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
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 current and future environmental laws and
regulations 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 that are not specifically recoverable, 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 Standard
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other non-owner changes in equity. Southern Company will adopt this statement in
1998.
FINANCIAL CONDITION
Overview
Southern Company's financial condition continues to remain strong. The company's
common stock closed 1997 with the highest year-end closing price in history.
Earnings, excluding the windfall profits tax, were some $1.1 billion. Based on
this performance, in January 1998, the Southern Company board of directors
increased the common stock dividend for the seventh consecutive year.
Gross property additions to utility plant were $1.9 billion in 1997. The
majority of funds needed for gross property additions since 1994 has been
provided from operating activities, principally from earnings and non-cash
charges to income. Southern Energy's business acquisitions in 1997 amounted to
approximately $2.9 billion. The Consolidated Statements of Cash Flows provide
additional details.
Derivative Financial Instruments
Southern Company is exposed to market risks in both its trading and non-trading
operations. The non-trading operations are exposed to market risks, including
changes in interest rates, currency exchange rates, and certain commodity
prices. To mitigate changes in cash flows attributable to these exposures, the
company has entered into various derivative financial instruments. Company
policy for non-trading activities stipulates that derivatives are to be used
only for hedging purposes. Derivative positions are monitored using techniques
that include market value and sensitivity analysis.
Interest rate swaps are used to hedge underlying debt obligations. These
swaps hedge specific debt issuances and therefore qualify for hedge accounting.
The company has interest rate swaps in various currencies. These match debt
issued in the same currency. In cases where debt is issued in currencies other
than the functional currency, currency swaps convert the exposure to that of the
functional currency. For qualifying hedges, the interest rate differential is
reflected as an adjustment to interest expense over the life of the instruments.
If the company sustained a 100 basis point change in interest rates for all
variable rate debt in all currencies, the change would affect annualized
interest expense by approximately $35 million at December 31, 1997. Based on the
company's overall interest rate exposure at December 31, 1997, including
derivative and other interest rate sensitive instruments, a near-term 100 basis
point change in interest rates would not materially affect the consolidated
financial statements.
The company has investments in various emerging market countries where the
net investments are not hedged, including Argentina, Chile, Trinidad, Bahamas,
Philippines, and China. The company relies on either currency pegs or
contractual or regulatory links to the U.S. dollar to mitigate currency risk
attributable to these investments. The company does not believe it has a
material exposure to changes in exchange rates between the U.S. dollar and the
currencies of these countries. The company also has investments in the United
Kingdom and Germany, and for these investments the company uses long-term
cross-currency agreements to reduce a substantial portion of its exposure to
fluctuations in the British pound sterling and German Deutschemark. These
instruments are used to hedge its net investments in these countries. As a
II-13
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
result of these swaps, a 10 percent sustained decline of the British pound
sterling and German Deutschemark versus the U.S. dollar would not materially
affect the consolidated financial statements.
The company also uses currency swaps and forward agreements to hedge dollar
denominated debt issued by subsidiaries with different functional currency.
These swaps offset the dollar flows, thereby effectively converting debt to the
appropriate currency. Gains and losses related to qualified hedges of foreign
currency firm commitments are deferred and included in the basis of the
underlying transactions.
In addition to the non-trading activities, the company is exposed to market
risks through its electricity and natural gas commodity trading business. To
estimate and manage the market risk of its trading and marketing portfolio,
Southern Energy employs a daily Value at Risk (VAR) methodology. VAR is used to
describe a probabilistic approach to measuring the exposure to market risk. VAR
models are relatively sophisticated. However, the quantitative risk information
is limited by the parameters established in creating the model. The instruments
being evaluated may have features that may trigger a potential loss in excess of
calculated amounts if the changes in commodity prices exceed the confidence
level of the model used. The calculation utilizes the standard deviation of
seasonally adjusted historical changes in the value of the market risk sensitive
commodity-based financial instruments to estimate the amount of change (i.e.,
volatility) in the current value of these instruments that could occur at a
specified confidence level over a specified holding interval. The parameters
used in the calculation include holding intervals ranging from five to 20 days,
depending upon the type of instrument, the term of the instrument, the liquidity
of the underlying market, and other factors. The models employed a 95 percent
confidence level based on historical price movement. Based on the company's VAR
analysis of its overall commodity price risk exposure at December 31, 1997,
management does not anticipate a materially adverse effect on the company's
consolidated financial statements as a result of market fluctuations.
In the United Kingdom, the company utilizes contracts to mitigate its
exposure to volatility in the prices of electricity purchased through the
wholesale electricity market. These contracts are in place to hedge electricity
purchases on approximately 20 billion kilowatt-hours through the year 2008. The
gains or losses realized on such contracts are deferred and recognized as
electricity is purchased. Because of the absence of a trading market, it is not
practicable to estimate the fair value of these contracts.
Due to cost-based rate regulations, the operating companies have limited
exposure to market volatility in interest rates and prices of electricity. To
mitigate residual risks relative to movements in electricity prices, the
operating companies enter into fixed price contracts for the purchase and sale
of electricity through the wholesale electricity market. Realized gains and
losses are recognized in the income statement as incurred. At December 31, 1997,
exposure from these activities was not material to the consolidated financial
statements.
For additional information, see Note 1 to the financial statements under
"Financial Instruments for Non-Trading and Trading."
Capital Structure
Southern Company achieved a ratio of common equity to total capitalization --
including short-term debt -- of 38.6 percent in 1997, compared with 45.1 percent
in 1996, and 42.4 percent in 1995.
During 1997, the subsidiary companies sold, through public authorities, $404
million of pollution control revenue bonds. Preferred securities of $1.3 billion
were issued in 1997. The companies continued to reduce financing costs by
retiring higher-cost bonds and preferred stock. Retirements, including
maturities, of bonds totaled $507 million during 1997, $600 million during 1996,
and $1.3 billion during 1995. As a result, the composite interest rate on
long-term debt decreased from 7.2 percent at December 31, 1994 to 6.6 percent
at December 31, 1997. Retirements of preferred stock totaled $660 million during
1997, $179 million during 1996, and $1 million during 1995.
In 1997, Southern Company raised $360 million from the issuance of new
common stock under the company's various stock plans. At the close of 1997, the
company's common stock had a market value of 257/8 per share, compared with a
book value of $13.91 per share. The market-to-book value ratio was 186 percent
at the end of 1997, compared with 166 percent at year-end 1996, and 188 percent
at year-end 1995.
II-14
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Capital Requirements for Construction
The construction program of Southern Company is budgeted at $2.0 billion for
1998, $2.0 billion for 1999, and $1.6 billion for 2000. 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 will be fully recovered.
The operating companies have approximately 1,600 megawatts of combined cycle
generation scheduled to be placed in service by 2001. Southern Energy has under
construction some 1,400 megawatts of owned capacity. Significant construction of
transmission and distribution facilities and upgrading of generating plants will
be continuing for the core business in the Southeast.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $2.5
billion will be required by the end of 2000 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 -- significantly
affected 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
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.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $300
million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as necessary
to meet Phase II limits and ozone non-attainment requirements for metropolitan
Atlanta through 2000. Current compliance strategy for Phase II and ozone
non-attainment could require total estimated construction expenditures of
approximately $70 million, of which $55 million remains to be spent.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. Also, in October 1997, the EPA
issued a proposed regional ozone rule -- if implemented -- that could make
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: emission control strategies for
ozone non-attainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
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 any
required cleanup costs and have recognized in their respective financial
statements costs to clean up known sites. These costs for Southern Company
amounted to $4 million in 1997 and $8 million in 1995. In 1996, the company was
reimbursed $6 million for amounts previously expensed. Additional sites may
II-15
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
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 Brunswick, 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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect 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 amount and timing of additional equity capital to be raised in 1998 -- as
well as in subsequent years -- will be contingent on 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 1998 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 were
primarily from internal sources. However, the type and timing of any financings
- -- if needed -- will depend on market conditions and regulatory approval.
The operating companies historically have relied on issuances of first
mortgage bonds and preferred stock, in addition to pollution control revenue
bonds issued for their benefit by public authorities, to meet their long-term
external financing requirements. Recently, the operating companies' financings
have consisted of unsecured debt and trust preferred securities. In this regard,
the operating companies -- except Savannah Electric -- sought and obtained
stockholder approval in 1997 to amend their respective corporate charters
eliminating restrictions on the amounts of unsecured indebtedness they may
incur.
To meet short-term cash needs and contingencies, Southern Company had
approximately $601 million of cash and cash equivalents and $4.9 billion of
unused credit arrangements with banks at the beginning of 1998.
Cautionary Statement Regarding Forward-Looking
Information
Southern Company's 1997 Annual Report contains forward-looking statements in
addition to historical information. The company cautions that there are various
important factors that could cause actual results to differ materially from
those indicated in the forward-looking statements; accordingly, there can be no
assurance that such indicated results will be realized. These factors include
legislative and regulatory initiatives regarding deregulation and restructuring
of the electric utility industry; the extent and timing of the entry of
additional competition in the markets of the subsidiary companies; potential
business strategies -- including acquisitions or dispositions of assets or
internal restructuring -- that may be pursued by the company; state and federal
rate regulation in the United States; changes in or application of environmental
and other laws and regulations to which the company and its subsidiaries are
subject; political, legal and economic conditions and developments in the United
States and in foreign countries in which the subsidiaries operate; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; the performance
of projects undertaken by the non-traditional business and the success of
efforts to invest in and develop new opportunities; and other factors discussed
in the reports -- including Form 10-K -- filed from time to time by the company
with the SEC.
II-16
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Southern Company and Subsidiary Companies 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in millions)
Operating Revenues $ 12,611 $ 10,358 $9,180
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,281 2,245 2,126
Purchased power 3,033 1,103 491
Other 1,930 1,860 1,626
Maintenance 763 782 683
Depreciation and amortization 1,246 996 904
Amortization of deferred Plant Vogtle costs, net 121 137 124
Taxes other than income taxes 572 634 535
Income taxes 725 747 805
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 10,671 8,504 7,294
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,940 1,854 1,886
Other Income:
Allowance for equity funds used during construction 6 4 5
Interest income 152 54 38
Other, net 53 42 (65)
Income taxes applicable to other income 34 (10) 36
Windfall profits tax assessed in United Kingdom (Note 8) (148) - -
-------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 2,037 1,944 1,900
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 678 530 557
Allowance for debt funds used during construction (14) (19) (20)
Interest on notes payable 112 107 63
Amortization of debt discount, premium, and expense, net 34 33 44
Other interest charges 63 46 43
Minority interest in subsidiaries 29 13 13
Distributions on capital and preferred securities of subsidiary companies 120 22 9
Preferred dividends of subsidiary companies 43 85 88
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 1,065 817 797
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 972 $ 1,127 $1,103
================================================================================================================================
Common Stock Data: (Note 9)
Average number of shares of common stock outstanding (in millions) 685 673 665
Basic and diluted earnings per share of common stock $1.42 $1.68 $1.66
Cash dividends paid per share of common stock $1.30 $1.26 $1.22
- --------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $ 3,764 $ 3,483 $3,191
Consolidated net income 972 1,127 1,103
- --------------------------------------------------------------------------------------------------------------------------------
4,736 4,610 4,294
Cash dividends on common stock 889 846 811
Capital and preferred stock transactions, net 5 - -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 9) $ 3,842 $ 3,764 $3,483
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-17
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Southern Company and Subsidiary Companies 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in millions)
Operating Activities:
Consolidated net income $ 972 $ 1,127 $ 1,103
Adjustments to reconcile consolidated net income
to net cash provided by operating activities --
Depreciation and amortization 1,471 1,201 1,134
Deferred income taxes and investment tax credits (5) 57 117
Allowance for equity funds used during construction (6) (4) (5)
Amortization of deferred Plant Vogtle costs, net 121 137 124
Gain on asset sales (25) (59) (33)
Other, net (61) 54 (121)
Changes in certain current assets and liabilities
excluding effects from acquisitions --
Receivables, net (238) (92) (109)
Fossil fuel stock 56 57 28
Materials and supplies 21 47 11
Accounts payable 138 19 (138)
Other 181 (143) 204
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,625 2,401 2,315
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,859) (1,229) (1,401)
Southern Energy business acquisitions, net of cash acquired (2,925) - (1,416)
Sales of property 32 211 287
Other (13) (275) 153
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,765) (1,293) (2,377)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Common stock 360 171 277
Capital and preferred securities 1,321 322 -
First mortgage bonds - 85 375
Other long-term debt 2,499 1,570 1,805
Retirements --
Preferred stock (660) (179) (1)
First mortgage bonds (168) (426) (538)
Other long-term debt (802) (1,754) (902)
Increase (decrease) in notes payable, net 509 (268) 727
Payment of common stock dividends (889) (846) (811)
Miscellaneous 126 (110) (237)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 2,296 (1,435) 695
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 156 (327) 633
Cash and Cash Equivalents at Beginning of Year 445 772 139
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 601 $ 445 $ 772
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $876 $677 $622
Income taxes $823 $706 $645
Southern Energy business acquisitions --
Fair value of assets acquired $4,768 $- $2,745
Less cash paid for common stock 2,925 - 1,416
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities assumed $1,843 $- $1,329
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-18
CONSOLIDATED BALANCE SHEETS
At December 31, 1997 and 1996
Southern Company and Subsidiary Companies 1997 Annual Report
=======================================================================================================================
Assets 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
(in millions)
Utility Plant:
Plant in service (Note 1) $34,044 $33,260
Less accumulated provision for depreciation 11,934 10,921
- -----------------------------------------------------------------------------------------------------------------------
22,110 22,339
Nuclear fuel, at amortized cost 230 246
Construction work in progress (Note 4) 1,312 684
- -----------------------------------------------------------------------------------------------------------------------
Total 23,652 23,269
- -----------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Goodwill, being amortized (Note 14) 1,888 318
Leasehold interests, being amortized 1,389 416
Equity investments in subsidiaries 1,168 227
Nuclear decommissioning trusts 387 279
Miscellaneous 742 261
- -----------------------------------------------------------------------------------------------------------------------
Total 5,574 1,501
- -----------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 601 445
Special deposits 17 62
Receivables, less accumulated provisions for uncollectible accounts
of $77 million in 1997 and $32 million in 1996 2,100 1,440
Fossil fuel stock, at average cost 214 270
Materials and supplies, at average cost 493 510
Prepayments 99 87
Vacation pay deferred 79 77
- -----------------------------------------------------------------------------------------------------------------------
Total 3,603 2,891
- -----------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 1,142 1,238
Prepaid pension costs 399 341
Deferred Plant Vogtle costs 50 171
Debt expense, being amortized 101 81
Premium on reacquired debt, being amortized 285 289
Miscellaneous 465 449
- -----------------------------------------------------------------------------------------------------------------------
Total 2,442 2,569
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $35,271 $30,230
=======================================================================================================================
The accompanying notes are an integral part of these balance sheets.
II-19
CONSOLIDATED BALANCE SHEETS
At December 31, 1997 and 1996
Southern Company and Subsidiary Companies 1997 Annual Report
===============================================================================================================================
Capitalization and Liabilities 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
(in millions)
Capitalization (See(Seeoaccompanyingtstatements):
Common stock equity $ 9,647 $ 9,216
Preferred stock of subsidiaries 493 980
Company or subsidiary obligated mandatorily redeemable capital and preferred securities 1,744 422
Long-term debt 10,274 7,938
- -------------------------------------------------------------------------------------------------------------------------------
Total 22,158 18,556
- -------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year 784 364
Notes payable 2,064 1,483
Accounts payable 1,049 788
Customer deposits 133 132
Taxes accrued-
Federal and state income 120 12
Other 259 193
Interest accrued 262 187
Vacation pay accrued 108 104
Miscellaneous 608 535
- -------------------------------------------------------------------------------------------------------------------------------
Total 5,387 3,798
- -------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 4,650 4,738
Deferred credits related to income taxes (Note 8) 746 814
Accumulated deferred investment tax credits 754 788
Employee benefits provisions 447 439
Minority interests in subsidiaries 435 375
Prepaid capacity revenues 110 122
Department of Energy assessments 72 81
Disallowed Plant Vogtle capacity buyback costs 56 57
Storm damage reserves 38 35
Miscellaneous 418 427
- -------------------------------------------------------------------------------------------------------------------------------
Total 7,726 7,876
- -------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 7, 13, and 14)
Total Capitalization and Liabilities $ 35,271 $ 30,230
===============================================================================================================================
The accompanying notes are an integral part of these balance sheets.
II-20
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Southern Company and Subsidiary Companies 1997 Annual Report
==============================================================================================================================
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Common Stock Equity:
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Outstanding -- 1997: 693 million shares
1996: 677 million shares $ 3,467 $ 3,385
Paid-in capital 2,338 2,067
Retained earnings (Note 9) 3,842 3,764
- -------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 9,647 9,216 43.5% 49.7%
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock of Subsidiaries:
$100 par or stated value --
4.20% to 5.96% 89 199
6.32% to 7.88% 47 130
$25 par or stated value --
$1.90 to $1.9875 - 191
6.40% to 7.60% 131 323
Auction rates -- at January 1, 1998:
4.20% to 4.235% 70 70
Adjustable rates -- at January 1, 1998:
4.67% to 5.27% 156 240
- -------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $27 million) 493 1,153
Less amount due within one year - 173
- -------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 493 980 2.2 5.3
- -------------------------------------------------------------------------------------------------------------------------------
Company or Subsidiary Obligated Mandatorily
Redeemable Capital and Preferred Securities (Note 10):
$25 liquidation value --
7.375% 97 97
7.60% to 7.625 % 415 -
7.75% 649 225
8.14% to 9% 583 100
- -------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $138 million) 1,744 422 7.9 2.3
- -------------------------------------------------------------------------------------------------------------------------------
II-21
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1997 and 1996
Southern Company and Subsidiary Companies 1997 Annual Report
===================================================================================================================================
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Long-Term Debt of Subsidiaries:
First mortgage bonds --
Maturity Interest Rates
1997 5 7/8 % - 25
1997 8.665% - 7
1998 5% to 8.665% 238 238
1999 6 1/8% to 8.665% 373 373
2000 6% to 8.665% 349 349
2001 8.665% 9 9
2002 6.85% to 8.665% 260 260
2003 through 2007 6.07% to 8.665% 944 944
2008 through 2012 6 7/8% to 8.665% 121 121
2013 through 2017 8.665% 73 73
2018 through 2022 8.30% to 9 1/4% 476 612
2023 through 2026 6 7/8% to 9% 1,109 1,109
- -----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 3,952 4,120
Other long-term debt (Note 11) 7,191 4,084
Unamortized debt premium (discount), net (85) (75)
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $738 million) 11,058 8,129
Less amount due within one year (Note 12) 784 191
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 10,274 7,938 46.4 42.7
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 22,158 $ 18,556 100.0% 100.0%
===================================================================================================================================
CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1997, 1996, and 1995
===================================================================================================================================
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $2,067 $1,941 $1,712
Proceeds from sales of common stock over the par value -- 16.4 million,
7.5 million, and 13.0 million shares in 1997, 1996, and 1995, respectively 278 133 212
Miscellaneous (7) (7) 17
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $2,338 $2,067 $1,941
===================================================================================================================================
The accompanying notes are an integral part of these statements.
II-22
NOTES TO FINANCIAL STATEMENTS
Southern Company and Subsidiary Companies 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Southern Company is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern Communications),
Southern Company Energy Solutions, Southern Energy, Inc. (Southern Energy),
Southern Nuclear Operating Company (Southern Nuclear), and other direct and
indirect subsidiaries. The operating companies -- Alabama Power, Georgia Power,
Gulf Power, Mississippi Power, and Savannah Electric -- provide electric service
in four southeastern states. Contracts among the operating 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) and/or the Securities and Exchange Commission
(SEC). The system service company provides, at cost, specialized services to
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 Company
Energy Solutions develops new business opportunities related to energy products
and services. Worldwide, Southern Energy develops and manages electricity and
other energy related projects, including domestic energy trading and marketing.
Southern Nuclear provides services to Southern Company's nuclear power plants.
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.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis and other investments on an equity basis.
Effective in January 1998, Southern Energy and Vastar Resources combined their
energy trading and marketing activities to form a joint venture. Southern
Energy's investment in the joint venture will be accounted for under the equity
method of accounting. Certain prior years' data presented in the consolidated
financial statements have been reclassified to conform with the 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 expected to be credited to customers through the ratemaking process.
Regulatory assets and (liabilities) reflected in the Consolidated Balance Sheets
at December 31 relate to the following:
1997 1996
------------------------
(in millions)
Deferred income taxes $1,142 $1,238
Deferred Plant Vogtle costs 50 171
Premium on reacquired debt 285 289
Demand-side programs 11 44
Department of Energy assessments 63 69
Vacation pay 79 77
Deferred fuel charges 4 29
Postretirement benefits 38 38
Work force reduction costs 37 48
Deferred income tax credits (746) (814)
Storm damage reserves (36) (32)
Other, net 152 114
- -----------------------------------------------------------------
Total $1,079 $1,271
=================================================================
In the event that a portion of an operating company's operations is no
longer subject to the provisions of FASB Statement No. 71, the company would be
required to write off related net regulatory assets and liabilities that are not
specifically recoverable through regulated rates. In addition, the company would
be required to determine if any impairment to other assets exists, including
plant, and write down the assets, if impaired, to their fair value.
II-23
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
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, the energy component of purchased power costs, and certain
other costs. Revenues are adjusted for differences between recoverable fuel
costs and amounts actually recovered in current rates.
Southern Energy's revenues for product sales and marketing services are
recognized when title passes to the customer or when service is performed.
The operating companies have a diversified base of customers. No single
customer or industry comprises 10 percent or more of revenues. In 1997,
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 $144
million in 1997, $142 million in 1996, and $140 million in 1995. 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 2008 at Plant Vogtle, and into 2010 and
2013 at Plant Farley units 1 and 2, respectively. Activities for adding dry cask
storage capacity at Plant Hatch by as early as 1999 are in progress.
Also, the Energy Policy Act of 1992 required the establishment in 1993 of a
Uranium Enrichment Decontamination and Decommissioning Fund, which is funded in
part by a special assessment on utilities with nuclear plants. This assessment
is being 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, 1997, under this law to be approximately $34 million
and $27 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
3.4 percent in 1997 and 3.3 percent in 1996 and 1995. 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.
Georgia Power recorded additional depreciation of electric plant amounting
to $159 million in 1997, $24 million in 1996, and $6 million in 1995. See Note 3
under "Georgia Power Retail Accounting Order" for additional information.
The Nuclear Regulatory Commission (NRC) requires 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 periods 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
II-24
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
specific facility as of retirement date. The estimated costs of decommissioning
- -- both site study costs and ultimate costs -- at December 31, 1997, 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 1997 1997
Decommissioning periods:
Beginning year 2017 2014 2027
Completion year 2029 2027 2038
- -----------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $489 $372 $317
Non-radiated structures 89 33 44
- -----------------------------------------------------------------
Total $578 $405 $361
=================================================================
Ultimate costs:
Radiated structures $1,504 $722 $922
Non-radiated structures 274 65 129
- -----------------------------------------------------------------
Total $1,778 $787 $1,051
=================================================================
Plant Plant Plant
Farley Hatch Vogtle
-----------------------------
(in millions)
Amount expensed in 1997 $ 18 $ 11 $ 9
Accumulated provisions:
Balance in external trust
funds $193 $118 $76
Balance in internal reserves 44 23 13
- ------------------------------------------------------------------
Total $237 $141 $89
==================================================================
Significant assumptions:
Inflation rate 4.5% 3.6% 3.6%
Trust earning rate 7.0 6.5 6.5
- ------------------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity 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
currently included in cost of service. Georgia Power's decommissioning costs
currently included in cost of service are $320 million and $267 million for
plants Hatch and Vogtle, respectively. The estimated ultimate costs associated
with the amounts currently included in cost of service are $781 million and
$1.1 billion for plants Hatch and Vogtle, respectively. Alabama Power and
Georgia Power expect their respective state public service commissions 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 these estimates.
Income Taxes
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, 1989, and 1991, 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. Each GPSC order called
for recovery of deferred costs within 10 years. Under these plans, all allowed
costs will be recovered by 1999.
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 1995 through 1997 ranged from a
before-income-tax rate of 5.8 percent to 9.8 percent. AFUDC, net of income tax,
as a percent of consolidated net income was 1.6 percent in 1997, 1.4 percent in
1996, and 1.6 percent in 1995.
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.
II-25
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Leasehold Interests
Leasehold interests include Southern Energy's power generation facilities that
are developed under build, operate, and transfer agreements with foreign
governments. Southern Energy's construction costs are initially recorded as
construction work in progress, and -- after completion -- these costs are
recorded as leasehold interests. These costs are amortized over the length of
time the facility is operated before transferring ownership to the local
government.
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.
Foreign Currency Translation
Assets and liabilities of Southern Company's international operations, where the
local currency is the functional currency, have been translated at year-end
exchange rates, and revenues and expenses have been translated using average
exchange rates prevailing during the year. Adjustments resulting from
translation have been recorded in stockholders' equity. The financial statements
of international operations, where the U.S. dollar is the functional currency
and when certain transactions are denominated in a local currency, are
remeasured in U.S. dollars. The remeasurement of local currencies into U.S.
dollars creates adjustments. These adjustments and all gains and losses from
foreign currency transactions are included in consolidated net income. Foreign
exchange gains and losses are not material for all periods presented.
Financial Instruments for Non-Trading
Non-trading derivative financial instruments are used to hedge exposures to
fluctuations in interest rates, foreign currency exchange rates, and certain
commodity prices. Gains and losses on qualifying hedges are deferred and
recognized either in income or as an adjustment to the carrying amount when the
hedged transaction occurs.
The company utilizes interest rate swaps and cross currency interest rate
swaps to minimize borrowing costs by changing the interest rate and currency of
the original borrowing. For qualifying hedges, the interest rate differential is
reflected as an adjustment to interest expense over the life of the swaps.
Southern Company's international operations are exposed to the effects of
foreign exchange rate fluctuations. To protect against this exposure, the
company utilizes currency swaps to hedge its net investment in certain foreign
subsidiaries, which has the effect of converting foreign currency cash inflows
into U.S. dollars at fixed exchange rates. Gains or losses on these currency
swaps, designated as hedges of net investment, are offset against the
translation effects reflected in stockholders' equity, net of tax.
Non-trading financial derivative instruments held at December 31, 1997, were
as follows:
Year of Unrecognized
Maturity or Notional Gain
Type Termination Amount (Loss)
- ------------------------------------ ---------------------------
(in millions)
Interest rate
swaps:
2002-2012 $710 $(33)
2001-2012 (pound)500 $(52)
2002-2007 DM691 $(3)
Cross currency
swaps 2001-2007 (pound)439 $6
Cross currency
swaption 2003 DM570 $1
- ---------------------------------------------------------------
(pound) - Denotes British pound sterling.
DM - Denotes Deutschemark.
The company is exposed to losses related to financial instruments in the
event of counterparties' nonperformance. The company has established controls to
determine and monitor the creditworthiness of counterparties in order to
mitigate the company's exposure to counterparty credit risk. The company does
not expect any of the counterparties to fail to meet their obligations.
In the United Kingdom, the company utilizes contracts to mitigate its
exposure to volatility in the prices of electricity purchased through the
wholesale electricity market. These contracts are in place to hedge electricity
purchases of approximately 20 billion kilowatt-hours through the year 2008. The
gains or losses realized on such contracts are deferred and recognized as
electricity is purchased. Because of the absence of a trading market, it is not
practicable to estimate the fair value of these contracts .
II-26
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Other Southern Company financial instruments for which the carrying amount
did not equal fair value at December 31 were as follows:
Carrying Fair
Amount Value
--------------------------
(in millions)
Long-term debt:
At December 31, 1997 $10,916 $11,160
At December 31, 1996 7,975 8,122
Capital and preferred securities:
At December 31, 1997 1,744 1,826
At December 31, 1996 422 427
- -----------------------------------------------------------------
The fair values for long-term debt and capital and preferred securities were
based on either closing market price or closing price of comparable instruments.
Financial Instruments for Trading
Derivative financial instruments used for trading purposes primarily relate to
commodities associated with the energy sector, such as electricity, natural gas,
and crude oil. These instruments are recorded at fair value for balance sheet
purposes. The determination of fair value considers various factors, such as
closing exchange prices, broker price quotations, and model pricing. Model
pricing considers time value and volatility factors underlying any options and
contractual commitments. These transactions are accounted for using the
mark-to-market method of accounting in which the unrealized gains or losses
resulting from the impact of price movements are recognized as net gains or
losses in the consolidated statements of income. If the company has a master
netting agreement with counterparties, net positions are recognized for
consolidated balance sheet and income statement purposes.
The company provides price risk management services by entering into a
variety of contractual commitments such as price cap and floor agreements,
futures contracts, forward purchase and sale agreements, and option contracts.
These contracts generally require future settlement, and are either executed on
an exchange or traded as over-the-counter (OTC) instruments. Contractual
commitments have widely varying terms and durations that range from a few hours
to a number of years depending on the instrument. The majority of the company's
transactions are short-term in duration, with a weighted average maturity of
approximately 1.3 years and 0.6 years at December 31, 1997 and 1996,
respectively.
All contractual commitments used for trading purposes are recorded at fair
value. Contracts in a net receivable position, as well as options held, are
reported as assets. Similarly, contractual commitments in a net payable
position, as well as options written, are reported as liabilities. The net
unrealized gain from risk management services amounted to $8 million at December
31, 1997. Southern Company has made guarantees to certain counterparties
regarding performance of contractual commitments by its affiliates related to
trading and marketing activities. Contractual commitments reflected in the
Consolidated Balance Sheets at December 31 were as follows:
Net Fair Value
Notional -------------------------
Amounts
1997 (Kilowatt-Hours) Assets Liabilities
- ---------- ---------------------------------------------
(in millions)
Exchange-issued
products:
Futures
contracts 904 $14 $15
Other 958 1 1
- -------------------------------------------------------------------
Total 1,862 15 16
- -------------------------------------------------------------------
OTC products:
Forward
contracts 2,643 69 62
Swaps (473) 1 -
Other 639 9 8
- -------------------------------------------------------------------
Total 2,809 79 70
- -------------------------------------------------------------------
Total 4,671 $94 $86
===================================================================
Net Fair Value
Notional -----------------------
Amounts
1996 (Kilowatt-Hours) Assets Liabilities
- ------------ ---------------------------------------------
(in millions)
Exchange-issued
products:
Futures
contracts 42 $ 3 $ 3
Other 105 - -
- -------------------------------------------------------------------
Total 147 3 3
- -------------------------------------------------------------------
OTC products:
Forward
contracts 56 15 15
Swaps - - -
Other 51 - -
- -------------------------------------------------------------------
Total 107 15 15
- -------------------------------------------------------------------
Total 254 $18 $18
===================================================================
II-27
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Notional amounts -- stated in equivalent millions of kilowatt-hours -- are
indicative only of the volume of activity and are not a measure of market risk.
Notional amounts of natural gas and crude oil positions are reflected in
equivalent kilowatt-hours based on standard conversion rates. The company has
established controls to determine and monitor the creditworthiness of
counterparties in order to mitigate the company's exposure to counterparty
credit risk. A concentration of counterparties may impact the company's overall
exposure to credit risk, either positively or negatively, in that the
counterparties may be similarly affected by changes in economic, regulatory, or
other conditions.
The annual average gross balances of the company's options and contractual
commitments used for trading purposes, based on month-end balances were as
follows:
Average Fair Value
-------------------------
1997 Assets Liabilities
- ----------- -------------------------
(in millions)
Commodity instruments:
Electricity $97 $94
Gas 6 6
Other 7 6
Average Fair Value
-------------------------
1996 Assets Liabilities
- ----------- -------------------------
(in millions)
Commodity instruments:
Electricity $19 $18
Gas 1 1
Other - -
- ----------------------------------------------------------------
Materials and Supplies
Generally, materials and supplies include the costs 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 Plans
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, Southern Company provides certain medical care and life
insurance benefits for retired employees. Substantially all these employees may
become eligible for such benefits when they retire. The operating companies fund
trusts to the extent deductible under federal income tax regulations or to the
extent required by their 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 was expensed each succeeding year until the costs were 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.
II-28
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Funded Status and Cost of Benefits
The funded status of the plans and reconciliation to amounts reflected in the
Consolidated Balance Sheets at December 31 were as follows:
Pension
-----------------------
1997 1996
-----------------------
(in millions)
Actuarial present value of
benefit obligation:
Vested benefits $ 2,891 $ 2,730
Non-vested benefits 83 119
- ------------------------------------------------------------------
Accumulated benefit obligation 2,974 2,849
Additional amounts related to
projected salary increases 728 775
- ------------------------------------------------------------------
Projected benefit obligation 3,702 3,624
Less:
Fair value of plan assets 5,953 5,258
Unrecognized net gain (1,877) (1,314)
Unrecognized prior service cost 126 135
Unrecognized transition asset (101) (114)
- ------------------------------------------------------------------
Prepaid asset recognized in the
Consolidated Balance Sheets $ 399 $ 341
==================================================================
Postretirement Benefits
----------------------------
1997 1996
--------------- ------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $477 $409
Employees eligible to retire 85 78
Other employees 373 383
- -------------------------------------------------------------------
Accumulated benefit obligation 935 870
Less:
Fair value of plan assets 335 260
Unrecognized net loss (gain) 68 79
Unrecognized prior service cost (4) (5)
Unrecognized transition
obligation 233 249
- -------------------------------------------------------------------
Accrued liability recognized in the
Consolidated Balance Sheets $303 $287
===================================================================
The weighted average rates assumed in the actuarial calculations were:
1997 1996 1995
---------------------------------
Discount 7.5% 7.8% 7.3%
Annual salary increase 5.0 5.3 4.8
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 8.8
percent for 1997, decreasing gradually to 5.5 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, 1997, by $80 million and the aggregate of the service
and interest cost components of the net retiree cost by $7 million.
Components of the plans' net costs are shown below:
Pension
---------------------------
1997 1996 1995
---------------------------
(in millions)
Benefits earned during the year $ 94 $ 99 $ 79
Interest cost on projected
benefit obligation 271 267 193
Actual return on plan assets (856) (564) (730)
Net amortization and deferral 417 152 412
- -------------------------------------------------------------------
Net pension cost (income) $ (74) $ (46) $ (46)
===================================================================
Of the above net pension income, $52 million in 1997, $37 million in 1996,
and $30 million in 1995 were recorded in operating expenses, and the remainder
was recorded in construction and other accounts.
Postretirement Benefits
---------------------------
1997 1996 1995
---------------------------
(in millions)
Benefits earned during the year $ 18 $ 20 $ 28
Interest cost on accumulated
benefit obligation 67 60 67
Amortization of transition
obligation 15 15 27
Actual return on plan assets (28) (17) (23)
Net amortization and deferral 12 6 12
- ------------------------------------------------------------------
Net postretirement costs $ 84 $ 84 $111
==================================================================
Of the above net postretirement costs, $70 million in 1997, $64 million in
1996, and $78 million in 1995 were charged to operating expenses, and $3 million
in 1996 and $11 million in 1995 were deferred. The remainder for each year 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 $50 million, $85 million, and
$42 million for the years 1997, 1996, and 1995, respectively. In addition,
certain costs of these programs were deferred and are being amortized in
II-29
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
accordance with regulatory treatment. The unamortized balance of these costs was
$37 million at December 31, 1997.
3. LITIGATION AND REGULATORY MATTERS
Alabama Power Appliance Warranty Litigation
In 1996, legal actions against Alabama Power were filed in several counties in
Alabama charging Alabama Power with fraud and non-compliance with regulatory
statutes relating to the offer, sale, and financing of "extended service
contracts" in connection with the sale of electric appliances. Some of these
suits were filed as class actions, while others were filed on behalf of multiple
individual plaintiffs. The plaintiffs seek damages for an unspecified amount.
Alabama Power has offered extended service agreements to its customers since
January 1984, and approximately 175,000 extended service agreements could be
involved in these proceedings. The final outcome of these cases cannot now be
determined.
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, 1997, Georgia Power had recorded approximately $5 million in
expenses associated with the site. This represents Georgia Power's agreed upon
share of removal and remedial investigation and feasibility study costs.
The final outcome of this matter cannot now be determined. However, based on
the nature and extent of Georgia Power's activities relating to the site,
management believes that the company's portion of any remaining remediation
costs should not be material to the financial statements.
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. The plant went into commercial operation in 1995.
In June 1996, the GPSC initiated a review of this plant. On January 14,
1998, the GPSC ordered that Georgia Power be allowed to include approximately
$108 million of its $143 million investment in rate base as of December 31,
1998. Georgia Power has appealed the GPSC's order to the Superior Court of
Fulton County, Georgia. If the order is upheld, Georgia Power will be required
to record a write-off currently estimated to be approximately $29 million, after
taxes.
The final outcome of this matter cannot now be determined. Accordingly, no
provision related to the GPSC's disallowance has been recorded.
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.
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. 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 -- as
well as to certain other contracts that reference these proceedings in
determining return on common equity -- and if refunds were ordered, the amount
II-30
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
of refunds could range up to approximately $194 million at December 31, 1997.
Although management believes that rates are not excessive and that refunds are
not justified, the final outcome of this matter cannot now be determined.
Southern Company Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement is subject to the review and approval by the Joint
Congressional Committee on Taxation. If approved by the Joint Committee, the
agreement would resolve all issues in the case for the years before the U.S. Tax
Court, resulting in a refund to Southern Company of approximately $162 million.
This amount includes interest of $76 million. The tax litigation was related to
a timing issue as to when taxes should have been paid; therefore, only the
interest portion will affect future income. There can be no assurance that such
Joint Committee approval will be received.
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.
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 April
1997, the APSC issued an additional order authorizing Alabama Power to reduce
balance sheet asset items. This order authorizes the reduction of such items up
to an amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by Alabama Power.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Georgia Power Retail Accounting Order
In February 1996, the GPSC approved a three-year accounting order, effective
January 1, 1996. Under the accounting order, Georgia Power's earnings are
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 to accelerate the depreciation of electric
plant. At its option, Georgia Power may also accelerate amortization or
depreciation of assets while within the range allowed on common equity. Georgia
Power is required to absorb cost increases of approximately $29 million annually
during the three-year period, including $14 million annually of accelerated
depreciation of electric plant. Under the accounting order, Georgia Power will
not file for a general base rate increase unless its projected retail return on
common 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 provisions of the accounting order or adopt new ones.
A consumer group appealed the GPSC's decision to the Superior Court of
Fulton County, Georgia. In 1996, the superior court ruled that statutory
requirements applicable to rate cases were not followed and remanded the matter
to the GPSC. In October 1997, the Georgia Court of Appeals upheld the accounting
order and reversed the superior court's decision. This matter is now concluded.
4. CONSTRUCTION PROGRAM
The system companies are engaged in continuous construction programs, currently
estimated to total some $2.0 billion in 1998, $2.0 billion in 1999, and $1.6
billion in 2000. 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, 1997, significant purchase commitments were outstanding in
connection with the construction program. The operating companies have
approximately 1,600 megawatts of combined cycle generation scheduled to be
placed in service by 2001. Southern Energy has under construction some 1,400
II-31
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
megawatts of owned capacity. In addition, significant construction will continue
related to transmission and distribution facilities and the upgrading 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, INVESTMENTS, AND
COMMITMENTS
General
The amount and timing of additional equity capital to be raised in 1998 -- as
well as in subsequent years -- will be contingent on 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 securities primarily for debt maturities and for
redeeming higher-cost securities if market conditions permit.
Bank Credit Arrangements
At the beginning of 1998, unused credit arrangements with banks totaled $4.9
billion, of which $3.0 billion expires during 1998, $800 million during 1999 to
2001, and $1.0 billion during 2002. The following table outlines the credit
arrangements by company:
Amount of Credit
-----------------------------------------
Expires
--------------------
1999 &
Company Total Unused 1998 beyond
- ------------- -----------------------------------------
(in millions)
Alabama Power $ 814 $ 814 $ 679 $ 135
Georgia Power 1,144 1,144 919 225
Gulf Power 103 94 94 -
Mississippi Power 96 76 56 20
Savannah Electric 41 41 21 20
Southern Company 2,000 2,000 1,000 1,000
Southern Energy 1,038 635 193 442
Other 70 66 66 -
------------------------------------------
Total $5,306 $4,870 $3,028 $1,842
==========================================
Approximately $2.1 billion of the credit facilities allows for term loans
ranging from one to three years. Most of the agreements include stated
borrowing rates but also allow for competitive bid loans.
All of the credit arrangements require payment of commitment fees based on
the unused portion of the commitments or the maintenance of compensating
balances with the banks. These balances are not legally restricted from
withdrawal. Of Southern Company's credit facilities, $1.7 billion is a
syndicated credit arrangement which also requires the payment of agent fees.
A portion of the $4.9 billion unused credit with banks is allocated to
provide liquidity support to the companies' variable rate pollution control
bonds. At December 31, 1997, the amount of the credit lines allocated for this
purpose was $1.2 billion.
In addition, the companies from time to time borrow under uncommitted lines
of credit with banks, and in the case of Southern Company, Alabama Power,
Georgia Power, and Southern Energy, through commercial paper programs that have
the liquidity support of committed bank credit arrangements.
Assets Subject to Lien
Each of Southern Company's subsidiaries is organized as a legal entity,
separate, and apart from 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
Southern Company or any of its subsidiaries.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of the generating plants, 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.
II-32
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Also, Southern Company has entered into various long-term commitments for the
purchase of electricity. Total estimated long-term obligations at December 31,
1997, were as follows:
Purchased
Year Fuel Power
- ----------- ------------------------------
(in millions)
1998 $ 2,081 $ 338
1999 1,596 164
2000 1,235 175
2001 1,122 178
2002 1,005 182
2003 and thereafter 4,580 1,720
- -------------------------------------------------------------
Total commitments $11,619 $2,757
=============================================================
Operating Leases
Southern Company has operating lease agreements with various terms and
expiration dates. These expenses totaled $33 million, $23 million, and $17
million for 1997, 1996, and 1995, respectively. At December 31, 1997, estimated
minimum rental commitments for noncancelable operating leases were as follows:
Year Amounts
- -------- -----------------
(in millions)
1998 $ 39
1999 37
2000 32
2001 28
2002 28
2003 and thereafter 291
- -------------------------------------------------------------
Total minimum payments $455
=============================================================
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.
At December 31, 1997, 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% $3,299 $1,100
Plant Hatch
(nuclear) 50.1 840 477
Plant Miller
(coal)
Units 1 and 2 91.8 717 311
Plant Scherer
(coal)
Units 1 and 2 8.4 112 44
Plant Wansley
(coal) 53.5 298 136
Rocky Mountain
(pumped storage) 25.4 202 44
Intercession City
(combustion turbine) 33.3 13 *
- ------------------------------------------------------------------
*Less than $1 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. These 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,
profitability is primarily affected by revenues from capacity sales. The
capacity revenues amounted to $203 million in 1997, $217 million in 1996, and
$237 million in 1995.
Unit power from specific generating plants is currently being sold to
Florida Power & Light Company (FP&L), FPC, Jacksonville Electric Authority
(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
II-33
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the
periods after 1999 with a minimum of three years notice -- until the expiration
of the contracts in 2010.
8. INCOME TAXES
At December 31, 1997, the tax-related regulatory assets and liabilities were
$1.1 billion and $746 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 income tax provisions are as follows:
1997 1996 1995
-----------------------------
(in millions)
Total provision for income taxes:
Federal --
Currently payable $ 547 $569 $ 567
Deferred -- current year 188 116 185
-- reversal of
prior years (160) (74) (111)
- --------------------------------------------------------------------
575 611 641
- --------------------------------------------------------------------
State --
Currently payable 104 82 90
Deferred -- current year 15 23 26
-- reversal of
prior years (19) (9) (12)
- --------------------------------------------------------------------
100 96 104
- --------------------------------------------------------------------
International -
Windfall profits tax
assessed in United Kingdom 148 - -
Other 16 50 24
- --------------------------------------------------------------------
Total 839 757 769
Less income taxes charged
(credited) to other income 114 10 (36)
- --------------------------------------------------------------------
Total income taxes charged
to operations $ 725 $747 $ 805
====================================================================
The first half of the windfall profits tax assessed in the United Kingdom
was paid in December 1997, and the remainder is due December 1998.
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:
1997 1996
---------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $3,345 $2,981
Property basis differences 1,756 2,154
Other 269 362
- -----------------------------------------------------------------
Total 5,370 5,497
- -----------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 108 110
Other property basis differences 245 253
Deferred costs 116 139
Pension and other benefits 72 68
Other 197 214
- -----------------------------------------------------------------
Total 738 784
- -----------------------------------------------------------------
Net deferred tax liabilities 4,632 4,713
Portion included in current assets, net 18 25
- -----------------------------------------------------------------
Accumulated deferred income taxes
in the Consolidated Balance Sheets $4,650 $4,738
=================================================================
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 $30 million in 1997, $33 million in 1996, and $38 million in
1995. At December 31, 1997, 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:
1997 1996 1995
-------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 3.4 3.2 3.4
Non-deductible book
depreciation 2.3 1.8 1.6
Windfall profits tax 8.0 - -
Difference in prior years'
deferred and current tax rate (1.5) (1.0) (1.1)
Other (1.9) (0.5) 0.3
- ----------------------------------------------------------------------
Effective income tax rate 45.3% 38.5% 39.2%
======================================================================
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.
II-34
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
9. COMMON STOCK
Shares Reserved
At December 31, 1997, a total of 49 million shares was reserved for issuance
pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside
Directors Stock Plan, and the Performance Stock Plan.
Performance Stock Plan
Southern Company's Executive Stock Option Plan was replaced by the Performance
Stock Plan effective February 17, 1997. As of December 31, 1997, 283 current and
former employees participated in the plan. The maximum number of shares of
common stock that may be issued under the new plan may not exceed 40 million.
The prices of options granted to date have been at the fair market value of the
shares on the dates of grant. The first grant under the new plan was in July
1997. 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 Southern
Company Board of Directors in accordance with the plan. Stock option activity
in 1996 and 1997 for both plans are summarized below:
Shares Average
Subject Option Price
To Option Per Share
----------------------------------
Balance at December 31, 1995 2,476,299 $19.87
Options granted 1,460,731 23.00
Options canceled (13,878) 22.35
Options exercised (97,988) 17.94
- --------------------------------------------------------------------
Balance at December 31, 1996 3,825,164 21.11
Options granted 1,776,094 21.25
Options canceled (51,913) 21.83
Options exercised (137,426) 19.72
- --------------------------------------------------------------------
Balance at December 31, 1997 5,411,919 $21.18
====================================================================
Shares reserved for future grants:
At December 31, 1995 2,114,915
At December 31, 1996 668,062
At December 31, 1997 38,234,044
- --------------------------------------------------------------------
Options exercisable:
At December 31, 1996 1,279,830
At December 31, 1997 1,996,724
- --------------------------------------------------------------------
Southern Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25. Accordingly, no
compensation expense has been recognized.
The pro forma impact on earnings of fair-value accounting for options
granted -- as required by FASB Statement No. 123, Accounting for Stock-Based
Compensation -- is less than 1 cent per share and is not significant to the
consolidated financial statements.
Earnings Per Share
In 1997, Southern Company adopted FASB Statement No. 128, Earnings per Share.
This statement simplifies the methodology for computing both basic and diluted
earnings per share. The only difference in the two methods for computing
Southern Company's per share amounts is attributable to outstanding options,
under the Performance Stock Plan. The effect of the stock options was determined
using the treasury stock method. Consolidated net income as reported was not
affected. Shares used to compute diluted earnings per share are as follows:
Average Common Stock Shares
--------------------------------------
1997 1996 1995
--------------------------------------
(in thousands)
As reported shares 685,033 672,590 665,064
Effect of options 191 200 170
--------------------------------------
Diluted shares 685,224 672,790 665,234
======================================
Common Stock Dividend Restrictions
The income of Southern Company is derived primarily from equity in earnings of
its subsidiaries. At December 31, 1997, consolidated retained earnings included
$3.8 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.
10. CAPITAL AND PREFERRED SECURITIES
Company or subsidiary obligated mandatorily redeemable capital and preferred
securities have been issued by special purpose financing entities of Southern
Company and its subsidiaries. Substantially all the assets of these special
financing entities are junior subordinated notes issued by the related company
seeking financing. Each of these companies considers that the mechanisms and
obligations relating to the capital or preferred securities issued for its
II-35
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
benefit, taken together, constitute a full and unconditional guarantee by it of
the respective special financing entities' payment obligations with respect to
the capital or preferred securities. At December 31, 1997, preferred securities
of $1.1 billion and capital securities of $600 million were outstanding.
Southern Company guarantees the notes related to $600 million of capital
securities issued on its behalf.
11. OTHER LONG-TERM DEBT
Details of other long-term debt at December 31 are as follows:
1997 1996
--------------------
(in millions)
Obligations incurred in connection
with the sale by public authorities
of pollution control
revenue bonds:
Collateralized --
4.375% to 9.375% due
2000-2026 $1,154 $1,403
Variable rates (3.85% to 5.20%
at 1/1/98) due 2011-2025 639 639
Non-collateralized --
7.25% due 2003 1 1
6.75% to 8.375% due 2015-2020 109 200
5.8% due 2022 10 10
Variable rates (4.50% to 5.90%
at 1/1/98) due 2021-2037 670 265
- ----------------------------------------------------------------
2,583 2,518
- ----------------------------------------------------------------
Capitalized lease obligations 142 151
- ----------------------------------------------------------------
Long-term notes payable:
4% to 11% due 1997-2000 295 301
5.502% to 10.56% due 2001-2037 1,741 793
7.125% due 2047 194 -
Adjustable rates (5.70% to 13% at
1/1/98) due 1997-2000 703 240
Adjustable rates (3.77% to
8.0781% at 1/1/98) due
2001-2007 1,533 81
- ----------------------------------------------------------------
4,466 1,415
- ----------------------------------------------------------------
Total $7,191 $4,084
================================================================
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.
Sinking fund requirements and/or serial maturities through 2002 applicable to
other long-term debt are as follows: $400 million in 1998; $610 million in 1999;
$364 million in 2000; $323 million in 2001; and $939 million in 2002.
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:
1997 1996
----------------
(in millions)
Bond improvement fund requirements $ 38 $ 40
Less:
Portion to be satisfied by certifying
property additions 3 4
- -----------------------------------------------------------------
Cash sinking fund requirements 35 36
First mortgage bond maturities
and redemptions 349 76
Other long-term debt maturities
(Note 11) 400 79
- -----------------------------------------------------------------
Total $784 $191
=================================================================
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.
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
II-36
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
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 $160 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 Electric Insurance
Limited (NEIL), 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 $8 million and $10 million,
respectively, under current primary 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 primary
coverage. This excess insurance is also provided by NEIL.
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 17 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 $10 million and $11
million, respectively. The maximum replacement power assessments are $8 million
for Alabama Power and $11 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.
All retrospective assessments -- whether generated for liability, property,
or replacement power -- may be subject to applicable state premium taxes.
14. ACQUISITIONS
In 1997, Southern Energy acquired a 26 percent interest in an integrated utility
in Berlin, Germany for approximately $820 million. Southern Energy also
completed in 1997 the acquisition of a 100 percent interest in Consolidated
Electric Power Asia (CEPA) for a total net investment of some $2.1 billion. CEPA
is the largest independent power producer in Asia. The acquisition has been
accounted for under the purchase method of accounting. The acquisition cost
exceeded the fair market value of net assets by approximately $1.6 billion. This
amount is considered goodwill and is being amortized on a straight-line basis
over 40 years.
CEPA has been included in the consolidated financial statements since
January 29, 1997. The following unaudited pro forma results of operations for
the years 1997 and 1996 have been prepared assuming the acquisition of CEPA,
effective January 1, 1996. The pro forma results assume acquisition financing of
$716 million of short-term borrowings, $792 million of long-term notes, and $600
million of capital securities. Southern Company's assumed effective composite
interest rate on these obligations for each period was 6.82 percent.
In 1995, Southern Energy acquired SWEB for approximately $1.8 billion. The
British utility distributes electricity to some 1.3 million customers. The
acquisition has been accounted for under the purchase method of accounting.
Goodwill of $287 million is being amortized over 40 years. SWEB has been
included in the consolidated financial statements since September 1995. The
following pro forma results of operations for the year 1995 has been prepared
assuming the acquisition of SWEB, effective January 1, 1994, and assuming 100
percent short-term debt financing.
These unaudited pro forma results are not necessarily indicative of the
actual results that would have been realized had the acquisitions occurred on
the assumed dates, nor are they necessarily indicative of future results. Pro
forma operating results are for information purposes only and are as follows:
II-37
1997 1996 1995
-----------------------------------------------------------------------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-----------------------------------------------------------------------------------
Operating revenues (in millions) $12,611 $12,632 $10,358 $10,506 $9,180 $10,013
Consolidated net income (in millions) $972 $977 $1,127 $1,109 $1,103 $1,144
Earnings per share $1.42 $1.43 $1.68 $1.65 $1.66 $1.72
15. SEGMENT AND RELATED INFORMATION
Effective December 31, 1997, Southern Company adopted FASB Statement No. 131, Disclosure About Segments of an Enterprise and
Related Information. Southern Company's principal business segment -- or its traditional core business -- is the five regulated
electric utility operating companies that provide electric service in four southeastern states. The other reportable business
segment is non-traditional energy services provided by Southern Energy, which develops and manages electricity and other
energy-related projects both in the United States and abroad including domestic energy trading and marketing. Intersegment revenues
are not material. Financial data for business segments, products and services, and geographic areas are as follows:
Business Segments
Regulated
Domestic Non-Traditional Services All
Electric ------------------------------------ Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- -------------------------------- ----------------------------------------------------------------------------------------------
1997
- ---- (in millions)
Operating revenues $ 8,688 $1,748 $2,089 $ 3,837 $ 98 $ (12) $12,611
Depreciation and amortization 1,038 179 15 194 14 - 1,246
Interest income 51 96 42 138 21 (58) 152
Net interest charges 588 289 73 362 84 (41) 993
Income taxes from operations 735 24 (11) 13 (17) (6) 725
Windfall profits tax - 148 - 148 - - 148
Net income from equity
method subsidiaries - 41 7 48 - - 48
Segment net income (loss) 1,105 (4) 5 1 (123) (11) 972
Total assets 24,555 9,225 1,832 11,057 1,224 (1,565) 35,271
Investments in equity
method subsidiaries - 1,023 135 1,158 - 10 1,168
Gross property additions 1,080 720 1 721 58 - 1,859
Increase in goodwill - 1,649 - 1,649 - - 1,649
- -------------------------------------------------------------------------------------------------- ------------- --------------
1996
- -----
Operating revenues $ 8,639 $1,506 $177 $1,683 $ 50 $(14) $10,358
Depreciation and amortization 879 95 13 108 9 - 996
Interest income 36 15 2 17 20 (19) 54
Net interest charges 546 126 31 157 18 (2) 719
Income taxes from operations 755 16 (4) 12 (14) (6) 747
Net income from equity
method subsidiaries - 11 - 11 - - 11
Segment net income (loss) 1,086 88 4 92 (40) (11) 1,127
Total assets 24,899 4,320 604 4,924 450 (43) 30,230
Investments in equity
method subsidiaries - 227 - 227 - - 227
Gross property additions 1,033 157 8 165 31 - 1,229
Increase in goodwill - - - - - - -
- -------------------------------------------------------------------------------------------------- ------------- ---------------
II-38
NOTES (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
Business Segments
Regulated
Domestic Non-Traditional Services All
Electric -------------------------------------- Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- -------------------------------- --------------------------------------------------------------------------------------------
1995 (in millions)
Operating revenues $ 8,537 $ 561 $ 82 $ 643 $ - $ - $ 9,180
Depreciation and amortization 847 46 11 57 - - 904
Interest income 23 12 2 14 9 (8) 38
Net interest charges 611 54 19 73 20 (8) 696
Income taxes from operations 771 25 9 34 - - 805
Net income from equity
method subsidiaries - 11 - 11 - - 11
Segment net income (loss) 1,103 31 7 38 (38) - 1,103
Total assets 25,414 4,495 495 4,990 638 (520) 30,522
Investments in equity
method subsidiaries - 122 - 122 - 6 128
Gross property additions 1,213 123 13 136 52 - 1,401
Increase in goodwill - 287 - 287 - - 287
- --------------------------------------------------------------------------------------------------------------------------------
(Note) The all other category includes parent Southern Company, which does not allocate operating expenses to business segments.
Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include a wireless
communication company and a developmental company for energy products and services. Non-traditional services exclude interest
expense to parent Southern Company.
Products and Services
Revenues
------------------------------------------------------------------------------------------
Non-Traditional Energy Services
Regulated ------------------------------------------------------------------------
Domestic Energy
Electric Trading
Year Utilities Generation Distribution Marketing Other Total
- --------------- ------------------------------------------------------------------------------------------
(in millions)
1997 $8,688 $513 $1,282 $1,982 $60 $3,837
1996 8,639 242 1,309 77 55 1,683
1995 8,537 234 372 - 37 643
Geographic Areas
Revenues
- --------------------------------------------------------------------------------------------------------------------------------
International
---------------------------------------------------------------
United Southeast All
Year Domestic Kingdom Asia Other Total Consolidated
- --------- ----------------------------------------------------------------------------------------------------------
(in millions)
1997 $10,863 $1,282 $247 $219 $1,748 $12,611
1996 8,852 1,309 - 197 1,506 10,358
1995 8,619 372 - 189 561 9,180
II-39
Long-Lived Assets
----------------------------------------------------------------------------------------------------------
International
---------------------------------------------------------------
United Southeast All
Year Domestic Kingdom Asia Other Total Consolidated
- --------- ----------------------------------------------------------------------------------------------------------
(in millions)
1997 $21,282 $2,428 $3,628 $1,888 $7,944 $29,226
1996 21,190 2,473 108 999 3,580 24,770
1995 21,114 2,232 - 973 3,205 24,319
16. QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized quarterly financial data for 1997 and 1996 are as follows:
Per Common Share
----------------------------------------------------
Price Range
-----------------
Operating Operating Consolidated
Quarter Ended Revenues Income Net Income Earnings Dividends High Low
- ---------------------- --------------------------------------------- ----------------------------------------------------
(in millions)
March 1997 $2,585 $397 $187 $0.28 $0.325 233/8 203/4
June 1997 2,717 429 215 0.31 0.325 221/4 197/8
September 1997 4,071 720 375 0.55 0.325 23 2013/16
December 1997 3,238 394 195 0.28 0.325 261/4 22
March 1996 $2,429 $408 $233 $0.35 $0.315 257/8 223/8
June 1996 2,564 450 287 0.43 0.315 245/8 211/4
September 1996 2,932 665 468 0.69 0.315 245/8 213/4
December 1996 2,433 331 139 0.21 0.315 231/8 211/8
- ----------------------------------------------------------------------------------------------------------------------------------
Southern Company's business is influenced by seasonal weather conditions.
Earnings for the third quarter 1997 declined by $111 million or 16 cents per share as a result of a windfall profits tax being
assessed in the United Kingdom.
