-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PGBjjraTS9wEu9h47+xD9/ewbhnS1uTZ5N6ZojfGf6KCaBKjc+GjJ2YDiP6pm3TY kuSJs3waWQ0EH+owwNt8ZA== 0000950144-94-000714.txt : 19940331 0000950144-94-000714.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950144-94-000714 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CO CENTRAL INDEX KEY: 0000092122 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 580690070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03526 FILM NUMBER: 94518157 BUSINESS ADDRESS: STREET 1: 64 PERIMETER CTR EAST CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 4043930650 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA POWER CO CENTRAL INDEX KEY: 0000003153 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 630004250 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03164 FILM NUMBER: 94518158 BUSINESS ADDRESS: STREET 1: 600 N 18TH ST STREET 2: P O BOX 2641 CITY: BIRMINGHAM STATE: AL ZIP: 35291 BUSINESS PHONE: 2052501000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIA POWER CO CENTRAL INDEX KEY: 0000041091 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 580257110 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06468 FILM NUMBER: 94518159 BUSINESS ADDRESS: STREET 1: 333 PIEDMONT AVE NE CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045266526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULF POWER CO CENTRAL INDEX KEY: 0000044545 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 590276810 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-02429 FILM NUMBER: 94518160 BUSINESS ADDRESS: STREET 1: 500 BAYFRONT PKWY CITY: PENSACOLA STATE: FL ZIP: 32501 BUSINESS PHONE: 9044446111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI POWER CO CENTRAL INDEX KEY: 0000066904 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 640205820 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-11229 FILM NUMBER: 94518161 BUSINESS ADDRESS: STREET 1: 2992 W BEACH CITY: GULFPORT STATE: MS ZIP: 39501 BUSINESS PHONE: 6018641211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH ELECTRIC & POWER CO CENTRAL INDEX KEY: 0000086940 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 580418070 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05072 FILM NUMBER: 94518162 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-K 1 SOUTHERN COMPANY FORM 10-K 1 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, 1993 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) 64 Perimeter Center East Atlanta, Georgia 30346 (404) 393-0650 1-3164 ALABAMA POWER COMPANY 63-0004250 (An Alabama Corporation) 600 North 18th Street Birmingham, Alabama 35291 (205) 250-1000 1-6468 GEORGIA POWER COMPANY 58-0257110 (A Georgia Corporation) 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 (404) 526-6526 0-2429 GULF POWER COMPANY 59-0276810 (A Maine Corporation) 500 Bayfront Parkway Pensacola, Florida 32501 (904) 444-6111 0-6849 MISSISSIPPI POWER COMPANy 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (601) 864-1211 1-5072 SAVANNAH ELECTRIC AND POWER COMPANY 58-0418070 (A Georgia Corporation) 600 Bay Street, East Savannah, Georgia 31401 (912) 232-7171
2 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Each of the following securities registered pursuant to Section 12(b) of the Act are registered on the New York Stock Exchange.
TITLE OF EACH CLASS Registrant - ------------------- ---------- COMMON STOCK, $5 PAR VALUE THE SOUTHERN COMPANY
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CLASS A PREFERRED, CUMULATIVE, $25 STATED CAPITAL ALABAMA POWER COMPANY 7.60% (First 1992 Series) 6.80% Series 7.60% (Second 1992 Series) 6.40% Series Adjustable Rate (1993 Series)
FIRST MORTGAGE BONDS 10 5/8% Series due 2017 9 1/4% Series due 2021 ------------------------------------ PREFERRED STOCK, CUMULATIVE, $100 STATED VALUE GEORGIA POWER COMPANY $7.72 Series $7.80 Series CLASS A PREFERRED, CUMULATIVE, $25 STATED VALUE $2.125 Series $1.9375 Series $1.90 Series Adjustable Rate (First 1993 Series) $1.9875 Series Adjustable Rate (Second 1993 Series) $1.925 Series FIRST MORTGAGE BONDS 4 3/4% Series due 1996 6 7/8% Series due 2002 6 1/8% Series due 1999 10% Series due 2016 7% Series due 2000 7.95% Series due 2023 6% Series due 2000 7 5/8% Series due 2023 ------------------------------------ PREFERRED STOCK, CUMULATIVE, $100 PAR VALUE MISSISSIPPI POWER COMPANY Depositary Preferred Shares, each representing one-fourth of a share of: 7.25% Series 6.32% Series 6.65% Series ------------------------------------ PREFERRED STOCK, CUMULATIVE, $25 PAR VALUE SAVANNAH ELECTRIC AND POWER COMPANY 6.64% Series
3 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS REGISTRANT - ------------------- ---------- PREFERRED STOCK, CUMULATIVE, $100 PAR VALUE ALABAMA POWER COMPANY 4.20% Series 4.60% Series 4.72% Series 5.96% Series 4.52% Series 4.64% Series 4.92% Series 6.88% Series
CLASS A PREFERRED, CUMULATIVE, $100,000 STATED CAPITAL Auction (1993 Series) CLASS A PREFERRED, CUMULATIVE, $100 STATED CAPITAL Auction (1988 Series) --------------------------------------------
PREFERRED STOCK, CUMULATIVE, $100 STATED VALUE GEORGIA POWER COMPANY $4.60 Series $4.60 Series (1964) $4.96 Series $6.48 Series $4.60 Series (1962) $4.72 Series $5.00 Series $6.60 Series $4.60 Series (1963) $4.92 Series $5.64 Series
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PREFERRED STOCK, CUMULATIVE, $100 PAR VALUE GULF POWER COMPANY 4.64% Series 5.44% Series 7.88% Series 5.16% Series 7.52% Series 11.36% Series
CLASS A PREFERRED, CUMULATIVE, $10 PAR, $25 STATED CAPITAL 7.00% Series 7.30% Series 6.72% Series Adjustable Rate (1993 Series) --------------------------------------------
PREFERRED STOCK, CUMULATIVE, $100 PAR VALUE MISSISSIPPI POWER COMPANY 4.40% Series 4.60% Series 4.72% Series 7.00% Series
4 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, 1994: $13.4 billion. Each of such other registrants are wholly-owned subsidiaries of The Southern Company and have no voting stock other than their common stock. A description of registrants' common stock follows:
DESCRIPTION OF SHARES OUTSTANDING REGISTRANT COMMON STOCK AT FEBRUARY 28, 1994 - ---------- ------------ -------------------- The Southern Company Par Value $5 Per Share 648,346,540 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 portions of The Southern Company's Proxy Statement relating to the 1994 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. 5
TABLE OF CONTENTS Page PART I ---- Item 1 Business- The SOUTHERN System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 New Business Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-2 Certain Factors Affecting the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3 Construction Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3 Financing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5 Fuel Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7 Territory Served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12 Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-13 Rate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15 Long-Term Power Sales Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-16 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-17 Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-18 Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-22 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 MattersII-1 Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2 Item 7 Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2 Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-4 PART III Item 10 Directors and Executive Officers of the Registrants . . . . . . . . . . . . . . . . . . . . . . III-1 Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-13 Item 12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-30 Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . III-36 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
i 6 DEFINITIONS When used in Items 1 through 5 and Items 10 through 14, the following terms will have the meanings indicated. Other defined terms specific only to Item 11 are found on page III-13.
TERM MEANING AEC . . . . . . . . . . . . . . Alabama Electric Cooperative, Inc. AFUDC . . . . . . . . . . . . . Allowance for Funds Used During Construction ALABAMA . . . . . . . . . . . . Alabama Power Company Alicura . . . . . . . . . . . . Hidroelectrica Alicura, S.A. (Argentina) AMEA . . . . . . . . . . . . . Alabama Municipal Electric Authority Clean Air Act . . . . . . . . Clean Air Act Amendments of 1990 Dalton . . . . . . . . . . . . City of Dalton, Georgia DOE . . . . . . . . . . . . . United States Department of Energy ECO Plan . . . . . . . . . . . Environmental Compliance Overview Plan ECR Plan . . . . . . . . . . . Environmental Cost Recovery Plan Edelnor . . . . . . . . . . . . Empressa, Electrica del Norte Grande, S.A. (Chile) Energy Act . . . . . . . . . . Energy Policy Act of 1992 EMF . . . . . . . . . . . . . . Electromagnetic field EPA . . . . . . . . . . . . . . United States Environmental Protection Agency FERC . . . . . . . . . . . . . Federal Energy Regulatory Commission FPC . . . . . . . . . . . . . . Florida Power Corporation FP&L . . . . . . . . . . . . . Florida Power & Light Company Freeport . . . . . . . . . . . Freeport Power Company (Bahamas) GEORGIA . . . . . . . . . . . . Georgia Power Company GULF . . . . . . . . . . . . . Gulf Power Company Gulf States . . . . . . . . . . Gulf States Utilities Company Holding Company Act . . . . . . Public Utility Holding Company Act of 1935, as amended IBEW . . . . . . . . . . . . . International Brotherhood of Electrical Workers JEA . . . . . . . . . . . . . . Jacksonville Electric Authority MEAG . . . . . . . . . . . . . Municipal Electric Authority of Georgia MISSISSIPPI . . . . . . . . . . Mississippi Power Company NRC . . . . . . . . . . . . . Nuclear Regulatory Commission OPC . . . . . . . . . . . . . . Oglethorpe Power Corporation operating affiliates . . . . . ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH PSC . . . . . . . . . . . . . . Public Service Commission REA . . . . . . . . . . . . . Rural Electrification Administration RICO . . . . . . . . . . . . . Racketeer Influenced and Corrupt Organizations Act SAVANNAH . . . . . . . . . . . Savannah Electric and Power Company SCS . . . . . . . . . . . . . . Southern Company Services, Inc. SEC . . . . . . . . . . . . . . Securities and Exchange Commission SEGCO . . . . . . . . . . . . . Southern Electric Generating Company SEI . . . . . . . . . . . . . . Southern Electric International, Inc. SEPA . . . . . . . . . . . . . Southeastern Power Administration SERC . . . . . . . . . . . . . Southeastern Electric Reliability Council SMEPA . . . . . . . . . . . . . South Mississippi Electric Power Association SOUTHERN . . . . . . . . . . . The Southern Company Southern Nuclear . . . . . . . Southern Nuclear Operating Company, Inc. SOUTHERN system . . . . . . . . SOUTHERN, the operating affiliates, SEGCO, SEI Southern Nuclear, SCS and other subsidiaries TVA . . . . . . . . . . . . . . Tennessee Valley Authority
ii 7 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 Georgia; its charter was granted by the Secretary of State on August 5, 1921. SOUTHERN also owns all the outstanding common stock of SEI, Southern Nuclear, SCS (the system service company), and various other subsidiaries related to foreign operations and domestic non-utility operations (see Exhibit 21 herein). At this time, the operations of the other subsidiaries are not material. SEI designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. A further description of SEI's business and organization follows later in this section. Southern Nuclear provides services to the Southern electric system's nuclear plants. SEGCO owns electric generating units with an aggregate capacity of 1,019,680 kilowatts at Plant Gaston on the Coosa River near Wilsonville, Alabama, and ALABAMA and GEORGIA are each entitled to one-half of SEGCO's capacity and energy. ALABAMA acts as SEGCO's agent in the operation of SEGCO's units and furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000 volt transmission lines extending from Plant Gaston to the Georgia state line at which point connection is made with the GEORGIA transmission line system. THE SOUTHERN SYSTEM The transmission facilities of each of the operating affiliates and SEGCO are connected to the respective company's own generating plants and other sources of power and are interconnected with the transmission facilities of the other operating affiliates and SEGCO by means of heavy-duty high voltage lines. (In the case of GEORGIA's integrated transmission system, see Item 1 - BUSINESS - "Territory Served" herein.) Operating contracts covering arrangements in effect with principal neighboring utility systems provide for capacity exchanges, capacity purchases and sales, transfers of economy energy and other similar transactions. Additionally, the operating affiliates have entered into voluntary reliability agreements with the subsidiaries of Entergy Corporation, Florida Electric Power Coordinating Group and TVA and with Carolina Power & Light Company, Duke Power Company, South Carolina Electric & Gas Company and Virginia Electric I-1 8 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 each operating affiliate, SEI, various of the other subsidiaries, Southern Nuclear and SEGCO to furnish, at cost and upon request, the following services: general executive and advisory services, power pool operations, general engineering, design engineering, purchasing, accounting and statistical, 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 also has a contract with SCS for certain of these specialized services. Southern Nuclear has contracted with ALABAMA to operate its Farley Nuclear Plant, as authorized by amendments to the plant operating licenses. Southern Nuclear also has a contract to provide GEORGIA with technical and other services to support GEORGIA's operation of plants Hatch and Vogtle. Applications are now pending before the NRC for amendments to the Hatch and Vogtle operating licenses which would authorize Southern Nuclear to become the operator. See Item 1 - BUSINESS - "Regulation - Atomic Energy Act of 1954" herein. NEW BUSINESS DEVELOPMENT SOUTHERN continues to consider new business opportunities, particularly those which allow use of the expertise and resources developed through its regulated utility experience. These endeavors began in 1981 and are conducted through SEI and other existing subsidiaries. SEI's primary business focus is international and domestic cogeneration, the independent power market, and the privatization of generation facilities in the international market. SEI currently operates two domestic independent power production projects totaling 225 megawatts and is one-third owner of one of these (which produces 180 megawatts). It has a contract to sell electric energy to Virginia Electric and Power Company from a facility SEI is developing (through subsidiaries) in King George, Virginia. Upon completion, currently planned for 1996, SEI will operate the 220 megawatt coal-fired plant and own 50% of the project. In April 1993, SOUTHERN completed the purchase of a 50% interest in Freeport, an electric utility on the Island of Grand Bahama, for a purchase price of $35.5 million. Freeport has generating capacity of about 112 megawatts. In August 1993, SOUTHERN completed the purchase of a 55% interest in Alicura, an entity that owns the right to use the generation from a 1,000 megawatt hydroelectric generating facility in Argentina, for a net purchase price of approximately $188 million. In December 1993, SOUTHERN completed the purchase of a 35% interest in Edelnor for the purchase price of $73 million. Edelnor is a utility located in Northern Chile that owns and operates a transmission grid and a 96 megawatt generating facility and is building an additional 150 megawatt facility. SEI has continued to render consulting services and market SOUTHERN system expertise in the United States and throughout the world. It contracts with other public utilities, commercial concerns and government agencies for the rendition of services and the licensing of intellectual property. In addition, SEI engages in energy management-related services and activities. 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, because of the absence of any assured return or rate of return, they also involve a higher I-2 9 degree of risk. SOUTHERN expects to make substantial investments over the period 1994-1996 in these and other new businesses. CERTAIN FACTORS AFFECTING THE INDUSTRY The electric utility industry is expected to become increasingly competitive in the future as a result of the enactment of the Energy Act (see each registrant's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein), deregulation, competing technologies and other factors. In recent years the electric utility industry in general has experienced problems in a number of areas including the uncertain cost of capital needed for construction programs, difficulty in obtaining sufficient return on invested capital and in securing adequate rate increases when required, high costs and other issues associated with compliance with environmental and nuclear regulations, changes in regulatory climate, prudence audits and the effects of inflation and other factors on the costs of operations and construction expenditures. The SOUTHERN system has been experiencing certain of these problems in varying degrees and management is unable to predict the future effect of these or other factors upon its operations and financial condition. 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 1994 through 1996 by the operating affiliates, SEGCO, SCS and Southern Nuclear are estimated as follows: (in millions)
- ----------------------------------------------------------- 1994 1995 1996 --------------------------------- ALABAMA $ 588 $ 572 $ 531 GEORGIA 688 555 629 GULF 77 55 68 MISSISSIPPI 96 62 98 SAVANNAH 33 32 33 SEGCO 14 16 26 SCS 26 18 14 Southern Nuclear 1 2 2 SOUTHERN system* $1,524 $1,326 $1,411 - -----------------------------------------------------------
*Does not add due to changes made in subsidiaries' construction budget subsequent to approval of SOUTHERN system construction budget. Reference is made to Note 4 to the financial statements of each registrant in Item 8 herein for the amounts of AFUDC included in the above estimates. The construction estimates for the period 1994 through 1996 do not include amounts which may be spent by SEI (or the subsidiary(s) created to effect such project(s)) on future power production projects or the projects discussed earlier under "New Business Development." (See also Item 1 - BUSINESS - "Financing Programs" herein.) I-3 10 Estimated construction costs in 1994 are expected to be apportioned approximately as follows: (in millions)
- --------------------------------------------------------------------------------------------------------------------- SOUTHERN System* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH ------------------------------------------------------------------------------------ Combustion turbines $ 239 $123 $103 $ - $ 5 $ 8 Other generating facilities including associated plant substations 369 102 166 39 44 4 New business 276 114 130 13 11 8 Transmission 150 48 80 2 18 2 Joint line and substation 61 24 34 2 1 - Distribution 126 50 49 11 9 7 Nuclear fuel 123 61 62 - - - General plant 179 66 64 10 8 4 ------------------------------------------------------------------------------------ $1,524 $588 $688 $77 $96 $33 ====================================================================================
*SCS and Southern Nuclear plan capital additions to general plant in 1994 of $26 million and $1 million, respectively, while SEGCO plans capital additions of $14 million to generating facilities. Does not add due to changes made in subsidiaries' construction budget subsequent to approval of SOUTHERN system construction budget. 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 cost of labor, equipment and materials; cost of capital and SEI securing a contract(s) to buy or build additional generating facilities. The operating affiliates do not have any baseload generating plants under construction and current energy demand forecasts do not require any additional baseload generating facilities before 2011. However, within the service area, the construction of combustion turbine peaking units with an aggregate capacity of approximately 1,700 megawatts is planned to be completed by 1996. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will be continuing. During 1991, the Georgia legislature passed legislation which requires GEORGIA and SAVANNAH each to file an Integrated Resource Plan for approval by the Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the construction of new power plants. (See Item 1 - BUSINESS - "Rate Matters - Integrated Resource Planning" herein.) See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for information with respect to certain existing and proposed environmental requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for additional information concerning ALABAMA's and GEORGIA's joint ownership of certain generating units and related facilities with certain non-affiliated utilities. ROCKY MOUNTAIN HYDROELECTRIC PROJECT For information regarding GEORGIA's Rocky Mountain Project, including a joint ownership agreement with OPC and the uncertain recovery of GEORGIA's costs in this project, reference is made to Note 4 to SOUTHERN's and to GEORGIA's financial statements in Item 8 herein. STOCKHOLDER SUIT For information concerning a suit against certain current and former directors and officers of SOUTHERN involving allegations related to Plant Vogtle, the Rocky Mountain project and other matters, see Item 3 - LEGAL PROCEEDINGS herein. I-4 11 FINANCING PROGRAMS In early 1994, SOUTHERN sold - through a public offering - common stock for proceeds totaling approximately $120 million. SOUTHERN may require additional equity capital during the remainder of 1994. The amount and timing of raising additional equity capital in 1994, 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 its various stock plans. The operating affiliates' construction programs are expected to be financed primarily from internal sources. Short-term debt will be utilized when necessary. The operating affiliates may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities. In order to issue first mortgage bonds and preferred stock, each of the operating affiliates must comply with earnings coverage requirements contained in its respective mortgage and charter. These provisions require, for the issuance of additional first mortgage bonds, a minimum, before income tax, earnings coverage of twice the pro forma annual interest charges on first mortgage bonds and indebtedness secured by prior or equal ranking lien and, for the issuance of additional preferred stock, a minimum, after income tax, earnings coverage of one and one-half times pro forma annual interest charges and preferred stock dividends, in each case for a period of twelve consecutive calendar months within the fifteen calendar months immediately preceding the proposed new issue. On the basis of these requirements, the respective mortgage and preferred stock coverages of the operating affiliates for the twelve months ended December 31, 1993, are:
- --------------------------------------------------------- Mortgage Preferred Stock Coverages Coverages --------- --------------- ALABAMA 5.70 2.71 GEORGIA 7.75 2.61 GULF 5.79 2.56 MISSISSIPPI 5.78 2.67 SAVANNAH 3.94 2.20 - ---------------------------------------------------------
The amounts of securities representing short-term unsecured indebtedness allowable under the respective charters, and the maximum amounts of short-term indebtedness authorized by the appropriate regulatory authorities, are shown in the following table:
- ---------------------------------------------------------------------------- Short-term Unsecured Indebtedness - ---------------------------------------------------------------------------- Allowable Under Charter at December 31, 1993 -------------------- Percent of Secured Indebtedness and Other Amount Capital(2) ------------- ---------------------- (Millions) ALABAMA $ 542 10% GEORGIA 1,736 20 GULF 92 10 MISSISSIPPI 133 20 SAVANNAH 70 20 SOUTHERN (1) (1) - ---------------------------------------------------------------------------- Short-term Indebtedness Maximum Regulatory Authorization ------------- Outstanding at Amount December 31, 1993 ------------- ---------------------- (Millions) ALABAMA $530 (3) $ 40 GEORGIA 900 (3) 482 GULF 100 (3) 6 MISSISSIPPI 140 (3) 40 SAVANNAH 70 (3) 3 SOUTHERN 500 (3) 222
Notes: (1) No limitation. (2) Under the provisions of the respective charters, GEORGIA's, MISSISSIPPI's and SAVANNAH's preferred stockholders have approved increases in the amounts of securities representing short-term unsecured indebtedness which the companies may have outstanding until July 1 in 2003, 1999 and 1999, respectively. Such limitations were raised from 10% of secured indebtedness and other capital to 20% thereof. These approved increases are reflected in the above table. ALABAMA currently plans to seek approval of its preferred stockholders to have the charter limitation on short-term indebtedness increased above its current limitation and I-5 12 may seek that such increase be made on a permanent basis. (3) ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH 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 March 31, 1996. Each of the operating affiliates (excluding MISSISSIPPI) must also receive authorization from their respective state PSC to issue short-term debt. At December 31, 1993, the Alabama PSC authorization limited ALABAMA's short-term debt to $450 million. Reference is made to Note 5, 5, 8, 5, 5 and 5 to the financial statements for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, respectively, in Item 8 herein for information regarding the registrants' credit arrangements. I-6 13 FUEL SUPPLY The operating affiliates' and SEGCO's supply of electricity is derived predominantly from coal. The sources of generation for the years 1991 through 1993 and the estimates for 1994 are shown below: Oil and ALABAMA Coal Nuclear Hydro Gas Total ---- ------- ----- --- ----- 1991 68% 23% 9% *% 100% 1992 70 21 9 * 100 1993 70 22 8 * 100 1994 71 21 8 * 100 GEORGIA 1991 78 19 3 * 100 1992 76 21 3 * 100 1993 77 20 3 * 100 1994 78 19 3 * 100 GULF 1991 100 ** ** * 100 1992 100 ** ** * 100 1993 99 ** ** 1 100 1994 100 ** ** * 100 MISSISSIPPI 1991 89 ** ** 11 100 1992 91 ** ** 9 100 1993 90 ** ** 10 100 1994 83 ** ** 17 100 SAVANNAH 1991 91 ** ** 9 100 1992 81 ** ** 19 100 1993 83 ** ** 17 100 1994 96 ** ** 4 100 SEGCO 1991 100 ** ** * 100 1992 100 ** ** * 100 1993 100 ** ** * 100 1994 100 ** ** * 100 SOUTHERN SYSTEM 1991 77 17 5 1 100 1992 77 17 5 1 100 1993 78 17 4 1 100 1994 78 17 4 1 100 - ------------------------------------------------------------- *Less than 0.5% **Not applicable The average costs of fuel in cents per net kilowatt-hour generated are shown below: Oil and Weighted ALABAMA Coal Nuclear Gas Average ---- ------- --- -------- 1991 2.06 0.57 * 1.69 1992 1.99 0.44 * 1.64 1993 2.11 0.51 * 1.73 GEORGIA 1991 1.77 0.75 * 1.57 1992 1.75 0.63 * 1.52 1993 1.75 0.58 * 1.52 GULF 1991 2.16 ** * 2.17 1992 2.07 ** * 2.07 1993 2.03 ** 4.50 2.05 MISSISSIPPI 1991 1.80 ** 1.71 1.80 1992 1.59 ** 3.05 1.60 1993 1.66 ** 2.97 1.71 SAVANNAH 1991 2.05 ** 3.41 2.18 1992 2.28 ** 3.55 2.53 1993 2.02 ** 4.70 2.49 SEGCO 1991 1.97 ** * 1.97 1992 1.81 ** * 1.81 1993 1.80 ** * 1.81 SOUTHERN SYSTEM 1991 1.91 0.66 2.84 1.69 1992 1.86 0.54 4.81 1.62 1993 1.90 0.54 4.34 1.67 - --------------------------------------------------------------- * Not meaningful because of minimal generation from fuel source ** Not applicable I-7 14 At March 4, 1994, the operating affiliates and SEGCO had stockpiles of coal on hand at their respective coal-fired plants which represented an estimated 25-day recoverable supply, based on projected 1994 nameplate burn requirements. It is estimated that approximately 53 million tons of coal will be consumed in 1994 by the operating affiliates and SEGCO (including those units GEORGIA owns jointly with OPC, MEAG, Dalton, FP&L and JEA and the units ALABAMA owns jointly with AEC). The operating affiliates and SEGCO currently have 32 coal contracts. These contracts cover remaining terms of up to 16 years. Approximately 30% of 1994 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 25% of the SOUTHERN system's coal supply. Additionally, it has been determined that approximately 35 days of recoverable supply of coal is the appropriate level for coal stockpiles. During 1993, the operating affiliates and SEGCO's average price of coal delivered was approximately $46 per ton. The typical sulfur content of coal purchased under contracts ranges from approximately 0.7% to 3.0% 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". 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 an agreement with a non-affiliated industrial and mining firm to mine coal from ALABAMA's reserves, as well as its own reserves, for supply to ALABAMA's generating units. Should the arrangement between the mining firm and ALABAMA be terminated pursuant to its provisions, ALABAMA would be obligated to pay the mining firm's net investment in the mine and take over ownership of equipment and facilities. On December 31, 1993, the mining firm's investment was approximately $13 million. 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 SOUTHERN, GULF and MISSISSIPPI in Item 8 herein. Reference is made to Item 3 - LEGAL PROCEEDINGS herein for a discussion of a complaint filed against GULF and SCS regarding the delivery of coal. In 1974, MISSISSIPPI filed a civil suit against a supplier of natural gas for violation of the antitrust laws, breach of contract and tortious interference with its contracts on account of MISSISSIPPI's failure to receive its full contracted quantities of natural gas. The aggregate amount of damages sought is approximately $134 million. An internal review of this matter has determined that the possibility of any recovery is remote. ALABAMA and GEORGIA have contracts with the United States Enrichment Corporation for nuclear fuel enrichment services on a total system basis. These contracts provide that any or all enrichment needs in any fiscal year may be terminated at no charge upon a 10- year advance notice. To provide contracting flexibility, all enrichment needs during the period October 1, 1999 - - September 30, 2002 were terminated prior to April 1, 1992. Except for enrichment requirements during this termination period, all enrichment services needs of Plants Farley, Hatch and Vogtle until the years cited above may be accommodated by such contracts. ALABAMA and GEORGIA have contracts with the DOE that provide for the permanent disposal of spent nuclear fuel. The service to be provided by the DOE is 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, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Management believes that sufficient capacity for nuclear fuel processing exists to preclude the impairment of normal operations of the SOUTHERN system's nuclear generating units. I-8 15 The Energy Act imposed upon utilities with nuclear plants, including ALABAMA and GEORGIA, obligations for the decontamination and decommissioning of federal nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein. TERRITORY SERVED The territory in which the operating affiliates provide electric service comprises most of the states of Alabama and Georgia together with the northwestern portion of Florida and southeastern Mississippi. In this territory there are non-affiliated electric distribution systems which obtain some or all of their power requirements either directly or indirectly from the operating affiliates. The territory has an area of approximately 120,000 square miles and an estimated population of approximately 11 million. ALABAMA is engaged, within the State of Alabama, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in over 1,000 communities (including Anniston, Birmingham, Gadsden, 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 its generating plants. ALABAMA also sells, and cooperates with dealers in promoting the sale of, electric appliances. GEORGIA is engaged in the generation and purchase of electricity and the distribution and sale of such electricity within the State of Georgia at retail in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon, Rome and Valdosta), as well as in rural areas, and at wholesale currently to 39 electric cooperative associations through OPC, a corporate cooperative of electric membership cooperatives in Georgia, and to 50 municipalities, 47 of which are served through MEAG, a public corporation and an instrumentality of the State of Georgia. GULF is engaged, within the northwestern portion of Florida, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in 71 communities (including Pensacola, Panama City and Fort Walton Beach), as well as in rural areas, and at wholesale to a non-affiliated utility and a municipality. GULF also sells electric appliances. MISSISSIPPI is engaged in the generation and purchase of electricity and the distribution and sale of such energy within the 23 counties of southeastern Mississippi, at retail in 123 communities (including Biloxi, Gulfport, Hattiesburg, Laurel, Meridian and Pascagoula), as well as in rural areas, and at wholesale to one municipality and four rural electric cooperative associations. 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. I-9 16 The sources of revenues for the SOUTHERN system and each of SOUTHERN's operating affiliates are shown in Item 6 herein. For the year ended December 31, 1993, the registrants derived their respective industrial revenues as shown in the following table.