II-40
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997
Southern Company and Subsidiary Companies 1997 Annual Report
===================================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $12,611 $10,358 $9,180
Consolidated Net Income (in millions) $972 $1,127 $1,103
Basic and Diluted Earnings Per Share of Common Stock $1.42 $1.68 $1.66
Cash Dividends Paid Per Share of Common Stock $1.30 $1.26 $1.22
Return on Average Common Equity (percent) 10.30 12.53 13.01
Total Assets (in millions) $35,271 $30,230 $30,522
Gross Property Additions (in millions) $1,859 $1,229 $1,401
- ----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $9,647 $9,216 $8,772
Preferred stock and securities 2,237 1,402 1,432
Long-term debt 10,274 7,938 8,274
- ----------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $22,158 $18,556 $18,478
==================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 43.5 49.7 47.5
Preferred stock and securities 10.1 7.6 7.7
Long-term debt 46.4 42.7 44.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0
==================================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $13.91 $13.61 $13.10
Market price per share:
High 26 1/4 25 7/8 25
Low 19 7/8 21 1/8 19 3/8
Close 25 7/8 22 5/8 24 5/8
Market-to-book ratio (year-end) (percent) 186.0 166.2 188.0
Price-earnings ratio (year-end) (times) 18.2 13.5 14.8
Dividends paid (in millions) $889 $846 $811
Dividend yield (year-end) (percent) 5.0 5.6 5.0
Dividend payout ratio (percent) 91.5 75.1 73.5
Cash coverage of dividends (year-end) (times) 2.8 2.9 2.9
Proceeds from sales of stock (in millions) $360 $171 $277
Shares outstanding (in thousands):
Average 685,033 672,590 665,064
Year-end 693,423 677,036 669,543
Stockholders of record (year-end) 200,508 215,246 225,739
- ----------------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $- $85 $375
Retired 168 426 538
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $1,321 $322 $--
Retired 660 179 1
- ----------------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 3,220 3,157 3,100
Commercial 479 464 450
Industrial 16 17 17
Other 5 5 5
- ----------------------------------------------------------------------------------------------------------------------------------
Total 3,720 3,643 3,572
==================================================================================================================================
Employees (year-end):
Traditional core business 24,667 25,034 26,452
Southern Energy 6,089 4,212 5,430
- ----------------------------------------------------------------------------------------------------------------------------------
Total 30,756 29,246 31,882
==================================================================================================================================
II-41
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997
Southern Company and Subsidiary Companies 1997 Annual Report
==========================================================================================================================
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $8,297 $8,489 $8,073
Consolidated Net Income (in millions) $989 $1,002 $953
Basic and Diluted Earnings Per Share of Common Stock $1.52 $1.57 $1.51
Cash Dividends Paid Per Share of Common Stock $1.18 $1.14 $1.10
Return on Average Common Equity (percent) 12.47 13.43 13.42
Total Assets (in millions) $27,042 $25,911 $20,038
Gross Property Additions (in millions) $1,536 $1,441 $1,105
- -------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $8,186 $7,684 $7,234
Preferred stock and securities 1,432 1,333 1,359
Long-term debt 7,593 7,412 7,241
- -------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $17,211 $16,429 $15,834
=========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.6 46.8 45.7
Preferred stock and securities 8.3 8.1 8.6
Long-term debt 44.1 45.1 45.7
- -------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0
=========================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $12.47 $11.96 $11.43
Market price per share:
High 22 23 5/8 19 1/2
Low 17 18 3/8 15 1/8
Close 20 22 19 1/4
Market-to-book ratio (year-end) (percent) 160.4 183.9 168.4
Price-earnings ratio (year-end) (times) 13.2 14.0 12.7
Dividends paid (in millions) $766 $726 $695
Dividend yield (year-end) (percent) 5.9 5.2 5.7
Dividend payout ratio (percent) 77.5 72.4 72.9
Cash coverage of dividends (year-end) (times) 2.7 2.9 2.8
Proceeds from sales of stock (in millions) $279 $204 $30
Shares outstanding (in thousands):
Average 649,927 637,319 631,844
Year-end 656,528 642,662 632,917
Stockholders of record (year-end) 234,927 237,105 247,378
- -------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $185 $2,185 $1,815
Retired 241 2,178 2,575
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $100 $426 $410
Retired 1 516 326
- -------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 3,046 2,996 2,950
Commercial 439 427 414
Industrial 17 18 18
Other 5 4 4
- -------------------------------------------------------------------------------------------------------------------------
Total 3,507 3,445 3,386
=========================================================================================================================
Employees (year-end):
Traditional core business 27,480 28,516 28,872
Southern Energy 1,400 745 213
- -------------------------------------------------------------------------------------------------------------------------
Total 28,880 29,261 29,085
=========================================================================================================================
II-42A
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997
Southern Company and Subsidiary Companies 1997 Annual Report
===================================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $8,050 $8,053 $7,620
Consolidated Net Income (in millions) $876 $604 $846
Basic and Diluted Earnings Per Share of Common Stock $1.39 $0.96 $1.34
Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.07
Return on Average Common Equity (percent) 12.74 8.85 12.49
Total Assets (in millions) $19,863 $19,955 $20,092
Gross Property Additions (in millions) $1,123 $1,185 $1,346
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $6,976 $6,783 $6,861
Preferred stock and securities 1,333 1,358 1,400
Long-term debt 7,992 8,458 8,575
- -----------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $16,301 $16,599 $16,836
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 42.8 40.9 40.8
Preferred stock and securities 8.2 8.2 8.3
Long-term debt 49.0 50.9 50.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0
===================================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $11.05 $10.74 $10.87
Market price per share:
High 17 3/8 14 5/8 14 7/8
Low 12 7/8 11 1/2 11
Close 17 1/8 13 7/8 14 1/2
Market-to-book ratio (year-end) (percent) 155.5 129.7 134.0
Price-earnings ratio (year-end) (times) 12.4 14.6 10.9
Dividends paid (in millions) $676 $676 $675
Dividend yield (year-end) (percent) 6.2 7.7 7.3
Dividend payout ratio (percent) 77.1 111.8 79.8
Cash coverage of dividends (year-end)(times) 2.5 2.8 2.6
Proceeds from sales of stock (in millions) $-- $-- $4
Shares outstanding (in thousands):
Average 631,307 631,307 631,303
Year-end 631,307 631,307 631,307
Stockholders of record (year-end) 254,568 263,046 273,751
- -----------------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $380 $300 $280
Retired 881 146 201
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $100 $-- $--
Retired 125 96 21
- -----------------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 2,903 2,865 2,824
Commercial 403 396 392
Industrial 18 18 18
Other 4 4 4
- -----------------------------------------------------------------------------------------------------------------------------------
Total 3,328 3,283 3,238
===================================================================================================================================
Employees (year-end):
Traditional core business 30,144 30,087 30,368
Southern Energy 258 176 162
- -----------------------------------------------------------------------------------------------------------------------------------
Total 30,402 30,263 30,530
===================================================================================================================================
II-42B
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997
Southern Company and Subsidiary Companies 1997 Annual Report
===================================================================================================================
1988 1987
- -------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $7,287 $7,204
Consolidated Net Income (in millions) $846 $577
Basic and Diluted Earnings Per Share of Common Stock $1.36 $0.96
Cash Dividends Paid Per Share of Common Stock $1.07 $1.07
Return on Average Common Equity (percent) 13.03 9.27
Total Assets (in millions) $19,731 $19,518
Gross Property Additions (in millions) $1,754 $1,853
- -------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $6,686 $6,307
Preferred stock and securities 1,465 1,363
Long-term debt 8,433 8,333
- -------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $16,584 $16,003
===================================================================================================================
Capitalization Ratios (percent):
Common stock equity 40.3 39.4
Preferred stock and securities 8.8 8.5
Long-term debt 50.9 52.1
- -------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0
===================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $10.60 $10.28
Market price per share:
High 12 1/8 14 1/2
Low 10 1/8 8 7/8
Close 11 1/8 11 1/8
Market-to-book ratio (year-end) (percent) 105.5 108.8
Price-earnings ratio (year-end) (times) 8.2 11.7
Dividends paid (in millions) $661 $628
Dividend yield (year-end) (percent) 9.6 9.6
Dividend payout ratio (percent) 78.1 108.9
Cash coverage of dividends (year-end) (times) 2.3 2.0
Proceeds from sales of stock (in millions) $194 $247
Shares outstanding (in thousands):
Average 622,292 601,390
Year-end 630,898 613,565
Stockholders of record (year-end) 290,725 296,079
- -------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $335 $700
Retired 273 369
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $120 $125
Retired 10 160
- -------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 2,781 2,733
Commercial 384 374
Industrial 18 18
Other 4 4
- -------------------------------------------------------------------------------------------------------------------
Total 3,187 3,129
===================================================================================================================
Employees (year-end):
Traditional core business 32,366 32,557
Southern Energy 157 55
- -------------------------------------------------------------------------------------------------------------------
Total 32,523 32,612
===================================================================================================================
II-42C
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997 (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,837 $2,894 $2,840
Commercial 2,595 2,559 2,485
Industrial 2,139 2,136 2,206
Other 76 76 72
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 7,647 7,665 7,603
Sales for resale within service area 381 409 399
Sales for resale outside service area 505 429 415
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,533 8,503 8,417
Southern Energy 3,837 1,683 643
Other revenues 241 172 120
- ------------------------------------------------------------------------------------------------------------------------------
Total $12,611 $10,358 $9,180
==============================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 39,217 40,117 39,147
Commercial 38,926 37,993 35,938
Industrial 54,196 52,798 51,644
Other 903 911 863
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 133,242 131,819 127,592
Sales for resale within service area 9,884 10,935 9,472
Sales for resale outside service area 13,325 10,777 9,143
- ------------------------------------------------------------------------------------------------------------------------------
Total 156,451 153,531 146,207
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.23 7.21 7.25
Commercial 6.67 6.74 6.91
Industrial 3.95 4.04 4.27
Total retail 5.74 5.81 5.96
Sales for resale 3.82 3.86 4.38
Total sales 5.45 5.54 5.76
Average Annual Kilowatt-Hour Use Per Residential Customer 12,296 12,824 12,722
Average Annual Revenue Per Residential Customer $889.50 $925.12 $922.83
Plant Nameplate Capacity Owned (year-end) (megawatts 31,146 31,076 30,733
Maximum Peak-Hour Demand (megawatts):
Winter 22,969 22,631 21,422
Summer 27,334 27,190 27,420
System Reserve Margin (at peak)(percent) 15.0 14.0 9.4
Annual Load Factor (percent) 59.4 62.3 59.5
Plant Availability (percent):
Fossil-steam 88.2 86.4 86.7
Nuclear 88.8 89.7 88.3
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 74.8 73.3 72.5
Nuclear 16.6 16.7 16.4
Hydro 4.4 4.1 4.1
Oil and gas 1.7 1.5 1.7
Purchased power 2.5 4.4 5.3
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,035 10,257 10,099
Cost of fuel per million BTU (cents) 145.81 144.02 151.70
Average cost of fuel per net kilowatt-hour generated (cents) 1.46 1.48 1.53
- ------------------------------------------------------------------------------------------------------------------------------
II-43
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997 (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
===============================================================================================================================
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,560 $2,696 $2,402
Commercial 2,357 2,313 2,181
Industrial 2,162 2,200 2,126
Other 70 68 64
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 7,149 7,277 6,773
Sales for resale within service area 360 447 409
Sales for resale outside service area 505 613 797
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,014 8,337 7,979
Southern Energy 185 54 -
Other revenues 98 98 94
- --------------------------------------------------------------------------------------------------------------------------------
Total $8,297 $8,489 $8,073
================================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 35,836 36,807 33,627
Commercial 34,080 32,847 31,025
Industrial 50,311 48,738 47,816
Other 844 814 777
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 121,071 119,206 113,245
Sales for resale within service area 8,151 13,258 12,107
Sales for resale outside service area 10,769 12,445 16,632
- --------------------------------------------------------------------------------------------------------------------------------
Total 139,991 144,909 141,984
================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.14 7.32 7.14
Commercial 6.92 7.04 7.03
Industrial 4.30 4.51 4.45
Total retail 5.90 6.10 5.98
Sales for resale 4.57 4.12 4.20
Total sales 5.72 5.75 5.62
Average Annual Kilowatt-Hour Use Per Residential Customer 11,851 12,378 11,490
Average Annual Revenue Per Residential Customer $846.48 $906.60 $820.67
Plant Nameplate Capacity Owned (year-end) (megawatts) 29,932 29,513 29,830
Maximum Peak-Hour Demand (megawatts):
Winter 22,254 19,432 19,121
Summer 24,546 25,937 24,146
System Reserve Margin (at peak)(percent) 19.3 13.2 14.3
Annual Load Factor (percent) 63.5 59.4 60.3
Plant Availability (percent):
Fossil-steam 85.2 87.9 88.6
Nuclear 89.8 85.9 85.2
- --------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 70.8 73.0 71.7
Nuclear 17.9 16.3 16.2
Hydro 4.7 3.9 4.6
Oil and gas 0.9 0.9 0.5
Purchased power 5.7 5.9 7.0
- --------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,010 9,994 9,976
Cost of fuel per million BTU (cents) 155.81 166.85 162.58
Average cost of fuel per net kilowatt-hour generated (cents) 1.56 1.67 1.62
- --------------------------------------------------------------------------------------------------------------------------------
II-44A
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997 (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
=============================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,391 $2,342 $2,194
Commercial 2,122 2,062 1,965
Industrial 2,088 2,085 2,011
Other 65 64 60
- -----------------------------------------------------------------------------------------------------------------------------
Total retail 6,666 6,553 6,230
Sales for resale within service area 417 412 401
Sales for resale outside service area 884 977 928
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 7,967 7,942 7,559
Southern Energy - - -
Other revenues 83 111 61
- -----------------------------------------------------------------------------------------------------------------------------
Total $8,050 $8,053 $7,620
=============================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 33,622 33,118 31,627
Commercial 30,379 29,658 28,454
Industrial 46,050 45,974 45,022
Other 817 806 787
- -----------------------------------------------------------------------------------------------------------------------------
Total retail 110,868 109,556 105,890
Sales for resale within service area 12,320 11,134 11,419
Sales for resale outside service area 19,839 24,402 24,228
- -----------------------------------------------------------------------------------------------------------------------------
Total 143,027 145,092 141,537
=============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.11 7.07 6.94
Commercial 6.99 6.96 6.91
Industrial 4.53 4.53 4.47
Total retail 6.01 5.98 5.88
Sales for resale 4.05 3.91 3.73
Total sales 5.57 5.47 5.34
Average Annual Kilowatt-Hour Use Per Residential Customer 11,659 11,637 11,287
Average Annual Revenue Per Residential Customer $829.18 $822.93 $782.90
Plant Nameplate Capacity Owned (year-end)(megawatts) 29,915 29,532 29,532
Maximum Peak-Hour Demand (megawatts):
Winter 19,166 17,629 20,772
Summer 25,261 25,981 24,399
System Reserve Margin (at peak) (percent) 16.5 14.0 21.0
Annual Load Factor (percent) 58.3 56.6 58.6
Plant Availability (percent):
Fossil-steam 91.3 91.9 92.2
Nuclear 83.4 83.0 87.0
- -----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 72.6 72.1 71.5
Nuclear 16.2 15.6 15.7
Hydro 4.4 4.4 5.2
Oil and gas 0.6 1.3 1.1
Purchased power 6.2 6.6 6.5
- -----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,022 10,065 10,086
Cost of fuel per million BTU (cents) 168.28 172.81 171.00
Average cost of fuel per net kilowatt-hour generated (cents) 1.69 1.74 1.72
- -----------------------------------------------------------------------------------------------------------------------------
II-44B
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1987 - 1997 (continued)
Southern Company and Subsidiary Companies 1997 Annual Report
======================================================================================================================
1988 1987
- -----------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,103 $2,042
Commercial 1,835 1,692
Industrial 1,945 1,870
Other 56 54
- -----------------------------------------------------------------------------------------------------------------------
Total retail 5,939 5,658
Sales for resale within service area 480 461
Sales for resale outside service area 777 1,028
- -----------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 7,196 7,147
Southern Energy - -
Other revenues 91 57
- -----------------------------------------------------------------------------------------------------------------------
Total $7,287 $7,204
=======================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 31,041 30,583
Commercial 27,005 25,593
Industrial 43,675 42,113
Other 763 737
- -----------------------------------------------------------------------------------------------------------------------
Total retail 102,484 99,026
Sales for resale within service area 14,806 13,282
Sales for resale outside service area 15,860 22,905
- -----------------------------------------------------------------------------------------------------------------------
Total 133,150 135,213
=======================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.77 6.68
Commercial 6.79 6.61
Industrial 4.45 4.44
Total retail 5.80 5.71
Sales for resale 4.10 4.11
Total sales 5.40 5.29
Average Annual Kilowatt-Hour Use Per Residential Customer 11,255 11,307
Average Annual Revenue Per Residential Customer $762.42 $754.96
Plant Nameplate Capacity Owned (year-end)(megawatts) 27,552 27,610
Maximum Peak-Hour Demand (megawatts):
Winter 18,685 18,185
Summer 23,641 23,194
System Reserve Margin (at peak) (percent) 15.0 16.2
Annual Load Factor (percent) 59.8 58.7
Plant Availability (percent):
Fossil-steam 91.3 91.2
Nuclear 78.4 84.5
- -----------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 77.7 77.8
Nuclear 14.5 13.1
Hydro 2.3 3.3
Oil and gas 0.7 0.6
Purchased power 4.8 5.2
- ------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
=======================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,094 10,122
Cost of fuel per million BTU (cents) 170.36 176.64
Average cost of fuel per net kilowatt-hour generated (cents) 1.72 1.78
- -----------------------------------------------------------------------------------------------------------------------
II-44C
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
=========================================================================================================================
At Time of Peak 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 22,504 22,512 22,514
- Gas & Oil 4,220 4,074 3,744
- -------------------------------------------------------------------------------------------------------------------------
Total 26,724 26,586 26,258
Nuclear 4,414 4,404 4,328
Hydro 2,652 2,744 2,780
- -------------------------------------------------------------------------------------------------------------------------
Plant Capability 33,790 33,734 33,366
Firm Capacity Purchases 1,201 791 196
- -------------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 34,991 34,525 33,562
=========================================================================================================================
=========================================================================================================================
Years Ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 123,030 119,382 112,157
- Gas 2,593 1,991 2,315
- Oil 180 364 385
- -------------------------------------------------------------------------------------------------------------------------
Total 125,803 121,737 114,857
Nuclear 27,225 27,119 25,351
Hydro 7,156 6,665 6,377
- -------------------------------------------------------------------------------------------------------------------------
Total Energy Generated 160,184 155,521 146,585
Purchased Power 4,183 7,227 8,259
- -------------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 164,367 162,748 154,844
=========================================================================================================================
=========================================================================================================================
Years Ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,881 10,139 9,915
Cost of Fuel per Million BTU (Cents) 168.73 166.84 176.46
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.67 1.69 1.75
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,738 10,782 10,924
Cost of Fuel per Million BTU (Cents) 49.23 48.51 50.82
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.53 0.52 0.56
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,035 10,257 10,099
Cost of Fuel per Million BTU (Cents) 145.81 144.02 151.70
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.46 1.48 1.53
- -------------------------------------------------------------------------------------------------------------------------
II-45
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
==================================================================================================================
At Time of Peak 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 22,668 22,770 22,708
- Gas & Oil 3,004 2,519 2,483
- ------------------------------------------------------------------------------------------------------------------
Total 25,672 25,289 25,191
Nuclear 4,338 4,317 4,260
Hydro 2,567 2,567 2,592
- ------------------------------------------------------------------------------------------------------------------
Plant Capability 32,577 32,173 32,043
Firm Capacity Purchases 391 (1) (1,366)
- ------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 32,968 32,172 30,677
==================================================================================================================
==================================================================================================================
Years Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 106,263 111,912 107,537
- Gas 1,224 1,106 727
- Oil 106 204 74
- ------------------------------------------------------------------------------------------------------------------
Total 107,593 113,222 108,338
Nuclear 26,902 24,993 24,328
Hydro 7,043 5,971 6,919
- ------------------------------------------------------------------------------------------------------------------
Total Energy Generated 141,538 144,186 139,585
Purchased Power 8,612 9,076 10,453
- ------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 150,150 153,262 150,038
==================================================================================================================
==================================================================================================================
Years Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,807 9,790 9,755
Cost of Fuel per Million BTU (Cents) 184.60 195.75 191.22
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.81 1.92 1.87
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,814 10,912 10,958
Cost of Fuel per Million BTU (Cents) 52.22 49.94 49.66
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.56 0.54 0.54
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,010 9,994 9,976
Cost of Fuel per Million BTU (Cents) 155.81 166.85 162.58
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.56 1.67 1.62
- ------------------------------------------------------------------------------------------------------------------
II-46A
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
==================================================================================================================
At Time of Peak 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 24,191 23,807 23,824
- Gas & Oil 2,338 2,327 2,324
- ------------------------------------------------------------------------------------------------------------------
Total 26,529 26,134 26,148
Nuclear 5,356 5,385 5,361
Hydro 2,592 2,592 2,592
- ------------------------------------------------------------------------------------------------------------------
Plant Capability 34,477 34,111 34,101
Firm Capacity Purchases (1,041) (949) (947)
- ------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 33,436 33,162 33,154
==================================================================================================================
==================================================================================================================
Years Ended December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 109,674 110,442 106,878
- Gas 962 1,776 1,501
- Oil 30 96 91
- ------------------------------------------------------------------------------------------------------------------
Total 110,666 112,314 108,470
Nuclear 24,464 23,958 23,471
Hydro 6,666 6,773 7,851
- ------------------------------------------------------------------------------------------------------------------
Total Energy Generated 141,796 143,045 139,792
Purchased Power 9,347 10,168 9,670
- ------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 151,143 153,213 149,462
==================================================================================================================
==================================================================================================================
Years Ended December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,811 9,869 9,898
Cost of Fuel per Million BTU (Cents) 195.09 197.53 193.16
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.91 1.95 1.91
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,972 10,980 10,951
Cost of Fuel per Million BTU (Cents) 60.37 69.10 78.61
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.66 0.76 0.86
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,022 10,065 10,086
Cost of Fuel per Million BTU (Cents) 168.28 172.81 171.00
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.69 1.74 1.72
- ------------------------------------------------------------------------------------------------------------------
II-46B
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
================================================================================================
At Time of Peak 1988 1987
- ------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 22,255 22,274
- Gas & Oil 2,295 2,338
- ------------------------------------------------------------------------------------------------
Total 24,550 24,612
Nuclear 4,258 4,277
Hydro 2,592 2,591
- ------------------------------------------------------------------------------------------------
Plant Capability 31,400 31,480
Firm Capacity Purchases (923) (1,626)
- ------------------------------------------------------------------------------------------------
Total Operating Area Capability 30,477 29,854
================================================================================================
================================================================================================
Years Ended December 31, 1988 1987
- ------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 108,936 110,591
- Gas 644 673
- Oil 200 134
- ------------------------------------------------------------------------------------------------
Total 109,780 111,398
Nuclear 20,368 18,572
Hydro 3,285 4,697
- ------------------------------------------------------------------------------------------------
Total Energy Generated 133,433 134,667
Purchased Power 6,694 7,436
- ------------------------------------------------------------------------------------------------
Total Energy Generated and Received 140,127 142,103
================================================================================================
================================================================================================
Years Ended December 31, 1988 1987
- ------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,921 9,961
Cost of Fuel per Million BTU (Cents) 189.88 195.27
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.88 1.95
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 11,027 11,086
Cost of Fuel per Million BTU (Cents) 75.67 76.28
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.83 0.85
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,094 10,122
Cost of Fuel per Million BTU (Cents) 170.36 176.64
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.72 1.78
- ------------------------------------------------------------------------------------------------
II-46C
CONSOLIDATED STATEMENTS OF INCOME
Southern Company and Subsidiary Companies
==============================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 12,611 $ 10,358 $ 9,180
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,281 2,245 2,126
Purchased power 3,033 1,103 491
Proceeds from settlement of disputed contracts - - -
Other 1,930 1,860 1,626
Maintenance 763 782 683
Depreciation and amortization 1,246 996 904
Amortization of deferred Plant Vogtle costs, net 121 137 124
Taxes other than income taxes 572 634 535
Income taxes 725 747 805
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 10,671 8,504 7,294
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,940 1,854 1,886
Other Income:
Allowance for equity funds used during construction 6 4 5
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 152 54 38
Other, net 53 42 (65)
Income taxes applicable to other income (114) (10) 36
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 2,037 1,944 1,900
- ------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 678 530 557
Allowance for debt funds used during construction (14) (19) (20)
Interest on notes payable 112 107 63
Amortization of debt discount, premium, and expense, net 34 33 44
Other interest charges 63 46 43
Minority interest in subsidiaries 29 13 13
Distributions on preferred securities of subsidiary companies 120 22 9
Preferred dividends of subsidiary companies 43 85 88
- ------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 1,065 817 797
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 972 $ 1,127 $ 1,103
==============================================================================================================================
Earnings Per Share of Common Stock $1.42 $1.68 $1.66
Average Number of Shares of Common Stock Outstanding (Thousands) 685,033 672,590 665,064
==============================================================================================================================
II-47
CONSOLIDATED STATEMENTS OF INCOME
Southern Company and Subsidiary Companies
==================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 8,297 $ 8,489 $ 8,073
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,058 2,265 2,114
Purchased power 277 336 454
Proceeds from settlement of disputed contracts - (3) (7)
Other 1,505 1,448 1,317
Maintenance 660 653 613
Depreciation and amortization 821 793 768
Amortization of deferred Plant Vogtle costs, net 75 36 (31)
Taxes other than income taxes 475 462 436
Income taxes 711 734 647
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,582 6,724 6,311
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,715 1,765 1,762
Other Income:
Allowance for equity funds used during construction 11 9 10
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 32 30 32
Other, net (28) (34) (50)
Income taxes applicable to other income 26 57 39
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,756 1,827 1,793
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 568 595 684
Allowance for debt funds used during construction (18) (13) (12)
Interest on notes payable 33 30 16
Amortization of debt discount, premium, and expense, net 30 26 14
Other interest charges 47 87 34
Minority interest in subsidiaries 20 7 -
Distributions on preferred securities of subsidiary companies - - -
Preferred dividends of subsidiary companies 87 93 104
- ---------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 767 825 840
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 989 $ 1,002 $ 953
==================================================================================================================================
Earnings Per Share of Common Stock $1.52 $1.57 $1.51
Average Number of Shares of Common Stock Outstanding (Thousands) 649,927 637,319 631,844
==================================================================================================================================
II-48A
CONSOLIDATED STATEMENTS OF INCOME
Southern Company and Subsidiary Companies
==================================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 8,050 $ 8,053 $ 7,620
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,237 2,327 2,241
Purchased power 468 642 575
Proceeds from settlement of disputed contracts (181) - -
Other 1,321 1,161 1,103
Maintenance 637 602 542
Depreciation and amortization 763 749 698
Amortization of deferred Plant Vogtle costs, net 16 31 (39)
Taxes other than income taxes 432 397 356
Income taxes 618 520 525
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,311 6,429 6,001
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,739 1,624 1,619
Other Income:
Allowance for equity funds used during construction 13 33 71
Deferred return on Plant Vogtle 35 83 48
Write-off of Plant Vogtle costs - (281) -
Income tax reduction for write-off of Plant Vogtle costs - 63 -
Interest income 30 28 28
Other, net (57) (55) (50)
Income taxes applicable to other income 21 36 30
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,781 1,531 1,746
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 757 788 791
Allowance for debt funds used during construction (18) (34) (63)
Interest on notes payable 20 22 12
Amortization of debt discount, premium, and expense, net 9 10 11
Other interest charges 29 26 26
Minority interest in subsidiaries - - -
Distributions on preferred securities of subsidiary companies - - -
Preferred dividends of subsidiary companies 108 115 123
- ----------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 905 927 900
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 876 $ 604 $ 846
==================================================================================================================================
Earnings Per Share of Common Stock $1.39 $0.96 $1.34
Average Number of Shares of Common Stock Outstanding (Thousands) 631,307 631,307 631,303
==================================================================================================================================
II-48B
CONSOLIDATED STATEMENTS OF INCOME
Southern Company and Subsidiary Companies
====================================================================================================================
For the Years Ended December 31, 1988 1987
- --------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 7,287 $ 7,204
- --------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,213 2,303
Purchased power 562 552
Proceeds from settlement of disputed contracts - -
Other 1,167 1,219
Maintenance 547 574
Depreciation and amortization 632 563
Amortization of deferred Plant Vogtle costs, net (8) (142)
Taxes other than income taxes 362 349
Income taxes 412 517
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 5,887 5,935
- --------------------------------------------------------------------------------------------------------------------
Operating Income 1,400 1,269
Other Income:
Allowance for equity funds used during construction 138 190
Deferred return on Plant Vogtle 107 115
Write-off of Plant Vogtle costs - (358)
Income tax reduction for write-off of Plant Vogtle costs - 129
Interest income 46 77
Other, net (30) (59)
Income taxes applicable to other income 23 19
- --------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,684 1,382
- --------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 784 776
Allowance for debt funds used during construction (130) (157)
Interest on notes payable 22 24
Amortization of debt discount, premium, and expense, net 10 8
Other interest charges 32 29
Minority interest in subsidiaries - -
Distributions on preferred securities of subsidiary companies - -
Preferred dividends of subsidiary companies 120 125
- --------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 838 805
- --------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 846 $ 577
====================================================================================================================
Earnings Per Share of Common Stock $1.36 $0.96
Average Number of Shares of Common Stock Outstanding (Thousands) 622,292 601,390
====================================================================================================================
II-48C
CONSOLIDATED STATEMENTS OF CASH FLOWS
Southern Company and Subsidiary Companies
===================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 972 $ 1,127 $ 1,103
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 1,471 1,201 1,134
Deferred income taxes (5) 57 116
Deferred investment tax credits - - 1
Allowance for equity funds used during construction (6) (4) (5)
Amortization of deferred Plant Vogtle costs, net 121 137 124
Write-off of Plant Vogtle costs - - -
Non-cash proceeds from settlement of disputed contracts - - -
Other, net (86) (5) (154)
Changes in certain current assets and liabilities --
Receivables (238) (92) (109)
Inventories 77 104 39
Payables 138 19 (138)
Taxes accrued 125 (69) -
Other 56 (74) 204
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,625 2,401 2,315
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,859) (1,229) (1,401)
Southern Energy business acquisitions (2,925) - (1,416)
Sales of property 32 211 287
Other (13) (275) 153
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,765) (1,293) (2,377)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 360 171 277
Preferred securities 1,321 322 -
Preferred stock - - -
First mortgage bonds - 85 375
Pollution control bonds 405 167 731
Other long-term debt 2,094 1,403 1,074
Prepaid capacity revenues - - -
Retirements:
Preferred stock (660) (179) (1)
First mortgage bonds (168) (426) (538)
Pollution control bonds (340) (174) (721)
Other long-term debt (462) (1,580) (181)
Increase (decrease) in notes payable, net 509 (268) 727
Payment of common stock dividends (889) (846) (811)
Miscellaneous 126 (110) (237)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 2,296 (1,435) 695
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 156 (327) 633
Cash and Cash Equivalents at Beginning of Year 445 772 139
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 601 $ 445 $ 772
===================================================================================================================================
( ) Denotes use of cash.
II-49
CONSOLIDATED STATEMENTS OF CASH FLOWS
Southern Company and Subsidiary Companies
============================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 989 $ 1,002 $ 953
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 1,050 1,011 969
Deferred income taxes (3) 209 221
Deferred investment tax credits (1) (20) (6)
Allowance for equity funds used during construction (11) (9) (10)
Amortization of deferred Plant Vogtle costs, net 75 36 (31)
Write-off of Plant Vogtle costs - - -
Non-cash proceeds from settlement of disputed contracts - - (7)
Other, net (7) (45) (25)
Changes in certain current assets and liabilities --
Receivables 114 (55) (10)
Inventories (128) 136 (23)
Payables 81 43 35
Taxes accrued - 3 (62)
Other (48) (64) (9)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,111 2,247 1,995
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,536) (1,441) (1,105)
Southern Energy business acquisitions (405) (465) -
Sales of property 171 262 44
Other (87) (37) 61
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,857) (1,681) (1,000)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 279 205 30
Preferred securities 100 - -
Preferred stock - 426 410
First mortgage bonds 185 2,185 1,815
Pollution control bonds 749 386 208
Other long-term debt 439 206 48
Prepaid capacity revenues - - -
Retirements:
Preferred stock (1) (516) (326)
First mortgage bonds (241) (2,178) (2,575)
Pollution control bonds (732) (351) (208)
Other long-term debt (307) (99) (88)
Increase (decrease) in notes payable, net 37 114 525
Payment of common stock dividends (766) (726) (695)
Miscellaneous (35) (137) (148)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (293) (485) (1,004)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (39) 81 (9)
Cash and Cash Equivalents at Beginning of Year 178 97 106
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 139 $ 178 $ 97
============================================================================================================================
( ) Denotes use of cash.
II-50A
CONSOLIDATED STATEMENTS OF CASH FLOWS
Southern Company and Subsidiary Companies
=========================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 876 $ 604 $ 846
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 968 982 951
Deferred income taxes 26 158 225
Deferred investment tax credits (11) - (1)
Allowance for equity funds used during construction (13) (33) (71)
Amortization of deferred Plant Vogtle costs, net (19) (52) (87)
Write-off of Plant Vogtle costs - 281 -
Non-cash proceeds from settlement of disputed contracts (141) - -
Other, net 45 (10) (28)
Changes in certain current assets and liabilities --
Receivables 68 8 (123)
Inventories 20 (82) 6
Payables (13) (41) (23)
Taxes accrued 107 (5) (15)
Other (46) (34) 156
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,867 1,776 1,836
- -------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,123) (1,185) (1,346)
Southern Energy business acquisitions - - -
Sales of property 291 35 -
Other (45) 14 54
- -------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (877) (1,136) (1,292)
- -------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock - - 4
Preferred securities - - -
Preferred stock 100 - -
First mortgage bonds 380 300 280
Pollution control bonds 126 - 104
Other long-term debt 14 74 74
Prepaid capacity revenues 53 - -
Retirements:
Preferred stock (125) (96) (21)
First mortgage bonds (881) (146) (201)
Pollution control bonds (130) (3) (55)
Other long-term debt (70) (207) (83)
Increase (decrease) in notes payable, net 180 78 27
Payment of common stock dividends (676) (676) (675)
Miscellaneous (41) (8) (10)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (1,070) (684) (556)
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (80) (44) (12)
Cash and Cash Equivalents at Beginning of Year 186 230 242
- -------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 106 $ 186 $ 230
=========================================================================================================================
( ) Denotes use of cash.
II-50B
CONSOLIDATED STATEMENTS OF CASH FLOWS
Southern Company and Subsidiary Companies
===========================================================================================================
For the Years Ended December 31, 1988 1987
- -----------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 846 $ 577
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 837 742
Deferred income taxes 206 198
Deferred investment tax credits 27 20
Allowance for equity funds used during construction (138) (190)
Amortization of deferred Plant Vogtle costs, net (115) (257)
Write-off of Plant Vogtle costs - 358
Non-cash proceeds from settlement of disputed contracts - -
Other, net 46 87
Changes in certain current assets and liabilities --
Receivables (21) (113)
Inventories (47) (62)
Payables (6) 125
Taxes accrued 29 (34)
Other (40) 42
- -----------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,624 1,493
- -----------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,754) (1,853)
Southern Energy business acquisitions - -
Sales of property - 12
Other (2) 64
- -----------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,756) (1,777)
- -----------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 194 247
Preferred securities - -
Preferred stock 120 125
First mortgage bonds 335 700
Pollution control bonds 73 228
Other long-term debt 68 81
Prepaid capacity revenues - -
Retirements:
Preferred stock (10) (160)
First mortgage bonds (273) (369)
Pollution control bonds (1) (122)
Other long-term debt (108) (56)
Increase (decrease) in notes payable, net (300) 313
Payment of common stock dividends (661) (628)
Miscellaneous (20) (58)
- -----------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (583) 301
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (715) 17
Cash and Cash Equivalents at Beginning of Year 957 940
- -----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 242 $ 957
===========================================================================================================
( ) Denotes use of cash.
II-50C
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
============================================================================================================================
At December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 8,780 $ 8,706 $ 8,533
Nuclear 5,924 5,982 5,956
Hydro 1,512 1,489 1,477
- ----------------------------------------------------------------------------------------------------------------------------
Total production 16,216 16,177 15,966
Transmission 3,705 3,596 3,452
Distribution 8,278 7,910 7,583
General 2,720 2,548 2,436
SEI utility plant 3,104 3,008 2,420
Construction work in progress 1,312 684 990
Nuclear fuel, at amortized cost 230 246 225
- ----------------------------------------------------------------------------------------------------------------------------
Total electric plant 35,565 34,169 33,072
- ----------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 21 21 21
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 35,586 34,190 33,093
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 11,922 10,909 10,056
Steam heat 12 12 11
- ----------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 11,934 10,921 10,067
- ----------------------------------------------------------------------------------------------------------------------------
Total 23,652 23,269 23,026
- ----------------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes - - -
- ----------------------------------------------------------------------------------------------------------------------------
Total 23,652 23,269 23,026
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Equity investments in subsidiaries 1,168 227 128
Leasehold interest, being amortized 1,389 416 431
Goodwill, being amortized 1,888 318 344
Nuclear decommissioning trusts 387 279 201
Miscellaneous 742 261 189
- ----------------------------------------------------------------------------------------------------------------------------
Total 5,574 1,501 1,293
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 601 445 772
Investment securities - - -
Receivables, net 1,792 1,157 1,175
Accrued utility revenues 325 345 347
Fossil fuel stock, at average cost 214 270 327
Materials and supplies, at average cost 493 510 552
Prepayments 99 87 126
Vacation pay deferred 79 77 74
- ----------------------------------------------------------------------------------------------------------------------------
Total 3,603 2,891 3,373
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 1,142 1,238 1,386
Deferred Plant Vogtle costs 50 171 308
Deferred fuel charges 3 13 34
Debt expense, being amortized 101 81 68
Premium on reacquired debt, being amortized 285 289 295
Miscellaneous 861 777 739
- ----------------------------------------------------------------------------------------------------------------------------
Total 2,442 2,569 2,830
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 35,271 $ 30,230 $ 30,522
============================================================================================================================
II-51
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
===========================================================================================================================
At December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 8,778 $ 8,006 $ 8,033
Nuclear 5,942 5,930 5,912
Hydro 1,341 1,263 1,253
- ---------------------------------------------------------------------------------------------------------------------------
Total production 16,061 15,199 15,198
Transmission 3,504 3,224 3,093
Distribution 7,243 6,848 6,430
General 2,380 2,395 2,291
SEI utility plant - - -
Construction work in progress 1,247 1,031 665
Nuclear fuel, at amortized cost 238 229 257
- ---------------------------------------------------------------------------------------------------------------------------
Total electric plant 30,673 28,926 27,934
- ---------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 21 21 21
- ---------------------------------------------------------------------------------------------------------------------------
Total utility plant 30,694 28,947 27,955
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 9,567 8,924 8,271
Steam heat 10 10 9
- ---------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 9,577 8,934 8,280
- ---------------------------------------------------------------------------------------------------------------------------
Total 21,117 20,013 19,675
- ---------------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes - - 3,186
- ---------------------------------------------------------------------------------------------------------------------------
Total 21,117 20,013 16,489
- ---------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Equity investments in subsidiaries 93 - -
Leasehold interest, being amortized 446 469 -
Goodwill, being amortized 12 7 -
Nuclear decommissioning trusts 125 88 52
Miscellaneous 131 172 75
- ---------------------------------------------------------------------------------------------------------------------------
Total 807 736 127
- ---------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 139 178 97
Investment securities - - 199
Receivables, net 840 962 742
Accrued utility revenues 218 185 177
Fossil fuel stock, at average cost 354 254 392
Materials and supplies, at average cost 553 535 533
Prepayments 122 148 220
Vacation pay deferred 70 73 70
- ---------------------------------------------------------------------------------------------------------------------------
Total 2,296 2,335 2,430
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 1,454 1,546 -
Deferred Plant Vogtle costs 432 507 383
Deferred fuel charges 47 70 89
Debt expense, being amortized 48 33 28
Premium on reacquired debt, being amortized 298 288 222
Miscellaneous 543 383 270
- ---------------------------------------------------------------------------------------------------------------------------
Total 2,822 2,827 992
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 27,042 $ 25,911 $ 20,038
===========================================================================================================================
II-52A
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
==================================================================================================================
At December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 7,997 $ 7,661 $ 7,565
Nuclear 5,902 5,820 5,976
Hydro 1,247 1,222 1,215
- ------------------------------------------------------------------------------------------------------------------
Total production 15,146 14,703 14,756
Transmission 2,955 2,824 2,683
Distribution 6,092 5,738 5,365
General 2,196 2,078 2,026
SEI utility plant - - -
Construction work in progress 603 1,092 1,006
Nuclear fuel, at amortized cost 301 354 402
- ------------------------------------------------------------------------------------------------------------------
Total electric plant 27,293 26,789 26,238
- ------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 20 20 20
- ------------------------------------------------------------------------------------------------------------------
Total utility plant 27,313 26,809 26,258
- ------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 7,676 7,079 6,492
Steam heat 8 8 7
- ------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 7,684 7,087 6,499
- ------------------------------------------------------------------------------------------------------------------
Total 19,629 19,722 19,759
- ------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes 3,020 2,911 2,759
- ------------------------------------------------------------------------------------------------------------------
Total 16,609 16,811 17,000
- ------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts 202 - -
Equity investments in subsidiaries - - -
Leasehold interest, being amortized - - -
Goodwill, being amortized - - -
Nuclear decommissioning trusts 26 2 -
Miscellaneous 83 83 85
- ------------------------------------------------------------------------------------------------------------------
Total 311 85 85
- ------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 106 186 230
Investment securities - - -
Receivables, net 723 793 765
Accrued utility revenues 160 151 189
Fossil fuel stock, at average cost 445 467 427
Materials and supplies, at average cost 457 456 413
Prepayments 222 193 192
Vacation pay deferred 70 64 65
- ------------------------------------------------------------------------------------------------------------------
Total 2,183 2,310 2,281
- ------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - -
Deferred Plant Vogtle costs 375 364 322
Deferred fuel charges 106 126 143
Debt expense, being amortized 23 23 24
Premium on reacquired debt, being amortized 126 99 103
Miscellaneous 130 137 134
- ------------------------------------------------------------------------------------------------------------------
Total 760 749 726
- ------------------------------------------------------------------------------------------------------------------
Total Assets $ 19,863 $ 19,955 $ 20,092
==================================================================================================================
II-52B
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
=========================================================================================================
At December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 6,226 $ 6,157
Nuclear 4,995 4,987
Hydro 1,197 1,192
- ---------------------------------------------------------------------------------------------------------
Total production 12,418 12,336
Transmission 2,500 2,388
Distribution 4,944 4,510
General 1,865 1,674
SEI utility plant - -
Construction work in progress 3,071 2,519
Nuclear fuel, at amortized cost 481 479
- ---------------------------------------------------------------------------------------------------------
Total electric plant 25,279 23,906
- ---------------------------------------------------------------------------------------------------------
Steam Heat Plant 20 20
- ---------------------------------------------------------------------------------------------------------
Total utility plant 25,299 23,926
- ---------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 5,885 5,355
Steam heat 6 6
- ---------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 5,891 5,361
- ---------------------------------------------------------------------------------------------------------
Total 19,408 18,565
- ---------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes 2,559 2,371
- ---------------------------------------------------------------------------------------------------------
Total 16,849 16,194
- ---------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - -
Equity investments in subsidiaries - -
Leasehold interest, being amortized - -
Goodwill, being amortized - -
Nuclear decommissioning trusts - -
Miscellaneous 88 70
- ---------------------------------------------------------------------------------------------------------
Total 88 70
- ---------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 242 957
Investment securities - -
Receivables, net 687 687
Accrued utility revenues 148 139
Fossil fuel stock, at average cost 490 513
Materials and supplies, at average cost 348 278
Prepayments 174 136
Vacation pay deferred 63 59
- ---------------------------------------------------------------------------------------------------------
Total 2,152 2,769
- ---------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - -
Deferred Plant Vogtle costs 270 173
Deferred fuel charges 157 112
Debt expense, being amortized 24 25
Premium on reacquired debt, being amortized 102 95
Miscellaneous 89 80
- ---------------------------------------------------------------------------------------------------------
Total 642 485
- ---------------------------------------------------------------------------------------------------------
Total Assets $19,731 $19,518
=========================================================================================================
II-52C
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
============================================================================================================================
At December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 3,467 $ 3,385 $ 3,348
Paid-in capital 2,338 2,067 1,941
Retained Earnings 3,842 3,764 3,483
- ----------------------------------------------------------------------------------------------------------------------------
Total common stock equity 9,647 9,216 8,772
Preferred stock 493 980 1,332
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities 1,744 422 100
Long-term debt 10,274 7,938 8,274
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 22,158 18,556 18,478
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 690 828 445
Commercial paper 1,374 655 1,225
Preferred stock due within one year - 173 -
Long-term debt due within one year 784 191 509
Accounts payable 1,049 788 785
Customer deposits 133 132 216
Taxes accrued 379 205 272
Interest accrued 262 187 199
Vacation pay accrued 108 104 100
Miscellaneous 608 535 530
- ----------------------------------------------------------------------------------------------------------------------------
Total 5,387 3,798 4,281
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,650 4,738 4,611
Deferred credits related to income taxes 746 814 936
Accumulated deferred investment tax credits 754 788 820
Minority interest 435 375 231
Prepaid capacity revenues 110 122 131
Disallowed Plant Vogtle capacity buyback costs 56 57 59
Miscellaneous 975 982 975
- ----------------------------------------------------------------------------------------------------------------------------
Total 7,726 7,876 7,763
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 35,271 $ 30,230 $ 30,522
============================================================================================================================
II-53
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
===========================================================================================================================
At December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 3,283 $ 3,213 $ 1,582
Paid-in capital 1,712 1,503 2,931
Retained Earnings 3,191 2,968 2,721
- ---------------------------------------------------------------------------------------------------------------------------
Total common stock equity 8,186 7,684 7,234
Preferred stock 1,332 1,332 1,351
Preferred stock subject to mandatory redemption - 1 8
Subsidiary obligated mandatorily redeemable preferred securities 100 - -
Long-term debt 7,593 7,412 7,241
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 17,211 16,429 15,834
- ---------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 575 865 567
Commercial paper 403 76 260
Preferred stock due within one year 1 1 65
Long-term debt due within one year 228 156 188
Accounts payable 806 698 646
Customer deposits 102 103 99
Taxes accrued 153 206 172
Interest accrued 190 186 191
Vacation pay accrued 87 90 86
Miscellaneous 233 190 242
- ---------------------------------------------------------------------------------------------------------------------------
Total 2,778 2,571 2,516
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,007 3,979 -
Deferred credits related to income taxes 987 1,051 -
Accumulated deferred investment tax credits 858 900 957
Minority interest 267 - -
Prepaid capacity revenues 138 144 148
Disallowed Plant Vogtle capacity buyback costs 60 63 72
Miscellaneous 736 774 511
- ---------------------------------------------------------------------------------------------------------------------------
Total 7,053 6,911 1,688
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 27,042 $ 25,911 $ 20,038
===========================================================================================================================
II-54A
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
==================================================================================================================
At December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 1,578 $ 1,578 $ 1,578
Paid-in capital 2,908 2,909 2,909
Retained Earnings 2,490 2,296 2,374
- ------------------------------------------------------------------------------------------------------------------
Total common stock equity 6,976 6,783 6,861
Preferred stock 1,207 1,207 1,209
Preferred stock subject to mandatory redemption 126 151 191
Subsidiary obligated mandatorily redeemable preferred securities - - -
Long-term debt 7,992 8,458 8,575
- ------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 16,301 16,599 16,836
- ------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 302 122 44
Commercial paper - - -
Preferred stock due within one year 7 7 61
Long-term debt due within one year 217 308 169
Accounts payable 585 616 676
Customer deposits 95 91 89
Taxes accrued 215 144 181
Interest accrued 221 246 233
Vacation pay accrued 84 75 75
Miscellaneous 229 233 252
- ------------------------------------------------------------------------------------------------------------------
Total 1,955 1,842 1,780
- ------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - -
Deferred credits related to income taxes - - -
Accumulated deferred investment tax credits 1,004 1,063 1,111
Minority interest - - -
Prepaid capacity revenues 149 100 102
Disallowed Plant Vogtle capacity buyback costs 110 136 73
Miscellaneous 344 215 190
- ------------------------------------------------------------------------------------------------------------------
Total 1,607 1,514 1,476
- ------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 19,863 $ 19,955 $ 20,092
==================================================================================================================
II-54B
CONSOLIDATED BALANCE SHEETS
Southern Company and Subsidiary Companies
=========================================================================================================
At December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 1,577 $ 1,534
Paid-in capital 2,906 2,755
Retained Earnings 2,203 2,018
- ---------------------------------------------------------------------------------------------------------
Total common stock equity 6,686 6,307
Preferred stock 1,259 1,139
Preferred stock subject to mandatory redemption 206 224
Subsidiary obligated mandatorily redeemable preferred securities - -
Long-term debt 8,433 8,333
- ---------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 16,584 16,003
- ---------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 17 317
Commercial paper - -
Preferred stock due within one year 17 9
Long-term debt due within one year 190 192
Accounts payable 728 747
Customer deposits 83 86
Taxes accrued 203 221
Interest accrued 240 233
Vacation pay accrued 74 68
Miscellaneous 104 110
- ---------------------------------------------------------------------------------------------------------
Total 1,656 1,983
- ---------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - -
Deferred credits related to income taxes - -
Accumulated deferred investment tax credits 1,161 1,180
Minority interest - -
Prepaid capacity revenues 81 104
Disallowed Plant Vogtle capacity buyback costs 104 79
Miscellaneous 145 169
- ---------------------------------------------------------------------------------------------------------
Total 1,491 1,532
- ---------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 19,731 $ 19,518
=========================================================================================================
II-54C
ALABAMA POWER COMPANY
FINANCIAL SECTION
II-55
MANAGEMENT'S REPORT
Alabama Power Company 1997 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, Chief Financial Officer,
and Treasurer
February 11, 1998
II-56
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 a wholly owned subsidiary
of Southern Company) as of December 31, 1997 and 1996, and the related
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1997. 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 11-65 through II-82)
referred to above present fairly, in all material respects, the financial
position of Alabama Power Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/Arthur Andersen LLP
Birmingham, Alabama
February 11, 1998
II-57
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Alabama Power Company 1997 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1997 net income after dividends on preferred stock was
$376 million, representing a $4.4 million (1.2 percent) increase from the prior
year. This improvement can be attributed primarily to lower non-fuel related
operating expenses. Despite the mild weather experienced during 1997, retail
sales increased approximately 2 percent. However, the expected net income effect
was offset by reductions in certain industrial and commercial prices.
In 1996, earnings were $371 million, representing a 2.9 percent increase
from the prior year. This increase was due to an increase in retail energy
sales of 2.7 percent from 1995 levels and lower net interest charges compared
to the prior year. This improvement was partially offset by a 4.4 percent
increase in operating costs.
The return on average common equity for 1997 was 13.76 percent compared to
13.75 percent in 1996, and 13.61 percent in 1995.
Revenues
Operating revenues for 1997 were $3.1 billion, reflecting a 0.9 percent increase
from 1996. The following table summarizes the principal factors that affected
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
--------------------------------------
1997 1996 1995
--------------------------------------
(in thousands)
Retail --
Growth and price
change $ 33,813 $ 42,385 $ 19,164
Weather (22,973) (29,660) 54,888
Fuel cost recovery
and other 31,353 (30,846) 35,235
-------------------------------------------------------------
Total retail 42,193 (18,121) 109,287
-------------------------------------------------------------
Sales for resale --
Non-affiliates 39,354 21,529 15,380
Affiliates (54,825) 88,890 (37,032)
-------------------------------------------------------------
Total sales for resale (15,471) 110,419 (21,652)
Other operating
revenues 1,614 3,703 1,997
-------------------------------------------------------------
Total operating
revenues $ 28,336 $ 96,001 $ 89,632
-------------------------------------------------------------
Percent change 0.9% 3.2% 3.1%
=============================================================
Retail revenues of $2.5 billion in 1997 increased $42 million (1.7 percent)
from the prior year, compared with a decrease of $18 million (0.7 percent) in
1996. Fuel revenues increased in 1997 due to slightly higher generation and
higher fuel costs. This was the primary reason for the increase in 1997 retail
revenues over 1996. Lower fuel cost recovery was the primary reason for the
decrease in 1996 retail revenues as compared to 1995. Fuel revenues 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
contracts. Energy is generally sold at variable cost. These capacity
II-58
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
and energy components were:
1997 1996 1995
-------------------------------------------
(in thousands)
Capacity $136,248 $150,797 $157,119
Energy 134,498 107,996 83,352
----------------------------------------------------------
Total $270,746 $258,793 $240,471
==========================================================
Capacity revenues from non-affiliates in 1997 decreased 9.6% compared to
1996 primarily due to a one-time unit power sales adjustment in 1997. Capacity
revenues from non-affiliates were relatively constant in 1996 and 1995.
Kilowatt-hour (KWH) sales for 1997 and the percent change by year were as
follows:
KWH Percent Change
----------- -------------------------------
1997 1997 1996 1995
-------------------------------- ----------
(millions)
Residential 14,336 (1.8)% 1.5% 9.1%
Commercial* 11,330 3.9 8.6 4.1
Industrial* 20,728 3.6 0.7 2.0
Other 181 (6.3) 3.1 0.5
----------
Total retail 46,575 1.9 2.7 4.7
Sales for resale -
Non-affiliates 11,894 25.3 18.0 18.8
Affiliates 8,993 (12.6) 53.5 (20.5)
----------
Total 67,462 3.0% 10.5% 2.6%
- -----------------------------------------------------------------
*The KWH sales for 1996 reflect a reclassification of approximately 200
customers from industrial to commercial, which resulted in a shift of 473
million KWH. Absent the reclassification, the percentage change in KWH sales for
commercial and industrial would have been 3.9% and 3.1%, respectively.
The increases in 1997 and 1996 retail energy sales were primarily due to the
strength of business and economic conditions in the company's service area.
Residential energy sales experienced a decline as a result of milder than normal
weather in 1997, compared to relatively normal weather in 1996. Assuming normal
weather, sales to retail customers are projected to grow approximately 2.3
percent annually on average during 1998 through 2003.
Expenses
Total operating expenses of $2.5 billion for 1997 were up $18 million or 0.7
percent compared with the prior year. This increase was primarily due to a $19
million increase in fuel costs and a $10 million increase in depreciation and
amortization expense. These increases were somewhat offset by a $16 million
decrease in maintenance expenses.
Total operating expenses of $2.5 billion for 1996 were up $105 million or
4.4 percent compared with 1995. The major components of this increase include
$85 million in fuel costs, $15 million in maintenance expense, and $17 million
in depreciation and amortization offset by a decrease in purchased power of $15
million.
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 KWH generated were as follows:
--------------------------
1997 1996 1995
--------------------------
Total generation
(billions of KWHs) 65 65 58
Sources of generation
(percent) --
Coal 72 72 73
Nuclear 20 20 19
Hydro 8 8 8
Average cost of fuel per net
KWH generated
(cents) --
Coal 1.73 1.71 1.71
Nuclear 0.54 0.50 0.50
Total 1.49 1.46 1.48
- --------------------------------------------------------------
Note: Oil & Gas comprise less than 1% of generation.
Fuel expense increased in 1997 by $19 million or 2.2 percent. This increase
can be attributed to slightly higher generation and fuel costs. Fuel expense
increased in 1996 by $85 million or 10.8 percent. This increase can be
attributed to higher generation.
Purchased power consists primarily of purchases from the affiliates of the
Southern electric system. Purchased power transactions among the company and its
II-59
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
affiliates will vary from period to period depending on demand, the
availability, and the variable production cost of generating resources at each
company. Total KWH purchases increased 12.4 percent from the prior year.
The 6.1 percent decrease in maintenance expenses in 1997 is attributable
primarily to a decrease in distribution expenses. The increase in maintenance
expenses for 1996 is due to increased nuclear expenses, primarily outage related
accruals.
Depreciation and amortization expense increased 3.2 percent in 1997 and 5.6
percent in 1996. These increases reflect additions to utility plant.
Total net interest and other charges increased $25.4 million (11.2 percent)
in 1997 primarily due to an increase in company obligated mandatorily redeemable
preferred securities outstanding. This increase was offset by a $12 million
(45.2 percent) decrease in dividends on preferred stock. The decline in net
interest and other charges in 1996 by $11 million (4.5 percent) was due
primarily to a charge of $10 million in 1995 to the amortization of debt
discount, premium, and expense net, pursuant to an Alabama Public Service
Commission (APSC) order. See Note 3 to the financial statements under "Retail
Rate Adjustment Procedures" for additional details.
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.
The company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
state of Alabama. Prices for electricity provided by the company to retail
customers are set by the APSC under cost-based regulatory principles.
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 having 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
marketers and brokers. The company is aggressively working to maintain and
expand its share of wholesale business in the Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
II-60
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of the company to recover its investments, including the
regulatory assets described in Note 1 to the financial statements, could have a
material adverse effect on the financial condition of the company. The company
is attempting to minimize or reduce stranded cost exposure.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, 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.
Rates to retail customers served by the company are regulated by the 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. In April 1997,
the APSC issued an additional order authorizing the company to reduce balance
sheet asset items. This order authorizes the reduction of such items up to an
amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by the company. See Note 3 to
the financial statements for information about this and other 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 change. 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 company is heavily dependent upon complex computer systems for all
phases of its operations. The year 2000 issue -- common to most corporations
- --concerns the inability of certain software and databases to properly recognize
date sensitive information related to the year 2000 and thereafter. This problem
could result in a material disruption to the company's operations, if not
corrected. The company has assessed and developed a detailed strategy to prevent
or at least minimize problems related to the year 2000 issue. In 1997 resources
were committed and implementation began to modify the affected information
systems. Total costs related to the project are estimated to be approximately
$26 million, of which $2.1 million was spent in 1997. The remaining costs will
be expensed primarily in 1998. Implementation is currently on schedule.
Although, the degree of success of this project cannot be determined at this
time, management believes there will be no significant effect on the company's
operations.
The 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 current and future environmental laws and
regulations 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."
II-61
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
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 that are not specifically recoverable, and determine if any other
assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
Exposure to Market Risk
Due to cost-based rate regulation, the company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1997, exposure from these activities was
not material to the company's financial position, results of operations, or cash
flows.
New Accounting Standards
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other nonowner changes in equity. The company will adopt this statement in 1998.
The FASB has issued Statement No. 131, Disclosure about Segments of an
Enterprise and Related Information. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Generally, financial information is required to
be reported on the basis that it is used by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. This
statement also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The company adopted the new
rules in 1997, and they did not have a significant impact on the company's
financial reporting. However, this conclusion may change as industry
restructuring and competitive factors influence the company's operations.
FINANCIAL CONDITION
Overview
The company's financial condition remained stable in 1997. 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 $451 million in 1997. 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 44.7 percent in 1997, compared with 45.3 percent in 1996,
and 45.0 percent in 1995.
In January 1997, Alabama Power Capital Trust II (Trust II), of which the
company owns all of the common securities, issued $200 million of 7.60 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust II are $206 million aggregate principal amount of the company's 7.60
percent junior subordinated notes due December 31, 2036.
During 1997, the company redeemed $162.0 million of preferred stock and
reacquired an additional $22.9 million through tender offer.
II-62
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
The company's current securities ratings are as follows:
Duff & Standard
Phelps Moody's & Poor's
----------------------------------
First Mortgage Bonds AA- A1 A+
Company Obligated
Mandatorily
Redeemable
Preferred Securities A+ a2 A
Preferred Stock A+ a2 A
------------------------------------------------------------
Capital Requirements
Capital expenditures are estimated to be $615 million for 1998, $723 million for
1999, and $524 million for 2000. The total is $1.9 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 will replace all six steam generators at Plant Farley at a total
cost of approximately $234 million. Additionally, the company plans to construct
and install 800 megawatts of new generating capacity and associated substation
facilities at Plant Barry. The projected capital expenditures for this project
amount to approximately $289 million.
Other Capital Requirements
In addition to the funds needed for the capital budget, approximately $320
million will be required by the end of 2000 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 - significantly
impacted the operating companies of Southern Company, including Alabama 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 of Southern Company. As
a result of 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.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $25
million for the company.
For Phase II sulfur dioxide compliance, the company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also equipment to control nitrogen oxide emissions
will be installed on additional system fossil-fired units as necessary to meet
Phase II limits. Current compliance strategy for Phase II could require total
estimated construction expenditures of approximately $33 million, of which $27
million remains to be spent.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. Also, in October 1997, the EPA
issued a proposed regional ozone rule that --if implemented--could require
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: emission control strategies for
ozone nonattainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
II-63
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1997 Annual Report
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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect 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 company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur. To issue
additional debt and equity securities, 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."
Cautionary Statement Regarding Forward-Looking Information
The company's 1997 Annual Report contains forward-looking statements in addition
to historical information. The company cautions that there are various important
factors that could cause actual results to differ materially from those
indicated in the forward-looking statements; accordingly, there can be no
assurance that such indicated results will be realized. These factors include
legislative and regulatory initiatives regarding deregulation and restructuring
of the electric utility industry; the extent and timing of the entry of
additional competition in the company's markets; potential business strategies
- -- including acquisitions or dispositions of assets or internal restructuring
- --that may be pursued by Southern Company; state and federal rate regulation;
changes in or application of environmental and other laws and regulations to
which the company is subject; political, legal and economic conditions and
developments; financial market conditions and the results of financing efforts;
changes in commodity prices and interest rates; weather and other natural
phenomena; and other factors discussed in the reports--including Form
10-K--filed from time to time by the company with the Securities and Exchange
Commission.
II-64
STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Alabama Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues (Notes 1, 3, and 7): $ 2,987,316 $ 2,904,155 $ 2,897,044
Revenues from affiliates 161,795 216,620 127,730
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,149,111 3,120,775 3,024,774
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 896,014 877,076 791,819
Purchased power from non-affiliates 41,795 36,813 30,065
Purchased power from affiliates 95,538 91,500 112,826
Other 510,203 505,884 501,876
Maintenance 242,691 258,482 243,218
Depreciation and amortization 330,377 320,102 303,050
Taxes other than income taxes 185,062 186,172 185,620
Federal and state income taxes (Note 8) 220,228 228,108 230,982
--------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,521,908 2,504,137 2,399,456
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 627,203 616,638 625,318
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) - - 1,649
Income from subsidiary (Note 6) 4,266 3,851 4,051
Charitable foundation - (6,800) (11,542)
Interest income 37,844 28,318 13,768
Other, net (38,522) (39,053) (21,536)
Income taxes applicable to other income 12,351 22,400 14,142
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges and Other 643,142 625,354 625,850
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 167,172 169,390 180,714
Allowance for debt funds used during construction (Note 1) (4,787) (6,480) (7,067)
Interest on interim obligations 22,787 20,617 16,917
Amortization of debt discount, premium, and expense, net 9,645 9,508 20,259
Other interest charges 36,037 27,510 27,064
Distributions on preferred securities of
Alabama Power Capital Trust I & II (Note 9) 21,763 6,717 -
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 252,617 227,262 237,887
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 390,525 398,092 387,963
Dividends on Preferred Stock 14,586 26,602 27,069
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 375,939 $ 371,490 $ 360,894
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-65
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Alabama Power Company 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 390,525 $ 398,092 $ 387,963
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 394,572 383,438 371,382
Deferred income taxes and investment tax credits, net (12,429) 16,585 32,627
Allowance for equity funds used during construction - - (1,649)
Other, net (11,353) 6,247 459
Changes in certain current assets and liabilities --
Receivables, net (30,268) 3,958 (54,209)
Inventories 13,709 36,234 18,425
Payables (9,745) 1,006 (63,656)
Taxes accrued 6,191 (5,756) 551
Energy cost recovery, retail 7,108 25,771 1,177
Other 7,127 8,205 16,890
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 755,437 873,780 709,960
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (451,167) (425,024) (551,781)
Other (51,791) (61,119) (53,321)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (502,958) (486,143) (605,102)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Company obligated mandatorily redeemable preferred securities 200,000 97,000 -
Other long-term debt 258,800 21,000 131,500
Retirements:
Preferred stock (184,888) - -
First mortgage bonds (74,951) (83,797) -
Other long-term debt (951) (21,907) (132,291)
Interim obligations, net (57,971) (25,163) 210,134
Payment of preferred stock dividends (22,524) (26,665) (27,118)
Payment of common stock dividends (339,600) (347,500) (285,000)
Miscellaneous (16,024) (3,634) (4,143)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (238,109) (390,666) (106,918)
- ------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 14,370 (3,029) (2,060)
Cash and Cash Equivalents at Beginning of Year 9,587 12,616 14,676
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year 23,957 $ 9,587 $ 12,616
==============================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 209,919 $ 193,871 $ 189,268
Income taxes 207,653 195,214 172,777
- ------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
II-66
BALANCE SHEETS
At December 31, 1997 and 1996
Alabama Power Company 1997 Annual Report
================================================================================================================
ASSETS 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Note 1) $11,070,323 $10,806,921
Less accumulated provision for depreciation 4,384,180 4,113,622
- ------------------------------------------------------------------------------------------------------------------
6,686,143 6,693,299
Nuclear fuel, at amortized cost 103,272 123,862
Construction work in progress 311,223 256,802
------------------------------------------------------------------------------------------------------------------
Total 7,100,638 7,073,963
- -------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 6) 24,972 26,032
Nuclear decommissioning trusts (Note 1) 193,008 148,760
Miscellaneous 22,233 20,243
- ------------------------------------------------------------------------------------------------------------------
Total 240,213 195,035
- ------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 23,957 9,587
Receivables-
Customer accounts receivable 368,255 334,150
Other accounts and notes receivable 28,921 28,524
Affiliated companies 50,353 47,630
Accumulated provision for uncollectible accounts (2,272) (1,171)
Refundable income taxes - 5,856
Fossil fuel stock, at average cost 74,186 81,704
Materials and supplies, at average cost 161,601 167,792
Prepayments 20,453 17,841
Vacation pay deferred 28,783 28,369
- ------------------------------------------------------------------------------------------------------------------
Total 754,237 720,282
- ------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 384,549 410,010
Debt expense, being amortized 7,276 7,398
Premium on reacquired debt, being amortized 81,417 84,149
Prepaid pension costs 130,733 114,029
Department of Energy assessments (Note 1) 34,416 37,490
Miscellaneous 79,388 91,490
- ------------------------------------------------------------------------------------------------------------------
Total 717,779 744,566
- ------------------------------------------------------------------------------------------------------------------
Total Assets $8,812,867 $8,733,846
==================================================================================================================
The accompanying notes are an integral part of these balance sheets.
II-67
BALANCE SHEETS
At December 31, 1997 and 1996
Alabama Power Company 1997 Annual Report
==================================================================================================================
CAPITALIZATION AND LIABILITIES 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $2,750,569 $2,714,277
Preferred stock 255,512 340,400
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts holding Company Junior Subordinated Notes (Note 9) 297,000 97,000
Long-term debt 2,473,202 2,354,006
- ------------------------------------------------------------------------------------------------------------------
Total 5,776,283 5,505,683
- ------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 11) - 100,000
Long-term debt due within one year (Note 11) 75,336 20,753
Commercial paper 306,882 364,853
Accounts payable-
Affiliated companies 79,822 64,307
Other 159,146 182,563
Customer deposits 34,968 32,003
Taxes accrued-
Federal and state income 21,177 35,638
Other 15,309 15,271
Interest accrued 50,722 51,941
Vacation pay accrued 28,783 28,369
Miscellaneous 103,602 96,485
- ------------------------------------------------------------------------------------------------------------------
Total 875,747 992,183
- ------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,192,265 1,177,687
Accumulated deferred investment tax credits 282,873 294,071
Prepaid capacity revenues, net (Note 7) 109,982 122,496
Department of Energy assessments (Note 1) 30,592 33,741
Deferred credits related to income taxes (Note 8) 327,328 364,792
Natural disaster reserve (Note 1) 22,416 20,757
Miscellaneous 195,381 222,436
- ------------------------------------------------------------------------------------------------------------------
Total 2,160,837 2,235,980
- ------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 12)
Total Capitalization and Liabilities $8,812,867 $8,733,846
==================================================================================================================
The accompanying notes are an integral part of these balance sheets.
II-68
STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, par value $40 per share --
Authorized -- 6,000,000 shares
Outstanding -- 5,608,955 shares in 1997 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 99 146
Retained earnings (Note 13) 1,221,467 1,185,128
- -----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 2,750,569 2,714,277 47.6% 49.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$1 par value --
Authorized -- 27,500,000 shares
Outstanding -- 6,020,200 shares
$25 stated capital --
6.40% 50,000 50,000
6.80% 38,000 38,000
7.60% - 150,000
Adjustable rate
4.82% - at January 1, 1998 50,000 50,000
$100 stated capital --
Auction rate - 4.235% at January 1, 1998 50,000 50,000
$100,000 stated capital --
Auction rate - 4.20% at January 1, 1998 20,000 20,000
$100 par value --
Authorized -- 3,850,000 shares
Outstanding -- 475,117 shares
4.20% to 4.52% 18,512 41,400
4.60% to 4.92% 29,000 29,000
5.96% to 6.88% - 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $13,313,000) 255,512 440,400
Less amount due within one year (Note 11) - 100,000
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 255,512 340,400 4.4 6.2
- -----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 7.375% 97,000 97,000
$25 liquidation value -- 7.60% 200,000 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $22,354,000) 297,000 97,000 5.2 1.7
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
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
August 1, 2002 6.85% 100,000 100,000
2003 through 2007 6 3/4% to 7 1/4% 475,000 475,000
2021 through 2024 7.30% to 9% 946,108 1,021,059
- -----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,841,108 1,916,059
Pollution control obligations 541,140 476,140
Long-term senior notes 193,800 -
Other long-term debt 7,105 8,056
Unamortized debt premium (discount), net (34,615) (25,496)
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $181,726,000) 2,548,538 2,374,759
Less amount due within one year (Note 11) 75,336 20,753
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,473,202 2,354,006 42.8 42.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 5,776,283 $ 5,505,683 100.0% 100.0%
===================================================================================================================================
The accompanying notes are an integral part of these statements.
II-69
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
Alabama Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $1,185,128 $1,161,225 $1,085,256
Net income after dividends on preferred stock 375,939 371,490 360,894
Cash dividends on common stock (339,600) (347,500) (285,000)
Preferred stock transactions, net (45) (7) -
Other adjustments to retained earnings 45 (80) 75
- --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 13) $1,221,467 $1,185,128 $1,161,225
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-70
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Alabama Power Company (the company) is a wholly owned subsidiary of Southern
Company, which is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern Communications),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), Southern Company Energy Solutions, 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 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 Energy designs, builds, owns and operates power production
and delivery facilities and provides a broad range of energy related services in
the United States and international markets. Southern Nuclear provides services
to Southern Company's nuclear power plants. Southern Company Energy Solutions
develops new business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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 expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
1997 1996
-----------------------
(in thousands)
Deferred income taxes $ 384,549 $ 410,010
Deferred income tax credits (327,328) (364,792)
Premium on reacquired debt 81,417 84,149
Department of Energy assessments 34,416 37,490
Vacation pay 28,783 28,369
Natural disaster reserve (22,416) (20,757)
Work force reduction costs 19,316 45,969
Other, net 59,726 45,521
- ----------------------------------------------------------------
Total $ 258,463 $265,959
================================================================
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 net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the company would be required
to determine if any impairment to other assets exists, 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.
The company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1997, uncollectible
II-71
NOTES (continued)
Alabama Power Company 1997 Annual Report
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 $68
million in 1997, $64 million in 1996, and $54 million in 1995. 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 2010 and 2013
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, 1997, under this law to be
approximately $34 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
3.3 percent in 1997 and 1996, and 3.2 percent in 1995. 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 periods 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, 1997, for Plant Farley were as
follows:
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
===========================================================
(in millions)
Amount expensed in 1997 $ 18
-----------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $ 193
Balance in internal reserves 44
-----------------------------------------------------------
Total $ 237
===========================================================
Significant assumptions:
Inflation rate 4.5%
Trust earning rate 7.0
-----------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the APSC. All of the company's decommissioning costs are approved
for ratemaking.
II-72
NOTES (continued)
Alabama Power Company 1997 Annual Report
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 5.8 percent in 1997 and 1996, and 7.1 percent in 1995. AFUDC, net
of income tax, as a percent of net income after dividends on preferred stock was
0.8 percent in 1997, 1.1 percent in 1996 and 1.7 percent in 1995.
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
The company's only financial instruments for which the carrying amount did not
approximate fair value at December 31 are as follows:
Carrying Fair
Amount Value
-------------------------
(in millions)
Long-term debt:
At December 31, 1997 $2,541 $2,638
At December 31, 1996 $2,367 $2,420
Preferred Securities:
At December 31, 1997 297 300
At December 31, 1996 97 94
------------------------------------------------------------
The fair value for long-term debt and preferred securities was 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.
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. Regulatory
treatment allows the 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. 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
II-73
NOTES (continued)
Alabama Power Company 1997 Annual Report
"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 these 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 funded status of the plans and reconciliation to amounts reflected in the
Balance Sheets at December 31 are as follows:
Pension
-------------------
1997 1996
-------------------
(in millions)
Actuarial present value of
benefit obligations:
Vested benefits $ 626 $ 603
Non-vested benefits 22 30
---------------------------------------------------------
Accumulated benefit obligation 648 633
Additional amounts related to
projected salary increases 165 180
- ----------------------------------------------------------
Projected benefit obligation 813 813
Less:
Fair value of plan assets 1,521 1,334
Unrecognized net gain (585) (413)
Unrecognized prior service cost 43 46
Unrecognized transition asset (35) (40)
- ----------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 131 $ 114
==========================================================
Postretirement
Benefits
----------------------
1997 1996
----------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $135 $116
Employees eligible to retire 24 28
Other employees 93 98
-----------------------------------------------------------
Accumulated benefit obligation 252 242
Less:
Fair value of plan assets 135 108
Unrecognized net loss 3 15
Unrecognized transition
obligation 61 65
-----------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 53 $ 54
===========================================================
The weighted average rates assumed in the actuarial calculations were:
1997 1996 1995
-------------------------------
Discount 7.5% 7.8% 7.3%
Annual salary increase 5.0 5.3 4.8
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 8.8
percent for 1997, decreasing gradually to 5.5 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, 1997, by $21 million and the aggregate of the
service and interest cost components of the net retiree cost by $2 million.
Components of the plans' net cost are shown below:
Pension
-------------------------------------------------------------------
1997 1996 1995
-----------------------------
(in millions)
Benefits earned during
the year $ 20.3 $ 21.5 $ 21.2
Interest cost on projected
benefit obligation 58.4 59.5 54.3
Actual (return) loss on plan
assets (227.8) (148.9) (236.3)
Net amortization and deferral 116.8 43.8 136.9
-------------------------------------------------------------------
Net pension cost (income) $ (32.3) $ (24.1) $ (23.9)
=====================================================================
II-74
NOTES (continued)
Alabama Power Company 1997 Annual Report
Of the above net pension income, $24.8 million in 1997, $20.3 million
in 1996, and $17.1 million in 1995 were recorded as credits to operating
expenses, and the remainder was recorded as credits to construction and other
accounts.
Postretirement
Benefits
--------------------
1997 1996 1995
------------- ------
(in millions)
Benefits earned during the year $ 4 $ 5 $ 7
Interest cost on accumulated
benefit obligation 18 17 18
Amortization of transition
obligation 4 4 7
Actual (return) loss on plan
assets (14) (7) (10)
Net amortization and deferral 7 2 5
- -------------------------------------------------------------
Net postretirement costs $ 19 $ 21 $ 27
=============================================================
Of the above net postretirement costs recorded, $16.3 million in 1997, $17.8
million in 1996, and $22.7 million in 1995 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 $33 million, $26.7 million and $14.3
million for the years 1997, 1996 and 1995, 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 $19.3 million
at December 31, 1997.
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
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 April 1997,
the APSC issued an additional order authorizing the company to reduce balance
sheet asset items. This order authorizes the reduction of such items up to an
amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by the company.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Appliance Warranty Litigation
In 1996, legal actions against the company were filed in several counties in
Alabama charging the company with fraud and non-compliance with regulatory
statutes relating to the offer, sale, and financing of "extended service
contracts" in connection with the sale of electric appliances. Some of these
suits were filed as class actions, while others were filed on behalf of multiple
individual plaintiffs. The plaintiffs seek damages for an unspecified amount.
The company has offered extended service agreements to its customers since
January 1984, and approximately 175,000 extended service agreements could be
involved in these proceedings. The final outcome of these cases cannot now be
determined.
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.
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
II-75
NOTES (continued)
Alabama Power Company 1997 Annual Report
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. 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, as
well as certain other contracts that reference these proceedings in determining
return on common equity, and if refunds were ordered, the amount of refunds
could range up to approximately $194 million at December 31, 1997 for Southern
Company, of which the company's portion would be approximately $95 million.
Although management believes that rates are not excessive and that refunds are
not justified, the final outcome of this matter cannot now be determined.
Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service entered into a
settlement agreement related to tax issues for the years 1984 through 1987. The
agreement is subject to the review and approval by the Joint Congressional
Committee on Taxation. If approved by the Joint Committee, the agreement would
resolve all issues in the case for the years before the U. S. Tax Court,
resulting in a refund to the company of approximately $22 million. This amount
includes interest of $14 million. The tax litigation was related to a timing
issue as to when taxes should have been paid; therefore, only the interest
portion will affect future income.
4. CAPITAL BUDGET
The company's capital expenditures are currently estimated to total $615 million
in 1998, $723 million in 1999, and $524 million in 2000. 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.
The company will replace all six steam generators at Plant Farley at a total
cost of approximately $234 million. Additionally, the company plans to construct
and install 800 megawatts of new generating capacity and associated substation
facilities at Plant Barry. The projected capital expenditures for this project
amount to approximately $289 million.
In addition, significant construction will continue related to transmission
and distribution facilities and the upgrading 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 is often utilized and
the amounts available are discussed below. The company may issue additional
long-term debt and preferred securities for debt maturities, redeeming
higher-cost securities, and meeting additional capital requirements.
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 historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur. In order to
issue additional debt and equity securities, the company must comply with
II-76
NOTES (continued)
Alabama Power Company 1997 Annual Report
certain earnings coverage requirements designated 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 Georgia Power Company, has entered into agreements with
several banks outside the service area to provide $300 million of revolving
credit to the companies through June 30, 1999. 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.
However, the allocations can be changed among the borrowers by notifying the
respective banks. 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 $679 million (including $208 million of such lines under which borrowings may
be made only to fund purchase obligations relating to variable rate pollution
control bonds) which expire at various times during 1998 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, 1997, the company had regulatory approval to have
outstanding up to $750 million of short-term borrowings.
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, 1997, were as follows:
Year Amounts
- ---- -----------------
(in millions)
1998 $869
1999 632
2000 388
2001 377
2002 317
2003-2013 2,538
- -------------------------------------------------------------
Total commitments $5,121
=============================================================
Operating Leases
The company has entered into coal rail car rental agreements with various terms
and expiration dates. At December 31, 1997, estimated minimum rental commitments
for noncancellable operating leases were as follows:
Year Amounts
- ---- -----------------
(in millions)
1998 $5.6
1999 5.6
2000 5.6
2001 5.6
2002 5.6
2003-2017 55.5
- ------------------------------------------------------------------
Total minimum payments $83.5
==================================================================
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
II-77
NOTES (continued)
Alabama Power Company 1997 Annual Report
generating units with a total rated capacity of 1,020 megawatts, 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 $73 million in
1997, $75 million in 1996 and $71 million in 1995, 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, 1997, the capitalization of SEGCO consisted of $50 million
of equity and $72 million of long-term debt on which the annual interest
requirement is $4.5 million. SEGCO paid dividends totaling $10.6 million in
1997, $10.1 million in 1996, and $7.6 million in 1995, of which one-half of each
was paid to the company. SEGCO's net income was $8.5 million, $7.7 million, and
$8.1 million for 1997, 1996 and 1995, respectively.
The company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1997, 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 $ 93 $ 40
Plant Miller
Units 1 and 2 717 311
- ------------------------------------------------------------
7. LONG-TERM POWER SALES AGREEMENTS
General
The company and the operating affiliates of 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. These
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, profitability is primarily
affected by revenues from capacity sales. The company's capacity revenues
amounted to $136 million in 1997, $151 million in 1996, and $157 million in
1995.
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,
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 with a minimum of three years
notice -- 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
II-78
NOTES (continued)
Alabama Power Company 1997 Annual Report
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,
1997, $113.8 million of such bonds was held by the escrow agent under the
contracts.
8. INCOME TAXES
At December 31, 1997, the tax-related regulatory assets and liabilities were
$385 million and $327 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:
1997 1996 1995
------------------------------------
(in thousands)
Total provision for income
taxes:
Federal--
Currently payable $197,159 $172,911 $166,105
Deferred--
current year 32,884 (6,309) 43,493
reversal of prior years (44,300) 18,948 (15,817)
Deferred investment tax
credits - - (75)
- ------------------------------------------------------------------------
185,743 185,550 193,706
- -----------------------------------------------------------------------
State--
Currently payable 23,147 16,212 18,108
Deferred--
current year 1,409 697 5,117
reversal of prior years (2,422) 3,249 (91)
- ------------------------------------------------------------------------
22,134 20,158 23,134
Total 207,877 205,708 216,840
Less income taxes credited
to other income (12,351) (22,400) (14,142)
- -------------------------------------------------------------------------
Total income taxes
charged operations $220,228 $228,108 $230,982
=========================================================================
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:
1997 1996
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 847 $ 816
Property basis differences 463 466
Premium on reacquired debt 30 31
Other 31 51
- ------------------------------------------------------------------
Total 1,371 1,364
- ------------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 31 34
Other deferred costs 33 27
Postretirement benefits 18 21
Unbilled revenue 16 15
Other 66 54
- ------------------------------------------------------------------
Total 164 151
- ------------------------------------------------------------------
Net deferred tax liabilities 1,207 1,213
Portion included in current assets
(liabilities), net (15) (35)
- ------------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $1,192 $1,178
===================================================================
II-79
NOTES (continued)
Alabama Power Company 1997 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 Statements of Income. Credits amortized in this manner
amounted to $11 million in 1997 and 1996, and $12 million in 1995. At December
31, 1997, 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:
1997 1996 1995
--------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.4 2.2 2.5
Non-deductible book
depreciation 1.5 1.5 1.6
Differences in prior years'
deferred and current tax rates (2.3) (1.6) (1.8)
Other (1.9) (3.0) (1.4)
--------------------------------------------------------------
Effective income tax rate 34.7% 34.1% 35.9%
==============================================================
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. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In January 1996, Alabama Power Capital Trust I (Trust I), of which the company
owns all of the common securities, issued $97 million of 7.375 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $100 million aggregate principal amount of the company's 7.375
percent junior subordinated notes due March 31, 2026.
In January 1997, Alabama Power Capital Trust II (Trust II), of which the
company also owns all of the common securities, issued $200 million of 7.60
percent mandatorily redeemable preferred securities. Substantially all of the
assets of Trust II are $206 million aggregate principal amount of the company's
7.60 percent junior subordinated notes due December 31, 2036.
10. OTHER LONG-TERM DEBT
Details of other long-term debt at December 31 are as follows:
1997 1996
--------------------------
(in thousands)
Obligations incurred in
connection with the
sale of pollution control
revenue bonds by public
authorities-
Collateralized -
5.5% to 6.5 % due
2023-2024 $223,040 $223,040
Variable rates (4.1%
to 4.8% at 1/1/98)
due 2015-2017 89,800 89,800
Non-collateralized -
7.25% due 2003 1,000 1,000
5.8% due 2022 9,800 9,800
Variable rates (4.50%
to 5.9% at 1/1/98)
due 2021 - 2022 217,500 152,500
- -------------------------------------------------------------
541,140 476,140
Capitalized lease obligations 7,105 8,056
Long-term senior notes -
7.125% due 2047 193,800 -
- -------------------------------------------------------------
Total $742,045 $484,196
=============================================================
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.
The estimated aggregate annual maturities of other long-term debt through
2001 are as follows: $1.0 million in 1998, $1.2 million in 1999, $1.1 million in
2000, $1.0 million in 2001 and $1.1 million in 2002.
II-80
NOTES (continued)
Alabama Power Company 1997 Annual Report
11. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1997 1996
------------------------
(in thousands)
Bond improvement fund
requirements $18,450 $ 19,410
First mortgage bond maturities
and redemptions 55,895 391
Other long-term debt maturities
(Note 10) 991 952
------------------------------------------------------------
Total long-term debt due within
one year 75,336 20,753
------------------------------------------------------------
Preferred stock to be reacquired - 100,000
------------------------------------------------------------
Total $75,336 $120,753
============================================================
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 1998 requirement of $18.5 million was
satisfied by the deposit of cash in 1998, all of which was used for the
redemption of outstanding first mortgage bonds. Also in early 1998, the company
redeemed $5.9 million first mortgage bonds and retired $50 million first
mortgage bonds. Scheduled maturities amount to $991 thousand in connection with
capitalized office building leases and a street light lease.
12. 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. 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, 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 Electric Insurance Limited (NEIL), 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 $8 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 primary
coverage. This excess insurance is also provided by NEIL.
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 17 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 per incident under current policies
for the company would be $10 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.
II-81
NOTES (continued)
Alabama Power Company 1997 Annual Report
All retrospective assessments, whether generated for liability, property
or replacement power may be subject to applicable state premium taxes.
13. 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, 1997, retained earnings of $796 million were
restricted against the payment of cash dividends on common stock under terms of
the mortgage indenture.
14. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Summarized quarterly financial data for 1997 and 1996 are as follows:
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
------------------- -----------------------------------------
(in thousands)
March 1997 $704,768 $123,455 $ 57,807
June 1997 728,089 125,750 63,137
September 1997 962,446 249,487 191,800
December 1997 753,808 128,511 63,195
March 1996 $732,809 $142,052 $ 73,159
June 1996 779,587 151,673 95,778
September 1996 913,308 222,523 152,589
December 1996 695,071 100,390 49,964
----------------------------------------------------------------
The company's business is influenced by seasonal weather conditions.