- -------------------------------------------------------------------------------------------------------------------------- SOUTHERN System ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH --------------------------------------------------------------------------------------------------- Textiles 13% 10% 18% *% 3% -% Chemical 11 14 7 25 14 32 Paper 11 11 10 11 4 32 Primary metal 8 14 4 * 2 - Stone, clay, glass and concrete 6 6 8 2 1 4 Utility services 8 8 9 3 10 6 Food 5 3 6 1 6 8 Government 5 3 5 35 10 - Transportation equipment 3 1 4 1 8 9 Lumber and wood products 4 5 4 2 8 4 Other** 26 25 25 20 34 5 - -------------------------------------------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% ==========================================================================================================================
* Less than 0.5% **Other major sources (more than 5%) of industrial revenues were: ALABAMA, coal mining (5%); GULF, oil and gas extraction (8%); and MISSISSIPPI, petroleum refining (21%) and electric machinery (5%). 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 REA 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 70 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 828 megawatts of nameplate capacity, including an undivided ownership interest in ALABAMA's Plant Miller Units 1 and 2, and associated transmission lines. AEC's facilities were financed with REA 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 REA, operate within GULF's service area. These cooperatives purchase their full requirements from AEC and SEPA. A non-affiliated utility also operates within GULF's service area and purchases a portion of its requirements from GULF. ALABAMA and GULF have entered into separate agreements with AEC involving interconnection between the respective systems and, in the case of ALABAMA, the delivery of capacity and energy from AEC to certain distributing cooperatives. The rates for the various services provided by ALABAMA and GULF to AEC are based on formulary approaches which result in the charges by each company being updated annually, subject to FERC approval. See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for details of ALABAMA's I-10 17 joint-ownership with AEC of a portion of Plant Miller. Another of the 70 electric cooperatives is SMEPA, also a generating and transmitting cooperative. SMEPA, which began operation in 1970, 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. This agreement did not have a material effect on SOUTHERN's or GEORGIA's revenues or earnings. 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 beginning October 1, 1991. In both contracts the power is being sold to AMEA for its member municipalities that previously were served directly by ALABAMA as wholesale customers. Under the terms of the contracts, ALABAMA received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements. Forty-six municipally-owned electric distribution systems formerly served on a full requirements wholesale basis by GEORGIA and one county-owned system now receive their requirements through MEAG, which was established by a state statute in 1975. MEAG serves these requirements from self-owned generation facilities acquired from GEORGIA and through purchases of capacity and energy from GEORGIA under partial requirements rates. Similarly, since 1977 Dalton has filled its requirements from generation facilities acquired from GEORGIA and through partial requirements purchases. The full requirements of two municipally-owned electric distribution systems are still served at wholesale by GEORGIA. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) GULF and MISSISSIPPI provide wholesale requirements for one municipal system each. GEORGIA has entered into substantially similar agreements with OPC, MEAG and Dalton providing for the establishment of an integrated transmission system to carry the power and energy of each. The agreements require an investment by each party in the integrated transmission system in proportion to its respective share of the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) ALABAMA, GEORGIA, GULF and MISSISSIPPI also have contracts with SEPA (a federal power marketing agency) providing for the use of those companies' facilities at government expense to deliver to certain cooperatives and municipalities, entitled by federal statute to preference in the purchase of power from SEPA, quantities of power equivalent to the amounts of power allocated to them by SEPA from certain United States Government hydroelectric projects. The operating affiliates also purchase certain amounts of capacity from SEPA. 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 I-11 18 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 in excess of 900 kilowatts may receive electric service from the supplier of its choice. 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. No other electric utility operates in competition with SAVANNAH in its service area. Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of convenience and necessity to MISSISSIPPI and to six distribution rural cooperatives operating in southeastern Mississippi, then served in whole or in part by MISSISSIPPI, authorizing them to distribute electricity in certain specified geographically described areas of the state. The six cooperatives serve approximately 271,000 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. COMPETITION The electric utility industry in general has become, and is expected to continue to be, increasingly competitive as the result of factors including regulatory and technological developments. The Energy Act, enacted in 1992, was intended to foster competition in the wholesale market by, among other things, facilitating participation by independent power producers. The Energy Act includes provisions authorizing the FERC under certain conditions to order utilities owning transmission facilities to provide wholesale transmission services for other utilities or entities that generate energy. As a result of the foregoing factors, SOUTHERN may experience 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. Reference is made to each registrant's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein for further discussion of competition. 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 1993, ALABAMA purchased 48.3 million kilowatt-hours from such companies at a cost of $0.8 million. GEORGIA currently has cogeneration contracts in effect with seven industrial customers. Under the terms of these contracts, GEORGIA purchases excess generation of such companies. During 1993, GEORGIA purchased 4.6 million kilowatt-hours from such companies at a cost of $76,000. GULF currently has cogeneration agreements for "as available" energy in effect with two industrial customers. During 1993, GULF purchased 119 million kilowatt-hours from such companies for $2.3 million. SAVANNAH currently has cogeneration contracts in I-12 19 effect with four industrial customers. Under the terms of these contracts, SAVANNAH purchases excess generation of such companies. During 1993, SAVANNAH purchased 2.4 million kilowatt-hours from such companies at a cost of $51,000. 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, political and environmental considerations, taxation and supply. The operating affiliates have experienced, and expect to continue to experience, competition in their respective retail service territories in varying degrees as the result of self-generation (as described above) and fuel switching by customers and other factors. (See also Item 1 - BUSINESS - "Territory Served" herein for information concerning suppliers of electricity operating within or near the areas served at retail by the operating affiliates.) In addition, while the Energy Act does not provide for "retail wheeling" (i.e., the transmission and distribution by an electric utility to retail customers within its service territory of energy produced by another entity), applicable legislative and regulatory bodies may consider imposing such a requirement in the future, the effect of which may be adverse. REGULATION STATE COMMISSIONS The operating affiliates and SEGCO are subject to the jurisdiction of their respective state regulatory commissions, which have broad powers of supervision and regulation over public utilities operating in the respective states, including their rates, service regulations, sales of securities (except for the Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and "Territory Served" herein.) HOLDING COMPANY ACT SOUTHERN is registered as a holding company under the Holding Company Act, and it and its subsidiary companies are subject to the regulatory provisions of said Act, including provisions relating to the issuance of securities, sales and acquisitions of securities and utility assets, services performed by SCS and Southern Nuclear, and the activities of certain of SOUTHERN's special purpose subsidiaries. FEDERAL POWER ACT The Federal Power Act subjects the operating affiliates and SEGCO to regulation by the FERC as companies engaged in the transmission or sale at wholesale of electric energy in interstate commerce, including regulation of accounting policies and practices. ALABAMA and GEORGIA are also subject to the provisions of the Federal Power Act or the earlier Federal Water Power Act applicable to licensees with respect to their hydroelectric developments. Among the hydroelectric projects subject to licensing by the FERC are 14 existing ALABAMA generating stations having an aggregate installed capacity of 1,582,725 kilowatts and 17 existing GEORGIA generating stations having an aggregate installed capacity of 859,440 kilowatts. In December 1991, ALABAMA and GEORGIA filed with the FERC their applications for new licenses on six of their existing hydroelectric projects. The six projects, ALABAMA's Yates and Thurlow and GEORGIA's Lloyd Shoals, Langdale, Riverview and North Georgia, with 272,340 kilowatts of capacity, had licenses that expired December 31, 1993. Although the possibility of competition existed for these licenses, no competing applications were filed prior to the filing deadline of December 31, 1991. The Lloyd Shoals, Langdale and Riverview projects were granted new 30-year licenses that expire 2023. Each of the remaining projects are operating on annual licenses under the same terms and conditions as their original licenses. Additionally, the FERC has issued an order granting a combined, 40-year license for the Yates and Thurlow projects. ALABAMA has applied to the FERC for rehearing of certain provisions of this license. As a part of the application for the combined, 40-year license for the Yates and Thurlow projects, ALABAMA agreed to expand the capacity of these units by a total of approximately 10.3 megawatts. I-13 20 GEORGIA and OPC also have a license, expiring in 2027, for the Rocky Mountain Project, a pure pumped storage facility of 847,800 kilowatt capacity. In 1988, the FERC approved an amendment to GEORGIA's license for the project, adding OPC as co-licensee and extending the commercial operation date to 1996. (See Item 1 - BUSINESS - "Construction Programs - Rocky Mountain Hydroelectric Project" and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) 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 1997-2020 in the case of GEORGIA's projects. Upon or after the expiration of each license, the United States Government, by act of Congress, may take over the project, or the FERC may relicense the project either to the original licensee or to a new licensee. In the event of takeover or relicensing to another, the original licensee is to be compensated in accordance with the provisions of the Federal Power Act, such compensation to reflect the net investment of the licensee in the project, not in excess of the fair value of the property taken, plus reasonable damages to other property of the licensee resulting from the severance therefrom of the property taken. ATOMIC ENERGY ACT OF 1954 ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over the construction and operation of nuclear reactors, particularly with regard to certain public health and safety and antitrust matters. The National Environmental Policy Act has been construed to expand the jurisdiction of the NRC to consider the environmental impact of a facility licensed under the Atomic Energy Act of 1954, as amended. Reference is made to Notes 1 and 13 to SOUTHERN's, Notes 1 and 11 to ALABAMA's and Notes 1 and 4 to GEORGIA's financial statements in Item 8 herein for information on nuclear insurance and nuclear decommissioning costs. 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 I-14 21 facilities for the years 1994, 1995 and 1996 are as follows: (in millions)
- ------------------------------------------------------------------------------- Estimated* ---------------------------------------------------------------- 1994 1995 1996 ---- ---- ---- ALABAMA $ 12.4 $ 12.3 $ 19.3 GEORGIA 87.2 7.8 1.0 GULF 26.0 3.0 7.6 MISSISSIPPI 33.0 2.0 4.0 SAVANNAH 1.9 0.5 0.5 SEGCO 7.2 2.6 7.4 ---------------------------------------------------------------- SOUTHERN system $167.7 $ 28.2 $ 39.8 ===============================================================================
*Such estimates are included in the current construction programs. (See Item 1 - BUSINESS - "Construction Programs" herein.) Additionally, each operating affiliate (excluding SAVANNAH) and SEGCO have incurred costs for environmental remediation of various sites. Reference is made to each applicable registrant's "Management's Discussion and Analysis" in Item 7 herein for information regarding the registrants' environmental remediation efforts. 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 (without differentiation between industrial and commercial classifications) including those with special features to encourage off-peak usage. With respect to GULF's and 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 clauses. ALABAMA, GEORGIA and SAVANNAH are allowed by state law to recover fuel and net purchased energy costs through fuel cost recovery provisions which are adjusted to reflect increases or decreases in such costs. GULF's recovery of such costs is based upon projections thereof for six-month periods; any over/under recovery during any such period is reflected in the subsequent six-month period. The adjustment factors for MISSISSIPPI's retail and wholesale rates are levelized based on the estimated energy cost for the year, adjusted for any actual over/under collection from the previous year. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. INTEGRATED RESOURCE PLANNING During 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 intend to meet the future electrical needs of their customers through a combination of demand-side and supply-side resources. The Georgia PSC must pre-certify these new resources. Once certified, all prudently incurred construction costs will be recoverable through rates. In July 1992, the Georgia PSC approved Integrated Resource Plans for GEORGIA and SAVANNAH. In January 1993, the Georgia PSC certified the construction of two combustion turbine units by SAVANNAH, scheduled to be in service in 1994, to meet its peaking needs. The Georgia PSC has certified the construction by I-15 22 GEORGIA of four combustion turbine generating units in 1994 and four units in 1995. GEORGIA has also completed a demonstration competitive bid process for its supply-side resource requirements expected for 1996. In December 1993, GEORGIA filed with the Georgia PSC a proposal to purchase from FPC 400 megawatts of capacity in 1996 and 1997 and 200 megawatts of capacity in 1998 and 1999 with options to increase or decrease capacity during those years. Also, GEORGIA has proposed a joint venture combustion turbine project to be completed in 1996, also with FPC, which would provide GEORGIA with a 1/3 ownership in a 147 megawatt combustion turbine located at FPC's Intercession City Plant. GEORGIA would have exclusive rights to all capacity from the unit for the four summer months and FPC would have the output for the other eight months of the year. The process is designed to verify the need for capacity and that the lowest cost alternatives have been selected. In January 1993, the Georgia PSC also certified certain residential energy conservation programs for GEORGIA and SAVANNAH and provided for the recovery by GEORGIA and SAVANNAH of program costs. Depending on the success of these programs, GEORGIA and SAVANNAH may each receive a reward or, in GEORGIA's case, a penalty. In August 1993, the Georgia PSC also certified certain commercial and industrial energy conservation programs submitted by GEORGIA and SAVANNAH. During 1991, the Georgia PSC approved pilot demand-side programs that encourage conservation for retail customers. Pursuant to an Integrated Resource Plan approved by the Georgia PSC, GEORGIA has implemented various demand-side option programs and has been authorized by the Georgia PSC to recover associated program costs through rate riders. On October 15, 1993, a superior court judge ruled that recovery of these costs through rate riders is unlawful. GEORGIA has ceased collection of the rate riders and is deferring program costs as ordered by the Georgia PSC pending the final outcome of this matter. See Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for further information. ENVIRONMENTAL COST RECOVERY PLANS In April 1993, the Florida Legislature adopted legislation for an ECR clause, which allows a utility to petition the Florida PSC for recovery of all prudent environmental compliance costs that are not being recovered through base rates or any other rate-adjustment clause. Such environmental costs include increased operation and maintenance expense, depreciation, and a return on invested capital. On January 12, 1994, the Florida PSC approved GULF's petition under ECR for recovery of environmental costs that were projected to be incurred from July 1993 through September 1994. The order allows the recovery from customers of such costs amounting to $7.8 million from February through September 1994. Thereafter, recovery under ECR will be determined semi-annually and will include a true-up of the prior period and a projection of the ensuing six-month period. The Mississippi PSC approved MISSISSIPPI's ECO Plan in 1992. The plan establishes procedures to facilitate the Mississippi PSC's overview of MISSISSIPPI's environmental strategy and provides for recovery of costs associated with environmental projects approved by the Mississippi PSC. 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 resulted in an annual retail rate increase of $2.6 million effective April 1993. RATE INCREASE APPLICATIONS Reference is made to Note 3 to each registrant's notes to the financial statements in Item 8 herein for a discussion of retail and wholesale rate proceedings. Also discussed therein is a review 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. LONG-TERM POWER SALES AGREEMENTS The operating affiliates of the Southern electric system 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. Certain of these agreements are non-firm and are based on capacity of the system in general. Other agreements are I-16 23 firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, profitability is affected primarily by revenues from capacity sales. See Note 8, 7, 6, 7, 7 and 6 to the financial statements of SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, respectively, in Item 8 herein for the amounts of capacity revenues recorded for each of the past three years. Long-term non-firm power of 400 megawatts was sold to FPC in 1993. In January 1994, the amount decreased to 200 megawatts, and the contract will expire at year-end. Unit power from specific generating plants is currently being sold to FP&L, FPC, JEA, and the city of Tallahassee, Florida. Under these agreements, an average of 1,700 megawatts of capacity is scheduled to be sold during 1994 and 1995. Thereafter, these sales will decline to some 1,600 megawatts and remain at that approximate level, unless reduced by FP&L, FPC and JEA after 1999, until the expiration of the contracts in 2010. GULF STATES DISPUTE SETTLEMENT Reference is made to Note 8, 7, 3, 7 and 7 to the financial statements of SOUTHERN, ALABAMA, GEORGIA, GULF and MISSISSIPPI, respectively, in Item 8 herein for a discussion of the Gulf States settlement. EMPLOYEE RELATIONS The companies of the SOUTHERN system had a total of 28,743 employees on their payrolls at December 31, 1993.
- ------------------------------------------------------------------------------- Employees at December 31, 1993 ----------------- ALABAMA 8,009 GEORGIA 12,528 GULF 1,565 MISSISSIPPI 1,586 SAVANNAH 655 SCS 2,702 Southern Nuclear 1,453 Other 245 ------ Total 28,743 ======
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, 1995. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. GEORGIA has an agreement with the IBEW covering wages and working conditions which is in effect through June 30, 1996. GEORGIA also has a contract with the United Plant Guard Workers of America with respect to Plant Hatch which extends through September 30, 1995. GULF has an agreement with a local union of the IBEW on a three-year contract extending to August 15, 1995. MISSISSIPPI has agreements with local unions of the IBEW on a contract extending to August 16, 1995. Southern Nuclear has an agreement with the IBEW on a three-year contract extending to August 15, 1995. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. The agreements also subject the terms of the pension plans for the companies discussed above to collective bargaining with the unions at five-year intervals. SAVANNAH has three-year labor agreements with the IBEW and the Office and Professional Employees International Union that expire April 15, 1996 and December 1, 1996, respectively. I-17 24 ITEM 2. PROPERTIES ELECTRIC PROPERTIES The operating affiliates and SEGCO, at December 31, 1993, operated 33 hydroelectric generating stations, 31 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 ------------------ -------- -------- (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 (1) Gaston, Unit 5 Wilsonville, AL 880,000 Miller Birmingham, AL 2,532,288 (2) --------- 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 1,021,682 (3) Wansley Carrollton, GA 925,550 (4) Yates Newnan, GA 1,250,000 --------- GEORGIA TOTAL 9,811,932 --------- Crist Pensacola, FL 1,045,000 Lansing Smith Panama City, FL 305,000 Scholz Chattahoochee, FL 80,000 Daniel Pascagoula, MS 500,000 (5) Scherer Unit 3 Macon, GA 204,500 (3) --------- 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 (5) Greene County Demopolis, AL 200,000 (1) --------- MISSISSIPPI TOTAL 1,859,500 --------- - ---------------------------------------------------------------------------------- Nameplate Generating Station Location Capacity ------------------ -------- -------------- (Kilowatts) McIntosh Effingham County, GA 163,117 Kraft Port Wentworth, GA 281,136 Riverside Savannah, GA 102,278 ---------- SAVANNAH TOTAL 546,531 ---------- Gaston Units 1-4 Wilsonville, AL (SEGCO) 1,000,000 (6) ---------- TOTAL FOSSIL STEAM 21,971,001 ---------- NUCLEAR STEAM Farley Dothan, AL (ALABAMA) 1,720,000 ---------- Hatch Baxley, GA 816,630 (7) Vogtle Augusta, GA 1,060,240 (8) ---------- GEORGIA TOTAL 1,876,870 ---------- TOTAL NUCLEAR STEAM 3,596,870 ---------- COMBUSTION TURBINES Arkwright Macon, GA 30,580 Atkinson Atlanta, GA 78,720 Bowen Cartersville, GA 39,400 McDonough Atlanta, GA 78,800 McManus Brunswick, GA 481,700 Mitchell Albany, GA 118,200 Wilson Augusta, GA 354,100 Wansley Carrollton, GA 26,322 (4) ---------- GEORGIA TOTAL 1,207,822 ---------- Lansing Smith Unit A (GULF) Panama City, FL 39,400 ---------- Chevron Cogenerating Station Pascagoula, MS 72,720 (9) Sweatt Meridian, MS 39,400 Watson Gulfport, MS 39,360 ---------- MISSISSIPPI TOTAL 151,480 ---------- Boulevard Savannah, GA 59,100 Kraft Port Wentworth, GA 22,000 ---------- SAVANNAH TOTAL 81,100 ---------- Gaston(SEGCO) Wilsonville, AL 19,680 (6) ---------- TOTAL COMBUSTION TURBINES 1,499,482 ----------
I-18 25
- ------------------------------------------------------------------------------- Generating Nameplate Station Location Capacity ------- -------- ---------- (Kilowatts) 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 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 862,480 ---------- TOTAL HYDROELECTRIC FACILITIES 2,445,205 ---------- Total Generating Capacity 29,512,558 ==========
Notes: (1) Owned by ALABAMA and MISSISSIPPI as tenants in common in the proportions of 60% and 40%, respectively. (2) Excludes the capacity owned by AEC. (See Item 2- PROPERTIES - "Jointly-Owned Facilities" herein.) (3) Capacity shown is GEORGIA's or GULF's (Unit 3 only) current portion: 8.4% of Units 1 and 2, 75% (25% for GULF) for Unit 3 and 33.1% for Unit 4 of total plant capacity. See Item 2 - PROPERTIES - "Proposed Sales of Property" and "Jointly-Owned Facilities" herein. (4) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity. (5) Represents 50% of the plant which is owned as tenants in common by GULF and MISSISSIPPI. (6) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS herein.) (7) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity. (8) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity. (9) Generation is dedicated to a single industrial customer. Except as discussed below under "Titles to Property", the principal plants and other important units of the SOUTHERN system are owned in fee by the operating affiliates and SEGCO. It is the opinion of management of each such company that its operating properties are adequately maintained and are substantially in good operating condition. MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is leased to Gulf States. The line, completed in 1984, extends from Plant Daniel to the Louisiana state line. Gulf States is paying a use fee over a forty-year period covering all expenses and the amortization of the original $57 million cost of the line. The all-time maximum demand on the SOUTHERN system was 25,936,900 kilowatts and occurred in July 1993. This amount excludes demand served by generation retained by OPC, MEAG and Dalton and excludes demand associated with power purchased from SEPA by its preference customers. At that time, 27,342,700 kilowatts were supplied by SOUTHERN system generation and 1,405,800 kilowatts (net) were sold to other parties through net purchased and interchanged power. The reserve margin for the Southern electric system at that time was 13.2%. For information on the other registrants' 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 - I-19 26 "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 a 50% interest in Freeport, a 35% interest in Edelnor, a 55.3% interest Alicura and a 33.3% interest in a co-generation facility in Hawaii. For further discussion of other SEI projects, see Item 1 - BUSINESS - "New Business Development" herein. The generating capacity of these utilities (or facilities) at December 31, 1993, was as follows:
- ------------------------------------------------------------------------------- Nameplate Type Facility Location Capacity ------------- -------- -------- (Megawatts) Combined cycle co-generation Northern Chile 96 Fossil steam Freeport, Grand Bahamas 112 Combined cycle Barbers Point, co-generation Oahu, HI 180 Hydroelectric Argentina 1,000*
* Represents a concession contract that provides SEI with the rights to use the generation. I-20 27 JOINTLY-OWNED FACILITIES ALABAMA has sold an undivided interest in two units of Plant Miller to AEC. GEORGIA has sold undivided interests in certain generating plants and other related facilities to OPC, MEAG, Dalton, FP&L and JEA. The percentages of ownership resulting from these sales are as follows:
- ------------------------------------------------------------------------------------------------------------------------------ Percentage Ownership Total ---------------------------------------------------------------------------------- Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FP&L JEA -------- ------- --- ------- --- ---- ------ ---- --- (Megawatts) Plant Miller Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -% -% Plant Hatch 1,630 - - 50.1 30.0 17.7 2.2 - - Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 - - Plant Scherer - Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 - - Unit 4 818 - - 33.1 - - - 49.2 17.7 Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 - - Rocky Mountain 848 - - 25.0* 75.0 - - - - *Estimated ownership at completion - ------------------------------------------------------------------------------------------------------------------------------
ALABAMA and GEORGIA have contracted to operate and maintain the respective units in which each has an interest (other than Rocky Mountain, as described below) as agent for the joint owners. See "Proposed Sales of Property" below for a description of the proposed sale of GEORGIA's remaining unsold ownership interest in Plant Scherer Unit 4. In connection with the joint ownership arrangements for Plant Vogtle, GEORGIA has remaining commitments to purchase declining fractions of OPC's and MEAG's capacity and energy until 1994 for Unit 1 and 1996 for Unit 2 and, with regard to a portion of a 5% interest in Plant Vogtle owned by MEAG, until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether 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 in the Statements of Income in Item 8 herein. In December 1988, GEORGIA and OPC completed a joint ownership agreement for the Rocky Mountain project under which GEORGIA will retain its present investment in the project and OPC will finance, complete and operate the facility. Upon completion (scheduled for 1995), GEORGIA will own an undivided interest in the project equal to the proportion its investment bears to the total investment in the project (excluding each party's cost of funds and ad valorem taxes). For purposes of the ownership formula, GEORGIA's investment will be expressed in nominal dollars and OPC's investment will be expressed in constant 1987 dollars. Based on current cost estimates, GEORGIA's final ownership is estimated at approximately 25% of the project at completion. GEORGIA has held preliminary discussions regarding the potential disposition of its remaining interest in the project. PROPOSED SALES OF PROPERTY In 1991 and 1993, GEORGIA completed the first two in a series of four separate transactions to sell Unit 4 of Plant Scherer to FP&L and JEA for a total price of approximately $806 million, including any gains on these transactions. FP&L would eventually own approximately 76.4% of this unit, with JEA owning the remainder. The capacity from this unit was previously dedicated to off-system sales contracts with Gulf States that were suspended in 1988. GEORGIA will continue to operate the unit. I-21 28 The 1991 and 1993 sales and the remaining transactions are scheduled as follows:
- ----------------------------------------------------------- Percentage Closing of Sales Date Capacity Ownership Price ---- -------- ---------- ----- Megawatts (in millions) July 1991 290 35.46% $291 June 1993 258 31.44 253 June 1994 135 16.55 132 June 1995 135 16.55 130 - ----------------------------------------------------------- Total 818 100.00% $806 ===========================================================
Plant Scherer, a jointly owned coal-fired generating plant, has four units with a total capacity of 3,272 megawatts. Unit 4 was completed in 1989. TITLES TO PROPERTY The operating affiliates' and SEGCO's interests in the principal plants (other than certain pollution control facilities, one small hydroelectric generating station leased by GEORGIA and the land on which four combustion turbine generators of MISSISSIPPI are located, which is held by easement) and other important units of the respective companies are owned in fee by such companies, subject only to the liens of applicable mortgage indentures (except for SEGCO) and to excepted encumbrances as defined therein. The operating affiliates own the fee interests in certain of their principal plants as tenants in common. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) Properties such as electric transmission and distribution lines and steam heating mains are constructed principally on rights-of-way which are maintained under franchise or are held by easement only. A substantial portion of lands submerged by reservoirs is held under flood right easements. In substantially all of its coal reserve lands, SEGCO owns or will own the coal only, with adequate rights for the mining and removal thereof. PROPERTY ADDITIONS AND RETIREMENTS During the period from January 1, 1989, to December 31, 1993, the operating affiliates, SEGCO, and other (i.e. SCS, Southern Nuclear and, beginning in 1993, various of the special purpose subsidiaries) gross property additions and retirements were as follows:
- ------------------------------------------------------------ Gross Property Additions Retirements -------------------- ----------- (in millions) ALABAMA (1) $2,104 $ 375 GEORGIA (2) 3,017 1,519 GULF 341 86 MISSISSIPPI 355 65 SAVANNAH 161 15 SEGCO 90 15 Other (3) 132 53 - ------------------------------------------------------------ SOUTHERN System $6,200 $2,128 ============================================================