II-82
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,149,111 $3,120,775 $3,024,774
Net Income after Dividends
on Preferred Stock (in thousands) $375,939 $371,490 $360,894
Cash Dividends on Common Stock (in thousands) $339,600 $347,500 $285,000
Return on Average Common Equity (percent) 13.76 13.75 13.61
Total Assets (in thousands) $8,812,867 $8,733,846 $8,744,360
Gross Property Additions (in thousands) $451,167 $425,024 $551,781
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,750,569 $2,714,277 $2,690,374
Preferred stock 255,512 340,400 440,400
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities 297,000 97,000 -
Long-term debt 2,473,202 2,354,006 2,374,948
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,776,283 $5,505,683 $5,505,722
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.6 49.3 48.9
Preferred stock 4.4 6.2 8.0
Company obligated mandatorily redeemable preferred securities 5.2 1.7 -
Long-term debt 42.8 42.8 43.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - -
Retired 74,951 83,797 -
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued 200,000 97,000 -
Preferred Stock (in thousands):
Issued - - -
Retired 184,888 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- A+
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A+ A+ A
- -----------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,092,161 1,073,559 1,058,197
Commercial 177,362 171,827 166,480
Industrial 5,076 5,100 5,338
Other 728 732 725
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,275,327 1,251,218 1,230,740
===================================================================================================================================
Employees (year-end) 6,531 6,865 7,261
II-83
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,935,142 $3,007,609 $2,846,840
Net Income after Dividends
on Preferred Stock (in thousands) $356,338 $346,494 $338,555
Cash Dividends on Common Stock (in thousands) $268,000 $252,900 $273,300
Return on Average Common Equity (percent) 13.86 13.94 14.02
Total Assets (in thousands) $8,459,217 $8,248,683 $6,593,618
Gross Property Additions (in thousands) $536,785 $435,843 $367,463
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,614,405 $2,526,348 $2,443,493
Preferred stock 440,400 440,400 489,400
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities - - -
Long-term debt 2,455,013 2,362,852 2,202,473
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,509,818 $5,329,600 $5,135,366
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.4 47.4 47.6
Preferred stock 8.0 8.3 9.5
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 44.6 44.3 42.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued 150,000 860,000 745,000
Retired 20,387 699,788 931,797
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - -
Preferred Stock (in thousands):
Issued - 158,000 150,000
Retired - 207,000 145,000
- -----------------------------------------------------------------------------------------------------------------------------------
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 1,042,974 1,027,130 1,012,294
Commercial 162,239 157,337 152,530
Industrial 5,341 5,391 5,434
Other 716 713 704
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,211,270 1,190,571 1,170,962
===================================================================================================================================
Employees (year-end) 7,996 8,009 8,116
II-84A
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,846,794 $2,722,424 $2,629,354
Net Income after Dividends
on Preferred Stock (in thousands) $339,666 $312,803 $311,146
Cash Dividends on Common Stock (in thousands) $232,900 $220,800 $217,300
Return on Average Common Equity (percent) 14.55 14.00 14.53
Total Assets (in thousands) $6,549,462 $6,362,293 $6,279,431
Gross Property Additions (in thousands) $397,011 $444,680 $459,199
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,387,198 $2,280,590 $2,188,811
Preferred stock 484,400 484,400 484,400
Preferred stock subject to mandatory redemption - 12,500 17,500
Subsidiary obligated mandatorily redeemable preferred securities - - -
Long-term debt 2,382,635 2,397,931 2,435,129
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,254,233 $5,175,421 $5,125,840
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.4 44.1 42.7
Preferred stock 9.2 9.6 9.8
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 45.4 46.3 47.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued 250,000 - -
Retired 227,695 33,122 75,650
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - -
Preferred Stock (in thousands):
Issued - - -
Retired 17,500 5,000 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 997,585 985,566 974,622
Commercial 148,228 144,340 141,265
Industrial 5,496 5,322 5,200
Other 697 690 684
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,152,006 1,135,918 1,121,771
===================================================================================================================================
Employees (year-end) 8,513 9,473 9,698
II-84B
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1997 Annual Report
=====================================================================================================================
1988 1987
- ---------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,476,626 $2,574,634
Net Income after Dividends
on Preferred Stock (in thousands) $283,475 $257,239
Cash Dividends on Common Stock (in thousands) $212,700 $201,100
Return on Average Common Equity (percent) 14.03 13.56
Total Assets (in thousands) $6,180,945 $5,912,000
Gross Property Additions (in thousands) $643,892 $600,589
- ---------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,094,815 $1,946,747
Preferred stock 484,400 384,400
Preferred stock subject to mandatory redemption 22,500 27,500
Subsidiary obligated mandatorily redeemable preferred securities - -
Long-term debt 2,496,492 2,386,258
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,098,207 $4,744,905
=====================================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.1 41.0
Preferred stock 9.9 8.7
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 49.0 50.3
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
=====================================================================================================================
First Mortgage Bonds (in thousands):
Issued 150,000 200,000
Retired 42,445 108,082
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - -
Preferred Stock (in thousands):
Issued 100,000 -
Retired 2,500 5,000
- ---------------------------------------------------------------------------------------------------------------------
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 964,581 950,101
Commercial 137,955 134,533
Industrial 5,120 4,955
Other 678 713
- ---------------------------------------------------------------------------------------------------------------------
Total 1,108,334 1,090,302
=====================================================================================================================
Employees (year-end) 10,302 10,457
II-84C
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $997,507 $998,806 $997,069
Commercial 724,148 696,453 670,453
Industrial 775,591 759,628 805,596
Other 13,563 13,729 13,619
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,510,809 2,468,616 2,486,737
Sales for resale - non-affiliates 431,023 391,669 370,140
Sales for resale - affiliates 161,795 216,620 127,730
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,103,627 3,076,905 2,984,607
Other revenues 45,484 43,870 40,167
- -----------------------------------------------------------------------------------------------------------------------------------
Total $3,149,111 $3,120,775 $3,024,774
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,336,408 14,593,761 14,383,231
Commercial 11,330,312 10,904,476 10,043,220
Industrial 20,727,912 19,999,258 19,862,577
Other 180,389 192,573 186,848
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 46,575,021 45,690,068 44,475,876
Sales for resale - non-affiliates 11,893,905 9,491,237 8,046,189
Sales for resale - affiliates 8,993,326 10,292,066 6,705,174
- -----------------------------------------------------------------------------------------------------------------------------------
Total 67,462,252 65,473,371 59,227,239
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.96 6.84 6.93
Commercial 6.39 6.39 6.68
Industrial 3.74 3.80 4.06
Total retail 5.39 5.40 5.59
Sales for resale 2.84 3.07 3.38
Total sales 4.60 4.70 5.04
Residential Average Annual Kilowatt-Hour
Use Per Customer 13,254 13,705 13,686
Residential Average Annual Revenue
Per Customer $922.21 $937.95 $948.71
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 11,151 11,151 10,831
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 8,478 8,413 7,958
Summer 9,778 9,912 10,090
Annual Load Factor (percent) (Note 2) 62.7 61.3 59.2
Plant Availability (percent):
Fossil-steam 86.3 86.6 88.3
Nuclear 88.8 90.5 81.1
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 66.0 67.0 67.1
Nuclear 18.0 18.5 17.1
Hydro 7.6 7.1 7.0
Oil and gas 0.7 0.4 0.4
Purchased power -
From non-affiliates 2.3 2.4 2.7
From affiliates 5.4 4.6 5.7
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,984 10,035 10,025
Cost of fuel per million BTU (cents) 148.61 147.09 148.68
Average cost of fuel per net kilowatt-hour generated (cents) 1.48 1.48 1.49
===================================================================================================================================
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.
II-85
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $913,146 $947,277 $845,660
Commercial 647,202 634,895 589,816
Industrial 803,587 832,938 800,311
Other 13,515 13,344 12,734
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,377,450 2,428,454 2,248,521
Sales for resale - non-affiliates 354,760 364,105 407,791
Sales for resale - affiliates 164,762 181,975 158,088
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,896,972 2,974,534 2,814,400
Other revenues 38,170 33,075 32,440
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,935,142 $3,007,609 $2,846,840
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 13,183,147 13,185,062 12,069,268
Commercial 9,645,798 9,185,462 8,629,869
Industrial 19,479,364 18,595,237 18,260,274
Other 185,876 181,673 176,798
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 42,494,185 41,147,434 39,136,209
Sales for resale - non-affiliates 6,775,176 7,143,672 8,382,571
Sales for resale - affiliates 8,432,533 8,081,324 7,210,697
- -----------------------------------------------------------------------------------------------------------------------------------
Total 57,701,894 56,372,430 54,729,477
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.93 7.18 7.01
Commercial 6.71 6.91 6.83
Industrial 4.13 4.48 4.38
Total retail 5.59 5.90 5.75
Sales for resale 3.42 3.59 3.63
Total sales 5.02 5.28 5.14
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,746 12,936 12,017
Residential Average Annual Revenue
Per Customer $882.88 $929.36 $842.00
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,431 10,431 10,431
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 8,217 7,152 7,077
Summer 9,028 9,457 8,801
Annual Load Factor (percent) (Note 2) 62.2 58.6 59.6
Plant Availability (percent):
Fossil-steam 86.9 89.7 88.9
Nuclear 92.5 86.6 80.2
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 62.9 63.9 64.3
Nuclear 21.7 20.1 19.0
Hydro 8.4 6.9 8.5
Oil and gas * * *
Purchased power -
From non-affiliates 1.3 1.1 1.2
From affiliates 5.7 8.0 7.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,961 10,003 10,000
Cost of fuel per million BTU (cents) 157.62 173.66 164.57
Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.74 1.65
===================================================================================================================================
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.
II-86A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1997 Annual Report
===================================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $864,347 $825,645 $781,982
Commercial 582,730 551,634 533,487
Industrial 790,224 777,580 762,274
Other 12,662 12,103 11,743
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,249,963 2,166,962 2,089,486
Sales for resale - non-affiliates 407,912 434,996 409,202
Sales for resale - affiliates 159,375 93,473 104,488
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,817,250 2,695,431 2,603,176
Other revenues 29,544 26,993 26,178
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,846,794 $2,722,424 $2,629,354
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 12,324,898 11,996,794 11,346,736
Commercial 8,526,131 8,201,534 7,915,685
Industrial 17,511,579 17,713,153 17,360,791
Other 174,760 170,420 166,485
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 38,537,368 38,081,901 36,789,697
Sales for resale - non-affiliates 8,810,442 10,277,060 10,292,329
Sales for resale - affiliates 7,784,285 4,519,275 5,048,743
- -----------------------------------------------------------------------------------------------------------------------------------
Total 55,132,095 52,878,236 52,130,769
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.01 6.88 6.89
Commercial 6.83 6.73 6.74
Industrial 4.51 4.39 4.39
Total retail 5.84 5.69 5.68
Sales for resale 3.42 3.57 3.35
Total sales 5.11 5.10 4.99
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,435 12,256 11,717
Residential Average Annual Revenue
Per Customer $872.04 $843.50 $807.50
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,539 9,879 9,879
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,586 6,293 7,264
Summer 8,627 8,878 8,256
Annual Load Factor (percent) (Note 2) 59.9 57.4 59.5
Plant Availability (percent):
Fossil-steam 93.1 92.2 90.7
Nuclear 87.0 86.5 83.1
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 61.5 57.0 54.1
Nuclear 20.8 21.6 21.0
Hydro 8.2 8.7 11.0
Oil and gas * 0.1 0.1
Purchased power -
From non-affiliates 1.6 0.9 1.8
From affiliates 7.9 11.7 12.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,985 10,072 10,061
Cost of fuel per million BTU (cents) 170.49 171.55 172.20
Average cost of fuel per net kilowatt-hour generated (cents) 1.70 1.73 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.
II-86B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1997 Annual Report
====================================================================================================================
1988 1987
- --------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $761,805 $759,957
Commercial 510,910 501,088
Industrial 738,755 721,298
Other 11,255 10,968
- --------------------------------------------------------------------------------------------------------------------
Total retail 2,022,725 1,993,311
Sales for resale - non-affiliates 355,362 443,880
Sales for resale - affiliates 76,691 118,746
- --------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,454,778 2,555,937
Other revenues 21,848 18,697
- --------------------------------------------------------------------------------------------------------------------
Total $2,476,626 $2,574,634
====================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 11,332,285 11,149,225
Commercial 7,711,092 7,476,924
Industrial 16,881,342 15,969,075
Other 165,122 159,422
- --------------------------------------------------------------------------------------------------------------------
Total retail 36,089,841 34,754,646
Sales for resale - non-affiliates 7,905,750 10,523,554
Sales for resale - affiliates 3,551,142 4,963,997
- --------------------------------------------------------------------------------------------------------------------
Total 47,546,733 50,242,197
====================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.72 6.82
Commercial 6.63 6.70
Industrial 4.38 4.52
Total retail 5.60 5.74
Sales for resale 3.77 3.63
Total sales 5.16 5.09
Residential Average Annual Kilowatt-Hour
Use Per Customer 11,839 11,848
Residential Average Annual Revenue
Per Customer $795.84 $807.61
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,279 9,337
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,377 6,138
Summer 7,991 7,886
Annual Load Factor (percent) (Note 2) 59.6 58.3
Plant Availability (percent):
Fossil-steam 91.3 90.2
Nuclear 91.9 83.3
- --------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 53.9 52.5
Nuclear 26.1 21.7
Hydro 4.8 6.3
Oil and gas 0.1 0.2
Purchased power -
From non-affiliates 0.5 0.2
From affiliates 14.6 19.1
- --------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
====================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,137 10,214
Cost of fuel per million BTU (cents) 168.21 176.72
Average cost of fuel per net kilowatt-hour generated (cents) 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.
II-86C
STATEMENTS OF INCOME
Alabama Power Company
================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,987,316 $2,904,155 $2,897,044
Revenues from affiliates 161,795 216,620 127,730
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,149,111 3,120,775 3,024,774
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 896,014 877,076 791,819
Purchased power from non-affiliates 41,795 36,813 30,065
Purchased power from affiliates 95,538 91,500 112,826
Proceeds from settlement of disputed contracts - - -
Other 510,203 505,884 501,876
Maintenance 242,691 258,482 243,218
Depreciation and amortization 330,377 320,102 303,050
Taxes other than income taxes 185,062 186,172 185,620
Federal and state income taxes 220,228 228,108 230,982
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,521,908 2,504,137 2,399,456
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 627,203 616,638 625,318
Other Income (Expense):
Allowance for equity funds used during construction - - 1,649
Income from subsidiary 4,266 3,851 4,051
Charitable foundation - (6,800) (11,542)
Interest income 37,844 28,318 13,768
Other, net (38,522) (39,053) (21,536)
Income taxes applicable to other income 12,351 22,400 14,142
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 643,142 625,354 625,850
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 167,172 169,390 180,714
Allowance for debt funds used during construction (4,787) (6,480) (7,067)
Interest on interim obligations 22,787 20,617 16,917
Amortization of debt discount, premium, and expense, net 9,645 9,508 20,259
Other interest charges 36,037 27,510 27,064
Distributions on preferred securities of
Alabama Power Capital Trust I 21,763 6,717 -
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 252,617 227,262 237,887
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 390,525 398,092 387,963
Dividends on Preferred Stock 14,586 26,602 27,069
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 375,939 $ 371,490 $ 360,894
================================================================================================================================
II-87
STATEMENTS OF INCOME
Alabama Power Company
============================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,770,380 $2,825,634 $2,688,752
Revenues from affiliates 164,762 181,975 158,088
- ----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 2,935,142 3,007,609 2,846,840
- ----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 801,948 877,099 794,438
Purchased power from non-affiliates 15,158 15,230 14,242
Purchased power from affiliates 100,888 120,330 107,230
Proceeds from settlement of disputed contracts - (2,568) (641)
Other 458,917 473,383 446,477
Maintenance 262,102 252,506 237,071
Depreciation and amortization 292,420 290,310 280,881
Taxes other than income taxes 183,425 178,997 172,095
Federal and state income taxes 224,280 207,210 201,925
---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,339,138 2,412,497 2,253,718
- ----------------------------------------------------------------------------------------------------------------------------
Operating Income 596,004 595,112 593,122
Other Income (Expense):
Allowance for equity funds used during construction 3,239 3,260 2,071
Income from subsidiary 3,588 4,127 4,635
Charitable foundation (13,500) (3,000) (6,887)
Interest income 16,944 20,775 14,804
Other, net (30,569) (24,420) (11,019)
Income taxes applicable to other income 16,834 10,239 8,947
- ----------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 592,540 606,093 605,673
- ----------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 178,045 184,861 206,871
Allowance for debt funds used during construction (3,548) (2,992) (2,416)
Interest on interim obligations 5,939 3,760 3,704
Amortization of debt discount, premium, and expense, net 9,623 8,937 4,392
Other interest charges 19,908 35,474 19,381
Distributions on preferred securities of
Alabama Power Capital Trust I - - -
- ----------------------------------------------------------------------------------------------------------------------------
Net interest charges 209,967 230,040 231,932
- ----------------------------------------------------------------------------------------------------------------------------
Net Income 382,573 376,053 373,741
Dividends on Preferred Stock 26,235 29,559 35,186
- ----------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 356,338 $ 346,494 $ 338,555
============================================================================================================================
II-88A
STATEMENTS OF INCOME
Alabama Power Company
============================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,687,419 $2,628,951 $2,524,866
Revenues from affiliates 159,375 93,473 104,488
- ----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 2,846,794 2,722,424 2,629,354
- ----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 812,667 756,501 712,453
Purchased power from non-affiliates 21,080 11,185 28,272
Purchased power from affiliates 119,602 165,982 163,267
Proceeds from settlement of disputed contracts (14,819) - -
Other 435,908 411,559 380,536
Maintenance 229,114 215,304 202,633
Depreciation and amortization 271,433 262,817 247,973
Taxes other than income taxes 169,639 163,567 154,398
Federal and state income taxes 200,612 185,954 188,507
- --------------------------------------------------------------------------------------------- -------------- --------------
Total operating expenses 2,245,236 2,172,869 2,078,039
- ----------------------------------------------------------------------------------------------------------------------------
Operating Income 601,558 549,555 551,315
Other Income (Expense):
Allowance for equity funds used during construction 2,368 25,487 29,515
Income from subsidiary 4,576 4,182 3,750
Charitable foundation (6,500) (17,500) (25,000)
Interest income 14,356 12,006 10,871
Other, net (9,926) (8,235) (4,313)
Income taxes applicable to other income 7,523 11,081 13,629
- ---------------------------------------------------------------------------------------------- -------------- --------------
Income Before Interest Charges 613,955 576,576 579,767
- ----------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 214,107 221,527 230,046
Allowance for debt funds used during construction (6,903) (23,339) (27,627)
Interest on interim obligations 13,385 10,252 9,098
Amortization of debt discount, premium, and expense, net 2,634 3,706 4,469
Other interest charges 14,927 13,115 13,112
Distributions on preferred securities of
Alabama Power Capital Trust I - - -
- -----------------------------------------------------------------------------------------------------------------------------
Net interest charges 238,150 225,261 229,098
- -----------------------------------------------------------------------------------------------------------------------------
Net Income 375,805 351,315 350,669
Dividends on Preferred Stock 36,139 38,512 39,523
- -----------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 339,666 $ 312,803 $ 311,146
=============================================================================================================================
II-88B
STATEMENTS OF INCOME
Alabama Power Company
=============================================================================================================
For the Years Ended December 31, 1988 1987
- -------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,399,935 $2,455,888
Revenues from affiliates 76,691 118,746
------------------------------------------------------------------------------------------------------------
Total operating revenues 2,476,626 2,574,634
- -------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 676,423 696,763
Purchased power from non-affiliates 8,407 6,703
Purchased power from affiliates 185,390 257,052
Proceeds from settlement of disputed contracts - -
Other 400,879 410,575
Maintenance 197,225 199,617
Depreciation and amortization 225,123 212,072
Taxes other than income taxes 148,681 141,422
Federal and state income taxes 143,614 190,575
- -------------------------------------------------------------------------------------------------------------
Total operating expenses 1,985,742 2,114,779
- -------------------------------------------------------------------------------------------------------------
Operating Income 490,884 459,855
Other Income (Expense):
Allowance for equity funds used during construction 39,047 27,663
Income from subsidiary 3,302 3,440
Charitable foundation - -
Interest income 9,914 7,044
Other, net (13,694) (816)
Income taxes applicable to other income 8,034 849
-------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 537,487 498,035
- -------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 225,522 205,824
Allowance for debt funds used during construction (31,830) (24,235)
Interest on interim obligations 5,714 7,221
Amortization of debt discount, premium, and expense, net 4,411 4,405
Other interest charges 13,715 14,662
Distributions on preferred securities of
Alabama Power Capital Trust I - -
- -------------------------------------------------------------------------------------------------------------
Net interest charges 217,532 207,877
- -------------------------------------------------------------------------------------------------------------
Net Income 319,955 290,158
Dividends on Preferred Stock 36,480 32,919
- -------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 283,475 $ 257,239
=============================================================================================================
II-88C
STATEMENTS OF CASH FLOWS
Alabama Power Company
- ------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 390,525 $ 398,092 $ 387,963
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 394,572 383,438 371,382
Deferred income taxes, net (12,429) 16,585 32,702
Deferred investment tax credits, net - - (75)
Allowance for equity funds used during construction - - (1,649)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net (11,353) 6,247 459
Changes in certain current assets and liabilities --
Receivables, net (30,268) 3,958 (54,209)
Inventories 13,709 36,234 18,425
Payables (9,745) 1,006 (63,656)
Taxes accrued 6,191 (5,756) 551
Energy cost recovery, retail 7,108 25,771 1,177
Other 7,127 8,205 16,890
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 755,437 873,780 709,960
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (451,167) (425,024) (551,781)
Sales of property - - -
Other (51,791) (61,119) (53,321)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (502,958) (486,143) (605,102)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities 200,000 97,000 -
Preferred stock - - -
First mortgage bonds - - -
Pollution control bonds 258,800 21,000 131,500
Other long-term debt - - -
Capital contributions from parent company - - -
Prepaid capacity revenues - - -
Retirements:
Preferred stock (184,888) - -
First mortgage bonds (74,951) (83,797) -
Pollution control bonds - (21,000) (131,500)
Other long-term debt (951) (907) (791)
Interim obligations, net (57,971) (25,163) 210,134
Payment of preferred stock dividends (22,524) (26,665) (27,118)
Payment of common stock dividends (339,600) (347,500) (285,000)
Miscellaneous (16,024) (3,634) (4,143)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (238,109) (390,666) (106,918)
- ------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash 14,370 (3,029) (2,060)
Cash at Beginning of Year 9,587 12,616 14,676
- ------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 23,957 $ 9,587 $ 12,616
==============================================================================================================================
( ) Denotes use of cash.
II-89
STATEMENTS OF CASH FLOWS
Alabama Power Company
================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 382,573 $ 376,053 $ 373,741
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 359,791 356,499 338,421
Deferred income taxes, net (32,612) 35,100 23,514
Deferred investment tax credits, net (1) (2,106) -
Allowance for equity funds used during construction (3,239) (3,260) (2,071)
Non-cash proceeds from settlement of disputed contracts - - (641)
Other, net 28,656 36,493 (2,657)
Changes in certain current assets and liabilities --
Receivables, net 19,390 19,215 (11,010)
Inventories (38,946) 51,630 12,704
Payables (21,240) 31,544 2,158
Taxes accrued 6,856 (9,959) (21,120)
Energy cost recovery, retail 16,907 (56,128) 45,509
Other (14,235) (21,110) 10,629
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 703,900 813,971 769,177
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (536,785) (435,843) (367,463)
Sales of property - - 43,556
Other (26,632) (741) (13,379)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (563,417) (436,584) (337,286)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities - - -
Preferred stock - 158,000 150,000
First mortgage bonds 150,000 860,000 745,000
Pollution control bonds 179,750 144,436 -
Other long-term debt 28,970 35,878 48,382
Capital contributions from parent company - - -
Prepaid capacity revenues - - -
Retirements:
Preferred stock - (207,000) (145,000)
First mortgage bonds (20,387) (699,788) (931,797)
Pollution control bonds (179,750) (135,315) (335)
Other long-term debt (125,630) (46,014) (53,888)
Interim obligations, net 139,882 (156,917) 120,917
Payment of preferred stock dividends (25,431) (32,099) (35,704)
Payment of common stock dividends (268,000) (252,900) (273,300)
Miscellaneous (8,444) (56,064) (53,697)
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (129,040) (387,783) (429,422)
- --------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash 11,443 (10,396) 2,469
Cash at Beginning of Year 3,233 13,629 11,160
- --------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 14,676 $ 3,233 $ 13,629
================================================================================================================================
( ) Denotes use of cash.
II-90A
STATEMENTS OF CASH FLOWS
Alabama Power Company
==============================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 375,805 $ 351,315 $ 350,669
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 337,978 331,858 322,042
Deferred income taxes, net (5,779) 64,480 31,715
Deferred investment tax credits, net (1,089) 132 6,917
Allowance for equity funds used during construction (2,368) (25,487) (29,515)
Non-cash proceeds from settlement of disputed contracts (13,750) - -
Other, net 26,614 19,899 (5,297)
Changes in certain current assets and liabilities --
Receivables, net 9,178 12,005 (10,436)
Inventories (17,374) (40,901) 20,408
Payables 28,889 6,597 16,259
Taxes accrued 24,828 (6,167) 1,547
Energy cost recovery, retail (12,304) (42,535) 39,164
Other (37,906) 14,144 28,701
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 712,722 685,340 772,174
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (397,011) (444,680) (459,199)
Sales of property - - -
Other (36,083) 6,935 3,768
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (433,094) (437,745) (455,431)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities - - -
Preferred stock - - -
First mortgage bonds 250,000 - -
Pollution control bonds - - 53,700
Other long-term debt 12,906 54,831 55,176
Capital contributions from parent company - - -
Prepaid capacity revenues 52,900 - -
Retirements:
Preferred stock (17,500) (5,000) (5,000)
First mortgage bonds (227,695) (33,122) (75,650)
Pollution control bonds (250) (250) (53,950)
Other long-term debt (48,428) (56,895) (57,316)
Interim obligations, net (13,500) 59,500 30,000
Payment of preferred stock dividends (36,829) (38,245) (40,105)
Payment of common stock dividends (232,900) (220,800) (217,300)
Miscellaneous (17,732) (293) (4,576)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (279,028) (240,274) (315,021)
- ------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash 600 7,321 1,722
Cash at Beginning of Year 10,560 3,239 1,517
- ------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 11,160 $ 10,560 $ 3,239
==============================================================================================================================
( ) Denotes use of cash.
II-90B
STATEMENTS OF CASH FLOWS
Alabama Power Company
=================================================================================================================
For the Years Ended December 31, 1988 1987
- --------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 319,955 $ 290,158
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 296,234 270,492
Deferred income taxes, net 37,952 107,824
Deferred investment tax credits, net 15,019 23,477
Allowance for equity funds used during construction (39,047) (27,663)
Non-cash proceeds from settlement of disputed contracts - -
Other, net 16,106 67,445
Changes in certain current assets and liabilities --
Receivables, net 8,822 (133,468)
Inventories (23,182) (26,255)
Payables (12,957) 39,645
Taxes accrued (7,754) 516
Energy cost recovery, retail - -
Other (18,658) 4,464
- ---------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 592,490 616,635
- --------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (643,892) (600,589)
Sales of property - -
Other 23,161 17,010
- --------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (620,731) (583,579)
- --------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities - -
Preferred stock 100,000 -
First mortgage bonds 150,000 200,000
Pollution control bonds - 432
Other long-term debt 62,515 69,786
Capital contributions from parent company 79,500 43,000
Prepaid capacity revenues - -
Retirements:
Preferred stock (2,500) (5,000)
First mortgage bonds (42,445) (108,082)
Pollution control bonds - -
Other long-term debt (56,748) (32,500)
Interim obligations, net (15,000) 15,000
Payment of preferred stock dividends (35,362) (32,837)
Payment of common stock dividends (212,700) (201,100)
Miscellaneous (5,581) (2,581)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 21,679 (53,882)
- --------------------------------------------------------------------------------------------------------------
Net Change in Cash (6,562) (20,826)
Cash at Beginning of Year 8,079 28,905
- --------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 1,517 $ 8,079
==============================================================================================================
( ) Denotes use of cash.
II-90C
BALANCE SHEETS
Alabama Power Company
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,330,389 $ 3,326,628 $ 3,221,250
Nuclear 1,893,359 1,884,567 1,874,111
Hydro 863,511 844,609 834,790
- -----------------------------------------------------------------------------------------------------------------------------------
Total production 6,087,259 6,055,804 5,930,151
Transmission 1,275,091 1,208,636 1,132,336
Distribution 2,803,423 2,657,327 2,522,051
General 883,568 864,321 825,417
Construction work in progress 311,179 256,758 362,722
Nuclear fuel, at amortized cost 103,272 123,862 100,537
- -----------------------------------------------------------------------------------------------------------------------------------
Total electric plant 11,463,792 11,166,708 10,873,214
- -----------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,982 20,833 20,837
Construction work in progress 44 44 46
- -----------------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 21,026 20,877 20,883
- -----------------------------------------------------------------------------------------------------------------------------------
Total utility plant 11,484,818 11,187,585 10,894,097
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 4,371,895 4,102,070 3,827,123
Steam heat 12,285 11,552 10,970
- -----------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 4,384,180 4,113,622 3,838,093
- -----------------------------------------------------------------------------------------------------------------------------------
Total 7,100,638 7,073,963 7,056,004
Less property-related accumulated deferred income taxes - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total 7,100,638 7,073,963 7,056,004
- -----------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 193,008 148,760 108,368
Miscellaneous 47,205 46,275 46,388
- -----------------------------------------------------------------------------------------------------------------------------------
Total 240,213 195,035 154,756
- -----------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 23,957 9,587 12,616
Investment securities - - -
Receivables, net 445,257 414,989 427,157
Fossil fuel stock, at average cost 74,186 81,704 106,627
Materials and supplies, at average cost 161,601 167,792 179,103
Prepayments 20,453 17,841 17,618
Vacation pay deferred 28,783 28,369 29,458
- -----------------------------------------------------------------------------------------------------------------------------------
Total 754,237 720,282 772,579
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 384,549 410,010 436,837
Debt expense, being amortized 7,276 7,398 7,648
Premium on reacquired debt, being amortized 81,417 84,149 89,967
Uranium enrichment decontamination and decommissioning fund 34,416 37,490 40,282
Miscellaneous 210,121 205,519 186,287
- -----------------------------------------------------------------------------------------------------------------------------------
Total 717,779 744,566 761,021
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 8,812,867 $ 8,733,846 $ 8,744,360
===================================================================================================================================
II-91
BALANCE SHEETS
Alabama Power Company
==============================================================================================================================
At December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,027,956 $ 2,987,010 $ 2,953,683
Nuclear 1,866,750 1,860,842 1,860,832
Hydro 836,256 819,848 818,363
- ------------------------------------------------------------------------------------------------------------------------------
Total production 5,730,962 5,667,700 5,632,878
Transmission 1,087,452 1,051,130 1,013,464
Distribution 2,366,477 2,206,834 2,072,165
General 847,111 810,551 751,652
Construction work in progress 317,745 225,743 164,555
Nuclear fuel, at amortized cost 101,630 93,551 101,128
- ------------------------------------------------------------------------------------------------------------------------------
Total electric plant 10,451,377 10,055,509 9,735,842
- ------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,770 20,926 20,924
Construction work in progress 34 43 33
- ------------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,804 20,969 20,957
- ------------------------------------------------------------------------------------------------------------------------------
Total utility plant 10,472,181 10,076,478 9,756,799
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 3,588,363 3,374,310 3,122,332
Steam heat 10,241 9,846 9,211
- ------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 3,598,604 3,384,156 3,131,543
- ------------------------------------------------------------------------------------------------------------------------------
Total 6,873,577 6,692,322 6,625,256
Less property-related accumulated deferred income taxes - - 1,170,982
- ------------------------------------------------------------------------------------------------------------------------------
Total 6,873,577 6,692,322 5,454,274
- ------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 71,014 49,550 32,390
Miscellaneous 43,955 49,635 49,892
- ------------------------------------------------------------------------------------------------------------------------------
Total 114,969 99,185 82,282
- ------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 14,676 3,233 13,629
Investment securities - - 64,832
Receivables, net 374,125 410,422 344,934
Fossil fuel stock, at average cost 119,555 88,481 134,328
Materials and supplies, at average cost 184,600 176,728 182,511
Prepayments 103,550 79,207 108,254
Vacation pay deferred 20,442 22,680 21,879
- ------------------------------------------------------------------------------------------------------------------------------
Total 816,948 780,751 870,367
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 451,886 469,010 -
Debt expense, being amortized 7,370 7,064 6,118
Premium on reacquired debt, being amortized 101,851 102,634 74,835
Uranium enrichment decontamination and decommissioning fund 42,996 45,554 47,730
Miscellaneous 49,620 52,163 58,012
- ------------------------------------------------------------------------------------------------------------------------------
Total 653,723 676,425 186,695
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 8,459,217 $ 8,248,683 $ 6,593,618
==============================================================================================================================
II-92A
BALANCE SHEETS
Alabama Power Company
============================================================================================================================
At December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 2,991,876 $ 2,462,100 $ 2,428,146
Nuclear 1,851,317 1,794,540 1,786,877
Hydro 814,301 809,578 803,901
- ----------------------------------------------------------------------------------------------------------------------------
Total production 5,657,494 5,066,218 5,018,924
Transmission 977,239 925,368 882,933
Distribution 1,947,972 1,815,265 1,692,426
General 713,948 660,217 646,523
Construction work in progress 148,564 654,055 557,150
Nuclear fuel, at amortized cost 109,259 143,711 147,997
- ----------------------------------------------------------------------------------------------------------------------------
Total electric plant 9,554,476 9,264,834 8,945,953
- ----------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,214 20,091 20,083
Construction work in progress 181 74 71
- ----------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,395 20,165 20,154
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 9,574,871 9,284,999 8,966,107
- ----------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 2,913,385 2,676,957 2,458,747
Steam heat 8,492 7,861 7,154
- ----------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 2,921,877 2,684,818 2,465,901
- ----------------------------------------------------------------------------------------------------------------------------
Total 6,652,994 6,600,181 6,500,206
Less property-related accumulated deferred income taxes 1,140,303 1,106,664 1,051,877
- ----------------------------------------------------------------------------------------------------------------------------
Total 5,512,691 5,493,517 5,448,329
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts 69,550 - -
Nuclear decommissioning trusts 15,864 - -
Miscellaneous 48,254 40,604 34,710
- ----------------------------------------------------------------------------------------------------------------------------
Total 133,668 40,604 34,710
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 11,160 10,560 3,239
Investment securities - - -
Receivables, net 349,599 346,473 355,107
Fossil fuel stock, at average cost 154,798 144,960 131,942
Materials and supplies, at average cost 174,745 167,209 139,326
Prepayments 95,832 50,364 54,613
Vacation pay deferred 21,691 22,845 22,021
- ----------------------------------------------------------------------------------------------------------------------------
Total 807,825 742,411 706,248
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - -
Debt expense, being amortized 5,957 6,083 6,491
Premium on reacquired debt, being amortized 40,174 26,504 28,778
Uranium enrichment decontamination and decommissioning fund - - -
Miscellaneous 49,147 53,174 54,875
- ----------------------------------------------------------------------------------------------------------------------------
Total 95,278 85,761 90,144
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 6,549,462 $ 6,362,293 $ 6,279,431
============================================================================================================================
II-92B
BALANCE SHEETS
Alabama Power Company
=============================================================================================================
At December 31, 1988 1987
- -------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 1,820,966 $ 1,787,979
Nuclear 1,769,093 1,765,854
Hydro 789,617 788,046
- -------------------------------------------------------------------------------------------------------------
Total production 4,379,676 4,341,879
Transmission 844,003 817,065
Distribution 1,587,690 1,481,845
General 613,498 535,148
Construction work in progress 1,023,019 750,907
Nuclear fuel, at amortized cost 174,130 191,493
- -------------------------------------------------------------------------------------------------------------
Total electric plant 8,622,016 8,118,337
- -------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,076 20,217
Construction work in progress 58 89
- -------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,134 20,306
- -------------------------------------------------------------------------------------------------------------
Total utility plant 8,642,150 8,138,643
- -------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 2,257,696 2,068,176
Steam heat 6,456 5,938
- -------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 2,264,152 2,074,114
- -------------------------------------------------------------------------------------------------------------
Total 6,377,998 6,064,529
Less property-related accumulated deferred income taxes 1,001,173 933,932
- -------------------------------------------------------------------------------------------------------------
Total 5,376,825 5,130,597
- -------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - -
Nuclear decommissioning trusts - -
Miscellaneous 29,677 31,402
- -------------------------------------------------------------------------------------------------------------
Total 29,677 31,402
- -------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,517 8,079
Investment securities - -
Receivables, net 344,671 353,493
Fossil fuel stock, at average cost 173,858 164,671
Materials and supplies, at average cost 117,818 103,823
Prepayments 28,412 10,595
Vacation pay deferred 21,871 21,317
- -------------------------------------------------------------------------------------------------------------
Total 688,147 661,978
- -------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - -
Debt expense, being amortized 6,831 6,695
Premium on reacquired debt, being amortized 27,329 30,767
Uranium enrichment decontamination and decommissioning fund - -
Miscellaneous 52,136 50,561
- -------------------------------------------------------------------------------------------------------------
Total 86,296 88,023
- -------------------------------------------------------------------------------------------------------------
Total Assets $ 6,180,945 $ 5,912,000
=============================================================================================================
II-92C
BALANCE SHEETS
Alabama Power Company
==============================================================================================================================
At December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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 99 146 146
Earnings retained in the business 1,221,467 1,185,128 1,161,225
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 2,750,569 2,714,277 2,690,374
Preferred stock 255,512 340,400 440,400
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes 297,000 97,000 -
Long-term debt 2,473,202 2,354,006 2,374,948
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,776,283 5,505,683 5,505,722
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - -
Commercial paper 306,882 364,853 390,016
Preferred stock due within one year - 100,000 -
Long-term debt due within one year 75,336 20,753 84,682
Accounts payable 238,968 246,870 258,727
Customer deposits 34,968 32,003 30,353
Taxes accrued 36,486 50,909 31,757
Interest accrued 50,722 51,941 53,527
Vacation pay accrued 28,783 28,369 29,458
Miscellaneous 103,602 96,485 70,543
- --------------------------------------------------------------------------------------------------------------------------------
Total 875,747 992,183 949,063
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,192,265 1,177,687 1,191,591
Accumulated deferred investment tax credits 282,873 294,071 305,372
Prepaid capacity revenues, net 109,982 122,496 131,186
Deferred revenues from settlement of disputed contracts - - -
Uranium enrichment decontamination and decommissioning fund 30,592 33,741 36,620
Deferred credits related to income taxes 327,328 364,792 386,038
Natural disaster reserve 22,416 20,757 17,959
Miscellaneous 195,381 222,436 220,809
- --------------------------------------------------------------------------------------------------------------------------------
Total 2,160,837 2,235,980 2,289,575
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 8,812,867 $ 8,733,846 $ 8,744,360
================================================================================================================================
II-93
BALANCE SHEETS
Alabama Power Company
================================================================================================================================
At December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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 146 146 342
Earnings retained in the business 1,085,256 997,199 914,148
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 2,614,405 2,526,348 2,443,493
Preferred stock 440,400 440,400 489,400
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes - - -
Long-term debt 2,455,013 2,362,852 2,202,473
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,509,818 5,329,600 5,135,366
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 40,000 71,000
Commercial paper 179,882 - 125,917
Preferred stock due within one year - - -
Long-term debt due within one year 796 58,998 67,379
Accounts payable 318,991 334,998 296,731
Customer deposits 30,245 31,198 31,286
Taxes accrued 22,437 40,144 24,373
Interest accrued 52,516 52,809 41,675
Vacation pay accrued 20,442 22,680 21,879
Miscellaneous 57,047 50,426 93,836
- --------------------------------------------------------------------------------------------------------------------------------
Total 682,356 631,253 774,076
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,181,342 1,165,127 -
Accumulated deferred investment tax credits 317,018 329,909 344,707
Prepaid capacity revenues, net 138,421 143,762 147,658
Deferred revenues from settlement of disputed contracts - 19,871 46,721
Uranium enrichment decontamination and decommissioning fund 39,413 39,644 44,548
Deferred credits related to income taxes 405,256 440,945 -
Natural disaster reserve 28,750 - -
Miscellaneous 156,843 148,572 100,542
- --------------------------------------------------------------------------------------------------------------------------------
Total 2,267,043 2,287,830 684,176
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 8,459,217 $ 8,248,683 $ 6,593,618
================================================================================================================================
II-94A
BALANCE SHEETS
Alabama Power Company
============================================================================================================================
At December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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 461 461 461
Earnings retained in the business 857,734 751,126 659,347
- ----------------------------------------------------------------------------------------------------------------------------
Total common equity 2,387,198 2,280,590 2,188,811
Preferred stock 484,400 484,400 484,400
Preferred stock subject to mandatory redemption - 12,500 17,500
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes - - -
Long-term debt 2,382,635 2,397,931 2,435,129
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,254,233 5,175,421 5,125,840
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 76,000 89,500 30,000
Commercial paper - - -
Preferred stock due within one year - 5,000 5,000
Long-term debt due within one year 85,077 83,989 81,031
Accounts payable 295,333 271,776 267,645
Customer deposits 30,165 29,571 28,450
Taxes accrued 45,493 20,665 26,832
Interest accrued 49,288 49,820 49,926
Vacation pay accrued 21,691 22,845 22,021
Miscellaneous 37,699 64,547 91,022
- ----------------------------------------------------------------------------------------------------------------------------
Total 640,746 637,713 601,927
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - -
Accumulated deferred investment tax credits 362,672 379,990 399,097
Prepaid capacity revenues, net 149,534 99,835 102,346
Deferred revenues from settlement of disputed contracts 59,937 - -
Uranium enrichment decontamination and decommissioning fund - - -
Deferred credits related to income taxes - - -
Natural disaster reserve - - -
Miscellaneous 82,340 69,334 50,221
- ----------------------------------------------------------------------------------------------------------------------------
Total 654,483 549,159 551,664
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 6,549,462 $ 6,362,293 $ 6,279,431
============================================================================================================================
II-94B
BALANCE SHEETS
Alabama Power Company
=============================================================================================================
At December 31, 1988 1987
- -------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,225,145
Premium on preferred stock 461 461
Earnings retained in the business 565,351 496,783
- -------------------------------------------------------------------------------------------------------------
Total common equity 2,094,815 1,946,747
Preferred stock 484,400 384,400
Preferred stock subject to mandatory redemption 22,500 27,500
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes - -
Long-term debt 2,496,492 2,386,258
- -------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,098,207 4,744,905
- -------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 15,000
Commercial paper - -
Preferred stock due within one year 5,000 2,500
Long-term debt due within one year 96,242 95,140
Accounts payable 259,443 273,613
Customer deposits 25,964 32,220
Taxes accrued 25,285 72,118
Interest accrued 50,174 49,489
Vacation pay accrued 21,871 21,317
Miscellaneous 28,944 24,660
- -------------------------------------------------------------------------------------------------------------
Total 512,923 586,057
- -------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - -
Accumulated deferred investment tax credits 412,771 418,370
Prepaid capacity revenues, net 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 52,833 58,721
- -------------------------------------------------------------------------------------------------------------
Total 569,815 581,038
- -------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 6,180,945 $ 5,912,000
=============================================================================================================
II-94C
ALABAMA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ----------------------------------------------------------------------------------------------
(Thousands) (Thousands)
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 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
---------- ----------
$1,845,000 $1,841,108
========== ==========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ----------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1978 $ 5,600 7-1/4% $ 1,000 5/1/03
1994 53,700 Variable 53,700 6/1/15
1993 12,000 Variable 12,000 8/1/17
1993 12,000 Variable 12,000 8/1/17
1993 12,100 Variable 12,100 8/1/17
1996 21,000 Variable 21,000 11/1/21
1997 65,000 Variable 65,000 11/1/21
1995 50,000 Variable 50,000 5/1/22
1993 9,800 5.80% 9,800 6/1/22
1995 81,500 Variable 81,500 10/1/22
1993 96,990 6.05% 96,990 5/1/23
1994 101,650 6-1/2% 101,650 9/1/23
1994 24,400 5-1/2% 24,400 1/1/24
---------- ----------
$ 545,740 $ 541,140
========== ==========
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trusts Holding Company Junior Subordinated Notes
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
- ----------------------------------------------------------------------------------------------
(Thousands)
1996 3,880,000(1) 7.375% $ 97,000(1)
1997 8,000,000(2) 7.60% 200,000(2)
---------- ----------
11,880,000 $ 297,000
========== ==========
(1) Issued by Alabama Power Capital Trust I and guaranteed to the extent Alabama Power
Capital Trust I has funds by ALABAMA.
(2) Issued by Alabama Power Capital Trust II and guaranteed to the extent Alabama Power
Capital Trust II has funds by ALABAMA.
II-95
ALABAMA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997 (Continued)
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
----------------------------------------------------------------------------------
(Thousands)
1946-1952 135,117 4.20% $ 13,512
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
1988 500,000 Auction 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
--------- --------
6,495,317 $255,512
========= ========
=========================================================================================
SECURITIES RETIRED DURING 1997
First Mortgage Bonds
Principal Interest
Series Amount Rate
----------------------------------------------------------------------------------
(Thousands)
1991 $ 74,951 9-1/4%
Preferred Stock
Principal Dividend
Series Amount Rate
----------------------------------------------------------------------------------
(Thousands)
1946-1952 $ 22,888 4.20%
1966 7,000 5.96%
1968 5,000 6.88%
1992 100,000 7.60%
1992 50,000 7.60%
----------
$ 184,888
==========
II-96
GEORGIA POWER COMPANY
FINANCIAL SECTION
II-97
MANAGEMENT'S REPORT
Georgia Power Company 1997 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 four
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 11, 1998
II-98
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 a wholly owned subsidiary of
Southern Company) as of December 31, 1997 and 1996, 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, 1997. 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 11-108 through II-128)
referred to above present fairly, in all material respects, the financial
position of Georgia Power Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 11, 1998
II-99
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Georgia Power Company 1997 Annual Report
RESULTS OF OPERATIONS
Earnings
Georgia Power Company's 1997 earnings totaled $594 million, representing a $14
million (2.4 percent) increase over 1996. This earnings increase resulted
primarily from lower operating expenses, lower financing costs, and increased
non-operating income, partially offset by lower retail revenues and additional
depreciation charges pursuant to a Georgia Public Service Commission (GPSC)
retail accounting order discussed below. Earnings for 1996 totaled $580 million,
representing a $29 million (4.7 percent) decrease from 1995. Earnings for 1995
included an after-tax gain of approximately $12 million from the completion of
the sale of Plant Scherer Unit 4. The remaining decrease in 1996 earnings was
primarily due to increased operating and maintenance expenses, partially offset
by lower interest charges compared to the prior year.
Revenues
The following table summarizes the factors impacting operating revenues for the
1995-1997 period:
Increase (Decrease)
From Prior Year
-----------------------------------
1997 1996 1995
-----------------------------------
Retail - (in millions)
Sales growth $ 62 $ 58 $110
Weather (74) (25) 69
Fuel cost recovery (30) 28 66
Demand-side programs (3) (10) 36
- ------------------------------------------------------------------
Total retail (45) 51 281
- ------------------------------------------------------------------
Sales for resale -
Non-affiliates 1 (9) (61)
Affiliates 3 (41) 16
- ------------------------------------------------------------------
Total sales for resale 4 (50) (45)
- ------------------------------------------------------------------
Other operating revenues 10 10 7
- ------------------------------------------------------------------
Total operating revenues $ (31) $ 11 $243
==================================================================
Percent change (0.7)% 0.3% 5.8%
- ------------------------------------------------------------------
Retail revenues of $4 billion in 1997 decreased $45 million (1.1 percent)
from 1996 primarily due to milder-than-normal weather, as well as commercial and
industrial customers taking advantage of load management rates. Retail revenues
in 1996 increased $51 million (1.3 percent) over the prior year primarily due
to strong economic growth and an increase in sales to existing customers.
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.
Wholesale revenues from sales to non-affiliated utilities increased slightly
in 1997 and were as follows:
1997 1996 1995
-------------------------------
(in millions)
Outside service area -
Long-term contracts $ 71 $ 84 $ 98
Other sales 80 37 25
Inside service area 132 161 168
- --------------------------------------------------------------
Total $283 $282 $291
==============================================================
Contractual long-term sales to Florida utilities for 1997 and 1996 are down
primarily due to scheduled reductions in the amount of capacity under those
contracts. See Note 7 to the financial statements for further information
regarding these sales. Revenues from other sales outside the service area
increased in 1997 and 1996 primarily due to power marketing activities.
Wholesale revenues from customers within the service area decreased in 1997 and
1996 primarily due to a decrease in revenues under a power supply agreement with
Oglethorpe Power Corporation (OPC) and, in 1996, recognition of a refund to
these customers. OPC decreased its purchases of capacity by 250 megawatts each
in September 1996 and 1997 and has notified the Company of its intent to
decrease purchases of capacity by an additional 250 megawatts in September 1998
and 1999.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from year to year depending on
demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.
II-100
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
Kilowatt-hour (KWH) sales for 1997 and the percent change by year were as
follows:
Percent Change
---------------------------
1997
KWH 1997 1996 1995
------- -----------------------------
(in billions)
Residential 17.3 (3.0)% 3.0% 10.4%
Commercial 21.1 1.5 4.9 5.9
Industrial 26.7 1.9 3.6 3.9
Other 0.6 0.4 8.6 2.0
-------
Total retail 65.7 0.4 3.9 6.2
-------
Sales for resale -
Non-affiliates 6.8 (13.6) 19.4 (17.3)
Affiliates 1.7 44.6 (56.9) (10.4)
-------
Total sales for resale 8.5 (6.0) (3.0) (15.4)
-------
Total sales 74.2 (0.3) 3.0 2.8
=======
- ----------------------------------------------------------------
Residential sales declined 3.0 percent while sales to commercial and
industrial customers increased slightly by 1.5 percent and 1.9 percent,
respectively. Milder-than-normal temperatures experienced in 1997 contributed to
the moderate sales. Residential, commercial and industrial energy sales growth
in 1996 reflected strong economic growth and an increase in sales to existing
customers.
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:
1997 1996 1995
--------------------------
Total generation
(billions of kilowatt-hours) 66.5 63.7 64.3
Sources of generation
(percent) --
Coal 74.8 74.3 73.7
Nuclear 21.8 22.4 22.6
Hydro 2.7 2.7 3.0
Oil and gas 0.7 0.6 0.7
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.53 1.55 1.67
Nuclear 0.52 0.55 0.60
Oil and gas * * *
Total 1.32 1.35 1.44
- --------------------------------------------------------------
* Not meaningful because of minimal generation from
fuel source.
Fuel expense increased 2.6 percent in 1997 primarily due to an increase in
generation, partially offset by a lower average cost of fuel. Fuel expense
decreased 7.3 percent in 1996 because of a decrease in generation resulting from
the timing of maintenance at nuclear plants and a lower average cost of fuel.
Purchased power expense decreased $66 million (17.1 percent) in 1997
primarily due to decreased purchases from affiliated companies and declines in
contractual capacity buyback purchases from the co-owners of Plant Vogtle.
Purchased power expense increased $72 million (22.8 percent) in 1996 primarily
due to increased purchases from affiliated companies as a result of the timing
of maintenance at nuclear plants discussed above. The increase in 1996 was
partially offset by a decrease in energy purchases from wholesale customers
within the service area and declines in the Plant Vogtle contractual capacity
buyback purchases. Under the terms of the 1991 GPSC retail rate order, the
II-101
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
declines in the Plant Vogtle contractual capacity buyback purchases were
levelized over a six-year period ending September 1997. The levelization is
reflected in the amortization of deferred Plant Vogtle costs in the Statements
of Income. See Note 1 to the financial statements under "Plant Vogtle Phase-In
Plans" for additional information.
Other operation and maintenance (O&M) expenses, excluding the provision for
separation benefits, decreased 4.1 percent in 1997 primarily due to initiatives
in 1996 to reduce fossil generation materials inventory levels and an adjustment
in 1996 to deferred postretirement benefits to reflect changes in the retiree
benefits plan. Other O&M expenses increased 2.9 percent in 1996 primarily as a
result of the inventory initiatives and the adjustment to deferred
postretirement benefits discussed above, and increased costs under a three-year
retail accounting order effective January 1, 1996. See Note 3 to the financial
statements under "Retail Accounting Order" for additional information.
Depreciation and amortization increased $140 million in 1997 and $11 million
in 1996 primarily due to accelerated depreciation of generating plant pursuant
to the retail accounting order and an increase in plant-in-service.
The Company has deferred certain expenses and recorded a deferred return
related to Plant Vogtle under phase-in plans. The amortization of deferred Plant
Vogtle costs reflects the completion in September 1997 of the amortization of
the levelized buybacks and the Plant Vogtle Unit 1 cost deferrals under a 1987
GPSC order. See Note 1 to the financial statements under "Plant Vogtle Phase-In
Plans" for information regarding the deferral and subsequent amortization of
costs related to Plant Vogtle.
Other income increased in 1997 and decreased in 1996. The increase in 1997
is primarily due to increased tax benefits from losses of the parent company
allocated to the Company under the joint consolidated income tax agreement
between Southern Company and its subsidiaries. See Note 8 to the financial
statements for additional information. The decrease in 1996 is primarily due to
expenses in connection with the 1996 Summer Olympic games and the completion of
the sale in 1995 of Plant Scherer Unit 4, which resulted in an after-tax gain of
approximately $12 million.
Total financing costs decreased in 1997 and 1996. These changes were
primarily due to the refinancing or retirement of securities. The Company
refinanced or retired $701 million and $510 million of securities in 1997 and
1996, respectively. Interest and other charges increased $17 million
(6.8 percent) and decreased $52 million (17.4 percent) in 1997 and 1996,
respectively. While the issuance of additional mandatorily redeemable preferred
securities in August 1996, January 1997 and June 1997 increased interest and
other charges by $32 million and $6 million in 1997 and 1996, respectively,
dividends on preferred stock decreased $26 million and $3 million in 1997 and
1996, respectively.
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. The level of future earnings depends on numerous
factors including regulatory matters and energy sales.
The Company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
state of Georgia. Prices for electricity provided by the Company to retail
customers are set by the GPSC under cost-based regulatory principles.
On January 1, 1996, the Company began operating under a three-year retail
accounting order. Under the order, the Company's earnings are evaluated against
a retail return on common equity range of 10 percent to 12.5 percent. Earnings
II-102
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
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 order's three-year
operation, including $14 million annually of accelerated depreciation of
electric plant. During the order'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 order, 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 provisions of the accounting order or adopt
different ones. See Note 3 to the financial statements under "Retail Accounting
Order" for additional information.
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, initiatives to increase sales to existing customers, 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 1998 through 2000.
Beginning in September 1997, OPC decreased its purchases of capacity under a
power supply agreement by 250 megawatts and has notified the Company of its
intent to decrease purchases of capacity by an additional 250 megawatts each in
September 1998 and 1999. As a result, the Company's capacity revenues from OPC
will decline by approximately $26 million in 1998, an additional $25 million in
1999, and an additional $18 million in 2000. Under the amended 1995 Integrated
Resource Plan approved by the GPSC in March 1997, the resources associated with
the decreased purchases in 1997 and 1998 will be used to meet the needs of the
Company's retail customers through 2004.
The Company has entered into a 30-year purchase power agreement whereby the
Company will buy electricity from a 300 megawatt cogeneration facility, starting
in June 1998. Capacity and fixed O&M payments are projected to be $13 million in
1998, $14 million in 1999 and $14 million in 2000. The Company has also entered
into a five-year purchase power agreement scheduled to begin in June 2000 for
approximately 215 megawatts. Capacity and fixed O&M payments are estimated to be
approximately $7 million in 2000.
The amortization of Plant Vogtle costs deferred under phase-in plans will
decline by $89 million in 1998, $12 million in 1999, and $19 million in 2000.
These costs will be fully amortized by September 1999. See Note 1 to the
financial statements under "Plant Vogtle Phase-In Plans" for additional
information.
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.
As discussed in Note 3 to the financial statements, regulatory uncertainties
exist related to the Rocky Mountain pumped storage hydroelectric plant. On
January 14, 1998, the GPSC ordered that the Company be allowed approximately
$108 million of its $143 million investment in the plant in rate base as of
December 31, 1998. The Company has appealed the GPSC's order. If such order is
ultimately upheld, the Company will be required to record a charge to earnings
currently estimated at approximately $29 million, after taxes.
Southern Company and the Internal Revenue Service (IRS) have entered into a
settlement agreement that is subject to review and approval by the Joint
Congressional Committee on Taxation. If approved, the agreement would result in
a refund, including interest, to the Company. See Note 3 to the financial
statements under "Tax Litigation" for additional information.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Issues."
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
II-103
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). 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 electric energy
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 permit retail customer access,
it was a major catalyst for the current restructuring and consolidation taking
place within the utility industry.
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. Numerous federal and state
initiatives are in varying stages to promote wholesale and retail competition
across the nation. Among other things, these initiatives allow customers to
choose their electricity provider. As these initiatives materialize, the
structure of the utility industry could radically change. Some states have
approved initiatives that result in a separation of the ownership and/or
operation of generating facilities from the ownership and/or operation of
transmission and distribution facilities. While the GPSC has held workshops to
discuss retail competition and industry restructuring, there has been no
proposed or enacted legislation to date in Georgia. Enactment would require
numerous issues to be resolved, including significant ones relating to
transmission pricing and recovery of costs. The ability of the Company to
recover all its costs, including the regulatory assets described in Note 1 to
the financial statements, could have a material effect on the financial
condition of the Company. The Company is attempting to reduce regulatory assets
and other costs through a three-year retail accounting order. See Note 3 to the
financial statements under "Retail Accounting Order" for additional information.
Unless the Company remains a low-cost producer and provides quality service,
the Company's retail energy sales growth could be limited as competition
increases. Conversely, continuing to be a low-cost producer could provide
opportunities to increase market share and profitability in markets that evolve
with 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 that are not specifically recoverable, 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's - 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 change. 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 Company is heavily dependent upon complex computer systems for all
phases of its operations. The year 2000 issue -- common to most corporations --
concerns the inability of certain software and databases to properly recognize
date sensitive information related to the year 2000 and thereafter. This problem
could result in a material disruption to the Company's operations, if not
corrected. The Company has assessed and developed a detailed strategy to prevent
or at least minimize problems related to the year 2000 issue. In 1997 resources
were committed and implementation began to modify the affected information
systems. Total costs related to the project are estimated to be approximately
$33 million, of which $3 million was spent in 1997. The remaining costs will be
II-104
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
expensed primarily in 1998. Implementation is currently on schedule. Although
the degree of success of this project cannot be determined at this time,
management believes there will be no significant effect on the Company's
operations.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1997, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows.
New Accounting Standards
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other nonowner changes in equity. The Company will adopt this statement in 1998.
The FASB has issued Statement No. 131, Disclosure about Segments of an
Enterprise and Related Information. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Generally, financial information is required to
be reported on the basis that it is used by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. This
statement also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company adopted the new
rules in 1997, and they did not have a significant impact on the Company's
financial reporting. However, this conclusion may change as industry
restructuring and competitive factors influence the company's operations.
FINANCIAL CONDITION
Plant Additions
In 1997 gross utility plant additions were $476 million. These additions were
primarily related to transmission and distribution facilities and to the
purchase of nuclear fuel. The funds needed for gross property additions are
currently provided from operations. The Statements of Cash Flows provide
additional details.
Financing Activities
In 1997, the Company continued to lower its financing costs by refinancing
higher-cost issues. New issues during 1995 through 1997 totaled $1.6 billion and
retirement or repayment of securities totaled $2.2 billion. The retirements
included the redemption of $131 million in 1995 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 1995 through 1997, as of
year-end, were as follows:
1997 1996 1995
---------------------------------
Composite interest rate
on long-term debt 6.11% 6.39% 6.57%
Composite preferred
stock dividend rate 5.18 6.34 6.73
- ----------------------------------------------------------------
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
- -----------------------------------------------------------------
Subsidiaries of the Company have issued mandatorily redeemable preferred
securities. See Note 9 to the financial statements under "Preferred Securities"
for additional information.
In January 1998, the Company issued $145 million of 6 7/8% unsecured senior
notes due December 31, 2047. The senior notes are subordinated to all secured
II-105
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
debt of the Company, including its first mortgage bonds.
Liquidity and Capital Requirements
Cash provided from operations decreased by $15 million in 1997, primarily due to
lower retail revenues.
The Company estimates that construction expenditures for the years 1998
through 2000 will total $506 million, $561 million and $549 million,
respectively. Investments in transmission and distribution facilities,
enhancements to existing generating plants, and equipment to comply with the
provisions of the Clean Air Act are planned.
Cash requirements for improvement fund requirements, redemptions announced,
and maturities of long-term debt and preferred stock are expected to total $693
million during 1998 through 2000.
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 1998 through 2000, 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."
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 $1.3 billion of unused credit
arrangements with banks at the beginning of 1998. See Note 9 to the financial
statements under "Bank Credit Arrangements" for additional information.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
If the Company chooses to issue first mortgage bonds or preferred stock, it
is required to meet certain coverage requirements specified in its mortgage
indenture and corporate charter. 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 signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- significantly
impacted the operating companies of 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 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.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
units by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Georgia Power's Phase I compliance totaled
approximately $167 million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits and ozone nonattainment requirements for metropolitan
Atlanta through 2000. Current compliance strategy for Phase II and ozone
nonattainment could require total estimated construction expenditures of
approximately $39 million, of which $28 million remains to be spent as of
December 31, 1997.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
II-106
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1997 Annual Report
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. Also, in October 1997, the EPA
issued a proposed regional ozone rule that --if implemented--could require
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: emission control strategies for ozone
nonattainment areas; additional controls for hazardous air pollutant emissions;
and hazardous waste disposal requirements. The impact of new standards will
depend on the development and implementation of applicable regulations.
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 $4 million, $2
million and $8 million, in 1997, 1996, and 1995, respectively. Additional sites
may require environmental remediation for which the Company may be liable for a
portion of or all required clean-up 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 any such changes
cannot be determined at this time.
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.
Cautionary Statement Regarding Forward-Looking Information
The Company's 1997 Annual Report contains forward-looking statements in addition
to historical information. The Company cautions that there are various important
factors that could cause actual results to differ materially from those
indicated in the forward-looking statements; accordingly, there can be no
assurance that such indicated results will be realized. These factors include
legislative and regulatory initiatives regarding deregulation and restructuring
of the electric utility industry; the extent and timing of the entry of
additional competition in the Company's markets; potential business strategies
- -- including acquisitions or dispositions of assets or internal restructuring --
that may be pursued by Southern Company; state and federal rate regulation;
changes in or application of environmental and other laws and regulations to
which the Company is subject; political, legal and economic conditions and
developments; financial market conditions and the results of financing efforts;
changes in commodity prices and interest rates; weather and other natural
phenomena; and other factors discussed in the reports--including Form
10-K--filed from time to time by the Company with the Securities and Exchange
Commission.
II-107
STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Georgia Power Company 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues $4,347,009 $4,380,893 $4,328,432
Revenues from affiliates 38,708 35,886 76,906
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,385,717 4,416,779 4,405,338
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation--
Fuel 857,269 835,194 900,973
Purchased power from non-affiliates 143,409 157,308 183,009
Purchased power from affiliates 177,240 229,324 131,740
Provision for separation benefits 5,459 39,099 10,607
Other 696,700 741,383 735,918
Maintenance 317,199 315,934 292,029
Depreciation and amortization 572,640 432,940 421,850
Amortization of deferred Plant Vogtle costs (Note 1) 120,577 136,650 124,454
Taxes other than income taxes 207,192 207,098 204,675
Federal and state income taxes 426,918 435,904 449,204
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,524,603 3,530,834 3,454,459
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 861,114 885,945 950,879
Other Income (Expense):
Allowance for equity funds used during construction 6,012 3,144 2,734
Equity in earnings of unconsolidated subsidiary (Note 4) 4,266 3,851 4,051
Interest income 10,581 5,333 5,524
Other, net (35,834) (43,502) (8,973)
Income taxes applicable to other income 31,763 18,581 3,022
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 877,902 873,352 957,237
- ------------------------------------------------------------------------------------------------------------------------------
Interest and Other Charges:
Interest on long-term debt 194,344 207,851 254,607
Allowance for debt funds used during construction (8,962) (11,416) (12,081)
Interest on interim obligations 7,795 15,478 21,463
Amortization of debt discount, premium and expense, net 14,179 14,790 15,835
Other interest charges 10,254 6,338 11,399
Distributions on preferred securities of subsidiary companies 47,369 14,958 9,000
- ------------------------------------------------------------------------------------------------------------------------------
Interest and other charges, net 264,979 247,999 300,223
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 612,923 625,353 657,014
Dividends on Preferred Stock 18,927 45,026 48,152
- ------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 593,996 $ 580,327 $ 608,862
==============================================================================================================================
The accompanying notes are an integral part of these statements.
II-108
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Georgia Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 612,923 $ 625,353 $ 657,014
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 674,286 521,086 527,310
Deferred income taxes and investment tax credits, net (21,425) 35,700 37,150
Allowance for equity funds used during construction (6,012) (3,144) (2,734)
Amortization of deferred Plant Vogtle costs, net 120,577 136,650 124,454
Loss (gain) on asset sales (974) 3,766 (23,588)
Other, net 3,050 41,489 (7,980)
Changes in certain current assets and liabilities --
Receivables, net 13,387 9,421 (59,370)
Inventories 39,748 55,753 30,761
Payables (10,007) (35,651) 45,882
Taxes accrued (3,596) 11,766 11,373
Energy cost recovery, retail (20,103) 679 42,576
Other (30,026) (15,880) 35,175
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,371,828 1,386,988 1,418,023
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (475,921) (428,220) (480,449)
Sales of property - 3,319 131,099
Other 16,223 (16,468) (42,579)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (459,698) (441,369) (391,929)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Preferred securities 364,250 225,000 -
First mortgage bonds - 10,000 75,000
Pollution control bonds 284,700 112,825 504,700
Retirements --
Preferred stock (356,392) (179,148) -
First mortgage bonds (60,258) (210,860) (505,789)
Pollution control bonds (284,700) (119,665) (504,810)
Other long-term debt - - (37,000)
Interim obligations, net (64,266) 30,166 (24,472)
Special deposits -- redemption funds 44,454 (44,454) -
Capital distribution to parent company (205,000) (250,000) -
Payment of preferred stock dividends (26,917) (46,911) (48,419)
Payment of common stock dividends (520,000) (475,500) (451,500)
Miscellaneous (20,024) (10,646) (17,413)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (844,153) (959,193) (1,009,703)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 67,977 (13,574) 16,391
Cash and Cash Equivalents at Beginning of Year 15,356 28,930 12,539
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 83,333 $ 15,356 $ 28,930
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 258,298 $ 249,434 $ 298,482
Income taxes (net of refunds) 427,596 373,886 404,129
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
II-109
BALANCE SHEETS
At December 31, 1997 and 1996
Georgia Power Company 1997 Annual Report
===================================================================================================================
ASSETS 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service $ 15,082,570 $ 14,769,573
Less accumulated provision for depreciation 5,319,680 4,793,638
- ---------------------------------------------------------------------------------------------------------------------
9,762,890 9,975,935
Nuclear fuel, at amortized cost 126,882 121,840
Construction work in progress (Note 4) 214,128 256,141
- ---------------------------------------------------------------------------------------------------------------------
Total 10,103,900 10,353,916
- ---------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 4) 24,973 26,032
Nuclear decommissioning trusts, at market 194,417 130,178
Miscellaneous 87,907 103,787
- ---------------------------------------------------------------------------------------------------------------------
Total 307,297 259,997
- ---------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 83,333 15,356
Receivables--
Customer accounts receivable 385,844 392,328
Other accounts and notes receivable 110,278 159,499
Affiliated companies 20,333 20,095
Accumulated provision for uncollectible accounts (3,000) (4,000)
Fossil fuel stock, at average cost 96,067 117,382
Materials and supplies, at average cost 240,387 258,820
Prepayments 27,503 67,118
Vacation pay deferred 40,996 39,965
- ---------------------------------------------------------------------------------------------------------------------
Total 1,001,741 1,066,563
- ---------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 688,472 754,002
Deferred Plant Vogtle costs (Note 1) 50,412 170,988
Premium on reacquired debt, being amortized 166,609 166,670
Prepaid pension costs 67,777 42,653
Debt expense, being amortized 40,927 32,693
Miscellaneous 146,593 159,153
- ---------------------------------------------------------------------------------------------------------------------
Total 1,160,790 1,326,159
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $ 12,573,728 $ 13,006,635
=====================================================================================================================
The accompanying notes are an integral part of these statements.
II-110
BALANCE SHEETS (continued)
At December 31, 1997 and 1996
Georgia Power Company 1997 Annual Report
===============================================================================================================================
CAPITALIZATION AND LIABILITIES 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 4,019,728 $ 4,154,281
Preferred stock 157,247 464,611
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes (Note 9) 689,250 325,000
Long-term debt 2,982,835 3,200,419
- --------------------------------------------------------------------------------------------------------------------------------
Total 7,849,060 8,144,311
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 9) - 49,028
Long-term debt due within one year (Note 9) 220,855 60,622
Notes payable to banks (Note 9) 142,300 207,300
Commercial paper (Note 9) 223,930 223,196
Accounts payable--
Affiliated companies 71,373 66,821
Other 261,293 263,093
Customer deposits 68,618 64,901
Taxes accrued--
Federal and state income 4,480 15,497
Other 111,541 100,661
Interest accrued 72,437 79,936
Miscellaneous 105,683 153,127
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,282,510 1,284,182
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 2,417,547 2,522,945
Accumulated deferred investment tax credits 397,202 415,477
Deferred credits related to income taxes (Note 8) 297,560 317,965
Employee benefits provisions 169,887 186,319
Miscellaneous 159,962 135,436
- --------------------------------------------------------------------------------------------------------------------------------
Total 3,442,158 3,578,142
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1 through 7)
Total Capitalization and Liabilities $ 12,573,728 $ 13,006,635
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-111
STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Georgia Power Company 1997 Annual Report
==================================================================================================================================
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
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 1,929,971 2,134,886
Premium on preferred stock 160 371
Retained earnings (Note 9) 1,745,347 1,674,774
- ----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 4,019,728 4,154,281 51.2% 51.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock, without par value:
Authorized -- 55,000,000 shares
Outstanding -- 4,719,226 shares at December 31, 1997
Outstanding -- 16,111,964 shares at December 31, 1996
$100 stated value --
4.60% to 6.60% 52,355 117,787
7.72% to 7.80% - 30,000
$25 stated value --
$1.90 to $2.125 - 190,852
Adjustable rate -- at January 1, 1998:
4.85% 64,213 100,000
5.27% 40,679 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $8,141,000) 157,247 513,639
Less amount due within one year (Note 9) - 49,028
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 157,247 464,611 2.0 5.7
- ----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 9% 100,000 100,000
$25 liquidation value -- 7.75% 225,000 225,000
$25 liquidation value -- 7.60% 175,000 -
$25 liquidation value -- 7.75% 189,250 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $54,404,000) 689,250 325,000 8.8 4.0
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
April 1, 1998 5 1/2% 100,000 100,000
September 1, 1999 6 1/8% 195,000 195,000
March 1, 2000 6% 100,000 100,000
October 1, 2000 7% 100,000 100,000
September 1, 2002 6 7/8% 150,000 150,000
2003 through 2005 6.07% to 6 5/8% 285,000 285,000
2008 6 7/8% 50,000 50,000
2023 through 2025 7.55% to 7.95% 474,250 534,508
- ----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,454,250 1,514,508
Pollution control obligations (Note 9) 1,671,190 1,671,190
Other long-term debt (Note 9) 86,675 87,114
Unamortized debt discount, net (8,425) (11,771)
- ----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $196,378,000) 3,203,690 3,261,041
Less amount due within one year (Note 9) 220,855 60,622
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,982,835 3,200,419 38.0 39.3
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 7,849,060 $ 8,144,311 100.0% 100.0%
==================================================================================================================================
The accompanying notes are an integral part of these statements.
II-112
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
Georgia Power Company 1997 Annual Report
==================================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $1,674,774 $1,569,905 $1,412,543
Net income after dividends on preferred stock 593,996 580,327 608,862
Cash dividends on common stock (520,000) (475,500) (451,500)
Preferred stock transactions, net (3,423) 42 -
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 9) $1,745,347 $1,674,774 $1,569,905
==================================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1997, 1996, and 1995
Georgia Power Company 1997 Annual Report
==================================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $2,134,886 $2,384,444 $2,384,348
Capital distribution to parent company (205,000) (250,000) -
Contributions to capital by parent company 85 442 96
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period $1,929,971 $2,134,886 $2,384,444
==================================================================================================================================
The accompanying notes are an integral part of these statements.
II-113
NOTES TO FINANCIAL STATEMENTS
Georgia Power Company 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
The Company is a wholly owned subsidiary of 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 Energy, Inc. (Southern Energy), Southern Nuclear
Operating Company (Southern Nuclear), Southern Company Energy Solutions, 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 operating 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 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 Energy designs, builds, owns, and operates power production
and delivery facilities and provides a broad range of energy related services in
the United States and international markets. Southern Nuclear provides services
to Southern Company's nuclear power plants. Southern Company Energy Solutions
develops new business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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 expected 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:
1997 1996
---------- ---------
(in millions)
--------------------
Deferred income taxes $ 688 $ 754
Deferred income tax credits (298) (318)
Premium on reacquired debt 167 167
Corporate building lease 52 51
Deferred Plant Vogtle costs 50 171
Vacation pay 41 40
Postretirement benefits 38 38
Department of Energy assessments 29 32
Deferred nuclear outage costs 28 18
Demand-side program costs 11 44
Other, net 10 (9)
- --------------------------------------------------------------
Total $ 816 $ 988
==============================================================
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 net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.
II-114
NOTES (continued)
Georgia Power Company 1997 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, and certain other 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 1997, 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 $76
million in 1997, $78 million in 1996, and $86 million in 1995. 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 2008 at Plant Vogtle. Activities for adding dry cask storage
capacity at Plant Hatch by as early as 1999 are in progress.
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, 1997, to be approximately $27 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
3.1 percent in 1997 and 1996 and 3.2 percent in 1995. In addition, the Company
recorded accelerated depreciation of electric plant of $159 million in 1997, $24
million in 1996, and $6 million in 1995. The amount of such charges in the
accumulated provision for depreciation is $189 million at December 31, 1997. See
Note 3 under "Retail Accounting Order" 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 ordered
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.
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
II-115
NOTES (continued)
Georgia Power Company 1997 Annual Report
the retirement date. The estimated costs of decommissioning -- both site study
costs and ultimate costs at December 31, 1997 -- based on the Company's
ownership interests -- were as follows:
Plant Plant
Hatch Vogtle
--------------------
Site study basis (year) 1997 1997
Decommissioning periods:
Beginning year 2014 2027
Completion year 2027 2038
- ------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $372 $317
Non-radiated structures 33 44
- ------------------------------------------------------------
Total $405 $361
============================================================
(in millions)
Ultimate costs:
Radiated structures $722 $922
Non-radiated structures 65 129
- ------------------------------------------------------------
Total $787 $1,051
============================================================
(in millions)
Amount expensed in 1997 $ 11 $ 9
Accumulated provisions:
Balance in external trust funds $118 $ 76
Balance in internal reserves 23 13
- ------------------------------------------------------------
Total $141 $ 89
============================================================
Significant assumptions:
Inflation rate 3.6% 3.6%
Trust earnings rate 6.5 6.5
- ------------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the GPSC. The decommissioning costs currently included in cost of
service are $320 million and $267 million for plants Hatch and Vogtle,
respectively. These amounts are based on the higher of the costs to
decommission the radioactive portions of the plants based on 1994 site studies
or the 1993 NRC minimum funding requirements. The estimated ultimate costs
associated with the amounts currently included in cost of service are $781
million and $1.1 billion for plants Hatch and Vogtle, respectively. 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. Pursuant to the orders, the Company recorded a deferred return under
phase-in plans until October 1991 when the allowed investment was fully
reflected in rates. In 1991, the GPSC levelized the remaining Plant Vogtle
declining capacity buyback expenses over a six-year period. In addition, the
Company deferred certain Plant Vogtle operating expenses and financing costs
under accounting orders issued by the GPSC. These GPSC orders provide for the
recovery of deferred costs within 10 years. Costs deferred under the 1987 order
and the levelized buybacks were fully recovered as of September 1997.
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 1997, 1996 and 1995, the average AFUDC rates
were 7.60 percent, 6.59 percent and 6.53 percent, respectively. AFUDC, net of
taxes, as a percentage of net income after dividends on preferred stock, was
less than 2.0 percent for 1997, 1996, and 1995.