(1) Includes approximately $62 million attributable to property sold to AEC in 1992. (2) Includes approximately $480 million attributable to property sold to OPC, FP&L and JEA, but excludes $231 million from the write-off of certain Plant Vogtle costs in 1990. (3) Net of intercompany eliminations. ITEM 3. LEGAL PROCEEDINGS (1) STEPAK V. CERTAIN SOUTHERN OFFICIALS (U.S. District Court for the Southern District of Georgia) In April 1991, two SOUTHERN stockholders filed a derivative action suit against certain current and former directors and officers of SOUTHERN. The suit alleges violations of RICO by officers and breaches of fiduciary duty and gross negligence by all defendants resulting from alleged fraudulent accounting for spare parts, illegal political campaign contributions, violations of federal securities laws involving misrepresentations and omissions in SEC filings, and concealment of the foregoing acts. The complaint seeks damages, including treble damages pursuant to RICO, in an unspecified amount, which if awarded, would be payable to SOUTHERN. The plaintiffs' amended complaint was dismissed by the court in March 1992. The court ruled the plaintiffs had failed to present adequately their allegation that the I-22 29 SOUTHERN board of directors' refusal of an earlier demand by the plaintiffs was wrongful. The plaintiffs appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. (2) JOHNSON V. ALABAMA (Circuit Court of Shelby County, Alabama) In September 1990, two customers of ALABAMA filed a civil complaint in the Circuit Court of Shelby County, Alabama, against ALABAMA seeking to represent all persons who, prior to June 23, 1989, entered into agreements with ALABAMA for the financing of heat pumps and other merchandise purchased from vendors other than ALABAMA. The plaintiffs contended that ALABAMA was required to obtain a license under the Alabama Consumer Finance Act to engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring ALABAMA to refund all payments, principal and interest, made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June 1993, the court ordered ALABAMA to refund or forfeit interest of approximately $10 million because of ALABAMA's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. ALABAMA has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot be determined; however, in management's opinion, the final outcome will not have a material adverse effect on SOUTHERN's or ALABAMA's financial statements. (3) OHIO RIVER COMPANY, ET AL.VS. GULF, ET AL. (U.S. District Court for Southern District of Ohio, Western Division) In 1993, a complaint against GULF and SCS was filed in federal district court in Ohio by two companies with which GULF had contracted for the transportation by barge for certain GULF coal supplies. The complaint alleges breach of the contract by GULF and seeks damages estimated by the plaintiffs to be in excess of $85 million. The final outcome of this matter cannot now be determined; however, in management's opinion the final outcome will not have a material adverse effect on SOUTHERN's or GULF's financial statements. See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation - - Federal Power Act" and "Rate Matters", for a description of certain other administrative and legal proceedings discussed therein. Additionally, each of the operating affiliates and SEI 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. In management's opinion these various actions will not have a material adverse effect on any of the registrants' financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. I-23 30 EXECUTIVE OFFICERS OF SOUTHERN (Inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3) EDWARD L. ADDISON Chairman and CEO Age 63 Elected in 1983; responsible primarily for the formation of overall corporate policy. He was elected Chairman of SOUTHERN effective January 1994. A. W. DAHLBERG President and Director Age 53 Elected in 1985; President and Chief Executive Officer of GEORGIA from 1988 through 1993. He was elected Executive Vice President of SOUTHERN in 1991. He was elected President of SOUTHERN effective January 1994. PAUL J. DENICOLA Executive Vice President and Director Age 45 Elected in 1989; Executive Vice President of SOUTHERN since 1991. Elected President and Chief Executive Officer of SCS effective January 1994. He previously served as Executive Vice President of SCS from 1991 to 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. H. ALLEN FRANKLIN Executive Vice President and Director Age 49 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 CEO of GEORGIA effective January 1994. ELMER B. HARRIS Executive Vice President and Director Age 54 Elected in 1989; President and Chief Executive Officer of ALABAMA since 1989 and, beginning 1991, Executive Vice President of SOUTHERN. He previously served as Senior Executive Vice President of GEORGIA from 1986 to 1989. W. L. WESTBROOK Financial Vice President Age 54 Elected in 1986; responsible primarily for all aspects of financing for SOUTHERN. He has served as Executive Vice President of SCS since 1986. BILL M. GUTHRIE Vice President Age 60 Elected in 1991; serves as Chief Production Officer for the SOUTHERN system. Senior Executive Vice President of SCS effective January 1994. He has also served as Executive Vice President of ALABAMA since 1988. Each of the above is currently an officer of SOUTHERN, serving a term running from the last annual meeting of the directors (May 26, 1993) for one year until the next annual meeting or until his successor is elected and qualified. I-24 31 PART II ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The common stock of SOUTHERN is listed and traded on the New York Stock Exchange. The stock is also traded on regional exchanges across the United States. High and low stock prices, per the New York Stock Exchange Composite Tape and as adjusted to reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994, during each quarter for the past two years were as follows:
--------------------------------------------- High Low ---- --- 1993 First Quarter $21-3/8 $18-3/8 Second Quarter 22-1/2 19-3/8 Third Quarter 23 20-1/2 Fourth Quarter 23-5/8 20-3/4 1992 First Quarter $17-3/8 $15-1/8 Second Quarter 17-5/8 15-5/8 Third Quarter 19 17-3/8 Fourth Quarter 19-1/2 17-5/8 ---------------------------------------------
There is no market for the other registrants' common stock, all of which is owned by SOUTHERN. On February 28, 1994, the closing price of SOUTHERN's common stock was $20-5/8. (b) Number of SOUTHERN's common stockholders at December 31, 1993: 237,105 Each of the other registrants have one common stockholder, SOUTHERN. (c) Common dividends are payable at the discretion of each registrant's board of directors. The common dividends paid by SOUTHERN and the operating affiliates to their stockholder(s) for the past two years were as follows: (in thousands)
================================================= Registrant Quarter 1993 1992 ------------------------------------------------- SOUTHERN First $180,381 $173,610 Second 180,948 173,610 Third 181,892 173,610 Fourth 182,351 174,052 ALABAMA First 62,900 60,800 Second 63,100 60,900 Third 63,400 60,700 Fourth 63,500 90,900 GEORGIA First 100,100 96,000 Second 100,400 96,200 Third 100,800 95,800 Fourth 101,100 96,000 GULF First 10,400 10,000 Second 10,400 10,000 Third 10,500 9,900 Fourth 10,500 10,000 MISSISSIPPI First 7,200 7,000 Second 7,200 7,000 Third 7,300 7,000 Fourth 7,300 7,000 SAVANNAH First 4,500 5,500 Second 5,500 5,500 Third 5,500 5,500 Fourth 5,500 5,500 -------------------------------------------------
In January 1994, SOUTHERN's board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price have been adjusted to reflect the stock distribution. II-1 32 The dividend paid per share by SOUTHERN was 27.5c. for each quarter of 1992 and 28.5c. for each quarter of 1993. SOUTHERN's common dividend for the first quarter of 1994 was raised to 29.5c. per share. The amount of common dividends that may be paid by the subsidiary registrants is restricted in accordance with their respective first mortgage bond indenture and charter. The amounts of earnings retained in the business and the amounts restricted against the payment of cash dividends on common stock at December 31, 1993, were as follows:
Retained Restricted Earnings Amount ---------- ---------- (in millions) ALABAMA $ 997 $ 653 GEORGIA 1,316 742 GULF 158 101 MISSISSIPPI 129 86 SAVANNAH 93 55 Consolidated 2,968 1,639 - ------------------------------------------------------
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-38 through II-49. ALABAMA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-78 through II-91. GEORGIA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-123 through II-137. GULF. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II- 166 through II-179. MISSISSIPPI. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-207 through II-220. SAVANNAH. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-245 through II-258. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SOUTHERN. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-8 through II-15. ALABAMA. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-53 through II-58. 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-95 through II-101. 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-141 through II-147. 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-183 through II-189. 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-224 through II-230. II-2 33 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO 1993 FINANCIAL STATEMENTS
PAGE ---- THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES: Report of Independent Public Accountants (in which their opinion on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project) II-7 Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-16 Consolidated Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-16 Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-17 Consolidated Balance Sheets at December 31, 1993 and 1992 II-18 Consolidated Statements of Capitalization at December 31, 1993 and 1992 II-20 Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1993, 1992 and 1991 II-21 Notes to Financial Statements II-22 ALABAMA: Report of Independent Public Accountants II-52 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-59 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-60 Balance Sheets at December 31, 1993 and 1992 II-61 Statements of Capitalization at December 31, 1993 and 1992 II-63 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-64 Notes to Financial Statements II-65 GEORGIA: Report of Independent Public Accountants (in which their opinion on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding the recoverability of Georgia Power's investment in the Rocky Mountain pumped storage hydroelectric project) II-94 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-102 Balance Sheets at December 31, 1993 and 1992 II-103 Statements of Capitalization at December 31, 1993 and 1992 II-105 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-107 Statements of Paid-In Capital for the Years Ended December 31, 1993, 1992 and 1991 II-107 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-108 Notes to Financial Statements II-109
II-3 34
PAGE ---- GULF: Report of Independent Public Accountants II-140 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-148 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-149 Balance Sheets at December 31, 1993 and 1992 II-150 Statements of Capitalization at December 31, 1993 and 1992 II-152 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-154 Statements of Paid-In Capital for the Years Ended December 31, 1993, 1992 and 1991 II-154 Notes to Financial Statements II-155 MISSISSIPPI: Report of Independent Public Accountants II-182 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-190 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-191 Balance Sheets at December 31, 1993 and 1992 II-192 Statements of Capitalization at December 31, 1993 and 1992 II-194 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-195 Statements of Paid-In Capital for the Years Ended December 31, 1993, 1992 and 1991 II-195 Notes to Financial Statements II-196 SAVANNAH: Report of Independent Public Accountants II-223 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 II-231 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 II-232 Balance Sheets at December 31, 1993 and 1992 II-233 Statements of Capitalization at December 31, 1993 and 1992 II-235 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 II-236 Statements of Paid-In Capital for the Years Ended December 31, 1993, 1992 and 1991 II-236 Notes to Financial Statements II-237
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-4 35 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES FINANCIAL SECTION II-5 36 MANAGEMENT'S REPORT The Southern Company and Subsidiary Companies 1993 Annual Report The management of The Southern Company has prepared -- and is responsible for - -- the consolidated financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The company's system of internal accounting controls is evaluated on an ongoing basis by the company's internal audit staff. The company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of three directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the company's operations are conducted according to a high standard of business ethics. In management's opinion, the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of The Southern Company and its subsidiaries in conformity with generally accepted accounting principles. As discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until regulatory proceedings are concluded. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ E. L. Addison /s/ W. L. Westbrook - ------------------------------------ ---------------------------- Edward L. Addison W. L. Westbrook Chairman and Chief Executive Officer Financial Vice President II-6 37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS AND TO THE STOCKHOLDERS OF THE SOUTHERN COMPANY: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of The Southern Company (a Delaware corporation) and its subsidiaries as of December 31, 1993 and 1992, 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, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-16 through II-37) referred to above present fairly, in all material respects, the financial position of The Southern Company and its subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 9 to the financial statements, effective January 1, 1993, The Southern Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. As more fully discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until regulatory proceedings are concluded. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ Arthur Andersen & Co. Atlanta, Georgia February 16, 1994 II-7 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Southern Company and Subsidiary Companies 1993 Annual Report RESULTS OF OPERATIONS EARNINGS AND DIVIDENDS The Southern Company's 1993 financial performance exceeded the strong results recorded for 1992, and set several new records. The company's financial strength continued to gain momentum for the third consecutive year. In January 1994, The Southern Company board of directors increased the quarterly dividend rate by 3.5 percent, and approved a two-for-one common stock split in the form of a stock distribution. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price have been adjusted to reflect the stock distribution. For 1993, The Southern Company's net income of $1.0 billion established a new record high and the company's common stock reached an all-time high closing price during the year of 23 3/8 -- surpassing the record of 19 1/2 set in 1992. Also, return on average common equity reached the highest level since 1986. Earnings reported for 1993 totaled $1,002 million or $1.57 per share, an increase of $49 million or 6 cents per share from the previous year. Both 1993 and 1992 earnings were affected by special non-operating or non-recurring items. After excluding these special items in both years, earnings from operations of the ongoing business of selling electricity were $1,016 million or $1.59 per share, an increase of $77 million or 10 cents per share compared with 1992. The special items that affected 1993 and 1992 earnings were as follows:
Consolidated Earnings Net Income Per Share 1993 1992 1993 1992 (in millions) Earnings as reported $1,002 $953 $1.57 $1.51 Gulf States related (6) (16) (.01) (.03) Sale of Scherer Unit 4 (18) -- (.03) -- Environmental cleanup 25 2 .04 .01 Transportation fleet reductions 13 -- .02 -- Total items excluded 14 (14) .02 (.02) Earnings from operations $1,016 $939 $1.59 $1.49 Amount and percent change $77 8.2% $0.10 6.7%
In 1993, several items -- both positive and negative -- had an impact on earnings, which resulted in a net reduction of $14 million. These items were: (1) The conclusion of a settlement agreement -- discussed later -- with Gulf States Utilities (Gulf States) increased earnings. (2) The second in a series of four separate transactions to sell Plant Scherer Unit 4 to two Florida utilities increased earnings. (3) Environmental clean-up costs incurred at sites located in Alabama and Georgia decreased earnings. (4) Costs associated with a transportation fleet reduction program decreased earnings. The improvements in 1993 earnings resulted primarily from increased retail energy sales and continued emphasis on effective cost controls. The special items that increased 1992 earnings were primarily related to additional settlement provisions from Gulf States, and to gains on the sale of Gulf States common stock received in 1991. Returns on average common equity were 13.43 percent in 1993, 13.42 percent in 1992, and 12.74 percent in 1991. Dividends paid on common stock during 1993 were $1.14 per share or 28 1/2 cents per quarter. During 1992 and 1991, dividends paid per share were $1.10 and $1.07, respectively. In January 1994, The Southern Company board of directors raised the quarterly dividend to 29 1/2 cents per share or an annual rate of $1.18 per share. REVENUES Operating revenues increased in 1993 and 1992 and decreased in 1991 as a result of the following factors:
Increase (Decrease) From Prior Year 1993 1992 1991 (in millions) Retail -- Change in base rates $ 3 $ 137 $ 46 Sales growth 104 138 122 Weather 198 (113) (19) Fuel cost recovery and other 199 (55) (36) Total retail 504 107 113 Sales for resale -- Within service area 38 (8) 5 Outside service area (184) (87) (93) Total sales for resale (146) (95) (88) Other operating revenues 58 11 (28) Total operating revenues $ 416 $ 23 $ (3) Percent change 5.2% 0.3% 0.0%
II-8 39 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report Retail revenues of $7.3 billion in 1993 increased 7.4 percent from last year, compared with an increase of 1.6 percent in 1992. 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 $447 million in 1993, up 9.2 percent from the prior year. This increase resulted primarily from the prolonged hot summer weather, which increased the demand for electricity. Revenues from sales for resale within the service area were $409 million in 1992, down 1.9 percent from the prior year. The decrease resulted from certain municipalities and cooperatives in the service area retaining more of their own generation at facilities jointly owned with Georgia Power. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components were as follows:
1993 1992 1991 (in millions) Capacity $350 $457 $490 Energy 230 330 366 Total $580 $787 $856
Capacity revenues decreased in 1993 and 1992 because the amount of capacity under contract declined by some 500 megawatts and 300 megawatts, respectively. In 1994, the contracted capacity will decline another 400 megawatts. Changes in revenues are influenced heavily by the amount of energy sold each year. Kilowatt-hour sales for 1993 and the percent change by year were as follows:
(billions of Amount Percent Change kilowatt-hours) 1993 1993 1992 1991 Residential 36.8 9.5% 0.0% 1.5% Commercial 32.8 5.9 2.1 2.4 Industrial 48.7 1.9 3.8 0.2 Other 0.9 4.6 (4.8) 1.2 Total retail 119.2 5.3 2.1 1.2 Sales for resale -- Within service area 13.3 9.5 (1.7) 10.7 Outside service area 12.4 (25.2) (16.2) (18.7) Total 144.9 2.1 (0.7) (1.4)
The rate of growth in 1993 retail energy sales was the highest since 1986. Residential energy sales registered the highest annual increase in two decades as a result of hotter-than-normal summer weather and the addition of 46,000 new customers. Commercial sales were also affected by the warm summer. Industrial energy sales in 1993 and 1992 showed moderate growth, reflecting a recovery in the business and economic conditions in The Southern Company's service area. Energy sales to retail customers are projected to grow at an average annual rate of 1.7 percent during the period 1994 through 2004. 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 have decreased for the third consecutive year primarily as a result of the scheduled decline in megawatts of capacity under contract. In addition, the decline in 1992 and 1991 sales was also influenced by fluctuations in prices for oil and natural gas, the primary fuel sources for utilities with which the company has long-term contracts. When oil and gas prices fall below a certain level, these customers can generate electricity to meet their requirements more economically. However, the fluctuation in these energy sales, excluding the impact of contractual declines, had minimal effect on earnings because The Southern Company is paid for dedicating specific amounts of its generating capacity to these utilities. EXPENSES Total operating expenses of $6.7 billion for 1993 were up 6.5 percent compared with the prior year. The increase was attributable to higher production expenses of $75 million to meet increased energy demands and an additional $50 million in depreciation expenses and property taxes resulting from additional utility plant being placed into service. The transportation fleet reduction program and environmental clean-up costs discussed earlier increased expenses by some $62 million. Also, a $67 million change in deferred Plant Vogtle expenses compared with the amount in 1992 contributed to the rise in total operating expenses. In 1992, total operating expenses of $6.3 billion were at the same level reported for 1991. The costs to produce and deliver electricity in 1992 declined by $165 million primarily as a result of less energy being sold and continued effective cost controls. However, expenses in 1991 were reduced by proceeds from a settlement II-9 40 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report agreement with Gulf States that more than offset the decline in 1992 expenses when compared with 1991. Deferred expenses related to Plant Vogtle in 1992 increased by $47 million when compared with the prior year. Fuel costs constitute the single largest expense for The Southern Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows:
1993 1992 1991 Total generation (billions of kilowatt-hours) 144 140 142 Sources of generation (percent) -- Coal 78 77 77 Nuclear 17 17 17 Hydro 4 5 5 Oil and gas 1 1 1 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.90 1.86 1.91 Nuclear 0.54 0.54 0.66 Oil and gas 4.34 4.81 2.84 Total 1.67 1.62 1.69
Fuel and purchased power expenses of $2.6 billion in 1993 increased 1.3 percent compared with the prior year because of increased energy demands and slightly higher average cost of fuel per net kilowatt-hour generated. Fuel and purchased power costs in 1992 decreased $137 million or 5.0 percent compared with 1991 primarily because 1.1 billion fewer kilowatt-hours were needed to meet customer requirements. Also, the decrease in these costs was attributable to a lower average cost of fuel per net kilowatt-hour generated. Income taxes for 1993 increased $69 million compared with the prior year. The increase is attributable to a number of factors, including a 1 percent increase in the corporate federal income tax rate effective January 1993, the second sale of additional ownership interest in Plant Scherer Unit 4, and the increase in taxable income from operations. For 1992, income taxes rose $11 million or 1.7 percent above the amount reported for 1991. For the fifth consecutive year, total gross interest charges and preferred stock dividends declined from amounts reported in the previous year. The declines are attributable to lower interest rates and significant refinancing activities during the past two years. In 1993, these costs were $831 million - -- down $21 million or 2.3 percent. These costs for 1992 decreased $71 million. As a result of favorable market conditions during 1993, some $3.0 billion of senior securities was issued for the primary purpose of retiring higher-cost debt and preferred stock. EFFECTS OF INFLATION The Southern Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on The Southern Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. 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 growth in energy sales to regulatory matters. Georgia Power has completed two of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. The remaining transactions are scheduled to take place in 1994 and 1995. If the sales take place as planned, Georgia Power could realize an after-tax gain currently estimated to total approximately $20 million. See Note 7 to the financial statements for additional information. In early 1994, Georgia Power and the system service company announced work force reduction programs that are estimated to reduce 1994 earnings by some $55 million. These actions will assist in efforts to control the growth in operating expenses. II-10 41 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report See Note 4 to the financial statements for information on an uncertainty regarding full recovery of an investment in the Rocky Mountain pumped storage hydroelectric project. Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) will have a profound 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 law also includes provisions to streamline the licensing process for new nuclear plants. The Southern Company is preparing to meet the challenge of this major change in the traditional business practices 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, and this may enhance the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, pressure for legislation to allow retail wheeling will continue. If The Southern Company does not remain a low-cost producer and provide quality service, the company's retail energy sales growth, as well as new long-term contracts for energy sales outside the service area, could be limited, and this could significantly erode earnings. An important part of the Energy Act was to amend the Public Utility Holding Company Act of 1935 (PUHCA) and allow holding companies to form exempt wholesale generators and foreign utility companies to sell power largely free of regulation under PUHCA. These new entities are able to sell power to affiliates -- under certain restrictions -- and to own and operate power generating facilities in other domestic and international markets. To take advantage of these opportunities, Southern Electric International (Southern Electric) -- founded in 1981 -- is focusing on international and domestic cogeneration, the independent power market, and the privatization of generating facilities in the international market. During 1993, investments of some $315 million were made in entities that own and operate generating facilities in various international markets. In the near term, Southern Electric is expected to have minimal effect on earnings, but the possibility exists that it could be a prime contributor to future earnings growth. Demand-side options -- programs that enable customers to lower or alter their peak energy requirements -- have been implemented by some of the system operating companies and are a significant part of integrated resource planning. See Note 3 to the financial statements under "Georgia Power's Demand-Side Conservation Programs" for information concerning the recovery of certain costs. Customers can receive cash incentives for participating in these programs as well as reduce their energy requirements. Expansion and increased utilization of these programs will be contingent upon sharing of cost savings between the customers and the utility. Besides promoting energy efficiency, another benefit of these programs could be the ability to defer the need to construct baseload generating facilities further into the future. The ability to defer major construction projects in conjunction with precertification approval processes of such projects by the respective state public service commissions in Alabama, Georgia, and Mississippi will diminish the possible exposure to prudency disallowances and the resulting impact on earnings. In addition, Georgia Power has conducted a competitive bidding process for additional peaking capacity needed in 1996 and 1997. To meet expected requirements for 1996, Georgia Power has filed a plan with the state public service commission for certification of a four-year purchase power contract and for an ownership interest in a combustion turbine peaking unit. Rates to retail customers served by the system operating companies are regulated by the respective state public service commissions in Alabama, Florida, Georgia, and Mississippi. Rates for Alabama Power and Mississippi Power are adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. See Note 3 to the financial statements for information about other regulatory matters. The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that The Southern Company has with its sales for resale customers. The FERC currently is reviewing the rate of return on common equity included in some of these schedules and contracts and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Reviews Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." II-11 42 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be effective by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental unemployment benefits, disability-related benefits, job training, and health and life insurance coverage. In 1993, The Southern Company adopted Statement No. 112, with no material effect on the financial statements. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which is effective in 1994. Statement No. 115 supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The Southern Company adopted the new rules January 1, 1994, with no material effect on the financial statements. FINANCIAL CONDITION OVERVIEW The Southern Company's financial condition is now the strongest since the mid-1980s. Record levels of performance were set in 1993 related to earnings, market price of common stock, and energy sold to retail customers. In January 1994, The Southern Company board of directors increased the common stock dividend for the third consecutive year, and approved a two-for-one common stock split in the form of a stock distribution. Another major change in The Southern Company's financial condition was gross property additions of $1.4 billion to utility plant. The majority of funds needed for gross property additions since 1990 have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Consolidated Statements of Cash Flows provide additional details. On January 1, 1993, The Southern Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. See notes 2 and 9 to the financial statements, regarding the impact of these changes. CAPITAL STRUCTURE The company achieved a ratio of common equity to total capitalization -- including short-term debt -- of 43.5 percent in 1993, compared with 42.8 percent in 1992 and 41.5 percent in 1991. The company's goal is to maintain the common equity ratio generally within a range of 40 percent to 45 percent. During 1993, the operating companies sold $2.2 billion of first mortgage bonds and, through public authorities, $385 million of pollution control revenue bonds, at a combined weighted interest rate of 6.5 percent. Preferred stock of $426 million was issued at a weighted dividend rate of 5.7 percent. The operating companies continued to reduce financing costs by retiring higher-cost bonds and preferred stock. Retirements, including maturities, of bonds totaled $2.5 billion during 1993, $2.8 billion during 1992, and $1.0 billion during 1991. Retirements of preferred stock totaled $516 million during 1993, $326 million during 1992, and $125 million during 1991. As a result, the composite interest rate on long-term debt decreased from 9.2 percent at December 31, 1990, to 7.6 percent at December 31, 1993. During this same period, the composite dividend rate on preferred stock declined from 8.5 percent to 6.4 percent. In 1993, The Southern Company raised $205 million from the issuance of new common stock under the Dividend Reinvestment and Stock Purchase Plan (DRIP) and the Employee Savings Plan. At the close of 1993, the company's common stock had a market value of $22.00 per share, compared with a book value of $11.96 per share. The market-to-book value ratio was 184 percent at the end of 1993, compared with 168 percent at year-end 1992 and 156 percent at year-end 1991. CAPITAL REQUIREMENTS FOR CONSTRUCTION The construction program of the operating companies is budgeted at $1.5 billion for 1994, $1.3 billion for 1995, and $1.5 billion for 1996. The total is $4.3 billion for the three years. Actual construction costs may vary from this estimate because of factors such as changes in environmental regulations; changes in existing nuclear plants to meet new regulations; revised load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. The operating companies do not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload facilities until well into the future. However, within the II-12 43 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report service area, the construction of combustion turbine peaking units of approximately 1,700 megawatts of capacity is planned to be completed by 1996 to meet increased peak-hour demands. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will be continuing. OTHER CAPITAL REQUIREMENTS In addition to the funds needed for the construction program, approximately $789 million will be required by the end of 1996 for present sinking fund requirements, redemptions announced, and maturities of long-term debt. Also, the operating subsidiaries plan to continue a program to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital. ENVIRONMENTAL MATTERS In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995 and affects eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing slower than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $275 million through 1995. Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance could require total construction expenditures ranging from approximately $450 million to $800 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 3 percent in revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. There can be no assurance that all Clean Air Act costs will be recovered. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules by November 1994 -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state has issued rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules require nitrogen oxide controls, above Title IV II-13 44 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report requirements, on some Georgia Power plants. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions as early as 1997. Compliance with any new rules could result in significant additional costs. The impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Southern Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the 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. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; and the Resource Conservation and Recovery Act. Changes to these laws could affect many areas of The Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential for lawsuits alleging damages caused by electromagnetic fields exists. SOURCES OF CAPITAL In early 1994, The Southern Company sold -- through a public offering -- common stock with proceeds totaling $120 million. The company may require additional equity capital during the remainder of 1994. The amount and timing of additional equity capital to be raised in 1994 -- as well as in subsequent years -- will be contingent on The Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. Any portion of the common stock required during 1994 for the DRIP and the employee 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 subsidiaries plan to obtain the funds required for construction and other purposes from sources similar to those used in the past. However, the type and timing of any financings -- if needed -- will depend on market conditions and regulatory approval. II-14 45 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1993 Annual Report Completing the sale of Unit 4 of Plant Scherer will provide some $260 million of cash during the years 1994 and 1995. As required by the Nuclear Regulatory Commission, Alabama Power and Georgia Power established external sinking funds for nuclear decommissioning costs. For 1994 through 2000, the combined amount to be funded for both Alabama Power and Georgia Power totals $36 million annually. The cumulative effect of funding over this 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." To meet short-term cash needs and contingencies, the system companies had approximately $178 million of cash and cash equivalents and $1.1 billion of unused credit arrangements with banks at the beginning of 1994. To issue additional first mortgage bonds and preferred stock, the operating companies must comply with certain earnings coverage requirements designated in their mortgage indentures and corporate charters. The ability to issue securities in the future will depend on coverages at that time. The coverage ratios were, at the end of the respective years, as follows:
Mortgage Charter Coverage Coverage (2.00* (1.50 Required) Required) 1993 1992 1993 1992 Alabama Power 5.70 5.86 2.71 2.56 Georgia Power 7.75 6.38 2.61 2.23 Gulf Power 5.79 5.27 2.56 2.35 Mississippi Power 5.78 5.68 2.67 2.51 Savannah Electric 3.94 5.01 2.20 2.65
*Savannah Electric's requirement is 2.50. II-15 46 CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 The Southern Company and Subsidiary Companies 1993 Annual Report
1993 1992 1991 (in millions) OPERATING REVENUES $8,489 $8,073 $8,050 OPERATING EXPENSES: Operation -- Fuel 2,265 2,114 2,237 Purchased power 336 454 468 Proceeds from settlement of disputed contracts (Note 8) (3) (7) (181) Other 1,448 1,317 1,321 Maintenance 653 613 637 Depreciation and amortization 793 768 763 Amortization of deferred Plant Vogtle expenses, net (Note 1) 36 (31) 16 Taxes other than income taxes 462 436 432 Federal and state income taxes 734 647 618 Total operating expenses 6,724 6,311 6,311 OPERATING INCOME 1,765 1,762 1,739 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 9 10 13 Deferred return on Plant Vogtle (Note 1) -- -- 35 Interest income 30 32 30 Other, net (41) (50) (57) Income taxes applicable to other income 57 39 21 INCOME BEFORE INTEREST CHARGES 1,820 1,793 1,781 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest on long-term debt 595 684 757 Allowance for debt funds used during construction (13) (12) (18) Interest on notes payable 30 16 20 Amortization of debt discount, premium, and expense, net 26 14 9 Other interest charges 87 34 29 Preferred dividends of subsidiary companies 93 104 108 Net interest charges and preferred dividends 818 840 905 CONSOLIDATED NET INCOME $1,002 $ 953 $ 876 COMMON STOCK DATA: (Note 10) Average number of shares of common stock outstanding (in millions) 637 632 632 Earnings per share of common stock $1.57 $1.51 $ 1.39 Cash dividends paid per share of common stock $1.14 $1.10 $ 1.07
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991
1993 1992 1991 (in millions) BALANCE AT BEGINNING OF YEAR $2,721 $2,490 $2,296 Consolidated net income 1,002 953 876 3,723 3,443 3,172 Cash dividends on common stock 726 695 676 Capital and preferred stock transactions, net 29 27 6 BALANCE AT END OF YEAR (Note 14) $2,968 $2,721 $2,490
The accompanying notes are an integral part of these statements. II-16 47 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993, 1992, and 1991 The Southern Company and Subsidiary Companies 1993 Annual Report
1993 1992 1991 (in millions) OPERATING ACTIVITIES: Consolidated net income $ 1,002 $ 953 $ 876 Adjustments to reconcile consolidated net income to net cash provided by operating activities -- Depreciation and amortization 1,011 969 968 Deferred income taxes and investment tax credits 189 215 15 Allowance for equity funds used during construction (9) (10) (13) Deferred Plant Vogtle costs (Note 1) 36 (31) (19) Non-cash proceeds from settlement of disputed contracts (Note 8) -- (7) (141) Gain on asset sales (36) -- (37) Other, net (9) (25) 82 Changes in certain current assets and liabilities -- Receivables, net (55) (10) 68 Fossil fuel stock 138 53 21 Materials and supplies (2) (76) (1) Accounts payable 43 35 (13) Other (61) (71) 61 Net cash provided from operating activities 2,247 1,995 1,867 INVESTING ACTIVITIES: Gross property additions (1,441) (1,105) (1,123) Foreign utility operations (465) -- -- Sales of property 262 44 291 Other (37) 61 (45) Net cash used for investing activities (1,681) (1,000) (877) FINANCING ACTIVITIES: Proceeds -- Common stock 205 30 -- Preferred stock 426 410 100 First mortgage bonds 2,185 1,815 380 Other long-term debt 592 256 140 Prepaid capacity revenues -- -- 53 Retirements -- Preferred stock (516) (326) (125) First mortgage bonds (2,178) (2,575) (881) Other long-term debt (450) (296) (200) Increase in notes payable, net 114 525 180 Payment of common stock dividends (726) (695) (676) Miscellaneous (137) (148) (41) Net cash used for financing activities (485) (1,004) (1,070) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 81 (9) (80) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 97 106 186 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 178 $ 97 $ 106 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for -- Interest (net of amount capitalized) $ 673 $ 743 $ 802 Income taxes 530 458 428
The accompanying notes are an integral part of these statements. II-17 48 CONSOLIDATED STATEMENTS OF BALANCE SHEETS At December 31, 1993, and 1992 The Southern Company and Subsidiary Companies 1993 Annual Report
ASSETS 1993 1992 (in millions) UTILITY PLANT: Plant in service (Note 1) $27,687 $27,033 Less accumulated provision for depreciation 8,934 8,280 18,753 18,753 Nuclear fuel, at amortized cost 229 257 Construction work in progress (Note 4) 1,031 665 Total 20,013 19,675 Less property-related accumulated deferred income taxes (Note 9) -- 3,186 Total 20,013 16,489 OTHER PROPERTY AND INVESTMENTS: Foreign utility operations, being amortized (Note 5) 559 -- Nuclear decommissioning trusts 88 52 Miscellaneous 89 75 Total 736 127 CURRENT ASSETS: Cash and cash equivalents 178 97 Investment securities -- 199 Receivables, less accumulated provisions for uncollectible accounts of $9 million in 1993 and $7 million in 1992 1,147 919 Fossil fuel stock, at average cost 254 392 Materials and supplies, at average cost 535 533 Prepayments 148 220 Vacation pay deferred (Note 1) 73 70 Total 2,335 2,430 DEFERRED CHARGES: Deferred charges related to income taxes (Note 9) 1,546 -- Deferred Plant Vogtle costs (Note 1) 507 383 Debt expense, being amortized 33 28 Premium on reacquired debt, being amortized 288 222 Deferred fuel charges (Note 5) 70 89 Miscellaneous 383 270 Total 2,827 992 TOTAL ASSETS $25,911 $20,038
The accompanying notes are an integral part of these balance sheets. II-18 49 CONSOLIDATED BALANCE SHEETS (continued) At December 31, 1993 and 1992 The Southern Company and Subsidiary Companies 1993 Annual Report
CAPITALIZATION AND LIABILITIES 1993 1992 (in millions) CAPITALIZATION (See accompanying statements): Common stock equity $7,684 $ 7,234 Preferred stock 1,332 1,351 Preferred stock subject to mandatory redemption 1 8 Long-term debt 7,412 7,241 Total 16,429 15,834 CURRENT LIABILITIES: Preferred stock due within one year 1 65 Long-term debt due within one year 156 188 Notes payable 941 827 Accounts payable 698 646 Customer deposits 103 99 Taxes accrued -- Federal and state income 34 27 Other 172 145 Interest accrued 186 191 Vacation pay accrued 90 86 Miscellaneous 190 242 Total 2,571 2,516 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 9) 3,979 -- Deferred credits related to income taxes (Note 9) 1,051 -- Accumulated deferred investment tax credits 900 957 Disallowed Plant Vogtle capacity buyback costs 63 72 Prepaid capacity revenues 144 148 Miscellaneous 774 511 Total 6,911 1,688 COMMITMENTS AND CONTINGENT MATTERS (Notes 1, 3, 4, 5, 6, 7, 8, and 13) TOTAL CAPITALIZATION AND LIABILITIES $25,911 $20,038
The accompanying notes are an integral part of these balance sheets. II-19 50 CONSOLIDATED STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 The Southern Company and Subsidiary Companies 1993 Annual Report
1993 1992 1993 1992 (in millions) (percent of total) COMMON STOCK EQUITY: Common stock, par value $5 per share -- Authorized -- 1 billion shares Outstanding -- 1993: 637 million shares, 1992: 632 million shares (Note 10) $ 3,213 $ 1,582 Paid-in capital 1,502 2,929 Premium on preferred stock 1 2 Retained earnings (Note 14) 2,968 2,721 Total common stock equity 7,684 7,234 46.8% 45.7% CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES: $100 par or stated value -- 4.20% to 5.96% 199 199 6.32% to 7.88% 205 182 8.04% to 8.80% -- 225 $25 par or stated value -- $1.90 to $2.125 295 295 6.40% to 9.50% 323 200 Auction rates -- at January 1, 1994; 2.72% to 2.92% 70 50 Adjustable rates -- at January 1, 1994; 4.80% to 7.57% 240 200 Total (annual dividend requirement -- $85 million) 1,332 1,351 8.1 8.5 CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES SUBJECT TO MANDATORY REDEMPTION: $100 par value -- 11.36% 2 3 $25 stated value -- $2.43 -- 45 $2.50 -- 25 Total 2 73 Less amount due within one year 1 65 Total excluding amount due within one year 1 8 0.0 0.1
II-20 51 CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued) At December 31, 1993 and 1992 The Southern Company and Subsidiary Companies 1993 Annual Report
1993 1992 1993 1992 (in millions) (percent of total) LONG-TERM DEBT: First mortgage bonds of subsidiaries -- Maturity Interest Rates 1994 4 5/8% 26 78 1995 4 3/4% to 5 1/8% 141 211 1996 4 1/2% to 6 1/4% 235 100 1997 5 7/8% to 7 1/8% 25 113 1998 5% to 9.2% 249 98 1999 through 2003 6% to 8 3/4% 1,580 1,626 2004 through 2008 6 7/8% to 9% 230 182 2014 through 2018 9 3/8% to 10 3/4% 85 975 2019 through 2023 7.3% to 9 3/8% 1,909 1,040 2020 Variable rates -- 50 2032 Variable rates 200 200 Total first mortgage bonds 4,680 4,673 Other long-term debt (Note 11) 2,962 2,820 Unamortized debt premium (discount), net (74) (64) Total long-term debt (annual interest requirement -- $581 million) 7,568 7,429 Less amount due within one year (Note 12) 156 188 Long-term debt excluding amount due within one year 7,412 7,241 45.1 45.7 TOTAL CAPITALIZATION 16,429 $ 15,834 100.0% 100.0%
CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL For The Years Ended December 31, 1993, 1992, and 1991 1993 1992 1991 (in millions) BALANCE AT BEGINNING OF YEAR $2,929 $2,906 $2,906 Proceeds from sales of common stock over the par value -- 9.7 million and 1.6 million shares in 1993 and 1992, respectively 179 23 -- Two-for-one stock split (Note 10) (1,606) -- -- BALANCE AT END OF YEAR $1,502 $2,929 $2,906
The accompanying notes are an integral part of these statements. II-21 52 NOTES TO FINANCIAL STATEMENTS The Southern Company and Subsidiary Companies 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The Southern Company is the parent company of five operating companies, a system service company, Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and various other subsidiaries related to foreign utility operations and domestic non-utility operations. At this time, the operations of the other subsidiaries are not material. The operating companies provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The operating companies also are subject to regulation by the FERC and their respective state regulatory commissions. The companies follow generally accepted accounting principles and comply with the accounting policies and practices prescribed by their respective commissions. All material intercompany items have been eliminated in consolidation. Consolidated retained earnings at December 31, 1993, include $2.6 billion of undistributed retained earnings of subsidiaries. Certain prior years' data presented in the consolidated financial statements have been reclassified to conform with current year presentation. REVENUES AND FUEL COSTS The operating companies accrue revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The operating companies' electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. 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 $137 million in 1993, $132 million in 1992, and $162 million in 1991. 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, 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, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This assessment will be paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. Georgia Power -- based on its ownership interests -- and Alabama Power currently estimate their liability under this law to be approximately $39 million and $46 million, respectively. These obligations are recorded in the Consolidated Balance Sheets. DEPRECIATION AND NUCLEAR DECOMMISSIONING Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.3 percent in 1993, 1992, and 1991. 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. II-22 53 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report 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. Reasonable assurance may be in the form of an external sinking fund, a surety method, or prepayment. Alabama Power and Georgia Power have established external sinking funds to comply with the NRC's regulations. Prior to the enactment of these regulations, Alabama Power and Georgia Power had reserved nuclear decommissioning costs. 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. The estimated cost of decommissioning and the amounts being recovered through rates at December 31, 1993, for Alabama Power's Plant Farley and Georgia Power's plants Hatch and Vogtle -- based on its ownership interests -- were as follows:
Plant Plant Plant Farley Hatch Vogtle Site study basis (year) 1993 1990 1990 Estimated completion of decommissioning (year) 2029 2027 2037 (in millions) Cost of decommissioning: Radiated structures $409 $184 $155 Non-radiated structures 75 35 62 Other 94 55 54 Total cost $578 $274 $271 (in millions) Approved for ratemaking $578 $184 $155 Amount expensed in 1993 14 6 6 Balance in external trust fund 50 22 16 Balance in internal reserve 53 33 11
The amounts in the internal reserve are being transferred into the external trust fund over a set period of time as approved by the respective state public service commissions. 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 regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. PLANT VOGTLE PHASE-IN PLANS In 1987 and 1989, the Georgia Public Service Commission (GPSC) ordered that the allowed costs of Plant Vogtle, a two-unit nuclear facility of which Georgia Power owns 45.7 percent, be phased into rates under plans that meet the requirements of Financial Accounting Standards Board (FASB) Statement No. 92, Accounting for Phase-In Plans. Under these plans, Georgia Power deferred financing costs and depreciation expense until the allowed investment was fully reflected in rates as of October 1991. In 1991, the GPSC modified the Plant Vogtle phase-in plan to begin earlier amortization of the costs deferred under the plan. Also, the GPSC levelized capacity buyback expense from co-owners of Plant Vogtle. See Note 3 for additional information regarding Georgia Power's 1991 rate order. Previously, pursuant to two separate interim accounting orders by the GPSC, Georgia Power deferred substantially all operating expenses and financing costs related to Plant Vogtle. Units 1 and 2 began commercial operation in May 1987 and May 1989, respectively. The accounting orders were for the periods from the date of each unit's commercial operation until October 1987 and 1989, respectively. Under phase-in plans and accounting orders from the GPSC, Georgia Power deferred and began amortizing the costs -- recovered through rates -- related to Plant Vogtle as follows:
Unrecovered Balance Year-End 1993 1992 1991 1993 (in millions) Deferred: Financing costs $ -- $ -- $ 35 $388 Capacity buyback expense 38 100 30 168 Other operating expenses -- -- 7 279 Amortization of amounts deferred (74) (69) (53) (328) Net deferred amounts $ (36) $31 $ 19 $507
The unrecovered balance above includes approximately $160 million related to the adoption in 1993 of FASB Statement No. 109, Accounting for Income Taxes. See Note 9 for information about Statement No. 109. II-23 54 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report Each GPSC order calls for recovery of deferred costs within 10 years. Also, the orders authorized Georgia Power to impute a return similar to allowance for funds used during construction (AFUDC) on its investment in Plant Vogtle units 1 and 2 after the units began commercial operation. These deferred returns are included in the above amounts, except for the equity component in the case of the Unit 2 accounting order. INCOME TAXES The companies provide 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, The Southern Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 9 for additional information about Statement No. 109. AFUDC AND DEFERRED RETURN 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 companies to calculate AFUDC during the years 1991 through 1993 ranged from a before-income-tax rate of 4.9 percent to 11.4 percent. Deferred income taxes related to capitalized debt cost were $5 million, $4 million, and $7 million in 1993, 1992, and 1991, respectively. After Plant Vogtle units 1 and 2 began commercial operation in 1987 and 1989, respectively, Georgia Power imputed a deferred return similar to AFUDC on its investment in the units under the short-term cost deferrals and phase-in plans, as discussed earlier. AFUDC and the deferred return, net of income tax, as a percent of consolidated net income were 1.7 percent in 1993, 1.8 percent in 1992, and 6.0 percent in 1991. The deferred return was discontinued in October 1991 after the allowed investment in Plant Vogtle was fully reflected in rates. UTILITY PLANT Utility plant is stated at original cost less regulatory disallowances. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. CASH AND CASH EQUIVALENTS For purposes of the Consolidated Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. FINANCIAL INSTRUMENTS In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, all financial instruments of The Southern Company -- for which the carrying amount does not approximate fair value -- are shown in the table below at December 31:
1993 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 88 $ 90 Long-term debt 7,321 7,729 Preferred stock subject to mandatory redemption 2 2 1992 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 52 $ 53 Investment securities 199 221 Long-term debt 7,165 7,566 Preferred stock subject to mandatory redemption 73 79
The fair values of nuclear decommissioning trusts and investment securities were based on listed closing market prices. The fair values for long-term debt and preferred II-24 55 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report stock subject to mandatory redemption were based on either closing market prices or closing prices of comparable instruments. MATERIALS AND SUPPLIES Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. In 1992, Georgia Power converted to the inventory method of accounting for certain emergency spare parts. This conversion resulted in a regulatory liability that will be amortized as a credit to income over approximately four years. This conversion will not have a material effect on net income. VACATION PAY The operating companies' employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the companies accrue a current liability for earned vacation pay and record a current asset representing the future recoverability of this cost. The amount was $73 million and $70 million at December 31, 1993 and 1992, respectively. In 1994, an estimated 71 percent of the 1993 deferred vacation cost will be expensed, and the balance will be charged to construction and other accounts. 2. RETIREMENT BENEFITS PENSION PLAN The system companies have defined benefit, trusteed, non-contributory pension plans that cover substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. 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 fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. POSTRETIREMENT BENEFITS The system companies also provide certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. A qualified trust for medical benefits has been established for funding amounts to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. Effective January 1, 1993, the system companies adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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 would be expensed in 1993 and the remaining costs would be deferred. An additional one-fifth of the costs would be expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The costs deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. As a result of regulatory treatment allowed by the operating companies' respective public service commissions, the adoption of Statement No. 106 did not have a material impact on consolidated net income. Prior to 1993, the system companies, except for Georgia Power and Savannah Electric, recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. Consistent with regulatory treatment in these years, Georgia Power and Savannah Electric recognized these costs on a cash basis as payments were made. The total costs of such benefits recognized by system companies in 1992 and 1991 were $42 million and $36 million, respectively. STATUS AND COST OF BENEFITS Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown only for 1993 because Statement II-25 56 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report No. 106 was adopted as of January 1, 1993, on a prospective basis. The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in millions) Actuarial present value of benefit obligation: Vested benefits $ 1,534 $ 1,293 Non-vested benefits 76 62 Accumulated benefit obligation 1,610 1,355 Additional amounts related to projected salary increases 558 638 Projected benefit obligation 2,168 1,993 Less: Fair value of plan assets 3,337 2,994 Unrecognized net gain (1,060) (891) Unrecognized prior service cost 72 77 Unrecognized transition asset (152) (164) Prepaid asset recognized in the Consolidated Balance Sheets $ 29 $ 23
Postretirement Medical Life 1993 1993 (in millions) Actuarial present value of benefit obligation: Retirees and dependents $ 243 $ 75 Employees eligible to retire 48 -- Other employees 389 96 Accumulated benefit obligation 680 171 Less: Fair value of plan assets 95 2 Unrecognized net loss (gain) 76 (13) Unrecognized transition obligation 419 113 Accrued liability recognized in the Consolidated Balance Sheets $ 90 $ 69
The weighted average rates assumed in the above actuarial calculations were:
1993 1992 1991 Discount 7.5% 8.0% 8.0% Annual salary increase 5.0 6.0 6.0 Long-term return on plan assets 8.5 8.5 8.5
An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1 percent would increase the accumulated medical benefit obligation at December 31, 1993, by $129 million and the aggregate of the service and interest cost components of the net retiree medical cost by $14 million. Components of the plans' net cost are shown below:
Pension 1993 1992 1991 (in millions) Benefits earned during the year $ 76 $ 75 $ 71 Interest cost on projected benefit obligation 156 146 138 Actual return on plan assets (432) (135) (745) Net amortization and deferral 186 (85) 551 Net pension cost (income) $ (14) $ 1 $ 15
Of the above net pension amounts, pension income of $9 million in 1993 and pension expense of $2 million in 1992 and $11 million in 1991 were recorded in operating expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical Life 1993 1993 (in millions) Benefits earned during the year $ 21 $ 6 Interest cost on accumulated benefit obligation 43 13 Amortization of transition obligation over 20 years 22 6 Actual return on plan assets (12) -- Net amortization and deferral 5 -- Net postretirement cost $ 79 $ 25
Of the above net postretirement medical and life insurance costs recorded in 1993, $64 million was charged to operating expenses, $21 million was deferred, and the remainder was charged to construction and other accounts. II-26 57 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report WORK FORCE REDUCTION PROGRAMS The system companies have incurred additional costs for work force reduction programs. The costs related to these programs were $35 million, $37 million, and $72 million for the years 1993, 1992, and 1991, respectively. A portion of the cost of these programs was deferred and is being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $19 million at December 31, 1993. 3. LITIGATION AND REGULATORY MATTERS RETAIL RATEPAYERS' SUIT CONCLUDED In March 1993, several retail ratepayers of Georgia Power filed a civil complaint in the Superior Court of Fulton County, Georgia, against Georgia Power, The Southern Company, the system service company, and Arthur Andersen & Co. The complaint alleged that Georgia Power obtained excessive rate increases by improper accounting for spare parts and sought actual damages estimated by the plaintiffs to be in excess of $60 million -- plus treble and punitive damages -- for alleged violations of the Georgia Racketeer Influenced and Corrupt Organizations Act and other state statutes, statutory and common law fraud, and negligence. These state law allegations were substantially the same as those included in a 1989 suit brought in federal district court in Georgia. That suit and similar ones filed in Alabama, Florida, and Mississippi federal courts were subsequently dismissed. The defendants' motions to dismiss the current complaint were granted by the Superior Court of Fulton County, Georgia, in July 1993. In January 1994, the plaintiffs' appeal of the dismissal to the Supreme Court of Georgia was rejected, and this matter is concluded. STOCKHOLDER SUIT In April 1991, two Southern Company stockholders filed a derivative action suit in the U.S. District Court for the Southern District of Georgia against certain current and former directors and officers of The Southern Company. The suit alleges violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) by officers and breaches of fiduciary duty and gross negligence by all defendants resulting from alleged fraudulent accounting for spare parts, illegal political campaign contributions, violations of federal securities laws involving misrepresentations and omissions in SEC filings, and concealment of the foregoing acts. The complaint seeks damages -- including treble damages pursuant to RICO -- in an unspecified amount, which if awarded, would be payable to The Southern Company. The plaintiffs' amended complaint was dismissed by the court in March 1992. The court ruled the plaintiffs had failed to present adequately their allegation that The Southern Company board of directors' refusal of an earlier demand by the plaintiffs was wrongful. The plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the 11th Circuit. ALABAMA POWER HEAT PUMP FINANCING SUIT In September 1990, two customers of Alabama Power filed a civil complaint in the Circuit Court of Shelby County, Alabama, against Alabama Power seeking to represent all persons who, prior to June 23, 1989, entered into agreements with Alabama Power for the financing of heat pumps and other merchandise purchased from vendors other than Alabama Power. The plaintiffs contended that Alabama Power was required to obtain a license under the Alabama Consumer Finance Act to engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring Alabama Power to refund all payments -- principal and interest -- made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June 1993, the court ordered Alabama Power to refund or forfeit interest of approximately $10 million because of Alabama Power's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. Alabama Power has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. GULF POWER COAL BARGE TRANSPORTATION SUIT In 1993, a complaint against Gulf Power and the system service company was filed in federal district court in Ohio by two companies with which Gulf Power had contracted for the transportation by barge for certain Gulf Power coal supplies. The complaint alleges breach of the contract by Gulf Power and seeks damages estimated by the plaintiffs to be in excess of $85 million. II-27 58 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. 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. The APSC issued an order in December 1991 that reduced a scheduled 2.03 percent annual increase in rates to 1.03 percent, effective January 1992. The 1 percent reduction will remain in effect through 1994. The rate reduction was designed to refund to retail ratepayers a portion of the benefits from a settled contract dispute with Gulf States Utilities Company (Gulf States). The present value of this portion of the settlement -- amounting to some $60 million -- is being amortized to income to offset the rate reduction in accordance with the APSC's rate order. See Note 8 for additional information concerning the Gulf States settlement. Also in the December 1991 rate order, the APSC reaffirmed its satisfaction with the ratemaking mechanism and stated that it did not foresee any further review or changes in the procedures until after 1994. The ratemaking procedures will remain in effect after 1994 unless the APSC votes to modify or discontinue them. GEORGIA POWER'S DEMAND-SIDE CONSERVATION PROGRAMS In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of Georgia Power's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. Georgia Power suspended collection of the demand-side conservation costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved Georgia Power's request for an accounting order allowing Georgia Power to defer all current unrecovered and future costs related to these programs until the superior court's decision is reversed or until the next general rate case proceedings. An association of industrial customers has filed a petition for review of the accounting order in superior court. Georgia Power's costs related to these conservation programs through 1993 were $60 million, of which $15 million has been collected and the remainder deferred. The estimated costs, assuming no change in the programs certified by the GPSC, are $38 million in 1994 and $40 million in 1995. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. GEORGIA POWER 1991 RATE ORDER; PHASE-IN PLAN MODIFICATIONS Georgia Power received a rate order in 1991 from the GPSC that modified the Plant Vogtle phase-in plans to begin earlier amortization of the costs deferred under the plans. The amortization period began October 1991 -- rather than October 1994 as originally scheduled -- and extends through September 1999. In addition, the GPSC ordered the levelization of capacity buyback expense from the co-owners of Plant Vogtle over a six-year period beginning October 1991. This results in net cost deferrals during the first three years and subsequent amortization of the deferred amounts in the last three years. MISSISSIPPI POWER RETAIL RATE ADJUSTMENT PLAN Mississippi Power's retail base rates have been set under a Performance Evaluation Plan (PEP) since 1986 with various modifications in 1991 and the latest in 1994. In 1993, the Mississippi Public Service Commission (MPSC) ordered Mississippi Power to review and propose changes that would enhance the plan. Mississippi Power filed a revised plan, and the MPSC approved PEP-2 on January 4, 1994. Under PEP-2, Mississippi Power's rate of return will be measured on retail net investment rather than on common equity, as previously calculated. Also, the number of indicators used to evaluate Mississippi Power's performance was reduced to three with emphasis on price and service to the customer. In addition, PEP-2 provides for the sharing of rate adjustments based on low rates and on the performance rating. The evaluation periods for PEP-2 are semiannual. Any change in rates is limited to 2 percent of retail revenues per period before a public hearing is required. PEP-2 will remain in effect until the MPSC modifies or terminates the plan. II-28 59 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report FERC REVIEWS EQUITY RETURNS In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any changes in the rate of return on common equity that may occur as a result of this proceeding would be effective 60 days after a proper notice of the proceeding is published. A notice was published on May 10, 1991. 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. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. 4. CONSTRUCTION PROGRAM GENERAL The operating companies are engaged in continuous construction programs, currently estimated to total some $1.5 billion in 1994, $1.3 billion in 1995, and $1.5 billion in 1996. These estimates include AFUDC of $34 million in 1994, $41 million in 1995, and $35 million in 1996. 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, 1993, significant purchase commitments were outstanding in connection with the construction program. The operating companies do not have any new baseload generating plants under construction. However, within the service area, the construction of combustion turbine peaking units of approximately 1,700 megawatts is planned to be completed by 1996. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 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. ROCKY MOUNTAIN PROJECT STATUS In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric project in 1991 was not economically justifiable and reasonable and withheld authorization for Georgia Power to spend funds from approved securities issuances on that project. 