II-116
NOTES (continued)
Georgia Power Company 1997 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; 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
The Company's financial instruments for which the carrying amounts did not
approximate fair value at December 31 were as follows:
Carrying Fair
Amount Value
------------------------
Long-term debt: (in millions)
At December 31, 1997 $3,125 $3,170
At December 31, 1996 3,174 3,206
Preferred securities:
At December 31, 1997 689 720
At December 31, 1996 325 333
- --------------------------------------------------------------
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 1997 and 1996, the Company funded $24 million and $25 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 were expensed each succeeding year until the costs were
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.
II-117
NOTES (continued)
Georgia Power Company 1997 Annual Report
Funded Status and Cost of Benefits
The funded status of the plans and reconciliation to amounts reflected in the
Balance Sheets at December 31 are as follows:
Pension
---------------------
1997 1996
---------------------
(in millions)
---------------------
Actuarial present value of
benefit obligations:
Vested benefits $ 841 $ 806
Non-vested benefits 29 52
- ----------------------------------------------------------------
Accumulated benefit obligation 870 858
Additional amounts related
to projected salary increases 249 314
- ---------------------------------------------------------------
Projected benefit obligation 1,119 1,172
Less:
Fair value of plan assets 1,931 1,797
Unrecognized net gain (753) (591)
Unrecognized prior service cost 48 56
Unrecognized transition asset (39) (47)
- ---------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 68 $ 43
===============================================================
Postretirement
Benefits
---------------------
1997 1996
---------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $246 $217
Employees eligible to retire 33 29
Other employees 156 184
- ---------------------------------------------------------------
Accumulated benefit obligation 435 430
Less:
Fair value of plan assets 151 112
Unrecognized net loss 47 50
Unrecognized transition
obligation 139 157
- ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $ 98 $111
===============================================================
The weighted average rates used in actuarial calculations were:
1997 1996 1995
----------------------------
Discount 7.5% 7.8% 7.3%
Annual salary increase 5.0 5.3 4.8
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 8.8 percent for 1997, decreasing gradually to 5.5 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, 1997, by $43 million and the aggregate of the
service and interest cost components of the net postretirement cost by $4
million.
The components of the plans' net costs are shown below:
Pension
----------------------------
1997 1996 1995
----------------------------
(in millions)
Benefits earned during the year $ 30 $ 35 $ 33
Interest cost on projected
benefit obligation 82 86 78
Actual return on plan assets (301) (202) (317)
Net amortization 161 62 185
- -----------------------------------------------------------------
Net pension benefit $ (28) $ (19) $ (21)
=================================================================
Of net pension amounts recorded, $20 million in 1997, $14 million in 1996,
and $15 million in 1995 were recorded as a reduction to operating expense, and
the remainder was recorded as a reduction to construction and other accounts.
II-118
NOTES (continued)
Georgia Power Company 1997 Annual Report
Postretirement Benefits
-------------------------
1997 1996 1995
-------------------------
(in millions)
Benefits earned during the year $ 7 $ 9 $13
Interest cost on accumulated
benefit obligation 32 30 34
Amortization of transition
obligation 9 9 16
Actual return on plan assets (8) (6) (8)
Net amortization 2 3 4
- ---------------------------------------------------------------
Net postretirement cost $42 $45 $59
===============================================================
Of the above net postretirement benefit costs recorded, $32 million in 1997,
$29 million in 1996, and $33 million in 1995 were charged to operating expenses.
In addition, $3 million in 1996 and $11 million in 1995 were deferred, and the
remainder was charged to construction and other accounts. During 1996, the
Company expensed an additional $19 million due to an adjustment to amounts
previously deferred under the GPSC order as a result of changes in the
postretirement benefit plan.
Work Force Reduction Programs
The Company has incurred costs for work force reduction programs. The costs
related to these programs were $5 million in 1997, $39 million in 1996 and $11
million in 1995. Additionally, the Company recognized $4 million in 1997, $9
million in 1996, and $3 million in 1995 for its share of costs associated with
SCS's work force reduction programs.
3. REGULATORY AND LITIGATION MATTERS
Retail Accounting Order
On February 16, 1996, the GPSC approved a three-year accounting order for the
Company. Under the order, effective January 1, 1996, the Company's earnings are
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 order's three-year operation, including $14 million annually of accelerated
depreciation of electric plant. During the order'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 order, 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 provisions of the accounting order or
adopt different ones.
The Company's 1996 retail return on common equity was within the 10 percent
to 12.5 percent range. During 1997, for earnings in excess of the 12.5% retail
return, the Company recorded charges of $135 million that are presented in the
financial statements as depreciation expense of electric plant and as an
addition to the reserve for depreciation.
In November 1996, on appeal by a consumer group, the Superior Court of
Fulton County, Georgia, reversed the GPSC's accounting order and remanded the
matter to the GPSC. The Court found that statutory requirements applicable to
rate cases should have been, but were not, followed. The GPSC and the Company
subsequently appealed the Superior Court's decision. In October 1997, the Court
of Appeals upheld the accounting order. No appeal of that decision was filed
within the allowable time frame. The order stands as written, and this matter is
now concluded.
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.
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. In November 1995, a
II-119
NOTES (continued)
Georgia Power Company 1997 Annual Report
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, as well
as certain other contracts that reference these proceedings in determining
return on common equity and if refunds were ordered, the amount of refunds could
range up to approximately $71 million at December 31, 1997. Although management
believes that rates are not excessive and that refunds are not justified, the
final outcome of this matter cannot now be determined.
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 Oglethorpe Power Corporation (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. In 1995, the plant went into
commercial operation.
In June 1996, the GPSC initiated a review of the plant. On January 14, 1998,
the GPSC ordered that the Company be allowed approximately $108 million of its
$143 million investment in the plant in rate base as of December 31, 1998. The
Company has appealed the GPSC's order to the Superior Court of Fulton County,
Georgia. If such order is ultimately upheld, the Company will be required to
record a charge to earnings currently estimated at approximately $29 million,
after taxes. The final outcome of this matter cannot now be determined.
Accordingly, no provision related to the GPSC's disallowance has been recorded.
Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement is subject to the review and approval by the Joint
Congressional Committee on Taxation. If approved by the Joint Committee, the
agreement would resolve all issues in the case for the years before the U. S.
Tax Court, resulting in a refund to the Company of approximately $140 million.
This amount includes interest of $61 million. The tax litigation was related to
a timing issue as to when taxes should have been paid; therefore, only the
interest portion will affect future income. There can be no assurance that such
Joint Committee approval will be received.
Demand-Side Conservation Programs
In August 1995, the GPSC ordered the Company to discontinue its current
demand-side conservation programs by the end of 1995. Rate riders previously
approved by the GPSC for recovery of the Company's costs incurred in connection
with these programs remained in effect until January 1998 when costs deferred
were fully collected.
Under the Retail Accounting Order 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.
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, 1997, the Company
has recognized approximately $5 million in expenses associated with this site.
This represents the Company's agreed upon share of removal and remedial
investigation and feasibility study costs. 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 any remaining remediation 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
II-120
NOTES (continued)
Georgia Power Company 1997 Annual Report
list, the State identified several hundred properties throughout the State,
including 25 sites which may require environmental remediation that were either
previously or are currently owned by the Company. The majority of these sites
are electrical power substations and power generation facilities. The Company
has remediated nine electrical substations on the list at a cost of
approximately $3 million. In addition, the Company has recognized approximately
$17 million in expenses through December 31, 1997 for the assessment of the
remaining sites on the list and the anticipated clean-up cost for 11 sites that
the Company plans to remediate. 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 $65 million to develop new waste management
facilities or install additional pollution control devices.
The accrued costs for environmental remediation obligations are not
discounted to their present value.
New Wholesale Agreement
On January 10, 1997, the Company and the Municipal Electric Authority of Georgia
(MEAG) reached an agreement to enter into a new power supply relationship which
would replace the partial requirements tariff pursuant to which the Company
sells wholesale energy to MEAG and the scheduling services agreement between the
Company and MEAG. The new power supply contract was approved by FERC and was
implemented in August 1997.
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
comparable 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. The GPSC approved a performance reward of approximately $8.5
million for the Company. This reward was collected through the retail fuel cost
recovery provision and recognized in income over a 36-month period which ended
in October 1996. In January 1997, the GPSC approved a performance award of
approximately $11.7 million for performance during the 1993-95 period. This
reward is being collected through the retail fuel cost recovery provision and
recognized in income over a 36-month period that began in January 1997.
4. COMMITMENTS
Construction Program
While the Company has no traditional baseload generating plants under
construction, the construction of one jointly owned combustion turbine peaking
unit was completed in January 1997. 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 $506 million in 1998, $561 million in
1999, and $549 million in 2000. The estimates for property additions for the
three-year period include $28 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.
II-121
NOTES (continued)
Georgia Power Company 1997 Annual Report
Total estimated long-term fossil and nuclear fuel commitments at December 31,
1997 were as follows:
Minimum
Year Obligations
----------------------
(in millions)
1998 $ 985
1999 799
2000 777
2001 673
2002 614
2003 and beyond 1,635
- ---------------------------------------------------------------
Total minimum obligations $5,483
===============================================================
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 portions of OPC's and
MEAG's capacity and energy from this plant. Declining commitments were in effect
during periods of up to seven years following commercial operation and ended in
1996. As discussed in Note 1, the Plant Vogtle declining capacity buyback
expense was levelized over a six-year period which ended in September 1997. In
addition, the Company has commitments regarding a portion of a 5 percent
interest in Plant Vogtle owned by MEAG that are in effect 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 $54 million, $68
million, and $76 million in 1997, 1996, and 1995, respectively.
The current projected Plant Vogtle capacity payments are:
Year Amounts
----------------------
(in millions)
1998 $ 57
1999 59
2000 62
2001 61
2002 60
2003 and beyond 771
- ----------------------------------------------------------------
Total $ 1,070
================================================================
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.
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:
1997 1996 1995
---------------------------------
(in millions)
Energy $45 $47 $44
Capacity 30 30 29
- --------------------------------------------------------------
Total $75 $77 $73
==============================================================
Kilowatt-hours 3,038 2,780 2,391
- --------------------------------------------------------------
At December 31, 1997, the capitalization of SEGCO consisted of $50 million
of equity and $72 million of long-term debt on which the annual interest
requirement is $4 million.
II-122
NOTES (continued)
Georgia Power Company 1997 Annual Report
The Company has entered into other various long-term commitments for the
purchase of electricity. Total long-term obligations at December 31, 1997 were
as follows:
Year Amounts
----------------------
(in millions)
1998 $ 16
1999 17
2000 21
2001 22
2002 23
2003 and beyond 360
- ---------------------------------------------------------------
Total $ 459
===============================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $11 million for 1997 and 1996 and
$12 million for 1995. At December 31, 1997, estimated minimum rental commitments
for these noncancelable operating leases were as follows:
Year Amounts
----------------------
(in millions)
1998 $ 11
1999 11
2000 11
2001 12
2002 12
2003 and beyond 132
- ---------------------------------------------------------------
Total $ 189
===============================================================
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 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 $160
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 Electric Insurance Limited (NEIL), 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
$10 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 primary
coverage. This excess insurance is also provided by NEIL.
Additionally, NEIL covers the 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 17 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 $11 million for excess property damage and $11 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
II-123
NOTES (continued)
Georgia Power Company 1997 Annual Report
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.
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 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, the
Company has sold 76.4 percent of Plant Scherer Unit 4 to Florida Power & Light
Company (FP&L) and the remaining 23.6 percent to Jacksonville Electric Authority
(JEA). The Company has also sold transmission facilities to Georgia Transmission
Corporation (formerly OPC's transmission division), MEAG, and the City of
Dalton.
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.
The Company and Florida Power Corporation (FPC) jointly own a combustion
turbine unit at Intercession City, Florida, near Orlando. The unit began
commercial operation in January 1997, and is operated by FPC. The Company owns a
one-third interest in the unit, with use of 100 percent of the unit's capacity
from June through September. FPC has the capacity the remainder of the year.
At December 31, 1997, 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) 1,722 50.1
Plant Wansley (coal) 1,730 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)
Intercession City 142 33.3
(combustion-turbine)
- ------------------------------------------------------------------
Accumulated
Facility (Type) Investment Depreciation
- ----------------------------------------------------------------
(in millions)
Plant Vogtle (nuclear) $3,299* $1,100
Plant Hatch (nuclear) 840 477
Plant Wansley (coal) 298 136
Plant Scherer (coal)
Units 1 and 2 112 44
Unit 3 542 164
Plant McIntosh
Common Facilities
(combustion-turbine) 19 1
Rocky Mountain
(pumped storage) 202 44
Intercession City
(combustion-turbine) 13 **
- ----------------------------------------------------------------
* Investment net of write-offs.
** Less than $1 million.
II-124
NOTES (continued)
Georgia Power Company 1997 Annual Report
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the operating subsidiaries of 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.
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 were as follows:
Year
-------------------------------------
(in millions) (megawatts)
1997 $ 42 159
1996 41 173
1995 53 248
-------------------------------------
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 159 megawatts of capacity in 1997 and is scheduled to sell
approximately 162 megawatts of capacity in 1998 and 1999. In 2000, 129 megawatts
will be sold. After 2000, capacity sales will decline to approximately 105
megawatts -- unless reduced by FP&L, FPC, and JEA -- until the expiration of the
contracts in 2010.
8. INCOME TAXES
At December 31, 1997, tax-related regulatory assets were $688 million and
tax-related regulatory liabilities were $298 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:
1997 1996 1995
-------------------------------
Total provision for income taxes: (in millions)
Federal:
Currently payable $ 352 $325 $349
Deferred -
Current year 49 70 84
Reversal of prior years (68) (41) (55)
Deferred investment tax
credits - - 1
- -----------------------------------------------------------------
333 354 379
- -----------------------------------------------------------------
State:
Currently payable 65 56 60
Deferred -
Current year 8 12 15
Reversal of prior years (11) (5) (8)
- -----------------------------------------------------------------
62 63 67
- -----------------------------------------------------------------
Total 395 417 446
- -----------------------------------------------------------------
Less:
Income taxes credited
to other income (32) (19) (3)
- -----------------------------------------------------------------
Total income taxes
charged to operations $ 427 $436 $449
=================================================================
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:
1997 1996
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $1,732 $1,736
Property basis differences 968 1,038
Other 142 174
- -----------------------------------------------------------------
Total 2,842 2,948
- -----------------------------------------------------------------
Deferred tax assets:
Other property basis differences 216 225
Federal effect of state deferred taxes 99 100
Other deferred costs 83 93
Disallowed Plant Vogtle buybacks 23 24
Other 14 36
- -----------------------------------------------------------------
Total 435 478
- -----------------------------------------------------------------
Net deferred tax liabilities 2,407 2,470
Portion included in current assets 11 53
- -----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $2,418 $2,523
=================================================================
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
II-125
NOTES (continued)
Georgia Power Company 1997 Annual Report
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $15 million in 1997, $17 million in 1996, and $22 million in 1995.
At December 31, 1997, 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:
1997 1996 1995
-------- -------- --------
Federal statutory rate 35% 35% 35%
State income tax, net of
federal deduction 4 4 4
Non-deductible book
depreciation 4 3 2
Other (4) (2) (1)
- ---------------------------------------------------------------
Effective income tax rate 39% 40% 40%
===============================================================
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
First Mortgage Bond Indenture & Charter
Restrictions
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
The Company's first mortgage bond indenture contains various restrictions
that remain in effect as long as the bonds are outstanding. At December 31,
1997, $852 million of retained earnings and paid-in capital was unrestricted for
the payment of cash dividends or any other distributions under terms of the
mortgage indenture. If additional first mortgage bonds are issued, supplemental
indentures in connection with those issues may contain more stringent
restrictions than those currently in effect.
The Company's charter previously limited 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, was below 25 percent,
and to 50 percent of such net income if such ratio was less than 20 percent.
These restrictions were removed by a vote of preferred shareholders on December
10, 1997.
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 mandatorily redeemable
preferred securities. Substantially all of the assets of Georgia Power Capital
are $103 million aggregate principal amount of Georgia Power's 9 percent Junior
Subordinated Deferrable Interest Debentures due December 19, 2024.
Statutory business trusts formed by the Company, of which the Company owns
all the common securities, have issued mandatorily redeemable preferred
securities as follows:
Date of Maturity
Issue Amount Rate Notes Date
-------------------------------------------------------
(millions) (millions)
Trust I 8/1996 $225.00 7.75% $232 6/2036
Trust II 1/1997 175.00 7.60% 180 12/2036
Trust III 6/1997 189.25 7.75% 195 3/2037
Substantially all of the assets of each trust are junior subordinated notes
issued by the Company in the respective approximate principal amounts set forth
above.
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 and the Trusts' payment
obligations with respect to the preferred securities.
II-126
NOTES (continued)
Georgia Power Company 1997 Annual Report
Georgia Power Capital, L.P., and the Trusts are subsidiaries of the Company,
and accordingly are consolidated in the Company's financial statements.
Pollution Control Bonds
The Company has incurred obligations in connection with the sale by public
authorities of tax-exempt pollution control revenue bonds. The Company has
authenticated and delivered to trustees an aggregate of $1.3 billion of its
first mortgage bonds, which are pledged as security for its obligations under
pollution control revenue contracts. No interest on these first mortgage bonds
is payable unless and until a default occurs on the installment purchase or loan
agreements.
Details of pollution control bonds are as follows:
Maturity Interest Rates 1997 1996
- --------------------------------------------------------------
(in millions)
2000 4.375% $ 50 $ 50
2004-2005 5% to 5.70% 104 143
2011 Variable 10 10
2017 8.375% to 9.375% - 140
2018-2022 6% to 6.35%
& Variable 112 218
2023-2026 5.40% to 6.75%
& Variable 1,110 1,110
2029-2032 Variable 235 -
2034 Variable 50 -
- --------------------------------------------------------------
Total pollution control bonds $1,671 $1,671
==============================================================
Senior Notes
In January 1998, the Company issued $145 million of 6 7/8% unsecured senior
notes due December 31, 2047. The senior notes are subordinated to all secured
debt of the Company, including its first mortgage bonds.
Bank Credit Arrangements
At the beginning of 1998, the Company had unused credit arrangements with banks
totaling $1.3 billion, of which $919 million expires at various times during
1998, $300 million expires at June 30, 1999, and $60.3 million expires at May 1,
2000.
The $300 million expiring June 30, 1999, is under revolving credit
arrangements with several banks providing the Company and Alabama Power Company
up to a total credit amount of $300 million. To provide liquidity support for
commercial paper programs, $165 million and $135 million are currently dedicated
to the Company and Alabama Power Company, respectively. However, the allocations
can be changed among the borrowers by notifying the respective banks.
Approximately $1.1 billion of the credit facilities allow for term loans of
between one and three years. Most of the agreements include stated borrowing
rates but also allow for negotiated rates. 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 $1.3 billion in unused credit arrangements, a portion
of the lines is dedicated to provide liquidity support to variable rate
pollution control bonds. The credit lines dedicated as of December 31, 1997,
totaled $879 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 1997.
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
long-term debt. At December 31, 1997 and 1996, the Company had a capitalized
lease obligation for its corporate headquarters building of $87 million with an
interest rate of 8.1 percent. The lease agreement 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.
11-127
NOTES (continued)
Georgia Power Company 1997 Annual Report
At December 31, 1997, and 1996, the interest and lease amortization deferred on
the Balance Sheets are $52 million and $51 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.
Securities Due Within One Year
The current portion of the Company's long-term debt and preferred stock is as
follows:
1997 1996
-------------------
(in millions)
First mortgage bonds $ 220 $ 61
Preferred stock - 49
- ----------------------------------------------------------------
Total $ 220 $ 110
================================================================
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 1998
requirement was met in the first quarter of the year by depositing cash with the
trustee. These funds were used to redeem first mortgage bonds.
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 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 of first mortgage bonds 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 1997 and 1996 is as follows:
Net Income
After
Dividends on
Operating Operating Preferred
Quarter Ended Revenues Income Stock
- -------------------------------------------------------------------
(in millions)
--------------------------------------------
March 1997 $ 959 $180 $106
June 1997 1,015 205 131
September 1997 1,407 317 257
December 1997 1,005 159 100
March 1996 $1,029 $192 $114
June 1996 1,134 233 154
September 1996 1,311 339 256
December 1996 943 122 56
- -------------------------------------------------------------------
Earnings in the fourth quarter of 1997, compared to the fourth quarter of
1996, increased primarily as a result of higher retail sales and the recognition
in 1996 of an agreement to refund $14 million to municipalities and cooperatives
in Georgia.
The Company's business is influenced by seasonal weather conditions.
II-128
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1997 Annual Report
==========================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,385,717 $4,416,779 $4,405,338
Net Income after Dividends
on Preferred Stock (in thousands) $593,996 $580,327 $608,862
Cash Dividends on Common Stock (in thousands) $520,000 $475,500 $451,500
Return on Average Common Equity (percent) 14.53 13.73 14.43
Total Assets (in thousands) $12,573,728 $13,006,635 $13,470,275
Gross Property Additions (in thousands) $475,921 $428,220 $480,449
- --------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $4,019,728 $4,154,281 $4,299,012
Preferred stock 157,247 464,611 692,787
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 689,250 325,000 100,000
Long-term debt 2,982,835 3,200,419 3,315,460
- --------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $7,849,060 $8,144,311 $8,407,259
==========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 51.2 51.0 51.1
Preferred stock 2.0 5.7 8.2
Company obligated mandatorily redeemable preferred securities 8.8 4.0 1.2
Long-term debt 38.0 39.3 39.5
- --------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 10,000 75,000
Retired 60,258 210,860 505,789
Preferred Stock (in thousands):
Issued - - -
Retired 356,392 179,148 -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued 364,250 225,000 -
- --------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A+ A+ A
- --------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,561,675 1,531,453 1,500,024
Commercial 211,672 205,087 198,624
Industrial 9,988 10,424 10,796
Other 2,748 2,645 2,568
- --------------------------------------------------------------------------------------------------------------------------
Total 1,786,083 1,749,609 1,712,012
==========================================================================================================================
Employees (year-end) 8,354 * 10,346 11,061
*In 1997 Georgia Power Company transferred 1,855 employees to Southern Nuclear Operating Company.
II-129
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1997 Annual Report
=============================================================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,162,403 $4,451,181 $4,297,436
Net Income after Dividends
on Preferred Stock (in thousands) $525,544 $569,853 $520,538
Cash Dividends on Common Stock (in thousands) $429,300 $402,400 $384,000
Return on Average Common Equity (percent) 12.84 14.37 13.60
Total Assets (in thousands) $13,712,658 $13,736,110 $10,964,442
Gross Property Additions (in thousands) $638,426 $674,432 $508,444
- -----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $4,141,554 $4,045,458 $3,888,237
Preferred stock 692,787 692,787 692,792
Preferred stock subject to mandatory redemption - - 6,250
Company obligated mandatorily redeemable preferred securities 100,000 - -
Long-term debt 3,757,823 4,031,387 4,131,016
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $8,692,164 $8,769,632 $8,718,295
=============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.6 46.1 44.6
Preferred stock 8.0 7.9 8.0
Company obligated mandatorily redeemable preferred securities 1.2 - -
Long-term debt 43.2 46.0 47.4
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 1,135,000 975,000
Retired 133,559 1,337,822 1,381,300
Preferred Stock (in thousands):
Issued - 175,000 195,000
Retired - 245,005 165,004
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued 100,000 - -
- -----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A3 A3
Standard and Poor's A A- A-
Duff & Phelps A+ A+ A-
Preferred Stock -
Moody's a3 baa1 baa1
Standard and Poor's A- BBB+ BBB+
Duff & Phelps A- A- BBB
- -----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,466,382 1,441,972 1,421,175
Commercial 193,648 188,820 183,784
Industrial 10,976 11,217 11,479
Other 2,426 2,322 2,269
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,673,432 1,644,331 1,618,707
=============================================================================================================================
Employees (year-end) 11,765 12,528 12,600
*In 1997 Georgia Power Company transferred 1,855 employees to Southern Nuclear Operating Company.
II-130A
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1997 Annual Report
=======================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,301,428 $4,445,809 $4,145,240
Net Income after Dividends
on Preferred Stock (in thousands) $474,855 $208,066 $449,099
Cash Dividends on Common Stock (in thousands) $375,200 $389,600 $394,500
Return on Average Common Equity (percent) 12.76 5.52 11.72
Total Assets (in thousands) $10,842,538 $11,176,619 $11,372,346
Gross Property Additions (in thousands) $548,051 $558,727 $727,631
- -----------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,766,551 $3,673,913 $3,860,657
Preferred stock 607,796 607,796 607,844
Preferred stock subject to mandatory redemption 118,750 125,000 155,000
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 4,553,189 5,000,225 5,054,001
- -----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $9,046,286 $9,406,934 $9,677,502
=======================================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.7 39.1 39.9
Preferred stock 8.0 7.8 7.9
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 50.3 53.1 52.2
- -----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=======================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 300,000 250,000
Retired 598,384 91,117 91,516
Preferred Stock (in thousands):
Issued 100,000 - -
Retired 100,000 83,750 7,500
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - -
- -----------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Baa1 Baa1 Baa2
Standard and Poor's BBB+ BBB+ BBB+
Duff & Phelps BBB+ BBB BBB
Preferred Stock -
Moody's baa1 baa1 baa2
Standard and Poor's BBB BBB BBB
Duff & Phelps BBB- BBB- BBB-
- -----------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,397,682 1,378,888 1,355,211
Commercial 179,933 178,391 177,814
Industrial 11,946 12,115 12,311
Other 2,190 2,114 2,050
- -----------------------------------------------------------------------------------------------------------------------
Total 1,591,751 1,571,508 1,547,386
=======================================================================================================================
Employees (year-end) 13,700 13,746 13,900
*In 1997 Georgia Power Company transferred 1,855 employees to Southern Nuclear Operating Company.
130B
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1997 Annual Report
============================================================================================================
1988 1987
- ------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,897,479 $3,786,485
Net Income after Dividends
on Preferred Stock (in thousands) $479,532 $240,057
Cash Dividends on Common Stock (in thousands) $386,600 $377,800
Return on Average Common Equity (percent) 13.06 6.85
Total Assets (in thousands) $11,130,539 $11,197,494
Gross Property Additions (in thousands) $929,019 $1,034,059
- ------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,806,070 $3,538,182
Preferred stock 657,844 657,844
Preferred stock subject to mandatory redemption 162,500 166,250
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 4,861,378 4,825,760
- ------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $9,487,792 $9,188,036
============================================================================================================
Capitalization Ratios (percent):
Common stock equity 40.1 38.5
Preferred stock 8.6 9.0
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 51.3 52.5
- ------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
============================================================================================================
First Mortgage Bonds (in thousands):
Issued 150,000 500,000
Retired 206,677 217,949
Preferred Stock (in thousands):
Issued - 125,000
Retired 3,750 150,000
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - -
- ------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Baa2 Baa2
Standard and Poor's BBB BBB
Duff & Phelps 9 9
Preferred Stock -
Moody's baa2 baa2
Standard and Poor's BBB- BBB-
Duff & Phelps 10 10
- ------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,329,173 1,303,721
Commercial 174,147 169,014
Industrial 12,353 12,307
Other 1,993 1,858
- ------------------------------------------------------------------------------------------------------------
Total 1,517,666 1,486,900
============================================================================================================
Employees (year-end) 15,110 14,924
*In 1997 Georgia Power Company transferred 1,855 employees to Southern Nuclear Operating Company.
130C
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,326,787 $1,371,033 $1,337,060
Commercial 1,493,353 1,486,586 1,449,108
Industrial 1,110,311 1,118,633 1,141,766
Other 47,848 47,060 44,255
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 3,978,299 4,023,312 3,972,189
Sales for resale - non-affiliates 282,365 281,580 290,302
Sales for resale - affiliates 38,708 35,886 76,906
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,299,372 4,340,778 4,339,397
Other revenues 86,345 76,001 65,941
- --------------------------------------------------------------------------------------------------------------------------------
Total $4,385,717 $4,416,779 $4,405,338
================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 17,295,022 17,826,451 17,307,399
Commercial 21,134,346 20,823,073 19,844,999
Industrial 26,701,685 26,191,831 25,286,340
Other 538,163 536,057 493,720
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 65,669,216 65,377,412 62,932,458
Sales for resale - non-affiliates 6,795,300 7,868,342 6,591,841
Sales for resale - affiliates 1,706,699 1,180,207 2,738,947
- --------------------------------------------------------------------------------------------------------------------------------
Total 74,171,215 74,425,961 72,263,246
================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.67 7.69 7.73
Commercial 7.07 7.14 7.30
Industrial 4.16 4.27 4.52
Total retail 6.06 6.15 6.31
Sales for resale 3.78 3.51 3.94
Total sales 5.80 5.83 6.00
Residential Average Annual Kilowatt-Hour Use Per Customer 11,171 11,763 11,654
Residential Average Annual Revenue Per Customer $857.01 $904.70 $900.28
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,437 14,367 14,344
Maximum Peak-Hour Demand (megawatts):
Winter 10,407 10,410 9,819
Summer 13,153 12,914 12,828
Annual Load Factor (percent) 57.4 62.2 59.6
Plant Availability (percent):
Fossil-steam 85.8 85.2 85.8
Nuclear 88.8 89.3 91.8
- --------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 64.3 60.4 63.0
Nuclear 18.8 18.2 19.3
Hydro 2.2 2.2 2.5
Oil and gas 0.6 0.5 0.6
Purchased power -
From non-affiliates 2.7 5.6 7.7
From affiliates 11.4 13.1 6.9
- --------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,990 10,468 10,039
Cost of fuel per million BTU (cents) 132.61 128.72 143.85
Average cost of fuel per net kilowatt-hour generated (cents) 1.32 1.35 1.44
================================================================================================================================
* Less than one-tenth of one percent.
II-131
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1997 Annual Report
============================================================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,180,358 $1,291,035 $1,128,396
Commercial 1,367,315 1,354,130 1,285,681
Industrial 1,100,995 1,113,067 1,083,856
Other 42,983 41,399 39,504
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 3,691,651 3,799,631 3,537,437
Sales for resale - non-affiliates 351,591 534,370 640,308
Sales for resale - affiliates 60,899 61,668 67,835
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,104,141 4,395,669 4,245,580
Other revenues 58,262 55,512 51,856
- ----------------------------------------------------------------------------------------------------------------------------
Total $4,162,403 $4,451,181 $4,297,436
============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 15,680,709 16,649,859 14,939,172
Commercial 18,738,461 18,278,508 17,260,614
Industrial 24,337,632 23,635,363 22,978,312
Other 484,009 460,801 436,144
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 59,240,811 59,024,531 55,614,242
Sales for resale - non-affiliates 7,968,475 14,307,030 15,870,222
Sales for resale - affiliates 3,056,050 3,027,733 3,320,060
- ----------------------------------------------------------------------------------------------------------------------------
Total 70,265,336 76,359,294 74,804,524
============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.53 7.75 7.55
Commercial 7.30 7.41 7.45
Industrial 4.52 4.71 4.72
Total retail 6.23 6.44 6.36
Sales for resale 3.74 3.44 3.69
Total sales 5.84 5.76 5.68
Residential Average Annual Kilowatt-Hour Use Per Customer 10,766 11,630 10,603
Residential Average Annual Revenue Per Customer $810.39 $901.79 $800.88
Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,943 13,759 14,076
Maximum Peak-Hour Demand (megawatts):
Winter 10,509 9,067 8,938
Summer 11,758 12,573 11,448
Annual Load Factor (percent) 63.0 58.5 60.5
Plant Availability (percent):
Fossil-steam 83.1 85.9 86.6
Nuclear 88.4 85.5 87.7
- ----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 61.3 62.1 61.4
Nuclear 18.0 16.2 17.0
Hydro 2.6 2.3 2.5
Oil and gas 0.1 0.2 *
Purchased power -
From non-affiliates 9.7 10.2 12.2
From affiliates 8.3 9.0 6.9
- ----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,915 9,912 9,900
Cost of fuel per million BTU (cents) 145.33 153.62 153.08
Average cost of fuel per net kilowatt-hour generated (cents) 1.44 1.52 1.52
============================================================================================================================
* Less than one-tenth of one percent.
II-132A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1997 Annual Report
================================================================================================================
1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,111,358 $1,109,165 $1,022,781
Commercial 1,243,067 1,218,441 1,143,727
Industrial 1,057,702 1,061,830 1,006,416
Other 37,861 36,773 34,775
- ----------------------------------------------------------------------------------------------------------------
Total retail 3,449,988 3,426,209 3,207,699
Sales for resale - non-affiliates 736,643 784,086 760,809
Sales for resale - affiliates 65,586 168,251 150,394
- ----------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,252,217 4,378,546 4,118,902
Other revenues 49,211 67,263 26,338
- ----------------------------------------------------------------------------------------------------------------
Total $4,301,428 $4,445,809 $4,145,240
================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,815,089 14,771,648 14,134,195
Commercial 16,885,833 16,627,128 15,843,181
Industrial 22,298,062 22,126,604 21,801,404
Other 429,016 428,459 414,107
- ----------------------------------------------------------------------------------------------------------------
Total retail 54,428,000 53,953,839 52,192,887
Sales for resale - non-affiliates 18,719,924 20,158,681 20,479,412
Sales for resale - affiliates 3,885,892 8,272,528 7,489,948
- ----------------------------------------------------------------------------------------------------------------
Total 77,033,816 82,385,048 80,162,247
================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.50 7.51 7.24
Commercial 7.36 7.33 7.22
Industrial 4.74 4.80 4.62
Total retail 6.34 6.35 6.15
Sales for resale 3.55 3.35 3.26
Total sales 5.52 5.31 5.14
Residential Average Annual Kilowatt-Hour Use Per Customer 10,675 10,795 10,530
Residential Average Annual Revenue Per Customer $800.78 $810.56 $761.96
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,076 14,366 14,366
Maximum Peak-Hour Demand (megawatts):
Winter 10,001 8,977 10,101
Summer 13,090 13,196 12,735
Annual Load Factor (percent) 55.2 55.5 56.3
Plant Availability (percent):
Fossil-steam 93.3 92.5 93.0
Nuclear 81.6 81.3 89.2
- ----------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.6 65.1 64.0
Nuclear 15.3 13.7 14.1
Hydro 2.3 2.2 2.1
Oil and gas * 0.1 0.1
Purchased power -
From non-affiliates 10.3 11.0 10.2
From affiliates 8.5 7.9 9.5
- ----------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,960 9,939 10,020
Cost of fuel per million BTU (cents) 157.97 166.22 164.27
Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.65 1.65
================================================================================================================
* Less than one-tenth of one percent.
II-132B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1997 Annual Report
===========================================================================================================
1988 1987
- -----------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $979,047 $904,218
Commercial 1,054,995 915,540
Industrial 983,822 911,933
Other 31,743 29,350
- -----------------------------------------------------------------------------------------------------------
Total retail 3,049,607 2,761,041
Sales for resale - non-affiliates 707,076 822,696
Sales for resale - affiliates 86,751 159,998
- -----------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,843,434 3,743,735
Other revenues 54,045 42,750
- -----------------------------------------------------------------------------------------------------------
Total $3,897,479 $3,786,485
===========================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 13,800,038 13,675,730
Commercial 14,790,561 13,799,379
Industrial 21,412,845 20,884,454
Other 397,669 385,514
- -----------------------------------------------------------------------------------------------------------
Total retail 50,401,113 48,745,077
Sales for resale - non-affiliates 18,544,705 20,910,185
Sales for resale - affiliates 3,327,814 6,032,889
- -----------------------------------------------------------------------------------------------------------
Total 72,273,632 75,688,151
===========================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.09 6.61
Commercial 7.13 6.63
Industrial 4.59 4.37
Total retail 6.05 5.66
Sales for resale 3.63 3.65
Total sales 5.32 4.95
Residential Average Annual Kilowatt-Hour Use Per Customer 10,484 10,623
Residential Average Annual Revenue Per Customer $743.82 $702.36
Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,018 13,018
Maximum Peak-Hour Demand (megawatts):
Winter 9,866 9,446
Summer 12,295 12,390
Annual Load Factor (percent) 59.1 56.1
Plant Availability (percent):
Fossil-steam 94.5 92.7
Nuclear 69.4 85.4
- -----------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 72.0 70.9
Nuclear 9.6 9.1
Hydro 1.2 1.7
Oil and gas 0.1 0.1
Purchased power -
From non-affiliates 8.2 8.5
From affiliates 8.9 9.7
- -----------------------------------------------------------------------------------------------------------
Total 100.0 100.0
===========================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,969 9,932
Cost of fuel per million BTU (cents) 166.28 168.81
Average cost of fuel per net kilowatt-hour generated (cents) 1.66 1.68
===========================================================================================================
* Less than one-tenth of one percent.
II-132C
STATEMENTS OF INCOME
Georgia Power Company
================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $4,347,009 $4,380,893 $4,328,432
Revenues from affiliates 38,708 35,886 76,906
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,385,717 4,416,779 4,405,338
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 857,269 835,194 900,973
Purchased power from non-affiliates 143,409 157,308 183,009
Purchased power from affiliates 177,240 229,324 131,740
Provision for separation benefits 5,459 39,099 10,607
Proceeds from settlement of disputed contracts - - -
Other 696,700 741,383 735,918
Maintenance 317,199 315,934 292,029
Depreciation and amortization 572,640 432,940 421,850
Deferred Plant Vogtle expenses, net 120,577 136,650 124,454
Taxes other than income taxes 207,192 207,098 204,675
Federal and state income taxes 426,918 435,904 449,204
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,524,603 3,530,834 3,454,459
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 861,114 885,945 950,879
Other Income (Expense):
Allowance for equity funds used during construction 6,012 3,144 2,734
Equity in earnings of unconsolidated subsidiary 4,266 3,851 4,051
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 10,581 5,333 5,524
Other, net (See note) (35,834) (43,502) (8,973)
Income taxes applicable to other income 31,763 18,581 3,022
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 877,902 873,352 957,237
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 194,344 207,851 254,607
Allowance for debt funds used during construction (8,962) (11,416) (12,081)
Interest on interim obligations 7,795 15,478 21,463
Amortization of debt discount, premium, and expense, net 14,179 14,790 15,835
Other interest charges 10,254 6,338 11,399
Distributions on preferred securities of subsidiary companies 47,369 14,958 9,000
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 264,979 247,999 300,223
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 612,923 625,353 657,014
Dividends on Preferred Stock 18,927 45,026 48,152
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 593,996 $ 580,327 $ 608,862
================================================================================================================================
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.
II-133
STATEMENTS OF INCOME
Georgia Power Company
================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $4,101,504 $4,389,513 $4,229,601
Revenues from affiliates 60,899 61,668 67,835
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,162,403 4,451,181 4,297,436
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 870,653 951,507 929,780
Purchased power from non-affiliates 193,130 313,170 436,761
Purchased power from affiliates 158,063 194,024 158,306
Provision for separation benefits 82,238 - 9,778
Proceeds from settlement of disputed contracts - - (4,982)
Other 643,375 675,284 616,116
Maintenance 272,818 284,521 264,757
Depreciation and amortization 379,158 379,425 375,460
Deferred Plant Vogtle expenses, net 74,888 36,284 (30,804)
Taxes other than income taxes 194,566 192,671 179,460
Federal and state income taxes 399,413 452,122 377,542
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,268,302 3,479,008 3,312,174
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 894,101 972,173 985,262
Other Income (Expense):
Allowance for equity funds used during construction 5,663 3,168 5,855
Equity in earnings of unconsolidated subsidiary 3,588 4,127 4,635
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 3,254 3,806 12,475
Other, net (See note) 10,626 11,902 (30,527)
Income taxes applicable to other income 7,975 37,661 25,163
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 925,207 1,032,837 1,002,863
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 306,473 343,634 402,541
Allowance for debt funds used during construction (11,571) (8,271) (8,310)
Interest on interim obligations 17,529 15,530 9,694
Amortization of debt discount, premium, and expense, net 15,743 14,024 8,033
Other interest charges 23,183 47,393 12,425
Distributions on preferred securities of subsidiary companies 300 - -
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 351,657 412,310 424,383
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 573,550 620,527 578,480
Dividends on Preferred Stock 48,006 50,674 57,942
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 525,544 $ 569,853 $ 520,538
================================================================================================================================
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.
II-134A
STATEMENTS OF INCOME
Georgia Power Company
================================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $4,235,842 $4,277,558 $3,994,846
Revenues from affiliates 65,586 168,251 150,394
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,301,428 4,445,809 4,145,240
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 998,701 1,120,933 1,078,586
Purchased power from non-affiliates 444,920 626,989 543,448
Purchased power from affiliates 193,114 173,716 195,355
Provision for separation benefits 52,952 - -
Proceeds from settlement of disputed contracts (142,183) - -
Other 596,565 524,665 504,743
Maintenance 295,012 280,304 233,680
Depreciation and amortization 382,549 380,394 346,091
Deferred Plant Vogtle expenses, net 16,008 31,146 (39,211)
Taxes other than income taxes 172,893 151,124 128,518
Federal and state income taxes 349,284 270,561 273,287
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,359,815 3,559,832 3,264,497
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 941,613 885,977 880,743
Other Income (Expense):
Allowance for equity funds used during construction 9,083 6,985 40,525
Equity in earnings of unconsolidated subsidiary 4,576 4,182 3,750
Deferred return on Plant Vogtle 34,549 82,721 48,096
Write-off of Plant Vogtle costs - (281,254) -
Income tax reduction for write-off of Plant Vogtle costs - 63,231 -
Interest income 10,563 7,552 10,333
Other, net (See note) 13,551 (21,199) (20,603)
Income taxes applicable to other income (7,522) 20,859 15,573
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,006,413 769,054 978,417
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 459,184 480,174 475,991
Allowance for debt funds used during construction (10,385) (9,325) (34,244)
Interest on interim obligations 4,906 8,512 1,059
Amortization of debt discount, premium, and expense, net 6,214 6,100 5,865
Other interest charges 9,938 9,404 8,868
Distributions on preferred securities of subsidiary companies - - -
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 469,857 494,865 457,539
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 536,556 274,189 520,878
Dividends on Preferred Stock 61,701 66,123 71,779
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 474,855 $ 208,066 $ 449,099
================================================================================================================================
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.
II-134B
STATEMENTS OF INCOME
Georgia Power Company
================================================================================================================
For the Years Ended December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $3,810,728 $3,626,487
Revenues from affiliates 86,751 159,998
- ----------------------------------------------------------------------------------------------------------------
Total operating revenues 3,897,479 3,786,485
- ----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 1,023,173 1,064,552
Purchased power from non-affiliates 546,511 530,051
Purchased power from affiliates 164,873 199,831
Provision for separation benefits - -
Proceeds from settlement of disputed contracts - -
Other 541,975 575,182
Maintenance 246,877 274,672
Depreciation and amortization 306,492 254,929
Deferred Plant Vogtle expenses, net (8,333) (141,977)
Taxes other than income taxes 146,759 143,289
Federal and state income taxes 204,222 250,093
- ----------------------------------------------------------------------------------------------------------------
Total operating expenses 3,172,549 3,150,622
- ----------------------------------------------------------------------------------------------------------------
Operating Income 724,930 635,863
Other Income (Expense):
Allowance for equity funds used during construction 96,530 159,414
Equity in earnings of unconsolidated subsidiary 3,302 3,440
Deferred return on Plant Vogtle 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 28,445 55,388
Other, net (See note) (3,746) (55,081)
Income taxes applicable to other income 6,583 17,344
- ----------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 963,354 702,498
- ----------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 471,897 480,519
Allowance for debt funds used during construction (95,818) (130,756)
Interest on interim obligations 15,084 16,362
Amortization of debt discount, premium, and expense, net 5,466 3,573
Other interest charges 14,556 12,239
Distributions on preferred securities of subsidiary companies - -
- ----------------------------------------------------------------------------------------------------------------
Interest charges and other, net 411,185 381,937
- ----------------------------------------------------------------------------------------------------------------
Net Income 552,169 320,561
Dividends on Preferred Stock 72,637 80,504
- ----------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 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.
II-134C
STATEMENTS OF CASH FLOWS
Georgia Power Company
==============================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 612,923 $ 625,353 $ 657,014
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 674,286 521,086 527,310
Deferred income taxes, net (21,425) 35,700 36,023
Deferred investment tax credits, net - - 1,127
Allowance for equity funds used during construction (6,012) (3,144) (2,734)
Amortization of deferred Plant Vogtle costs, net 120,577 136,650 124,454
Write-off of Plant Vogtle costs - - -
Non-cash portion of separation benefits - - -
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 2,076 45,255 (31,568)
Changes in certain current assets and liabilities:
Receivables, net 13,387 9,421 (59,370)
Inventories 39,748 55,753 30,761
Payables (10,007) (35,651) 45,882
Other (53,725) (3,435) 89,124
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,371,828 1,386,988 1,418,023
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (475,921) (428,220) (480,449)
Sales of property - 3,319 131,099
Other 16,223 (16,468) (42,579)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (459,698) (441,369) (391,929)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 364,250 225,000 -
Preferred stock - - -
First mortgage bonds - 10,000 75,000
Pollution control bonds 284,700 112,825 504,700
Other long-term debt - - -
Capital contributions from parent company - - -
Retirements:
Preferred stock (356,392) (179,148) -
First mortgage bonds (60,258) (210,860) (505,789)
Pollution control bonds (284,700) (119,665) (504,810)
Other long-term debt - - (37,000)
Interim obligations, net (64,266) 30,166 (24,472)
Special deposits -- redemption funds 44,454 (44,454) -
Capital distribution to parent company (205,000) (250,000) -
Payment of preferred stock dividends (26,917) (46,911) (48,419)
Payment of common stock dividends (520,000) (475,500) (451,500)
Miscellaneous (20,024) (10,646) (17,413)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (844,153) (959,193) (1,009,703)
- ------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 67,977 (13,574) 16,391
Cash and Cash Equivalents at Beginning of Year 15,356 28,930 12,539
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 83,333 $ 15,356 $ 28,930
==============================================================================================================================
( ) Denotes use of cash.
II-135
STATEMENTS OF CASH FLOWS
Georgia Power Company
===========================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 573,550 $ 620,527 $ 578,480
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 484,032 475,152 471,014
Deferred income taxes, net 34,053 169,009 194,955
Deferred investment tax credits, net (486) (18,274) (5,704)
Allowance for equity funds used during construction (5,663) (3,168) (5,855)
Amortization of deferred Plant Vogtle costs, net 74,888 36,284 (30,804)
Write-off of Plant Vogtle costs - - -
Non-cash portion of separation benefits 68,599 - -
Non-cash proceeds from settlement of disputed contracts - - (4,982)
Other, net (95,314) (46,227) (9,768)
Changes in certain current assets and liabilities:
Receivables, net 67,218 27,088 (31,348)
Inventories (63,545) 82,433 (65,621)
Payables 5,409 17,364 25,303
Other (5,675) (94,574) (85,961)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,137,066 1,265,614 1,029,709
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (638,426) (674,432) (508,444)
Sales of property 132,644 261,687 46
Other (41,273) (43,154) 42,892
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (547,055) (455,899) (465,506)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 100,000 - -
Preferred stock - 175,000 195,000
First mortgage bonds - 1,135,000 975,000
Pollution control bonds 527,210 145,425 161,955
Other long-term debt - 37,000 -
Capital contributions from parent company - - -
Retirements:
Preferred stock - (245,005) (165,004)
First mortgage bonds (133,559) (1,337,822) (1,381,300)
Pollution control bonds (510,320) (145,465) (160,205)
Other long-term debt (10,187) (19,451) (567)
Interim obligations, net (57,425) (51,444) 334,671
Special deposits -- redemption funds - - -
Capital distribution to parent company - - -
Payment of preferred stock dividends (47,147) (53,123) (60,475)
Payment of common stock dividends (429,300) (402,400) (384,000)
Miscellaneous (22,640) (63,648) (70,986)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (583,368) (825,933) (555,911)
- ---------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 6,643 (16,218) 8,292
Cash and Cash Equivalents at Beginning of Year 5,896 22,114 13,822
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 12,539 $ 5,896 $ 22,114
===========================================================================================================================
( ) Denotes use of cash.
II-136A
STATEMENTS OF CASH FLOWS
Georgia Power Company
=======================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 536,556 $ 274,189 $ 520,878
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 480,318 502,098 484,870
Deferred income taxes, net 53,219 88,667 184,490
Deferred investment tax credits, net (9,524) (52) (8,017)
Allowance for equity funds used during construction (9,083) (6,985) (40,525)
Amortization of deferred Plant Vogtle costs, net (18,541) (51,575) (87,307)
Write-off of Plant Vogtle costs - 281,254 -
Non-cash portion of separation benefits - - -
Non-cash proceeds from settlement of disputed contracts (103,846) - -
Other, net (26,024) (50,804) (38,046)
Changes in certain current assets and liabilities:
Receivables, net 23,920 1,444 (59,035)
Inventories 24,130 (23,498) (33,123)
Payables (23,075) (43,470) (38,976)
Other 54,777 (9,991) 36,015
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 982,827 961,277 921,224
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (548,051) (558,727) (727,631)
Sales of property 291,075 34,573 -
Other 931 1,937 47,260
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (256,045) (522,217) (680,371)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - - -
Preferred stock 100,000 - -
First mortgage bonds - 300,000 250,000
Pollution control bonds 80,420 - 50,000
Other long-term debt - - -
Capital contributions from parent company - - -
Retirements:
Preferred stock (100,000) (83,750) (7,500)
First mortgage bonds (598,384) (91,117) (91,516)
Pollution control bonds (83,265) (535) (505)
Other long-term debt (1,130) (114,452) (3,806)
Interim obligations, net 199,000 - -
Special deposits -- redemption funds - - -
Capital distribution to parent company - - -
Payment of preferred stock dividends (60,766) (67,757) (72,259)
Payment of common stock dividends (375,200) (389,600) (394,500)
Miscellaneous (17,613) (7,663) (4,742)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (856,938) (454,874) (274,828)
- -----------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (130,156) (15,814) (33,975)
Cash and Cash Equivalents at Beginning of Year 143,978 159,792 193,767
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 13,822 $ 143,978 $ 159,792
=======================================================================================================================
( ) Denotes use of cash.
II-136B
STATEMENTS OF CASH FLOWS
Georgia Power Company
=========================================================================================================
For the Years Ended December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 552,169 $ 320,561
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 400,665 336,647
Deferred income taxes, net 160,774 76,445
Deferred investment tax credits, net 11,605 (5,075)
Allowance for equity funds used during construction (96,530) (159,414)
Amortization of deferred Plant Vogtle costs, net (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 6,983 (759)
Changes in certain current assets and liabilities:
Receivables, net 11,225 (6,880)
Inventories (10,044) (72,540)
Payables (2,065) 74,341
Other 1,161 2,751
- ---------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 920,300 666,893
- ---------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (929,019) (1,034,059)
Sales of property - 12,276
Other 35,328 45,801
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing activities (893,691) (975,982)
- ---------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - -
Preferred stock - 125,000
First mortgage bonds 150,000 500,000
Pollution control bonds 69,526 191,736
Other long-term debt - -
Capital contributions from parent company 175,000 228,000
Retirements:
Preferred stock (3,750) (150,000)
First mortgage bonds (206,677) (217,949)
Pollution control bonds (475) (90,000)
Other long-term debt (2,878) (2,824)
Interim obligations, net (302,261) 302,261
Special deposits -- redemption funds - -
Capital distribution to parent company - -
Payment of preferred stock dividends (72,931) (80,420)
Payment of common stock dividends (386,600) (377,800)
Miscellaneous (13,440) (51,745)
- ---------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (594,486) 376,259
- ---------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (567,877) 67,170
Cash and Cash Equivalents at Beginning of Year 761,644 694,474
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 193,767 $ 761,644
=========================================================================================================
( ) Denotes use of cash.
II-136C
BALANCE SHEETS
Georgia Power Company
===============================================================================================================================
At December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,191,446 $ 3,140,069 $ 3,105,165
Nuclear 4,030,532 4,097,192 4,082,098
Hydro 648,785 644,826 642,237
- -------------------------------------------------------------------------------------------------------------------------------
Total production 7,870,763 7,882,087 7,829,500
Transmission 1,897,697 1,862,384 1,822,778
Distribution 4,268,909 4,090,262 3,949,238
General 1,045,201 934,840 937,079
Construction work in progress 214,128 256,141 236,715
Nuclear fuel, at amortized cost 126,882 121,840 124,849
- -------------------------------------------------------------------------------------------------------------------------------
Total electric plant 15,423,580 15,147,554 14,900,159
Steam Heat Plant - - -
- -------------------------------------------------------------------------------------------------------------------------------
Total utility plant 15,423,580 15,147,554 14,900,159
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 5,319,680 4,793,638 4,417,120
Steam heat - - -
- -------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 5,319,680 4,793,638 4,417,120
- -------------------------------------------------------------------------------------------------------------------------------
Total 10,103,900 10,353,916 10,483,039
Less property-related accumulated deferred income taxes - - -
- -------------------------------------------------------------------------------------------------------------------------------
Total 10,103,900 10,353,916 10,483,039
- -------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 194,417 130,178 92,273
Miscellaneous 112,880 129,819 147,615
- -------------------------------------------------------------------------------------------------------------------------------
Total 307,297 259,997 239,888
- -------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 83,333 15,356 28,930
Investment securities - - -
Receivables, net 395,122 463,502 411,038
Accrued utility revenues 118,333 104,420 121,146
Fossil fuel stock, at average cost 96,067 117,382 145,151
Materials and supplies, at average cost 240,387 258,820 286,804
Prepayments 27,503 67,118 73,271
Vacation pay deferred 40,996 39,965 35,543
- -------------------------------------------------------------------------------------------------------------------------------
Total 1,001,741 1,066,563 1,101,883
- -------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 688,472 754,002 871,783
Deferred Plant Vogtle costs 50,412 170,988 307,638
Debt expense, being amortized 40,927 32,693 27,227
Premium on reacquired debt, being amortized 166,609 166,670 174,018
Miscellaneous 214,370 201,806 264,799
- -------------------------------------------------------------------------------------------------------------------------------
Total 1,160,790 1,326,159 1,645,465
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets $12,573,728 $13,006,635 $13,470,275
===============================================================================================================================
II-137
BALANCE SHEETS
Georgia Power Company
=======================================================================================================================
At December 31, 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,077,470 $ 2,976,806 $ 3,144,405
Nuclear 4,075,339 4,069,299 4,051,020
Hydro 443,466 442,888 434,341
- -----------------------------------------------------------------------------------------------------------------------
Total production 7,596,275 7,488,993 7,629,766
Transmission 1,754,945 1,713,122 1,646,904
Distribution 3,777,279 3,600,115 3,413,681
General 926,418 941,291 923,010
Construction work in progress 541,889 584,013 405,606
Nuclear fuel, at amortized cost 136,425 135,742 155,194
- -----------------------------------------------------------------------------------------------------------------------
Total electric plant 14,733,231 14,463,276 14,174,161
Steam Heat Plant - - -
- -----------------------------------------------------------------------------------------------------------------------
Total utility plant 14,733,231 14,463,276 14,174,161
- -----------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 4,054,986 3,822,344 3,569,717
Steam heat - - -
- -----------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 4,054,986 3,822,344 3,569,717
- -----------------------------------------------------------------------------------------------------------------------
Total 10,678,245 10,640,932 10,604,444
Less property-related accumulated deferred income taxes - - 1,589,743
- -----------------------------------------------------------------------------------------------------------------------
Total 10,678,245 10,640,932 9,014,701
- -----------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 54,297 37,937 20,311
Miscellaneous 116,527 61,142 55,463
- -----------------------------------------------------------------------------------------------------------------------
Total 170,824 99,079 75,774
- -----------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 12,539 5,896 22,114
Investment securities - - 108,206
Receivables, net 389,279 515,178 385,227
Accrued utility revenues 103,223 99,550 88,164
Fossil fuel stock, at average cost 169,252 111,620 197,332
Materials and supplies, at average cost 293,464 287,551 284,272
Prepayments 55,383 65,269 91,447
Vacation pay deferred 40,823 41,575 40,169
- -----------------------------------------------------------------------------------------------------------------------
Total 1,063,963 1,126,639 1,216,931
- -----------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 919,750 992,510 -
Deferred Plant Vogtle costs 432,092 506,980 383,025
Debt expense, being amortized 26,223 20,730 17,719
Premium on reacquired debt, being amortized 164,676 153,146 116,940
Miscellaneous 256,885 196,094 139,352
- -----------------------------------------------------------------------------------------------------------------------
Total 1,799,626 1,869,460 657,036
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $13,712,658 $13,736,110 $10,964,442
=======================================================================================================================
II-138A
BALANCE SHEETS
Georgia Power Company
===========================================================================================================================
At December 31, 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,128,594 $ 3,350,018 $ 3,319,876
Nuclear 4,051,043 4,025,862 4,189,723
Hydro 432,674 412,157 411,235
- ---------------------------------------------------------------------------------------------------------------------------
Total production 7,612,311 7,788,037 7,920,834
Transmission 1,566,173 1,522,157 1,431,485
Distribution 3,252,111 3,056,825 2,863,011
General 896,477 876,989 859,013
Construction work in progress 390,437 370,243 403,365
Nuclear fuel, at amortized cost 191,726 210,320 254,101
- ---------------------------------------------------------------------------------------------------------------------------
Total electric plant 13,909,235 13,824,571 13,731,809
Steam Heat Plant - - -
- ---------------------------------------------------------------------------------------------------------------------------
Total utility plant 13,909,235 13,824,571 13,731,809
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 3,315,247 3,040,298 2,762,937
Steam heat - - -
- ---------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 3,315,247 3,040,298 2,762,937
- ---------------------------------------------------------------------------------------------------------------------------
Total 10,593,988 10,784,273 10,968,872
Less property-related accumulated deferred income taxes 1,465,408 1,397,647 1,313,626
- ---------------------------------------------------------------------------------------------------------------------------
Total 9,128,580 9,386,626 9,655,246
- ---------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts 107,993 - -
Nuclear decommissioning trusts 10,007 - -
Miscellaneous 71,880 78,895 69,839
- ---------------------------------------------------------------------------------------------------------------------------
Total 189,880 78,895 69,839
- ---------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 13,822 143,978 159,792
Investment securities - - -
Receivables, net 330,411 356,236 347,899
Accrued utility revenues 79,099 78,067 93,786
Fossil fuel stock, at average cost 200,248 225,966 214,487
Materials and supplies, at average cost 215,735 220,103 208,084
Prepayments 96,750 121,646 116,342
Vacation pay deferred 39,769 33,677 35,238
- ---------------------------------------------------------------------------------------------------------------------------
Total 975,834 1,179,673 1,175,628
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - -
Deferred Plant Vogtle costs 375,028 364,446 322,116
Debt expense, being amortized 12,368 12,708 13,032
Premium on reacquired debt, being amortized 70,855 60,653 61,889
Miscellaneous 89,993 93,618 74,596
- ---------------------------------------------------------------------------------------------------------------------------
Total 548,244 531,425 471,633
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $10,842,538 $11,176,619 $11,372,346
===========================================================================================================================
II-138B
BALANCE SHEETS
Georgia Power Company
=====================================================================================================
At December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 2,638,725 $ 2,616,741
Nuclear 3,225,945 3,220,632
Hydro 407,771 404,291
- ----------------------------------------------------------------------------------------------------
Total production 6,272,441 6,241,664
Transmission 1,322,034 1,248,976
Distribution 2,598,714 2,318,185
General 737,621 657,258
Construction work in progress 1,963,283 1,710,769
Nuclear fuel, at amortized cost 307,109 287,492
- ----------------------------------------------------------------------------------------------------
Total electric plant 13,201,202 12,464,344
Steam Heat Plant - 7
- ----------------------------------------------------------------------------------------------------
Total utility plant 13,201,202 12,464,351
- ----------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 2,445,404 2,193,395
Steam heat - (5)
- ----------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 2,445,404 2,193,390
- ----------------------------------------------------------------------------------------------------
Total 10,755,798 10,270,961
Less property-related accumulated deferred income taxes 1,178,291 1,077,747
- ----------------------------------------------------------------------------------------------------
Total 9,577,507 9,193,214
- ----------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - -
Nuclear decommissioning trusts - -
Miscellaneous 66,677 54,148
- ----------------------------------------------------------------------------------------------------
Total 66,677 54,148
- ----------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 193,767 761,644
Investment securities - -
Receivables, net 320,018 342,315
Accrued utility revenues 66,265 68,370
Fossil fuel stock, at average cost 225,274 262,752
Materials and supplies, at average cost 164,174 116,652
Prepayments 121,840 113,381
Vacation pay deferred 34,418 30,100
- ----------------------------------------------------------------------------------------------------
Total 1,125,756 1,695,214
- ----------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - -
Deferred Plant Vogtle costs 269,958 172,990
Debt expense, being amortized 12,476 12,985
Premium on reacquired debt, being amortized 62,352 51,509
Miscellaneous 15,813 17,434
- ----------------------------------------------------------------------------------------------------
Total 360,599 254,918
- ----------------------------------------------------------------------------------------------------
Total Assets $11,130,539 $11,197,494
====================================================================================================
II-138C
BALANCE SHEETS
Georgia Power Company
================================================================================================================================
At December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250
Paid-in capital 1,929,971 2,134,886 2,384,444
Premium on preferred stock 160 371 413
Earnings retained in the business 1,745,347 1,674,774 1,569,905
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 4,019,728 4,154,281 4,299,012
Preferred stock 157,247 464,611 692,787
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes 689,250 325,000 100,000
Long-term debt 2,982,835 3,200,419 3,315,460
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 7,849,060 8,144,311 8,407,259
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 142,300 207,300 178,000
Commercial paper 223,930 223,196 222,330
Preferred stock due within one year - 49,028 -
Long-term debt due within one year 220,855 60,622 150,446
Accounts payable 332,666 329,914 389,156
Customer deposits 68,618 64,901 53,145
Taxes accrued 116,021 116,158 104,392
Interest accrued 72,437 79,936 96,162
Vacation pay accrued 32,285 38,597 34,233
Miscellaneous 73,398 114,530 137,184
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,282,510 1,284,182 1,365,048
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,417,547 2,522,945 2,510,458
Accumulated deferred investment tax credits 397,202 415,477 432,184
Disallowed Plant Vogtle capacity buyback costs 55,856 57,250 58,514
Deferred credits related to income taxes 297,560 317,965 410,016
Miscellaneous 273,993 264,505 286,796
- --------------------------------------------------------------------------------------------------------------------------------
Total 3,442,158 3,578,142 3,697,968
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $12,573,728 $13,006,635 $13,470,275
================================================================================================================================
II-139
BALANCE SHEETS
Georgia Power Company
===========================================================================================================================
At December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250
Paid-in capital 2,384,348 2,384,348 2,384,140
Premium on preferred stock 413 413 467
Earnings retained in the business 1,412,543 1,316,447 1,159,380
- ---------------------------------------------------------------------------------------------------------------------------
Total common equity 4,141,554 4,045,458 3,888,237
Preferred stock 692,787 692,787 692,792
Preferred stock subject to mandatory redemption - - 6,250
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes 100,000 - -
Long-term debt 3,757,823 4,031,387 4,131,016
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 8,692,164 8,769,632 8,718,295
- ---------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 202,200 406,700 400,200
Commercial paper 222,602 75,527 133,471
Preferred stock due within one year - - 63,750
Long-term debt due within one year 167,420 10,543 95,823
Accounts payable 355,067 324,044 317,351
Customer deposits 47,017 45,922 45,145
Taxes accrued 93,019 153,493 138,289
Interest accrued 110,256 110,497 132,319
Vacation pay accrued 39,720 40,060 38,694
Miscellaneous 70,006 64,527 89,355
- ---------------------------------------------------------------------------------------------------------------------------
Total 1,307,307 1,231,313 1,454,397
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,477,661 2,479,720 -
Accumulated deferred investment tax credits 453,121 478,334 515,539
Disallowed Plant Vogtle capacity buyback costs 60,490 63,067 72,201
Deferred credits related to income taxes 433,334 452,819 -
Miscellaneous 288,581 261,225 204,010
- ---------------------------------------------------------------------------------------------------------------------------
Total 3,713,187 3,735,165 791,750
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $13,712,658 $13,736,110 $10,964,442
===========================================================================================================================
II-140A
BALANCE SHEETS
Georgia Power Company
===========================================================================================================================
At December 31, 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250
Paid-in capital 2,383,800 2,383,800 2,383,800
Premium on preferred stock 489 1,089 1,089
Earnings retained in the business 1,038,012 944,774 1,131,518
- ---------------------------------------------------------------------------------------------------------------------------
Total common equity 3,766,551 3,673,913 3,860,657
Preferred stock 607,796 607,796 607,844
Preferred stock subject to mandatory redemption 118,750 125,000 155,000
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes - - -
Long-term debt 4,553,189 5,000,225 5,054,001
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 9,046,286 9,406,934 9,677,502
- ---------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 199,000 - -
Commercial paper - - -
Preferred stock due within one year 6,250 - 53,750
Long-term debt due within one year 54,976 204,906 54,712
Accounts payable 275,932 310,676 372,968
Customer deposits 41,623 38,144 36,255
Taxes accrued 161,117 84,185 91,424
Interest accrued 151,171 175,959 162,513
Vacation pay accrued 38,531 33,677 35,238
Miscellaneous 106,810 135,392 130,546
- ---------------------------------------------------------------------------------------------------------------------------
Total 1,035,410 982,939 937,406
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - -
Accumulated deferred investment tax credits 540,134 576,837 601,248
Disallowed Plant Vogtle capacity buyback costs 109,537 135,926 73,111
Deferred credits related to income taxes - - -
Miscellaneous 111,171 73,983 83,079
- ---------------------------------------------------------------------------------------------------------------------------
Total 760,842 786,746 757,438
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $10,842,538 $11,176,619 $11,372,346
===========================================================================================================================
II-140B
BALANCE SHEETS
Georgia Power Company
===========================================================================================================
At December 31, 1988 1987
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250
Paid-in capital 2,383,800 2,208,800
Premium on preferred stock 1,089 1,089
Earnings retained in the business 1,076,931 984,043
- -----------------------------------------------------------------------------------------------------------
Total common equity 3,806,070 3,538,182
Preferred stock 657,844 657,844
Preferred stock subject to mandatory redemption 162,500 166,250
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes - -
Long-term debt 4,861,378 4,825,760
- -----------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 9,487,792 9,188,036
- -----------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 302,261
Commercial paper - -
Preferred stock due within one year 3,750 3,750
Long-term debt due within one year 42,001 65,774
Accounts payable 429,807 446,004
Customer deposits 34,221 31,106
Taxes accrued 130,686 114,947
Interest accrued 170,090 162,439
Vacation pay accrued 34,418 30,100
Miscellaneous 51,289 62,364
- -----------------------------------------------------------------------------------------------------------
Total 896,262 1,218,745
- -----------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - -
Accumulated deferred investment tax credits 632,111 640,694
Disallowed Plant Vogtle capacity buyback costs 80,585 79,376
Deferred credits related to income taxes - -
Miscellaneous 33,789 70,643
- -----------------------------------------------------------------------------------------------------------
Total 746,485 790,713
- -----------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $11,130,539 $11,197,494
===========================================================================================================
II-140C
GEORGIA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- -----------------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
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
1996 10,000 6.07% 10,000 12/1/05
1993 50,000 6-7/8% 50,000 4/1/08
1993 160,000 7.95% 138,250 2/1/23
1993 100,000 7-5/8% 84,000 3/1/23
1993 75,000 7-3/4% 70,000 4/1/23
1993 125,000 7.55% 120,000 8/1/23
1995 75,000 7.70% 62,000 5/1/25
---------- ----------
$1,515,000 $1,454,250
=========== ==========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ----------------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1995 $ 50,000 4-3/8% $ 50,000 11/1/00
1993 46,790 5-3/8% 46,790 3/1/05
1995 57,000 5% 57,000 9/1/05
1991 10,450 Variable 10,450 7/1/11
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 10,125 6.25% 10,125 7/1/21
1992 13,155 Variable 13,155 5/1/22
1992 35,000 6.20% 4,100 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
1996 51,345 Variable 51,345 6/1/23
1996 15,480 Variable 15,480 9/1/26
1996 46,000 Variable 46,000 9/1/26
1997 37,000 Variable 37,000 9/1/29
1997 69,700 Variable 69,700 9/1/29
1997 38,000 Variable 38,000 9/1/29
1997 49,600 Variable 49,600 4/1/32
1997 19,600 Variable 19,600 4/1/32
1997 20,800 Variable 20,800 4/1/32
1997 50,000 Variable 50,000 9/1/34
---------- ----------
$1,702,090 $1,671,190
========== ==========
II-141
GEORGIA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997 (Continued)
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiaries Substantially All of Whose
Assets Are Junior Subordinated Debentures or Notes
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
----------------------------------------------------------------------------------
(Thousands)
1994 4,000,000 1 9% $100,000 1
1996 9,000,000 2 7.75% 225,000 2
1997 7,000,000 3 7.60% 175,000 3
1997 7,570,000 4 7.75% 189,250 4
------------ -----------
27,570,000 $689,250
============ ===========
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
----------------------------------------------------------------------------------
(Thousands)
(5) 4,454 $5.00 $ 445
1953 23,277 $4.92 2,328
1954 159,476 $4.60 15,948
1961 11,896 $4.96 1,190
1962 18,080 $4.60 1,808
1963 25,512 $4.60 2,551
1964 11,005 $4.60 1,100
1965 17,531 $4.72 1,753
1966 32,318 $5.64 3,232
1967 120,000 $6.48 12,000
1968 100,000 $6.60 10,000
1993 1,627,160 Adjustable 40,679
1993 2,568,517 Adjustable 64,213
--------- --------
4,719,226 $157,247
========= ========
II-142
(1) Issued by Georgia Power Capital, L.P., and guaranteed to the extent Georgia Power Capital
has funds by GEORGIA.
(2) Issued by Georgia Power Capital Trust I and guaranteed to the extent Georgia Power
Capital Trust I has funds by GEORGIA.
(3) Issued by Georgia Power Capital Trust II and guaranteed to the extent Georgia Power
Capital Trust II has funds by GEORGIA.
(4) Issued by Georgia Power Capital Trust III and guaranteed to the extent Georgia Power
Capital Trust III has funds by GEORGIA.
(5) Issued in exchange for $5.00 preferred outstanding at the time of company formation.
II-142
GEORGIA POWER COMPANY
SECURITIES RETIRED DURING 1997
First Mortgage Bonds
Principal Interest
Series Amount Rate
- -------------------------------------------------------------------------------------------
(Thousands)
1992 $ 60,258 8-5/8%
Pollution Control Bonds
Principal Interest
Series Amount Rate
- -------------------------------------------------------------------------------------------
(Thousands)
1987 $ 90,000 8-3/8%
1987 50,000 9-3/8%
1992 75,000 6.20%
1992 30,900 6.20%
1992 38,800 5.70%
--------
$284,700
========
Preferred Stock
Principal Dividend
Series Amount Rate
- -------------------------------------------------------------------------------------------
(Thousands)
(1) $ 964 $5.00
1953 7,672 $4.92
1954 27,430 $4.60
1961 5,810 $4.96
1962 5,192 $4.60
1963 4,449 $4.60
1964 3,900 $4.60
1965 4,247 $4.72
1966 5,768 $5.64
1971 30,000 $7.72
1992 49,028 $1.90
1992 54,155 $1.9875
1992 58,757 $1.9375
1992 28,912 $1.925
1993 34,321 Adjustable
1993 35,787 Adjustable
--------
$356,392
========
(1) Issued in exchange for $5.00 preferred outstanding at the time of company formation.
II-143
GULF POWER COMPANY
FINANCIAL SECTION
II-144
MANAGEMENT'S REPORT
Gulf Power Company 1997 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 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 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 11, 1998
II-145
REPORT OF INDEPENDENT PUBLIC 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
Southern Company) as of December 31, 1997 and 1996, 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, 1997. 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-155 through II-171)
referred to above present fairly, in all material respects, the financial
position of Gulf Power Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 11, 1998
II-146
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1997 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's 1997 net income after dividends on preferred stock was
$57.6 million, a decrease of $0.2 million over the prior year. This change is
primarily attributable to lower residential revenues as a result of milder than
normal weather.
In 1996, earnings were $57.8 million, representing an increase of $0.6
million compared to the prior year. Earnings in 1996 were affected primarily
by higher retail revenues.
The return on average common equity was 13.33 percent for 1997 and 13.27
percent for 1996.
Revenues
Operating revenues decreased in 1997 and increased in 1996 as a result of the
following factors:
Increase (Decrease)
From Prior Year
-------------------------------------
1997 1996 1995
-------------------------------------
(in thousands)
Retail --
Sales growth $ 4,004 $ 7,123 $ 3,647
Weather (5,277) (1,057) 9,749
Regulatory cost
recovery and other (7,837) 5,649 22,502
- ----------------------------------------------------------------
Total retail (9,110) 11,715 35,898
- ----------------------------------------------------------------
Sales for resale--
Non-affiliates 496 2,788 (5,698)
Affiliates (1,002) (857) 1,266
- ----------------------------------------------------------------
Total sales for resale (506) 1,931 (4,432)
Other operating
revenues 1,107 1,642 8,798
- ----------------------------------------------------------------
Total operating
revenues $(8,509) $15,288 $40,264
================================================================
Percent change (1.3)% 2.5% 7.0%
- ----------------------------------------------------------------
Retail revenues of $521 million in 1997 decreased $9.1 million or 1.7 percent
from last year, compared with an increase of 2.3 percent in 1996 and 7.4 percent
in 1995. The 1997 reduction was due primarily to a decrease in residential
revenues as a result of mild weather and recovery of lower purchased power
capacity costs.
The decrease in regulatory cost recovery and other retail revenues is
primarily attributable to the recovery of decreased purchased power capacity
costs from affiliated companies. 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.
Sales for resale were $80.5 million in 1997, decreasing $0.5 million or 0.6
percent from 1996. 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:
1997 1996 1995
----------------------------------------
(in thousands)
Capacity $24,899 $25,400 $25,870
Energy 18,160 19,804 18,598
- ------------------------------------------------------------
Total $43,059 $45,204 $44,468
============================================================
Capacity revenues decreased slightly in 1997 and 1996, primarily reflecting
the decline in net plant investment related to these sales.