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 project, as discussed in Note 6. However, full recovery of Georgia Power's costs depends on the GPSC's treatment of the project's cost and disposition of the project's capacity output. In the event Georgia Power cannot demonstrate to the GPSC the project's economic viability based on current ownership, construction schedule, and costs, then part or all of such costs may have to be written off. At December 31, 1993, Georgia Power's investment in the project amounted to approximately $197 million. AFUDC accrued on the Rocky Mountain project has not been credited to income or included in the project cost since December 1985. If accrual of AFUDC is not resumed, Georgia Power's portion of the estimated total plant additions at completion would be approximately $199 million. The plant is currently scheduled to begin commercial operation in 1995. Georgia Power has held preliminary discussions with other parties regarding the potential disposition of its remaining interest in the project. The ultimate outcome of this matter cannot now be determined. 5. FINANCING, INVESTMENT, AND COMMITMENTS GENERAL In early 1994, The Southern Company sold -- through a public offering -- 5.6 million shares of common stock with proceeds totaling $120 million. The company may require additional equity capital during the remainder of 1994. The amount and timing of additional equity capital to be raised in 1994 -- as well as in subsequent years -- will be contingent on The Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. II-29 60 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report To the extent possible, the operating companies' construction programs are expected to be financed primarily from internal sources. Short-term debt will be utilized when necessary; the amounts available are discussed below. The subsidiary companies may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities. FOREIGN UTILITY OPERATIONS During 1993, The Southern Company made investments of approximately $315 million in utilities that own and operate generating facilities in various foreign markets. The consolidated financial statements reflect these investments in majority-owned subsidiaries on a consolidated basis and other investments on an equity basis. BANK CREDIT ARRANGEMENTS At the beginning of 1994, unused credit arrangements with banks totaled $1.1 billion, of which approximately $500 million expires at various times during 1994 and 1995; $130 million expires at May 1, 1996; $400 million expires at June 30, 1996; and $70 million expires at December 1, 1996. Georgia Power's revolving credit agreements of $150 million, of which $130 million remained unused as of December 31, 1993, expire May 1, 1996. During the term of these agreements, Georgia Power may convert short-term borrowings into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Georgia Power's option. In connection with these credit arrangements, Georgia Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. The $400 million expiring June 30, 1996, is under revolving credit arrangements with several banks providing The Southern Company, Alabama Power, and Georgia Power up to the total credit amount of $400 million. To provide liquidity support to commercial paper programs, $135 million and $165 million of the $400 million available credit are currently dedicated to the exclusive use of Alabama Power and Georgia Power, respectively. During the term of these agreements, short-term borrowings may be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Mississippi Power has $70 million of revolving credit agreements expiring December 1, 1996. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Mississippi Power's option. In connection with these credit arrangements, Mississippi Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Savannah Electric has $20 million of revolving credit arrangements expiring December 31, 1995. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at Savannah Electric's option. In connection with these credit arrangements, Savannah Electric agrees to pay commitment fees based on the unused portions of the commitments. In connection with all other lines of credit, the companies have the option of paying fees or maintaining compensating balances, which are substantially all the cash of the companies except for daily working funds and similar items. These balances are not legally restricted from withdrawal. In addition, the companies from time to time borrow under uncommitted lines of credit with banks, and in the case of Alabama Power and Georgia Power, through commercial paper programs that have the liquidity support of committed bank credit arrangements. ASSETS SUBJECT TO LIEN The operating 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. FUEL COMMITMENTS To supply a portion of the fuel requirements of the system's generating plants, the subsidiary companies have II-30 61 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report 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 were approximately $15 billion at December 31, 1993. Additional commitments for coal and nuclear fuel will be required in the future to supply the operating companies' fuel needs. To take advantage of lower-cost coal supplies, agreements were reached in 1986 for the payment of $121 million to terminate two contracts for the supply of coal to Plant Daniel, which is jointly owned by Gulf Power and Mississippi Power. Also, in March 1988, Gulf Power made an advance payment of $60 million to a coal supplier under an agreement to lower the cost of future coal purchased under an existing contract. These amounts are being amortized to expense. The remaining unamortized amount included in deferred charges at December 31, 1993, was $70 million. OPERATING LEASES The operating companies have entered into coal rail car rental agreements with various terms and expiration dates. Rental expense totaled $11 million, $9 million, and $7 million for 1993, 1992, and 1991, respectively. At December 31, 1993, estimated minimum rental commitments for noncancelable operating leases were as follows:
Amounts (in millions) 1994 $ 12 1995 14 1996 12 1997 12 1998 12 1999 and thereafter 226 Total minimum payments $ 288
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 (MEAG), and the city of Dalton, Georgia. Georgia Power has completed two of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. See Note 7 for additional information concerning these sales. In addition, Georgia Power has entered into a joint ownership agreement with OPC with respect to the Rocky Mountain project, as discussed later. At December 31, 1993, 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 (in millions) Plant Vogtle (nuclear) 45.7% $3,285 $540 Plant Hatch (nuclear) 50.1 840 325 Plant Miller (coal) Units 1 and 2 91.8 703 247 Plant Scherer (coal) Units 1 and 2 8.4 111 33 Unit 4 33.1 236 31 Plant Wansley (coal) 53.5 286 125 Rocky Mountain (pumped storage) 25.0* 197 --
*Estimated ownership at date of completion. Georgia Power and OPC have entered into a joint ownership agreement regarding the 848-megawatt Rocky Mountain pumped storage hydroelectric project. Under the agreement, Georgia Power will retain its present investment in the project and OPC will finance, complete, and operate the facility. Upon completion, Georgia Power will own an undivided interest in the project equal to the proportion its investment bears to the total investment in the project (excluding each party's cost of funds and ad valorem taxes). Based on current cost estimates, Georgia Power's final ownership is estimated at approximately 25 percent of the project at completion. Georgia Power has held preliminary discussions with other parties regarding the potential disposition of its remaining interest in the project. II-31 62 NOTES (continued) THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES 1993 ANNUAL REPORT Alabama Power and Georgia Power have contracted to operate and maintain the jointly owned facilities -- except for the Rocky Mountain project -- 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. In connection with a joint ownership arrangement at Plant Vogtle, Georgia Power has remaining commitments to purchase declining fractions of OPC's and MEAG's capacity and energy from this plant for periods of up to 10 years following commercial operation (and, with regard to a portion of the 5 percent additional interest in Plant Vogtle owned by MEAG, until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest). The payments for such capacity are required whether any capacity is available. The energy cost of these purchases 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 in the Consolidated Statements of Income. Capacity payments totaled $183 million, $289 million, and $320 million, for 1993, 1992, and 1991, respectively. Projected capacity payments for the next five years are as follows: $132 million in 1994; $77 million in 1995; $70 million in 1996; $59 million in 1997; and $59 million in 1998. Also, a portion of the above capacity payments relates to Plant Vogtle costs that were written off after being disallowed for retail ratemaking purposes. In 1991, the GPSC ordered that the Plant Vogtle capacity buyback expense be levelized over a six-year period. The amounts deferred and not expensed in the year paid totaled $38 million in 1993, $100 million in 1992, and $30 million in 1991. The projected net amount to be deferred in 1994 is $1 million. The projected net amortization of the deferred expense is $49 million in 1995, $62 million in 1996, and $57 million in 1997. 7. PLANNED SALES OF INTEREST IN PLANT SCHERER Georgia Power has completed two of four separate transactions to sell Unit 4 of Plant Scherer to Florida Power & Light Company (FP&L) and Jacksonville Electric Authority (JEA) for a total price of approximately $806 million, including any gains on these transactions. FP&L would eventually own approximately 76.4 percent of the unit, with JEA owning the remainder. The capacity from this unit was previously dedicated to long-term power sales contracts with Gulf States that were suspended in 1988. Georgia Power will continue to operate the unit. The completed and scheduled remaining transactions are as follows:
Closing Percent Date Capacity Ownership Amount (megawatts) (in millions) July 1991 290 35.46% $291 June 1993 258 31.44 253 June 1994 135 16.55 132 June 1995 135 16.55 130 Total 818 100.00% $806
Plant Scherer -- a jointly owned coal-fired generating plant -- has four units with a total capacity of 3,272 megawatts. Unit 4 was completed in 1989. See Note 6 for information regarding current plant ownership. 8. LONG-TERM POWER SALES AGREEMENTS GENERAL The operating subsidiaries of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. Certain of these agreements are non-firm and are based on capacity of the system in general. Other 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 revenues have been as follows:
Unit Other Year Power Long-Term Total (in millions) 1993 $312 $38 $350 1992 435 22 457 1991 468 22 490
Long-term non-firm power of 400 megawatts was sold in 1993 to Florida Power Corporation (FPC). In January 1994, this amount decreased to 200 megawatts, and the contract will expire at year-end. Unit power from specific generating plants is currently being sold to FP&L, FPC, JEA, and the city of Tallahassee, Florida. Under these agreements, an average II-32 63 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report of 1,700 megawatts of capacity is scheduled to be sold during 1994 and 1995. Thereafter, these sales will decline to some 1,600 megawatts and remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. GULF STATES SETTLEMENT COMPLETED On November 7, 1991, subsidiaries of The Southern Company entered into a settlement agreement with Gulf States that resolved litigation between the companies that had been pending since 1986 and arose out of a dispute over certain unit power and other long-term power sales contracts. In 1993, all remaining terms and obligations of the settlement agreement were satisfied. Based on the value of the settlement proceeds received -- less the amounts to be refunded to customers and the amounts previously included in income -- The Southern Company recorded an increase in consolidated net income of $114 million, or 18 cents per share, in November 1991. With respect to Alabama Power's portion of proceeds received in 1991, see Note 3 concerning the regulatory treatment of amounts being refunded to retail customers over a three-year period. 9. INCOME TAXES Effective January 1, 1993, The Southern Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no material effect on consolidated net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $1.5 billion are revenues to be received from customers. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The related liabilities of $1.1 billion are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. Details of the federal and state income tax provisions are as follows:
1993 1992 1991 (in millions) Total provision for income taxes: Federal -- Currently payable $424 $343 $506 Deferred -- current year 224 225 139 -- reversal of prior years (51) (41) (121) Deferred investment tax credits (20) (6) (11) 577 521 513 State -- Currently payable 64 50 76 Deferred -- current year 39 46 23 -- reversal of prior years (3) (9) (15) 100 87 84 Total 677 608 597 Less income taxes charged (credited) to other income (57) (39) (21) Federal and state income taxes charged to operations $734 $647 $618
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:
1993 (in millions) Deferred tax liabilities: Accelerated depreciation $2,496 Property basis differences 1,741 Deferred plant costs 161 Other 289 Total 4,687 Deferred tax assets: Federal effect of state deferred taxes 102 Other property basis differences 292 Deferred costs 69 Pension and other benefits 46 Other 210 Total 719 Net deferred tax liabilities 3,968 Portion included in current assets, net 11 Accumulated deferred income taxes in the Consolidated Balance Sheets $3,979
II-33 64 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Consolidated Statements of Income. Credits amortized in this manner amounted to $29 million in 1993, $41 million in 1992, and $48 million in 1991. At December 31, 1993, 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:
1993 1992 1991 Federal statutory rate 35.0% 34.0% 34.0% State income tax, net of federal deduction 3.7 3.4 3.5 Non-deductible book depreciation 1.9 2.2 2.9 Difference in prior years' deferred and current tax rate (1.3) (1.5) (1.5) Other (1.1) (1.6) (1.1) Effective income tax rate 38.2% 36.5% 37.8%
The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 10. COMMON STOCK STOCK DISTRIBUTION In January 1994, The Southern Company board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price have been adjusted to reflect the stock distribution. SHARES RESERVED At December 31, 1993, a total of 24 million shares was reserved for issuance pursuant to the Dividend Reinvestment and Stock Purchase Plan, the Employee Savings Plan, and the Executive Stock Option Plan. EXECUTIVE STOCK OPTION PLAN The Southern Company's Executive Stock Option Plan authorizes the granting of non-qualified stock options to key employees of The Southern Company, including officers. Currently, 34 employees are eligible to participate in the plan. As of December 31, 1993, 38 current and former employees participated in the plan. The maximum number of shares of common stock that may be issued under the Executive Stock Option Plan may not exceed 6 million. The price of options granted to date has been at the fair market value of the shares on the date of grant. Options granted to date become exercisable pro rata over a maximum period of four years from date of grant, such that all options generally are exercisable by 1997. Options outstanding will expire upon termination of the plan, which will occur on December 7, 1997, unless terminated earlier by the board of directors. Stock option activity in 1992 and 1993 is summarized below:
Shares Average Subject Option Price To Option Per Share Balance at December 31, 1991 1,399,088 $13.02 Options granted 434,840 18.09 Options canceled -- -- Options exercised (644,806) 12.75 Balance at December 31, 1992 1,189,122 15.02 Options granted 359,492 21.22 Options canceled -- -- Options exercised (183,804) 14.14 Balance at December 31, 1993 1,364,810 $16.77 Shares reserved for future grants: At December 31, 1991 4,508,776 At December 31, 1992 4,073,936 At December 31, 1993 3,714,444 Options exercisable: At December 31, 1992 243,566 At December 31, 1993 475,795
II-34 65 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report 11. OTHER LONG-TERM DEBT Details of other long-term debt are as follows:
December 31, 1993 1992 (in millions) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized -- 5.375% to 10.0% due 2003-2023 $ 708 $ 512 Variable rates (3.05% to 3.40%) due 2016-2022 63 23 Non-collateralized -- 5.9% to 7.25% due 2003-2006 6 32 7.2% to 9.2% due 2007-2010 -- 92 Variable rate (3.7% at 1/1/94) due 2011 10 10 7.2% to 12.25% due 2013-2014 644 738 6.75% to 10.6% due 2015-2017 890 891 5.8% due 2022 10 -- Variable rate (3.55% at 1/1/94) due 2019 59 59 Variable rates (3.7% to 6.2% at 1/1/94) due 2021 and 2022 23 23 Less funds on deposit with trustees -- 2 2,413 2,378 Capitalized lease obligations: Nuclear fuel 96 104 Buildings 146 154 Other 5 6 247 264 Notes payable: 8.25% due 1993-1995 35 51 7.5% due 1993-1995 2 3 9.75% due 1993-2010 10 10 8.0% due 1993 -- 2 4.36% to 8.00% due 1993-1995 101 20 4.62% to 9.4% due 1996-2000 94 25 Adjustable rates (3.45% to 4.41% at 1/1/94) due 1994 60 67 302 178 Total $2,962 $2,820
With respect to the collateralized pollution control revenue bonds, the operating companies have authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under installment sale or loan agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. Assets acquired under capital leases are recorded as utility plant in service, and the related obligation is classified as other long-term debt. The net book value of capitalized leases was $217 million and $236 million at December 31, 1993 and 1992, respectively. At December 31, 1993, the composite interest rates for nuclear fuel, buildings, and other were 3.6 percent, 9.7 percent, and 12.0 percent, respectively. Sinking fund requirements and/or serial maturities through 1998 applicable to other long-term debt are as follows: $89 million in 1994; $154 million in 1995; $58 million in 1996; $26 million in 1997; and $7 million in 1998. 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 is as follows:
1993 1992 (in millions) Bond improvement fund requirements $ 51 $ 54 Less: Portion to be satisfied by certifying property additions 3 2 Reacquired bonds 25 -- Cash sinking fund requirements 23 52 First mortgage bond maturities and redemptions 44 57 Other long-term debt maturities (Note 11) 89 79 Total $156 $188
The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the indentures prior to January 1 of each year, other than those issued to collateralize pollution control and other obligations. The requirements may be satisfied by depositing cash or reacquiring bonds, or by pledging additional property equal to 166 2/3 percent of such requirements. II-35 66 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report 13. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power maintain agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the companies' nuclear power plants. The act limits to $9.4 billion public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback interests -- is $159 million and $171 million, respectively, per incident but not more than an aggregate of $20 million and $22 million, respectively, to be paid for each incident in any one year. Alabama Power and Georgia Power are members of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium adjustment in the event that losses exceed accumulated reserve funds. Alabama Power's and Georgia Power's maximum annual assessments are limited to $14 million and $18 million, respectively, under current policies. Additionally, both companies have policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company, and American Nuclear Insurers/Mutual Atomic Energy Liability Underwriters. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 21 weeks after the outage -- for one year and up to $2.3 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 $16 million and $15 million, respectively. The replacement power assessments are $9 million for Alabama Power and $13 million for Georgia Power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. Alabama Power and Georgia Power participate in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, Alabama Power and Georgia Power could be subject to a maximum total assessment of $6 million and $7 million, respectively. II-36 67 NOTES (continued) The Southern Company and Subsidiary Companies 1993 Annual Report 14. COMMON STOCK DIVIDEND RESTRICTIONS The income of The Southern Company is derived primarily from equity in earnings of its operating subsidiaries. At December 31, 1993, $1.6 billion of consolidated retained earnings was restricted against the payment by the operating companies of cash dividends on common stock under terms of bond indentures or charters. 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 1993 and 1992 are as follows:
Per Common Share* Operating Operating Consolidated Price Range Quarter Ended Revenues Income Net Income Earnings Dividends High Low (in millions) March 1993 $1,840 $377 $177 $0.28 $0.285 21 3/8 18 3/8 June 1993 2,068 426 250 0.39 0.285 22 1/2 19 3/8 September 1993 2,636 637 442 0.70 0.285 23 20 1/2 December 1993 1,945 324 133 0.20 0.285 23 5/8 20 3/4 March 1992 $1,808 $387 $185 $0.29 $0.275 17 3/8 15 1/8 June 1992 2,011 428 223 0.36 0.275 17 5/8 15 5/8 September 1992 2,386 609 404 0.64 0.275 19 17 3/8 December 1992 1,868 338 141 0.22 0.275 19 1/2 17 5/8
*Common stock data have been adjusted to reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994. The company's business is influenced by seasonal weather conditions and the timing of rate changes. II-37 68 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1993 Annual Report (See Note Below)
1993 1992 1991 OPERATING REVENUES (in millions) $ 8,489 $ 8,073 $ 8,050 CONSOLIDATED NET INCOME (in millions) $ 1,002 $ 953 $ 876 EARNINGS PER SHARE OF COMMON STOCK $ 1.57 $ 1.51 $ 1.39 CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 1.14 $ 1.10 $ 1.07 RETURN ON AVERAGE COMMON EQUITY (percent) 13.43 13.42 12.74 TOTAL ASSETS (in millions) $ 25,911 $ 20,038 $ 19,863 GROSS PROPERTY ADDITIONS (in millions) $ 1,441 $ 1,105 $ 1,123 CAPITALIZATION (in millions): Common stock equity $ 7,684 $ 7,234 $ 6,976 Preferred stock 1,332 1,351 1,207 Preferred and preference stock subject to mandatory redemption 1 8 126 Long-term debt 7,412 7,241 7,992 Total excluding amounts due within one year $ 16,429 $ 15,834 $ 16,301 CAPITALIZATION RATIOS (percent): Common stock equity 46.8 45.7 42.8 Preferred stock 8.1 8.6 8.2 Long-term debt 45.1 45.7 49.0 Total excluding amounts due within one year 100.0 100.0 100.0 OTHER COMMON STOCK DATA: Book value per share (year-end) $ 11.96 $ 11.43 $ 11.05 Market price per share: High 23 5/8 19 1/2 17 3/8 Low 18 3/8 15 1/8 12 7/8 Close 22 19 1/4 17 1/8 Market-to-book ratio (year-end) (percent) 183.9 168.4 155.5 Price-earnings ratio (year-end) (times) 14.0 12.7 12.4 Dividends paid (in millions) $ 726 $ 695 $ 676 Dividend yield (year-end) (percent) 5.2 5.7 6.2 Dividend payout ratio (percent) 72.4 72.9 77.1 Cash coverage of dividends (year-end) (times) 2.9 2.8 2.5 Proceeds from sales of stock (in millions) $ 204 $ 30 -- Shares outstanding (in thousands): Average 637,319 631,844 631,307 Year-end 642,662 632,917 631,307 Stockholders of record (year-end) 237,105 247,378 254,568 FIRST MORTGAGE BONDS (in millions): Issued $ 2,185 $ 1,815 $ 380 Retired 2,178 2,575 881 PREFERRED STOCK (in millions): Issued $ 426 $ 410 $ 100 Retired 516 326 125 CUSTOMERS (year-end) (in thousands): Residential 2,996 2,950 2,903 Commercial 427 414 403 Industrial 18 18 18 Other 4 4 4 Total 3,445 3,386 3,328 EMPLOYEES (year-end) 28,743 29,085 30,402
Note: Common stock data have been adjusted to reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994. II-38 69 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1993 Annual Report (See Note Below)
1990 1989 1988 1987 1986 1985 1984 1983 $ 8,053 $ 7,620 $ 7,287 $ 7,204 $ 7,033 $ 6,999 $ 6,350 $ 5,673 $ 604 $ 846 $ 846 $ 577 $ 903 $ 845 $ 735 $ 604 $ 0.96 $ 1.34 $ 1.36 $ 0.96 $ 1.56 $ 1.56 $ 1.47 $ 1.32 $ 1.07 $ 1.07 $ 1.07 $ 1.07 $ 1.0325 $ 0.975 $ 0.915 $ 0.8625 8.85 12.49 13.03 9.27 15.61 16.59 16.55 15.67 $ 19,955 $ 20,092 $ 19,731 $ 19,518 $ 18,483 $ 16,855 $ 15,327 $ 13,790 $ 1,185 $ 1,346 $ 1,754 $ 1,853 $ 2,367 $ 2,242 $ 2,130 $ 1,722 $ 6,783 $ 6,861 $ 6,686 $ 6,307 $ 6,133 $ 5,443 $ 4,741 $ 4,135 1,207 1,209 1,259 1,139 1,214 1,114 1,004 954 151 191 206 224 178 194 206 214 8,458 8,575 8,433 8,333 7,812 7,220 6,774 6,439 $ 16,599 $ 16,836 $ 16,584 $ 16,003 $ 15,337 $ 13,971 $ 12,725 $ 11,742 40.9 40.8 40.3 39.4 40.0 38.9 37.3 35.2 8.2 8.3 8.8 8.5 9.1 9.4 9.5 9.9 50.9 50.9 50.9 52.1 50.9 51.7 53.2 54.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 $ 10.74 $ 10.87 $ 10.60 $ 10.28 $ 10.35 $ 9.72 $ 9.08 $ 8.60 14 5/8 14 7/8 12 1/8 14 1/2 13 5/8 11 5/8 9 3/8 8 7/8 11 1/2 11 10 1/8 8 7/8 10 1/8 8 7/8 7 1/8 7 1/4 13 7/8 14 1/2 11 1/8 11 1/8 12 5/8 11 1/8 9 3/8 8 1/8 129.7 134.0 105.5 108.8 122.5 114.5 103.9 95.2 14.6 10.9 8.2 11.7 8.2 7.1 6.4 6.2 $ 676 $ 675 $ 661 $ 628 $ 583 $ 512 $ 444 $ 380 7.7 7.3 9.6 9.6 8.4 9.2 10.2 11.0 111.8 79.8 78.1 108.9 64.6 60.6 60.4 63.0 2.8 2.6 2.3 2.0 2.7 2.6 3.1 3.4 -- $ 4 $ 194 $ 247 $ 379 $ 373 $ 318 $ 333 631,307 631,303 622,292 601,390 580,252 541,244 501,313 456,262 631,307 631,307 630,898 613,565 592,364 560,063 522,018 480,649 263,046 273,751 290,725 296,079 297,302 318,221 336,165 351,012 $ 300 $ 280 $ 335 $ 700 $ 735 $ 20 $ 150 $ 129 146 201 273 369 875 69 71 53 $ -- $ -- $ 120 $ 125 $ 100 $ 150 $ 50 $ 50 96 21 10 160 53 6 6 11 2,865 2,824 2,781 2,733 2,675 2,611 2,541 2,473 396 392 384 374 362 348 336 324 18 18 18 18 17 17 17 17 4 4 4 4 4 4 4 4 3,283 3,238 3,187 3,129 3,058 2,980 2,898 2,818 30,263 30,530 32,523 32,612 32,358 32,354 31,753 31,499
II-39 70 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (in millions): Residential $ 2,696 $ 2,402 $ 2,391 Commercial 2,313 2,181 2,122 Industrial 2,200 2,126 2,088 Other 68 64 65 Total retail 7,277 6,773 6,666 Sales for resale within service area 447 409 417 Sales for resale outside service area 613 797 884 Total revenues from sales of electricity 8,337 7,979 7,967 Other revenues 152 94 83 Total $ 8,489 $ 8,073 $ 8,050 KILOWATT-HOUR SALES (in millions): Residential 36,807 33,627 33,622 Commercial 32,847 31,025 30,379 Industrial 48,738 47,816 46,050 Other 814 777 817 Total retail 119,206 113,245 110,868 Sales for resale within service area 13,258 12,107 12,320 Sales for resale outside service area 12,445 16,632 19,839 Total 144,909 141,984 143,027 AVERAGE REVENUE PER KILOWATT-HOUR (cents): Residential 7.32 7.14 7.11 Commercial 7.04 7.03 6.99 Industrial 4.51 4.45 4.53 Total retail 6.10 5.98 6.01 Sales for resale 4.12 4.20 4.05 Total sales 5.75 5.62 5.57 AVERAGE ANNUAL KILOWATT-HOUR USE PER RESIDENTIAL CUSTOMER 12,378 11,490 11,659 AVERAGE ANNUAL REVENUE PER RESIDENTIAL CUSTOMER $ 906.60 $ 820.67 $ 829.18 PLANT NAMEPLATE CAPACITY RATINGS (year-end) (megawatts) 29,513 29,830 29,915 MAXIMUM PEAK-HOUR DEMAND (megawatts): Winter 19,432 19,121 19,166 Summer 25,937 24,146 25,261 SYSTEM RESERVE MARGIN (at peak) (percent) 13.2 14.3 16.5 ANNUAL LOAD FACTOR (percent) 59.4 60.3 58.3 PLANT AVAILABILITY (percent): Fossil-steam 87.9 88.6 91.3 Nuclear 85.9 85.2 83.4 SOURCE OF ENERGY SUPPLY (percent): Coal 72.2 71.7 72.6 Nuclear 16.1 16.2 16.2 Hydro 3.9 4.6 4.4 Oil and gas 0.7 0.5 0.6 Purchased power 7.1 7.0 6.2 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA: BTU per net kilowatt-hour generated 9,994 9,976 10,022 Cost of fuel per million BTU (cents) 166.85 162.58 168.28 Average cost of fuel per net kilowatt-hour generated (cents) 1.67 1.62 1.69
II-40 71 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 2,342 $ 2,194 $ 2,103 $ 2,042 $ 1,996 $ 1,825 $ 1,751 $ 1,641 2,062 1,965 1,835 1,692 1,613 1,512 1,410 1,284 2,085 2,011 1,945 1,870 1,845 1,830 1,790 1,600 64 60 56 54 52 50 47 42 6,553 6,230 5,939 5,658 5,506 5,217 4,998 4,567 412 401 480 461 511 436 456 439 977 928 777 1,028 957 1,289 854 619 7,942 7,559 7,196 7,147 6,974 6,942 6,308 5,625 111 61 91 57 59 57 42 48 $ 8,053 $ 7,620 $ 7,287 $ 7,204 $ 7,033 $ 6,999 $ 6,350 $ 5,673 33,118 31,627 31,041 30,583 29,501 27,088 26,163 25,425 29,658 28,454 27,005 25,593 24,166 22,512 20,816 19,512 45,974 45,022 43,675 42,113 40,503 39,804 39,055 35,618 806 787 763 737 723 713 663 645 109,556 105,890 102,484 99,026 94,893 90,117 86,697 81,200 11,134 11,419 14,806 13,282 14,347 11,079 11,193 10,829 24,402 24,228 15,860 22,905 16,909 27,881 21,374 15,509 145,092 141,537 133,150 135,213 126,149 129,077 119,264 107,538 7.07 6.94 6.77 6.68 6.77 6.74 6.69 6.45 6.96 6.91 6.79 6.61 6.67 6.71 6.77 6.58 4.53 4.47 4.45 4.44 4.56 4.60 4.58 4.49 5.98 5.88 5.80 5.71 5.80 5.79 5.76 5.62 3.91 3.73 4.10 4.11 4.69 4.43 4.02 4.02 5.47 5.34 5.40 5.29 5.53 5.38 5.29 5.23 11,637 11,287 11,255 11,307 11,157 10,515 10,434 10,395 $ 822.93 $ 782.90 $ 762.42 $ 754.96 $ 754.93 $ 708.46 $ 698.26 $ 670.76 29,532 29,532 27,552 27,610 26,262 26,262 25,397 25,377 17,629 20,772 18,685 18,185 19,665 19,347 16,353 15,502 25,981 24,399 23,641 23,194 23,255 21,778 20,210 20,999 14.0 21.0 15.0 16.2 11.4 17.6 32.8 27.0 56.6 58.6 59.8 58.7 57.2 57.4 58.9 53.9 91.9 92.2 91.3 91.2 90.3 90.5 90.5 90.5 83.0 87.0 78.4 84.5 74.2 80.3 66.9 75.8 72.1 71.5 77.7 77.8 79.4 78.5 77.3 75.2 15.6 15.7 14.5 13.1 11.5 12.0 11.8 13.2 4.4 5.2 2.3 3.3 2.2 3.1 5.6 6.4 1.3 1.1 0.7 0.6 0.9 0.3 0.2 0.5 6.6 6.5 4.8 5.2 6.0 6.1 5.1 4.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10,065 10,086 10,094 10,122 10,171 10,193 10,208 10,357 172.81 171.00 170.36 176.64 185.89 191.24 191.44 184.25 1.74 1.72 1.72 1.78 1.89 1.95 1.95 1.91
II-41 72 CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Millions of Dollars) OPERATING REVENUES $ 8,489 $ 8,073 $ 8,050 OPERATING EXPENSES: Operation -- Fuel 2,265 2,114 2,237 Purchased power 336 454 468 Proceeds from settlement of disputed contracts (3) (7) (181) Other 1,448 1,317 1,321 Maintenance 653 613 637 Depreciation and amortization 793 768 763 Deferred Plant Vogtle expenses, net 36 (31) 16 Taxes other than income taxes 462 436 432 Federal and state income taxes 734 647 618 Total operating expenses 6,724 6,311 6,311 OPERATING INCOME 1,765 1,762 1,739 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 9 10 13 Deferred return on Plant Vogtle - - 35 Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 30 32 30 Other, net (41) (50) (57) Income taxes applicable to other income 57 39 21 INCOME BEFORE INTEREST CHARGES 1,820 1,793 1,781 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest on long-term debt 595 684 757 Allowance for debt funds used during construction (13) (12) (18) Interest on interim obligations 30 16 20 Amortization of debt discount, premium, and expense, net 26 14 9 Other interest charges 87 34 29 Preferred and preference dividends of subsidiary companies 93 104 108 Net interest charges and preferred and preference dividends 818 840 905 CONSOLIDATED INCOME BEFORE REFUND OF RETAIL REVENUES BILLED SUBJECT TO REFUND IN PRIOR YEARS AND CUMULATIVE EFFECT OF A CHANGE IN METHOD OF RECORDING REVENUES 1,002 953 876 Refund of Retail Revenues Billed Subject to Refund in Prior Years--Less Income Taxes - - - Cumulative Effect as of Jan. 1, of Accruing Unbilled Revenues--Less Income Taxes - - - CONSOLIDATED NET INCOME AS REPORTED $ 1,002 $ 953 $ 876 EARNINGS PER SHARE OF COMMON STOCK $ 1.57 $ 1.51 $ 1.39 AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING (THOUSANDS) 637,319 631,844 631,307
II-42 73 CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies
1990 1989 1988 1987 1986 1985 1984 1983 $ 8,053 $ 7,620 $ 7,287 $ 7,204 $ 7,033 $ 6,999 $ 6,350 $ 5,673 2,327 2,241 2,213 2,303 2,316 2,431 2,197 1,944 642 575 562 552 386 456 435 281 - - - - - - - - 1,161 1,103 1,167 1,219 1,045 941 840 759 602 542 547 574 576 562 494 429 749 698 632 563 510 471 444 420 31 (39) (8) (142) - - - - 397 356 362 349 315 303 283 255 520 525 412 517 672 649 576 533 6,429 6,001 5,887 5,935 5,820 5,813 5,269 4,621 1,624 1,619 1,400 1,269 1,213 1,186 1,081 1,052 33 71 138 190 312 269 212 146 83 48 107 115 - - - - (281) - - (358) - - - - 63 - - 129 - - - - 28 28 46 77 66 70 61 61 (55) (50) (30) (59) (20) - 46 (6) 36 30 23 19 - (19) (42) (20) 1,531 1,746 1,684 1,382 1,571 1,506 1,358 1,233 788 791 784 776 782 755 679 644 (34) (63) (130) (157) (260) (254) (199) (142) 22 12 22 24 4 21 16 2 10 11 10 8 6 3 2 2 26 26 32 29 15 17 15 13 115 123 120 125 121 119 110 106 927 900 838 805 668 661 623 625 604 846 846 577 903 845 735 608 - - - - - - - (11) - - - - - - - 7 $ 604 $ 846 $ 846 $ 577 $ 903 $ 845 $ 735 $ 604 $ 0.96 $ 1.34 $ 1.36 $ 0.96 $ 1.56 $ 1.56 $ 1.47 $ 1.32 631,307 631,303 622,292 601,390 580,252 541,244 501,313 456,262
II-43 74 CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Millions of Dollars) OPERATING ACTIVITIES: Net income $ 1,002 $ 953 $ 876 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 1,011 969 968 Deferred income taxes, net 209 221 26 Deferred investment tax credits, net (20) (6) (11) Allowance for equity funds used during constuction (9) (10) (13) Deferred Plant Vogtle costs 36 (31) (19) Write-off of Plant Vogtle costs - - - Non-cash proceeds from settlement of disputed contracts - (7) (141) Other, net (45) (25) 45 Changes in certain current assets and liabilities -- Receivables (55) (10) 68 Inventories 136 (23) 20 Payables 43 35 (13) Taxes accrued 3 (62) 107 Other (64) (9) (46) Net cash provided from operating activities 2,247 1,995 1,867 INVESTING ACTIVITIES: Gross property additions (1,441) (1,105) (1,123) Foreign utility operations (465) - - Sales of property 262 44 291 Other (37) 61 (45) Net cash used for investing activities (1,681) (1,000) (877) FINANCING ACTIVITIES: Proceeds: Common stock 205 30 - Preferred stock 426 410 100 First mortgage bonds 2,185 1,815 380 Pollution control bonds 386 208 126 Other long-term debt 206 48 14 Prepaid capacity revenues - - 53 Retirements: Preferred and preference stock (516) (326) (125) First mortgage bonds (2,178) (2,575) (881) Pollution control bonds (351) (208) (130) Other long-term debt (99) (88) (70) Interim obligations, net 114 525 180 Payment of common stock dividends (726) (695) (676) Miscellaneous (137) (148) (41) Net cash provided from (used for) financing activities (485) (1,004) (1,070) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 81 (9) (80) CASH AND EQUIVALENTS AT BEGINNING OF YEAR 97 106 186 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 178 $ 97 $ 106 ( ) Denotes use of cash.