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 in 1997 is primarily attributable to
adjustments to reflect differences between recoverable costs and the amounts
actually reflected in current rates. The increase in other operating revenues
for 1996 was primarily due to increased amounts collected to recover
newly-imposed county franchise fees. These fees are included in taxes other than
income taxes and have no impact on earnings. See Notes 1 and 3 to the financial
statements under "Revenues and Regulatory Cost Recovery Clauses" and
II-147
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
"Environmental Cost Recovery," respectively, for further discussion.
Kilowatt-hour sales for 1997 and percent changes in sales since 1995 are
reported below.
KWH Percent Change
------------ ---------------------------
1997 1997 1996 1995
------------ ---------------------------
(millions)
Residential 4,119 (1.0)% 3.6% 7.0%
Commercial 2,898 3.2 3.7 6.3
Industrial 1,903 5.3 0.7 (2.8)
Other 18 1.6 2.7 (0.1)
------------
Total retail 8,939 1.6 3.0 4.5
Sales for resale
Non-affiliates 1,531 (0.2) 9.9 (1.6)
Affiliates 848 19.5 (6.5) (13.1)
------------
Total 11,318 2.5 3.3 2.2
==================================================================
Retail sales growth was lower in 1997 than in the past two years. Although
the total number of residential customers served increased by more than 9,000 or
3.1% during the year, residential energy sales declined as a result of milder
weather in 1997, compared with more normal weather in 1996. The increase in
energy sales to the industrial class is primarily the result of the
Real-Time-Pricing program. The price structure of this program has encouraged
participating industrial customers to lower their peak demand requirements and
increase their purchases of energy during off-peak periods. See "Future Earnings
Potential" for information on the Company's initiatives to remain competitive
and to meet conservation goals set by the Florida Public Service Commission
(FPSC).
In 1997, energy sales for resale to non-affiliates were essentially
unchanged, decreasing 0.2 percent, and are predominantly related to unit power
sales under long-term contracts to other Florida utilities and bulk power sales
under short-term contracts to other non-affiliated utilities. Energy sales to
affiliated companies vary from year to year as mentioned previously.
Expenses
In 1997, total operating expenses decreased $3.9 million or 0.7 percent from
1996 primarily due to lower fuel and purchased power expenses and maintenance
expenses, offset by higher other operation expenses and depreciation and
amortization expenses. Total operating expenses for 1996 increased $12.7 million
or 2.4 percent from 1995. The increase is due to higher purchased power
expenses, other operation expenses, depreciation expenses, and taxes.
In 1997, fuel and purchased power expenses decreased $10.1 million or 4.4
percent from 1996 reflecting the decrease in fuel and purchased power costs due
to slightly lower fuel costs and increased generation. Fuel and purchased power
expenses for 1996 increased $4 million or 1.8 percent from 1995. The change
reflected the increase in purchased power from affiliated companies due to
scheduled maintenance outages at Plant Crist and Plant Daniel during the first
half of 1996. This increase was partially offset by a slight decrease in fuel
expense reflecting a lower cost of fuel.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1997 1996 1995
----------------------------
Total generation
(millions of kilowatt-hours) 10,435 10,214 9,828
Sources of generation
(percent)
Coal 99.6 99.4 99.5
Oil and gas 0.4 0.6 0.5
Average cost of fuel per net
kilowatt-hour generated
(cents)
Coal 1.97 1.99 2.08
Oil and gas 5.59 6.41 3.56
Total 1.99 2.02 2.09
- -----------------------------------------------------------------
Other operation expenses increased $11.1 million or 9.6% in 1997. The
increase was primarily attributable to higher costs related to the amortization
of prior year buyout and renegotiation of coal supply contracts. Other
contributing factors were implementation costs related to a new customer
accounting system and increased production and distribution costs related to
1997 work force reduction programs. In 1996, other operation expenses increased
$1.8 million or 1.5 percent from the 1995 level. The increase was primarily
attributable to an increase in administrative and general expenses including
costs associated with the approved increase in the Company's annual accrual to
II-148
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
the accumulated provision for property damage to amortize deferred storm charges
and restore the account balance to a reasonable level. See Note 2 to the
financial statements under "Workforce Reduction Programs" for further
discussion.
Maintenance expenses decreased $3.1 million or 6.0 percent in 1997 and
decreased $0.9 million or 1.7 percent in 1996. The decreases were primarily due
to a decrease in scheduled maintenance of production facilities.
Depreciation and amortization expenses increased $1.2 million or 2.2 percent
in 1997 and increased $1.5 million or 2.8 percent in 1996. Both years increases
were primarily due to an increase in depreciation expenses as a result of an
increase in the average investment in distribution property required to serve
the additional customers in the Company's service area.
Federal and state income taxes decreased $2.8 million or 7.4 percent in 1997
primarily due to a decrease in taxable income.
Interest expense in 1997 decreased $0.9 million or 3.0 percent from the prior
year. The decrease is attributable to retirements and refinancings of long-term
debt and reduced interest on notes payable, partially offset by the increase
related to distributions on preferred securities of a subsidiary trust. In 1996,
interest expense increased $0.9 million or 3.2 percent over the prior year. The
increase was attributable to the issuance of $30 million of new first mortgage
bonds in January 1996. The increase in interest on long-term debt was partially
offset by a decrease in interest on notes payable as a result of a lower average
amount of short-term notes outstanding.
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.
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 potentially less
regulated more competitive environment.
Gulf Power currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in
northwest Florida. Prices for electricity provided by the Company to
retail customers are set by the FPSC.
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.
The electric utility industry in the United States is currently undergoing a
period of change as a result of regulatory and competitive factors. Among the
primary agents of change has been the Energy Policy Act of 1992 (Energy Act).
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 enhances the incentive for
IPPs to build cogeneration plants for industrial and commercial customers and
sell energy generation to other utilities. The Company has and will continue to
evaluate opportunities to partner and participate in profitable cogeneration
projects. In 1997, partnering with one of the Company's largest industrial
customers, 15 megawatts of Company-owned cogeneration is being constructed on
the customer's plant site. 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.
II-149
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives to promote
wholesale and retail competition are at varying stages. Among other things,
these initiatives allow customers to choose their electricity provider. As the
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Florida, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on the financial
condition of the Company. The Company is attempting to minimize or reduce its
cost exposure.
Continuing to be a low-cost producer could provide significant opportunities
to increase market share and profitability in markets that evolve with changing
regulation. Conversely, 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.
The FPSC set conservation goals and approved programs to accomplish the goals
beginning in 1995. The goals require conservation programs which reduce 154
megawatts of summer peak demand and 65 million KWH of sales by the year 2004.
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 additional generating capacity.
On September 3, 1996, the FPSC approved a new optional Commercial/Industrial
Service Rider (CISR), which is applicable to the rate schedules for the
Company's largest existing and potential customers who are able to show they
have viable alternatives to purchasing the Company's energy services. The CISR,
approved as a pilot program, provides the flexibility needed to enable the
Company to offer its services in a more competitive manner to these customers.
During 1997, the publicity of the CISR ruling, increased competitive pressures,
and general awareness of customer choice pilots and proposals across the country
has stimulated interest on the part of customers in custom tailored offerings.
The Company has participated in one-on-one discussions with many of these
customers, and has negotiated and executed two Contract Service Agreements
within the CISR pilot program in 1997.
The Company is heavily dependent upon complex computer systems for all phases
of its operations. The year 2000 issue--common to most corporations--concerns
the inability of certain software and databases to properly recognize date
sensitive information beginning related to the year 2000 and thereafter. This
problem could result in a material disruption to the Company's operation, if not
corrected. The Company has assessed and developed a detailed strategy to prevent
or at least minimize problems related to the year 2000 issue. In 1997, resources
were committed and implementation began to modify the affected information
systems. Total costs related to the project for Southern Company are estimated
to be approximately $85 million, of which $8 million was spent in 1997. The
Company's total costs related to the project are estimated to be approximately
$5 million, of which $0.5 million was spent in 1997. Most all remaining costs
will be expensed in 1998. Implementation is currently on schedule and all costs
are being expensed as incurred. The degree of success of this project cannot be
determined at this time. However, management believes that the final outcome
will not have a material adverse effect on the operations of the Company.
II-150
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
Compliance costs related to current and future environmental laws and
regulations 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." Also, 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 that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statements as incurred. At December 31, 1997, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows.
New Accounting Standards
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other non-owner changes in equity. These rules will be adopted by the Company
in 1998.
The FASB has issued Statement No. 131, Disclosure about Segments of an
Enterprise and Related Information. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Generally, financial information is required to
be reported on the basis that it is used by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. This
statement also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company adopted the new
rules in 1997, which do not have a significant impact on the Company's financial
reporting. However, this conclusion may change as industry restructuring and
competitive factors influence the Company's operations.
FINANCIAL CONDITION
Overview
The Company's financial condition continues to be very solid. During 1997, gross
property additions were $54.3 million. Funds for the property additions were
provided by internal sources. See the Statements of Cash Flows for further
details.
Financing Activities
The Company continued to lower its financing costs by issuing new long
term-notes and trust preferred securities and retiring higher-cost issues in
1997. The Company sold $40 million of trust preferred securities, $40.9 million
of pollution control bonds, and $20 million of junior subordinated notes.
Retirements, including maturities during 1997, totaled $25 million of first
mortgage bonds, $40.9 million of pollution control bonds, $75.9 million of
preferred stock, and $16 million of long-term bank notes. The refinancing of
$40.9 million in pollution control bonds and $39.5 million in preferred stock
will result in savings of over $2.6 million annually. See the Statements of Cash
Flows for further details.
Composite financing rates for the years 1995 through 1997 as of year end were
as follows:
1997 1996 1995
------------------------------
Composite interest rate on
long-term debt 5.9% 6.1% 6.5%
Composite preferred stock
dividend rate 6.1% 6.4% 6.4%
- ----------------------------------------------------------------
II-151
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
The decrease in the composite interest rate on long-term debt from 1995 to
1997 reflects the Company's efforts to refinance higher-cost debt. The decrease
in the composite preferred stock dividend rate in 1997 was primarily due to a
decrease in dividends on the Company's adjustable rate preferred stock,
reflecting lower interest rates, and the retirement of higher coupon rate
preferred stock.
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $192 million for the three years
beginning in 1998 ($68 million in 1998, $62 million in 1999, and $62 million in
2000). Actual construction costs may vary from this estimate because of changes
in such factors as: 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. The Company does
not have any major generating plants under construction, 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 $80
million will be required by the end of 2000 in connection with maturities of
long-term debt. Also, the Company will continue to retire higher-cost debt and
preferred stock and replace these securities 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 -- significantly
affected 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
Southern Company. As a result of 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.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $300
million for Southern Company, including approximately $42 million for Gulf
Power.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits. Current compliance strategy for Phase II and ozone
non-attainment could require total estimated construction expenditures for
Southern Company of approximately $70 million, of which $55 million remains to
be spent. Phase II compliance is not expected to have a material impact on Gulf
Power.
Following adoption of legislation in April of 1992 allowing electric
utilities in Florida to seek FPSC approval of their Clean Air Act Compliance
Plans, Gulf Power 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.
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 environmental legislation discussed below are expected to be
recovered through the Environmental Cost Recovery Clause.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. Also, in October 1997, the EPA
issued a proposed regional ozone rule--if implemented--that could require
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
II-152
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: emission control strategies for
ozone non-attainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
Gulf Power 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 substantial 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. 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 any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electric and magnetic fields, and other environmental 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 electric and magnetic fields.
Sources of Capital
At December 31, 1997, the Company had $4.7 million of cash and cash equivalents
and $32.5 million of unused committed lines of credit with banks to meet its
short-term cash needs. Refer to Statements of Cash Flows for details related to
the Company's financing activities. See Note 5 to the financial statements under
"Bank Credit Arrangements" for additional information.
In January 1998, Gulf Power Capital Trust II (Trust II), of which the Company
owns all the common securities, issued $45 million of 7.0 percent mandatorily
redeemable preferred securities. See Note 9 to the financial statements under
"Company Obligated Mandatorily Redeemable Preferred Securities" 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, long-term
unsecured debt, pollution control bonds, and preferred securities; bank notes;
and capital contributions from Southern Company. 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. 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. In
December 1997, the Company obtained stockholder approval to amend the corporate
charter including the elimination of the restrictions on the amount of unsecured
indebtedness allowed. 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.
Cautionary Statement Regarding Forward-Looking Information
Gulf Power Company's 1997 Annual Report contains forward-looking statements in
addition to historical information. The Company cautions that there are various
important factors that could cause actual results to differ materially from
those indicated in the forward-looking statements; accordingly, there can be no
assurance that such indicated results will be realized. These factors include
legislative and regulatory initiatives regarding deregulation and restructuring
of the electric utility industry; the extent and timing of the entry of
additional competition in the Company's markets; potential business
strategies--including acquisitions or dispositions of assets or internal
restructuring--that may be pursued by the company; state and federal rate
II-153
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1997 Annual Report
regulation; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather and
other natural phenomena; and other factors discussed in the reports--including
Form 10-K--filed from time to time by the Company with the Securities and
Exchange Commission.
II-154
STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Gulf Power Company 1997 Annual Report
========================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues $ 609,096 $ 616,603 $ 600,458
Revenues from affiliates 16,760 17,762 18,619
- ------------------------------------------------------------------------------------------------------------------------
Total operating revenues 625,856 634,365 619,077
- ------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation-
Fuel 180,843 184,500 185,274
Purchased power from non-affiliates 11,938 8,300 8,594
Purchased power from affiliates 24,955 35,076 29,966
Other 126,266 115,154 113,397
Maintenance 47,988 51,050 51,917
Depreciation and amortization 57,874 56,645 55,104
Taxes other than income taxes 51,775 52,027 49,598
Federal and state income taxes (Note 8) 35,034 37,821 34,065
- ------------------------------------------------------------------------------------------------------------------------
Total operating expenses 536,673 540,573 527,915
- ------------------------------------------------------------------------------------------------------------------------
Operating Income 89,183 93,792 91,162
Other Income (Expense):
Interest income 1,203 1,921 2,877
Other, net (992) (1,678) (1,225)
Income taxes applicable to other income 1,584 248 (121)
- ------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 90,978 94,283 92,693
- ------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 21,699 24,691 23,294
Other interest charges 2,076 1,824 1,487
Interest on notes payable 891 2,071 2,931
Amortization of debt discount, premium, and expense, net 2,281 2,087 2,014
Distributions on preferred securities of subsidiary trust 2,804 - -
- ------------------------------------------------------------------------------------------------------------------------
Net interest charges 29,751 30,673 29,726
- ------------------------------------------------------------------------------------------------------------------------
Net Income 61,227 63,610 62,967
Dividends on Preferred Stock 3,617 5,765 5,813
- ------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 57,610 $ 57,845 $ 57,154
========================================================================================================================
The accompanying notes are an integral part of these statements.
II-155
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Gulf Power Company 1997 Annual Report
=================================================================================================================================
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 61,227 $ 63,610 $ 62,967
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 72,860 71,825 75,293
Deferred income taxes (7,047) 2,157 390
Accumulated provision for property damage 2,572 4,227 (19,024)
Deferred costs of 1995 coal contract renegotiation 1,246 10,931 (12,177)
Other, net (1,413) 1,123 1,191
Changes in certain current assets and liabilities --
Receivables, net (1,111) 736 (12,210)
Inventories 10,674 12,957 (618)
Payables 1,398 (7,078) 18,258
Taxes accrued 6,123 (441) (2,803)
Current costs of 1995 coal contract renegotiation 14,778 (5,099) (9,859)
Other 4,240 5,937 (1,457)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 165,547 160,885 99,951
- ---------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (54,289) (61,386) (63,113)
Other 509 (2,786) 4,401
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (53,780) (64,172) (58,712)
- ---------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 40,000 - -
First mortgage bonds - 55,000 -
Pollution control bonds 40,930 33,275 -
Other long-term debt 20,000 49,148 -
Retirements:
Preferred stock (75,911) - (1,000)
First mortgage bonds (25,000) (50,930) (1,750)
Pollution control bonds (40,930) (33,275) (125)
Other long-term debt (15,972) (34,923) (13,314)
Notes payable, net 22,000 (55,500) 27,000
Payment of preferred stock dividends (5,370) (5,749) (5,813)
Payment of common stock dividends (64,600) (48,300) (46,400)
Miscellaneous (3,014) (5,332) (59)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (107,867) (96,586) (41,461)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 3,900 127 (222)
Cash and Cash Equivalents at Beginning of Year 807 680 902
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 4,707 $ 807 $ 680
=================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $26,558 $26,050 $26,161
Income taxes $36,010 $25,858 $38,537
- ---------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
II-156
BALANCE SHEETS
At December 31, 1997 and 1996
Gulf Power Company Annual Report
=====================================================================================================================
ASSETS 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service (Notes 1 and 6) $1,762,244 $1,734,510
Less accumulated provision for depreciation 737,767 694,245
- ---------------------------------------------------------------------------------------------------------------------
1,024,477 1,040,265
Construction work in progress 31,030 23,465
- ---------------------------------------------------------------------------------------------------------------------
Total 1,055,507 1,063,730
- ---------------------------------------------------------------------------------------------------------------------
Other Property and Investments 622 652
- ---------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,707 807
Receivables-
Customer accounts receivable 63,691 67,727
Other accounts and notes receivable 2,744 3,098
Affiliated companies 7,329 1,821
Accumulated provision for uncollectible accounts (796) (789)
Fossil fuel stock, at average cost 19,296 28,352
Materials and supplies, at average cost (Note 1) 28,634 30,252
Current portion of deferred coal contract costs (Note 5) 4,456 16,389
Regulatory clauses under recovery (Note 1) 1,675 4,144
Prepayments 2,171 1,268
Vacation pay deferred 4,057 4,055
- ---------------------------------------------------------------------------------------------------------------------
Total 137,964 157,124
- ---------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 26,586 28,313
Debt expense and loss, being amortized 22,941 23,308
Deferred coal contract costs (Note 5) - 13,126
Prepaid pension costs (Note 2) 10,385 7,918
Deferred storm charges (Note 1) 703 3,275
Miscellaneous 10,904 10,920
- ---------------------------------------------------------------------------------------------------------------------
Total 71,519 86,860
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $1,265,612 $1,308,366
=====================================================================================================================
The accompanying notes are an integral part of these statements.
II-157
BALANCE SHEETS
At December 31, 1997 and 1996
Gulf Power Company 1997 Annual Report
=======================================================================================================================
CAPITALIZATION AND LIABILITIES 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity (Note 12) $ 428,718 $ 435,758
Preferred stock 13,691 65,102
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding Company Junior Subordinated Notes (Note 9) 40,000 -
Long-term debt 296,993 331,880
- -----------------------------------------------------------------------------------------------------------------------
Total 779,402 832,740
- -----------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 11) - 24,500
Long-term debt due within one year (Note 11) 53,327 40,972
Notes payable 47,000 25,000
Accounts payable-
Affiliated companies 14,334 10,274
Other 20,205 22,496
Customer deposits 13,778 13,464
Taxes accrued 8,258 8,342
Interest accrued 7,227 7,629
Regulatory clauses over recovery (Note 1) 5,062 5,884
Vacation pay accrued 4,057 4,055
Dividends declared 10,210 11,453
Miscellaneous 8,739 5,668
- -----------------------------------------------------------------------------------------------------------------------
Total 192,197 179,737
- -----------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 166,302 163,857
Deferred credits related to income taxes (Note 8) 56,935 64,354
Accumulated deferred investment tax credits 31,552 33,760
Accumulated provision for postretirement benefits (Note 2) 20,491 18,339
Miscellaneous 18,733 15,579
- -----------------------------------------------------------------------------------------------------------------------
Total 294,013 295,889
- -----------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7)
Total Capitalization and Liabilities $1,265,612 $1,308,366
=======================================================================================================================
The accompanying notes are an integral part of these statements.
II-158
STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Gulf Power Company 1997 Annual Report
=================================================================================================================================
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized and outstanding --
992,717 shares in 1997 and 1996 $ 38,060 $ 38,060
Paid-in capital 218,438 218,438
Premium on preferred stock 12 81
Retained earnings (Note 12) 172,208 179,179
- ---------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 428,718 435,758 55.0% 52.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$10 par value --
Authorized -- 10,000,000 shares,
Outstanding -- 377,989 shares at December 31, 1997
$25 stated capital --
6.72% 8,661 20,000
7.00% - 14,500
7.30% - 15,000
Adjustable Rate -- at January 1, 1998: 4.67% 789 15,000
$100 par value --
Authorized -- 801,626 shares
Outstanding -- 42,411 shares at December 31, 1997
4.64% 1,255 5,102
5.16% 1,357 5,000
5.44% 1,629 5,000
7.52% - 5,000
7.88% - 5,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $836,000) 13,691 89,602
- ---------------------------------------------------------------------------------------------------------------------------------
Less amount due within one year (Note 11) - 24,500
- ---------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 13,691 65,102 1.8 7.8
- ---------------------------------------------------------------------------------------------------------------------------------
II-159
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1997 and 1996
Gulf Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 Liquidation Value--7.625% 40,000 -
- --------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement--$3,050,000) 40,000 - 5.1 -
- --------------------------------------------------------------------------------------------------------------------------------
Long-term Debt:
First mortgage bonds --
Maturity Interest Rates
August 1, 1997 5.875% - 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
November 1, 2006 6.50% 25,000 25,000
January 1, 2026 6.875% 30,000 30,000
- --------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 130,000 155,000
Pollution control obligations (Note 10) 169,630 169,630
Other long-term debt (Note 10) 55,327 51,299
Unamortized debt premium (discount), net (4,637) (3,077)
- --------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $20,771,000) 350,320 372,852
Less amount due within one year (Note 11) 53,327 40,972
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 296,993 331,880 38.1 39.9
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 779,402 $ 832,740 100.0% 100.0%
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-160
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
Gulf Power Company 1997 Annual Report
==================================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 179,179 $ 179,663 $ 168,951
Net income after dividends on preferred stock 57,610 57,845 57,154
Dividends on common stock (64,600) (58,300) (46,400)
Preferred stock transactions, net 19 (29) (42)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 11) $ 172,208 $ 179,179 $ 179,663
==================================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1997, 1996, and 1995
Gulf Power Company 1997 Annual Report
==================================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 218,438 $ 218,438 $ 218,380
Contributions to capital by parent company - - 58
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $ 218,438 $ 218,438 $ 218,438
==================================================================================================================================
The accompanying notes are an integral part of these statements.
II-161
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Gulf Power Company is a wholly owned subsidiary of Southern Company, which is
the parent company of five operating companies, a system service company,
Southern Communications Services (Southern Communications), Southern Energy,
Inc. (Southern Energy), Southern Nuclear Operating Company (Southern Nuclear),
Southern Company Energy Solutions, and other direct and indirect subsidiaries.
The operating companies (Alabama Power, Georgia Power, Gulf Power, Mississippi
Power, and Savannah Electric) provide electric service in four southeastern
states. Gulf Power Company provides electric service to the northwest panhandle
of Florida. Contracts among the operating 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. The system service
company provides, at cost, specialized services to 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. Worldwide, Southern Energy develops
and manages electricity and other energy related projects, including domestic
energy trading and marketing. Southern Nuclear provides services to Southern
Company's nuclear power plants. Southern Company Energy Solutions develops new
business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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 expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
1997 1996
-------------------------
(in thousands)
Deferred income tax debits $ 26,586 $ 28,313
Deferred loss on reacquired debt 20,494 20,386
Environmental remediation 7,338 7,577
Current & deferred
coal contract costs 4,456 29,515
Vacation pay 4,057 4,055
Deferred storm charges 703 3,275
Regulatory clauses over
recovery, net (3,387) (1,740)
Deferred income tax credits (56,935) (64,354)
Other, net (629) (1,202)
- -----------------------------------------------------------------
Total $ 2,683 $ 25,825
=================================================================
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 net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. 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-162
NOTES (continued)
Gulf Power Company 1997 Annual Report
Revenues and Regulatory Cost Recovery Clauses
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. The Company has a diversified base of customers and no
single customer or industry comprises 10 percent or more of revenues. In 1997,
uncollectible accounts continued to average significantly less than 1 percent of
revenues.
Fuel costs are expensed as the fuel is used. The Company's electric rates
include provisions to periodically adjust billings for fluctuations in fuel, the
energy component of purchased power costs, and certain other 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.
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 1997, 1996, and 1995. 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.
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 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. AFUDC amounts for 1997, 1996, and 1995 were immaterial and
are included in other, net and other interest charges in the Statements of
Income.
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.
Financial Instruments
The Company's financial instruments for which the carrying amount did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
----------------------------
(in thousands)
Long-term debt
At December 31, 1997 $350,320 $356,766
At December 31, 1996 $372,852 $373,394
Capital trust preferred
securities:
At December 31, 1997 $40,000 $40,800
At December 31, 1996 - -
- -------------------------------------------------------------
II-163
NOTES (continued)
Gulf Power Company 1997 Annual Report
The fair values for long-term debt and preferred 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.
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 $1.4 million and $1.8 million
at December 31, 1997 and 1996, 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 damages to its
transmission and distribution property. At December 31, 1997, the accumulated
provision for property damage had a negative balance of $0.7 million. The
negative balance was reclassified to deferred storm charges in the accompanying
Balance Sheets. In December 1995, the FPSC approved the Company's request to
increase the amount of its annual accrual to the accumulated provision for
property damage account from $1.2 million to $3.5 million and approved a target
level for the accumulated provision account between $25.1 and $36 million. The
FPSC has also given the Company the flexibility to increase its annual accrual
amount above $3.5 million, when the Company believes it is in a position to do
so, until the account balance reaches $12 million. The Company accrued $3.9
million in 1997 and $4.5 million in 1996 to the accumulated provision for
property damage. The expense of repairing damages from major storms and other
uninsured property damages is 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 Pension, requires use of the
"projected unit credit" actuarial method for financial reporting purposes.
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."
II-164
NOTES (continued)
Gulf Power Company 1997 Annual Report
Funded Status and Cost of Benefits
The funded status of the plans and reconciliation to amounts reflected in the
Balance Sheets at December 31 are as follows:
Pension
-------------------------
1997 1996
-------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $ 97,180 $ 87,245
Non-vested benefits 3,886 5,101
- -------------------------------------------------------------
Accumulated benefit obligation 101,066 92,346
Additional amounts related to
projected salary increases 29,728 31,121
- -------------------------------------------------------------
Projected benefit obligation 130,794 123,467
Less:
Fair value of plan assets 222,196 191,152
Unrecognized net gain (80,497) (58,900)
Unrecognized prior service cost 5,244 5,618
Unrecognized transition asset (5,764) (6,485)
- -------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 10,385 $ 7,918
=============================================================
Postretirement Benefits
---------------------------
1997 1996
---------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $17,363 $10,478
Employees eligible to retire 4,537 5,484
Other employees 17,769 17,694
- ----------------------------------------------------------------
Accumulated benefit obligation 39,669 33,656
Less:
Fair value of plan assets 9,813 7,996
Unrecognized net loss 3,930 1,531
Unrecognized transition
obligation 5,435 5,790
- ----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $20,491 $18,339
================================================================
The weighted average rates assumed in the actuarial calculations were:
1997 1996 1995
------------------------------
Discount 7.5% 7.8% 7.3%
Annual salary increase 5.0% 5.3% 4.8%
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 8.8
percent for 1997, decreasing gradually to 5.5 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, 1997, by $3.2 million and the aggregate of the
service and interest cost components of the net retiree cost by $278 thousand.
Components of the plans' net costs are shown below:
Pension
------------------------------------
1997 1996 1995
------------------------------------
(in thousands)
Benefits earned during
the year $ 3,897 $ 3,880 $ 3,867
Interest cost on projected
benefit obligation 9,301 9,129 8,042
Actual (return) loss on
plan assets (32,924) (21,021) (33,853)
Net amortization
and deferral 17,246 5,920 19,619
- ------------------------------------------------------------------
Net pension income $ (2,480) $ (2,092) $(2,325)
==================================================================
Of the above net pension amounts, pension income of $1.8 million in 1997,
$1.5 million in 1996, and $1.8 million in 1995 were recorded in operating
expenses, and the remainder was recorded in construction and other accounts.
II-165
NOTES (continued)
Gulf Power Company 1997 Annual Report
Postretirement Benefits
--------------------------------
1997 1996 1995
--------------------------------
(in thousands)
Benefits earned during the year $ 896 $ 939 $1,259
Interest cost on accumulated
benefit obligation 2,845 2,330 2,520
Amortization of transition
obligation 356 356 853
Actual (return) loss on plan assets (1,166) (797) (1,268)
Net amortization and deferral 709 318 742
- -------------------------------------------------------------------
Net postretirement cost $3,640 $3,146 $4,106
===================================================================
Of the above net postretirement costs recorded, $2.7 million in 1997, $2.3
million in 1996, and $3.1 million in 1995 were charged to operating expenses,
and the remainder was recorded in construction and other accounts.
Work Force Reduction Programs
The Company recorded costs related to work force reductions programs of $1.4
million in 1997, $1.2 million in 1996, and $7 million in 1995. The Company has
also incurred its pro rata share for the costs of affiliated companies'
programs. The costs related to these programs were $1.3 million for 1997, $2.1
million for 1996, and $1 million for 1995. The costs related to work force
reductions have been expensed to operation expenses.
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.
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. 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, as
well as certain other contracts that reference these proceedings in determining
return on common equity, and if refunds were ordered, the amount of refunds
could range up to approximately $194 million for Southern Company, including
approximately $13 million for the Company at December 31, 1997. Although
management believes that rates are not excessive and that refunds are not
justified, the final outcome of this matter cannot now be determined.
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.
In January 1994, the FPSC approved the Company's initial petition under the
ECRC for recovery of environmental costs. Beginning with this initial period
through September 1996, recovery under the ECRC was determined semi-annually. In
August 1996, the FPSC approved annual recovery periods beginning with the
October 1996 through September 1997 period. Recovery includes a true-up of the
prior period and a projection of the ensuing period. During 1997 and 1996, the
Company recorded ECRC revenues of $10.2 million and $11.0 million, respectively.
At December 31, 1997, the Company's liability for the estimated costs of
environmental remediation projects for known sites was $7.3 million. These
estimated costs are expected to be expended during the period 1998 to 2002.
II-166
NOTES (continued)
Gulf Power Company 1997 Annual Report
These projects have been approved by the FPSC for recovery through the ECRC
discussed above. Therefore, the Company recorded $1.7 million in current assets
and current liabilities, and $5.6 million in deferred assets and liabilities
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 $68 million in 1998, $62 million in 1999, and
$62 million in 2000. 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, 1997, significant purchase commitments were outstanding in
connection with the construction program. The Company does not have any major
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 derived from the sale of additional first mortgage bonds, long-term unsecured
debt, pollution control bonds, and preferred securities; bank notes; and capital
contributions from Southern Company. In addition, the Company may issue
additional long-term debt and preferred securities primarily for debt maturities
and redemptions of higher-cost securities.
Bank Credit Arrangements
At December 31, 1997, the Company had $41.5 million of lines of credit with
banks subject to renewal June 1 of each year, of which $32.5 million remained
unused. In addition, the Company has two unused committed lines of credit
totaling $61.9 million that were established for liquidity support of its
variable rate pollution control bonds. In connection with these credit lines,
the Company has agreed to pay commitment fees and/or to 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 ten major money center banks that total $180
million, of which $38 million was committed at December 31, 1997.
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, 1997, were as follows:
Year Fuel
------- ----------------
(in millions)
1998 $82
1999 77
2000 70
2001 72
2002 74
2003 - 2007 408
--------------------------------------------------------
Total commitments $783
=========================================================
In 1988, the Company made an advance payment of $60 million to a 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
II-167
NOTES (continued)
Gulf Power Company 1997 Annual Report
basis over a ten-year period. The remaining unamortized amount was $2.7
million at December 31, 1997.
In December 1995, the Company made another payment of $22 million to the same
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 being amortized to expense on a per ton basis through the first
quarter of 1998. The remaining unamortized amount was $1.8 million at December
31, 1997.
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 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. In 1997, three additional lease agreements for 120 cars each
were entered into for three years, with a monthly renewal option for up to an
additional nine months.
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 inventories was $2.3 million in 1997 and $1.7 million in 1996.
The annual amounts for 1998 through 2002 will be $2.8 million, $2.8 million,
$2.1 million, $1.7 million, and $1.7 million respectively, and after 2002 will
total $17.8 million.
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 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, 1997, 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 $185,723(1) $222,230
Accumulated Depreciation $58,219 $108,176
Construction Work in Progress $282 $231
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 unit power sales
agreements 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 capacity
II-168
NOTES (continued)
Gulf Power Company 1997 Annual Report
revenues from these sales were $24.9 million in 1997, $25.4 million in 1996, and
$25.9 million in 1995.
Unit power from specific generating plants of 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, 211 megawatts of net
dependable capacity were sold by the Company during 1997, and sales will
remain at that level until the expiration of the contracts in 2010,
unless reduced by FPC, FP&L and JEA after 2000.
Capacity and energy sales to FP&L, the Company's largest single
customer, provided revenues of $25.4 million in 1997, $27.2 million in
1996, and $25.4 million in 1995, or 4.1 percent, 4.3 percent, and 4.1
percent of operating revenues, respectively.
8. INCOME TAXES
At December 31, 1997, the tax-related regulatory assets to be recovered
from customers were $26.6 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, 1997, the tax-related regulatory liabilities
to be credited to customers were $56.9 million. 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:
1997 1996 1995
----------------------------------
(in thousands)
Total provision for income taxes:
Federal--
Currently payable $34,522 $31,022 $29,018
Deferred --current year 19,297 26,072 23,172
--reversal of
prior years (25,778) (24,780) (23,116)
- ------------------------------------------------------------------
28,041 32,314 29,074
- ------------------------------------------------------------------
State--
Currently payable 5,975 4,394 4,778
Deferred --current year 2,868 3,904 3,313
--reversal of
prior years (3,434) (3,039) (2,979)
- ------------------------------------------------------------------
5,409 5,259 5,112
- ------------------------------------------------------------------
Total 33,450 37,573 34,186
Less income taxes charged
(credited) to other income (1,584) (248) 121
- ------------------------------------------------------------------
Total income taxes charged
to operations $35,034 $37,821 $34,065
==================================================================
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:
1997 1996
----------- -----------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $156,328 $151,664
Property basis differences 19,220 21,028
Other 14,242 17,622
- -------------------------------------------------------------------
Total 189,790 190,314
- -------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 9,268 9,773
Postretirement benefits 6,976 5,767
Other 10,861 7,814
- -------------------------------------------------------------------
Total 27,105 23,354
- -------------------------------------------------------------------
Net deferred tax liabilities 162,685 166,960
Less current portion, net (3,617) 3,103
- -------------------------------------------------------------------
Accumulated deferred income
taxes in the Balance Sheets $166,302 $163,857
===================================================================
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
depreciation and amortization in the Statements of Income. Credits amortized in
II-169
NOTES (continued)
Gulf Power Company 1997 Annual Report
this manner amounted to $2.2 million in 1997 and $2.3 million in 1996 and 1995.
At December 31, 1997, 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:
1997 1996 1995
--------- --------- ---------
Federal statutory rate 35% 35% 35%
State income tax,
net of federal deduction 4 4 4
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (1) (1) (3)
Other, net (4) (2) (2)
- ---------------------------------------------------------------
Effective income tax rate 35% 37% 35%
===============================================================
The Company and the other subsidiaries of 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 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. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In January 1997, Gulf Power Capital Trust I (Trust I), of which the Company owns
all of the common securities, issued $40 million of 7.625 percent mandatorily
redeemable preferred securities. Substantially all of the assets of Trust I are
$41 million aggregate principal amount of the Company's 7.625 percent junior
subordinated notes due December 31, 2036.
In January 1998, Gulf Power Capital Trust II (Trust II), of which the Company
also owns all of the common securities, issued $45 million of 7.0 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust II are $46 million aggregate principal amount of the Company's 7.0 percent
junior subordinated notes due December 31, 2037.
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 payment obligations with respect to the preferred
securities of Gulf Power Capital Trust I and Trust II.
Gulf Power Capital Trust I and Trust II are subsidiaries of the Company, and
accordingly are consolidated in the Company's financial statements.
10. POLLUTION CONTROL OBLIGATIONS AND
OTHER LONG-TERM DEBT
Details of pollution control obligations and other long-term debt at December 31
are as follows:
1997 1996
--------------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
Collateralized
5.25% due 2006 $12,075 $12,075
8.25% due 2017 - 32,000
6.75% due 2022 - 8,930
Variable Rate due 2022
Remarketable daily 40,930 -
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 due 2024
Remarketable daily 20,000 20,000
5.50% due 2026 21,200 21,200
- ---------------------------------------------------------------
$169,630 $169,630
- ---------------------------------------------------------------
Other long-term debt:
5.2125% due 1996-1998 5,754 16,823
6.44% due 1994-1998 2,573 7,476
Variable Rate due 1999 13,500 13,500
Variable Rate due 1999 13,500 13,500
7.5% Junior Subordinated
Note due 2037 20,000 -
- ---------------------------------------------------------------
55,327 51,299
- ---------------------------------------------------------------
Total $224,957 $220,929
===============================================================
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
II-170
NOTES (continued)
Gulf Power Company 1997 Annual Report
bonds, the Company has executed and delivered to trustees a like principal
amount of first mortgage bonds, or in the case of the $40.9 million issue a deed
of trust, 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 estimated annual maturities of other long-term debt are as follows:
$8.3 million in 1998 and $27 million in 1999.
11. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirement and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1997 1996
----------------------
(in thousands)
Bond improvement fund requirement $ 1,300 $ 1,550
Less: Portion to be satisfied by
certifying property additions 1,300 1,550
- ---------------------------------------------------------------
Cash sinking fund requirement - -
Maturities of first mortgage bonds 45,000 25,000
Current portion of other long-term
debt (Note 10) 8,327 15,972
Redemption of preferred stock - 24,500
- ---------------------------------------------------------------
Total $53,327 $65,472
===============================================================
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.
12. 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, 1997, retained earnings of $127 million were
restricted against the payment of cash dividends on common stock under the terms
of the mortgage indenture.
The Company's charter previously limited 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, 1997, the ratio was 50.4 percent. These
restrictions were removed by a vote of preferred shareholders on December 10,
1997.
13. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1997 and 1996 are as follows:
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- ------------------------------------------------------------------
(in thousands)
March 31, 1997 $141,374 $20,212 $10,740
June 30, 1997 145,292 19,153 10,386
Sept. 30, 1997 193,710 34,750 27,484
Dec. 31, 1997 145,480 15,068 9,000
March 31, 1996 $154,921 $20,201 $11,258
June 30, 1996 153,821 21,565 12,581
Sept. 30, 1996 179,619 32,568 23,721
Dec. 31, 1996 146,004 19,458 10,285
- ------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
II-171
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1997 Annual Report
================================================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $625,856 $634,365 $619,077
Net Income after Dividends
on Preferred Stock (in thousands) $57,610 $57,845 $57,154
Dividends on Common Stock (in thousands) $64,600 $58,300 $46,400
Return on Average Common Equity (percent) 13.33 13.27 13.27
Total Assets (in thousands) 1,265,612 $1,308,366 $1,341,859
Gross Property Additions (in thousands) $54,289 $61,386 $63,113
- ----------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $428,718 $435,758 $436,242
Preferred stock 13,691 65,102 89,602
Preferred stock subject to mandatory redemption - - -
Trust preferred securities 40,000 - -
Long-term debt 296,993 331,880 323,376
- ----------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $779,402 $832,740 $849,220
- ----------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 55.0 52.3 51.4
Preferred stock 1.8 7.8 10.5
Trust preferred securities 5.1
Long-term debt 38.1 39.9 38.1
- ----------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 55,000 -
Retired 25,000 50,930 1,750
Preferred Stock (in thousands):
Issued - - -
Retired 75,911 - 1,000
- ----------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- A+
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A+ A+ A
- ----------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 300,257 291,196 283,421
Commercial 44,589 43,196 41,281
Industrial 267 278 278
Other 264 162 134
- ----------------------------------------------------------------------------------------------------------------
Total 345,377 334,832 325,114
================================================================================================================
Employees (year-end) 1,328 1,384 1,501
II-172
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1997 Annual Report
==================================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $578,813 $583,142 $570,902
Net Income after Dividends
on Preferred Stock (in thousands) $55,229 $54,311 $54,090
Dividends on Common Stock (in thousands) $44,000 $41,800 $39,900
Return on Average Common Equity (percent) 13.15 13.29 13.62
Total Assets (in thousands) $1,315,542 $1,307,809 $1,062,699
Gross Property Additions (in thousands) $78,869 $78,562 $64,671
- ------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $425,472 $414,196 $403,190
Preferred stock 89,602 89,602 74,662
Preferred stock subject to mandatory redemption - 1,000 2,000
Trust preferred securities - - -
Long-term debt 356,393 369,259 382,047
- ------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $871,467 $874,057 $861,899
- ------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 48.8 47.4 46.8
Preferred stock 10.3 10.4 8.9
Trust preferred securities
Long-term debt 40.9 42.2 44.3
- ------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 75,000 25,000
Retired 48,856 88,809 117,693
Preferred Stock (in thousands):
Issued - 35,000 29,500
Retired 1,000 21,060 15,500
- ------------------------------------------------------------------------------------------------------------------
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 280,859 274,194 267,591
Commercial 40,398 39,253 37,105
Industrial 283 274 270
Other 106 86 74
- ------------------------------------------------------------------------------------------------------------------
Total 321,646 313,807 305,040
==================================================================================================================
Employees (year-end) 1,540 1,565 1,613
II-173A
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1997 Annual Report
==============================================================================================================================
1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $565,207 $567,825 $527,821
Net Income after Dividends
on Preferred Stock (in thousands) $57,796 $38,714 $37,361
Dividends on Common Stock (in thousands) $38,000 $37,000 $37,200
Return on Average Common Equity (percent) 15.17 10.51 10.32
Total Assets (in thousands) $1,095,736 $1,084,579 $1,093,430
Gross Property Additions (in thousands) $64,323 $62,462 $70,726
- ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $390,981 $371,185 $365,471
Preferred stock 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 7,500 9,250 11,000
Trust preferred securities - - -
Long-term debt 434,648 475,284 484,608
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $888,291 $910,881 $916,241
- ------------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 44.0 40.8 39.9
Preferred stock 7.1 7.1 7.2
Trust preferred securities
Long-term debt 48.9 52.1 52.9
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 - -
Retired 32,807 6,455 9,344
Preferred Stock (in thousands):
Issued - - -
Retired 2,500 1,750 1,250
- ------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A2 A1
Standard and Poor's A A A
Duff & Phelps A A AA-
Preferred Stock -
Moody's a2 a2 a1
Standard and Poor's A- A- A-
Duff & Phelps A- A- A+
- ------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 261,210 256,111 251,341
Commercial 34,685 34,019 33,678
Industrial 264 252 240
Other 72 67 67
- ------------------------------------------------------------------------------------------------------------------------------
Total 296,231 290,449 285,326
==============================================================================================================================
Employees (year-end) 1,598 1,615 1,614
II-173B
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1997 Annual Report
==============================================================================================================
1988 1987
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $550,827 $587,860
Net Income after Dividends
on Preferred Stock (in thousands) $45,698 $42,217
Dividends on Common Stock (in thousands) $35,400 $34,200
Return on Average Common Equity (percent) 13.41 13.23
Total Assets (in thousands) $1,097,225 $1,051,182
Gross Property Additions (in thousands) $67,042 $97,511
- --------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $358,310 $323,012
Preferred stock 55,162 55,162
Preferred stock subject to mandatory redemption 12,750 14,000
Trust preferred securities - -
Long-term debt 497,069 474,640
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $923,291 $866,814
- --------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 38.8 37.2
Preferred stock 7.4 8.0
Trust preferred securities
Long-term debt 53.8 54.8
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
==============================================================================================================
First Mortgage Bonds (in thousands):
Issued 35,000 -
Retired 9,369 -
Preferred Stock (in thousands):
Issued - -
Retired 1,750 2,500
- --------------------------------------------------------------------------------------------------------------
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 246,450 241,138
Commercial 33,030 32,139
Industrial 206 206
Other 61 61
- --------------------------------------------------------------------------------------------------------------
Total 279,747 273,544
==============================================================================================================
Employees (year-end) 1,601 1,603
II-173C
SELECTED FINANCIAL AND OPERATING DATE (continued)
Gulf Power Company 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $277,609 $285,498 $276,155
Commercial 164,435 164,181 159,260
Industrial 77,492 78,994 81,606
Other 2,084 2,056 1,993
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 521,620 530,729 519,014
Sales for resale - non-affiliates 63,697 63,201 60,413
Sales for resale - affiliates 16,760 17,762 18,619
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 602,077 611,692 598,046
Other revenues 23,779 22,673 21,031
- ------------------------------------------------------------------------------------------------------------------------------
Total $625,856 $634,365 $619,077
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,119,492 4,159,924 4,014,142
Commercial 2,897,887 2,808,634 2,708,243
Industrial 1,903,050 1,808,086 1,794,754
Other 18,101 17,815 17,345
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 8,938,530 8,794,459 8,534,484
Sales for resale - non-affiliates 1,531,179 1,534,097 1,396,474
Sales for resale - affiliates 848,135 709,647 759,341
- ------------------------------------------------------------------------------------------------------------------------------
Total 11,317,844 11,038,203 10,690,299
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.74 6.86 6.88
Commercial 5.67 5.85 5.88
Industrial 4.07 4.37 4.55
Total retail 5.84 6.03 6.08
Sales for resale 3.38 3.61 3.67
Total sales 5.32 5.54 5.59
Average Annual Kilowatt-Hour Use Per Residential Customer 13,894 14,457 14,148
Average Annual Revenue Per Residential Customer $936.30 $992.17 $973.35
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,844 2,136 1,732
Summer 2,032 1,961 2,040
Annual Load Factor (percent) 55.5 51.4 53.0
Plant Availability - Fossil-Steam (percent) 91.0 91.8 84.0
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 87.1 87.8 86.8
Oil and gas 0.4 0.5 0.4
Purchased power -
From non-affiliates 3.5 2.7 4.0
From affiliates 9.0 9.0 8.8
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,436 10,484 10,609
Cost of fuel per million BTU (cents) 190.75 192.22 196.62
Average cost of fuel per net kilowatt-hour generated (cents) 1.99 2.02 2.09
==============================================================================================================================
II-174
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1997 Annual Report
========================================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $252,598 $244,967 $235,296
Commercial 146,394 137,308 133,071
Industrial 82,169 87,526 91,320
Other 1,955 1,882 1,784
- ------------------------------------------------------------------------------------------------------------------------
Total retail 483,116 471,683 461,471
Sales for resale - non-affiliates 66,111 72,209 70,078
Sales for resale - affiliates 17,353 23,166 24,075
- ------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 566,580 567,058 555,624
Other revenues 12,233 16,084 15,278
- ------------------------------------------------------------------------------------------------------------------------
Total $578,813 $583,142 $570,902
========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,751,932 3,712,980 3,596,515
Commercial 2,548,846 2,433,382 2,369,236
Industrial 1,847,114 2,029,936 2,179,435
Other 17,354 16,944 16,649
- ------------------------------------------------------------------------------------------------------------------------
Total retail 8,165,246 8,193,242 8,161,835
Sales for resale - non-affiliates 1,418,977 1,460,105 1,430,908
Sales for resale - affiliates 874,050 1,029,787 1,208,771
- ------------------------------------------------------------------------------------------------------------------------
Total 10,458,273 10,683,134 10,801,514
========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.73 6.60 6.54
Commercial 5.74 5.64 5.62
Industrial 4.45 4.31 4.19
Total retail 5.92 5.76 5.65
Sales for resale 3.64 3.83 3.57
Total sales 5.42 5.31 5.14
Average Annual Kilowatt-Hour Use Per Residential Customer 13,486 13,671 13,553
Average Annual Revenue Per Residential Customer $907.92 $901.96 $886.66
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,801 1,571 1,533
Summer 1,795 1,898 1,828
Annual Load Factor (percent) 56.7 54.5 55.0
Plant Availability - Fossil-Steam (percent) 92.2 88.9 91.2
- ------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 87.2 84.5 87.7
Oil and gas 0.2 0.5 0.1
Purchased power -
From non-affiliates 2.8 1.5 0.8
From affiliates 9.8 13.5 11.4
- ------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,614 10,390 10,347
Cost of fuel per million BTU (cents) 189.55 197.37 200.30
Average cost of fuel per net kilowatt-hour generated (cents) 2.01 2.05 2.07
========================================================================================================================
II-175A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1997 Annual Report
================================================================================================================================
1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $231,220 $217,843 $203,781
Commercial 130,691 124,066 118,897
Industrial 92,300 91,041 84,671
Other 1,860 1,805 1,586
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 456,071 434,755 408,935
Sales for resale - non-affiliates 69,636 73,855 67,554
Sales for resale - affiliates 29,343 38,563 39,244
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 555,050 547,173 515,733
Other revenues 10,157 20,652 12,088
- --------------------------------------------------------------------------------------------------------------------------------
Total $565,207 $567,825 $527,821
================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,455,100 3,360,838 3,293,750
Commercial 2,272,690 2,217,568 2,169,497
Industrial 2,117,408 2,177,872 2,094,670
Other 17,118 18,866 17,209
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 7,862,316 7,775,144 7,575,126
Sales for resale - non-affiliates 1,550,018 1,775,703 1,640,355
Sales for resale - affiliates 1,236,223 1,435,558 1,461,036
- --------------------------------------------------------------------------------------------------------------------------------
Total 10,648,557 10,986,405 10,676,517
================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.69 6.48 6.19
Commercial 5.75 5.59 5.48
Industrial 4.36 4.18 4.04
Total retail 5.80 5.59 5.40
Sales for resale 3.55 3.50 3.44
Total sales 5.21 4.98 4.83
Average Annual Kilowatt-Hour Use Per Residential Customer 13,320 13,173 13,173
Average Annual Revenue Per Residential Customer $891.38 $853.86 $815.00
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,418 1,310 1,814
Summer 1,740 1,778 1,691
Annual Load Factor (percent) 57.0 55.2 52.6
Plant Availability - Fossil-Steam (percent) 92.2 89.2 89.1
- --------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 82.0 69.8 78.3
Oil and gas 0.1 0.5 0.2
Purchased power -
From non-affiliates 0.5 0.6 0.4
From affiliates 17.4 29.1 21.1
- --------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,636 10,765 10,621
Cost of fuel per million BTU (cents) 203.60 206.06 193.70
Average cost of fuel per net kilowatt-hour generated (cents) 2.17 2.22 2.06
================================================================================================================================
II-175B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1997 Annual Report
===============================================================================================================
1988 1987
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $184,036 $199,701
Commercial 107,615 116,057
Industrial 72,634 80,295
Other 1,402 1,357
- --------------------------------------------------------------------------------------------------------------
Total retail 365,687 397,410
Sales for resale - non-affiliates 117,466 134,456
Sales for resale - affiliates 48,277 55,955
- --------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 531,430 587,821
Other revenues 19,397 39
- --------------------------------------------------------------------------------------------------------------
Total $550,827 $587,860
==============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,154,541 3,055,041
Commercial 2,088,598 1,986,332
Industrial 1,968,091 1,839,931
Other 16,257 15,241
- --------------------------------------------------------------------------------------------------------------
Total retail 7,227,487 6,896,545
Sales for resale - non-affiliates 1,911,759 2,138,390
Sales for resale - affiliates 2,326,238 2,689,487
- --------------------------------------------------------------------------------------------------------------
Total 11,465,484 11,724,422
==============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.83 6.54
Commercial 5.15 5.84
Industrial 3.69 4.36
Total retail 5.06 5.76
Sales for resale 3.91 3.94
Total sales 4.64 5.01
Average Annual Kilowatt-Hour Use Per Residential Customer 12,883 12,763
Average Annual Revenue Per Residential Customer $751.60 $834.31
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,395 1,354
Summer 1,613 1,617
Annual Load Factor (percent) 56.5 54.4
Plant Availability - Fossil-Steam (percent) 88.2 92.8
- --------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 93.2 93.5
Oil and gas 0.4 0.4
Purchased power -
From non-affiliates 0.4 0.4
From affiliates 6.0 5.7
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
==============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,461 10,512
Cost of fuel per million BTU (cents) 178.00 197.53
Average cost of fuel per net kilowatt-hour generated (cents) 1.86 2.08
==============================================================================================================
II-175C
STATEMENTS OF INCOME
Gulf Power Company
==============================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $609,096 $616,603 $600,458
Revenues from affiliates 16,760 17,762 18,619
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 625,856 634,365 619,077
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 180,843 184,500 185,274
Purchased power from non-affiliates 11,938 8,300 8,594
Purchased power from affiliates 24,955 35,076 29,966
Proceeds from settlement of disputed contracts - - -
Other 126,266 115,154 113,397
Maintenance 47,988 51,050 51,917
Depreciation and amortization 57,874 56,645 55,104
Taxes other than income taxes 51,775 52,027 49,598
Federal and state income taxes 35,034 37,821 34,065
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 536,673 540,573 527,915
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 89,183 93,792 91,162
Other Income (Expense):
Allowance for equity funds used during construction 3 17 36
Interest income 1,203 1,921 2,877
Other, net (995) (1,695) (1,261)
Gain on sale of investment securities - - -
Income taxes applicable to other income 1,584 248 (121)
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 90,978 94,283 92,693
- ------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 21,699 24,691 23,294
Allowance for debt funds used during construction (5) (58) (187)
Interest on notes payable 891 2,071 2,931
Amortization of debt discount, premium, and expense, net 2,281 2,087 2,014
Other interest charges 2,081 1,882 1,674
Distributions on preferred securities of subsidiary trust 2,804 - -
- ------------------------------------------------------------------------------------------------------------------------------
Net interest charges 29,751 30,673 29,726
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 61,227 63,610 62,967
Dividends on Preferred Stock 3,617 5,765 5,813
- ------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 57,610 $ 57,845 $ 57,154
==============================================================================================================================
II-176
STATEMENTS OF INCOME
Gulf Power Company
==============================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $561,460 $559,976 $546,827
Revenues from affiliates 17,353 23,166 24,075
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 578,813 583,142 570,902
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 161,168 170,485 182,754
Purchased power from non-affiliates 6,761 4,386 1,394
Purchased power from affiliates 25,819 32,273 26,788
Proceeds from settlement of disputed contracts - - (920)
Other 113,879 109,164 98,230
Maintenance 46,700 46,004 41,947
Depreciation and amortization 56,615 55,309 53,758
Taxes other than income taxes 41,701 40,204 37,898
Federal and state income taxes 33,957 32,730 32,078
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 486,600 490,555 473,927
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 92,213 92,587 96,975
Other Income (Expense):
Allowance for equity funds used during construction 450 512 14
Interest income 1,429 1,328 2,733
Other, net (780) (1,238) (1,487)
Gain on sale of investment securities - 3,820 -
Income taxes applicable to other income 95 (921) 187
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 93,407 96,088 98,422
- ------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 27,124 31,344 35,792
Allowance for debt funds used during construction (656) (454) (46)
Interest on notes payable 1,509 870 1,041
Amortization of debt discount, premium, and expense, net 1,834 1,412 1,032
Other interest charges 2,442 2,877 1,410
Distributions on preferred securities of subsidiary trust - - -
- ------------------------------------------------------------------------------------------------------------------------------
Net interest charges 32,253 36,049 39,229
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 61,154 60,039 59,193
Dividends on Preferred Stock 5,925 5,728 5,103
- ------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 55,229 $ 54,311 $ 54,090
==============================================================================================================================
II-177A
STATEMENTS OF INCOME
Gulf Power Company
==============================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $535,864 $529,262 $488,577
Revenues from affiliates 29,343 38,563 39,244
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 565,207 567,825 527,821
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 176,038 156,712 158,858
Purchased power from non-affiliates 896 1,427 1,251
Purchased power from affiliates 32,579 67,729 48,972
Proceeds from settlement of disputed contracts (20,385) - -
Other 94,411 90,045 82,231
Maintenance 45,468 45,491 44,295
Depreciation and amortization 52,195 50,899 48,760
Taxes other than income taxes 42,359 39,110 30,718
Federal and state income taxes 33,893 24,780 23,621
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 457,454 476,193 438,706
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 107,753 91,632 89,115
Other Income (Expense):
Allowance for equity funds used during construction 54 - (446)
Interest income 2,427 4,508 3,271
Other, net (3,484) (6,360) (3,800)
Gain on sale of investment securities - - -
Income taxes applicable to other income 1,104 1,303 779
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 107,854 91,083 88,919
- ------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 41,665 43,215 43,265
Allowance for debt funds used during construction (95) 1 242
Interest on notes payable 280 693 180
Amortization of debt discount, premium, and expense, net 699 603 613
Other interest charges 2,272 2,422 1,636
Distributions on preferred securities of subsidiary trust - - -
- ------------------------------------------------------------------------------------------------------------------------------
Net interest charges 44,821 46,934 45,936
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 63,033 44,149 42,983
Dividends on Preferred Stock 5,237 5,435 5,622
- ------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 57,796 $ 38,714 $ 37,361
==============================================================================================================================
II-177B
STATEMENTS OF INCOME
Gulf Power Company
=============================================================================================================
For the Years Ended December 31, 1988 1987
- -------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $502,550 $531,905
Revenues from affiliates 48,277 55,955
- -------------------------------------------------------------------------------------------------------------
Total operating revenues 550,827 587,860
- -------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 191,687 227,233
Purchased power from non-affiliates 1,468 1,792
Purchased power from affiliates 27,267 28,326
Proceeds from settlement of disputed contracts - -
Other 93,028 100,032
Maintenance 41,919 38,748
Depreciation and amortization 47,530 44,619
Taxes other than income taxes 27,087 26,246
Federal and state income taxes 26,239 31,703
- -------------------------------------------------------------------------------------------------------------
Total operating expenses 456,225 498,699
- -------------------------------------------------------------------------------------------------------------
Operating Income 94,602 89,161
Other Income (Expense):
Allowance for equity funds used during construction 457 1,013
Interest income 2,858 4,507
Other, net (3,491) (1,207)
Gain on sale of investment securities - -
Income taxes applicable to other income 1,001 (642)
- -------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 95,427 92,832
- -------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 42,538 43,689
Allowance for debt funds used during construction (808) (1,004)
Interest on notes payable 182 -
Amortization of debt discount, premium, and expense, net 600 555
Other interest charges 1,456 1,350
Distributions on preferred securities of subsidiary trust - -
- -------------------------------------------------------------------------------------------------------------
Net interest charges 43,968 44,590
- -------------------------------------------------------------------------------------------------------------
Net Income 51,459 48,242
Dividends on Preferred Stock 5,761 6,025
- -------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 45,698 $ 42,217
=============================================================================================================
II-177C
STATEMENTS OF CASH FLOWS
Gulf Power Company
============================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 61,227 $ 63,610 $ 62,967
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 72,860 71,825 75,293
Deferred income taxes, net (7,047) 2,157 390
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction 3 (17) (36)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 2,402 16,298 (29,974)
Changes in certain current assets and liabilities --
Receivables, net (1,111) 736 (12,210)
Inventories 10,674 12,957 (618)
Payables 1,398 (7,078) 18,258
Other 25,141 397 (14,119)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 165,547 160,885 99,951
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (54,289) (61,386) (63,113)
Other 509 (2,786) 4,401
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (53,780) (64,172) (58,712)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 40,000 - -
Preferred stock - - -
First mortgage bonds - 55,000 -
Pollution control bonds 40,930 33,275 -
Capital contributions from parent company - - 58
Other long-term debt 20,000 49,148 -
Retirements:
Preferred stock (75,911) - (1,000)
First mortgage bonds (25,000) (50,930) (1,750)
Pollution control bonds (40,930) (33,275) (125)
Other long-term debt (15,972) (34,923) (13,314)
Notes payable, net 22,000 (55,500) 27,000
Payment of preferred stock dividends (5,370) (5,749) (5,813)
Payment of common stock dividends (64,600) (48,300) (46,400)
Miscellaneous (3,014) (5,332) (117)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (107,867) (96,586) (41,461)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 3,900 127 (222)
Cash and Cash Equivalents at Beginning of Year 807 680 902
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 4,707 $ 807 $ 680
============================================================================================================================
( ) Denotes use of cash.
II-178
STATEMENTS OF CASH FLOWS
Gulf Power Company
============================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 61,154 $ 60,039 $ 59,193
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 86,098 72,111 68,021
Deferred income taxes, net (6,986) 5,347 3,322
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (450) (512) (14)
Non-cash proceeds from settlement of disputed contracts - - (920)
Other, net 4,898 (864) 185
Changes in certain current assets and liabilities --
Receivables, net 3,540 12,867 (11,041)
Inventories (13,901) 5,574 23,560
Payables (10,159) 5,386 1,580
Other 610 (9,504) (13,637)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 124,804 150,444 130,249
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (78,869) (78,562) (64,671)
Other (3,493) (5,328) 3,970
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (82,362) (83,890) (60,701)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - - -
Preferred stock - 35,000 29,500
First mortgage bonds - 75,000 25,000
Pollution control bonds 42,000 53,425 8,930
Capital contributions from parent company 98 11 121
Other long-term debt 32,108 25,000 -
Retirements:
Preferred stock (1,000) (21,060) (15,500)
First mortgage bonds (48,856) (88,809) (117,693)
Pollution control bonds (42,100) (40,650) (9,205)
Other long-term debt (24,240) (7,736) (5,783)
Notes payable, net 47,447 (37,947) 44,000
Payment of preferred stock dividends (5,925) (5,728) (5,103)
Payment of common stock dividends (44,000) (41,800) (39,900)
Miscellaneous (2,648) (6,888) (8,760)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (47,116) (62,182) (94,393)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (4,674) 4,372 (24,845)
Cash and Cash Equivalents at Beginning of Year 5,576 1,204 26,049
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 902 $ 5,576 $ 1,204
============================================================================================================================
( ) Denotes use of cash.
II-179A
STATEMENTS OF CASH FLOWS
Gulf Power Company
============================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 63,033 $ 44,149 $ 42,983
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 65,584 63,650 59,955
Deferred income taxes, net (3,392) 1,837 5,319
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (54) - 446
Non-cash proceeds from settlement of disputed contracts (19,734) - -
Other, net 3,079 1,544 3,827
Changes in certain current assets and liabilities --
Receivables, net 12,421 (2,468) 492
Inventories (2,397) (11,807) 16,306
Payables (2,003) (3,440) 6,142
Other 8,012 5,781 4,466
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 124,549 99,246 139,936
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (64,323) (62,462) (70,726)
Other (8,097) (1,597) 419
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (72,420) (64,059) (70,307)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - - -
Preferred stock - - -
First mortgage bonds 50,000 - -
Pollution control bonds 21,200 - -
Capital contributions from parent company - 4,000 7,000
Other long-term debt - - -
Retirements:
Preferred stock (2,500) (1,750) (1,250)
First mortgage bonds (32,807) (6,455) (9,344)
Pollution control bonds (21,250) (50) (50)
Other long-term debt (7,981) (6,083) (5,611)
Notes payable, net - - -
Payment of preferred stock dividends (5,237) (5,435) (5,622)
Payment of common stock dividends (38,000) (37,000) (37,200)
Miscellaneous (3,715) 5 (3)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (40,290) (52,768) (52,080)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 11,839 (17,581) 17,549
Cash and Cash Equivalents at Beginning of Year 14,210 31,791 14,242
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 26,049 $ 14,210 $ 31,791
============================================================================================================================
( ) Denotes use of cash.
II-179B
STATEMENTS OF CASH FLOWS
Gulf Power Company
=========================================================================================================
For the Years Ended December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 51,459 $ 48,242
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 56,260 51,672
Deferred income taxes, net 10,138 2,377
Deferred investment tax credits, net - 868
Allowance for equity funds used during construction (457) (1,013)
Non-cash proceeds from settlement of disputed contracts - -
Other, net 11,449 12,913
Changes in certain current assets and liabilities --
Receivables, net 8,984 (8,849)
Inventories (16,160) 23,691
Payables (5,340) 10,173
Other (18,432) 6,208
- ---------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 97,901 146,282
- ---------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (67,042) (97,511)
Other (62,782) (692)
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing activities (129,824) (98,203)
- ---------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - -
Preferred stock - -
First mortgage bonds 35,000 -
Pollution control bonds 3,677 35,996
Capital contributions from parent company 25,000 -
Other long-term debt - -
Retirements:
Preferred stock (1,750) (2,500)
First mortgage bonds (9,369) -
Pollution control bonds (50) (32,050)
Other long-term debt (5,175) (4,774)
Notes payable, net - -
Payment of preferred stock dividends (5,761) (6,025)
Payment of common stock dividends (35,400) (34,200)
Miscellaneous (233) (1,632)
- ---------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 5,939 (45,185)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (25,984) 2,894
Cash and Cash Equivalents at Beginning of Year 40,226 37,332
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 14,242 $ 40,226
=========================================================================================================
( ) Denotes use of cash.
II-179C
BALANCE SHEET
Gulf Power Company
============================================================================================================================
At December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 921,761 $ 921,295 $ 905,784
Transmission 163,018 161,634 156,786
Distribution 547,403 530,467 512,184
General 130,062 121,114 121,060
Construction work in progress 31,030 23,465 26,301
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,793,274 1,757,975 1,722,115
Accumulated provision for depreciation 737,767 694,245 658,806
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,055,507 1,063,730 1,063,309
Less property-related accumulated deferred income taxes - - -
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,055,507 1,063,730 1,063,309
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 622 652 740
- ----------------------------------------------------------------------------------------------------------------------------
Total 622 652 740
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,707 807 680
Investment securities - - -
Receivables, net 72,968 71,857 72,593
Fossil fuel stock, at average cost 19,296 28,352 37,875
Materials and supplies, at average cost 28,634 30,252 33,686
Current portion of deferred coal contract costs 4,456 16,389 12,767
Regulatory clauses under recovery 1,675 4,144 3,432
Prepayments 2,171 1,268 12,232
Vacation pay deferred 4,057 4,055 4,419
- ----------------------------------------------------------------------------------------------------------------------------
Total 137,964 157,124 177,684
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 26,586 28,313 29,093
Debt expense, being amortized 2,447 2,922 3,444
Premium on reacquired debt, being amortized 20,494 20,386 17,015
Deferred coal contract costs - 13,126 33,768
Miscellaneous 21,992 22,113 16,806
- ----------------------------------------------------------------------------------------------------------------------------
Total 71,519 86,860 100,126
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,265,612 $1,308,366 $1,341,859
============================================================================================================================
II-180
BALANCE SHEETS
Gulf Power Company
============================================================================================================================
At December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 896,236 $ 863,223 $ 841,489
Transmission 155,967 154,304 148,824
Distribution 487,986 464,182 443,352
General 116,178 129,995 127,826
Construction work in progress 24,288 34,591 29,564
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,680,655 1,646,295 1,591,055
Accumulated provision for depreciation 622,911 610,542 578,851
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,057,744 1,035,753 1,012,204
Less property-related accumulated deferred income taxes - - 200,904
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,057,744 1,035,753 811,300
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 7,997 13,242 7,074
- ----------------------------------------------------------------------------------------------------------------------------
Total 7,997 13,242 7,074
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 902 5,576 1,204
Investment securities - - 22,322
Receivables, net 60,384 63,924 60,047
Fossil fuel stock, at average cost 35,686 20,652 29,492
Materials and supplies, at average cost 35,257 36,390 33,124
Current portion of deferred coal contract costs 2,521 12,535 3,071
Regulatory clauses under recovery 5,002 3,244 1,680
Prepayments 4,354 2,160 1,395
Vacation pay deferred 4,172 4,022 3,779
- ----------------------------------------------------------------------------------------------------------------------------
Total 148,278 148,503 156,114
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 30,433 31,334 -
Debt expense, being amortized 3,625 3,693 3,253
Premium on reacquired debt, being amortized 18,494 17,554 15,319
Deferred coal contract costs 38,169 52,884 63,723
Miscellaneous 10,802 4,846 5,916
- ----------------------------------------------------------------------------------------------------------------------------
Total 101,523 110,311 88,211
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,315,542 $1,307,809 $1,062,699
============================================================================================================================
II-181A
BALANCE SHEETS
Gulf Power Company
============================================================================================================================
At December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 837,712 $ 817,490 $ 807,546
Transmission 143,275 136,813 133,926
Distribution 419,228 400,016 375,521
General 125,330 123,059 119,779
Construction work in progress 13,684 16,868 10,166
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,539,229 1,494,246 1,446,938
Accumulated provision for depreciation 535,408 501,739 464,944
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,003,821 992,507 981,994
Less property-related accumulated deferred income taxes 197,138 192,749 186,084
- ----------------------------------------------------------------------------------------------------------------------------
Total 806,683 799,758 795,910
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts 19,938 - -
Miscellaneous 6,410 5,439 6,933
- ----------------------------------------------------------------------------------------------------------------------------
Total 26,348 5,439 6,933
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 26,049 14,210 31,791
Investment securities - - -
Receivables, net 49,006 61,427 58,959
Fossil fuel stock, at average cost 52,106 50,469 37,526
Materials and supplies, at average cost 34,070 33,310 34,446
Current portion of deferred coal contract costs 4,626 6,212 5,534
Regulatory clauses under recovery - 7,008 4,503
Prepayments 1,410 2,168 2,490
Vacation pay deferred 3,776 3,631 3,425
- ----------------------------------------------------------------------------------------------------------------------------
Total 171,043 178,435 178,674
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - -
Debt expense, being amortized 3,232 2,954 3,117
Premium on reacquired debt, being amortized 8,855 6,256 6,574
Deferred coal contract costs 74,502 87,102 97,833
Miscellaneous 5,073 4,635 4,389
- ----------------------------------------------------------------------------------------------------------------------------
Total 91,662 100,947 111,913
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,095,736 $1,084,579 $1,093,430
============================================================================================================================
II-181B
BALANCE SHEETS
Gulf Power Company
=========================================================================================================
At December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 796,052 $ 801,600
Transmission 113,177 106,352
Distribution 343,421 325,037
General 115,273 102,664
Construction work in progress 29,572 10,113
- ---------------------------------------------------------------------------------------------------------
Total utility plant 1,397,495 1,345,766
Accumulated provision for depreciation 425,520 388,248
- ---------------------------------------------------------------------------------------------------------
Total 971,975 957,518
Less property-related accumulated deferred income taxes 178,657 166,707
- ---------------------------------------------------------------------------------------------------------
Total 793,318 790,811
- ---------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - -
Miscellaneous 6,756 2,932
- ---------------------------------------------------------------------------------------------------------
Total 6,756 2,932
- ---------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 14,242 40,226
Investment securities - -
Receivables, net 59,451 68,435
Fossil fuel stock, at average cost 55,286 43,290
Materials and supplies, at average cost 32,992 28,828
Current portion of deferred coal contract costs 6,194 2,642
Regulatory clauses under recovery 1,218 -
Prepayments 3,577 677
Vacation pay deferred 3,340 3,200
- ---------------------------------------------------------------------------------------------------------
Total 176,300 187,298
- ---------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - -
Debt expense, being amortized 3,281 3,203
Premium on reacquired debt, being amortized 6,892 7,210
Deferred coal contract costs 106,263 55,889
Miscellaneous 4,415 3,839
- ---------------------------------------------------------------------------------------------------------
Total 120,851 70,141
- ---------------------------------------------------------------------------------------------------------
Total Assets $1,097,225 $1,051,182
=========================================================================================================
II-181C
BALANCE SHEETS
Gulf Power Company
============================================================================================================================
At December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060
Paid-in capital 218,438 218,438 218,438
Premium on preferred stock 12 81 81
Earnings retained in the business 172,208 179,179 179,663
- ----------------------------------------------------------------------------------------------------------------------------
Total common equity 428,718 435,758 436,242
Preferred stock 13,691 65,102 89,602
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 40,000 - -
Long-term debt 296,993 331,880 323,376
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 779,402 832,740 849,220
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 47,000 25,000 80,500
Preferred stock due within one year - 24,500 -
Long-term debt due within one year 53,327 40,972 31,548
Accounts payable 34,539 32,770 41,643
Customer deposits 13,778 13,464 13,195
Taxes accrued 8,258 8,342 9,547
Interest accrued 7,227 7,629 5,719
Regulatory clauses over recovery 5,062 5,884 2,800
Vacation pay accrued 4,057 4,055 4,419
Miscellaneous 18,949 17,121 7,356
- ----------------------------------------------------------------------------------------------------------------------------
Total 192,197 179,737 196,727
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 166,302 163,857 162,345
Deferred credits related to income taxes 56,935 64,354 67,481
Accumulated deferred investment tax credits 31,552 33,760 36,052
Miscellaneous 39,224 33,918 30,034
- ----------------------------------------------------------------------------------------------------------------------------
Total 294,013 295,889 295,912
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,265,612 $1,308,366 $1,341,859
============================================================================================================================
II-182
BALANCE SHEETS
Gulf Power Company
============================================================================================================================
At December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060
Paid-in capital 218,380 218,282 218,271
Premium on preferred stock 81 81 88
Earnings retained in the business 168,951 157,773 146,771
- ----------------------------------------------------------------------------------------------------------------------------
Total common equity 425,472 414,196 403,190
Preferred stock 89,602 89,602 74,662
Preferred stock subject to mandatory redemption - 1,000 2,000
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 356,393 369,259 382,047
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 871,467 874,057 861,899
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 53,500 6,053 44,000
Preferred stock due within one year 1,000 1,000 1,000
Long-term debt due within one year 13,439 41,552 13,820
Accounts payable 23,656 38,699 33,461
Customer deposits 13,609 15,082 15,532
Taxes accrued 13,465 13,015 11,419
Interest accrued 6,106 5,420 6,370
Regulatory clauses over recovery 3,960 840 -
Vacation pay accrued 4,172 4,022 3,779
Miscellaneous 7,828 8,527 3,950
- ----------------------------------------------------------------------------------------------------------------------------
Total 140,735 134,210 133,331
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 151,681 151,743 -
Deferred credits related to income taxes 71,964 76,876 -
Accumulated deferred investment tax credits 38,391 40,770 43,117
Miscellaneous 41,304 30,153 24,352
- ----------------------------------------------------------------------------------------------------------------------------
Total 303,340 299,542 67,469
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,315,542 $1,307,809 $1,062,699
============================================================================================================================
II-183A
BALANCE SHEETS
Gulf Power Company
============================================================================================================================
At December 31, 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060
Paid-in capital 218,150 218,150 214,150
Premium on preferred stock 399 399 399
Earnings retained in the business 134,372 114,576 112,862
- ----------------------------------------------------------------------------------------------------------------------------
Total common equity 390,981 371,185 365,471
Preferred stock 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 7,500 9,250 11,000
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 434,648 475,284 484,608
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 888,291 910,881 916,241
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - -
Preferred stock due within one year 1,000 1,750 1,750
Long-term debt due within one year 59,111 9,452 12,588
Accounts payable 25,315 27,447 34,764
Customer deposits 15,513 15,551 15,752
Taxes accrued 19,274 19,610 12,388
Interest accrued 9,720 10,820 10,105
Regulatory clauses over recovery 1,114 - -
Vacation pay accrued 3,776 3,631 3,425
Miscellaneous 3,545 12,177 7,759
- ----------------------------------------------------------------------------------------------------------------------------
Total 138,368 100,438 98,531
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,775 6,736 13,381
Deferred credits related to income taxes - - -
Accumulated deferred investment tax credits 45,446 47,776 50,109
Miscellaneous 21,856 18,748 15,168
- ----------------------------------------------------------------------------------------------------------------------------
Total 69,077 73,260 78,658
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,095,736 $1,084,579 $1,093,430
============================================================================================================================
II-183B
BALANCE SHEETS
Gulf Power Company
=========================================================================================================
At December 31, 1988 1987
- ---------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060
Paid-in capital 207,150 182,150
Premium on preferred stock 399 399
Earnings retained in the business 112,701 102,403
- ---------------------------------------------------------------------------------------------------------
Total common equity 358,310 323,012
Preferred stock 55,162 55,162
Preferred stock subject to mandatory redemption 12,750 14,000
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 497,069 474,640
- ---------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 923,291 866,814
- ---------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - -
Preferred stock due within one year 1,250 1,750
Long-term debt due within one year 15,005 13,225
Accounts payable 29,595 34,500
Customer deposits 15,316 15,565
Taxes accrued 10,683 7,850
Interest accrued 10,247 9,584
Regulatory clauses over recovery - 9,330
Vacation pay accrued 3,340 3,200
Miscellaneous 2,748 2,144
- ---------------------------------------------------------------------------------------------------------
Total 88,184 97,148
- ---------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 17,678 22,992
Deferred credits related to income taxes - -
Accumulated deferred investment tax credits 52,451 54,597
Miscellaneous 15,621 9,631
- ---------------------------------------------------------------------------------------------------------
Total 85,750 87,220
- ---------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,097,225 $1,051,182
=========================================================================================================
II-183C
GULF POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
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
1996 30,000 6-7/8% 30,000 1/1/26
1996 25,000 6-1/2% 25,000 11/1/06
-------- --------
$130,000 $130,000
======== ========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1996 $ 12,075 5.25% $ 12,075 4/1/06
1997 40,930 Variable 40,930 7/1/22
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
1996 21,200 5-1/2% 21,200 2/1/26
-------- --------
$169,630 $169,630
======== ========
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Company Junior Subordinated Notes
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
- --------------------------------------------------------------------------------------------------
(Thousands)
1997 1,600,000 7.625% 40,000
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
- --------------------------------------------------------------------------------------------------
(Thousands)
1950 12,553 4.64% $ 1,255
1960 13,574 5.16% 1,357
1966 16,284 5.44% 1,629
1993 346,429 6.72% 8,661
1993 31,560 Adjustable 789
------- --------
420,400 $ 13,691
======= ========
II-184
GULF POWER COMPANY
SECURITIES RETIRED DURING 1997
First Mortgage Bonds
Principal Interest
Series Amount Rate
- ---------------------------------------------------------------------------------------
(Thousands)
1992 $25,000 5-7/8%
Pollution Control Bonds
Principal Interest
Series Amount Rate
- ---------------------------------------------------------------------------------------
(Thousands)
1987 $32,000 8-1/4%
1992 8,930 6-3/4%
-------
$40,930
=======
Preferred Stock
Principal Dividend
Series Amount Rate
- ---------------------------------------------------------------------------------------
(Thousands)
1950 $ 3,847 4.64%
1960 3,643 5.16%
1966 3,371 5.44%
1969 5,000 7.52%
1972 5,000 7.88%
1992 14,500 7%
1992 15,000 7.30%
1993 11,339 6.72%
1993 14,211 Adjustable
-------
$75,911
=======
II-185
MISSISSIPPI POWER COMPANY
FINANCIAL SECTION
II-186
MANAGEMENT'S REPORT
Mississippi Power Company 1997 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 11, 1998
II-187
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 Southern Company) as of December 31, 1997 and 1996, 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, 1997. 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-196 through II-211)
referred to above present fairly, in all material respects, the financial
position of Mississippi Power Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 11, 1998
II-188
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Mississippi Power Company 1997 Annual Report
RESULTS OF OPERATIONS
Earnings
Mississippi Power Company's net income after dividends on preferred stock for
1997 was $54.0 million, reflecting a 2.4 percent or $1.3 million increase above
1996. The increased earnings is due to lower operating expenses.
In 1996, earnings were $52.7 million, up $0.2 million from the prior year.