II-44 75 CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies
1990 1989 1988 1987 1986 1985 1984 1983 $ 604 $ 846 $ 846 $ 577 $ 903 $ 845 $ 735 $ 604 982 951 837 742 674 623 581 522 158 225 206 198 465 242 243 280 - (1) 27 20 132 184 245 202 (33) (71) (138) (190) (312) (269) (212) (146) (52) (87) (115) (257) - - - - 281 - - 358 - - - - - - - - - - - - (10) (28) 46 87 15 17 (190) (21) 8 (123) (21) (113) 38 (89) (27) (147) (82) 6 (47) (62) (37) 127 (69) (31) (41) (23) (6) 125 48 38 187 65 (5) (15) 29 (34) 24 (65) 32 25 (34) 156 (40) 42 (56) 84 70 19 1,776 1,836 1,624 1,493 1,894 1,737 1,595 1,372 (1,185) (1,346) (1,754) (1,853) (2,367) (2,242) (2,130) (1,722) - - - - - - - - 35 - - 12 - 1 321 - 14 54 (2) 64 46 126 110 74 (1,136) (1,292) (1,756) (1,777) (2,321) (2,115) (1,699) (1,648) - 4 194 247 379 373 318 333 - - 120 125 100 150 50 50 300 280 335 700 735 20 150 129 - 104 73 228 386 635 368 59 74 74 68 81 367 68 28 186 - - - - 100 - - - (96) (21) (10) (160) (53) (6) (6) (11) (146) (201) (273) (369) (875) (69) (71) (53) (3) (55) (1) (122) (21) - (4) (1) (207) (83) (108) (56) (55) (54) (99) (103) 78 27 (300) 313 (37) (77) 118 (2) (676) (675) (661) (628) (583) (512) (444) (380) (8) (10) (20) (58) (82) (24) (22) (6) (684) (556) (583) 301 361 504 386 201 (44) (12) (715) 17 (66) 126 282 (75) 230 242 957 940 1,006 880 598 673 $ 186 $ 230 $ 242 $ 957 $ 940 $ 1,006 $ 880 $ 598
II-45 76 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
At December 31, 1993 1992 1991 (Millions of Dollars) ASSETS ELECTRIC PLANT: Production- Fossil $ 8,006 $ 8,033 $ 7,997 Nuclear 5,930 5,912 5,902 Hydro 1,263 1,253 1,247 Total production 15,199 15,198 15,146 Transmission 3,224 3,093 2,955 Distribution 6,848 6,430 6,092 General 2,395 2,291 2,196 Construction work in progress 1,031 665 603 Nuclear fuel, at amortized cost 229 257 301 Total electric plant 28,926 27,934 27,293 STEAM HEAT PLAINT 21 21 20 Total utility plant 28,947 27,955 27,313 ACCUMULATED PROVISION FOR DEPRECIATION: Electric 8,924 8,271 7,676 Steam heat 10 9 8 Total accumulated provision for depreciation 8,934 8,280 7,684 Total 20,013 19,675 19,629 Less property-related accumulated deferred income taxes - 3,186 3,020 Total 20,013 16,489 16,609 OTHER PROPERTY AND INVESTMENTS: Securities received from settlement of disputed contracts - - 202 Foreign utility operations, being amortized 559 - - Nuclear decommissioning trusts 88 52 26 Miscellaneous 89 75 83 Total 736 127 311 CURRENT ASSETS: Cash and cash equivalents 178 97 106 Investment securities - 199 - Receivables, net 962 742 723 Accrued utility revenues 185 177 160 Fossil fuel stock, at average cost 254 392 445 Materials and supplies, at average cost 535 533 457 Prepayments 148 220 222 Vacation pay deferred 73 70 70 Total current assets 2,335 2,430 2,183 DEFERRED CHARGES: Deferred charges related to income taxes 1,546 - - Deferred Plant Vogtle costs 507 383 375 Deferred fuel charges 70 89 106 Debt expense, being amortized 33 28 23 Premium on reacquired debt, being amortized 288 222 126 Miscellaneous 383 270 130 Total deferred charges 2,827 992 760 TOTAL ASSETS $25,911 $20,038 $19,863
II-46 77 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
1990 1989 1988 1987 1986 1985 1984 1983 $ 7,661 $ 7,565 $ 6,226 $ 6,157 $ 5,415 $ 5,274 $ 4,740 $ 4,606 5,820 5,976 4,995 4,987 2,490 2,341 2,312 2,229 1,222 1,215 1,197 1,192 1,184 1,162 863 854 14,703 14,756 12,418 12,336 9,089 8,777 7,915 7,689 2,824 2,683 2,500 2,388 2,254 2,001 1,878 1,747 5,738 5,365 4,944 4,510 4,131 3,793 3,491 3,225 2,078 2,026 1,865 1,674 1,504 1,243 1,037 876 1,092 1,006 3,071 2,519 5,162 4,278 3,830 2,906 354 402 481 479 520 497 455 422 26,789 26,238 25,279 23,906 22,660 20,589 18,606 16,865 20 20 20 20 35 32 26 26 26,809 26,258 25,299 23,926 22,695 20,621 18,632 16,891 7,079 6,492 5,885 5,355 4,879 4,472 4,056 3,669 8 7 6 6 13 11 11 11 7,087 6,499 5,891 5,361 4,892 4,483 4,067 3,680 19,722 19,759 19,408 18,565 17,803 16,138 14,565 13,211 2,911 2,759 2,559 2,371 2,212 1,976 1,792 1,589 16,811 17,000 16,849 16,194 15,591 14,162 12,773 11,622 - - - - - - - - - - - - - - - - 2 - - - - - - - 83 85 88 70 69 36 32 12 85 85 88 70 69 36 32 12 186 230 242 957 940 1,006 880 598 - - - - - - - - 793 765 687 687 657 685 613 566 151 189 148 139 83 92 76 96 467 427 490 513 501 503 649 614 456 413 348 278 228 188 169 135 193 192 174 136 70 22 18 34 64 65 63 59 56 53 49 48 2,310 2,281 2,152 2,769 2,535 2,549 2,454 2,091 - - - - - - - - 364 322 270 173 - - - - 126 143 157 112 121 - - - 23 24 24 25 24 24 22 20 99 103 102 95 70 - - - 137 134 89 80 73 84 46 45 749 726 642 485 288 108 68 65 $19,955 $20,092 $19,731 $19,518 $18,483 $16,855 $15,327 $13,790
II-47 78 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
At December 31, 1993 1992 1991 (Millions of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock $ 3,213 $ 1,582 $ 1,578 Paid-in capital 1,502 2,929 2,906 Premium on preferred stock 1 2 2 Retained Earnings 2,968 2,721 2,490 Total common equity 7,684 7,234 6,976 Preferred stock 1,332 1,351 1,207 Preferred stock subject to mandatory redemption 1 8 126 Long-term debt 7,412 7,241 7,992 Total capitalization 16,429 15,834 16,301 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 865 567 302 Commercial paper 76 260 - Preferred stock due within one year 1 65 7 Long-term debt due within one year 156 188 217 Accounts payable 698 646 585 Customer deposits 103 99 95 Taxes accrued 206 172 215 Interest accrued 186 191 221 Vacation pay accrued 90 86 84 Miscellaneous 190 242 229 Total current liabilities 2,571 2,516 1,955 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 3,979 - - Deferred credits related to income taxes 1,051 - - Accumulated deferred investment tax credits 900 957 1,004 Prepaid capacity revenues, net 144 148 149 Disallowed Plant Vogtle capacity buyback costs 63 72 110 Miscellaneous 774 511 344 Total deferred credits and other liabilities 6,911 1,688 1,607 Total Capitalization and Liabilities $25,911 $20,038 $19,863
II-48 79 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
1990 1989 1988 1987 1986 1985 1984 1983 $ 1,578 $ 1,578 $ 1,577 $ 1,534 $ 1,481 $ 1,400 $ 1,305 $ 1,202 2,906 2,906 2,903 2,752 2,558 2,259 1,981 1,767 3 3 3 3 5 7 7 6 2,296 2,374 2,203 2,018 2,089 1,777 1,448 1,160 6,783 6,861 6,686 6,307 6,133 5,443 4,741 4,135 1,207 1,209 1,259 1,139 1,214 1,114 1,004 954 151 191 206 224 177 194 205 214 8,458 8,575 8,433 8,333 7,813 7,220 6,775 6,439 16,599 16,836 16,584 16,003 15,337 13,971 12,725 11,742 122 44 17 317 4 41 118 - - - - - - - - - 7 61 17 9 15 51 6 3 308 169 190 192 251 303 162 140 616 676 728 747 737 689 651 464 91 89 83 86 82 80 83 76 144 181 203 221 259 144 208 196 246 233 240 233 221 226 208 181 75 75 74 68 66 63 58 55 233 252 104 110 111 117 91 73 1,842 1,780 1,656 1,983 1,746 1,714 1,585 1,188 - - - - - - - - - - - - - - - - 1,063 1,111 1,161 1,180 1,208 1,114 968 767 100 102 81 104 101 - - - 136 73 104 79 - - - - 215 190 145 169 91 56 49 93 1,514 1,476 1,491 1,532 1,400 1,170 1,017 860 $19,955 $20,092 $19,731 $19,518 $18,483 $16,855 $15,327 $13,790
II-49 80 ALABAMA POWER COMPANY FINANCIAL SECTION II-50 81 MANAGEMENT'S REPORT Alabama Power Company 1993 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 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 /s/ William B. Hutchins, III - -------------------------- ------------------------------ Elmer B. Harris William B. Hutchins III President Senior Vice President and Chief Executive Officer and Chief Financial Officer II-51 82 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF ALABAMA POWER COMPANY: We have audited the accompanying balance sheets and statements of capitalization of Alabama Power Company (an Alabama corporation and wholly owned subsidiary of The Southern Company) as of December 31, 1993 and 1992, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1993. 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-59 through II-77) referred to above present fairly, in all material respects, the financial position of Alabama Power Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 8 to the financial statements, effective January 1, 1993, the company changed its methods of accounting for postretirement benefits other than pensions, and for income taxes. /s/ Arthur Andersen & Co. Birmingham, Alabama February 16, 1994 II-52 83 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Alabama Power Company 1993 Annual Report RESULTS OF OPERATIONS EARNINGS The company's 1993 net income after dividends on preferred stock was $346 million, representing a 2.3 percent increase over the prior year. This improvement can be attributed to higher retail energy sales and lower financing costs. Retail energy sales increased 5.1 percent from 1992 levels. This was primarily due to the extreme weather during 1993, especially when compared to the unusually mild weather of 1992. Long-term debt interest expense and preferred stock dividends decreased in 1993 reflecting the continued redemption and refinancing of higher cost debt and preferred stock. These positive factors were partially offset by higher operating costs and a scheduled reduction in capacity sales to non-affiliated utilities. When comparing 1992 earnings with the prior year, it should be noted that 1991 earnings included an unusual item -- the settlement of litigation with Gulf States Utilities Company (Gulf States) that resulted in an after-tax gain of $9 million. A comparison of 1992 to 1991, excluding this unusual item, would reflect a 1992 increase in earnings of $8 million. The return on average common equity for 1993 was 13.9 percent compared to 14.0 percent in 1992, and 14.6 percent in 1991. REVENUES The following table summarizes the principal factors that affected operating revenues for the past three years:
Increase (Decrease) From Prior Year 1993 1992 1991 (in thousands) Retail -- Change in base rates $ -- $ 36,348 $ 16,831 Sales growth 24,960 36,237 47,769 Weather 58,536 (42,709) (7,318) Fuel cost recovery and other 96,437 (31,318) 25,719 Total retail 179,933 (1,442) 83,001 Sales for Resale -- Non-affiliates (43,686) (121) (27,084) Affiliates 23,887 (1,287) 65,902 Total sales for resale (19,799) (1,408) 38,818 Other operating revenues 635 2,896 2,551 Total operating revenues $160,769 $ 46 $124,370 Percent change 5.6% -- % 4.6%
Retail revenues of $2.4 billion in 1993 increased $180 million (8.0 percent) over the prior year, compared with no increase in 1992. The extreme weather during 1993 and sales growth contributed to the increase in retail revenues over 1992. Fuel revenues increased substantially during 1993. However, changes in fuel revenues are offset with corresponding changes in recoverable fuel expenses and have no effect on net income. Gains in 1992 retail revenues, due to higher rates and sales growth, were partially offset by lower fuel cost recovery revenues. Revenues from sales to non-affiliated utilities 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: II-53 84 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1993 Annual Report
1993 1992 1991 (in thousands) Capacity $158,709 $185,689 $179,754 Energy 79,631 111,958 111,971 Total $238,340 $297,647 $291,725
Capacity revenues decreased in 1993 due to a scheduled reduction in capacity dedicated to unit power sales customers for the first five months of the year. The major factor contributing to the increase in capacity revenues in 1992 and 1991 was a new generating unit, Plant Miller Unit 4, that was placed in commercial service in March 1991 and dedicated to unit power sales. This unit's fixed costs are higher than those of the unit it replaced, which previously provided energy to unit power sales customers. 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. Kilowatt-hour (KWH) sales for 1993 and the percent change by year were as follows:
KWH Percent Change 1993 1993 1992 1991 (millions) Residential 13,185 9.2% (2.1)% 2.7% Commercial 9,185 6.4 1.2 4.0 Industrial 18,595 1.8 4.3 (1.1) Other 182 2.8 1.2 2.5 Total retail 41,147 5.1 1.6 1.2 Sales for resale- Non-affiliates 7,144 (14.8) (4.9) (14.3) Affiliates 8,081 12.1 (7.4) 72.2 Total 56,372 3.0% (0.7)% (4.3)%
EXPENSES Total operating expenses of $2.4 billion for 1993 were up 7.0 percent compared with the prior year. The increase was mainly attributable to higher production expenses of $95 million to meet increased energy demands. Total operating expenses for 1992 increased moderately over those recorded in 1991. However, absent the Gulf States settlement, which reduced 1991 operating expenses, total operating expenses would have decreased $6 million. Fuel costs are 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. Fuel expense increases in 1993 represent $83 million of the production expense increase mentioned above. Fuel expense decreased in 1992 as a result of the reduction in the cost of both coal and nuclear fuel, offset somewhat by a small increase in generation. Fuel cost per kilowatt-hour generated was 1.73 cents in 1993, 1.64 cents in 1992 and 1.69 cents in 1991. Purchased power expenses decreased in 1992 primarily due to less purchased energy and a decrease in the price of such energy. Other operation expenses increased 6.0 percent in 1993 following a minimal increase in 1992. The increase in 1993 is primarily the result of environmental cleanup costs, net expenses of a March snowstorm, and the one-time cost of a transportation fleet reduction program, which together totaled $16.1 million. Depreciation and amortization expense increased 3.4 percent in 1993 and 3.5 percent in 1992. This is principally due to continued growth in depreciable plant in service. Taxes other than income taxes increased 4.0 percent in 1993 and 1.4 percent in 1992. These increases were the result of the addition of new facilities and higher revenue-related taxes. The increase in income tax expense of 2.6 percent for 1993 is primarily attributable to a one percent increase in the corporate federal income tax rate effective January 1, 1993. Interest expense and dividends on preferred stock decreased $7.5 million (2.8 percent) and $7.2 million (2.6 percent) in 1993 and 1992, respectively. These reductions are due to significant refinancing of long-term debt and preferred stock. II - 54 85 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1993 Annual Report EFFECTS OF INFLATION The company is subject to rate regulation that is based on the recovery of historical costs and, therefore is subject to economic losses caused by inflation. 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 growth in energy sales to regulatory matters. Future earnings in the near term will also depend upon growth in electric sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the company's service area. In addition, the Energy Policy Act of 1992 (Energy Act) will have a profound 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 law also includes provisions to streamline the licensing process for new nuclear plants. The company is preparing to meet the challenge of this major change in the traditional business practices 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, and this may enhance the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, pressure for legislation to allow retail wheeling will continue. If the company does not remain a low-cost producer and provide quality service, the company's retail energy sales growth, as well as any new long-term contracts for energy sales outside the service area, could be limited, and this could significantly erode earnings. Rates to retail customers served by the company are regulated by the Alabama Public Service Commission (APSC). Rates for the company can be adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. See Note 3 to the financial statements for information about other regulatory matters. 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 Reviews Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be effective by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental unemployment benefits, disability-related benefits, job training, and health and life insurance coverage. In 1993, the company adopted Statement No. 112, with no material effect on the financial statements. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which is effective in 1994. Statement No. 115 supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The company adopted the new rules January 1, 1994, with no material effect on the financial statements. II-55 86 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1993 Annual Report FINANCIAL CONDITION OVERVIEW The company's financial condition remained stable in 1993. Growth in energy sales 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 contributed to this stability. The company had gross property additions of $436 million in 1993. The majority of funds needed for gross property additions since 1990 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. On January 1, 1993, the company changed its methods of accounting for postretirement benefits other than pensions, and for income taxes. See Notes 2 and 8 to the financial statements, regarding the impact of these changes. CAPITAL STRUCTURE The company's ratio of common equity to total capitalization was 47.4 percent in 1993, compared with 47.6 percent in 1992, and 45.4 percent in 1991. In 1993, the company issued $860 million of first mortgage bonds, $158 million of preferred stock and, through public authorities, $144 million of pollution control revenue bonds. The company continued to reduce financing costs by retiring higher-cost bonds and preferred stock. Retirements, including maturities, of bonds totaled $835 million, and preferred stock retirements totaled $207 million. Composite financing rates as of year-end for 1991 through 1993 were as follows:
1993 1992 1991 Composite interest rate on long-term debt 7.35% 8.00% 8.64% Composite dividend rate on preferred stock 5.80% 6.76% 7.10%
The company's current securities ratings are as follows:
Duff & Standard Phelps Moody's & Poor's First Mortgage Bonds A+ A1 A Preferred Stock A- a2 A-
CAPITAL REQUIREMENTS Capital expenditures are estimated to be $588 million for 1994, $572 million for 1995, and $531 million for 1996. The total is $1.7 billion for the three years. Actual capital costs may vary from this estimate because of factors such as changes in environmental regulations; changes in the existing nuclear plant to meet new regulations; revised load projections; increasing costs of labor, equipment, and materials; and the cost of capital. The company does not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload generating units until well into the future. However, the construction of combustion turbine peaking units of approximately 720 megawatts of capacity is planned by 1996 to meet increased peak-hour demands. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will continue. In addition to the funds needed for the capital budget, approximately $80 million will be required by the end of 1996 for present sinking fund requirements, redemptions announced, and maturities of first mortgage bonds. Also, the company plans to continue a program to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital. ENVIRONMENTAL MATTERS In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on the Southern electric system. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995 and affects eight generating plants -- some 10,000 II-56 87 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1993 Annual Report megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing slower than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $275 million through 1995 for The Southern Company, of which the company's portion is approximately $30 million. Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance could require total construction expenditures ranging from approximately $450 million to $800 million for The Southern Company, of which the company's portion is approximately $225 million to $350 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 2 percent in annual revenue requirements from customers could be necessary to fully recover the company's cost of compliance for both Phase I and Phase II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. There can be no assurance that all Clean Air Act costs will be recovered. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard II-57 88 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1993 Annual Report and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the company could incur costs to clean up properties currently or previously owned. The company conducts studies to determine the extent of any required clean-up costs and has recognized in the financial statements costs to clean up known sites. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; and the Resource Conservation and Recovery Act. Changes to these laws could affect many areas of The Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Southern electric system. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential for lawsuits alleging damages caused by electromagnetic fields exists. SOURCES OF CAPITAL It is anticipated that the funds required will be derived from sources in form and quantity similar to those used in the past. To issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements designated in its mortgage indenture and corporate charter. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. As required by the Nuclear Regulatory Commission and as ordered by the APSC, the company has established external trust funds for nuclear decommissioning costs. Also, during 1993, the APSC issued a policy statement which will require external funding of postretirement benefits. The cumulative effect of funding these items over a long period will diminish internally funded capital and may require capital from other sources. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." II-58 89 STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 Alabama Power Company
1993 1992 1991 (in thousands) OPERATING REVENUES (NOTES 1, 3 AND 7): Revenues $ 2,825,634 $ 2,688,752 $ 2,687,419 Revenues from affiliates 181,975 158,088 159,375 Total operating revenues 3,007,609 2,846,840 2,846,794 OPERATING EXPENSES: Operation -- Fuel 877,099 794,438 812,667 Purchased power from non-affiliates 15,230 14,242 21,080 Purchased power from affiliates 120,330 107,230 119,602 Proceeds from settlement of disputed contracts (Note 7) (2,568) (641) (14,819) Other 473,383 446,477 435,908 Maintenance 252,506 237,071 229,114 Depreciation and amortization 290,310 280,881 271,433 Taxes other than income taxes 178,997 172,095 169,639 Federal and state income taxes (Note 8) 207,210 201,925 200,612 Total operating expenses 2,412,497 2,253,718 2,245,236 OPERATING INCOME 595,112 593,122 601,558 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction (Note 1) 3,260 2,071 2,368 Income from subsidiary (Note 6) 4,127 4,635 4,576 Charitable foundation (3,000) (6,887) (6,500) Interest income 20,775 14,804 14,356 Other, net (24,420) (11,019) (9,926) Income taxes applicable to other income 10,239 8,947 7,523 INCOME BEFORE INTEREST CHARGES 606,093 605,673 613,955 INTEREST CHARGES: Interest on long-term debt 184,861 206,871 214,107 Allowance for debt funds used during construction (Note 1) (2,992) (2,416) (6,903) Interest on interim obligations 3,760 3,704 13,385 Amortization of debt discount, premium, and expense, net 8,937 4,392 2,634 Other interest charges 35,474 19,381 14,927 Net interest charges 230,040 231,932 238,150 NET INCOME 376,053 373,741 375,805 DIVIDENDS ON PREFERRED STOCK 29,559 35,186 36,139 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 346,494 $ 338,555 $ 339,666
The accompanying notes are an integral part of these statements. II-59 90 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993, 1992, and 1991 Alabama Power Company
1993 1992 1991 (in thousands) OPERATING ACTIVITIES: Net income $ 376,053 $ 373,741 $ 375,805 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 356,499 338,421 337,978 Deferred income taxes and investment tax credits 32,994 23,514 (6,868) Allowance for equity funds used during construction (3,260) (2,071) (2,368) Non-cash proceeds from settlement of disputed contracts (Note 7) - (641) (13,750) Other, net 36,493 (2,657) 26,614 Changes in certain current assets and liabilities -- Receivables, net 19,215 (11,010) 9,178 Inventories 51,630 12,704 (17,374) Payables 31,544 2,158 28,889 Taxes accrued (9,959) (21,120) 24,828 Energy cost recovery, retail (56,128) 45,509 (12,304) Other (21,110) 10,629 (37,906) Net cash provided from operating activities 813,971 769,177 712,722 INVESTING ACTIVITIES: Gross property additions (435,843) (367,463) (397,011) Sales of property - 43,556 - Other (741) (13,379) (36,083) Net cash used for investing activities (436,584) (337,286) (433,094) FINANCING ACTIVITIES: Proceeds: Preferred stock 158,000 150,000 - First mortgage bonds 860,000 745,000 250,000 Other long-term debt 180,314 48,382 12,906 Prepaid capacity revenues - - 52,900 Retirements: Preferred stock (207,000) (145,000) (17,500) First mortgage bonds (699,788) (931,797) (227,695) Other long-term debt (181,329) (54,223) (48,678) Interim obligations, net (156,917) 120,917 (13,500) Payment of preferred stock dividends (32,099) (35,704) (36,829) Payment of common stock dividends (252,900) (273,300) (232,900) Miscellaneous (56,064) (53,697) (17,732) Net cash used for financing activities (387,783) (429,422) (279,028) NET CHANGE IN CASH (10,396) 2,469 600 CASH AT BEGINNING OF YEAR 13,629 11,160 10,560 CASH AT END OF YEAR $ 3,233 $ 13,629 $ 11,160 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for -- Interest (net of amount capitalized) $ 176,805 $ 219,263 $ 220,154 Income taxes 175,591 197,693 148,721
( ) Denotes use of cash. The accompanying notes are an integral part of these statements. II-60 91 BALANCE SHEETS At December 31, 1993 and 1992 Alabama Power Company
ASSETS 1993 1992 (in thousands) UTILITY PLANT: Plant in service, at original cost (Note 1) $9,757,141 $9,491,083 Less accumulated provision for depreciation 3,384,156 3,131,543 6,372,985 6,359,540 Nuclear fuel, at amortized cost 93,551 101,128 Construction work in progress 225,786 164,588 Total 6,692,322 6,625,256 Less property-related accumulated deferred income taxes (Note 8) - 1,170,982 Total 6,692,322 5,454,274 OTHER PROPERTY AND INVESTMENTS: Southern Electric Generating Company, at equity (Note 6) 29,201 30,703 Nuclear decommissioning trusts (Note 1) 49,550 32,390 Miscellaneous 20,434 19,189 Total 99,185 82,282 CURRENT ASSETS: Cash 3,233 13,629 Investment securities (Note 7) - 64,832 Receivables- Customer accounts receivable 312,090 266,670 Other accounts and notes receivable 48,808 34,801 Affiliated companies 40,216 37,128 Accumulated provision for uncollectible accounts (2,632) (1,482) Refundable income taxes 11,940 7,817 Fossil fuel stock, at average cost 88,481 134,328 Materials and supplies, at average cost 176,728 182,511 Prepayments- Income taxes 18,980 66,250 Other 60,227 42,004 Vacation pay deferred 22,680 21,879 Total 780,751 870,367 DEFERRED CHARGES: Deferred charges related to income taxes (Note 8) 469,010 - Debt expense, being amortized 7,064 6,118 Premium on reacquired debt, being amortized 102,634 74,835 Uranium enrichment decontamination and decommissioning fund (Note 1) 45,554 47,730 Miscellaneous 52,163 58,012 Total 676,425 186,695 TOTAL ASSETS $8,248,683 $6,593,618
The accompanying notes are an integral part of these statements. II-61 92 BALANCE SHEETS At December 31, 1993 and 1992 Alabama Power Company