Earnings reflected a modest increase in energy sales, an annual retail rate
decrease of $3.0 million under the Environmental Compliance Overview Plan (ECO
Plan) and an annual retail increase of $4.5 million under the Performance
Evaluation Plan (PEP) which became effective in October 1996.
Revenues
The following table summarizes the factors impacting operating revenues for the
past three years:
Increase (Decrease)
from Prior Year
-------------------------------------
1997 1996 1995
-------------------------------------
(in thousands)
Retail --
Change in base
rates (PEP and
ECO Plan) $ 3,177 $ (402) $ 2,694
Sales growth 109 11,187 4,045
Weather (1,118) (5,585) 4,513
Fuel cost
recovery
and other 948 (1,255) 3,806
---------------------------------------------------------------
Total retail 3,116 3,945 15,058
---------------------------------------------------------------
Sales for resale --
Non-affiliates 5,464 7,776 3,698
Affiliates (11,606) 14,139 (1,847)
---------------------------------------------------------------
Total sales for
resale (6,142) 21,915 1,851
Other operating
revenues 2,585 1,616 482
---------------------------------------------------------------
Total operating
revenues $ (441) $27,476 $17,391
===============================================================
Percent change (0.1)% 5.3% 3.5%
---------------------------------------------------------------
Retail revenues in 1997 were $417 million, up 0.8 percent from the corresponding
amount in 1996. The increase in retail revenues was primarily caused by the
October 1996 PEP retail rate increase, as mentioned above, and the January 1997
ECO Plan retail rate increase of $0.9 million. Retail revenues for 1996 when
compared to 1995 reflected a 1.0 percent increase due to modest growth in energy
sales to industrial, commercial and residential customers, as well as changes in
retail revenues due to the ECO Plan and PEP. Changes in base rates reflect any
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
fuel expenses are offset with corresponding changes in fuel revenues and have no
effect on net income.
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.
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 3.6 percent in 1997 and
6.4 percent in 1996, with the related revenues rising 1.6 percent and 7.1
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:
1997 1996 1995
-------------------------------------
(in thousands)
Capacity $ 8 $ - $ 268
Energy 1,896 3,761 3,627
----------------------------------------------------------
Total $1,904 $3,761 $3,895
==========================================================
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.
II-189
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
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 1997 and the percent change
for the last three years:
Amount Percent Change
(millions of ----------- ------------------------------
kilowatt-hours) 1997 1997 1996 1995
---------- ------------------------------
Residential 2,039 (2.0)% 1.9% 6.2%
Commercial 2,408 4.0 3.3 6.7
Industrial 3,982 0.6 3.8 (0.9)
Other 40 2.6 1.9 1.1
----------
Total retail 8,469 0.9 3.2 2.9
Sales for
resale --
Non-affiliates 2,895 6.2 9.4 (2.4)
Affiliates 479 (31.0) 184.7 39.7
----------
Total 11,843 0.2 8.7 2.2
================================================================
Total retail energy sales for 1997 compared to 1996 and for 1996 compared to
1995 increased primarily due to growth in the number of customers served by the
Company.
The Company anticipates continued growth in energy sales as the economy
improves within its service area. The casino industry and ancillary services,
such as lodging, food, transportation, etc., are some of the factors which may
influence the economy of the Company's service area. Also, energy demand is
expected to grow as a result of a larger and more fully employed population.
Expenses
Total operating expenses for 1997 were $466 million, reflecting a decrease of
$1.3 million or 0.3 percent when compared to the corresponding amount in 1996.
The decrease was due primarily to lower administrative and general expenses. In
1996, total operating expenses increased by 6.6 percent when compared to the
prior year due to higher fuel expenses, higher maintenance and higher
depreciation and amortization.
Fuel costs are the single largest expense for the Company. Fuel expenses
for 1997 when compared to 1996 increased by 0.4 percent due to a 1.1 percent
increase in generation. The increase in generation was due to the higher demand
for energy in the retail sector. In 1997, expenses related to purchased power
from non-affiliates decreased 19.1 percent and expenses related to purchased
power from affiliates increased 13.7 percent due to the increased availability
of energy within the Southern electric system.
A comparison of 1996 to 1995 fuel costs reflects an increase that was due
to a 21.7 percent increase in generation. This increased generation was due to
higher demand for energy across the Southern electric system. Further, the
higher demand for energy resulted in higher purchased power costs from
non-affiliates and lower purchased power from affiliates of the Southern
electric system.
Purchased power consists mainly of energy purchases from affiliates in 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.
II-190
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
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:
1997 1996 1995
------------------------------
Total generation
(millions of
kilowatt-hours) 10,289 10,180 8,368
Sources of energy
supply (percent) --
Coal 70 70 58
Gas 13 12 15
Oil * * *
Purchased Power 17 18 27
Average cost of fuel per
net kilowatt-hour
generated (cents) --
Coal 1.44 1.43 1.58
Gas 3.54 4.24 2.32
Oil - 5.71 6.21
Total average cost
of energy supply 1.57 1.56 1.53
- --------------------------------------------------------------
* Not meaningful because of minimal generation from the fuel source.
Other operation expense in 1997 decreased 3.5 percent from the amount
recorded in 1996. The decrease was due to lower administrative and general
expenses.
Maintenance expenses in 1996 when compared to 1995 increased due to the
timing of maintenance performed at Plants Daniel and Watson, as well as other
projects.
In 1996, as compared to 1995, depreciation and amortization increased
primarily due to additional plant investment, higher depreciation rates
beginning in 1996, and increased amortization of regulatory assets.
Comparisons of taxes other than income taxes for 1997 to 1996 and for 1996
to 1995 show increases of 1.1 percent and 2.6 percent, respectively, due to
higher municipal franchise taxes resulting from higher retail revenues.
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. See Note 2 to the financial statements under
"Workforce Reduction Programs" for information regarding the Company's workforce
reduction plan of 1997.
The Company currently operates as a vertically integrated company providing
electricity to customers within its traditional service area located in
southeastern Mississippi. Prices for electricity provided by the Company to
retail customers are set by the MPSC under cost-based regulatory principles.
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 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 (including
costs of capital) 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."
II-191
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
The Federal Energy Regulatory Commission (FERC) regulates the Company's
wholesale rate schedules, power sales contracts and transmission facilities. 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
found in Note 3 to the financial statements herein.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include 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.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). 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 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 permit retail transmission access, it has
been a catalyst for some emerging restructuring and consolidation within the
utility industry. There are federal and various state initiatives in various
stages which would promote wholesale and retail competition. Certain of these
initiatives would result in some form of separation of generation, transmission
and distribution facilities. As these changes take place the structure of the
utility industry could change. Restructuring initiatives are being discussed in
Mississippi; none have been enacted to date. Enactment would have to encompass
the resolution of numerous complex legislative, jurisdictional, financial and
operational issues.
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 that are not
specifically recoverable, 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 inability of Mississippi Power to recover its
investment, including regulatory assets, could have a material adverse effect on
the financial condition of the Company.
The Company is attempting to minimize or reduce its cost exposure.
Continuing to be a low-cost producer could provide significant opportunities to
increase market share and profitability in markets that evolve with changing
regulation. Conversely, 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.
The Company is heavily dependent upon complex computer systems for all
phases of its operations. The year 2000 issue--common to most
corporations--concerns the inability of certain software and databases to
properly recognize date sensitive information related to the year 2000 and
thereafter. This problem could result in a material disruption to the company's
operations, if not corrected. Mississippi Power has assessed and developed a
detailed strategy to prevent or at least minimize problems related to the year
2000 issue. In 1997, resources were committed and implementation began to modify
the affected information systems. Total costs related to the project are
estimated to be approximately $4.8 million, of which $0.5 million was spent in
1997. Most all remaining costs will be expensed in 1998. Implementation is
currently on schedule. Although, the degree of success of this project cannot be
determined at this time, management believes that there will be no significant
effect on the Company's operations.
II-192
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
Exposure to Market Risk
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1997, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows.
New Accounting Standards
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other non-owner changes in equity. The Company will adopt the new rules in 1998.
The FASB has issued Statement No. 131, Disclosure about Segments of an
Enterprise and Related Information. Southern Company adopted the new rules
effective December 31, 1997. This statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. This statement also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Mississippi Power adopted the new rules in 1997, and they did not have any
significant impact on the Company's financial reporting. However, this
conclusion may change as industry restructuring and competitive factors
influence the Company's operations.
FINANCIAL CONDITION
Overview
The principal change in Mississippi Power's financial condition during 1997 was
gross property additions to utility plant of $55 million. Funding for gross
property additions and other capital requirements has been provided from
operating activities, principally earnings and the non-cash charges to income of
depreciation and amortization, and the issuance of preferred securities. The
Statements of Cash Flows provide additional details.
Financing Activity
Retirements, including maturities during 1997, primarily related to preferred
stock, totaled some $42 million. In February 1997, Mississippi Power Capital
Trust I (Trust I), of which the Company owns all the common securities, issued
$35 million of 7.75 percent mandatorily redeemable preferred securities.
Substantially all of the assets of Trust I are $36 million aggregate principal
amount of the Company's 7.75 percent junior subordinated notes due February 15,
2037. (See the Statements of Cash Flows for further details.) Composite
financing rates for the years 1995 through 1997 as of year-end were as follows:
1997 1996 1995
-----------------------------
Composite interest rate on
long-term debt 6.16% 6.03% 6.63%
Composite preferred stock
dividend rate 6.33% 6.58% 6.58%
Composite interest rate on
preferred securities 7.75% - -
-----------------------------------------------------------
The decrease in the composite dividend rate on preferred stock in 1997 is
primarily the result of retirements.
Capital Structure
At year-end 1997, the Company's ratio of common equity to total capitalization,
excluding long-term debt due within one year, was 52.0 percent, compared to 48.9
percent in 1996. The increase in equity ratio in 1997 is attributed to the
reclassification of $35 million of long-term debt to a current liability.
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$450 million ($67 million in 1998, $92 million in 1999, and $291 million in
2000). The major emphasis within the construction program will be on the upgrade
of existing facilities and the addition of combined cycle generation. In 1998,
Mississippi Power received approval from the MPSC to build up to 1,000 megawatts
of natural gas-fired combined cycle generation at Plant Daniel. Construction is
expected to begin in 1999.
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, and alternatives such as leasing.
II-193
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
Other Capital Requirements
In addition to the funds required for the Company's construction program,
approximately $155.1 million will be required by the end of 2000 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 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 -- significantly
affected Mississippi Power and the other operating companies of 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 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.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $65
million for Mississippi Power.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. 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.
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.
Mississippi Power's management believes that the ECO Plan provides for recovery
of the Clean Air Act costs. See Note 3 to the financial statements under
"Environmental Compliance Overview Plan" for additional information.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. Also, in October 1997, the EPA
issued a proposed regional ozone rule which-- if implemented-- could require
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: emission control strategies for ozone
non-attainment areas; additional controls for hazardous air pollutant emissions;
and hazardous waste disposal requirements. The impact of new standards will
depend on the development and implementation of applicable regulations.
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 is being investigated for potential
remediation. See Note 3 to the financial statements under "Environmental
Compliance Overview Plan" for additional information.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
II-194
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1997 Annual Report
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 any such changes cannot be determined at this
time.
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 lawsuits alleging damages
caused by electromagnetic fields. The likelihood or outcome of such potential
lawsuits cannot be determined at this time.
Sources of Capital
At December 31, 1997, the Company had $76.3 million of unused committed credit
agreements. The Company had no short-term notes payable outstanding at year end
1997.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from sources similar to those used in the past. These sources were primarily the
issuances of first mortgage bonds and preferred stock, in addition to pollution
control revenue bonds issued for the Company's benefit by public authorities.
Recently, the Company issued trust preferred securities and plans to issue
unsecured debt in 1998. In this regard, Mississippi Power sought and obtained
stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness the Company may incur.
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.
Cautionary Statement Regarding Forward-Looking Information
This annual report, including the foregoing Management's Discussion and
Analysis, contains forward-looking statements in addition to historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking statements; accordingly, there can be no assurance that such
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by the Company; state and federal rate regulation; changes in or
application of environmental and other laws and regulations to which the Company
is subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; and other
factors discussed in the reports (including Form 10-K) filed from time to time
by the Company with the SEC.
II-195
STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Mississippi Power Company 1997 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Notes 1 and 3):
Revenues $ 533,445 $ 522,199 $ 508,862
Revenues from affiliates 10,143 21,830 7,691
- ---------------------------------------------------------------------------------------------------------------------------
Total operating revenues 543,588 544,029 516,553
- ---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation--
Fuel 142,059 141,532 111,071
Purchased power from non-affiliates 14,536 17,960 6,019
Purchased power from affiliates 37,794 33,245 57,777
Other 102,365 106,061 107,296
Maintenance 47,302 47,091 39,627
Depreciation and amortization 45,574 44,906 39,224
Taxes other than income taxes 44,034 43,545 42,443
Federal and state income taxes (Note 8) 31,968 32,618 34,486
- ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 465,632 466,958 437,943
- ---------------------------------------------------------------------------------------------------------------------------
Operating Income 77,956 77,071 78,610
Other Income (Expense):
Interest income 857 239 199
Other, net 2,368 4,145 4,962
Income taxes applicable to other income 588 (932) (1,006)
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 81,769 80,523 82,765
- ---------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,856 19,898 21,898
Interest on notes payable 96 1,416 1,141
Amortization of debt discount, premium, and expense, net 1,577 1,547 1,510
Other interest charges 574 40 786
Distributions on preferred securities of subsidiary trust 2,369 - -
- ---------------------------------------------------------------------------------------------------------------------------
Net interest charges 24,472 22,901 25,335
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 57,297 57,622 57,430
Dividends on Preferred Stock 3,287 4,899 4,899
===========================================================================================================================
Net Income After Dividends on Preferred Stock $ 54,010 $ 52,723 $ 52,531
===========================================================================================================================
The accompanying notes are an integral part of these statements.
II-196
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Mississippi Power Company 1997 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 57,297 $ 57,622 $ 57,430
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 49,661 50,551 51,588
Deferred income taxes (1,809) 74 (480)
Other, net 3,206 9,443 5,338
Changes in certain current assets and liabilities--
Receivables, net (8,583) 5,118 (8,758)
Inventories 3,148 4,973 3,962
Payables 8,357 2,077 17,421
Taxes accrued 2,515 532 -
Other 1,465 (240) 681
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 115,257 130,150 127,182
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (55,375) (61,314) (67,570)
Other (489) (2,258) (1,697)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (55,864) (63,572) (69,267)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds--
Capital contribution - 27 -
First mortgage bonds - - 30,000
Pollution control bonds - - 10,600
Preferred securities 35,000 - -
Other long-term debt - 80,000 -
Retirements--
Preferred stock (42,518) - -
First mortgage bonds - (45,447) (1,625)
Pollution control bonds (10) (10) (10)
Other long-term debt - (55,000) (40,689)
Payment of preferred stock dividends (3,287) (4,899) (4,899)
Payment of common stock dividends (49,400) (43,900) (39,400)
Miscellaneous (1,804) (2,932) (568)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (62,019) (72,161) (46,591)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (2,626) (5,583) 11,324
Cash and Cash Equivalents at Beginning of Year 7,058 12,641 1,317
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 4,432 $ 7,058 $ 12,641
==================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for--
Interest (net of amount capitalized) $ 22,297 $ 21,467 $ 23,308
Income taxes 33,450 34,072 36,908
- ----------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
II-197
BALANCE SHEETS
At December 31, 1997 and 1996
Mississippi Power Company 1997 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Notes 1 and 6) $ 1,518,402 $ 1,483,875
Less accumulated provision for depreciation 559,098 526,776
- --------------------------------------------------------------------------------------------------------------------------------
959,304 957,099
Construction work in progress 41,083 35,100
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,000,387 992,199
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 650 3,054
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,432 7,058
Receivables--
Customer accounts receivable 32,220 26,364
Regulatory clauses under recovery 7,619 7,300
Other accounts and notes receivable 8,666 7,468
Affiliated companies 7,398 6,329
Accumulated provision for uncollectible accounts (698) (839)
Fossil fuel stock, at average cost 10,651 12,168
Materials and supplies, at average cost 19,452 21,083
Current portion of accumulated deferred income taxes 8,379 7,227
Prepayments 1,791 4,744
Vacation pay deferred 5,030 4,806
- --------------------------------------------------------------------------------------------------------------------------------
Total 104,940 103,708
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense and loss, being amortized 12,234 12,220
Deferred charges related to income taxes (Note 8) 21,906 22,274
Long-term notes receivable 2,837 3,737
Workforce Reduction Plan 18,236 -
Miscellaneous 5,639 5,135
- --------------------------------------------------------------------------------------------------------------------------------
Total 60,852 43,366
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,166,829 $ 1,142,327
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-198
BALANCE SHEETS (continued)
At December 31, 1997 and 1996
Mississippi Power Company 1997 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 387,824 $ 383,734
Preferred stock 31,896 74,414
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding Company Junior Subordinated Notes (Note 9) 35,000 -
Long-term debt 291,665 326,379
- --------------------------------------------------------------------------------------------------------------------------------
Total 746,385 784,527
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 11) 35,020 10
Accounts payable--
Affiliated companies 8,548 4,136
Regulatory clauses over recovery 15,476 8,788
Other 34,065 38,720
Customer deposits 3,225 3,154
Taxes accrued--
Federal and state income 1,101 -
Other 33,859 32,445
Interest accrued 4,098 4,384
Miscellaneous 12,797 13,942
- --------------------------------------------------------------------------------------------------------------------------------
Total 148,189 105,579
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 134,645 133,437
Accumulated deferred investment tax credits 27,121 28,333
Deferred credits related to income taxes (Note 8) 38,203 40,568
Postretirement benefits other than pension 25,145 21,850
Accumulated provision for property damage (Note 1) 13,991 12,955
Workforce Reduction Plan 15,700 -
Miscellaneous 17,450 15,078
- --------------------------------------------------------------------------------------------------------------------------------
Total 272,255 252,221
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 2, 3, 4, and 5)
Total Capitalization and Liabilities $ 1,166,829 $ 1,142,327
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-199
STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Mississippi Power Company 1997 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized -- 1,130,000 shares
Outstanding -- 1,121,000 shares in
1997 and 1996 $ 37,691 $ 37,691
Paid-in capital 179,389 179,389
Premium on preferred stock 327 372
Retained earnings (Note 12) 170,417 166,282
- ---------------------------------------------------------------------------------------------------------------------------
Total common stock equity 387,824 383,734 52.0% 48.9%
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value --
Authorized -- 1,244,139 shares
Outstanding --318,955 shares in 1997 and
744,139 shares in 1996
4.40% 948 4,000
4.60% 874 2,010
4.72% 1,670 5,000
6.32% 15,000 15,000
6.65% 8,404 8,404
7.00% 5,000 5,000
7.25% - 35,000
- ---------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,018,000) 31,896 74,414 4.3 9.5
- ---------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 7.75% 35,000 -
- ---------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,713,000) 35,000 - 4.7 -
- ---------------------------------------------------------------------------------------------------------------------------
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
June 1, 2023 7.45% 35,000 35,000
December 1, 2025 6 7/8% 30,000 30,000
- ---------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 175,000 175,000
Pollution control obligations (Note 10) 73,725 73,735
Other long-term debt (Note 10) 80,000 80,000
Unamortized debt premium (discount), net (2,040) (2,346)
- ---------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement--$20,246,000) 326,685 326,389
Less amount due within one year (Note 11) 35,020 10
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 291,665 326,379 39.0 41.6
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 746,385 $ 784,527 100.0% 100.0%
===========================================================================================================================
The accompanying notes are an integral part of these statements.
II-200
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
Mississippi Power Company 1997 Annual Report
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 166,282 $ 157,459 $ 144,328
Net income after dividends on preferred stock 54,010 52,723 52,531
Cash dividends on common stock (49,400) (43,900) (39,400)
Preferred stock transactions and other, net (475) - -
=====================================================================================================================
Balance at End of Period (Note 12) $ 170,417 $ 166,282 $ 157,459
=====================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1997, 1996, and 1995
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 179,389 $ 179,362 $ 179,362
Contributions to capital by parent company - 27 -
=====================================================================================================================
Balance at End of Period $ 179,389 $ 179,389 $ 179,362
=====================================================================================================================
The accompanying notes are an integral part of these statements.
II-201
NOTES TO FINANCIAL STATEMENTS
Mississippi Power Company 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Mississippi Power Company is a wholly owned subsidiary of Southern Company,
which is the parent company of five operating companies, Southern Company
Services (SCS), Southern Communications Services (Southern Communications),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), and Southern Energy Solutions, 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) and/or the
Securities and Exchange Commission. SCS provides, at cost, specialized services
to 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. Worldwide,
Southern Energy develops and manages electricity and other energy related
projects, including domestic energy trading and marketing. Southern Nuclear
provides services to Southern Company's nuclear power plants. Southern Energy
Solutions develops new business opportunities related to energy products and
services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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 expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets as of December 31 relate to:
1997 1996
-------------------------
(in thousands)
Deferred income taxes $21,906 $22,274
Vacation pay 5,030 4,806
Workforce reduction costs - 1,991
Workforce reduction plan of
1997 18,236 -
Premium on reacquired debt 9,508 10,672
Deferred environmental costs 1,583 1,679
Property damage reserve (13,991) (12,955)
Deferred income tax credits (38,203) (40,568)
Other, net (2,982) (2,882)
- ----------------------------------------------------------------
Total $ 1,087 $(14,983)
================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of FASB Statement No. 71, the Company would be required to
write off the net regulatory assets and liabilities related to that portion of
operations that are not specifically recoverable through regulated rates. 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
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, the energy component of
purchased power costs and certain other costs. Retail rates also include
II-202
NOTES (continued)
Mississippi Power Company 1997 Annual Report
provisions to adjust billings for 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 1997, 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 3.3 percent
in 1997 and 1996, and 3.2 percent in 1995. 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 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.
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. If applicable, the cost of
maintenance, repairs, and replacement of minor items of property are 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, at December 31 are as follows:
Carrying Fair
Amount Value
--------------------
(in millions)
Long-term debt:
At December 31, 1997 $327 $330
At December 31, 1996 326 324
Preferred securities:
At December 31, 1997 35 36
At December 31, 1996 - -
- --------------------------------------------------------
The fair value for long-term debt and preferred securities 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.
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 each of the
years 1997, 1996 and 1995. 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, 1997, the accumulated provision amounted to $14.0 million.
II-203
NOTES (continued)
Mississippi Power Company 1997 Annual Report
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. The Company funds trusts 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 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 funded status of the plans and reconciliation to amounts reflected in the
Balance Sheets at December 31 are as follows:
Pension
------------------------
1997 1996
------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $102,764 $92,091
Non-vested benefits 3,120 5,191
--------------------------------------------------------------
Accumulated benefit obligation 105,884 97,282
Additional amounts related to
projected salary increases 26,247 30,552
--------------------------------------------------------------
Projected benefit obligation 132,131 127,834
Less:
Fair value of plan assets 207,457 179,658
Unrecognized net gain (78,936) (56,674)
Unrecognized prior service cost 5,819 6,422
Unrecognized transition asset (4,904) (5,449)
--------------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 2,695 $3,877
==============================================================
Postretirement Benefits
------------------------
1997 1996
------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $19,816 $20,841
Employees eligible to retire 3,691 2,703
Other employees 19,910 17,564
------------------------------------------------------------
Accumulated benefit obligation 43,417 41,108
Less:
Fair value of plan assets 12,916 10,210
Unrecognized net (gain)/ loss (1,980) 1,136
Unrecognized transition
obligation 5,314 5,911
------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $27,167 $23,851
============================================================
II-204
NOTES (continued)
Mississippi Power Company 1997 Annual Report
The weighted average rates assumed in the above actuarial calculations were:
1997 1996 1995
---------------------------------
Discount 7.5% 7.8% 7.3%
Annual salary increase 5.0 5.3 4.8
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 8.8
percent for 1997, decreasing gradually to 5.5 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, 1997, by $3.3 million and the aggregate of the
service and interest cost components of the net retiree cost by $0.3 million.
Components of the plans' net cost are shown below:
Pension
--------------------------------
1997 1996 1995
--------------------------------
(in thousands)
Benefits earned during
the year $4,015 $ 3,842 $ 3,636
Interest cost on
projected benefit
obligation 9,408 9,310 8,434
Actual (return) loss on
plan assets (30,680) (20,438) (32,232)
Net amortization and
deferral 16,026 6,442 18,650
--------------------------------------------------------------
Net pension income $(1,231) $ (844) $ (1,512)
==============================================================
Of the above net pension income, $(0.9) million in 1997, $(0.6) million in
1996, and $(1.1) million in 1995 were recorded in operating expenses, and the
remainder was recorded in construction and other accounts.
Postretirement Benefits
------------------------------
1997 1996 1995
------------------------------
(in thousands)
Benefits earned during the year $ 867 $ 958 $1,525
Interest cost on accumulated
benefit obligation 2,922 2,830 3,442
Amortization of transition
obligation over 20 years 362 362 1,027
Actual (return) loss on
plan assets (1,388) (990) (1,436)
Net amortization and deferral 566 312 851
================================================================
Net postretirement costs $3,329 $3,472 $5,409
================================================================
Of the above net postretirement costs recorded, $2.6 million in 1997, $2.8
million in 1996, and $3.9 million in 1995 were recorded in operating expenses,
and the remainder was recorded in construction and other accounts.
Workforce Reduction Programs
During 1994, Mississippi Power and SCS instituted workforce reduction programs.
The costs of the SCS workforce 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 $2.0 million, $5.3 million, and $4.0 million of the cost of
these programs in 1997, 1996 and 1995, respectively. In 1997, Mississippi Power
expensed its pro-rata share of the costs for affiliated companies' programs of
$0.5 million.
In 1997, approximately one hundred employees of Mississippi Power, in
certain areas, including finance, environmental quality and external affairs,
accepted the terms under a workforce reduction plan. The total cost to be
incurred in connection with this voluntary plan is expected to be $18.2 million.
The MPSC approved the deferral and amortization of these program costs over a
period not to exceed 60 months beginning no later than July 1998. The
unamortized balance of this program was $18.2 million at December 31, 1997.
II-205
NOTES (continued)
Mississippi Power Company 1997 Annual Report
3. LITIGATION AND REGULATORY MATTERS
Retail Rate Adjustment Plans
Mississippi Power's retail base rates are set under a Performance Evaluation
Plan (PEP) approved by the MPSC in 1994. PEP was designed with the objective
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
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
provides for semiannual evaluations of Mississippi's performance-based return on
investment. Any change in rates is limited to 2 percent of retail revenues per
evaluation period. PEP will remain in effect until the MPSC modifies or
terminates the plan. In September 1996, the MPSC under PEP approved a retail
revenue increase of $4.5 million (1.06 percent of annual retail revenue) which
became effective in October 1996. There were no PEP retail revenue changes for
1997.
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 discussed in Note 5
under "Lease Agreements."
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. 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 -- as
well as certain other contracts that reference these proceedings in determining
return on common equity -- and if refunds were ordered, the amount of refunds
could range up to approximately $4.1 million for Mississippi Power at December
31, 1997. Although management believes that rates are not excessive and that
refunds are not justified, the final outcome of this matter cannot now be
determined.
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 (including costs of capital)
associated with environmental projects approved by the MPSC. 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 had
previously resulted in an annual retail rate increase of $3.7 million, effective
in May 1995 which included $1.6 million of 1994 carryover and an annual retail
rate increase of $7.6 million, effective in April 1994. The Company's 1996
annual filing under the ECO Plan resulted in a $3.0 million decrease in retail
rates, effective in April 1996. In 1997, the Company's filing with the MPSC
under the ECO Plan resulted in an annual retail rate increase of $0.9 million.
The 1998 ECO filing, if approved by the MPSC, will result in a small decrease in
customer prices.
Mississippi Power conducts studies, when possible, to determine the extent
of any required environmental remediation. 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
is being investigated for potential remediation. The remedial investigation is
near completion and is being conducted in conjunction with 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
II-206
NOTES (continued)
Mississippi Power Company 1997 Annual Report
ECO Plan as provided in the Company's 1995 ECO order. As of December 31, 1997,
the balance in the liability and regulatory asset accounts was $1.6 million. 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 $67 million in 1998, $92 million in 1999,
and $291 million in 2000.
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. Significant construction
will continue related to transmission and distribution facilities, the
upgrading of generating plants, and the addition of combined cycle generation.
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 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, 1997, Mississippi Power had total committed credit
agreements with banks for $96.3 million. At year-end 1997, the unused portion of
these committed credit agreements was $76.3 million. These credit agreements
expire at various dates in 1998 and in 2000. Some of 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 or
to maintain compensating balances with the banks. At December 31, 1997, the
Company had no short-term borrowings outstanding.
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 1997 use fees
collected under this agreement, net of related expenses, amounted to $3.5
million each year, and are included within Other Income in the Statements of
Income.
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. The Company has the option to purchase the 745
railcars at the greater of lease termination value or fair market value, or to
renew the leases at the end of the lease term. In 1997, a third lease agreement
for the use of 360 railcars was also entered into for three years, with a
monthly renewal option for up to an additional nine months. All of these leases,
totaling 1,105 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, charged to fuel
inventory, was $2.0 million in 1997, and $1.7 million in both 1996 and 1995. The
Company's annual lease payments for 1998 through 2002 will average approximately
$2.2 million and after 2002, lease payments total in aggregate approximately $18
million.
II-207
NOTES (continued)
Mississippi Power Company 1997 Annual Report
Fuel and Purchased Power 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 at December 31, 1997 were as follows:
Year Fuel
(in millions)
1998 $137
1999 88
- ---------------------------------------------------
Total commitments $225
===================================================
Additional commitments for fuel will be required in the future to supply the
Company's fuel needs.
In 1996, Mississippi Power entered into agreements to purchase options for
summer peaking power for the years 1997 through 2000. The Company has purchased
options from power marketers for up to 250 megawatts of peaking power in 1997;
300 megawatts in 1998; 350 megawatts in 1999; and 400 megawatts in 2000. In
1997, Mississippi Power exercised its option to purchase 250 megawatts of
peaking capacity. In June 1997, the MPSC approved Mississippi Power's request
that it be allowed to earn a return on the capacity portion of this agreement.
Mississippi Power expects to exercise its options to purchase 300 megawatts of
summer peaking capacity in 1998.
6. JOINT OWNERSHIP AGREEMENTS
Mississippi Power and Alabama Power own as tenants in common Units 1 and 2 at
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, 1997,
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
Units 1 and 2 500 40% $ 63,206 $30,168
Daniel 1,000 50% 220,984 92,484
----------------------------------------------------------------
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
Mississippi Power and the other operating affiliates of 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. Because the
energy is generally sold at cost under these agreements, profitability is
primarily affected by revenues from capacity sales. The capacity revenues have
been $8,000 in 1997; $0 in 1996; and $268,000 in 1995.
8. INCOME TAXES
At December 31, 1997, the tax-related regulatory assets and liabilities were $22
million and $38 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.
II-208
NOTES (continued)
Mississippi Power Company 1997 Annual Report
Details of the federal and state income tax provisions are shown below:
1997 1996 1995
---------------------------------
(in thousands)
Total provision for
income taxes
Federal --
Currently payable $27,651 $29,888 $32,546
Deferred --current year 8,171 13,816 5,122
--reversal of
prior years (9,236) (14,913) (7,039)
---------------------------------------------------------------
26,586 28,791 30,629
---------------------------------------------------------------
State --
Currently payable 5,537 3,588 3,426
Deferred --current year 1,756 4,727 2,270
--reversal of
prior years (2,499) (3,556) (833)
---------------------------------------------------------------
4,794 4,759 4,863
---------------------------------------------------------------
Total 31,380 33,550 35,492
Less income taxes charged
to other income (588) 932 1,006
---------------------------------------------------------------
Federal and state
income taxes charged
to operations $31,968 $32,618 $34,486
===============================================================
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:
1997 1996
-----------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $149,941 $148,667
Basis differences 10,037 10,507
Other 25,097 19,285
-------------------------------------------------------------
Total 185,075 178,459
-------------------------------------------------------------
Deferred tax assets:
Other property
basis differences 23,139 24,434
Pension and
other benefits 9,803 8,750
Property insurance 5,351 4,955
Unbilled fuel 802 2,808
Other 19,714 11,302
-------------------------------------------------------------
Total 58,809 52,249
-------------------------------------------------------------
Net deferred tax
liabilities 126,266 126,210
Portion included in
current assets, net 8,379 7,227
-------------------------------------------------------------
Accumulated deferred
income taxes in the
Balance Sheets $134,645 $133,437
=============================================================
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 $1.2 million in 1997, $1.4 million in 1996, and $1.5 million in
1995. At December 31, 1997, 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:
1997 1996 1995
-----------------------------
Total effective tax rate 37% 37% 38%
State income tax, net of
federal income tax benefit (3) (3) (3)
Tax rate differential 1 1 -
-------------------------------------------------------------
Statutory federal tax rate 35% 35% 35%
=============================================================
II-209
NOTES (continued)
Mississippi Power Company 1997 Annual Report
Mississippi Power and the subsidiaries of 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. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
In February 1997, Mississippi Power Capital Trust I (Trust I), of which the
Company owns all the common securities, issued $35 million of 7.75 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $36 million aggregate principal amount of the Company's 7.75 percent
junior subordinated notes due February 15, 2037.
10. OTHER LONG-TERM DEBT
Details of pollution control obligations and other long-term debt are as
follows:
December 31,
1997 1996
---------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
5.8$% due 2007 $ 950 $ 960
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 10,600
------------------------------------------------------------
73,725 73,735
------------------------------------------------------------
Other long-term debt:
Variable rates (6.10875% to
6.18984% at 1/1/98) due 1999 50,000 50,000
Variable rate due 2000 30,000 30,000
------------------------------------------------------------
80,000 80,000
------------------------------------------------------------
Total $153,725 $153,735
============================================================
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 5.80% series of pollution control obligations has a cash sinking
fund requirement of $20 thousand annually in 1998, 1999, 2000 and 2001.
11. 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:
1997 1996
-------------------
(in thousands)
Bond improvement
fund requirements $ 1,750 $1,750
Less:
Portion to be satisfied by
certifying property additions 1,750 1,750
-------------------------------------------------------------
Redemptions of first mortgage bonds 35,000 -
Pollution control bond cash
sinking fund requirements (Note 10) 20 10
-------------------------------------------------------------
Total $35,020 $ 10
=============================================================
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.
12. COMMON STOCK DIVIDEND RESTRICTIONS
Mississippi Power's first mortgage bond indenture and the corporate charter
contain various common stock dividend restrictions. At December 31, 1997,
approximately $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-210
NOTES (continued)
Mississippi Power Company 1997 Annual Report
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 are as follows:
Net Income
After Dividends
Quarter Operating Operating On
Ended Revenues Income Preferred Stock
-------------------------------------------------------------------
March 1997 $116,903 $17,132 $ 10,645
June 1997 128,915 19,340 12,618
September 1997 171,874 30,441 25,163
December 1997 125,896 11,043 5,584
March 1996 $126,954 $18,074 $ 11,695
June 1996 136,749 17,691 11,400
September 1996 156,603 27,670 21,784
December 1996 123,723 13,636 7,844
Mississippi Power's business is influenced by seasonal weather conditions
and the timing of rate changes.
II-211
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1997 Annual Report
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $543,588 $544,029 $516,553
Net Income after Dividends
on Preferred Stock (in thousands) $54,010 $52,723 $52,531
Cash Dividends on Common Stock (in thousands) $49,400 $43,900 $39,400
Return on Average Common Equity (percent) 14.0 13.9 14.26
Total Assets (in thousands) $1,166,829 $1,142,327 $1,148,953
Gross Property Additions (in thousands) $55,375 $61,314 $67,570
- -------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $387,824 $383,734 $374,884
Preferred stock 31,896 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 35,000 - -
Long-term debt 291,665 326,379 288,820
- ------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $746,385 $784,527 $738,118
=========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 52.0 48.9 50.8
Preferred stock 4.3 9.5 10.1
Company obligated mandatorily redeemable preferred securities 4.7 - -
Long-term debt 39.0 41.6 39.1
- -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 30,000
Retired - 45,447 1,625
Preferred Stock (in thousands):
Issued - - -
Retired 42,518 - -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued 35,000 - -
- -------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 Aa3 Aa3
Standard and Poor's AA- A+ A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps A+ A+ A+
- -------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 156,650 154,630 154,014
Commercial 31,667 30,366 29,903
Industrial 642 639 642
Other 200 200 194
- -------------------------------------------------------------------------------------------------------------------------
Total 189,159 185,835 184,753
=========================================================================================================================
Employees (year-end) 1,245 1,363 1,421
- -------------------------------------------------------------------------------------------------------------------------
II-212
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1997 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $499,162 $474,883 $434,447 $432,386
Net Income after Dividends
on Preferred Stock (in thousands) $49,157 $42,436 $36,790 $22,627
Cash Dividends on Common Stock (in thousands) $34,100 $29,000 $28,000 $28,500
Return on Average Common Equity (percent) 14.38 14.09 13.27 8.17
Total Assets (in thousands) $1,123,711 $1,050,334 $791,283 $790,641
Gross Property Additions (in thousands) $104,014 $139,976 $68,189 $53,675
- ----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $361,753 $321,768 $280,640 $273,855
Preferred stock 74,414 74,414 74,414 39,414
Preferred stock subject to mandatory redemption - - - -
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 306,522 250,391 238,650 304,150
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $742,689 $646,573 $593,704 $617,419
==================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.7 49.8 47.3 44.4
Preferred stock 10.0 11.5 12.5 6.4
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 41.3 38.7 40.2 49.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==================================================================================================================================
First Mortgage Bonds (in thousands):
Issued 35,000 70,000 40,000 50,000
Retired 32,628 51,300 104,703 -
Preferred Stock (in thousands):
Issued - 23,404 35,000 -
Retired - 23,404 - 4,118
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 A1 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps A+ A+ A+ A+
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A A A A
- ----------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 152,891 151,692 150,248 148,978
Commercial 29,276 28,648 28,056 27,441
Industrial 650 570 573 562
Other 189 190 189 400
- ----------------------------------------------------------------------------------------------------------------------------------
Total 183,006 181,100 179,066 177,381
==================================================================================================================================
Employees (year-end) 1,535 1,586 1,619 1,630
- ----------------------------------------------------------------------------------------------------------------------------------
II-213A
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1997 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $446,871 $442,650 $437,939 $455,843
Net Income after Dividends
on Preferred Stock (in thousands) $34,176 $38,576 $36,081 $35,200
Cash Dividends on Common Stock (in thousands) $27,500 $27,000 $27,600 $24,700
Return on Average Common Equity (percent) 12.36 14.43 14.03 14.68
Total Assets (in thousands) $800,026 $786,570 $779,319 $764,068
Gross Property Additions (in thousands) $49,009 $43,916 $54,550 $53,288
- ----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $279,833 $273,157 $261,473 $252,992
Preferred stock 39,414 39,414 39,414 39,414
Preferred stock subject to mandatory redemption 3,750 4,500 5,250 6,750
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 270,724 277,693 287,525 294,811
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $593,721 $594,764 $593,662 $593,967
==================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.1 45.9 44.1 42.6
Preferred stock 7.3 7.4 7.5 7.8
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 45.6 46.7 48.4 49.6
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==================================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - - -
Retired 4,000 3,823 - 29,701
Preferred Stock (in thousands):
Issued - - - -
Retired 750 750 1,500 1,500
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps A+ A+ 5 5
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A A 6 6
- ----------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 147,738 147,308 146,750 146,273
Commercial 27,134 26,867 26,751 26,342
Industrial 574 525 478 438
Other 411 404 399 389
- ----------------------------------------------------------------------------------------------------------------------------------
Total 175,857 175,104 174,378 173,442
==================================================================================================================================
Employees (year-end) 1,842 1,750 1,831 1,898
- ----------------------------------------------------------------------------------------------------------------------------------
II-213B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1997 Annual Report
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $138,608 $137,055 $134,286
Commercial 134,208 131,734 131,034
Industrial 140,233 141,324 140,947
Other 4,193 4,013 3,914
- -------------------------------------------------------------------------------------------------------------------------
Total retail 417,242 414,126 410,181
Sales for resale - non-affiliates 105,141 99,596 91,820
Sales for resale - affiliates 10,143 21,830 7,691
- -------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 532,526 535,552 509,692
Other revenues 11,062 8,477 6,861
- -------------------------------------------------------------------------------------------------------------------------
Total $543,588 $544,029 $516,553
=========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,039,042 2,079,611 2,040,608
Commercial 2,407,520 2,315,860 2,242,163
Industrial 3,981,875 3,960,243 3,813,456
Other 40,508 39,297 38,559
- -------------------------------------------------------------------------------------------------------------------------
Total retail 8,468,945 8,395,011 8,134,786
Sales for resale - non-affiliates 2,895,182 2,726,993 2,493,519
Sales for resale - affiliates 478,884 693,510 243,554
- ---------------------------------------------------------------------------------------------------------------------------
Total 11,843,011 11,815,514 10,871,859
=========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.80 6.59 6.58
Commercial 5.57 5.69 5.84
Industrial 3.52 3.57 3.70
Total retail 4.93 4.93 5.04
Total sales 4.50 4.53 4.69
Residential Average Annual Kilowatt-Hour Use Per Customer 13,132 13,469 13,307
Residential Average Annual Revenue Per Customer $892.68 $887.66 $875.69
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,086
Maximum Peak-Hour Demand (megawatts):
Winter 1,922 2,030 1,637
Summer 2,209 2,117 2,095
Annual Load Factor (percent) 59.1 60.7 60.0
Plant Availability - Fossil-Steam (percent) 92.4 91.8 92.1
- -------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 70.0 70.4 58.0
Oil and gas 13.0 12.0 15.2
Purchased power -
From non-affiliates 3.0 6.5 2.4
From affiliates 14.0 11.1 24.4
- -------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,078 10,038 10,249
Cost of fuel per million BTU (cents) 153.32 156.08 160.48
Average cost of fuel per net kilowatt-hour generated (cents) 1.54 1.57 1.64
- -------------------------------------------------------------------------------------------------------------------------
II-214
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1997 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $124,257 $118,793 $109,781 $103,820
Commercial 124,716 115,152 107,131 103,666
Industrial 142,268 130,198 117,010 116,972
Other 3,882 3,760 3,533 5,869
- ----------------------------------------------------------------------------------------------------------------------------------
Total retail 395,123 367,903 337,455 330,327
Sales for resale - non-affiliates 88,122 83,511 80,213 78,826
Sales for resale - affiliates 9,538 15,519 10,055 18,044
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 492,783 466,933 427,723 427,197
Other revenues 6,379 7,950 6,724 5,189
- ----------------------------------------------------------------------------------------------------------------------------------
Total $499,162 $474,883 $434,447 $432,386
==================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,922,217 1,929,835 1,804,858 1,832,266
Commercial 2,100,625 1,933,685 1,811,042 1,768,441
Industrial 3,847,011 3,623,543 3,536,634 3,297,247
Other 38,147 38,357 38,261 89,375
- ----------------------------------------------------------------------------------------------------------------------------------
Total retail 7,908,000 7,525,420 7,190,795 6,987,329
Sales for resale - non-affiliates 2,555,914 2,544,982 2,687,917 2,706,320
Sales for resale - affiliates 174,342 426,919 280,443 617,696
- ----------------------------------------------------------------------------------------------------------------------------------
Total 10,638,256 10,497,321 10,159,155 10,311,345
==================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.46 6.16 6.08 5.67
Commercial 5.94 5.96 5.92 5.86
Industrial 3.70 3.59 3.31 3.55
Total retail 5.00 4.89 4.69 4.73
Total sales 4.63 4.45 4.21 4.14
Residential Average Annual Kilowatt-Hour Use Per Customer 12,611 12,780 12,066 12,338
Residential Average Annual Revenue Per Customer $815.21 $786.71 $733.90 $699.11
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,011 2,011 2,011
Maximum Peak-Hour Demand (megawatts):
Winter 1,636 1,401 1,386 1,267
Summer 1,874 1,872 1,755 1,682
Annual Load Factor (percent) 63.4 60.0 60.8 61.5
Plant Availability - Fossil-Steam (percent) 85.4 88.0 92.0 89.8
- ----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 56.0 63.5 60.4 64.1
Oil and gas 10.2 7.6 5.8 8.1
Purchased power -
From non-affiliates 1.2 1.3 1.2 0.7
From affiliates 32.6 27.6 32.6 27.1
- ----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,295 10,075 9,888 10,142
Cost of fuel per million BTU (cents) 165.96 170.13 162.27 177.52
Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.71 1.60 1.80
- ----------------------------------------------------------------------------------------------------------------------------------
II-215A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1997 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $102,243 $100,068 $96,711 $98,338
Commercial 103,352 103,403 98,772 98,669
Industrial 123,754 128,983 123,038 129,004
Other 6,078 5,992 5,874 5,723
- ----------------------------------------------------------------------------------------------------------------------------------
Total retail 335,427 338,446 324,395 331,734
Sales for resale - non-affiliates 86,194 82,111 75,525 88,060
Sales for resale - affiliates 20,157 16,938 33,747 31,278
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 441,778 437,495 433,667 451,072
Other revenues 5,093 5,155 4,272 4,771
- ----------------------------------------------------------------------------------------------------------------------------------
Total $446,871 $442,650 $437,939 $455,843
==================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,804,838 1,741,855 1,686,722 1,658,327
Commercial 1,718,074 1,686,302 1,607,988 1,555,044
Industrial 3,311,460 3,204,208 2,879,457 2,862,632
Other 85,938 87,611 86,049 81,153
- ----------------------------------------------------------------------------------------------------------------------------------
Total retail 6,920,310 6,719,976 6,260,216 6,157,156
Sales for resale - non-affiliates 2,883,581 2,798,086 2,280,341 2,615,058
Sales for resale - affiliates 714,365 527,970 1,100,808 955,303
- ----------------------------------------------------------------------------------------------------------------------------------
Total 10,518,256 10,046,032 9,641,365 9,727,517
==================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.66 5.74 5.73 5.93
Commercial 6.02 6.13 6.14 6.35
Industrial 3.74 4.03 4.27 4.51
Total retail 4.85 5.04 5.18 5.39
Total sales 4.20 4.35 4.50 4.64
Residential Average Annual Kilowatt-Hour Use Per Customer 12,228 11,842 11,499 11,356
Residential Average Annual Revenue Per Customer $692.70 $680.32 $659.30 $673.41
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,998 1,998 1,966 1,966
Maximum Peak-Hour Demand (megawatts):
Winter 1,201 1,556 1,284 1,224
Summer 1,724 1,682 1,621 1,548
Annual Load Factor (percent) 59.0 58.8 57.6 59.0
Plant Availability - Fossil-Steam (percent) 93.3 94.0 93.0 93.5
- ----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 62.6 63.4 86.3 79.4
Oil and gas 14.0 13.5 4.8 5.3
Purchased power -
From non-affiliates 0.8 0.5 0.4 0.3
From affiliates 22.6 22.6 8.5 15.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,319 10,159 10,220 10,525
Cost of fuel per million BTU (cents) 183.27 178.38 185.13 194.46
Average cost of fuel per net kilowatt-hour generated (cents) 1.89 1.81 1.89 2.05
- ----------------------------------------------------------------------------------------------------------------------------------
II-215B
STATEMENTS OF INCOME
Mississippi Power Company
===================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $533,445 $522,199 $508,862
Revenues from affiliates 10,143 21,830 7,691
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 543,588 544,029 516,553
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 142,059 141,532 111,071
Purchased power from non-affiliates 14,536 17,960 6,019
Purchased power from affiliates 37,794 33,245 57,777
Proceeds from settlement of disputed contracts - - -
Other 102,365 106,061 107,296
Maintenance 47,302 47,091 39,627
Depreciation and amortization 45,574 44,906 39,224
Taxes other than income taxes 44,034 43,545 42,443
Federal and state income taxes 31,968 32,618 34,486
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 465,632 466,958 437,943
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 77,956 77,071 78,610
Other Income (Expense):
Allowance for equity funds used during construction - 344 366
Interest income 857 239 199
Other, net 2,368 3,801 4,596
Income taxes applicable to other income 588 (932) (1,006)
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 81,769 80,523 82,765
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,856 19,898 21,898
Allowance for debt funds used during construction - (713) (399)
Interest on notes payable 96 1,416 1,141
Amortization of debt discount, premium, and expense, net 1,577 1,547 1,510
Other interest charges 574 753 1,185
Distributions on preferred securities of subsidiary trust 2,369 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 24,472 22,901 25,335
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 57,297 57,622 57,430
- -----------------------------------------------------------------------------------------------------------------------------------
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 57,297 57,622 57,430
Dividends on Preferred Stock 3,287 4,899 4,899
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 54,010 $ 52,723 $ 52,531
===================================================================================================================================
II-216
STATEMENTS OF INCOME
Mississippi Power Company
===================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $489,624 $459,364 $424,392
Revenues from affiliates 9,538 15,519 10,055
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 499,162 474,883 434,447
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 102,216 113,986 96,743
Purchased power from non-affiliates 2,711 2,198 1,337
Purchased power from affiliates 68,543 58,019 60,689
Proceeds from settlement of disputed contracts - - (189)
Other 97,988 100,381 90,581
Maintenance 45,785 44,001 43,165
Depreciation and amortization 35,716 33,099 32,789
Taxes other than income taxes 41,742 37,145 34,664
Federal and state income taxes 31,386 22,668 16,378
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 426,087 411,497 376,157
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 73,075 63,386 58,290
Other Income (Expense):
Allowance for equity funds used during construction 1,099 1,010 642
Interest income 87 517 766
Other, net 2,033 3,971 5,501
Income taxes applicable to other income (227) (1,158) (1,427)
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 76,067 67,726 63,772
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,725 17,688 22,357
Allowance for debt funds used during construction (1,039) (788) (563)
Interest on notes payable 1,442 1,000 362
Amortization of debt discount, premium, and expense, net 1,479 1,262 630
Other interest charges 404 728 339
Distributions on preferred securities of subsidiary trust - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 22,011 19,890 23,125
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 54,056 47,836 40,647
- -----------------------------------------------------------------------------------------------------------------------------------
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 54,056 47,836 40,647
Dividends on Preferred Stock 4,899 5,400 3,857
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 49,157 $ 42,436 $ 36,790
===================================================================================================================================
II-217A
STATEMENTS OF INCOME
Mississippi Power Company
===================================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $414,342 $426,714 $425,712
Revenues from affiliates 18,044 20,157 16,938
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 432,386 446,871 442,650
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 120,485 138,303 133,671
Purchased power from non-affiliates 851 1,406 1,266
Purchased power from affiliates 45,506 49,547 47,066
Proceeds from settlement of disputed contracts (4,205) - -
Other 86,932 83,730 84,820
Maintenance 44,166 33,368 35,658
Depreciation and amortization 32,147 30,770 28,001
Taxes other than income taxes 35,414 32,709 32,435
Federal and state income taxes 13,976 17,144 18,387
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 375,272 386,977 381,304
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 57,114 59,894 61,346
Other Income (Expense):
Allowance for equity funds used during construction 728 307 903
Interest income 1,093 829 1,096
Other, net 3,845 6,297 6,013
Income taxes applicable to other income (863) (1,666) (1,392)
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 61,917 65,661 67,966
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 23,656 22,221 21,685
Allowance for debt funds used during construction (584) (600) (821)
Interest on notes payable 603 1,142 689
Amortization of debt discount, premium, and expense, net 377 359 362
Other interest charges 285 333 566
Distributions on preferred securities of subsidiary trust - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 24,337 23,455 22,481
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 37,580 42,206 45,485
- -----------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations of discontinued subsidiary, net of taxes (6,404) (4,669) (3,459)
Loss on disposal of discontinued subsidiary, net of taxes (5,455) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Loss From Discontinued Operations (11,859) (4,669) (3,459)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 25,721 37,537 42,026
Dividends on Preferred Stock 3,094 3,361 3,450
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 22,627 $ 34,176 $ 38,576
===================================================================================================================================
II-217B
STATEMENTS OF INCOME
Mississippi Power Company
=================================================================================================================
For the Years Ended December 31, 1988 1987
- ------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $404,192 $424,565
Revenues from affiliates 33,747 31,278
- ------------------------------------------------------------------------------------------------------------------
Total operating revenues 437,939 455,843
- ------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 165,912 167,165
Purchased power from non-affiliates 1,257 1,108
Purchased power from affiliates 19,270 36,114
Proceeds from settlement of disputed contracts - -
Other 83,542 81,331
Maintenance 33,412 33,974
Depreciation and amortization 26,610 26,210
Taxes other than income taxes 29,638 27,882
Federal and state income taxes 20,313 23,888
- ------------------------------------------------------------------------------------------------------------------
Total operating expenses 379,954 397,672
- ------------------------------------------------------------------------------------------------------------------
Operating Income 57,985 58,171
Other Income (Expense):
Allowance for equity funds used during construction 850 608
Interest income 1,030 1,121
Other, net 6,399 7,065
Income taxes applicable to other income (1,148) (2,507)
- ------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 65,116 64,458
- ------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 22,271 24,139
Allowance for debt funds used during construction (595) (652)
Interest on notes payable 341 558
Amortization of debt discount, premium, and expense, net 363 388
Other interest charges 522 601
Distributions on preferred securities of subsidiary trust - -
- ------------------------------------------------------------------------------------------------------------------
Net interest charges 22,902 25,034
- ------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 42,214 39,424
- ------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations of discontinued subsidiary, net of taxes (2,549) (487)
Loss on disposal of discontinued subsidiary, net of taxes - -
- ------------------------------------------------------------------------------------------------------------------
Net Loss From Discontinued Operations (2,549) (487)
- ------------------------------------------------------------------------------------------------------------------
Net Income 39,665 38,937
Dividends on Preferred Stock 3,584 3,737
- ------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 36,081 $ 35,200
==================================================================================================================
II-217C
STATEMENTS OF CASH FLOWS
Mississippi Power Company
=======================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 57,297 $ 57,622 $ 57,430
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 49,661 50,551 51,588
Deferred income taxes, net (1,809) 74 (480)
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction - (344) (366)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 3,206 9,787 5,704
Changes in certain current assets and liabilities --
Receivables, net (8,583) 5,118 (8,758)
Inventories 3,148 4,973 3,962
Payables 8,357 2,077 17,421
Other 3,980 292 681
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 115,257 130,150 127,182
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (55,375) (61,314) (67,570)
Other (489) (2,258) (1,697)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (55,864) (63,572) (69,267)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - -
First mortgage bonds - - 30,000
Pollution control bonds - - 10,600
Preferred securities 35,000 - -
Other long-term debt - 80,000 -
Capital contributions - 27 -
Redemptions:
Preferred stock (42,518) - -
First mortgage bonds - (45,447) (1,625)
Pollution control bonds (10) (10) (10)
Other long-term debt - (55,000) (40,689)
Notes payable, net - - -
Payment of preferred stock dividends (3,287) (4,899) (4,899)
Payment of common stock dividends (49,400) (43,900) (39,400)
Miscellaneous (1,804) (2,932) (568)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (62,019) (72,161) (46,591)
- -----------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (2,626) (5,583) 11,324
Cash and Cash Equivalents at Beginning of Year 7,058 12,641 1,317
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 4,432 $ 7,058 $ 12,641
=======================================================================================================================
( ) Denotes use of cash.
II-218
STATEMENTS OF CASH FLOWS
Mississippi Power Company
===========================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 54,056 $ 47,836 $ 40,647
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 47,827 45,660 41,472
Deferred income taxes, net 1,563 5,039 (5,473)
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (1,099) (1,010) (642)
Non-cash proceeds from settlement of disputed contracts - - (189)
Other, net 5,230 3,005 8,093
Changes in certain current assets and liabilities --
Receivables, net 3,066 (4,347) 1,002
Inventories (9,856) 11,119 975
Payables (8,754) 4,133 460
Other 3,334 (8,033) 6,095
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 95,367 103,402 92,440
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (104,014) (139,976) (68,189)
Other (14,087) 7,562 4,235
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (118,101) (132,414) (63,954)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - 23,404 35,000
First mortgage bonds 35,000 70,000 40,000
Pollution control bonds - 38,875 23,300
Preferred securities - - -
Other long-term debt 85,310 - -
Capital contributions 25,000 30,036 26
Redemptions:
Preferred stock - (23,404) -
First mortgage bonds (32,628) (51,300) (104,703)
Pollution control bonds (10) (25,885) (23,650)
Other long-term debt (9,299) (8,170) (6,212)
Notes payable, net (40,000) 9,000 26,500
Payment of preferred stock dividends (4,899) (5,400) (3,857)
Payment of common stock dividends (34,100) (29,000) (28,000)
Miscellaneous (1,201) (5,683) (7,821)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 23,173 22,473 (49,417)
- ---------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 439 (6,539) (20,931)
Cash and Cash Equivalents at Beginning of Year 878 7,417 28,348
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,317 $ 878 $ 7,417
===========================================================================================================================
( ) Denotes use of cash.
II-219A
STATEMENTS OF CASH FLOWS
Mississippi Power Company
=======================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 25,721 $ 37,537 $ 42,026
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 41,773 41,079 35,878
Deferred income taxes, net (11,869) 2,756 (294)
Deferred investment tax credits, net (2) (26) (38)
Allowance for equity funds used during construction (728) (307) (903)
Non-cash proceeds from settlement of disputed contracts (4,071) - -
Other, net (4,982) 7,257 4,306
Changes in certain current assets and liabilities --
Receivables, net 35,343 (6,252) (18,506)
Inventories 10,518 (8,922) 3,687
Payables (4,949) (5,552) 1,307
Other 11,433 (1,461) 2,172
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 98,187 66,109 69,635
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (53,675) (49,009) (43,916)
Other 2,148 4,481 1,860
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (51,527) (44,528) (42,056)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - -
First mortgage bonds 50,000 - -
Pollution control bonds - - -
Preferred securities - - -
Other long-term debt 844 - 844
Capital contributions - - -
Redemptions:
Preferred stock (4,118) (750) (750)
First mortgage bonds - (4,000) (3,823)
Pollution control bonds (300) (288) (62)
Other long-term debt (8,958) (6,416) (5,919)
Notes payable, net (25,603) 17,146 6,457
Payment of preferred stock dividends (3,094) (3,361) (3,450)
Payment of common stock dividends (28,500) (27,500) (27,000)
Miscellaneous (839) 2 -
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (20,568) (25,167) (33,703)
- -----------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 26,092 (3,586) (6,124)
Cash and Cash Equivalents at Beginning of Year 2,256 5,842 11,966
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 28,348 $ 2,256 $ 5,842
=======================================================================================================================
( ) Denotes use of cash.
II-219B
STATEMENTS OF CASH FLOWS
Mississippi Power Company
=======================================================================================================
For the Years Ended December 31, 1988 1987
- -------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 39,665 $ 38,937
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 34,440 33,971
Deferred income taxes, net (3,053) 10,035
Deferred investment tax credits, net 571 896
Allowance for equity funds used during construction (850) (608)
Non-cash proceeds from settlement of disputed contracts - -
Other, net 3,503 1,965
Changes in certain current assets and liabilities --
Receivables, net 816 12,000
Inventories 283 13,708
Payables (5,241) 7,487
Other (2,294) (9,342)
- -------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 67,840 109,049
- -------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (54,550) (53,288)
Other 8,368 (1,461)
- -------------------------------------------------------------------------------------------------------
Net cash used for investing activities (46,182) (54,749)
- -------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - -
First mortgage bonds - -
Pollution control bonds - -
Preferred securities - -
Other long-term debt - 130
Capital contributions - 16,000
Redemptions:
Preferred stock (1,500) (1,500)
First mortgage bonds - (29,701)
Pollution control bonds (50) (50)
Other long-term debt (5,401) (4,974)
Notes payable, net 6,500 -
Payment of preferred stock dividends (3,584) (3,737)
Payment of common stock dividends (27,600) (24,700)
Miscellaneous - (2,696)
- -------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (31,635) (51,228)
- -------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (9,977) 3,072
Cash and Cash Equivalents at Beginning of Year 21,943 18,871
- -------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 11,966 $ 21,943
=======================================================================================================
( ) Denotes use of cash.
II-219C
BALANCE SHEETS
Mississippi Power Company
==============================================================================================================================
At December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 732,102 $ 722,183 $ 717,055
Transmission 246,773 241,509 220,038
Distribution 374,453 356,305 335,163
General 165,074 163,878 162,071
Construction work in progress 41,083 35,100 41,210
- ------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,559,485 1,518,975 1,475,537
Accumulated provision for depreciation 559,098 526,776 499,308
- ------------------------------------------------------------------------------------------------------------------------------
Total 1,000,387 992,199 976,229
Less property-related accumulated deferred income taxes - - -
- ------------------------------------------------------------------------------------------------------------------------------
Total 1,000,387 992,199 976,229
- ------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 650 3,054 4,160
- ------------------------------------------------------------------------------------------------------------------------------
Total 650 3,054 4,160
- ------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,432 7,058 12,641
Investment securities - - -
Receivables, net 51,369 34,288 39,358
Accrued utility revenues 3,836 12,334 12,382
Fossil fuel stock, at average cost 10,651 12,168 15,666
Materials and supplies, at average cost 19,452 21,083 22,558
Current portion of deferred fuel commitments - - 1,546
Prepayments 10,170 11,971 7,584
Vacation pay deferred 5,030 4,806 4,715
- ------------------------------------------------------------------------------------------------------------------------------
Total 104,940 103,708 116,450
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 2,726 1,548 1,530
Premium on reacquired debt, being amortized 9,508 10,672 8,509
Deferred fuel commitments - - -
Deferred charges related to income taxes 21,906 22,274 23,384
Miscellaneous 26,712 8,872 18,691
- ------------------------------------------------------------------------------------------------------------------------------
Total 60,852 43,366 52,114
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $1,166,829 $1,142,327 $1,148,953
==============================================================================================================================
II-220
BALANCE SHEETS
Mississippi Power Company
==============================================================================================================================
At December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 705,043 $ 597,425 $ 576,848
Transmission 202,503 188,375 173,278
Distribution 313,345 295,799 279,335
General 164,141 157,248 151,044
Construction work in progress 44,838 108,063 41,692
- ------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,429,870 1,346,910 1,222,197
Accumulated provision for depreciation 477,098 462,725 440,777
- ------------------------------------------------------------------------------------------------------------------------------
Total 952,772 884,185 781,420
Less property-related accumulated deferred income taxes - - 142,338
- ------------------------------------------------------------------------------------------------------------------------------
Total 952,772 884,185 639,082
- ------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 3,353 11,289 4,539
- ------------------------------------------------------------------------------------------------------------------------------
Total 3,353 11,289 4,539
- ------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,317 878 7,417
Investment securities - - 3,622
Receivables, net 25,424 28,021 20,219
Accrued utility revenues 14,428 14,897 14,898
Fossil fuel stock, at average cost 16,885 11,185 21,341
Materials and supplies, at average cost 25,301 21,145 22,108
Current portion of deferred fuel commitments 1,068 440 1,861
Prepayments 11,189 8,971 5,869
Vacation pay deferred 4,588 4,797 4,651
- ------------------------------------------------------------------------------------------------------------------------------
Total 100,200 90,334 101,986
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 1,358 1,103 804
Premium on reacquired debt, being amortized 9,571 10,563 10,102
Deferred fuel commitments 9,000 17,520 25,255
Deferred charges related to income taxes 25,036 25,267 -
Miscellaneous 22,421 10,073 9,515
- ------------------------------------------------------------------------------------------------------------------------------
Total 67,386 64,526 45,676
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $1,123,711 $1,050,334 $ 791,283
==============================================================================================================================
II-221A
BALANCE SHEETS
Mississippi Power Company
==============================================================================================================================
At December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 567,588 $ 560,537 $ 547,946
Transmission 162,379 151,949 147,288
Distribution 259,929 247,705 229,238
General 141,564 136,815 133,361
Construction work in progress 33,078 26,816 27,057
- ------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,164,538 1,123,822 1,084,890
Accumulated provision for depreciation 415,135 392,440 366,193
- ------------------------------------------------------------------------------------------------------------------------------
Total 749,403 731,382 718,697
Less property-related accumulated deferred income taxes 138,616 139,970 138,071
- ------------------------------------------------------------------------------------------------------------------------------
Total 610,787 591,412 580,626
- ------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts 4,113 - -
Miscellaneous 3,954 8,631 7,792
- ------------------------------------------------------------------------------------------------------------------------------
Total 8,067 8,631 7,792
- ------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 28,348 2,256 5,842
Investment securities - - -
Receivables, net 27,152 67,734 58,425
Accrued utility revenues 12,420 10,797 13,854
Fossil fuel stock, at average cost 22,373 29,812 24,788
Materials and supplies, at average cost 22,051 25,130 21,232
Current portion of deferred fuel commitments 933 1,430 3,017
Prepayments 6,137 11,392 12,512
Vacation pay deferred 4,406 3,955 3,910
- ------------------------------------------------------------------------------------------------------------------------------
Total 123,820 152,506 143,580
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 981 824 886
Premium on reacquired debt, being amortized 4,676 4,919 5,161
Deferred fuel commitments 31,039 39,020 45,103
Deferred charges related to income taxes - - -
Miscellaneous 11,271 2,714 3,422
- ------------------------------------------------------------------------------------------------------------------------------
Total 47,967 47,477 54,572
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 790,641 $ 800,026 $ 786,570
==============================================================================================================================
II-221B
BALANCE SHEETS
Mississippi Power Company
===========================================================================================================
At December 31, 1988 1987
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 529,742 $ 524,198
Transmission 134,674 130,963
Distribution 221,327 207,810
General 137,333 127,690
Construction work in progress 35,204 27,755
- -----------------------------------------------------------------------------------------------------------
Total utility plant 1,058,280 1,018,416
Accumulated provision for depreciation 348,085 328,761
- -----------------------------------------------------------------------------------------------------------
Total 710,195 689,655
Less property-related accumulated deferred income taxes 134,220 127,912
- -----------------------------------------------------------------------------------------------------------
Total 575,975 561,743
- -----------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - -
Miscellaneous 8,153 4,122
- -----------------------------------------------------------------------------------------------------------
Total 8,153 4,122
- -----------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 11,966 21,943
Investment securities - -
Receivables, net 43,246 42,218
Accrued utility revenues 10,527 12,371
Fossil fuel stock, at average cost 26,587 29,989
Materials and supplies, at average cost 23,120 20,001
Current portion of deferred fuel commitments - -
Prepayments 12,341 830
Vacation pay deferred 3,815 3,956
- -----------------------------------------------------------------------------------------------------------
Total 131,602 131,308
- -----------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 949 1,012
Premium on reacquired debt, being amortized 5,404 5,647
Deferred fuel commitments 50,714 55,889
Deferred charges related to income taxes - -
Miscellaneous 6,522 4,347
- -----------------------------------------------------------------------------------------------------------
Total 63,589 66,895
- -----------------------------------------------------------------------------------------------------------
Total Assets $ 779,319 $ 764,068
===========================================================================================================
II-221C
BALANCE SHEETS
Mississippi Power Company
==============================================================================================================================
At December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691 $ 37,691
Paid-in capital 179,389 179,389 179,362
Premium on preferred stock 327 372 372
Earnings retained in the business 170,417 166,282 157,459
- ------------------------------------------------------------------------------------------------------------------------------
Total common equity 387,824 383,734 374,884
Preferred stock 31,896 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 35,000 - -
Long-term debt 291,665 326,379 288,820
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 746,385 784,527 738,118
- ------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - -
Preferred stock due within one year - - -
Long-term debt due within one year 35,020 10 57,229
Accounts payable 58,089 51,644 50,775
Customer deposits 3,225 3,154 2,716
Taxes accrued 34,960 32,445 31,913
Interest accrued 4,098 4,384 4,701
Vacation pay accrued 5,017 4,793 4,563
Miscellaneous 7,780 9,149 8,890
- ------------------------------------------------------------------------------------------------------------------------------
Total 148,189 105,579 160,787
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 134,645 133,437 129,711
Accumulated deferred investment tax credits 27,121 28,333 29,773
Deferred credits related to income taxes 38,203 40,568 43,266
Miscellaneous 72,286 49,883 47,298
- ------------------------------------------------------------------------------------------------------------------------------
Total 272,255 252,221 250,048
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,166,829 $1,142,327 $1,148,953
==============================================================================================================================
II-222
BALANCE SHEETS
Mississippi Power Company
==============================================================================================================================
At December 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691 $ 37,691
Paid-in capital 179,362 154,362 124,326
Premium on preferred stock 372 372 194
Earnings retained in the business 144,328 129,343 118,429
- ------------------------------------------------------------------------------------------------------------------------------
Total common equity 361,753 321,768 280,640
Preferred stock 74,414 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 306,522 250,391 238,650
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 742,689 646,573 593,704
- ------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 40,000 31,000
Preferred stock due within one year - - -
Long-term debt due within one year 41,199 19,345 8,878
Accounts payable 34,481 60,928 43,550
Customer deposits 2,712 2,786 2,976
Taxes accrued 31,657 27,138 32,035
Interest accrued 4,427 4,237 3,961
Vacation pay accrued 4,588 4,797 4,651
Miscellaneous 10,025 9,323 10,963
- ------------------------------------------------------------------------------------------------------------------------------
Total 129,089 168,554 138,014
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 129,505 124,334 169
Accumulated deferred investment tax credits 31,228 32,710 34,242
Deferred credits related to income taxes 45,832 48,228 -
Miscellaneous 45,368 29,935 25,154
- ------------------------------------------------------------------------------------------------------------------------------
Total 251,933 235,207 59,565
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,123,711 $1,050,334 $791,283
==============================================================================================================================
II-223A
BALANCE SHEETS
Mississippi Power Company
===============================================================================================================================
At December 31, 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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 194 299 299
Earnings retained in the business 111,670 117,543 110,867
- ------------------------------------------------------------------------------------------------------------------------------
Total common equity 273,855 279,833 273,157
Preferred stock 39,414 39,414 39,414
Preferred stock subject to mandatory redemption - 3,750 4,500
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 304,150 270,724 277,693
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 617,419 593,721 594,764
- ------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 4,500 30,103 12,957
Preferred stock due within one year - 368 368
Long-term debt due within one year 14,650 7,039 10,717
Accounts payable 38,213 45,763 47,019
Customer deposits 3,109 3,430 3,906
Taxes accrued 29,609 24,935 23,843
Interest accrued 4,602 4,315 4,280
Vacation pay accrued 4,406 3,955 3,910
Miscellaneous 10,236 6,833 7,746
- ------------------------------------------------------------------------------------------------------------------------------
Total 109,325 126,741 114,746
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,117 18,992 22,085
Accumulated deferred investment tax credits 35,657 37,187 38,752
Deferred credits related to income taxes - - -
Miscellaneous 24,123 23,385 16,223
- ------------------------------------------------------------------------------------------------------------------------------
Total 63,897 79,564 77,060
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $790,641 $800,026 $786,570
==============================================================================================================================
II-223B
BALANCE SHEETS
Mississippi Power Company
===========================================================================================================
At December 31, 1988 1987
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691
Paid-in capital 124,300 124,300
Premium on preferred stock 299 299
Earnings retained in the business 99,183 90,702
- -----------------------------------------------------------------------------------------------------------
Total common equity 261,473 252,992
Preferred stock 39,414 39,414
Preferred stock subject to mandatory redemption 5,250 6,750
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 287,525 294,811
- -----------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 593,662 593,967
- -----------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 6,500 -
Preferred stock due within one year 368 368
Long-term debt due within one year 9,789 5,451
Accounts payable 46,937 45,659
Customer deposits 3,904 3,857
Taxes accrued 21,130 21,351
Interest accrued 4,016 4,474
Vacation pay accrued 3,815 3,956
Miscellaneous 9,347 6,005
- -----------------------------------------------------------------------------------------------------------
Total 105,806 91,121
- -----------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 24,556 27,411
Accumulated deferred investment tax credits 40,435 41,427
Deferred credits related to income taxes - -
Miscellaneous 14,860 10,142
- -----------------------------------------------------------------------------------------------------------
Total 79,851 78,980
- -----------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 779,319 $ 764,068
===========================================================================================================
II-223C
MISSISSIPPI POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997
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
1993 35,000 7.45% 35,000 6/1/23
1995 30,000 6-7/8% 30,000 12/1/25
-------- --------
$175,000 $175,000
======== ========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ----------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1977 $ 1,000 5.80% $ 950 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 $ 73,725
======== ========
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Company Junior Subordinated Notes
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
- ----------------------------------------------------------------------------------------------------
(Thousands)
1997 1,400,000 7.75% $ 35,000
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
- ----------------------------------------------------------------------------------------------------
(Thousands)
1947 8,739 4.60% $ 874
1956 9,476 4.40% 948
1965 16,700 4.72% 1,670
1968 50,000 7.00% 5,000
1993 150,000 6.32% 15,000
1993 84,040 6.65% 8,404
------- ---------
318,955 $ 31,896
======= =========
II-224
MISSISSIPPI POWER COMPANY
SECURITIES RETIRED DURING 1997
Pollution Control Bonds
Principal Interest
Series Amount Rate
- -------------------------------------------------------------------------------
(Thousands)
1977 $ 10 5.80%
Preferred Stock
Principal Dividend
Series Amount Rate
- -------------------------------------------------------------------------------
(Thousands)
1947 $ 1,136 4.60%
1956 3,052 4.40%
1965 3,330 4.72%
1992 35,000 7.25%
-------
$42,518
=======
II-225
SAVANNAH ELECTRIC AND POWER COMPANY
FINANCIAL SECTION
II-226
MANAGEMENT'S REPORT
Savannah Electric and Power Company 1997 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/G. Edison Holland, Jr.
G. Edison Holland, Jr.
President and Chief Executive Officer
/s/K. R. Willis
K. R. Willis
Vice-President
Treasurer, Secretary and Chief Financial Officer
February 11, 1998
II-227
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 Southern Company) as of December 31, 1997 and 1996, and the
related statements of income, retained earnings, and cash flows for each of the
three years in the period ended December 31, 1997. 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-235 through 11-246)
referred to above present fairly, in all material respects, the financial
position of Savannah Electric and Power Company as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 11, 1998
II-228
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Savannah Electric and Power Company 1997 Annual Report
RESULTS OF OPERATIONS
Earnings
Savannah Electric and Power Company's net income after dividends on preferred
stock for 1997 totaled $23.8 million, representing a $0.1 million decrease from
the prior year. This (0.4) percent change in earnings from 1996 is principally
the result of an increase in other operation expense, partially offset by an
increase in other income, net.
In 1996, earnings were $23.9 million, representing a $0.5 million (2.3
percent) increase from the prior year. This was principally the result of
increased retail energy sales primarily attributable to an increase in the
number of customers served.
Revenues
Total revenues for 1997 were $226.3 million, reflecting a (3.3) percent decrease
compared to 1996. The following table summarizes revenue increases and decreases
compared to prior years:
Increase (Decrease)
From Prior Year
--------------------------------------
1997 1996 1995
--------------------------------------
Retail -- (in thousands)
Sales growth $ 7,664 $ 3,679 $ 1,068
Weather (6,186) (2,813) 6,232
Fuel cost recovery
and other (10,002) 12,365 6,177
-------------------------------------------------------------------
Total retail (8,524) 13,231 13,477
-------------------------------------------------------------------
Sales for resale--
Non-affiliates 1,469 147 (2,935)
Affiliates (1,078) (4,070) 754
-------------------------------------------------------------------
Total sales for resale 391 (3,923) (2,181)
-------------------------------------------------------------------
Other operating revenues 336 (963) 2,648
-------------------------------------------------------------------
Total operating revenues $(7,797) $ 8,345 $13,944
===================================================================
Percent change (3.3)% 3.7% 6.6%
-------------------------------------------------------------------
Retail revenues declined 3.7 percent in 1997, compared to an increase of
6.2 percent in 1996. The decline in 1997 retail revenues is attributable to the
mild summer weather and a decrease in fuel cost recovery revenues, somewhat
offset by customer growth and higher demand from a large industrial customer.
Under the Company's fuel cost recovery provisions, fuel revenues--including
purchased energy--generally equal fuel expense and have no effect on earnings.
The increase in 1996 retail revenues was attributable to an increase in the
number of customers served and an increase in fuel cost recovery revenues.
Industrial energy sales were lower primarily due to a decrease in the demand of
a major customer.
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 revenues remained unchanged
in 1997. The capacity and energy components were as follows:
1997 1996 1995
----------------------------------------
(in thousands)
Capacity $ 2 $ 2 $ 3
Energy 746 1,329 1,250
- ---------------------------------------------------------
Total $748 $1,331 $1,253
=========================================================
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.
Changes in revenues are influenced heavily by the amount of energy sold
each year. Kilowatt-hour sales for 1997 and the percent change by year were as
follows:
KWH Percent Change
------------ ---------------------------
1997 1997 1996 1995
------------ ---------------------------
(millions)
Residential 1,428 (1.9)% 3.9% 8.0%
Commercial 1,156 1.3 3.8 5.1
Industrial 881 5.1 (5.5) 11.0
Other 125 (1.4) 0.1 5.4
------------
Total retail 3,590 0.8 1.4 7.7
Sales for resale
Non-affiliates 94 2.9 4.4 (56.5)
Affiliates 55 30.4 (34.4) (31.5)
------------
Total 3,739 1.2 % 0.8% 3.1%
===================================================================
II-229
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1997 Annual Report
Expenses
Total operating expenses for 1997 were $189.1 million, reflecting a $6.1 million
decrease from 1996. Major components of this decrease include a $16.5 million
reduction in purchased power from affiliates, partially offset by increases of
$6.4 million in fuel and $3.7 million in other operation expenses. The decline
in purchased power from affiliates was due primarily to an increase in internal
generation and to an adjustment in affiliated billings. The increase in fuel
expense was primarily attributable to higher generation and to fuel mix. The
increase in other operation expense primarily resulted from a one-time charge
for work force reductions of $1.9 million, and expenses associated with the
implementation of a new computer software system.
In 1996, total operating expenses were $195.2 million, reflecting an $7.7
million increase over 1995. This increase includes $5.3 million in purchased
power from affiliates and $3.8 million in fuel, partially offset by a $1.2
million reduction in other operation expenses. The increase in purchased power
from affiliates was due to an increase in the unit cost of purchased power. The
increase in fuel expense was primarily attributable to higher generation and an
increase in the unit cost of gas. The reduction in other operation expense
primarily resulted from the demand-side management program being discontinued in
December 1995.
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:
1997 1996 1995
--------------------------
Total energy supply
(millions of kilowatt-hours) 3,964 3,917 3,908
Sources of energy supply
(percent) --
Coal 34 28 24
Oil - - -
Gas 5 3 6
Purchased Power 61 69 70
Average cost of fuel per net
Kilowatt-hour generated
(cents) --
Coal 1.91 1.76 1.77
Oil 4.73 5.79 5.14
Gas 4.62 8.89 3.76
Average cost of purchased
power per net kilowatt-
hour (cents) 1.86 2.25 2.02
Total average cost of
energy supply (cents) 2.02 2.30 2.07
---------------------------------------------------------------
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.
II-230
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1997 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.
Savannah Electric currently operates as a vertically integrated utility
providing electricity to customers within the traditional service area of
southeastern Georgia. Prices for electricity provided by the Company to retail
customers are set by the Georgia Public Service Commission(GPSC).
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include 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.
The electric utility industry in the United States is currently undergoing
a period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). 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
enhances the incentive for IPPs to build cogeneration plants for industrial and
commercial customers and sell 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.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Georgia, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on the financial
condition of the Company. The Company is attempting to minimize or reduce its
cost exposure.
Continuing to be a low-cost producer could provide significant
opportunities to increase market share and profitability in markets that evolve
with changing regulation. Conversely, 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.
The Company is heavily dependent upon complex computer systems for all
phases of its operations. The year 2000 issue--common to most
corporations--concerns the inability of certain software and databases to
properly recognize date sensitive information related to the year 2000 and
thereafter. This problem could result in a material disruption to the Company's
operation, if not corrected. The Company has assessed and developed a detailed
strategy to prevent or at least minimize problems related to the year 2000
issue. In 1997, resources were committed and implementation began to modify the
affected information systems. Total costs related to the project for Southern
Company are estimated to be approximately $85 million, of which $8 million was
spent in 1997. The Company's total costs related to the project are estimated to
be approximately $1 million, of which $0.2 million was spent in 1997. Most all
remaining costs will be expensed in 1998. Implementation is currently on
schedule. The degree of success of this project cannot be determined at this
time. However, management believes that the final outcome will not have a
material adverse affect on the operations of the Company.
Compliance costs related to current and future environmental laws and
regulations 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."
II-231
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1997 Annual Report
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.
The Company 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 that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1997, exposure from these activities was
not material to the Company's financial statements.
New Accounting Standards
The FASB has issued Statement No. 130, Reporting Comprehensive Income, which
will be effective in 1998. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
(comprehensive income). Comprehensive income is the total of net income and all
other non-owner changes in equity. The Company will adopt this statement in
1998.
The FASB has issued Statement No. 131, Disclosure about Segments of an
Enterprise and Related Information. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Generally, financial information is required to
be reported on the basis that it is used by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. This
statement also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company adopted the new
rules in 1997, which do not have a significant impact on the Company's financial
reporting. However, this conclusion may change as industry restructuring and
competitive factors influence the Company's operations.
FINANCIAL CONDITION
Overview
The principal change in the Company's financial condition in 1997 was the
addition of $19 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 and from financing activities. See Statements of Cash Flows for additional
information.
Capital Structure
As of December 31, 1997, the Company's capital structure consisted of 49.7
percent common equity, 9.9 percent preferred stock and 40.4 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 April 1997, the Company issued $14 million of variable interest rate
pollution control obligations maturing in 2037. Maturities and retirements of
long-term debt were $14 million in 1997, $29 million in 1996 and $29 million in
1995.
In March 1996, the Company entered into a fifteen year variable rate
capital lease agreement with the Savannah Economic Development Authority for a
coal ship docking and unloading facility at Plant Kraft.
II-232
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1997 Annual Report
The composite interest rates and dividend rate for the years 1995 through
1997 as of year-end were as follows:
1997 1996 1995
-------------------------------
Composite interest rates
on long-term debt 6.9% 7.0% 7.5%
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 AA-
Preferred Stock "a2" A
- -----------------------------------------------------------------
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$66 million ($22 million in 1998, $23 million in 1999, and $21 million in 2000).
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. The Company does not have any
traditional baseload generating plants under construction, and current energy
demand forecasts do not require any additional traditional baseload facilities
until well into the future. 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 $23
million will be needed by the end of 2000 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--significantly affected
the Company and other subsidiaries of 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 Southern Company. As a result of 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.
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. Construction expenditures for Phase I compliance totaled
approximately $2 million for Savannah Electric.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired plants as
necessary to meet Phase II limits. Current compliance strategy for Phase II and
ozone non-attainment could require total estimated construction expenditures for
Southern Company of approximately $70 million, of which $55 million remains to
be spent. Phase II compliance is not expected to have a material impact on
Savannah Electric.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the
national ambient air quality standards for ozone and particulate matter. This
revision makes the standards significantly more stringent. Also, in October
1997, the EPA issued a proposed regional ozone rule that could require
substantial further reductions in NOx emissions from fossil-fueled generating
facilities. Implementation of the standards and the proposed rule could result
in significant additional compliance costs and capital expenditures that cannot
be determined at this time.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: emission control strategies for
ozone non-attainment areas; additional controls for hazardous air pollutant
II-233
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1997 Annual Report
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
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 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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect 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, 1997, the Company had $6.1 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,
2000, 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, $20 million remained unused at December 31, 1997.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulation, will be derived
from sources similar to those used in the past. These sources were primarily
from the issuances of first mortgage bonds, other long-term debt and preferred
stock, in addition to pollution control revenue bonds issued for the Company's
benefit by public authorities, to meet long-term external financing
requirements. The Company plans to issue unsecured debt in 1998. 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 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.
Cautionary Statement Regarding Forward-Looking Information
Savannah Electric and Power Company's 1997 Annual Report contains
forward-looking statements in addition to historical information. The Company
cautions that there are various important factors that could cause actual
results to differ materially from those indicated in the forward-looking
statements; accordingly, there can be no assurance that such indicated results
will be realized. These factors include legislative and regulatory initiatives
regarding deregulation and restructuring of the electric utility industry; the
extent and timing of the entry of additional competition in the Company's
markets; potential business strategies--including acquisitions or dispositions
of assets or internal restructuring--that may be pursued by the company; state
and federal rate regulation; changes in or application of environmental and
other laws and regulations to which the Company is subject; political, legal and
economic conditions and developments; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; and other factors discussed in the
reports--including Form 10-K--filed from time to time by the Company with the
Securities and Exchange Commission.
II-234
STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
Savannah Electric and Power Company 1997 Annual Report
================================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Note 1):
Revenues $ 224,225 $ 230,944 $ 218,529
Revenues from affiliates 2,052 3,130 7,200
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 226,277 234,074 225,729
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 35,563 29,139 25,386
Purchased power from non-affiliates 2,347 2,350 2,139
Purchased power from affiliates 42,107 58,591 53,252
Other 47,735 44,007 45,214
Maintenance 13,236 14,140 13,668
Depreciation and amortization (Note 1) 20,152 19,113 18,949
Taxes other than income taxes 11,494 11,675 11,465
Federal and state income taxes (Notes 1 and 6) 16,419 16,175 17,378
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 189,053 195,190 187,451
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 37,224 38,884 38,278
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) 239 317 163
Interest income 279 201 164
Other, net (781) (1,756) (618)
Income taxes applicable to other income (Notes 1 and 6) 1,233 1,034 651
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 38,194 38,680 38,638
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 10,907 11,563 12,380
Allowance for debt funds used during construction (Note 1) (164) (333) (450)
Interest on notes payable 172 229 135
Amortization of debt discount, premium, and expense, net 739 579 448
Other interest charges 369 378 406
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,023 12,416 12,919
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 26,171 26,264 25,719
Dividends on Preferred Stock 2,324 2,324 2,324
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 23,847 $ 23,940 $ 23,395
================================================================================================================================
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 109,373 $ 105,033 $ 99,216
Net income after dividends on preferred stock 23,847 23,940 23,395
Cash dividends on common stock (20,500) (19,600) (17,600)
Preferred stock transactions, net - - 22
- --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 10) $ 112,720 $ 109,373 $ 105,033
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-235
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
Savannah Electric and Power Company 1997 Annual Report
=======================================================================================================================
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 26,171 $ 26,264 $ 25,719
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 21,083 20,246 20,535
Deferred income taxes and investment tax credits 3,841 7,482 4,359
Allowance for equity funds used during construction (239) (317) (163)
Other, net (2,577) (641) 35
Changes in certain current assets and liabilities --
Receivables, net (3,239) (641) (6,241)
Inventories 1,720 410 2,318
Payables (1,608) 4,242 2,213
Taxes accrued 2,310 (569) 451
Other 2,357 (4,038) (2,299)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 49,819 52,438 46,927
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (18,846) (28,950) (26,503)
Other (1,418) (3,173) 3,198
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,264) (32,123) (23,305)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
First mortgage bonds - 20,000 15,000
Pollution control obligations 13,870 - -
Other long-term debt - 17,000 33,500
Retirements:
First mortgage bonds - (29,400) (29,250)
Pollution control bonds (13,870) - -
Other long-term debt (433) (397) (23,003)
Notes payable, net (5,000) 1,000 1,500
Payment of preferred stock dividends (2,324) (2,324) (2,324)
Payment of common stock dividends (20,500) (19,600) (17,600)
Miscellaneous (368) (2,257) (2,131)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (28,625) (15,978) (24,308)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 930 4,337 (686)
Cash and Cash Equivalents at Beginning of Year 5,214 877 1,563
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 6,144 $ 5,214 $ 877
=======================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for-
Interest (net of amount capitalized) $11,619 $12,960 $12,775
Income taxes 11,150 10,926 11,316
- -----------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
II-236
BALANCE SHEETS
At December 31, 1997 and 1996
Savannah Electric and Power Company 1997 Annual Report
================================================================================================================================
Assets 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Notes 1, 4, 5, and 8) $ 760,694 $ 739,461
Less accumulated provision for depreciation 321,509 304,760
- --------------------------------------------------------------------------------------------------------------------------------
439,185 434,701
Construction work in progress 7,709 13,463
- --------------------------------------------------------------------------------------------------------------------------------
Total 446,894 448,164
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,783 1,785
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 6,144 5,214
Special deposits 94 1,395
Receivables-
Customer accounts receivable 21,148 18,827
Other accounts and notes receivable 720 769
Affiliated companies 1,128 844
Accumulated provision for uncollectible accounts (354) (632)
Fuel cost under recovery 7,694 7,289
Fossil fuel stock, at average cost 5,205 5,892
Materials and supplies, at average cost (Note 1) 6,980 8,013
Prepayments 5,922 4,789
- --------------------------------------------------------------------------------------------------------------------------------
Total 54,681 52,400
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 6) 17,267 19,167
Debt issue expense, being amortized 2,255 2,605
Premium on reacquired debt, being amortized 7,121 7,142
Prepaid pension costs (Note 2) 3,424 1,347
Cash surrender value of life insurance for deferred compensation plans 12,130 10,288
Miscellaneous 1,797 2,002
- --------------------------------------------------------------------------------------------------------------------------------
Total 43,994 42,551
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 547,352 $ 544,900
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-237
BALANCE SHEETS
At December 31, 1997 and 1996
Savannah Electric and Power Company 1997 Annual Report
================================================================================================================================
CAPITALIZATION AND LIABILITIES 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 175,631 $ 172,284
Preferred stock 35,000 35,000
Long-term debt 142,846 164,406
- --------------------------------------------------------------------------------------------------------------------------------
Total 353,477 371,690
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year (Note 9) 21,764 637
Notes payable - 5,000
Accounts payable-
Affiliated companies 6,025 6,374
Other 7,862 10,201
Customer deposits 5,541 5,232
Taxes accrued-
Federal and state income 534 -
Other 2,791 1,015
Interest accrued 4,963 5,275
Vacation pay accrued 1,893 2,038
Miscellaneous 9,031 7,470
- --------------------------------------------------------------------------------------------------------------------------------
Total 60,404 43,242
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 6) 80,697 76,654
Accumulated deferred investment tax credits (Note 6) 12,607 13,271
Deferred credits related to income taxes (Note 6) 21,469 22,792
Deferred compensation plans 9,272 8,602
Postretirement benefits (Note 2) 6,011 5,472
Miscellaneous 3,415 3,177
- --------------------------------------------------------------------------------------------------------------------------------
Total 133,471 129,968
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 4, 5, and 8)
Total Capitalization and Liabilities $ 547,352 $ 544,900
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-238
STATEMENTS OF CAPITALIZATION
At December 31, 1997 and 1996
Savannah Electric and Power Company 1997 Annual Report
======================================================================================================================
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity (Note 10):
Common stock, par value $5 per share --
Authorized -- 16,000,000 shares
Outstanding -- 10,844,635 shares in
1997 and 1996 $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Retained earnings 112,720 109,373
- ----------------------------------------------------------------------------------------------------------------------
Total common stock equity 175,631 172,284 49.7% 46.4%
- ----------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock (Note 7):
$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 9.9 9.4
- ----------------------------------------------------------------------------------------------------------------------
Long-Term Debt (Note 8):
First mortgage bonds --
Maturity Interest Rates
July 1, 2003 6 3/8% 20,000 20,000
May 1, 2006 6.90% 20,000 20,000
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 15,000
- ----------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 110,000 110,000
Pollution control obligations (Note 8) 17,955 17,955
Other long-term debt (Note 8) 36,655 37,088
- ----------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $11,380,000) 164,610 165,043
Less amount due within one year (Note 9) 21,764 637
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 142,846 164,406 40.4 44.2
- ----------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 353,477 $ 371,690 100.0% 100.0%
======================================================================================================================
The accompanying notes are an integral part of these statements
II-239
PAGE>
NOTES TO FINANCIAL STATEMENTS
Savannah Electric and Power Company 1997 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Savannah Electric and Power Company (the Company), is a wholly owned subsidiary
of Southern Company, which is the parent company of five operating companies, a
system service company, Southern Communications Services (Southern
Communications), Southern Energy, Inc. (Southern Energy), Southern Nuclear
Operating Company (Southern Nuclear), Southern Company Energy Solutions, 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) and/or the Securities and Exchange Commission. The system
service company provides, at cost, specialized services to 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. Worldwide, Southern Energy develops
and manages electricity and other energy related projects, including domestic
energy trading and marketing. Southern Nuclear provides services to Southern
Company's nuclear power plants. Southern Company Energy Solutions develops new
business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both 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 the 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 expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
1997 1996
---------------------------
(in thousands)
Deferred income taxes $ 17,267 $ 19,167
Premium on reacquired debt 7,121 7,142
Deferred income tax credits (21,469) (22,792)
Storm damage reserves (1,500) (900)
- ---------------------------------------------------------------
Total $ 1,419 $ 2,617
===============================================================
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 net regulatory assets and liabilities that are not
specifically recoverable through regulated rates. In addition, the Company would
be required to determine if any impairment to other assets exists, 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,
the energy component of purchased power costs, and certain other 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 1997, uncollectible
accounts continued to average less than 1 percent of revenues.
II-240
NOTES (continued)
Savannah Electric and Power Company 1997 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 1997, 2.8 percent in 1996 and 2.9 percent in 1995. 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 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 9.24 percent in 1997, 8.69 percent in 1996 and 7.42 percent in 1995.
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
The Company's financial instruments for which the carrying amounts did not equal
fair value at December 31 were as follows:
Long-Term Debt
--------------------------
Carrying Fair
Year Amount Value
--------------------------
(in millions)
1997 $158 $161
1996 155 161
- --------------------------------------------------------------
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 costs 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.
Work Force Reduction Program
In 1997, the Company incurred a $1.9 million one-time charge to other operation
expense for costs related to the implementation of a work force reduction
program.
2. RETIREMENT BENEFITS
Pension Plan
The Company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. Effective January 1, 1998, Savannah
Electric and Power Company's pension plan was merged with the Southern Company
plan. 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
II-241
NOTES (continued)
Savannah Electric and Power Company 1997 Annual Report
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. The Company funds trusts 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 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." The cost of postretirement
benefits is reflected in rates on a current basis.
Funded Status and Cost of Benefits
The funded status of the plans and reconciliation to amounts reflected in the
Balance Sheets at December 31 are as follows:
Pension
---------------------------
1997 1996
---------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $40,240 $39,270
Non-vested benefits 3,350 2,939
- ----------------------------------------------------------------
Accumulated benefit obligation 43,590 42,209
Additional amounts related to
projected salary increases 8,130 7,705
- ----------------------------------------------------------------
Projected benefit obligation 51,720 49,914
Less:
Fair value of plan assets 51,630 42,430
Unrecognized net loss 1,275 7,147
Unrecognized prior service cost 1,884 1,240
Unrecognized net transition
obligation 355 444
- ----------------------------------------------------------------
Prepaid asset
recognized in the Balance Sheets $ 3,424 $ 1,347
================================================================
Postretirement Benefits
-------------------------
1997 1996
--------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $12,509 $12,442
Employees eligible to retire 1,923 1,614
Other employees 6,467 6,464
- -------------------------------------------------------------
Accumulated benefit obligation 20,899 20,520
Less:
Fair value of plan assets 3,859 2,473
Unrecognized net loss 3,737 4,835
Unrecognized transition
Obligation 7,407 7,900
- -------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $ 5,896 $ 5,312
=============================================================
The weighted average rates assumed in the actuarial calculations for the
pension plan were:
1997 1996 1995
--------------------------
Discount 7.50% 7.25% 7.25%
Annual salary increase 5.00 4.75 4.75
Long-term return on plan assets 8.50 8.75 8.75
---------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 8.8
percent for 1997, decreasing gradually to 5.5 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, 1997, by $1.4 million and the aggregate of the
service and interest cost components of the net postretirement cost by $0.1
million.
Components of the plans' net costs are shown below:
Pension
-----------------------------
1997 1996 1995
-----------------------------
(in thousands)
Benefits earned during the year $1,393 $1,352 $1,188
Interest cost on projected
benefit obligation 3,556 3,389 3,395
Actual (return) loss
on plan assets (7,762) (4,852) (5,791)
Net amortization and deferral 4,735 2,439 4,125
- ------------------------------------------------------------------
Net pension cost $1,922 $2,328 $2,917
==================================================================
II-242
NOTES (continued)
Savannah Electric and Power Company 1997 Annual Report
Of the above net pension costs, $1.7 million in 1997, $2.0 million in 1996
and $2.4 million in 1995 were recorded in operating expenses, and the remainder
was recorded in construction and other accounts.
Postretirement Benefits
-----------------------------
1997 1996 1995
-----------------------------
(in thousands)
Benefits earned during the year $ 319 $ 360 $ 504
Interest cost on accumulated
benefit obligation 1,499 1,422 1,638
Amortization of transition
Obligation 494 494 723
Actual (return) loss
on plan assets (346) (145) (34)
Net amortization and deferral 260 187 93
- ------------------------------------------------------------------
Net postretirement costs $2,226 $2,318 $2,924
==================================================================
Of the above net postretirement costs, $1.9 million in 1997, $2.0 million
in 1996 and $2.4 million in 1995 were recorded in operating expenses. The
remainder for each year was charged to 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 were $0.4 million for 1997, 1996 and 1995.
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.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, currently estimated
to total $22 million in 1998, $23 million in 1999 and $21 million in 2000. 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 Company does
not have any traditional 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 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 end of 1997, unused credit arrangements with five banks totaled $20.5
million and expire at various times during 1998.
The Company's revolving credit arrangements of $20 million, of which $20
million remained unused as of December 31, 1997, expire December 31, 2000. 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. A second
lien for $10 million of bank debt is secured by a portion of the Plant Kraft
II-243
NOTES (continued)
Savannah Electric and Power Company 1997 Annual Report
property and a second lien for a $14 million bank note is secured by a portion
of the Plant McIntosh property.
Operating Leases
The Company has rental agreements with various terms and expiration dates.
Rental expenses totaled $1.2 million for 1997, $1.6 million for 1996, and $1.3
million for 1995. 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 one of
the Company's generating plants.
At December 31, 1997, estimated future minimum lease payments for
non-cancelable operating leases were as follows:
Amounts
--------------------
(in thousands)
1998 $1,077
1999 483
2000 483
2001 483
2002 and thereafter 7,935
- -------------------------------------------------------------
6. INCOME TAXES
At December 31, 1997, tax-related regulatory assets and liabilities were $17
million and $21 million, respectively. 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 income tax provisions are as follows:
1997 1996 1995
--------------------------------
(in thousands)
Total provision for income taxes
Federal --
Currently payable $9,743 $ 7,084 $10,427
Deferred -- current year 4,522 8,216 5,290
-- reversal of
prior years (1,381) (1,989) (1,661)
- -----------------------------------------------------------------
12,884 13,311 14,056
- -----------------------------------------------------------------
State --
Currently payable 1,603 575 1,941
Deferred -- current year 569 1,216 695
-- reversal of
prior years 130 39 35
- -----------------------------------------------------------------
2,302 1,830 2,671
- -----------------------------------------------------------------
Total 15,186 15,141 16,727
Less income taxes credited
to other income (1,233) (1,034) (651)
- -----------------------------------------------------------------
Total income taxes
charged to operations $16,419 $16,175 $17,378
=================================================================
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:
1997 1996
--------------------
Deferred tax liabilities: (in thousands)
Accelerated depreciation $72,663 $67,104
Property basis differences 8,034 9,550
Other 5,850 5,703
- ----------------------------------------------------------------
Total 86,547 82,357
- ----------------------------------------------------------------
Deferred tax assets:
Pension and other benefits 5,338 5,183
Other 2,957 2,186
- ----------------------------------------------------------------
Total 8,295 7,369
- ----------------------------------------------------------------
Net deferred tax liabilities 78,252 74,988
Portions included in current assets, net 2,445 1,666
- ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $80,697 $76,654
================================================================
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 1997, 1996 and 1995. At December 31, 1997, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
II-244
NOTES (continued)
Savannah Electric and Power Company 1997 Annual Report
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1997 1996 1995
-----------------------------
Federal statutory tax rate 35% 35% 35%
State income tax, net of
federal income tax benefit 4 3 4
Other (2) (1) -
--------------------------------------------------------------
Effective income tax rate 37% 37% 39%
==============================================================
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.
7. CUMULATIVE PREFERRED STOCK
The Company has outstanding 1,400,000 shares of 6.64% Series Preferred Stock
which has redemption provisions of $26.66 per share plus accrued dividends if
redeemed 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.
8. 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 April 1997, the Company issued $14 million in variable rate pollution
control obligations (bank note) maturing in 2037. The Company redeemed all of
its remaining outstanding 6 3/4% Pollution Control Bonds due 2022.
The sinking fund requirements of first mortgage bonds were satisfied by
certifying property additions in 1997 and by cash redemption in 1996. The 1998
requirement will be satisfied by cash redemption. Sinking fund requirements
and/or maturities through 2002 applicable to long-term debt are as follows:
$21.8 million in 1998; $0.6 million in 1999; $0.6 million in 2000; $10.5 million
in 2001; and $0.4 million in 2002.
Details of pollution control obligations and other long-term debt at
December 31 are as follows:
1997 1996
------------------------
(in thousands)
Collateralized obligations incurred
in connection with the sale by public
authorities of tax-exempt pollution
control revenue bonds --
Variable rate (4.20% at 1/1/98)
due 2016 $ 4,085 $ 4,085
6 3/4% due 2022 - 13,870
Variable rate bank note
(5.05% at 1/1/98) due 2037 13,870 -
Capital lease obligations --
Coal unloading facility
Variable rate (6.25% at 1/1/98) 5,867 6,667
Transportation fleet 788 421
Notes Payable --
6.88% due 2001 10,000 10,000
Variable rate (6.06% at 1/1/98)
due 1998 15,000 15,000
Variable rate (6.06% at 1/1/98)
due 1998 5,000 5,000
- ----------------------------------------------------------------
Total $54,610 $55,043
================================================================
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.
In March 1996, the Company entered into a fifteen year variable rate
capital lease agreement with the Savannah Economic Development Authority for a
coal ship docking and unloading facility at Plant Kraft.
II-245
NOTES (continued)
Savannah Electric and Power Company 1997 Annual Report
9. 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:
1997 1996
-------------------------
(in thousands)
Bond sinking fund requirement $ 1,100 $1,100
Less:
Portion to be satisfied by
certifying property additions - 1,100
- --------------------------------------------------------------------
Cash sinking fund requirement 1,100 -
Other long-term debt maturities (Note 8) 20,664 637
- --------------------------------------------------------------------
Total $21,764 $ 637
====================================================================
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.
10. 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, 1997,
approximately $68 million of retained earnings was restricted against the
payment of cash dividends on common stock under the terms of the Indenture.
11. QUARTERLY FINANCIAL INFORMATIO
(Unaudited)
Summarized quarterly financial data for 1997 and 1996 are as follows (in
thousands):
Net Income After
Operating Operating Dividends on
Quarter Ended Revenues Income Preferred Stock
- -----------------------------------------------------------------
March 1997 $42,945 $ 6,117 $ 2,545
June 1997 52,516 8,626 5,136
September 1997 79,900 17,531 14,276
December 1997 50,916 4,950 1,890
March 1996 $50,575 $ 6,562 $ 2,740
June 1996 61,906 9,786 5,859
September 1996 73,359 16,542 12,815
December 1996 48,234 5,994 2,526
- -----------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and a
seasonal rate structure, among other factors.
II-246
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $226,277 $234,074 $225,729
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $23,847 $23,940 $23,395
Cash Dividends on Common Stock (in thousands) $20,500 $19,600 $17,600
Return on Average Common Equity (percent) 13.71 14.08 14.20
Total Assets (in thousands) $547,352 $544,900 $524,662
Gross Property Additions (in thousands) $18,846 $28,950 $26,503
- ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $175,631 $172,284 $167,812
Preferred stock 35,000 35,000 35,000
Preferred and preference stock subject
to mandatory redemption - - -
Long-term debt 142,846 164,406 153,679
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $353,477 $371,690 $356,491
==============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 49.7 46.4 47.1
Preferred and preference stock 9.9 9.4 9.8
Long-term debt 40.4 44.2 43.1
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 20,000 15,000
Retired - 29,400 29,250
Preferred and Preference Stock (in thousands):
Issued - - -
Retired - - -
- ------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's AA- A+ A+
Preferred Stock -
Moody's ""a2" ""a2" ""a2"
Standard and Poor's A A A
- ------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 109,092 106,657 104,624
Commercial 14,233 13,877 13,339
Industrial 64 65 65
Other 1,129 1,097 1,048
- ------------------------------------------------------------------------------------------------------------------------------
Total 124,518 121,696 119,076
==============================================================================================================================
Employees (year-end) 535 571 584
Note:
NR = Not Rated
II-247
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1997 Annual Report
==================================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $211,785 $218,442 $197,761
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $22,110 $21,459 $20,512
Cash Dividends on Common Stock (in thousands) $16,300 $21,000 $22,000
Return on Average Common Equity (percent) 14.00 13.73 12.89
Total Assets (in thousands) $518,305 $527,187 $352,175
Gross Property Additions (in thousands) $30,078 $72,858 $30,132
- ------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $161,581 $154,269 $158,376
Preferred stock 35,000 35,000 20,000
Preferred and preference stock subject
to mandatory redemption - - -
Long-term debt 155,922 151,338 110,767
- ------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $352,503 $340,607 $289,143
==================================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.8 45.3 54.8
Preferred and preference stock 9.9 10.3 6.9
Long-term debt 44.3 44.4 38.3
- ------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 45,000 30,000
Retired 5,065 - 38,750
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 103,199 101,032 99,164
Commercial 13,015 12,702 12,416
Industrial 65 69 73
Other 1,007 957 940
- ------------------------------------------------------------------------------------------------------------------
Total 117,286 114,760 112,593
==================================================================================================================
Employees (year-end) 616 665 688
Note:
NR = Not Rated
II-248A
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1997 Annual Report
=======================================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $189,646 $205,635 $201,799
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $24,030 $26,254 $25,535
Cash Dividends on Common Stock (in thousands) $22,000 $22,000 $20,000
Return on Average Common Equity (percent) 15.13 16.85 16.88
Total Assets (in thousands) $352,505 $340,050 $349,887
Gross Property Additions (in thousands) $19,478 $20,086 $18,831
- -----------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $159,841 $157,811 $153,737
Preferred stock 20,000 20,000 22,300
Preferred and preference stock subject
to mandatory redemption - - 2,884
Long-term debt 119,280 112,377 117,522
- -----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $299,121 $290,188 $296,443
=======================================================================================================================
Capitalization Ratios (percent):
Common stock equity 53.4 54.4 51.9
Preferred and preference stock 6.7 6.9 8.5
Long-term debt 39.9 38.7 39.6
- -----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=======================================================================================================================
First Mortgage Bonds (in thousands):
Issued 30,000 - 30,000
Retired 22,500 9,135 18,275
Preferred and Preference Stock (in thousands):
Issued - - -
Retired - 5,374 6,591
- -----------------------------------------------------------------------------------------------------------------------
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 97,446 96,452 94,766
Commercial 12,153 12,045 12,298
Industrial 73 76 69
Other 897 867 856
- -----------------------------------------------------------------------------------------------------------------------
Total 110,569 109,440 107,989
=======================================================================================================================
Employees (year-end) 672 648 643
Note:
NR = Not Rated
II-248B
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1997 Annual Report
====================================================================================================
1988 1987
- ----------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $182,440 $174,707
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $24,272 $22,086
Cash Dividends on Common Stock (in thousands) $11,700 $10,741
Return on Average Common Equity (percent) 17.03 17.03
Total Assets (in thousands) $347,051 $340,109
Gross Property Additions (in thousands) $23,254 $32,276
- ----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $148,883 $136,207
Preferred stock 22,300 2,300
Preferred and preference stock subject
to mandatory redemption 3,075 9,665
Long-term debt 98,285 129,329
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $272,543 $277,501
====================================================================================================
Capitalization Ratios (percent):
Common stock equity 54.6 49.1
Preferred and preference stock 9.3 4.3
Long-term debt 36.1 46.6
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
====================================================================================================
First Mortgage Bonds (in thousands):
Issued - -
Retired 12,231 10,239
Preferred and Preference Stock (in thousands):
Issued 20,000 -
Retired 553 588
- ----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A3
Standard and Poor's A- A-
Preferred Stock -
Moody's ""a2" NR
Standard and Poor's BBB+ BBB+
- ----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 93,486 92,094
Commercial 12,135 11,812
Industrial 69 67
Other 828 762
- ----------------------------------------------------------------------------------------------------
Total 106,518 104,735
====================================================================================================
Employees (year-end) 655 655
Note:
NR = Not Rated
II-248C
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1997 Annual Report
==============================================================================================================================
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $96,587 $101,607 $95,208
Commercial 78,949 80,494 75,117
Industrial 35,301 37,077 36,040
Other 8,621 8,804 8,386
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 219,458 227,982 214,751
Sales for resale - non-affiliates 3,467 1,998 1,851
Sales for resale - affiliates 2,052 3,130 7,200
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 224,977 233,110 223,802
Other revenues 1,300 964 1,927
- ------------------------------------------------------------------------------------------------------------------------------
Total $226,277 $234,074 $225,729
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,428,337 1,456,651 1,402,148
Commercial 1,156,078 1,141,218 1,099,570
Industrial 881,261 838,753 887,141
Other 124,490 126,215 126,057
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 3,590,166 3,562,837 3,514,916
Sales for resale - non-affiliates 94,280 91,610 87,747
Sales for resale - affiliates 54,509 41,808 63,731
- ------------------------------------------------------------------------------------------------------------------------------
Total 3,738,955 3,696,255 3,666,394
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.76 6.98 6.79
Commercial 6.83 7.05 6.83
Industrial 4.01 4.42 4.06
Total retail 6.11 6.40 6.11
Sale for resale 3.71 3.84 5.98
Total sales 6.02 6.31 6.10
Residential Average Annual Kilowatt-Hour Use Per Customer 13,231 13,771 13,478
Residential Average Annual Revenue Per Customer $894.73 $960.58 $915.15
Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 788 788
Maximum Peak-Hour Demand (megawatts):
Winter 625 666 630
Summer 802 811 811
Annual Load Factor (percent) 54.3 53.1 52.9
Plant Availability - Fossil-Steam (percent) 93.7 77.6 83.3
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 34.4 27.7 23.9
Oil and gas 5.2 3.1 5.9
Purchased power -
From non-affiliates 1.4 2.1 2.3
From affiliates 59.0 67.1 67.9
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,495 11,888 12,146
Cost of fuel per million BTU (cents) 197.19 203.36 179.25
Average cost of fuel per net kilowatt-hour generated (cents) 2.27 2.42 2.18
==============================================================================================================================
II-249
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1997 Annual Report
==============================================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $89,195 $93,883 $82,670
Commercial 71,227 71,320 64,756
Industrial 32,906 36,180 33,171
Other 7,946 7,810 7,095
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 201,274 209,193 187,692
Sales for resale - non-affiliates 4,786 6,021 7,821
Sales for resale - affiliates 6,446 2,433 1,505
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 212,506 217,647 197,018
Other revenues (721) 795 743
- ------------------------------------------------------------------------------------------------------------------------------
Total $211,785 $218,442 $197,761
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,298,122 1,329,362 1,216,993
Commercial 1,045,831 1,015,935 953,840
Industrial 799,543 854,324 861,121
Other 119,593 115,969 110,270
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 3,263,089 3,315,590 3,142,224
Sales for resale - non-affiliates 201,716 247,203 367,066
Sales for resale - affiliates 93,001 75,384 37,632
- ------------------------------------------------------------------------------------------------------------------------------
Total 3,557,806 3,638,177 3,546,922
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.87 7.06 6.79
Commercial 6.81 7.02 6.79
Industrial 4.12 4.23 3.85
Total retail 6.17 6.31 5.97
Sale for resale 3.81 2.62 2.30
Total sales 5.97 5.98 5.55
Residential Average Annual Kilowatt-Hour Use Per Customer 12,686 13,269 12,369
Residential Average Annual Revenue Per Customer $871.68 $937.07 $840.23
Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 628 628
Maximum Peak-Hour Demand (megawatts):
Winter 617 524 533
Summer 729 747 695
Annual Load Factor (percent) 54.3 54.1 55.0
Plant Availability - Fossil-Steam (percent) 81.0 90.2 89.1
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 18.6 21.5 12.0
Oil and gas 1.8 4.5 2.9
Purchased power -
From non-affiliates 1.5 0.9 1.0
From affiliates 78.1 73.1 84.1
- -----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,786 11,515 12,547
Cost of fuel per million BTU (cents) 205.03 215.97 201.50
Average cost of fuel per net kilowatt-hour generated (cents) 2.42 2.49 2.53
==============================================================================================================================
II-250A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1997 Annual Report
==================================================================================================================
1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $80,541 $87,063 $85,113
Commercial 61,827 65,462 65,474
Industrial 30,492 30,237 28,304
Other 6,561 6,782 6,892
- ------------------------------------------------------------------------------------------------------------------
Total retail 179,421 189,544 185,783
Sales for resale - non-affiliates 7,813 9,482 8,814
Sales for resale - affiliates 1,430 5,566 6,025
- ------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 188,664 204,592 200,622
Other revenues 982 1,043 1,177
- ------------------------------------------------------------------------------------------------------------------
Total $189,646 $205,635 $201,799
==================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,195,005 1,183,486 1,109,976
Commercial 925,757 892,931 839,756
Industrial 825,862 644,704 561,063
Other 106,683 103,539 101,164
- ------------------------------------------------------------------------------------------------------------------
Total retail 3,053,307 2,824,660 2,611,959
Sales for resale - non-affiliates 372,085 441,090 437,943
Sales for resale - affiliates 32,581 294,042 303,142
- ------------------------------------------------------------------------------------------------------------------
Total 3,457,973 3,559,792 3,353,044
==================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.74 7.36 7.67
Commercial 6.68 7.33 7.80
Industrial 3.69 4.69 5.04
Total retail 5.88 6.71 7.11
Sale for resale 2.28 2.05 2.00
Total sales 5.46 5.75 5.98
Residential Average Annual Kilowatt-Hour Use Per Customer 12,323 12,339 11,781
Residential Average Annual Revenue Per Customer $830.54 $907.68 $903.37
Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605
Maximum Peak-Hour Demand (megawatts):
Winter 526 428 548
Summer 691 648 613
Annual Load Factor (percent) 54.1 53.2 52.4
Plant Availability - Fossil-Steam (percent) 76.9 89.6 94.7
- ------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 16.3 52.8 63.5
Oil and gas 1.7 3.4 1.4
Purchased power -
From non-affiliates 0.4 0.8 1.5
From affiliates 81.6 43.0 33.6
- ------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,917 10,741 10,611
Cost of fuel per million BTU (cents) 199.42 188.18 180.48
Average cost of fuel per net kilowatt-hour generated (cents) 2.18 2.02 1.92
==================================================================================================================
II-250B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1997 Annual Report
==============================================================================================================
1988 1987
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $81,098 $79,785
Commercial 62,640 60,285
Industrial 26,865 27,422
Other 6,557 6,315
- --------------------------------------------------------------------------------------------------------------
Total retail 177,160 173,807
Sales for resale - non-affiliates 808 -
Sales for resale - affiliates 3,567 -
- --------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 181,535 173,807
Other revenues 905 900
- --------------------------------------------------------------------------------------------------------------
Total $182,440 $174,707
==============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,067,411 1,044,554
Commercial 806,687 775,643
Industrial 533,604 557,281
Other 97,072 94,949
- --------------------------------------------------------------------------------------------------------------
Total retail 2,504,774 2,472,427
Sales for resale - non-affiliates 24,168 -
Sales for resale - affiliates 156,106 -
- --------------------------------------------------------------------------------------------------------------
Total 2,685,048 2,472,427
==============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.60 7.64
Commercial 7.77 7.77
Industrial 5.03 4.92
Total retail 7.07 7.03
Sale for resale 2.43 -
Total sales 6.76 7.03
Residential Average Annual Kilowatt-Hour Use Per Customer 11,489 11,481
Residential Average Annual Revenue Per Customer $872.87 $876.95
Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605
Maximum Peak-Hour Demand (megawatts):
Winter 471 414
Summer 574 562
Annual Load Factor (percent) 53.4 53.6
Plant Availability - Fossil-Steam (percent) 77.1 81.2
- --------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 79.8 74.3
Oil and gas 5.4 4.4
Purchased power -
From non-affiliates 5.9 19.9
From affiliates 8.9 1.4
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
==============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,683 10,551
Cost of fuel per million BTU (cents) 178.31 176.10
Average cost of fuel per net kilowatt-hour generated (cents) 1.90 1.86
==============================================================================================================
II-250C
STATEMENTS OF INCOME
Savannah Electric and Power Company
===================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $224,225 $230,944 $218,529
Revenues from affiliates 2,052 3,130 7,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 226,277 234,074 225,729
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 35,563 29,139 25,386
Purchased power from non-affiliates 2,347 2,350 2,139
Purchased power from affiliates 42,107 58,591 53,252
Other 47,735 44,007 45,214
Maintenance 13,236 14,140 13,668
Depreciation and amortization 20,152 19,113 18,949
Taxes other than income taxes 11,494 11,675 11,465
Federal and state income taxes 16,419 16,175 17,378
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 189,053 195,190 187,451
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 37,224 38,884 38,278
Other Income (Expense):
Allowance for equity funds used during construction 239 317 163
Interest income 279 201 164
Other, net (781) (1,756) (618)
Income taxes applicable to other income 1,233 1,034 651
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 38,194 38,680 38,638
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 10,907 11,563 12,380
Allowance for debt funds used during construction (164) (333) (450)
Interest on notes payable 172 229 135
Amortization of debt discount, premium, and expense, net 739 579 448
Other interest charges 369 378 406
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,023 12,416 12,919
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 26,171 26,264 25,719
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 26,171 26,264 25,719
Dividends on Preferred and Preference Stock 2,324 2,324 2,324
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 23,847 $ 23,940 $ 23,395
===================================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 23,847 $ 23,940 $ 23,395
II-251
STATEMENTS OF INCOME
Savannah Electric and Power Company
===================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $205,339 $216,009 $196,256
Revenues from affiliates 6,446 2,433 1,505
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 211,785 218,442 197,761
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 18,555 24,976 14,162
Purchased power from non-affiliates 1,839 793 494
Purchased power from affiliates 55,822 56,274 56,492
Other 41,623 45,610 36,884
Maintenance 12,560 13,516 14,232
Depreciation and amortization 17,854 16,467 16,829
Taxes other than income taxes 11,074 11,136 10,231
Federal and state income taxes 16,289 15,436 14,566
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 175,616 184,208 163,890
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 36,169 34,234 33,871
Other Income (Expense):
Allowance for equity funds used during construction 831 958 446
Interest income 54 209 276
Other, net (1,032) (1,841) (1,450)
Income taxes applicable to other income 864 1,117 758
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 36,886 34,677 33,901
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 12,585 10,696 10,870
Allowance for debt funds used during construction (1,225) (699) (289)
Interest on notes payable 205 240 15
Amortization of debt discount, premium, and expense, net 550 535 427
Other interest charges 337 340 466
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,452 11,112 11,489
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 24,434 23,565 22,412
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 24,434 23,565 22,412
Dividends on Preferred and Preference Stock 2,324 2,106 1,900
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 22,110 $ 21,459 $ 20,512
===================================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 22,110 $ 21,459 $ 20,512
II-252A
STATEMENTS OF INCOME
Savannah Electric and Power Company
================================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $188,216 $200,069 $195,774
Revenues from affiliates 1,430 5,566 6,025
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 189,646 205,635 201,799
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 14,415 42,630 44,224
Purchased power from non-affiliates 297 611 616
Purchased power from affiliates 49,007 34,648 26,361
Other 32,945 30,630 29,371
Maintenance 12,475 12,754 12,281
Depreciation and amortization 16,549 16,118 20,343
Taxes other than income taxes 10,122 9,798 9,152
Federal and state income taxes 16,195 17,611 17,571
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 152,005 164,800 159,919
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 37,641 40,835 41,880
Other Income (Expense):
Allowance for equity funds used during construction 170 193 -
Interest income 589 741 719
Other, net (879) (803) (672)
Income taxes applicable to other income 722 187 192
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 38,243 41,153 42,119
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 11,486 12,052 12,287
Allowance for debt funds used during construction (103) (194) (112)
Interest on notes payable 25 116 402
Amortization of debt discount, premium, and expense, net 380 241 274
Other interest charges 525 665 1,313
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,313 12,880 14,164
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 25,930 28,273 27,955
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 25,930 28,273 27,955
Dividends on Preferred and Preference Stock 1,900 2,019 2,420
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 24,030 $ 26,254 $ 25,535
================================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 24,030 $ 26,254 $ 25,535
II-252B
STATEMENTS OF INCOME
Savannah Electric and Power Company
================================================================================================================
For the Years Ended December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $178,873 $174,707
Revenues from affiliates 3,567 -
- ----------------------------------------------------------------------------------------------------------------
Total operating revenues 182,440 174,707
- ----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 46,578 38,597
Purchased power from non-affiliates 3,593 11,453
Purchased power from affiliates 6,586 1,186
Other 28,271 25,642
Maintenance 14,261 13,629
Depreciation and amortization 19,771 18,152
Taxes other than income taxes 9,209 9,088
Federal and state income taxes 14,017 16,969
- ----------------------------------------------------------------------------------------------------------------
Total operating expenses 142,286 134,716
- ----------------------------------------------------------------------------------------------------------------
Operating Income 40,154 39,991
Other Income (Expense):
Allowance for equity funds used during construction 273 512
Interest income 355 925
Other, net (1,423) (464)
Income taxes applicable to other income 459 (317)
- ----------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 39,818 40,647
- ----------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 15,603 17,127
Allowance for debt funds used during construction (330) (459)
Interest on notes payable 230 70
Amortization of debt discount, premium, and expense, net 196 237
Other interest charges 336 251
- ----------------------------------------------------------------------------------------------------------------
Net interest charges 16,035 17,226
- ----------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 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 25,703 23,421
Dividends on Preferred and Preference Stock 1,431 1,335
- ----------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 24,272 $ 22,086
================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 22,352 $ 21,865
II-252C
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
================================================================================================================================
For the Years Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 26,171 $ 26,264 $ 25,719
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 21,083 20,246 20,535
Deferred income taxes, net 3,841 7,482 4,359
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (239) (317) (163)
Other, net (2,577) (641) 35
Changes in certain current assets and liabilities --
Receivables, net (3,239) (641) (6,241)
Inventories 1,720 410 2,318
Payables (1,608) 4,242 2,213
Other 4,667 (4,607) (1,848)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 49,819 52,438 46,927
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (18,846) (28,950) (26,503)
Sales of property - - -
Other (1,418) (3,173) 3,198
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,264) (32,123) (23,305)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - - -
First mortgage bonds - 20,000 15,000
Pollution control bonds 13,870 - -
Other long-term debt - 17,000 33,500
Common stock - - -
Retirements:
Preferred and preference stock - - -
First mortgage bonds - (29,400) (29,250)
Pollution control bonds (13,870) - -
Other long-term debt (433) (397) (23,003)
Notes payable, net (5,000) 1,000 1,500
Payment of preferred and preference stock dividends (2,324) (2,324) (2,324)
Payment of common and class A stock dividends (20,500) (19,600) (17,600)
Miscellaneous (368) (2,257) (2,131)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (28,625) (15,978) (24,308)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 930 4,337 (686)
Cash and Cash Equivalents at Beginning of Year 5,214 877 1,563
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 6,144 $ 5,214 $ 877
================================================================================================================================
( ) Denotes use of cash.
II-253
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
===================================================================================================================================
For the Years Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 24,434 $ 23,565 $ 22,412
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 19,353 17,482 17,757
Deferred income taxes, net 1,625 607 5,947
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (831) (958) (446)
Other, net 826 2,853 (1,312)
Changes in certain current assets and liabilities --
Receivables, net 18,481 (16,839) (3,757)
Inventories 1,144 (3,947) 4,435
Payables (19,957) 18,742 351
Other (117) 3,282 2,083
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 44,958 44,787 47,470
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (30,078) (72,858) (30,132)
Sales of property - - -
Other (841) 1,676 (1,073)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (30,919) (71,182) (31,205)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - 35,000 -
First mortgage bonds - 45,000 30,000
Pollution control bonds - 4,085 13,870
Other long-term debt 8,500 10,000 -
Common stock - - -
Retirements:
Preferred and preference stock - (20,000) -
First mortgage bonds (5,065) - (38,750)
Pollution control bonds - (4,085) (14,550)
Other long-term debt (823) (10,356) (217)
Notes payable, net (500) (4,500) 7,500
Payment of preferred and preference stock dividends (2,129) (2,222) (1,900)
Payment of common and class A stock dividends (16,300) (21,000) (22,000)
Miscellaneous (74) (3,400) (3,985)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (16,391) 28,522 (30,032)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (2,352) 2,127 (13,767)
Cash and Cash Equivalents at Beginning of Year 3,915 1,788 15,555
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,563 $ 3,915 $ 1,788
================================================================================================================================
( ) Denotes use of cash.
II-254A
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
================================================================================================================================
For the Years Ended December 31, 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 25,930 $ 28,273 $ 27,955
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 17,501 16,995 21,310
Deferred income taxes, net 1,601 2,782 3,476
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (170) (193) -
Other, net (1,876) 511 (775)
Changes in certain current assets and liabilities --
Receivables, net 6,639 1,726 (4,241)
Inventories (1,082) 1,246 (1,503)
Payables 568 (228) 1,086
Other 3,710 (319) 1,544
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 52,821 50,793 48,852
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (19,478) (20,086) (18,831)
Sales of property - - -
Other 407 (120) 381
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (19,071) (20,206) (18,450)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - - -
First mortgage bonds 30,000 - 30,000
Pollution control bonds - - -
Other long-term debt - - -
Common stock - - -
Retirements:
Preferred and preference stock - (5,374) (6,591)
First mortgage bonds (22,500) (9,135) (18,275)
Pollution control bonds (515) (485) (455)
Other long-term debt (275) (364) (7,656)
Notes payable, net (1,500) 1,500 -
Payment of preferred and preference stock dividends (1,900) (2,113) (2,318)
Payment of common and class A stock dividends (22,000) (22,000) (20,000)
Miscellaneous (477) 47 (1,071)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (19,167) (37,924) (26,366)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 14,583 (7,337) 4,036
Cash and Cash Equivalents at Beginning of Year 972 8,309 4,273
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 15,555 $ 972 $ 8,309
================================================================================================================================
( ) Denotes use of cash.
II-254B
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
================================================================================================================
For the Years Ended December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 25,703 $ 23,421
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 20,592 19,126
Deferred income taxes, net 3,568 925
Deferred investment tax credits, net - (5)
Allowance for equity funds used during construction (273) (512)
Other, net 718 (1,016)
Changes in certain current assets and liabilities --
Receivables, net (7,620) 773
Inventories 3,063 (503)
Payables (1,151) (78)
Other (1,684) (757)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 42,916 41,374
- ----------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (23,254) (32,276)
Sales of property - -
Other (4,042) 1,296
- -----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (27,296) (30,980)
- ----------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock 20,000 -
First mortgage bonds - -
Pollution control bonds - -
Other long-term debt - -
Common stock 403 1,693
Retirements:
Preferred and preference stock (553) (588)
First mortgage bonds (12,231) (10,239)
Pollution control bonds (430) (405)
Other long-term debt (4,401) (3,954)
Notes payable, net - -
Payment of preferred and preference stock dividends (1,284) (1,351)
Payment of common and class A stock dividends (14,407) (10,383)
Miscellaneous (269) -
- ----------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (13,172) (25,227)
- ----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,448 (14,833)
Cash and Cash Equivalents at Beginning of Year 1,825 16,658
- ----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 4,273 $ 1,825
================================================================================================================
( ) Denotes use of cash.
II-254C
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $335,002 $327,549 $317,026
Transmission 103,776 103,160 102,129
Distribution 283,700 275,877 264,115
General 38,216 32,875 31,876
Construction work in progress 7,709 13,463 6,707
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 768,403 752,924 721,853
Accumulated provision for depreciation 321,509 304,760 287,004
- --------------------------------------------------------------------------------------------------------------------------------
Total 446,894 448,164 434,849
Less property-related accumulated deferred income taxes - - -
- --------------------------------------------------------------------------------------------------------------------------------
Total 446,894 448,164 434,849
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,783 1,785 1,788
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 6,144 5,214 877
Receivables, net 17,498 16,606 21,346
Accrued unbilled revenues 5,238 4,597 5,110
Fuel cost under recovery 7,694 7,289 -
Fossil fuel stock, at average cost 5,205 5,892 6,076
Materials and supplies, at average cost 6,980 8,013 8,239
Prepayments 5,922 4,789 6,467
- --------------------------------------------------------------------------------------------------------------------------------
Total 54,681 52,400 48,115
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 17,267 19,167 21,557
Miscellaneous 26,727 23,384 18,353
- --------------------------------------------------------------------------------------------------------------------------------
Total 43,994 42,551 39,910
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $547,352 $544,900 $524,662
================================================================================================================================
II-255
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $312,215 $257,708 $258,539
Transmission 100,956 99,791 93,182
Distribution 251,323 237,012 222,024
General 28,938 28,010 25,851
Construction work in progress 5,930 49,797 5,966
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 699,362 672,318 605,562
Accumulated provision for depreciation 267,590 251,565 240,094
- --------------------------------------------------------------------------------------------------------------------------------
Total 431,772 420,753 365,468
Less property-related accumulated deferred income taxes - - 65,725
- --------------------------------------------------------------------------------------------------------------------------------
Total 431,772 420,753 299,743
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,790 1,793 1,795
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,563 3,915 1,788
Receivables, net 12,328 27,714 14,480
Accrued unbilled revenues 4,780 3,789 3,401
Fuel cost under recovery 3,113 7,112 3,895
Fossil fuel stock, at average cost 7,557 8,419 4,895
Materials and supplies, at average cost 9,076 9,358 8,935
Prepayments 7,446 4,849 1,599
- --------------------------------------------------------------------------------------------------------------------------------
Total 45,863 65,156 38,993
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 23,521 24,890 -
Miscellaneous 15,359 14,595 11,644
- ---------------------------------------------------------------------------------------------------------------------------------
Total 38,880 39,485 11,644
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $518,305 $527,187 $352,175
================================================================================================================================
II-256A
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $247,017 $246,278 $242,988
Transmission 90,198 73,358 72,299
Distribution 212,576 217,913 204,611
General 24,283 22,990 22,482
Construction work in progress 4,211 1,354 2,880
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 578,285 561,893 545,260
Accumulated provision for depreciation 225,605 211,725 198,228
- --------------------------------------------------------------------------------------------------------------------------------
Total 352,680 350,168 347,032
Less property-related accumulated deferred income taxes 62,737 58,106 54,418
- --------------------------------------------------------------------------------------------------------------------------------
Total 289,943 292,062 292,614
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 39 39 49
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 15,555 972 8,309
Receivables, net 14,549 14,450 14,300
Accrued unbilled revenues 3,252 3,831 4,501
Fuel cost under recovery - 5,662 6,881
Fossil fuel stock, at average cost 9,196 8,071 9,706
Materials and supplies, at average cost 9,069 9,112 8,723
Prepayments 4,544 1,492 585
- --------------------------------------------------------------------------------------------------------------------------------
Total 56,165 43,590 53,005
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - -
Miscellaneous 6,358 4,359 4,219
- --------------------------------------------------------------------------------------------------------------------------------
Total 6,358 4,359 4,219
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $352,505 $340,050 $349,887
================================================================================================================================
II-256B
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================
At December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $241,833 $236,587
Transmission 71,601 69,822
Distribution 192,335 177,163
General 21,686 17,513
Construction work in progress 1,684 7,214
- ----------------------------------------------------------------------------------------------------------------
Total utility plant 529,139 508,299
Accumulated provision for depreciation 178,888 161,531
- ----------------------------------------------------------------------------------------------------------------
Total 350,251 346,768
Less property-related accumulated deferred income taxes 51,487 49,255
- ----------------------------------------------------------------------------------------------------------------
Total 298,764 297,513
- ----------------------------------------------------------------------------------------------------------------
Other Property and Investments 49 49
- ----------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,273 1,825
Receivables, net 15,714 14,419
Accrued unbilled revenues 3,889 -
Fuel cost under recovery 1,838 -
Fossil fuel stock, at average cost 8,455 12,359
Materials and supplies, at average cost 8,471 7,630
Prepayments 1,240 2,786
- ----------------------------------------------------------------------------------------------------------------
Total 43,880 39,019
- ----------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - -
Miscellaneous 4,358 4,127
- ----------------------------------------------------------------------------------------------------------------
Total 4,358 4,127
- ----------------------------------------------------------------------------------------------------------------
Total Assets $347,051 $340,708
================================================================================================================
II-256C
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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)
Retained Earnings 112,720 109,373 105,033
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 175,631 172,284 167,812
Preferred stock 35,000 35,000 35,000
Preferred and preference stock subject to mandatory redemption - - -
Long-term debt 142,846 164,406 153,679
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 353,477 371,690 356,491
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 5,000 4,000
Preferred and preference stock due within one year - - -
Long-term debt due within one year 21,764 637 1,407
Accounts payable 13,887 16,575 11,362
Customer deposits 5,541 5,232 5,054
Fuel cost over recovery - - 865
Taxes accrued 3,325 1,015 1,584
Interest accrued 4,963 5,275 6,331
Vacation pay accrued 1,893 2,038 1,916
Miscellaneous 9,031 7,470 5,870
- --------------------------------------------------------------------------------------------------------------------------------
Total 60,404 43,242 38,389
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 80,697 76,654 74,152
Accumulated deferred investment tax credits 12,607 13,271 13,934
Deferred credits related to income taxes 21,469 22,792 24,419
Deferred under-funded accrued benefit obligation - - 2,123
Miscellaneous 18,698 17,251 15,154
- --------------------------------------------------------------------------------------------------------------------------------
Total 133,471 129,968 129,782
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 547,352 $ 544,900 $ 524,662
================================================================================================================================
II-257
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
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 (546) (2,121) -
Retained Earnings 99,216 93,479 95,465
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 161,581 154,269 158,376
Preferred stock 35,000 35,000 20,000
Preferred and preference stock subject to mandatory redemption - - -
Long-term debt 155,922 151,338 110,767
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 352,503 340,607 289,143
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 2,500 3,000 7,500
Preferred and preference stock due within one year - - -
Long-term debt due within one year 2,579 4,499 1,319
Accounts payable 8,991 30,442 11,179
Customer deposits 4,698 4,714 4,541
Fuel cost over recovery - - -
Taxes accrued 1,133 1,529 3,016
Interest accrued 6,830 6,730 5,733
Vacation pay accrued 1,823 1,638 1,790
Miscellaneous 8,282 8,703 5,025
- --------------------------------------------------------------------------------------------------------------------------------
Total 36,836 61,255 40,103
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 70,786 66,947 -
Accumulated deferred investment tax credits 14,637 15,301 15,964
Deferred credits related to income taxes 25,487 26,173 -
Deferred under-funded accrued benefit obligation 3,022 5,855 -
Miscellaneous 15,034 11,049 6,965
- --------------------------------------------------------------------------------------------------------------------------------
Total 128,966 125,325 22,929
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 518,305 $ 527,187 $ 352,175
================================================================================================================================
II-258A
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================================
At December 31, 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 54,223 $ 54,223 $ 54,223
Paid-in capital 8,665 8,665 8,665
Additional minimum liability
for under-funded pension obligations - - -
Retained Earnings 96,953 94,923 90,849
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 159,841 157,811 153,737
Preferred stock 20,000 20,000 22,300
Preferred and preference stock subject to mandatory redemption - - 2,884
Long-term debt 119,280 112,377 117,522
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 299,121 290,188 296,443
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - 1,500 -
Preferred and preference stock due within one year - - 190
Long-term debt due within one year 2,442 2,358 7,091
Accounts payable 10,176 8,786 9,078
Customer deposits 4,528 4,472 4,296
Fuel cost over recovery 1,603 - -
Taxes accrued 724 1,387 1,749
Interest accrued 4,657 3,415 4,287
Vacation pay accrued 1,672 1,604 1,477
Miscellaneous 4,823 3,398 2,880
- --------------------------------------------------------------------------------------------------------------------------------
Total 30,625 26,920 31,048
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - -
Accumulated deferred investment tax credits 16,628 17,292 17,971
Deferred credits related to income taxes - - -
Deferred under-funded accrued benefit obligation - - -
Miscellaneous 6,131 5,650 4,425
- --------------------------------------------------------------------------------------------------------------------------------
Total 22,759 22,942 22,396
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 352,505 $ 340,050 $ 349,887
================================================================================================================================
II-258B
BALANCE SHEETS
Savannah Electric and Power Company
================================================================================================================
At December 31, 1988 1987
- ----------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 54,223 $ 54,131
Paid-in capital 8,665 8,353
Additional minimum liability
for under-funded pension obligations - -
Retained Earnings 85,995 73,723
- ----------------------------------------------------------------------------------------------------------------
Total common equity 148,883 136,207
Preferred stock 22,300 2,300
Preferred and preference stock subject to mandatory redemption 3,075 9,665
Long-term debt 98,285 129,329
- ----------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 272,543 277,501
- ----------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - -
Preferred and preference stock due within one year 6,590 553
Long-term debt due within one year 23,217 8,956
Accounts payable 7,950 9,427
Customer deposits 3,983 3,729
Fuel cost over recovery - 599
Taxes accrued 1,899 3,713
Interest accrued 4,154 4,599
Vacation pay accrued 1,412 1,306
Miscellaneous 1,705 6,257
- ----------------------------------------------------------------------------------------------------------------
Total 50,910 39,139
- ----------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - -
Accumulated deferred investment tax credits 19,106 20,264
Deferred credits related to income taxes - -
Deferred under-funded accrued benefit obligation - -
Miscellaneous 4,492 3,804
- ----------------------------------------------------------------------------------------------------------------
Total 23,598 24,068
- ----------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 347,051 $ 340,708
================================================================================================================
II-258C
SAVANNAH ELECTRIC AND POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1997
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 20,000 6-3/8% $ 20,000 7/1/03
1996 20,000 6.90% 20,000 5/1/06
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
-------- --------
$110,000 $110,000
======== ========
Pollution Control Obligations
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 4,085 Variable $ 4,085 1/1/16
1997 13,870 Variable 13,870 4/1/37
-------- --------
$ 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 1997
Pollution Control Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------------------------------
(Thousands)
1992 $13,870 6-3/4%
II-259
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 1998
annual meeting of stockholders. The ages of directors and executive officers in
Item 10 set forth below are as of December 31, 1997.
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 58
Served as Director since 3-1-89
Bill M. Guthrie
Executive Vice President
Age 64
Served as Director since 12-16-88
Whit Armstrong (2)
Age 50
Served as Director since 9-24-82
A. W. Dahlberg (2)
Age 57
Served as Director since 4-22-94
Peter V. Gregerson, Sr. (2)
Age 69
Served as Director since 10-22-93
Carl E. Jones, Jr. (2)
Age 57
Served as Director since 4-22-88
Patricia M. King (2)
Age 52
Served as Director since 7-25-97
James K. Lowder (2)
Age 48
Served as Director since 7-25-97
Wallace D. Malone, Jr. (2)
Age 61
Served as Director since 6-22-90
William V. Muse (2)
Age 58
Served as Director since 2-26-93
John T. Porter (2)
Age 66
Served as Director since 10-22-93
Robert D. Powers (2)
Age 47
Served as Director since 1-24-92
Andreas Renschler (2)
Age 39
Served as Director since 1-23-98
C. Dowd Ritter (2)
Age 50
Served as Director since 7-25-97
John W. Rouse (2)
Age 60
Served as Director since 4-22-88
William J. Rushton, III (2)
Age 68
Served as Director since 9-18-70
James H. Sanford (2)
Age 53
Served as Director since 8-1-83
John C. Webb, IV (2)
Age 55
Served as Director since 4-22-77
(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 25, 1997) for one year until the next annual meeting or
until a successor is elected and qualified, except for
Ms. King, Mr. Lowder, Mr. Renschler and Mr. Ritter whose elections were
effective on the date indicated.
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 58
Served as Executive Officer since 3-1-89
Banks H. Farris
Executive Vice President
Age 62
Served as Executive Officer since 12-3-91
Michael D. Garrett
Executive Vice President - External Affairs
Age 48
Served as Executive Officer since 3-1-98
William B. Hutchins, III
Executive Vice President, Chief Financial Officer
and Treasurer
Age 54
Served as Executive Officer since 12-3-91
Charles D. McCrary (2)
Executive Vice President
Age 46
Served as Executive Officer since 1-1-91
(1) Previously served as executive officer of ALABAMA from 1979 to 1985.
(2) Resigned effective March 1, 1998, upon being
elected Executive Vice President of SOUTHERN's
Fossil/Hydro Group.
Each of the above is currently an executive officer of ALABAMA, serving a
term running from the last annual meeting of the directors (April 25, 1997) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Garrett 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
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 the 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. Director of Enstar Group, Inc.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of
SOUTHERN since 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, Equifax, Inc., Protective Life Corporation
and SunTrust Banks, Inc.
Peter V. Gregerson, Sr. - Chairman Emeritus of Gregerson's Foods, Inc.
(retail groceries), Gadsden, Alabama.
Carl E. Jones, Jr. - President and Chief Executive Officer of Regions
Financial Corporation, Birmingham, Alabama. He previously
served as President and Chief Operating Officer of Regions Financial
Corporation.
III-2
Patricia M. King - President and Chief Executive Officer of King Motor Co.,
Inc., King's Highway, Inc. and King Imports, Inc., Anniston, Alabama.
James K. Lowder - President and Chief Executive Officer of The Colonial
Company (real estate development and sales), Montgomery, Alabama.
Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust
Corporation, bank holding company, Birmingham,
Alabama. Director of American Cast Iron Pipe Company.
William V. Muse - President of Auburn University. Director of SouthTrust Bank
and American Cast Iron Pipe Company.
John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama.
Director of Citizens Federal Savings Bank.
Robert D. Powers - President and Director, The Eufaula Agency, Inc. (real
estate and insurance), Eufaula, Alabama.
Andreas Renschler - President and Chief Executive Officer of Mercedes-Benz U.S.
International, Inc., Tuscaloosa County, Alabama.
C. Dowd Ritter - Chairman, President, Chief Executive Officer and Director,
AmSouth Bancorporation and AmSouth Bank, Birmingham,
Alabama.
John W. Rouse - President of The Rouse Group, LLC, (technology consulting),
Birmingham, Alabama and President Emeritus of Southern
Research Institute. 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. Chairman of the Board,
Sylvest Farms of Georgia, Inc., College Park, Georgia. Chairman of the Board,
Sylvest Poultry Inc., Montgomery, Alabama.
John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber and
wood products sales), Demopolis, Alabama. Director, J. F. Suttle, Co.
Banks H. Farris - Elected in 1991; responsible primarily for providing the
overall management of human resources, information resources, power delivery and
marketing departments, customer service centers and the six geographic
divisions. He previously served as Senior Vice President from 1991 to 1994.
Michael D. Garrett - Elected in 1998; responsible for external relations
department, public relations and corporate services. He previously served as
Senior Vice President - External Affairs from February 1994 to March 1998.
William B. Hutchins, III - Elected in 1991; responsible for financial and
accounting operations, corporate planning and treasury operations. He previously
served as Senior Vice President and Chief Financial Officer from 1991 to 1994
and as Executive Vice President and Chief Financial Officer from 1994 to 1998.
Charles D. McCrary - Elected in 1991; responsible for the external relations
department, public relations and corporate services. He previously served as
Senior Vice President from 1991 to 1994.
Involvement in certain legal proceedings.
None.
III-3
GEORGIA
Identification of directors of GEORGIA.
H. Allen Franklin
President and Chief Executive Officer
Age 53
Served as Director since 1-1-94
Warren Y. Jobe
Executive Vice President and
Chief Financial Officer
Age 57
Served as Director since 8-1-82
Daniel P. Amos (1)
Age 46
Served as Director since 5-21-97
Juanita P. Baranco (1)
Age 48
Served as Director since 5-21-97
A. W. Dahlberg (1)
Age 57
Served as Director since 6-1-88
William A. Fickling, Jr. (1)
Age 65
Served as Director since 4-18-73
L. G. Hardman III (1)
Age 58
Served as Director since 6-25-79
James R. Lientz, Jr. (1)
Age 54
Served as Director since 7-21-93
G. Joseph Prendergast (1)
Age 52
Served as Director since 1-20-93
Herman J. Russell (1)
Age 67
Served as Director since 5-18-88
Gloria M. Shatto (1)
Age 66
Served as Director since 2-20-80
William Jerry Vereen (1)
Age 57
Served as Director since 5-18-88
Carl Ware (1) (2)
Age 54
Served as Director since 2-15-95
Thomas R. Williams (1)
Age 69
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 21, 1997) 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 53
Served as Executive Officer since 1-1-94
Warren Y. Jobe (1)
Executive Vice President, Chief Financial Officer and
Director
Age 57
Served as Executive Officer since 5-19-82
III-4
William C. Archer, III
Executive Vice President - External Affairs
Age 49
Served as Executive Officer since 4-6-95
Gene R. Hodges
Executive Vice President - Customer Operations
Age 59
Served as Executive Officer since 11-19-86
David M. Ratcliffe
Executive Vice President and Treasurer
Age 49
Served as Executive Officer since 3-1-98
William P. Bowers
Senior Vice President - Marketing
Age 41
Served as Executive Officer since 9-22-95
Wayne T. Dahlke
Senior Vice President - Power Delivery
Age 56
Served as Executive Officer since 4-19-89
James K. Davis
Senior Vice President - Corporate Relations
Age 57
Served as Executive Officer since 10-1-93
Robert H. Haubein
Senior Vice President - Fossil/Hydro Power
Age 57
Served as Executive Officer since 2-19-92
Fred D. Williams
Senior Vice President - Resource Policy & Planning
Age 53
Served as Executive Officer since 11-18-92
(1) Elected Senior Vice President of SOUTHERN in February 1998; however, Mr.
Jobe will maintain his present position as Executive Vice President, Chief
Financial Officer and Director of GEORGIA.
Each of the above is currently an executive officer of GEORGIA, serving a
term running from the last annual meeting of the directors (May 21, 1997) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Ratcliffe 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 from 1992 to 1998. Responsible for financial and accounting
operations and planning, internal auditing, procurement, corporate secretary and
treasury operations.
Daniel P. Amos - President and Chief Executive Officer, American Family Life
Assurance Company (AFLAC), Columbus, Georgia. Director, AFLAC Incorporated (and
subsidiaries), CIT Group and Greystone Capital Partners, I.L.P.
Juanita P. Baranco - Business owner of Baranco Automotive Group. Director of
Federal Reserve Bank of Atlanta and John H. Harland
Company, Decatur, Georgia.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN
since 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, Equifax, Inc., Protective Life Corporation and SunTrust Banks, Inc.
William A. Fickling, Jr. - Chairman of the Board, Chief Executive Officer of
Beech Street Corporation (provider of managed care
services) and President from 1995 to 1996. He previously served as Chairman of
the Board and Chief Executive Officer of Charter
Medical Corporation (provider of psychiatric care).
III-5
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. Director of Cerulean Companies,
Inc. and Blue Cross/Blue Shield of Georgia.
G. Joseph Prendergast - Senior Executive Vice President, Wachovia Corporation.
Heads the banking division comprising the
companies consumer and corporate banking activities and Wachovia Bank, N.A.
Chairman, Wachovia Bank of Georgia, Wachovia Bank of
South Carolina and Wachovia Bank of North Carolina since 1994. Director,
Willamette Industries, Portland, Oregon.
Herman J. Russell - Chairman of the Board,
H. J. Russell & Company (construction), Atlanta, Georgia. Chairman of the
Board, Citizens Trust Bank, Atlanta, Georgia. Director
of Wachovia Corporation and First Union Real Estate and Mortgage Investments.
Gloria M. Shatto - President, Berry College, Mount Berry, Georgia. Director of
SOUTHERN, Becton Dickinson & Company 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 Corporation, Cerulean
Companies, Inc. and Blue Cross/Blue Shield of Georgia.
Carl Ware - President, Africa Group, The Coca-Cola Company since 1991.
Thomas R. Williams - President of The Wales Group, Inc. (investments), Atlanta,
Georgia. Director of ConAgra, Inc., 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.
Gene R. Hodges - Executive Vice President - Customer Operations, Power Delivery
and Safety.
David M. Ratcliffe - Executive Vice President - Finance and Treasurer since
3-1-98. Responsible for accounting, corporate secretary, finance and
procurement. He previously served as Senior Vice President - External Affairs of
SOUTHERN from 1995 to 1998. President and Chief Executive Officer of MISSISSIPPI
from 1991 to 1995.
William P. Bowers - Senior Vice President - Marketing since 1995. Vice President
- - Retail Sales and Service from 1992 to 1995. Director of Georgia MedCorp, Inc.,
Southern Regional Medical Center and Georgia MedCorp Development Corporation.
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 - Resource Policy and Planning since
1997. Senior Vice President - Wholesale Power Marketing from 1995 to 1997.
Senior Vice President - Bulk Power Markets from 1992 to August 1995. In
addition, he was elected Senior Vice President - Wholesale Power Marketing of
SCS in 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 59
Served as Director since 2-1-94
Paul J. DeNicola (1)
Age 49
Served as Director since 4-19-91
Fred C. Donovan (1)
Age 57
Served as Director since 1-18-91
W. Deck Hull, Jr. (1)
Age 65
Served as Director since 10-14-83
Joseph K. Tannehill (1)
Age 64
Served as Director since 7-19-85
Barbara H. Thames (1)
Age 57
Served as Director since 2-28-97
(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 24, 1997) 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 59
Served as Executive Officer since 2-1-94
Francis M. Fisher, Jr.
Vice President - Power Delivery and Customer Operations
Age 49
Served as Executive Officer since 5-19-89
John E. Hodges, Jr.
Vice President - Marketing and Employee/External Affairs
Age 54
Served as Executive Officer since 5-19-89
Robert G. Moore
Vice President - Power Generation and Transmission
Age 48
Served as Executive Officer since 7-25-97
Arlan E. Scarbrough
Vice President - Finance
Age 61
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 25, 1997) 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.
III-7
Identification of certain significant employees.
None.
Family relationships.
None.
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.
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.
Director of SOUTHERN, MISSISSIPPI and SAVANNAH.
Fred C. Donovan - President of Baskerville - Donovan, Inc., Pensacola, Florida,
an architectural and engineering firm.
W. Deck Hull, Jr. - President and Director of Hull Oil Company - Panama City,
Florida. He previously served as Vice Chairman of
the SunTrust Bank, West Florida, Panama City, Florida.
Joseph K. Tannehill - President and Chief Executive Officer of Merrick
International Industries, Lynn Haven, Florida. Director of
Regions Bank of North Florida, Panama City, Florida.
Barbara H. Thames - Chief Executive Officer of Santa Rosa Medical Center,
Milton, Florida.
Francis M. Fisher, Jr. - Elected Vice President - Employee and External
Relations in 1989 and, effective August 1996, Vice
President - Power Delivery and Customer Operations.
John E. Hodges, Jr. - Elected Vice President - Customer Operations in 1989 and,
effective August 1996, Vice President - Marketing
and Employee/External Affairs.
Robert G. Moore - Elected Vice President - Power Generation and Transmission of
GULF and Vice President of Fossil Generation of SCS in 1997. He previously
served as Plant Manager - Bowen at GEORGIA.
Arlan 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 49
Served as Director since 3-27-95
Paul J. DeNicola (1)
Age 49
Served as Director since 5-1-89
Edwin E. Downer (1)
Age 66
Served as Director since 4-24-84
Robert S. Gaddis (1)
Age 66
Served as Director since 1-21-86
Walter H. Hurt, III (1)
Age 62
Served as Director since 4-6-82
Aubrey K. Lucas (1)
Age 63
Served as Director since 4-24-84
George A. Schloegel (1)
Age 57
Served as Director since 7-26-95
Philip J. Terrell (1)
Age 44
Served as Director since 2-22-95
N. Eugene Warr (1)
Age 62
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 1,
1997) 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 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 49
Served as Executive Officer since 3-27-95
H. E. Blakeslee
Vice President - Customer Services and Marketing
Age 57
Served as Executive Officer since 1-25-84
Andrew J. Dearman, III
Vice President - Power Generation and Delivery
Age 44
Served as Executive Officer since 4-23-97
Don E. Mason
Vice President - External Affairs and Corporate Services
Age 56
Served as Executive Officer since 7-27-83
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
Age 45
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 23, 1997)
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
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 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. Director of SOUTHERN,
SAVANNAH and GULF.
Edwin E. Downer - Business consultant specializing in economic analysis,
management controls and procedural studies.
Robert S. Gaddis - Chairman of the Advisory Board of Trustmark National Bank,
Laurel, Mississippi.
Walter H. Hurt, III - President and Director of NPC Inc. (Investments). Vicar
of All Saints' Episcopal Church, Inverness,
Mississippi, and St. Thomas Church, Belzoni, Mississippi.
Aubrey K. Lucas - President Emeritus and Distinguished Professor of Higher
Education at 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 and Hancock Bank - 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). Director of
Coast Community Bank, formerly SouthTrust Bank of
Mississippi, Biloxi, Mississippi.
H. E. Blakeslee - Elected Vice President in 1984. Primarily responsible for
rate design, revenue forecasting, marketing, district
operations, corporate compliance, distribution engineering, customer account
and customer call center.
Andrew J. Dearman, III - Elected Vice President in 1997. Primarily responsible
for generating plants, environmental quality, fuel services, power generation
technical services, transmission, system planning, bulk power contracts, system
operations and control, system protection and real estate. He served as Vice
President - Southern Division of ALABAMA from 1995 to May 1997, and Division
Manager - Customer Service of ALABAMA from 1989 to 1995.
Don E. Mason - Elected Vice President in 1983. Primarily responsible for
external affairs, corporate communications, security, risk management, economic
development and general services, as well as the human resources function.
Michael W. Southern - Elected Vice President, Secretary, Treasurer and Chief
Financial Officer in 1995. Primarily responsible for accounting,
secretary/treasury, corporate planning, procurement 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.
G. Edison Holland, Jr.
President and Chief Executive Officer
Age 45
Served as Director since 5-20-97
Archie H. Davis (1)
Age 56
Served as Director since 2-18-97
Paul J. DeNicola (1)
Age 49
Served as Director since 3-14-91
Walter D. Gnann (1)
Age 62
Served as Director since 5-17-83
Robert B. Miller, III (1)
Age 52
Served as Director since 5-17-83
Arnold M. Tenenbaum (1)
Age 61
Served as Director since 5-17-77
(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 20, 1997)
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.
G. Edison Holland, Jr.
President, Chief Executive Officer and Director
Age 45
Served as Executive Officer since 10-1-97
W. Miles Greer
Vice President - Marketing and Customer Services
Age 54
Served as Executive Officer since 11-20-85
Larry M. Porter
Vice President - Operations
Age 52
Served as Executive Officer since 7-1-91
Kirby R. Willis
Vice President, Treasurer, Chief Financial Officer
and Assistant Corporate Secretary
Age 46
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 15, 1997) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Holland 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
SAVANNAH acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
G. Edison Holland, Jr. - Elected President and Chief Executive Officer in 1997.
Vice President - Power Generation/Transmission and Corporate Counsel of Gulf
Power Company from 1995 to 1997. Served as a partner in the law firm of Beggs
& Lane from 1979 to 1997.
Archie H. Davis - President and Chief Executive Officer of The Savannah Bancorp
and The Savannah Bank, N.A., Savannah, Georgia. Member of the Board of
Directors of Thomaston Mills, Thomaston, Georgia.
III-11
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994.
Executive Vice President of SCS from 1991 through 1993. Director of SOUTHERN,
GULF and MISSISSIPPI.
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 Bank of Georgia, First Union
Bank of Savannah, Cerulean Corporation and Blue Cross/Blue Shield of Georgia.
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.
Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since
1994 and Assistant Corporate Secretary effective 1998. Responsible primarily for
all accounting, financial, information resources, labor relations, corporate
services, environmental and safety activities. He previously served as
Treasurer, Controller and Assistant Secretary from 1991 to 1993.
Involvement in certain legal proceedings.
None.
Section 16(a) Beneficial Ownership Reporting Compliance.
GEORGIA's Messrs. Jobe and Vereen each failed to file on a timely basis a single
report disclosing one transaction on Form 5 as required by Section 16 of the
Securities Act of 1934.
GULF's Ms. Thames and Mr. Moore each failed to file on a timely basis a single
report disclosing one transaction on Form 3 as required by Section 16 of the
Securities Act of 1934. Ms. Thames executed a Form 3 on the day of the reporting
event for mailing by GULF; however, GULF inadvertently submitted the report two
days late.
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 $100,000 during
1997 for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI
and SAVANNAH).
Key terms used in this Item will have the following meanings:-
AME.........................................Above-market earnings on deferred compensation
ESP.........................................Employee Savings Plan
ESOP........................................Employee Stock Ownership Plan
SBP.........................................Supplemental Benefit Plan
ERISA.......................................Employee Retirement Income Security Act
ALABAMA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -----------------------------------------------------------------------------------------------------------------------
Elmer B. Harris
President,
Chief Executive 1997 500,700 101,002 20,453 35,648 247,224 30,172
Officer, 1996 480,310 72,697 7,112 31,608 439,508 25,068
Director 1995 458,940 74,204 5,956 32,170 494,447 26,058
Banks H. Farris 1997 247,170 37,500 7,218 13,513 155,313 14,379
Executive Vice 1996 235,255 32,390 7,829 9,730 155,313 12,161
President 1995 221,405 76,182 4,239 9,856 174,727 11,889
Charles D. McCrary 1997 224,359 34,000 8,639 10,112 126,075 12,864
Executive Vice 1996 215,762 29,906 3,198 8,984 126,075 11,530
President 1995 206,400 69,380 2,549 9,188 141,834 11,071
See next page for footnotes.
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
- --------------------------------------------------------------------------------------------------------------------------
William B.
Hutchins, III
Executive Vice
President, 1997 217,756 31,400 1,383 9,834 115,170 12,441
Chief Financial 1996 209,213 28,806 3,029 8,654 115,169 10,853
Officer 1995 199,164 69,841 1,180 8,850 129,565 11,088
1 Tax reimbursement by ALABAMA and certain personal benefits.
2 Payouts made in 1996, 1997 and 1998 for the four-year performance periods ending December 31, 1995, 1996 and 1997,
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 $7,125 $1,072 $21,975
Banks H. Farris 7,181 1,072 6,126
Charles D. McCrary 7,125 1,072 4,667
William B. Hutchins, III 7,125 1,072 4,244
III-14
GEORGIA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
H. Allen Franklin
President, 1997 511,505 129,426 14,219 36,544 280,513 31,350
Chief Executive 1996 482,658 73,260 10,992 31,853 498,688 27,334
Officer, Director 1995 456,366 82,935 3,936 31,960 561,024 25,493
Warren Y. Jobe
Executive
Vice President,
Treasurer, 1997 238,948 39,862 98,870 10,483 126,075 13,408
Chief Financial 1996 227,496 26,749 4,308 9,404 126,075 12,476
Officer, Director 1995 220,152 31,000 1,994 9,710 141,834 12,248
Gene R. Hodges 1997 228,336 39,058 5,544 10,271 126,075 13,111
Executive 1996 221,708 26,209 1,783 9,214 126,075 12,193
Vice President 1995 214,502 32,000 1,978 9,514 141,834 11,160
Robert H.
Haubein, Jr. 1997 220,358 35,683 657 9,952 115,170 11,981
Senior Vice 1996 211,010 29,681 2,081 8,757 115,169 11,740
President 1995 199,759 34,000 1,623 8,871 129,565 10,825
William C.
Archer 1997 197,870 40,054 3,410 8,953 84,048 11,280
Executive 1996 189,178 26,450 4,205 7,804 84,047 9,812
Vice President 1995 113,771 36,000 63,024 6,252 6,252 8,347
1 Tax reimbursement by GEORGIA on certain personal benefits including membership fees of $94,429 in 1997 for Mr. Jobe
and $61,877 in 1995 for Mr. Archer.
2 Payouts made in 1996, 1997 and 1998 for the four-year performance periods ending December 31, 1995,
1996 and 1997, 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 $7,181 $1,072 $23,097
Warren Y. Jobe 7,181 1,072 5,155
Gene R. Hodges 7,125 1,072 4,914
Robert H. Haubein, Jr. 7,181 1,072 3,728
William C. Archer 7,200 1,072 3,008
III-15
GULF
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
Travis J. Bowden
President, 1997 306,584 33,933 2,842 16,694 207,322 17,888
Chief Executive 1996 297,685 29,950 1,560 14,975 207,322 14,950
Officer, Director 1995 289,749 29,077 4,663 15,464 233,237 16,679
Arlan E. Scarbrough 1997 180,642 18,212 1,440 8,142 84,048 10,235
Vice President 1996 173,719 17,512 1,514 7,234 84,047 9,420
1995 167,568 16,718 722 7,398 94,553 8,556
John E. Hodges, Jr. 1997 178,428 17,989 2,418 8,042 91,977 10,185
Vice President 1996 171,688 17,297 1,415 7,145 91,977 9,405
1995 164,738 16,718 2,272 7,307 103,474 9,040
Francis M. 1997 160,783 16,274 479 7,275 84,048 9,182
Fisher, Jr. 1996 151,236 15,352 459 5,674 84,047 8,177
Vice President 1995 141,389 16,718 510 5,603 94,553 7,694
Robert G. Moore4 1997 149,926 23,474 - 4,741 46,551 7,550
Vice President 1996 - - - - - -
1995 - - - - - -
1 Tax reimbursement by GULF on certain personal benefits.
2 Payouts made in 1996, 1997 and 1998 for the four-year performance periods ending December 31, 1995,
1996 and 1997, 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 $7,181 $1,072 $9,635
Arlan E. Scarbrough 7,200 1,072 1,963
John E. Hodges, Jr. 6,438 1,072 2,675
Francis M. Fisher, Jr. 7,125 1,072 985
Robert G. Moore 6,159 1,072 319
4 Mr. Moore was named an executive officer effective July 25, 1997.
III-16
MISSISSIPPI
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
Dwight H. Evans
President, Chief 1997 262,678 39,643 3,830 14,303 126,075 15,025
Executive 1996 253,006 35,923 3,519 12,830 126,075 13,824
Officer, Director 1995 233,069 42,965 2,746 10,486 141,834 34,139
H. E. Blakeslee 1997 192,029 38,863 697 8,687 91,977 10,991
Vice President 1996 190,429 25,664 224 7,572 91,977 9,885
1995 168,651 29,358 952 7,598 103,474 9,161
Don E. Mason 1997 188,126 41,889 839 8,512 84,048 10,675
Vice President 1996 186,670 25,148 125 7,420 84,047 9,587
1995 163,901 29,358 794 7,445 94,553 8,830
Michael W. Southern
Vice President
Chief Financial 1997 155,151 31,406 1,590 6,281 65,768 8,757
Officer, Secretary, 1996 155,027 20,740 2,841 5,475 65,768 7,865
Treasurer 1995 133,505 24,467 344 4,847 73,989 19,806
Andrew J.
Dearman, III4 1997 141,393 21,008 2,083 5,871 42,903 21,354
Vice President 1996 - - - - - -
1995 - - - - - -
1 Tax reimbursement by MISSISSIPPI on certain personal benefits.
2 Payouts made in 1996, 1997 and 1998 for the four-year performance periods ending December 31, 1995,
1996 and 1997, 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 $7,181 $1,072 $6,772
H. E. Blakeslee 7,181 1,072 2,738
Don E. Mason 7,125 1,072 2,478
Michael W. Southern 7,007 1,072 678
Andrew J. Dearman, III 6,387 1,072 304
In 1997, Mr. Dearman received a one-time lump-sum payment of $13,591, given in connection with his appointment to
his current position.
4 Mr. Dearman was named an executive officer effective April 23, 1997.
III-17
SAVANNAH
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- --------------------------------------------------------------------------------------------------------------------------
Arthur M.
Gignilliat, Jr.4
President, 1997 203,888 20,866 3,555 10,365 151,383 28,095
Chief Executive 1996 218,208 26,371 1,104 9,077 151,382 25,705
Officer, Director 1995 211,385 31,847 492 9,327 170,305 21,323
G. Edison
Holland, Jr.5
President, 1997 202,413 26,231 3,046 8,640 91,977 49,892
Chief Executive 1996 184,359 18,584 2,969 7,677 91,977 9,940
Officer, Director 1995 177,682 16,718 2,463 7,851 103,474 9,491
Larry M. Porter 1997 143,135 18,472 177 5,761 65,768 11,624
Vice President 1996 138,931 16,740 421 4,560 65,768 9,814
1995 134,687 18,100 256 4,701 73,989 8,718
W. Miles Greer 1997 138,643 16,294 805 4,924 60,636 10,740
Vice President 1996 131,203 16,225 322 4,261 60,636 9,631
1995 125,891 18,225 355 4,393 68,215 8,376
Kirby R. Willis
Vice President, 1997 134,794 15,915 182 4,809 60,636 9,322
Chief Financial 1996 122,110 15,505 674 3,924 60,636 8,765
Officer, Treasurer 1995 115,632 18,225 256 4,038 68,215 7,444
1 Tax reimbursement by SAVANNAH on certain personal benefits.
2 Payouts made in 1996, 1997 and 1998 for the four-year performance periods ending December 31, 1995, 1996
and 1997, 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 $5,700 $1,072 $21,323
G. Edison Holland, Jr. 7,181 1,072 2,985
Larry M. Porter 6,139 1,072 4,413
W. Miles Greer 4,992 1,072 4,676
Kirby R. Willis 5,630 1,072 2,620
In 1997, Mr. Holland received a one-time lump-sum payment of $38,654, given in connection with his appointment
to his current position.
4 Mr. Gignilliat retired effective October 1, 1997.
5 Mr. Holland became president on July 1, 1997. He was previously an executive officer at GULF.
III-18
STOCK OPTION GRANTS IN 1997
Stock Option Grants. The following table sets forth all stock option grants to
the named executive officers of each operating subsidiary during the year ending
December 31, 1997.
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
---------------------------------------------------------------------------------------------------------------------
ALABAMA
Elmer B. Harris 35,648 2.0 21.25 07/21/2007 203,907
Banks H. Farris 13,513 0.8 21.25 06/01/2003 63,106
Charles D. McCrary 10,112 0.6 21.25 07/21/2007 57,841
William B. Hutchins, III 9,834 0.6 21.25 07/21/2007 56,250
GEORGIA
H. Allen Franklin 36,544 2.1 21.25 07/21/2007 209,032
Warren Y. Jobe 10,483 0.6 21.25 07/21/2007 59,963
Gene R. Hodges 10,271 0.6 21.25 07/21/2007 58,750
Robert H. Haubein, Jr. 9,952 0.6 21.25 07/21/2007 56,925
William C. Archer 8,953 0.5 21.25 07/21/2007 51,211
GULF
Travis J. Bowden 16,694 0.9 21.25 07/21/2007 95,375
Arlan E. Scarbrough 8,142 0.5 21.25 11/01/2004 40,629
John E. Hodges, Jr. 8,042 0.5 21.25 07/21/2007 46,000
Francis M. Fisher, Jr. 7,275 0.4 21.25 07/21/2007 41,613
Robert G. Moore 4,741 0.3 21.25 07/21/2007 27,119
See next page for footnotes.
STOCK OPTION GRANTS IN 1997
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
------------------------------------------------------------------------------------------------------------------
MISSISSIPPI
Dwight H. Evans 14,303 0.8 21.25 07/21/2007 81,813
H. E. Blakeslee 8,687 0.5 21.25 07/21/2007 49,690
Don E. Mason 8,512 0.5 21.25 07/21/2007 48,689
Michael W. Southern 6,281 0.4 21.25 07/21/2007 35,927
Andrew J. Dearman, III 5,871 0.3 21.25 07/21/2007 33,582
SAVANNAH
Arthur M. Gignilliat, Jr. 10,365 0.6 21.25 09/03/2000 34,101
G. Edison Holland, Jr. 8,640 0.5 21.25 07/21/2007 49,421
Larry M. Porter 5,761 0.3 21.25 07/21/2007 32,953
W. Miles Greer 4,924 0.3 21.25 07/21/2007 28,165
Kirby R. Willis 4,809 0.3 21.25 07/21/2007 27,507
1 Performance Stock Plan grants were made on July 21, 1997, 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 Performance Stock Plan, Mr. Farris'
unexercised options expire on June 1, 2003, three years after his normal
retirement date; Mr. Scarbrough'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
retirement date which was October 1, 1997.
2 A total of 1,776,094 stock options were granted in 1997 to key executives
participating in SOUTHERN's Performance 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 - 17.471%; risk-free rate of
return - 6.49%; dividend yield - 3.06%; and time to exercise - 10 years. These
assumptions reflect the effects of cash dividend equivalents paid to
participants at the target rates under the Performance Dividend Plan.
III-20
AGGREGATED STOCK OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
Aggregated Stock Option Exercises. The following table sets forth information
concerning options exercised during the year ending December 31, 1997, by the
named executive officers and the value of unexercised options held by them as of
December 31, 1997.
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($)2 Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------
ALABAMA
Elmer B. Harris - - 150,793/83,300 1,191,285/356,415
Banks H. Farris - - 13,662/27,822 57,279/119,004
Charles D. McCrary - - 24,067/23,386 137,122/99,258
William B. Hutchins, III - - 23,799/22,638 136,098/96,166
GEORGIA
H. Allen Franklin - - 120,384/84,261 892,379/360,544
Warren Y. Jobe - - 30,094/24,544 188,226/104,466
Gene R. Hodges - - 25,873/23,988 156,204/101,933
Robert H. Haubein, Jr. - - 24,693/22,748 142,756/96,308
Willam C. Archer - - 5,077/17,932 18,895/71,521
GULF
Travis J. Bowden - - 65,767/39,442 500,077/168,851
Arlan E. Scarbrough - - 5,507/17,267 20,919/68,977
John E. Hodges, Jr. - - 19,172/18,419 110,017/77,679
Francis M. Fisher, Jr. - - 4,219/14,333 15,981/57,791
Robert G. Moore - - 3,116/9,893 11,846/39,628
See next page for footnotes.
III-21
AGGREGATED STOCK OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
MISSISSIPPI
Dwight H. Evans - - 31,172/31,322 190,266/131,171
H. E. Blakeslee - - 19,875/19,543 113,822/82,296
Don E. Mason - - 5,577/17,800 21,152/71,190
Michael W. Southern - - 3,791/12,812 14,231/51,159
Andrew J. Dearman, III - - 3,164/11,128 12,010/45,182
SAVANNAH
Arthur M. Gignilliat, Jr. - - 75,138/0 550,074/0
G. Edison Holland, Jr. - - 22,443/20,048 129,070/85,268
Larry M. Porter - - 3,490/11,532 13,265/46,469
W. Miles Greer - - 3,261/10,317 12,395/41,299
Kirby R. Willis - - 3,000/9,771 11,401/39,284
1 This represents the excess of the fair market value of SOUTHERN's common stock
of $25.875 per share, as of December 31, 1997, above the exercise price of the
options. One column reports the "value" of options that are vested and therefore
could be exercised; the other the "value" of options that are not vested and
therefore could not be exercised as of December 31, 1997.
2 The "Value Realized" is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the time
of exercise over the exercise price.
III-22
LONG-TERM INCENTIVE PLANS - AWARDS IN 1997
Long-Term Incentive Plans. The following table sets forth the long-term
incentive plan awards made to the named executive officers for the performance
period January 1, 1997 through December 31, 2000.
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- ------------------------------------------------------------------------------------------------------------------
ALABAMA
Elmer B. Harris 285,784 4 years 142,892 285,784 571,568
Banks H. Farris 110,500 4 years 55,250 110,500 221,000
Charles D. McCrary 81,854 4 years 40,927 81,854 163,708
William B. Hutchins, III 81,854 4 years 40,927 81,854 163,708
GEORGIA
H. Allen Franklin 324,269 4 years 162,135 324,269 648,538
Warren Y. Jobe 81,854 4 years 40,927 81,854 163,708
Gene R. Hodges 81,854 4 years 40,927 81,854 163,708
Robert H. Haubein, Jr. 74,889 4 years 37,445 74,889 149,778
William C. Archer 81,854 4 years 40,927 81,854 163,708
GULF
Travis J. Bowden 134,814 4 years 67,407 134,814 269,628
Arlan E. Scarbrough 59,686 4 years 29,843 59,686 119,372
John E. Hodges, Jr. 59,686 4 years 29,843 59,686 119,372
Francis M. Fisher, Jr. 59,686 4 years 29,843 59,686 119,372
Robert G. Moore 29,610 4 years 14,805 29,610 59,220
See next page for footnotes.
III-23
LONG-TERM INCENTIVE PLANS - AWARDS IN 1997
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
Dwight H. Evans 134,814 4 years 67,407 134,814 269,628
H. E. Blakeslee 59,686 4 years 29,843 59,686 119,372
Don E. Mason 59,686 4 years 29,843 59,686 119,372
Michael W. Southern 42,635 4 years 21,318 42,635 85,270
Andrew J. Dearman, III 42,635 4 years 21,318 42,635 85,270
SAVANNAH
Arthur M. Gignilliat, Jr.3 N/A N/A N/A N/A N/A
G. Edison Holland, Jr. 59,686 4 years 29,843 59,686 119,372
Larry M. Porter 42,635 4 years 21,318 42,635 85,270
W. Miles Greer 42,635 4 years 21,318 42,635 85,270
Kirby R. Willis 42,635 4 years 21,318 42,635 85,270
1 A performance unit is a method of assigning a dollar value to a performance
award opportunity. Under the Productivity Improvement Plan (the "Plan") of
SOUTHERN, the number of units granted to named executive officers is 50 to 65
percent of their base salary range mid-point at the beginning of the performance
period, with each unit valued at $1.00. No awards are paid unless the
participant remains employed by the company through the end 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
and total shareholder return relative to selected groups of electric and gas
utilities. If certain minimum performance relative to the selected groups 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. The Plan provides that in the discretion of the committee
extraordinary income may be excluded for purposes of calculating the amount
available for the payment of awards. All awards are payable in cash at the end
of the performance period.
3 Not applicable due to Mr. Gignilliat's retirement on October 1, 1997.
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, Supplemental Defined Benefit, and
Supplemental Executive Retirement Plans in effect during 1997 for the named
executives at ALABAMA, GEORGIA, GULF and MISSISSIPPI and Messrs. Gignilliat and
Holland at SAVANNAH. Employee compensation covered by the Pension, Supplemental
Benefit, and Supplemental Executive Retirement Plans for pension purposes is
limited to the average of the highest three of the final 10 years' compensation
- -- base salary plus the excess of annual and long-term incentive compensation
over 25 percent of base salary (reported under column titled "Salary", "Bonus",
and "Long-Term Incentive Payouts" 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 $3,900 per year times the number of years of accredited
service, divided by the total possible years of accredited service to normal
retirement age.
Years of Accredited Service
Remuneration 15 20 25 30 35 40
- ------------ -----------------------------------------------------------------
$ 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
900,000 229,500 306,000 382,500 459,000 535,500 612,000
1,100,000 380,500 374,000 467,500 561,000 654,500 748,000
As of December 31, 1997, the applicable compensation levels and years
of accredited service are presented in the following tables:
ALABAMA
Compensation Accredited
Name Level Years of Service
Elmer B. Harris $839,724 39
Banks H. Farris 372,912 38
Charles D. McCrary 324,528 23
William B. Hutchins, III 306,456 31
III-25
GEORGIA
Compensation Accredited
Name Level Years of Service
H. Allen Franklin $908,664 26
Warren Y. Jobe1 334,656 26
Gene R. Hodges 331,092 33
Robert H. Haubein, Jr. 312,216 30
William C. Archer 258,780 26
GULF
Compensation Accredited
Name Level Years of Service
Travis J. Bowden2 $471,636 31
Arlan E. Scarbrough 236,436 34
John E. Hodges, Jr. 242,940 31
Francis M. Fisher, Jr. 218,364 26
Robert G. Moore 166,296 24
MISSISSIPPI
Compensation Accredited
Name Level Years of Service
Dwight H. Evans $360,732 26
H. E. Blakeslee 264,744 32
Don E. Mason 254,556 31
Michael W. Southern 205,272 22
Andrew J. Dearman, III 162,552 22
SAVANNAH
Compensation Accredited
Name Level Years of Service
Arthur M. Gignilliat $354,456 37
G. Edison Holland, Jr.3 255,768 15
Larry M. Porter 139,788 20
W. Miles Greer 133,860 13
Kirby R. Willis 126,180 23
1 The number of accredited years of service includes 8 years credited to Mr.
Jobe pursuant to a supplemental pension agreement.
2 The number of accredited years of service includes 10 years credited to
Mr. Bowden pursuant to a supplemental pension agreement.
3 The number of accredited years of service includes 10 years credited to
Mr. Holland pursuant to a supplemental pension agreement.
III-26
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 (excluding incentive
compensation) 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.
SAVANNAH also has in effect a supplemental executive retirement plan
for certain of its executive employees. The plan is designed to provide
participants 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 earnings
(excluding incentive compensation).
The following table sets forth the estimated combined annual pension
benefits under SAVANNAH's pension and supplemental executive retirement plans in
effect during 1997 which are payable to SAVANNAH's named executives, except
Messrs. Gignilliat and Holland who participate in the plans described on page
III-25, upon retirement at the normal retirement age after designated periods of
accredited service and at a specified compensation level.
Years of Accredited Service
Remuneration 15 25 35
- -------------------------- -- -- --
$ 90,000 $ 63,000 $ 63,000 $ 63,000
120,000 84,000 84,000 84,000
150,000 105,000 105,000 105,000
180,000 126,000 126,000 126,000
210,000 147,000 147,000 147,000
260,000 182,000 182,000 182,000
280,000 196,000 196,000 196,000
300,000 210,000 210,000 210,000
III-27
Compensation of Directors.
Standard Arrangements. The following table presents compensation paid
to the directors, during 1997 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 payable in cash may be deferred under
the Deferred Compensation Plan until membership on the board is terminated or
may be payable in SOUTHERN common stock at the election of the director.
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
Cash Retainer Fee $17,000 $20,000 $10,000 $10,000 $10,000
Stock Retainer Fee $3,000 $3,000 $2,000 $2,000 $2,000
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 - - -
Effective January 1, 1997, the Outside Directors Pension Plan (the
"Plan") was terminated and benefits payable under the Plan were frozen.
Non-employee directors serving as of January 1, 1997, were given a one-time
election to receive a Plan benefit buy-out equal to the actuarial present value
of future Plan benefits or receive benefits under the terms of the Plan at the
annual retainer rate in effect on December 31, 1996. Directors who elected to
receive the benefit buy-out were required to defer receipt of that amount under
the Deferred Compensation Plan until termination from board membership.
Directors who elected to continue to participate under the terms of the Plan are
entitled to benefits 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 percent of the annual retainer
in effect on December 31, 1996, if the participant has at least 60 months of
service on the board of one or more system companies, to 100 percent if the
participant has at least 120 months of such service. Payments will 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, 1997 in addition to
or in lieu of that specified by the standard arrangements specified above.
III-28
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
None.
Report on Repricing of Options.
None.
Compensation Committee Interlocks and Insider Participation.
None.
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.
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
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
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, 1997. 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, 1997.
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned1,2
ALABAMA
Whit Armstrong SOUTHERN Common 16,028
A. William Dahlberg SOUTHERN Common 255,790
Peter V. Gregerson, Sr. SOUTHERN Common 439
Bill M. Guthrie SOUTHERN Common 139,031
Elmer B. Harris SOUTHERN Common 204,339
Carl E. Jones, Jr. SOUTHERN Common 10,641
Patricia M. King SOUTHERN Common 34
James K. Lowder SOUTHERN Common 4,721
III-30
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned1,2
Wallace D. Malone, Jr. SOUTHERN Common 400
William V. Muse SOUTHERN Common 439
John T. Porter SOUTHERN Common 850
Robert D. Powers SOUTHERN Common 439
C. Dowd Ritter SOUTHERN Common 34
John W. Rouse, Jr. SOUTHERN Common 4,694
William J. Rushton, III SOUTHERN Common 7,607
ALABAMA Preferred 20
James H. Sanford SOUTHERN Common 400
John C. Webb, IV SOUTHERN Common 19,237
Banks H. Farris SOUTHERN Common 16,802
William B. Hutchins, III SOUTHERN Common 46,463
Charles D. McCrary SOUTHERN Common 30,576
The directors, nominees,
and executive officers
as a group SOUTHERN Common 758,964
ALABAMA Preferred 20
GEORGIA
Daniel P. Amos SOUTHERN Common 2,601
Juanita P. Baranco SOUTHERN Common 51
A. William Dahlberg SOUTHERN Common 255,790
W. A. Fickling, Jr. SOUTHERN Common 908
III-31
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned1,2
H. Allen Franklin SOUTHERN Common 146,255
L. G. Hardman III SOUTHERN Common 14,816
Warren Y. Jobe SOUTHERN Common 60,369
GEORGIA Preferred 200
James R. Lientz, Jr. SOUTHERN Common 617
G. Joseph Prendergast SOUTHERN Common 659
Herman J. Russell SOUTHERN Common 8,414
Gloria M. Shatto SOUTHERN Common 17,459
GEORGIA Preferred 1,200
W. J. Vereen SOUTHERN Common 5,376
Carl Ware SOUTHERN Common 108
Thomas R. Williams SOUTHERN Common 398
GEORGIA Preferred 1,000
William C. Archer, III SOUTHERN Common 18,918
GEORGIA Preferred 666
Robert H. Haubein, Jr. SOUTHERN Common 27,243
Gene R. Hodges SOUTHERN Common 40,856
The directors, nominees
and executive officers
as a group SOUTHERN Common 690,473
GEORGIA Preferred 3,066
III-32
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned1,2
GULF
Travis J. Bowden SOUTHERN Common 98,742
Paul J. DeNicola SOUTHERN Common 109,746
Fred C. Donovan SOUTHERN Common 1,059
W. Deck Hull, Jr. SOUTHERN Common 2,753
Joseph K. Tannehill SOUTHERN Common 4,344
Barbara H. Thames SOUTHERN Common 78
Francis M Fisher, Jr. SOUTHERN Common 10,212
John E. Hodges, Jr. SOUTHERN Common 43,001
Robert G. Moore SOUTHERN Common 17,857
Arlan E. Scarbrough SOUTHERN Common 28,457
The directors, nominees
and executive officers
as a group SOUTHERN Common 316,248
MISSISSIPPI
Paul J. DeNicola SOUTHERN Common 109,746
Edwin E. Downer SOUTHERN Common 2,671
Dwight H. Evans SOUTHERN Common 51,740
GEORGIA Preferred 400
MISSISSIPPI Preferred 200
SOUTHERN Preferred 200
Robert S. Gaddis SOUTHERN Common 3,019
III-33
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned1,2
Walter H. Hurt, III SOUTHERN Common 1,291
MISSISSIPPI Preferred 33
Aubrey K. Lucas SOUTHERN Common 3,581
George A. Schloegel SOUTHERN Common 389
Philip J. Terrell SOUTHERN Common 632
N. Eugene Warr SOUTHERN Common 688
H. E. Blakeslee SOUTHERN Common 26,953
Andrew J. Dearman, III SOUTHERN Common 11,674
Don E. Mason SOUTHERN Common 27,313
Michael W. Southern SOUTHERN Common 7,430
The directors, nominees
and executive officers
as a group SOUTHERN Common 247,127
GEORGIA Preferred 400
MISSISSIPPI Preferred 233
SOUTHERN Preferred 200
SAVANNAH
Archie H. Davis SOUTHERN Common 108
Paul J. DeNicola SOUTHERN Common 109,746
Walter D. Gnann SOUTHERN Common 1,334
G. Edison Holland SOUTHERN Common 24,416
Robert B. Miller, III SOUTHERN Common 2,318
Arnold M. Tenenbaum SOUTHERN Common 699
III-34
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
W. Miles Greer SOUTHERN Common 5,817
Larry M. Porter SOUTHERN Common 19,297
Kirby R. Willis SOUTHERN Common 8,054
The directors, nominees
and executive officers
as a group SOUTHERN Common 171,788
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, 19,875 shares; Mr. Bowden, 65,767 shares; Mr. Dahlberg, 193,347 shares; Mr. DeNicola, 75,791
shares; Mr. Evans, 31,172 shares; Mr. Farris, 13,662 shares; Mr. Franklin, 120,384 shares; Mr. Greer, 3,261
shares; Mr. Guthrie, 91,055 shares; Mr. Harris, 150,793 shares; Mr. Haubein, 24,693 shares; Mr. G. R. Hodges,
25,873 shares; Mr. J. E. Hodges, 19,172 shares; Mr. Holland, 22,443 shares; Mr. Hutchins, 23,799 shares; Mr.
Jobe, 30,094 shares; Mr. Mason, 5,577 shares; Mr. McCrary, 24,067 shares; Mr. Porter, 3,490 shares; Mr.
Scarbrough, 5,507 shares; Mr. Southern, 3,791 shares; and Mr. Willis, 3,000 shares. Also included are shares of
SOUTHERN common stock held by the spouses of the following directors: Mr. Bowden, 500 shares; Mr. Gaddis, 1,200
shares; Mr. Hardman, 100 shares; Mr. Harris, 310 shares; and Dr. Shatto, 13,438 shares. Also included are shares
of common stock held in the Southern Company Deferred Stock Trust of which certain directors have the power to
direct the voting, as follows: Mr. Hardman, 6,019 shares; Mr. Rushton, 400 shares and Dr. Shatto, 400 shares.
Also included are 1,200 shares of GEORGIA preferred stock held by Dr. Shatto's spouse.
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 President and
Chief Executive Officer of Regions Financial Corporation, Birmingham, Alabama;
Mr. Wallace D. Malone is Chairman and Chief Executive Officer of SouthTrust
Corporation, Birmingham, Alabama. Mr. Ritter is Chairman, President, Chief
Executive Officer and Director of AmSouth Bancorporation and AmSouth Bank,
Birmingham, Alabama. During 1997, 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 1997, 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 1997, GEORGIA leased a building from Riverside Manufacturing Co. for
approximately $80,511. Also, Riverside Manufacturing sold to GEORGIA fire
retardant uniforms for $104,687. 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. Deck Hull, Jr. was Vice Chairman of SunTrust Bank, West Florida,
Panama City, Florida from 1993 to 1997. During 1997, this bank 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 bank in the
future.
In 1997, GULF paid to Merrick Industries, Inc. $303,782 for replacement
parts for existing equipment and for the purchase and installation of coal
feeders for Plant Smith. Mr. Tannehill is President and Chief Executive Officer
of Merrick Industries, Inc.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
MISSISSIPPI
Transactions with management and others.
Mr. Robert S. Gaddis is Chairman of the Advisory Board of Trustmark
National Bank, Laurel, Mississippi; Mr. George A. Schloegel is President of
Hancock Bank, Gulfport, Mississippi. During 1997, 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.
None
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 1997 were as follows:
ALABAMA filed a Current Report on Form 8-K:
Date of event: December 4, 1997
Items reported: Items 5 and 7
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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 J. Rushton, III
Paul J. DeNicola Gloria M. Shatto
Jack Edwards Gerald J. St. Pe'
H. Allen Franklin Herbert Stockham
Bruce S. Gordon
L. G. Hardman III
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Art P. Beattie
Vice President, Secretary and Comptroller
(Principal Accounting Officer)
Directors:
Whit Armstrong John T. Porter
Peter V. Gregerson, Sr. Robert D. Powers
Bill M. Guthrie Andreas Renschler
Carl E. Jones, Jr. C. Dowd Ritter
Patricia M. King John W. Rouse
James K. Lowder James H. Sanford
Wallace D. Malone, Jr. John Cox Webb, IV
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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, Chief Financial Officer and Director
(Principal Financial Officer)
Cliff S. Thrasher
Vice President, Comptroller and Chief Accounting Officer
(Principal Accounting Officer)
Directors:
Daniel P. Amos G. Joseph Prendergast
Juanita P. Baranco Herman J. Russell
A. W. Dahlberg Gloria M. Shatto
William A. Fickling, Jr. William Jerry Vereen
L. G. Hardman III Carl Ware
James R. Lientz, Jr. Thomas R. Williams
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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)
Arlan E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
Directors:
Paul J. DeNicola Joseph K. Tannehill
Fred C. Donovan Barbara H. Thames
W. Deck Hull, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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 Gene Warr
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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: G. Edison Holland, Jr., President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
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.
G. Edison Holland, 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:
Archie H. Davis Robert B. Miller, III
Paul J. DeNicola Arnold M. Tenenbaum
Walter D. Gnann
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 30, 1998
IV-4
Exhibit 21. Subsidiaries of the Registrants.*
Jurisdiction of
Name of Company Organization
-----------------------------------------------------------------------------------------------------------------------
The Southern Company Delaware
Southern Company Capital Trust I Delaware
Southern Company Capital Trust II Delaware
Southern Company Capital Trust III Delaware
Alabama Power Company Alabama
Alabama Power Capital Trust I Delaware
Alabama Power Capital Trust II Delaware
Alabama Power Capital Trust III Delaware
Alabama Power Capital Trust IV Delaware
Alabama Power Capital Trust V Delaware
Alabama Property Company Alabama
Southern Electric Generating Company Alabama
Georgia Power Company Georgia
Georgia Power Capital Trust I Delaware
Georgia Power Capital Trust II Delaware
Georgia Power Capital Trust III Delaware
Georgia Power Capital Trust IV Delaware
Georgia Power Capital Trust V Delaware
Georgia Power Capital Trust VI Delaware
Georgia Power L.P. Holdings Corp. Georgia
Georgia Power Capital, L.P. Delaware
Piedmont-Forrest Corporation Georgia
Southern Electric Generating Company Alabama
Gulf Power Company Maine
Gulf Power Capital Trust I Delaware
Gulf Power Capital Trust II Delaware
Gulf Power Capital Trust III Delaware
Mississippi Power Company Mississippi
Mississippi Power Capital Trust I Delaware
Mississippi Power Capital Trust II Delaware
Mississippi Power Capital Trust III Delaware
Savannah Electric and Power Company Georgia
Southern Energy, Inc. Delaware
--------------------------------------------------------------------------------------------- --- ---------------------
*This information is as of December 31, 1997. In addition, the list omits
certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K Item
601.
IV-5
Exhibit 23(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of The
Southern Company and its subsidiaries and the related financial statement
schedule, included in this Form 10-K, into The Southern Company's previously
filed Registration Statement File Nos. 2-78617, 33-3546, 33-30171, 33-51433,
33-54415, 33-57951, 33-58371, 33-60427, 333-09077, 333-44127 and 333-44261.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1998
IV-6
Exhibit 23(b)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of Alabama
Power Company and the related financial statement schedule, included in this
Form 10-K, into Alabama Power Company's previously filed Registration Statement
File Nos. 33-49653, 33-61845 and 333-40629.
/s/ Arthur Andersen LLP
Birmingham, Alabama
March 27, 1998
IV-7
Exhibit 23(c)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of Georgia
Power Company and the related financial statement schedule, included in this
Form 10-K, into Georgia Power Company's previously filed Registration Statement
File Nos. 33-60345 and 333-43895.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1998
IV-8
Exhibit 23(d)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of Gulf Power
Company and the related financial statement schedule, included in this Form
10-K, into Gulf Power Company's previously filed Registration Statement File
Nos. 33-50165 and 333-42033.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1998
IV-9
Exhibit 23(e)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of
Mississippi Power Company and the related financial statement schedule, included
in this Form 10-K, into Mississippi Power Company's previously filed
Registration Statement File Nos. 33-49649, 333-20469 and 333-45069.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1998
IV-10
Exhibit 23(f)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 11, 1998 on the financial statements of Savannah
Electric and Power Company and the related financial statement schedule,
included in this Form 10-K, into Savannah Electric and Power Company's
previously filed Registration Statement File Nos. 33-52509 and 333-46171.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1998
IV-11
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-12
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-13
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-14
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-15
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-16
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 11, 1998. 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 11, 1998
IV-17
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page
II Valuation and Qualifying Accounts and Reserves
1997, 1996 and 1995
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, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
----------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
----------------------------------- ------------------------ -------------- ------------------- --------------- ----------------
Provision for uncollectible
accounts
1997.......................... $31,587 $35,930 $36,290 (2) $26,751 $77,056
1996.......................... 37,119 24,768 48 30,348 (1) 31,587
1995.......................... 9,129 30,445 23,053 (3) 25,508 (1) 37,119
- -------------------
Notes:
(1) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.
(2) Includes the addition of a Purchased Reserve in the amount of $37,000
related to the acquisition of CEPA.
(3) Includes the addition of a Purchased Reserve in the amount of
$23,027 related to the acquisition of SWEB.
S-2
ALABAMA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- -------------------------- --------------- ------------------ -------------------------------
Provision for uncollectible
accounts
1997.......................... $1,171 $8,580 $- $7,479 (Note) $2,272
1996.......................... 1,212 8,214 - 8,255 (Note) 1,171
1995.......................... 2,297 5,823 - 6,908 (Note) 1,212
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-3
GEORGIA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
--------------------------------- ----------------------- -------------- ------------------ ----------------- ----------------
Provision for uncollectible
accounts
1997.......................... $4,000 $ 7,888 $- $ 8,888 (Note) $3,000
1996.......................... 5,000 11,815 - 12,815 (Note) 4,000
1995.......................... 4,500 15,875 - 15,375 (Note) 5,000
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-4
GULF POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- ------------------------ --------------- ------------------ ---------------- ---------------
Provision for uncollectible
accounts
1997.......................... $789 $1,350 $- $1,343 (Note) $796
1996.......................... 768 1,850 7 1,836 (Note) 789
1995.......................... 600 1,612 3 1,447 (Note) 768
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-5
MISSISSIPPI POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- ------------------------- -------------- ------------------ ---------------- ---------------
Provision for uncollectible
accounts
1997.......................... $839 $1,128 $56 $1,325 (Note) $698
1996.......................... 802 1,726 41 1,730 (Note) 839
1995.......................... 670 1,602 23 1,493 (Note) 802
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-6
SAVANNAH ELECTRIC AND POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Stated in Thousands of Dollars)
Additions
-------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------ ---------------------- ------------ ------------------ --------------- -----------------
Provision for uncollectible
accounts
1997.......................... $632 $192 $- $470 (Note) $354
1996.......................... 983 126 - 477 (Note) 632
1995.......................... 866 439 - 322 (Note) 983
- -------------------
Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written
off.
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. (Designated in
GEORGIA's Form 10-K for the year ended December 31, 1995, as
Exhibit 1(c).)
(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 - Amendment to the Charter of ALABAMA dated December 15, 1997.
(b) 3 - 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.)
E-1
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 - Amendment to the Charter of GEORGIA dated January 26,
1998.
(c) 3 - 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 - Amendment to the Restated Articles of Incorporation of
GULF dated January 28, 1998.
(d) 3 - By-laws of GULF as amended effective July 26, 1996, and as
presently in effect. (Designated in Form U-1, File No.
70-8949, as Exhibit A-2(c).)
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
* (e) 2 - Article of Amendment to the Articles of Incorporation
of MISSISSIPPI dated December 31, 1997.
(e) 3 - By-laws of MISSISSIPPI as amended effective April 2, 1996,
and as presently in effect. (Designated in Form U5S for 1995,
File No. 30-222-2, as Exhibit B-10.)
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
SOUTHERN
(a) 1 - Subordinated Note Indenture dated as of February 1, 1997,
between SOUTHERN, Southern Company Capital Funding, Inc. and
Bankers Trust Company, as Trustee, and indentures supplemental
thereto dated as of February 4, 1997. (Designated in
Registration Nos. 333-28349 as Exhibits 4.1 and 4.2 and
333-28355 as Exhibit 4.2.)
* (a) 2 - Subordinated Note Indenture dated as of June 1, 1997,
between SOUTHERN, Southern Company Capital Funding, Inc. and
Bankers Trust Company, as Trustee, and indenture supplemental
thereto dated as of June 6, 1997.
(a) 3 - Amended and Restated Trust Agreement of Southern Company
Capital Trust I dated as of February 1, 1997. (Designated in
Registration No. 333-28349 as Exhibit 4.6)
(a) 4 - Amended and Restated Trust Agreement of Southern Company
Capital Trust II dated as of February 1, 1997. (Designated in
Registration No. 333-28355 as Exhibit 4.6)
* (a) 5 - Amended and Restated Trust Agreement of Southern
Company Capital Trust III dated as of June 1, 1997.
(a) 6 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust I dated as of February 1, 1997.
(Designated in Registration No. 333-28349 as Exhibit 4.10)
E-3
(a) 7 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust II dated as of February 1,
1997. (Designated in Registration No. 333-28355 as Exhibit
4.10)
* (a) 8 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust III dated as of June 1, 1997.
ALABAMA
(b) 1 - Indenture dated as of January 1, 1942, between ALABAMA and
The Chase Manhattan Bank (formerly 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. 1-3164, as Exhibit 4(a)-3, in Form
8-K dated February 17, 1993, File No. 1-3164, as Exhibit
4(a)-3, in Form 8-K dated March 10, 1993, File No. 1-3164, 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. 1-3164, as Exhibit 4, in Certificate of Notification,
File No. 70-8069, as Exhibit A, in Form 8-K dated November 16,
1993, File No. 1-3164, 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. 1-3164, as
Exhibit 4.)
(b) 2 - Subordinated Note Indenture dated as of January 1, 1996,
between ALABAMA and The Chase Manhattan Bank (formerly
Chemical Bank), as Trustee, and indenture supplemental thereto
dated as of January 1, 1996. (Designated in Certificate of
Notification, File No. 70-8461, as Exhibits E and F.)
(b) 3 - Subordinated Note Indenture dated as of January 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of January 1, 1997.
(Designated in Form 8-K dated January 9, 1997, File No.
1-3164, as Exhibits 4.1 and 4.2.)
(b) 4 - Senior Note Indenture dated as of December 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as Trustee, and
indentures supplemental thereto through that dated February
26, 1998. (Designated in Form 8-K dated December 4, 1997, File
No. 1-3164, as Exhibits 4.1 and 4.2 and in Form 8-K dated
February 20, 1998, File No. 1-3164, as Exhibit 4.2.)
(b) 5 - Amended and Restated Trust Agreement of Alabama Power
Capital Trust I dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit D.)
E-4
(b) 6 - Amended and Restated Trust Agreement of Alabama Power
Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibit
4.5.)
(b) 7 - Guarantee Agreement relating to Alabama Power Capital
Trust I dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit G.)
(b) 8 - Guarantee Agreement relating to Alabama Power Capital
Trust II dated as of January 1, 1997. (Designated in Form 8-K
dated January 9, 1997, File No. 1-3164, as Exhibit 4.8.)
GEORGIA
(c) 1 - Indenture dated as of March 1, 1941, between GEORGIA and
The Chase Manhattan Bank (formerly 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
October 15, 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, in Form 8-K dated May 17, 1995, File No. 1-6468, as Exhibit
4 and in GEORGIA's Form 10-K for the year ended December 31,
1995, File No. 1-6468, as Exhibits 4(c)2, 4(c)3, 4(c)4, 4(c)5
and 4(c)6.)
E-5
(c) 2 - 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.)
(c) 3 - Subordinated Note Indenture dated as of August 1, 1996,
between GEORGIA and The Chase Manhattan Bank, as Trustee, and
indentures supplemental thereto through January 1, 1997.
(Designated in Form 8-K dated August 21, 1996, File No.
1-6468, as Exhibits 4.1 and 4.2 and in Form 8-K dated January
9, 1997, File No. 1-6468, as Exhibit 4.2.)
(c) 4 - Subordinated Note Indenture dated as of June 1, 1997,
between GEORGIA and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of June 11, 1997.
(Designated in Certificate of Notification, File No. 70-8461,
as Exhibits D and E.)
(c) 5 - Senior Note Indenture dated as of January 1, 1998, between
GEORGIA and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of January 27, 1998.
(Designated in Form 8-K dated January 21, 1998, File No.
1-6468, as Exhibits 4.1 and 4.2.)
(c) 6 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust I dated as of August 1, 1996. (Designated in
Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit
4.5.)
(c) 7 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit
4.5.)
(c) 8 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust III dated as of June 1, 1997. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit C.)
(c) 9 - Guarantee Agreement relating to Georgia Power Capital
Trust I dated as of August 1, 1996. (Designated in Form 8-K
dated August 21, 1996, File No. 1-6468, as Exhibit 4.8.)
(c) 10 - Guarantee Agreement relating to Georgia Power Capital
Trust II dated as of January 1, 1997. (Designated in Form 8-K
dated January 9, 1997, File No. 1-6468, as Exhibit 4.8.)
(c) 11 - Guarantee Agreement relating to Georgia Power Capital
Trust III dated as of June 1, 1997. (Designated in Certificate
of Notification, File No. 70-8461, as Exhibit F.)
E-6
GULF
(d) 1 - Indenture dated as of September 1, 1941, between GULF and
The Chase Manhattan Bank (formerly The Chase Manhattan Bank
(National Association)), as Trustee, and indentures
supplemental thereto through November 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, in
Certificate of Notification, File No. 70-8229, as Exhibit A,
in Certificate of Notification, File No. 70-8229, as Exhibit A
and in Form 8-K dated November 6, 1996, File No. 0-2429, as
Exhibit 4.)
(d) 2 - Subordinated Note Indenture dated as of January 1, 1997,
between GULF and The Chase Manhattan Bank, as Trustee, and
indentures supplemental thereto through that dated as of
January 1, 1998. (Designated in Form 8-K dated January 27,
1997, File No. 0-2429, as Exhibits 4.1 and 4.2, in Form 8-K
dated July 28, 1997, File No. 0-2429, as Exhibit 4.2 and in
Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit
4.2.)
(d) 3 - Amended and Restated Trust Agreement of Gulf Power Capital
Trust I dated as of January 1, 1997. (Designated in Form 8-K
dated January 27, 1997, File No. 0-2429, as Exhibit 4.5.)
(d) 4 - Amended and Restated Trust Agreement of Gulf Power Capital
Trust II dated as of January 1, 1998. (Designated in Form 8-K
dated January 13, 1998, File No. 0-2429, as Exhibit 4.5.)
(d) 5 - Guarantee Agreement relating to Gulf Power Capital Trust I
dated as of January 1, 1997. (Designated in Form 8-K dated
January 27, 1997, File No. 0-2429, as Exhibit 4.8.)
(d) 6 - Guarantee Agreement relating to Gulf Power Capital Trust
II dated as of January 1, 1998. (Designated in Form 8-K dated
January 13, 1998, File No. 0-2429, as Exhibit 4.8.)
MISSISSIPPI
(e) 1 - 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
E-7
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.)
(e) 2 - Subordinated Note Indenture dated as of February 1, 1997,
between MISSISSIPPI and Bankers Trust Company, as Trustee, and
indenture supplemental thereto dated as of February 1, 1997.
(Designated in Form 8-K dated February 20, 1997, File No.
0-6849, as Exhibits 4.1 and 4.2.)
(e) 3 - Amended and Restated Trust Agreement of Mississippi Power
Capital Trust I dated as of February 1, 1997. (Designated in
Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibit
4.5.)
(e) 4 - Guarantee Agreement relating to Mississippi Power Capital
Trust I dated as of February 1, 1997. (Designated in Form 8-K
dated February 20, 1997, File No. 0-6849, as Exhibit 4.8.)
SAVANNAH
(f) 1 - Indenture dated as of March 1, 1945, between SAVANNAH and
The Bank of New York, New York, as Trustee, and indentures
supplemental thereto through May 1, 1996. (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, in Form 8-K dated May 18, 1995, File No.
1-5072, as Exhibit 4 and in Form 8-K dated May 23, 1996, File
No. 1-5072, as Exhibit 4.)
(f) 2 - Senior Note Indenture dated as of March 1, 1998 between
SAVANNAH and The Bank of New York, as Trustee and indenture
supplemental thereto dated as of March 1, 1998. (Designated in
Form 8-K dated March 9, 1998, File No. 1-5072, as Exhibits 4.1
and 4.2.)
(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).)
E-8
(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.)
E-9
(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 - Nuclear Operating Agreement between Southern Nuclear
and GEORGIA dated as of July 1, 1993.
* (a) 22 - Pseudo Scheduling and Services Agreement between
GEORGIA and MEAG dated as of April 8, 1997.
(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).)
E-10
(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.)
E-11
(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).)
E-12
(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 - Revised and Restated Coordination Services Agreement
between and among GEORGIA, OPC and Georgia Systems Operations
Corporation dated as of September 10, 1997.
(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.)
E-13
(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 - The Southern Company Productivity Improvement Plan,
Amended and Restated effective January 1, 1997.
* (a) 60 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997.
E-14
(a) 61 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1995, File No. 1-3526, as
Exhibit 10(a)63, in SOUTHERN's Form 10-K for the year ended
December 31, 1996, File No. 1-3526, as Exhibit 10(a)64 and in
Registration No. 333-44261 as Exhibit 4(e).)
(a) 62 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. (Designated
in SOUTHERN's Form 10-K for the year ended December 31, 1995,
File No. 1-3526, as Exhibit 10(a)64 and in SOUTHERN's Form
10-K for the year ended December 31, 1996, File No. 1-3526, as
Exhibit 10(a)66.)
* (a) 63 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan.
(a) 64 - Pension Plan For Employees of ALABAMA, Amended and
Restated effective as of January 1, 1989 and all amendments
thereto through Amendment Number Three. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1994,
File No. 1-3526, as Exhibit 10(a)69 and in SOUTHERN's Form
10-K for the year ended December 31, 1996, File No. 1-3526, as
Exhibit 10(a)68.)
(a) 65 - Pension Plan For Employees of GEORGIA, Amended and
Restated effective as of January 1, 1989 and all amendments
thereto through Amendment Number Three. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1994,
File No. 1-3526, as Exhibit 10(a)70 and in SOUTHERN's Form
10-K for the year ended December 31, 1996, File No. 1-3526, as
Exhibit 10(a)70.)
(a) 66 - Pension Plan For Employees of SCS, Amended and Restated
effective as of January 1, 1989 and all amendments thereto
through Amendment Number Four. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1994, File No. 1-3526, as
Exhibit 10(a)71, in SOUTHERN's Form 10-K for the year ended
December 31, 1995, File No. 1-3526, as Exhibit 10(a)68 and in
SOUTHERN's Form 10-K for the year ended December 31, 1996,
File No. 1-3526, as Exhibit 10(a)72.)
(a) 67 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1996, File No.
1-3526, as Exhibit 10(a)73.)
* (a) 68 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan.
(a) 69 - Supplemental Benefit Plan for ALABAMA. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995,
File No. 1-3526, as Exhibit 10(a)71.)
(a) 70 - Supplemental Benefit Plan for GEORGIA. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995,
File No. 1-3526, as Exhibit 10(a)72.)
E-15
(a) 71 - Supplemental Benefit Plan for SCS and SEI, Amended and
Restated effective as of January 1, 1996. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1996,
File No. 1-3526, as Exhibit 10(a)76.)
(a) 72 - The Deferred Compensation Plan for the Directors of The
Southern Company and First Amendment and Second Amendment
thereto. (Designated in SOUTHERN's Form 10-K for the year
ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)76
and in SOUTHERN's Form 10-K for the year ended December 31,
1995, File No. 1-3526, as Exhibit 10(a)75.)
(a) 73 - 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) 74 - The Southern Company Deferred Compensation Plan.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1995, File No. 1-3526, as Exhibit 10(a)77.)
(a) 75 - The Southern Company Outside Directors Stock Plan and
First Amendment thereto. (Designated in Registration No.
33-54415 as Exhibit 4(c) and in SOUTHERN's Form 10-K for the
year ended December 31, 1995, File No. 1-3526, as Exhibit
10(a)79.)
(a) 76 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995,
File No. 1-3526, as Exhibit 10(a)80.)
* (a) 77 - The Southern Company Performance Dividend Plan.
(a) 78 - The Southern Company Pension Plan, effective as of
January 1, 1997. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1996, File No. 1-3526, as Exhibit
10(a)83.)
* (a) 79 - Amendment Number One to The Southern Company Pension
Plan.
* (a) 80 - The Southern Company Performance Stock Plan.
* (a) 81 - The Southern Company Supplemental Executive
Retirement Plan.
* (a) 82 - The Southern Company Performance Sharing Plan.
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.
E-16
(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.
E-17
(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, 1997. See Exhibit
10(a)59 herein.
* (b) 20 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997. See Exhibit
10(a)60 herein.
(b) 21 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. See Exhibit 10(a)61 herein.
(b) 22 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (b) 23 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(b) 24 - Pension Plan For Employees of ALABAMA, Amended and
Restated effective as of January 1, 1989 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)64
herein.
(b) 25 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)67
herein.
* (b) 26 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan. See Exhibit 10(a)68
herein.
(b) 27 - Supplemental Benefit Plan for ALABAMA. See Exhibit
10(a)69 herein.
(b) 28 - The Southern Company Deferred Compensation Plan. See
Exhibit 10(a)74 herein.
(b) 29 - The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)73 herein.
E-18
(b) 30 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit
10(a)76 herein.
(b) 31 - The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)78 herein.
* (b) 32 - Amendment Number One to The Southern Company Pension
Plan. See Exhibit 10(a)79 herein.
* (b) 33 - The Southern Company Performance Stock Plan. See
Exhibit 10(a)80 herein.
* (b) 34 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)81 herein.
* (b) 35 - The Southern Company Performance Dividend Plan. See
Exhibit 10(a)77 herein.
* (b) 36 - The Southern Company Performance Sharing Plan. See
Exhibit 10(a)82 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.
E-19
(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 - Nuclear Operating Agreement between Southern Nuclear
and GEORGIA dated as of July 1, 1993. See Exhibit 10(a)21
herein.
* (c) 18 - Pseudo Scheduling and Services Agreement between
GEORGIA and MEAG dated as of April 8, 1997. 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
E-20
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.
E-21
(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 - Revised and Restated Coordination Services Agreement
between and among GEORGIA, OPC and Georgia Systems Operations
Corporation dated as of September 10, 1997. 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.
E-22
(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 - The Southern Company Productivity Improvement Plan,
Amended and Restated effective January 1, 1997. See Exhibit
10(a)59 herein.
* (c) 55 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997. See Exhibit
10(a)60 herein.
(c) 56 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. See Exhibit 10(a)61 herein.
(c) 57 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (c) 58 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(c) 59 - Pension Plan For Employees of GEORGIA, Amended and
Restated effective as of January 1, 1989 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)65
herein.
(c) 60 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)67
herein.
* (c) 61 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan. See Exhibit 10(a)68
herein.
(c) 62 - Supplemental Benefit Plan for GEORGIA. See Exhibit
10(a)70 herein.
E-23
(c) 63 - The Southern Company Deferred Compensation Plan. See
Exhibit 10(a)74 herein.
(c) 64 - The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)73 herein.
(c) 65 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit
10(a)76 herein.
(c) 66 - The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)78 herein.
* (c) 67 - Amendment Number One to The Southern Company Pension
Plan. See Exhibit 10(a)79 herein.
* (c) 68 - The Southern Company Performance Stock Plan. See
Exhibit 10(a)80 herein.
* (c) 69 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)81 herein.
* (c) 70 - The Southern Company Performance Dividend Plan. See
Exhibit 10(a)77 herein.
* (c) 71 - The Southern Company Performance Sharing Plan. See
Exhibit 10(a)82 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.
E-24
(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, 1997. See Exhibit
10(a)59 herein.
* (d) 16 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997. See Exhibit
10(a)60 herein.
(d) 17 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. See Exhibit 10(a)61 herein.
(d) 18 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (d) 19 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
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(d) 20 - Pension Plan For Employees of GULF, Amended and Restated
effective as of January 1, 1989 and all amendments thereto
through Amendment Number Three. (Designated in GULF's Form
10-K for the year ended December 31, 1994, File No. 0-2429, as
Exhibit 10(d)18 and in GULF's Form 10-K for the year ended
December 31, 1996, File No. 0-2429, as Exhibit 10(d)22.)
(d) 21 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)67
herein.
* (d) 22 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan. See Exhibit 10(a)68
herein.
(d) 23 - Supplemental Benefit Plan for GULF. (Designated in GULF's
Form 10-K for the year ended December 31, 1995, File No.
0-2429, as Exhibit 10(d)22.)
(d) 24 - The Southern Company Deferred Compensation Plan. See
Exhibit 10(a)74 herein.
(d) 25 - The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)73 herein.
(d) 26 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit
10(a)76 herein.
(d) 27 - The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)78 herein.
* (d) 28 - Amendment Number One to The Southern Company Pension
Plan. See Exhibit 10(a)79 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.
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(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, 1997. See Exhibit
10(a)59 herein.
* (e) 15 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997. See Exhibit
10(a)60 herein.
(e) 16 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. See Exhibit 10(a)61 herein.
(e) 17 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
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* (e) 18 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(e) 19 - Pension Plan For Employees of MISSISSIPPI, Amended and
Restated effective as of January 1, 1989 and all amendments
thereto through Amendment Number Three. (Designated in
MISSISSIPPI's Form 10-K for the year ended December 31, 1994,
File No. 0-6849, as Exhibit 10(e)18 and in MISSISSIPPI's Form
10-K for the year ended December 31, 1996, File No. 0-6849, as
Exhibit 10(e)21.)
(e) 20 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)67
herein.
* (e) 21 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan. See Exhibit 10(a)68
herein.
(e) 22 - Supplemental Benefit Plan for MISSISSIPPI, Amended and
Restated effective as of January 1, 1996. (Designated in
MISSISSIPPI's Form 10-K for the year ended December 31, 1996,
File No. 0-6849, as Exhibit 10(e)23.)
(e) 23 - The Southern Company Deferred Compensation Plan. See
Exhibit 10(a)74 herein.
(e) 24 - The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)73 herein.
(e) 25 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit
10(a)76 herein.
(e) 25 - The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)78 herein.
* (e) 26 - Amendment Number One to The Southern Company Pension
Plan. See Exhibit 10(a)79 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.
E-28
(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, 1997. See Exhibit
10(a)59 herein.
* (f) 12 - The Southern Company Executive Productivity
Improvement Plan, effective January 1, 1997. See Exhibit
10(a)60 herein.
(f) 13 - The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and all amendments thereto
through Amendment Number Six. See Exhibit 10(a)61 herein.
(f) 14 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective April 1, 1995 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (f) 15 - Amendment Number Three to The Southern Company
Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
* (f) 16 - Employees' Retirement Plan of SAVANNAH, Amended and
Restated effective January 1, 1997.
(f) 17 - Supplemental Executive Retirement Plan of SAVANNAH,
Amended and Restated effective January 1, 1996 and Amendment
Number One thereto. (Designated in SAVANNAH's Form 10-K for
the year ended December 31, 1995, File No. 1-5072, as Exhibit
10(f)17 and in SAVANNAH's Form 10-K for the year ended
December 31, 1996, File No. 1-5072, as Exhibit 10(f)20.)
E-29
* (f) 18 - Amendment Number Two to The Supplemental Executive
Retirement Plan of SAVANNAH.
(f) 19 - Deferred Compensation Plan for Key Employees of SAVANNAH
and all amendments thereto through Amendment Number Two.
(Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1994, File No. 1-5072, as Exhibit 10(f)17, in
SAVANNAH's Form 10-K for the year ended December 31, 1995,
File No. 1-5072, as Exhibit 10(f)19 and in SAVANNAH's Form
10-K for the year ended December 31, 1996, File No. 1-5072, as
Exhibit 10(f)22.)
(f) 20 - The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)67
herein.
* (f) 21 - Amendment Number One and Amendment Number Two to The
Southern Company Performance Pay Plan. See Exhibit 10(a)68
herein.
(f) 22 - The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)73 herein.
* (f) 23 - Deferred Compensation Plan for Directors of SAVANNAH.
(f) 24 - Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit
10(a)75 herein.
(f) 25 - The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)78 herein.
* (f) 26 - Amendment Number One to The Southern Company Pension
Plan. See Exhibit 10(a)79 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.
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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 11, 1998, File No. 1-3526, as Exhibit 27.)
ALABAMA
(b) - Financial Data Schedule. (Designated in Form 8-K dated
February 11, 1998, File No. 1-3164, as Exhibit 27.)
E-31
GEORGIA
(c) - Financial Data Schedule. (Designated in Form 8-K dated
February 11, 1998, File No. 1-6468, as Exhibit 27.)
GULF
(d) - Financial Data Schedule. (Designated in Form 8-K dated
February 11, 1998, File No. 0-2429, as Exhibit 27.)
MISSISSIPPI
(e) - Financial Data Schedule. (Designated in Form 8-K dated
February 11, 1998, File No. 0-6849, as Exhibit 27.)
SAVANNAH
(f) - Financial Data Schedule. (Designated in Form 8-K dated
February 11, 1998, File No. 1-5072, as Exhibit 27.)
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