CAPITALIZATION AND LIABILITIES 1993 1992 (in thousands) CAPITALIZATION (SEE ACCOMPANYING STATEMENTS): Common stock equity $2,526,348 $2,443,493 Preferred stock 440,400 489,400 Long-term debt 2,362,852 2,202,473 Total 5,329,600 5,135,366 CURRENT LIABILITIES: Long-term debt due within one year (Note 10) 58,998 67,379 Notes payable to banks 40,000 71,000 Commercial paper - 125,917 Accounts payable- Affiliated companies 62,507 64,318 Other 272,491 232,413 Customer deposits 31,198 31,286 Taxes accrued- Federal and state income 25,730 10,854 Other 14,414 13,519 Interest accrued 52,809 41,675 Vacation pay accrued 22,680 21,879 Miscellaneous 50,426 93,836 Total 631,253 774,076 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 8) 1,165,127 - Accumulated deferred investment tax credits 329,909 344,707 Prepaid capacity revenues, net 143,762 147,658 Deferred revenues from settlement of disputed contracts (Note 3) 19,871 46,721 Uranium enrichment decontamination and decommissioning fund (Note 1) 39,644 44,548 Deferred credits related to income taxes (Note 8) 441,240 - Miscellaneous 148,277 100,542 Total 2,287,830 684,176 COMMITMENTS AND CONTINGENT MATTERS (NOTES 1, 3, 4, 5, 6, 7, AND 11) TOTAL CAPITALIZATION AND LIABILITIES $8,248,683 $6,593,618
The accompanying notes are an integral part of these statements. II-62 93 STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 Alabama Power Company
1993 1992 1993 1992 (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 1993 and 1992 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 146 342 Retained earnings (Note 12) 997,199 914,148 Total common stock equity 2,526,348 2,443,493 47.4 % 47.6 % CUMULATIVE PREFERRED STOCK: $1 par value -- Authorized -- 27,500,000 shares Outstanding -- 12,020,200 shares $25 stated capital -- 6.40% 50,000 - 6.80% 38,000 - 7.60% 150,000 150,000 Adjustable rate 4.95% - at January 1, 1994 50,000 - 6.08% - at January 1, 1993 - 50,000 $100 stated capital -- Auction rate - at January 1, 1994: 2.92% 50,000 50,000 $100,000 stated capital -- Auction rate - at January 1, 1994: 2.72% 20,000 - $100 par value -- Authorized -- 3,850,000 shares Outstanding -- 824,000 shares 4.20% to 4.52% 41,400 41,400 4.60% to 4.92% 29,000 29,000 5.96% to 8.04% 12,000 32,000 8.16% to 9.44% - 137,000 Total (annual dividend requirement -- $25,547,000) 440,400 489,400 8.3 9.5 LONG-TERM DEBT: First mortgage bonds -- Maturity Interest Rates May 1, 1994 4 5/8% - 24,105 September 1, 1995 4 7/8% - 33,284 March 1, 1996 4 1/2% 60,000 - October 1, 1996 6 1/4% - 29,374 October 1, 1997 6 1/2% - 28,000 February 1, 1998 5 1/2% 50,000 - November 1, 1998 7% - 25,000 1999 through 2003 6% to 8 1/4% 670,000 533,500 2004 through 2008 7 1/4% 175,000 175,000 2009 through 2013 - - - 2014 through 2018 9 3/8% to 10 5/8% 15,243 311,768 2019 through 2023 7.30% to 9 1/4% 900,000 550,000 Total first mortgage bonds 1,870,243 1,710,031 Pollution control obligations 476,140 467,019 Other long-term debt 106,414 116,550 Unamortized debt premium (discount), net (30,947) (23,748) Total long-term debt (annual interest requirement -- $180,046,000) 2,421,850 2,269,852 Less amount due within one year (Note 10) 58,998 67,379 Long-term debt excluding amount due within one year 2,362,852 2,202,473 44.3 42.9 TOTAL CAPITALIZATION $ 5,329,600 $ 5,135,366 100.0 % 100.0 %
The accompanying notes are an integral part of these statements. II-63 94 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991 Alabama Power Company
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 914,148 $ 857,734 $ 751,126 Net income after dividends on preferred stock 346,494 338,555 339,666 Cash dividends on common stock (252,900) (273,300) (232,900) Preferred stock transactions, net (10,587) (8,732) (362) Other adjustments to retained earnings 44 (109) 204 BALANCE AT END OF PERIOD (NOTE 12) $ 997,199 $ 914,148 $ 857,734
The accompanying notes are an integral part of these statements. II-64 95 NOTES TO FINANCIAL STATEMENTS Alabama Power Company 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The company is a wholly owned subsidiary of The Southern Company which is the parent company of five operating companies, a system service company, Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and various other subsidiaries related to foreign utility operations and domestic non-utility operations. At this time, the operations of the other subsidiaries are not material. 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 upon request to The Southern Company and to the subsidiary companies. Southern Electric designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The company is also regulated 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 commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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. 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 $62 million in 1993, $48 million in 1992, and $69 million in 1991. 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 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This assessment will be paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The company currently estimates its liability under this law to be approximately $46 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 1993, 1992, and 1991. 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. II-65 96 NOTES (continued) Alabama Power Company 1993 Annual Report 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. Reasonable assurance may be in the form of an external trust fund, a surety method, or prepayment. The company has established external trust funds to comply with the NRC's regulations. Prior to the enactment of these regulations, the company had reserved nuclear decommissioning costs. 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 amount prescribed by the NRC. The estimated cost of decommissioning and the amounts being recovered through rates at December 31, 1993, for Plant Farley were as follows:
Plant Farley Site study basis (year) 1993 Estimated completion of decommissioning (year) 2029 (in millions) Cost of decommissioning: Radiated structures $409 Non-radiated structures 75 Other 94 Total cost $578 (in millions) Approved for ratemaking $578 Amount expensed in 1993 14 Balance in external trust funds 50 Balance in internal reserve 53
The amount in the internal reserve is being transferred into the external trust funds over the remaining life of the license for Plant Farley as approved by the APSC. 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 regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. INCOME TAXES The company 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, the company adopted Financial Accounting Standards Board (FASB) Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 8 for additional information about Statement No. 109. 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, net of deferred income tax, was 6.2 percent in 1991. Such method of computing AFUDC ceased upon the commercial operation of Plant Miller Unit 4 in March 1991. For construction projects begun after 1986, deferral of taxes related to capitalized interest is no longer permitted. For those projects, the composite rate used to determine the amount of allowance was 7.8 percent in 1993, 7.9 percent in 1992, and 8.3 percent in 1991. AFUDC, net of income tax, as a percent of net income after dividends on preferred stock was 1.5 percent in 1993, 1.1 percent in 1992, and 2.0 percent in 1991. 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 replacements of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive II-66 97 NOTES (continued) Alabama Power Company 1993 Annual Report of minor items of property) is charged to utility plant. FINANCIAL INSTRUMENTS In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, all financial instruments of the company -- for which the carrying amount does not approximate fair value -- are shown in the table below as of December 31:
1993 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 49.6 $ 50.4 Long-term debt 2,315.4 2,439.4 1992 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 32.4 $ 32.4 Investment securities 64.8 69.5 Long-term debt 2,154.7 2,255.8
The fair values of nuclear decommissioning trusts and investment securities were based on listed closing market prices. The fair values for long-term debt were based on either closing market prices or closing prices of comparable instruments. MATERIALS AND SUPPLIES Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. VACATION PAY The company's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the company accrues a current liability for earned vacation pay and records a current asset representing future recoverability of this cost. The amount was $23 million and $22 million at December 31, 1993 and 1992, respectively. In 1994, an estimated 65 percent of the 1993 deferred vacation cost will be expensed and the balance will be charged to construction and other accounts. 2. RETIREMENT BENEFITS PENSION PLAN The company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The company uses the "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 fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. 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. A qualified trust for medical benefits has been established for funding amounts to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. However, in December 1993, the APSC issued an accounting policy statement which requires the company to externally fund all postretirement benefits. It is expected that an external funding program will begin in 1994. Effective January 1, 1993, the company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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-67 98 NOTES (continued) Alabama Power Company 1993 Annual Report Because the adoption of Statement No. 106 was reflected in rates, it did not have a material impact on net income. Prior to 1993, the company recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The total costs of such benefits recognized by the company in 1992 and 1991 were $15.2 million and $15.4 million, respectively. Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown only for 1993 because Statement No. 106 was adopted as of January 1, 1993, on a prospective basis. The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in millions) Actuarial present value of benefit obligations: Vested benefits $ 523 $ 449 Non-vested benefits 20 19 Accumulated benefit obligation 543 468 Additional amounts related to projected salary increases 153 183 Projected benefit obligation 696 651 Less: Fair value of plan assets 1,121 1,014 Unrecognized net gain (349) (295) Unrecognized prior service cost 25 27 Unrecognized transition asset (56) (62) Prepaid asset recognized in the Balance Sheets $ 45 $ 33 Postretirement Medical Life 1993 1993 (in millions) Actuarial present value of benefit obligations: Retirees and dependents $ 67 $ 27 Employees eligible to retire 21 - Other employees 95 29 Accumulated postretirement benefit obligation 183 56 Less: Fair value of plan assets 39 1 Unrecognized net loss (gain) 18 (4) Unrecognized transition obligation 102 26 Accrued liability recognized in the Balance Sheets $ 24 $ 33
The weighted average rates assumed in the actuarial calculations were:
1993 1992 1991 Discount 7.5% 8.0% 8.0% Annual salary increase 5.0 6.0 6.0 Long-term return on plan assets 8.5 8.5 8.5
An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1993, by $32.8 million and the aggregate of the service and interest cost components of the net retiree medical cost by $3.4 million. II-68 99 NOTES(continued) Alabama Power Company 1993 Annual Report Components of the plans' net cost are shown below:
Pension 1993 1992 1991 (in millions) Benefits earned during the year $ 20.6 $ 20.6 $ 21.7 Interest cost on projected benefit obligation 50.4 48.2 47.5 Actual return on plan assets (146.3) (45.8) (260.5) Net amortization and deferral 63.3 (29.3) 193.2 Net pension cost (income) $ (12.0) $ (6.3) $ 1.9
Of the above net pension amounts, $(8.9) million in 1993, $(5.1) million in 1992, and $0.7 million in 1991 were recorded in operating expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical Life 1993 1993 (in millions) Benefits earned during the year $ 5 $ 2 Interest cost on accumulated benefit obligation 12 4 Amortization of transition obligation over 20 years 5 1 Actual return on plan assets (5) - Net amortization and deferral 2 - Net postretirement cost $ 19 $ 7
Of the above net postretirement medical and life insurance costs recorded in 1993, $22 million was charged to operating expenses and the remainder was charged to construction and other accounts. WORK FORCE REDUCTION PROGRAM The company has incurred additional costs for work force reduction programs. The costs related to these programs were $16.1 million, $13.4 million and $6.7 million for the years 1993, 1992 and 1991, respectively. A portion of the cost of these programs was deferred and is being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $15.3 million at December 31, 1993. 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. The APSC issued an order in December 1991 that reduced a scheduled 2.03 percent annual increase in rates to 1.03 percent, effective January 1992. The 1 percent reduction will remain in effect through 1994. The rate reduction was designed to refund to retail ratepayers a portion of the benefits from a settled contract dispute with Gulf States Utilities Company (Gulf States). The present value of this portion of the settlement amounting to approximately $60 million is being amortized to revenues to offset the rate reduction in accordance with the APSC's rate order. See Note 7 for additional information concerning the Gulf States settlement. Also in the December 1991 rate order, the APSC reaffirmed its satisfaction with the ratemaking mechanism and stated that it did not foresee any further review or changes in the procedures until after 1994. The ratemaking procedures will remain in effect after 1994 unless the APSC votes to modify or discontinue them. In February 1993, the APSC ordered - at the company's request - a moratorium on rate increases for the first two quarters of 1993, which facilitated the transition of an accounting change. This accounting change permitted the accrual of estimated operation and maintenance expenses related to nuclear refueling outages during the period between outages rather than at the time the expenses are incurred. HEAT PUMP FINANCING SUIT In September 1990, two customers of the company filed a civil complaint in the Circuit Court of Shelby County, Alabama, against the company seeking to represent all II-69 100 NOTES(continued) Alabama Power Company 1993 Annual Report persons who, prior to June 23, 1989, entered into agreements with the company for the financing of heat pumps and other merchandise purchased from vendors other than the company. The plaintiffs contended that the company was required to obtain a license under the Alabama Consumer Finance Act to engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring the company to refund all payments -- principal and interest -- made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June, 1993, the court ordered the company to refund or forfeit interest of approximately $10 million because of the company's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. The company has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material effect on the company's financial statements. FERC REVIEWS EQUITY RETURNS In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any changes in the rate of return on common equity that may occur as a result of this proceeding would be effective 60 days after a proper notice of the proceeding is published. A notice was published on May 10, 1991. 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. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material effect on the company's financial statements. 4. CAPITAL BUDGET The company's capital expenditures are currently estimated to total $588 million in 1994, $572 million in 1995 and $531 million in 1996. The estimates include AFUDC of $10 million in 1994, $11 million in 1995 and $12 million in 1996. The estimates for property additions for the three-year period includes $36.5 million committed to meeting the requirements of the Clean Air Act. The capital budget is subject to periodic review and revision, and actual capital cost incurred may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 1993, significant purchase commitments were outstanding in connection with the construction program. The company does not have any new baseload generating plants under construction. However, the construction of combustion turbine peaking units of approximately 720 megawatts is planned to be completed by 1996. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 5. FINANCING, INVESTMENT, AND COMMITMENTS GENERAL To the extent possible, the company's construction program is expected to be financed primarily from internal sources. Short-term debt will be utilized when necessary; the amounts available are discussed below. The company may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities. 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 II-70 101 NOTES(continued) Alabama Power Company 1993 Annual Report company's primary sources of external financing are sales of first mortgage bonds and preferred stock to the public, receipt of additional paid-in capital from The Southern Company, and leasing of nuclear material. In order to issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements contained in its mortgage indenture and corporate charter. The most restrictive of these provisions requires, for the issuance of additional first mortgage bonds, that before-income-tax earnings, as defined, cover pro forma annual interest charges on outstanding first mortgage bonds at least twice; and for the issuance of additional preferred stock, that gross income available for interest cover pro forma annual interest charges and preferred stock dividends at least one and one-half times. These coverages, for first mortgage bonds and for preferred stock for the year ended December 31, 1993, were 5.70 and 2.71, respectively. BANK CREDIT ARRANGEMENTS The company, along with The Southern Company and Georgia Power Company, has entered into agreements with several banks outside the service area to provide $400 million of revolving credit to the companies through June 30, 1996. To provide liquidity support for commercial paper programs, the company and Georgia Power Company have exclusive right to $135 million and $165 million, respectively, of the available credit. The companies have the option of converting the short-term borrowings into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements provide for 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 $350 million which expire at various times during 1994 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. In connection with all other lines of credit, the company has the option of paying fees or maintaining compensating balances, which are substantially all the cash of the company except for daily working funds and similar items. These balances are not legally restricted from withdrawal. At December 31, 1993, the company had regulatory approval to have outstanding up to $450 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 through the year 2013 were approximately $8 billion at December 31, 1993. In addition, a contract with a certain coal contractor requires reimbursement or purchase, at net book value, of the investment in the mine or equipment upon termination of the contract. At December 31, 1993, such net book value was approximately $13 million. Additional commitments for coal and for nuclear fuel will be required in the future to supply the company's fuel needs. 6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS The company and Georgia Power Company own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which owns electric generating units with a total rated capacity of 1,019,680 kilowatts, together with associated transmission facilities. The capacity of these units is sold equally to the company and Georgia Power Company under a contract expiring in 1994 which, in substance, requires payments sufficient to provide for the operating expenses, taxes, interest expense II-71 102 NOTES(continued) Alabama Power Company 1993 Annual Report and a return on equity, whether or not SEGCO has any capacity and energy available. The company's share of expenses totaled $86 million in 1993, $73 million in 1992 and $82 million in 1991, and is included in "Purchased power from affiliates" in the Statements of Income. An amended contract has been filed with the FERC with substantially the same provisions, but the term thereof would be extended automatically for two year periods, subject to any party's right to cancel upon two years' notice. 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, 1993, the capitalization of SEGCO consisted of $58 million of equity and $84 million of long-term debt on which the annual interest requirement is $3.8 million. SEGCO paid dividends totaling $11.3 million in 1993, $12.0 million in 1992, and $4.5 million in 1991, of which one-half of each was paid to the company. SEGCO's net income was $8.3 million, $9.3 million and $9.2 million for 1993, 1992 and 1991, respectively. In June 1992 the company completed the sale of a portion of Plant Miller Units 1 and 2 to Alabama Electric Cooperative, Inc. (AEC). The company's percentage ownership and investment in jointly-owned generating plants at December 31, 1993, 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 AEC.
Company Accumulated Facility (Type) Investment Depreciation (in millions) Greene County $ 81 $ 37 (coal) Plant Miller Units 1 and 2 $ 703 $ 247 (coal)
7. LONG-TERM POWER SALES AGREEMENTS GENERAL The operating subsidiaries of The Southern Company, including the company, have entered into long-term and short-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. Certain of these agreements are non-firm and are based on capacity of the system in general. Other 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 company's portion of off-system capacity revenues has been as follows:
Other Long-Term and Unit Short-Term Year Power Non-Firm Total (in millions) 1993 $144 $15 $159 1992 177 9 186 1991 172 8 180
Long-term non-firm power of 400 megawatts was sold by the Southern electric system in 1993 to Florida Power Corporation (FPC). In January 1994, this amount decreased to 200 megawatts, and the contract will expire at year-end. Unit power from Plant Miller is being sold to FPC, Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA) and the City of Tallahassee, Florida (Tallahassee). Under these agreements, an average of 1,100 megawatts of capacity is scheduled to be II-72 103 NOTES(continued) Alabama Power Company 1993 Annual Report sold during 1994. Thereafter, these sales will increase to some 1,200 megawatts and remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. GULF STATES SETTLEMENT COMPLETED On November 7, 1991, subsidiaries of The Southern Company entered into a settlement agreement with Gulf States that resolved litigation between the companies that had been pending since 1986 and arose out of a dispute over certain unit power and other long-term power sales contracts. In 1993, all remaining terms and obligations of the settlement agreement were satisfied. With respect to the company's portion of proceeds received in 1991, see Note 3 concerning the regulatory treatment of amounts being refunded to retail customers over a three-year period. ALABAMA MUNICIPAL ELECTRIC AUTHORITY (AMEA) CAPACITY CONTRACTS In August 1986, the company entered into a firm power purchase contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for a period of 15 years commencing September 1, 1986 (1986 Contract). In October 1991, the company entered into a second firm power purchase contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract). In both contracts the power will be sold to AMEA for its member municipalities that previously were served directly by the company as wholesale customers. Under the terms of the contracts, the company received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements, discounted at effective annual rates of 9.96 percent and 11.19 percent for the 1986 and 1991 Contracts, respectively. These payments are being recognized as operating revenues and the discounts are being amortized to other interest expense as scheduled capacity is made available over the terms of the contracts. In order to secure AMEA's advance payments and the company's performance obligation under the contracts, the company issued and delivered to an escrow agent first mortgage bonds representing the maximum amount of liquidated damages payable by the company in the event of a default under the contracts. No principal or interest is payable on such bonds unless and until a default by the company occurs. As the liquidated damages decline under the contracts, a portion of the bonds equal to the decreases are returned to the company. At December 31, 1993, $153 million of such bonds were held by the escrow agent under the contracts. 8. INCOME TAXES Effective January 1, 1993, the company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no material effect on net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $469 million are revenues to be received from customers. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The related liabilities of $441 million are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. II-73 104 NOTES (continued) Alabama Power Company 1993 Annual Report Details of the federal and state income tax provisions are as follows:
1993 1992 1991 (in thousands) Federal -- Currently payable $149,680 $152,481 $181,070 Deferred -- current year 9,636 27,760 28,382 reversal of prior years 19,653 (7,827) (34,911) Deferred investment tax credits (2,106) - (1,089) 176,863 172,414 173,452 State -- Currently payable 14,297 16,983 18,887 Deferred -- current year 1,898 6,387 2,256 reversal of prior years 3,913 (2,806) (1,506) 20,108 20,564 19,637 Total 196,971 192,978 193,089 Less income taxes charged (credited) to other income (10,239) (8,947) (7,523) Federal and state income taxes charged to operations $207,210 $201,925 $200,612
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:
1993 (in millions) Deferred tax liabilities: Accelerated depreciation $ 697 Property basis differences 536 Premium on reacquired debt 38 Fuel clause underrecovered 11 Other 17 Total 1,299 Deferred tax assets: Capacity prepayments 44 Other deferred costs 8 Pension and other benefits 15 Accrued nuclear outage costs 7 Unbilled revenue 7 Other 39 Total 120 Net deferred tax liabilities 1,179 Portion included in current liabilities, net (14) Accumulated deferred income taxes in the Balance Sheets $ 1,165
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 $13 million in 1993, $18 million in 1992, and $16 million in 1991. At December 31, 1993, 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:
1993 1992 1991 Effective tax rate 34.4% 34.1% 34.0% State income tax, net of federal income tax benefit (2.3) (2.4) (2.3) Non-deductible book depreciation (1.6) (1.6) (1.8) Differences in prior years' deferred and current tax rates 1.6 1.9 1.8 Other 2.9 2.0 2.3 Statutory federal tax rate 35.0% 34.0% 34.0%
The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. II-74 105 NOTES (continued) Alabama Power Company 1993 Annual Report 9. OTHER LONG-TERM DEBT Details of other long-term debt are as follows:
December 31, 1993 1992 (in thousands) Obligations incurred in connection with the sale of tax-exempt pollution control revenue bonds by public authorities- 2003-2013 6% to 9-3/8% $ 27,050 $162,365 2014-2023 3.05% to 10-7/8% 449,090 306,200 Less funds on deposit with trustees - 1,546 476,140 467,019 Capitalized lease obligations and other long-term debt: Nuclear fuel 95,943 104,058 Office buildings 7,710 8,069 Street light and other 2,761 4,423 106,414 116,550 Total $582,554 $583,569
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 $154.5 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 company has capitalized leased nuclear material and recorded the related lease obligations. The arrangement provides for the payment of interest at varying rates and times dependent on options selected by the company from types of loans available under the arrangement. At the end of 1993 the effective rate of this lease arrangement, including applicable fees, was 3.58 percent. Principal payments are required under the arrangement based on the cost of fuel burned. The company has also capitalized certain office building leases and a street light lease. Monthly principal payments plus interest are required, and at December 31, 1993, the interest rate was 9.5 percent for office buildings and 13.0 percent for street lights. The net book value of capitalized leases included in utility plant in service was $94.7 million and $103.0 million at December 31, 1993 and 1992, respectively. The estimated aggregate annual maturities of other long-term debt through 1998 are as follows: $38.9 million in 1994, $33.3 million in 1995, $18.7 million in 1996, $6.4 million in 1997 and $3.0 million in 1998. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year is as follows:
1993 1992 (in thousands) Cash sinking fund requirements $20,135 $18,525 Other long-term debt maturities (Note 9) 38,863 48,854 Total $58,998 $67,379
The annual first mortgage bond improvement fund requirement is one 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 1994 requirement of $20.1 million was satisfied by the deposit of cash in 1994, which was used for the partial redemption of various series of outstanding bonds. In addition, maturing in 1994 are other long-term debt of $38.9 million consisting primarily of capitalized nuclear fuel obligations. II-75 106 NOTES (continued) Alabama Power Company 1993 Annual Report 11. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988 (Act), the company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at Plant Farley. The Act limits to $9.4 billion, public liability claims that could arise from a single nuclear incident. Plant Farley is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums which could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for the company is $159 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium adjustment in the event that losses exceed accumulated reserve funds. The company's maximum annual assessment per incident is limited to $14 million under the current policy. Additionally, the company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company, and American Nuclear Insurers/Mutual Atomic Energy Liability Underwriters. NEIL also covers the additional cost that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased cost of replacement power in an amount up to $3.5 million per week (starting 21 weeks after the outage) for one year and up to $2.3 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 $16 million for excess property damage and $9 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 then, any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under applicable trust indentures. The company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the company could be subject to a maximum total assessment of $6.4 million. II-76 107 NOTES (continued) Alabama Power Company 1993 Annual Report 12. COMMON STOCK DIVIDEND RESTRICTIONS The company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 1993, $653 million of retained earnings was restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. 13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 1993 and 1992 are as follows:
Net Income After Dividends Quarter Operating Operating on Preferred Ended Revenues Income Stock (in thousands) MARCH 1993 $635,559 $124,356 $ 57,856 JUNE 1993 733,589 159,023 91,448 SEPTEMBER 1993 919,934 205,151 150,818 DECEMBER 1993 718,527 106,582 46,372 March 1992 $649,554 $140,574 $ 75,044 June 1992 720,661 146,488 83,545 September 1992 821,469 200,262 136,744 December 1992 655,156 105,798 43,222
The company's business is influenced by seasonal weather conditions and the timing of rate adjustments. II-77 108 SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS) $3,007,609 $2,846,840 $2,846,794 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK (IN THOUSANDS) $346,494 $338,555 $339,666 CASH DIVIDENDS ON COMMON STOCK (IN THOUSANDS) $252,900 $273,300 $232,900 RETURN ON AVERAGE COMMON EQUITY (PERCENT) 13.94 14.02 14.55 TOTAL ASSETS (IN THOUSANDS) $8,248,683 $6,593,618 $6,549,462 GROSS PROPERTY ADDITIONS (IN THOUSANDS) $435,843 $367,463 $397,011 CAPITALIZATION (IN THOUSANDS): Common stock equity $2,526,348 $2,443,493 $2,387,198 Preferred stock 440,400 489,400 484,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,362,852 2,202,473 2,382,635 Total (excluding amounts due within one year) $5,329,600 $5,135,366 $5,254,233 CAPITALIZATION RATIOS (PERCENT): Common stock equity 47.4 47.6 45.4 Preferred stock 8.3 9.5 9.2 Long-term debt 44.3 42.9 45.4 Total (excluding amounts due within one year) 100.0 100.0 100.0 FIRST MORTGAGE BONDS (IN THOUSANDS): Issued 860,000 745,000 250,000 Retired 699,788 931,797 227,695 PREFERRED STOCK (IN THOUSANDS): Issued 158,000 150,000 - Retired 207,000 145,000 17,500 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 1,027,130 1,012,294 997,585 Commercial 157,337 152,530 148,228 Industrial 5,391 5,434 5,496 Other 713 704 697 Total 1,190,571 1,170,962 1,152,006 EMPLOYEES (YEAR-END) 8,009 8,116 8,513
II-78 109 SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $2,722,424 $2,629,354 $2,476,626 $2,574,634 $2,549,574 $2,518,699 $2,236,560 $2,030,649 $ 312,803 $ 311,146 $ 283,475 $ 257,239 $ 273,456 $ 264,562 $ 233,252 $ 229,011 $ 220,800 $ 217,300 $ 212,700 $ 201,100 $ 191,300 $ 185,700 $ 161,900 $ 145,200 14.00 14.53 14.03 13.56 15.12 15.41 14.74 16.12 $6,362,293 $6,279,431 $6,180,945 $5,912,000 $5,570,653 $5,722,263 $5,496,197 $5,120,607 $ 444,680 $ 459,199 $ 643,892 $ 600,589 $ 553,767 $ 568,073 $ 575,173 $ 522,140 $2,280,590 $2,188,811 $2,094,815 $1,946,747 $1,847,608 $1,770,156 $1,664,295 $1,499,909 484,400 484,400 484,400 384,400 384,400 384,400 424,400 424,400 12,500 17,500 22,500 27,500 30,000 35,000 37,224 38,034 2,397,931 2,435,129 2,496,492 2,386,258 2,210,108 2,349,373 2,402,713 2,404,565 $5,175,421 $5,125,840 $5,098,207 $4,744,905 $4,472,116 $4,538,929 $4,528,632 $4,366,908 44.1 42.7 41.1 41.0 41.3 39.0 36.7 34.3 9.6 9.8 9.9 8.7 9.3 9.3 10.2 10.6 46.3 47.5 49.0 50.3 49.4 51.7 53.1 55.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - - 150,000 200,000 125,000 - - - 33,122 75,650 42,445 108,082 405,765 39,460 21,250 16,189 - - 100,000 - - - - 50,000 5,000 5,000 2,500 5,000 42,224 - 810 4,200 A1 A1 A1 A1 A1 A1 A2 A3 A A A A A A A- BBB+ A A 6 6 6 6 7 8 a2 a2 a2 a2 a2 a2 a3 baa2 A- A- A- A- A- A- BBB+ BBB A- A- 7 7 7 7 8 9 985,566 974,622 964,581 950,101 934,798 918,777 905,239 889,372 144,340 141,265 137,955 134,533 130,540 126,644 123,561 120,749 5,322 5,200 5,120 4,955 4,725 4,619 4,467 4,325 690 684 678 713 697 755 759 757 1,135,918 1,121,771 1,108,334 1,090,302 1,070,760 1,050,795 1,034,026 1,015,203 9,473 9,698 10,302 10,457 10,367 10,212 10,144 9,917
II-79 110 SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS): Residential $ 947,277 $ 845,660 $ 864,347 Commercial 634,895 589,816 582,730 Industrial 832,938 800,311 790,224 Other 13,344 12,734 12,662 Total retail 2,428,454 2,248,521 2,249,963 Sales for resale - non-affiliates 364,105 407,791 407,912 Sales for resale - affiliates 181,975 158,088 159,375 Total revenues from sales of electricity 2,974,534 2,814,400 2,817,250 Other revenues 33,075 32,440 29,544 Total $ 3,007,609 $ 2,846,840 $ 2,846,794 KILOWATT-HOUR SALES (IN THOUSANDS): Residential 13,185,062 12,069,268 12,324,898 Commercial 9,185,462 8,629,869 8,526,131 Industrial 18,595,237 18,260,274 17,511,579 Other 181,673 176,798 174,760 Total retail 41,147,434 39,136,209 38,537,368 Sales for resale - non-affiliates 7,143,672 8,382,571 8,810,442 Sales for resale - affiliates 8,081,324 7,210,697 7,784,285 Total 56,372,430 54,729,477 55,132,095 AVERAGE REVENUE PER KILOWATT-HOUR (CENTS): Residential 7.18 7.01 7.01 Commercial 6.91 6.83 6.83 Industrial 4.48 4.38 4.51 Total retail 5.90 5.75 5.84 Sales for resale 3.59 3.63 3.42 Total sales 5.28 5.14 5.11 RESIDENTIAL AVERAGE ANNUAL KILOWATT-HOUR USE PER CUSTOMER 12,936 12,017 12,435 RESIDENTIAL AVERAGE ANNUAL REVENUE PER CUSTOMER $ 929.36 $ 842.00 $ 872.04 PLANT NAMEPLATE CAPACITY RATINGS (NOTE 1) (year-end) (megawatts) 10,431 10,431 10,539 TERRITORIAL PEAK-HOUR DEMAND (MEGAWATTS) (NOTE 2): Winter 7,152 7,077 6,586 Summer 9,457 8,801 8,627 ANNUAL LOAD FACTOR (PERCENT) (NOTE 2) 58.6 59.6 59.9 PLANT AVAILABILITY (PERCENT): Fossil-steam 89.7 88.9 93.1 Nuclear 86.6 80.2 87.0 SOURCE OF ENERGY SUPPLY (PERCENT): Coal 63.9 64.3 61.5 Nuclear 20.1 19.0 20.8 Hydro 6.9 8.5 8.2 Oil and gas * * * Purchased power - From non-affiliates 1.1 1.2 1.6 From affiliates 8.0 7.0 7.9 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA (NOTE 1): BTU per net kilowatt-hour generated 10,003 10,000 9,985 Cost of fuel per million BTU (cents) 173.66 164.57 170.49 Average cost of fuel per net kilowatt-hour generated (cents) 1.74 1.65 1.70
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-80 111 SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 825,645 $ 781,982 $ 761,805 $ 759,957 $ 738,864 $ 684,970 $ 664,286 $ 629,478 551,634 533,487 510,910 501,088 481,676 453,651 430,400 398,827 777,580 762,274 738,755 721,298 705,395 717,078 692,177 631,440 12,103 11,743 11,255 10,968 10,811 10,129 9,615 8,914 2,166,962 2,089,486 2,022,725 1,993,311 1,936,746 1,865,828 1,796,478 1,668,659 434,996 409,202 355,362 443,880 472,938 539,343 317,890 225,535 93,473 104,488 76,691 118,746 120,911 95,733 108,812 119,610 2,695,431 2,603,176 2,454,778 2,555,937 2,530,595 2,500,904 2,223,180 2,013,804 26,993 26,178 21,848 18,697 18,979 17,795 13,380 16,845 $ 2,722,424 $ 2,629,354 $ 2,476,626 $ 2,574,634 $ 2,549,574 $ 2,518,699 $ 2,236,560 $ 2,030,649 11,996,794 11,346,736 11,332,285 11,149,225 10,606,698 9,814,814 9,634,285 9,176,413 8,201,534 7,915,685 7,711,092 7,476,924 7,015,589 6,593,645 6,270,899 5,816,678 17,713,153 17,360,791 16,881,342 15,969,075 15,025,806 15,215,276 15,134,188 13,688,096 170,420 166,485 165,122 159,422 153,282 146,119 143,785 138,901 38,081,901 36,789,697 36,089,841 34,754,646 32,801,375 31,769,854 31,183,157 28,820,088 10,277,060 10,292,329 7,905,750 10,523,554 9,064,049 12,158,464 8,587,936 6,473,574 4,519,275 5,048,743 3,551,142 4,963,997 4,456,360 3,588,338 4,270,493 3,904,285 52,878,236 52,130,769 47,546,733 50,242,197 46,321,784 47,516,656 44,041,586 39,197,947 6.88 6.89 6.72 6.82 6.97 6.98 6.90 6.86 6.73 6.74 6.63 6.70 6.87 6.88 6.86 6.86 4.39 4.39 4.38 4.52 4.69 4.71 4.57 4.61 5.69 5.68 5.60 5.74 5.90 5.87 5.76 5.79 3.57 3.35 3.77 3.63 4.39 4.03 3.32 3.33 5.10 4.99 5.16 5.09 5.46 5.26 5.05 5.14 12,256 11,717 11,839 11,848 11,457 10,781 10,755 10,400 $ 843.50 $ 807.50 $ 795.84 $ 807.61 $ 798.09 $ 752.43 $ 741.58 $ 713.40 9,879 9,879 9,279 9,337 9,337 9,337 8,580 8,629 6,293 7,264 6,377 6,138 6,257 6,191 5,696 5,456 8,878 8,256 7,991 7,886 7,892 7,570 6,946 7,147 57.4 59.5 59.6 58.3 56.2 57.2 59.8 55.0 92.2 90.7 91.3 90.2 88.5 90.5 91.2 90.4 86.5 83.1 91.9 83.3 83.8 81.0 86.5 82.9 57.0 54.1 53.9 52.5 58.8 55.7 51.5 49.1 21.6 21.0 26.1 21.7 23.8 22.4 26.1 26.9 8.7 11.0 4.8 6.3 4.2 6.2 11.0 12.9 0.1 0.1 0.1 0.2 0.1 0.1 * * 0.9 1.8 0.5 0.2 2.0 1.7 0.2 0.5 11.7 12.0 14.6 19.1 11.1 13.9 11.2 10.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10,072 10,061 10,137 10,214 10,209 10,229 10,367 10,610 171.55 172.20 168.21 176.72 179.65 185.74 179.40 164.30 1.73 1.73 1.71 1.80 1.83 1.90 1.86 1.74
II-81 112 STATEMENTS OF INCOME Alabama Power Company
FOR THE YEARS ENDED DECEMBER 31 1993* 1992* 1991* (Thousands of Dollars) OPERATING REVENUES: Revenues $ 2,825,634 $ 2,688,752 $ 2,687,419 Revenues from affiliates 181,975 158,088 159,375 Total operating revenues 3,007,609 2,846,840 2,846,794 OPERATING EXPENSES: Operation -- Fuel 877,099 794,438 812,667 Purchased power from non-affiliates 15,230 14,242 21,080 Purchased power from affiliates 120,330 107,230 119,602 Proceeds from settlement of disputed contracts (2,568) (641) (14,819) Other 473,383 446,477 435,908 Maintenance 252,506 237,071 229,114 Depreciation and amortization 290,310 280,881 271,433 Taxes other than income taxes 178,997 172,095 169,639 Federal and state income taxes 207,210 201,925 200,612 Total operating expenses 2,412,497 2,253,718 2,245,236 OPERATING INCOME 595,112 593,122 601,558 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 3,260 2,071 2,368 Income from subsidiary 4,127 4,635 4,576 Charitable foundation (3,000) (6,887) (6,500) Interest income 20,775 14,804 14,356 Other, net (24,420) (11,019) (9,926) Income taxes applicable to other income 10,239 8,947 7,523 INCOME BEFORE INTEREST CHARGES 606,093 605,673 613,955 INTEREST CHARGES: Interest on long-term debt 184,861 206,871 214,107 Allowance for debt funds used during construction (2,992) (2,416) (6,903) Interest on interim obligations 3,760 3,704 13,385 Amortization of debt discount, premium, and expense, net 8,937 4,392 2,634 Other interest charges 35,474 19,381 14,927 Net interest charges 230,040 231,932 238,150 NET INCOME 376,053 373,741 375,805 DIVIDENDS ON PREFERRED STOCK 29,559 35,186 36,139 NET INCOME AFTER DIVIDENDS ON PREFERRED $ 346,494 $ 338,555 $ 339,666
* Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. II-82 113 STATEMENTS OF INCOME Alabama Power Company
1990* 1989* 1988* 1987* 1986 1985 1984 1983 $ 2,628,951 $ 2,524,866 $ 2,399,935 $ 2,455,888 $ 2,428,663 $ 2,422,966 $ 2,127,748 $ 1,911,039 93,473 104,488 76,691 118,746 120,911 95,733 108,812 119,610 2,722,424 2,629,354 2,476,626 2,574,634 2,549,574 2,518,699 2,236,560 2,030,649 756,501 712,453 676,423 696,763 738,367 743,463 657,183 542,760 11,185 28,272 8,407 6,703 23,889 25,990 4,592 6,297 165,982 163,267 185,390 257,052 156,091 187,041 156,180 121,205 - - - - - - - - 411,559 380,536 400,879 410,575 350,671 308,437 287,647 262,354 215,304 202,633 197,225 199,617 203,972 210,143 182,957 164,391 262,817 247,973 225,123 212,072 201,803 183,779 174,514 169,231 163,567 154,398 148,681 141,422 135,248 128,648 122,928 107,445 185,954 188,507 143,614 190,575 255,400 248,774 224,726 220,245 2,172,869 2,078,039 1,985,742 2,114,779 2,065,441 2,036,275 1,810,727 1,593,928 549,555 551,315 490,884 459,855 484,133 482,424 425,833 436,721 25,487 29,515 39,047 27,663 27,455 32,985 45,704 35,103 4,182 3,750 3,302 3,440 2,967 3,417 3,181 3,088 (17,500) (25,000) - - - - - - 12,006 10,871 9,914 7,044 11,422 20,874 12,432 8,729 (8,235) (4,313) (13,694) (816) (3,738) (4,447) (666) (1,368) 11,081 13,629 8,034 849 185 (4,941) (3,088) (1,213) 576,576 579,767 537,487 498,035 522,424 530,312 483,396 481,060 221,527 230,046 225,522 205,824 226,110 248,073 245,684 246,246 (23,339) (27,627) (31,830) (24,235) (24,334) (29,048) (42,868) (38,558) 10,252 9,098 5,714 7,221 1,159 - - 1,261 3,706 4,469 4,411 4,405 3,313 1,145 996 985 13,115 13,112 13,715 14,662 8,695 4,234 4,291 4,179 225,261 229,098 217,532 207,877 214,943 224,404 208,103 214,113 351,315 350,669 319,955 290,158 307,481 305,908 275,293 266,947 38,512 39,523 36,480 32,919 34,025 41,346 42,041 37,936 $ 312,803 $ 311,146 $ 283,475 $ 257,239 $ 273,456 $ 264,562 $ 233,252 $ 229,011
II-83 114 STATEMENTS OF CASH FLOWS Alabama Power Company
For the Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) Operating Activities: Net income $ 376,053 $ 373,741 $ 375,805 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 356,499 338,421 337,978 Deferred income taxes, net 35,100 23,514 (5,779) Deferred investment tax credits, net (2,106) - (1,089) Allowance for equity funds used during construction (3,260) (2,071) (2,368) Non-cash proceeds from settlement of disputed contracts - (641) (13,750) Other, net 36,493 (2,657) 26,614 Changes in certain current assets and liabilities -- Receivables, net 19,215 (11,010) 9,178 Inventories 51,630 12,704 (17,374) Payables 31,544 2,158 28,889 Taxes accrued (9,959) (21,120) 24,828 Energy cost recovery, retail (56,128) 45,509 (12,304) Other (21,110) 10,629 (37,906) Net cash provided from operating activities 813,971 769,177 712,722 Investing Activities: Gross property additions (435,843) (367,463) (397,011) Sales of property - 43,556 - Other (741) (13,379) (36,083) Net cash used for investing activities (436,584) (337,286) (433,094) Financing Activities and Capital Contributions: Proceeds: Preferred stock 158,000 150,000 - First mortgage bonds 860,000 745,000 250,000 Pollution control bonds - - - Other long-term debt 180,314 48,382 12,906 Capital contributions from parent company - - - Prepaid capacity revenues - - 52,900 Redemptions: Preferred stock (207,000) (145,000) (17,500) First mortgage bonds (699,788) (931,797) (227,695) Pollution control bonds (135,315) (335) (250) Other long-term debt (46,014) (53,888) (48,428) Interim obligations, net (156,917) 120,917 (13,500) Payment of preferred stock dividends (32,099) (35,704) (36,829) Payment of common stock dividends (252,900) (273,300) (232,900) Miscellaneous (56,064) (53,697) (17,732) Net cash provided from (used for) financing activities (387,783) (429,422) (279,028) Net Change in Cash (10,396) 2,469 600 Cash at Beginning of Year 13,629 11,160 10,560 Cash at End of Year $ 3,233 $ 13,629 $ 11,160
( ) Denotes use of cash. II-84 115 STATEMENTS OF CASH FLOWS Alabama Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 351,315 $ 350,669 $ 319,955 $ 290,158 $ 307,481 $ 305,908 $ 275,293 $ 266,947 331,858 322,042 296,234 270,492 292,569 266,657 266,479 224,656 64,480 31,715 37,952 107,824 135,364 104,259 85,426 115,343 132 6,917 15,019 23,477 19,736 57,096 165,020 105,200 (25,487) (29,515) (39,047) (27,663) (27,455) (32,985) (45,704) (35,103) - - - - - - - - 19,899 (5,297) 16,106 67,445 4,251 (18,971) (4,573) (60,712) 12,005 (10,436) 8,822 (133,468) 15,238 (13,531) (16,403) (16,534) (40,901) 20,408 (23,182) (26,255) (2,040) 29,823 25,159 (58,678) 6,597 16,259 (12,957) 39,645 (56,720) 26,360 39,964 84,139 (6,167) 1,547 (7,754) 516 (1,487) (6,325) (8,198) 8,847 (42,535) 39,164 - - - - - - 14,144 28,701 (18,658) 4,464 (35,293) 4,358 29,836 (8,675) 685,340 772,174 592,490 616,635 651,644 722,649 812,299 625,430 (444,680) (459,199) (643,892) (600,589) (553,767) (568,073) (575,173) (522,140) - - - - - - - - 6,935 3,768 23,161 17,010 10,115 22,028 26,175 17,334 (437,745) (455,431) (620,731) (583,579) (543,652) (546,045) (548,998) (504,806) - - 100,000 - - - - 50,000 - - 150,000 200,000 125,000 - - - - 53,700 - 432 26,232 115,577 161,134 10,640 54,831 55,176 62,515 69,786 95,017 12,998 25,654 139,031 - - 79,500 43,000 - 27,000 93,000 76,000 - - - - 100,000 - - - (5,000) (5,000) (2,500) (5,000) (42,224) - (810) (4,200) (33,122) (75,650) (42,445) (108,082) (405,765) (39,460) (21,250) (16,189) (250) (53,950) - - (21,000) - (3,500) (500) (56,895) (57,316) (56,748) (32,500) (43,561) (35,023) (128,060) (73,154) 59,500 30,000 (15,000) 15,000 - - - - (38,245) (40,105) (35,362) (32,837) (36,014) (41,566) (42,061) (36,579) (220,800) (217,300) (212,700) (201,100) (191,300) (185,700) (161,900) (145,200) (293) (4,576) (5,581) (2,581) (38,052) (4,438) (2,727) (1,869) (240,274) (315,021) 21,679 (53,882) (431,667) (150,612) (80,520) (2,020) 7,321 1,722 (6,562) (20,826) (323,675) 25,992 182,781 118,604 3,239 1,517 8,079 28,905 352,580 326,588 143,807 25,203 $ 10,560 $ 3,239 $ 1,517 $ 8,079 $ 28,905 $ 352,580 $ 326,588 $ 143,807
II-85 116 BALANCE SHEETS Alabama Power Company
AT DECEMBER 31, 1993* 1992* 1991* (Thousands of Dollars) ASSETS ELECTRIC PLANT: Production- Fossil $ 2,987,010 $ 2,953,683 $ 2,991,876 Nuclear 1,860,842 1,860,832 1,851,317 Hydro 819,848 818,363 814,301 Total production 5,667,700 5,632,878 5,657,494 Transmission 1,051,130 1,013,464 977,239 Distribution 2,206,834 2,072,165 1,947,972 General 810,551 751,652 713,948 Construction work in progress 225,743 164,555 148,564 Nuclear fuel, at amortized cost 93,551 101,128 109,259 Total electric plant 10,055,509 9,735,842 9,554,476 STEAM HEAT PLANT: Plant in service 20,926 20,924 20,214 Construction work in progress 43 33 181 Total steam heat plant 20,969 20,957 20,395 Total utility plant 10,076,478 9,756,799 9,574,871 ACCUMULATED PROVISION FOR DEPRECIATION: Electric 3,374,310 3,122,332 2,913,385 Steam heat 9,846 9,211 8,492 Total accumulated provision for depreciation 3,384,156 3,131,543 2,921,877 Total 6,692,322 6,625,256 6,652,994 Less property-related accumulated deferred income taxes - 1,170,982 1,140,303 Total 6,692,322 5,454,274 5,512,691 OTHER PROPERTY AND INVESTMENTS: Securities received from settlement of disputed contracts - - 69,550 Nuclear decommissioning trusts 49,550 32,390 15,864 Miscellaneous 49,635 49,892 48,254 Total 99,185 82,282 133,668 CURRENT ASSETS: Cash and cash equivalents 3,233 13,629 11,160 Investment securities - 64,832 - Receivables, net 410,422 344,934 349,599 Fossil fuel stock, at average cost 88,481 134,328 154,798 Materials and supplies, at average cost 176,728 182,511 174,745 Prepayments 79,207 108,254 95,832 Vacation pay deferred 22,680 21,879 21,691 Total current assets 780,751 870,367 807,825 DEFERRED CHARGES: Deferred charges related to income taxes 469,010 - - Debt expense, being amortized 7,064 6,118 5,957 Premium on reacquired debt, being amortized 102,634 74,835 40,174 Uranium enrichment decontamination and decommissioning fund 45,554 47,730 - Miscellaneous 52,163 58,012 49,147 Total deferred charges 676,425 186,695 95,278 TOTAL ASSETS $ 8,248,683 $ 6,593,618 $ 6,549,462
*Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. II-86 117 BALANCE SHEETS Alabama Power Company
1990* 1989* 1988* 1987* 1986 1985 1984 1983 $ 2,462,100 $ 2,428,146 $ 1,820,966 $ 1,787,979 $ 1,748,226 $ 1,678,117 $ 1,203,447 $ 1,167,707 1,794,540 1,786,877 1,769,093 1,765,854 1,749,981 1,687,766 1,664,849 1,642,869 809,578 803,901 789,617 788,046 784,445 773,682 559,696 556,528 5,066,218 5,018,924 4,379,676 4,341,879 4,282,652 4,139,565 3,427,992 3,367,104 925,368 882,933 844,003 817,065 773,142 699,980 642,968 616,098 1,815,265 1,692,426 1,587,690 1,481,845 1,384,576 1,295,930 1,221,003 1,136,277 660,217 646,523 613,498 535,148 506,228 349,249 300,043 247,080 654,055 557,150 1,023,019 750,907 497,491 502,455 972,832 760,910 143,711 147,997 174,130 191,493 205,768 243,468 223,818 217,793 9,264,834 8,945,953 8,622,016 8,118,337 7,649,857 7,230,647 6,788,656 6,345,262 20,091 20,083 20,076 20,217 19,508 17,056 9,780 9,754 74 71 58 89 123 64 901 209 20,165 20,154 20,134 20,306 19,631 17,120 10,681 9,963 9,284,999 8,966,107 8,642,150 8,138,643 7,669,488 7,247,767 6,799,337 6,355,225 2,676,957 2,458,747 2,257,696 2,068,176 1,877,124 1,697,547 1,525,893 1,378,094 7,861 7,154 6,456 5,938 5,261 3,874 3,619 3,346 2,684,818 2,465,901 2,264,152 2,074,114 1,882,385 1,701,421 1,529,512 1,381,440 6,600,181 6,500,206 6,377,998 6,064,529 5,787,103 5,546,346 5,269,825 4,973,785 1,106,664 1,051,877 1,001,173 933,932 857,081 758,150 664,591 584,322 5,493,517 5,448,329 5,376,825 5,130,597 4,930,022 4,788,196 4,605,234 4,389,463 - - - - - - - - - - - - - - - - 40,604 34,710 29,677 31,402 30,735 24,849 22,288 22,190 40,604 34,710 29,677 31,402 30,735 24,849 22,288 22,190 10,560 3,239 1,517 8,079 28,905 352,580 326,588 143,807 - - - - - - - - 346,473 355,107 344,671 353,493 220,025 235,263 221,732 205,329 144,960 131,942 173,858 164,671 152,640 163,899 206,232 251,440 167,209 139,326 117,818 103,823 89,599 76,300 63,790 43,741 50,364 54,613 28,412 10,595 12,320 9,741 8,801 24,333 22,845 22,021 21,871 21,317 20,002 18,859 17,599 18,123 742,411 706,248 688,147 661,978 523,491 856,642 844,742 686,773 - - - - - - - - 6,083 6,491 6,831 6,695 6,308 6,607 6,774 6,847 26,504 28,778 27,329 30,767 34,170 524 109 59 - - - - - - - - 53,174 54,875 52,136 50,561 45,927 45,445 17,050 15,275 85,761 90,144 86,296 88,023 86,405 52,576 23,933 22,181 $ 6,362,293 $ 6,279,431 $ 6,180,945 $ 5,912,000 $ 5,570,653 $ 5,722,263 $ 5,496,197 $ 5,120,607
II-87 118 BALANCE SHEETS Alabama Power Company
AT DECEMBER 31, 1993* 1992* 1991* (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock $ 224,358 $ 224,358 $ 224,358 Other paid-in capital 1,304,645 1,304,645 1,304,645 Premium on preferred stock 146 342 461 Earnings retained in the business 997,199 914,148 857,734 Total common equity 2,526,348 2,443,493 2,387,198 Preferred stock 440,400 489,400 484,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,362,852 2,202,473 2,382,635 Total Capitalization 5,329,600 5,135,366 5,254,233 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 40,000 71,000 76,000 Commercial paper - 125,917 - Preferred stock due within one year - - - Long-term debt due within one year 58,998 67,379 85,077 Accounts payable 334,998 296,731 295,333 Customer deposits 31,198 31,286 30,165 Taxes accrued 40,144 24,373 45,493 Interest accrued 52,809 41,675 49,288 Vacation pay accrued 22,680 21,879 21,691 Miscellaneous 50,426 93,836 37,699 Total current liabilities 631,253 774,076 640,746 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 1,165,127 - - Accumulated deferred investment tax credit s 329,909 344,707 362,672 Prepaid capacity revenues, net 143,762 147,658 149,534 Deferred revenues from settlement of disputed contracts 19,871 46,721 59,937 Uranium enrichment decontamination and decommissioning fund 39,644 44,548 - Deferred credits related to income taxes 441,240 - - Miscellaneous 148,277 100,542 82,340 Total deferred credits and other liabilities 2,287,830 684,176 654,483 TOTAL CAPITALIZATION AND LIABILITIES $ 8,248,683 $ 6,593,618 $ 6,549,462
*Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers. II-88 119 BALANCE SHEETS Alabama Power Company
1990* 1989* 1988* 1987* 1986 1985 1984 1983 $ 224,358 $ 224,358 $ 224,358 $ 224,358 $ 224,358 $ 224,358 $ 224,358 $ 224,358 1,304,645 1,304,645 1,304,645 1,225,145 1,182,145 1,182,145 1,155,145 1,062,145 461 461 461 461 461 1,937 1,938 1,904 751,126 659,347 565,351 496,783 440,644 361,716 282,854 211,502 2,280,590 2,188,811 2,094,815 1,946,747 1,847,608 1,770,156 1,664,295 1,499,909 484,400 484,400 484,400 384,400 384,400 384,400 424,400 424,400 12,500 17,500 22,500 27,500 30,000 35,000 37,224 38,034 2,397,931 2,435,129 2,496,492 2,386,258 2,210,108 2,349,373 2,402,713 2,404,565 5,175,421 5,125,840 5,098,207 4,744,905 4,472,116 4,538,929 4,528,632 4,366,908 89,500 30,000 - 15,000 - - - - - - - - - - - - 5,000 5,000 5,000 2,500 5,000 42,224 - - 83,989 81,031 96,242 95,140 142,394 224,918 120,077 85,550 271,776 267,645 259,443 273,613 238,606 295,326 268,966 229,002 29,571 28,450 25,964 32,220 30,333 29,436 28,498 26,224 20,665 26,832 25,285 72,118 50,757 27,368 36,788 47,724 49,820 49,926 50,174 49,489 47,648 66,193 66,201 65,906 22,845 22,021 21,871 21,317 20,002 18,859 17,599 18,123 64,547 91,022 28,944 24,660 25,567 42,622 38,474 26,759 637,713 601,927 512,923 586,057 560,307 746,946 576,603 499,288 - - - - - - - - 379,990 399,097 412,771 418,370 418,275 418,222 379,433 243,399 99,835 102,346 104,211 103,947 101,143 - - - - - - - - - - - - - - - - - - - - - - - - - - - 69,334 50,221 52,833 58,721 18,812 18,166 11,529 11,012 549,159 551,664 569,815 581,038 538,230 436,388 390,962 254,411 $ 6,362,293 $ 6,279,431 $ 6,180,945 $ 5,912,000 $ 5,570,653 $ 5,722,263 $ 5,496,197 $ 5,120,607
II-89 120 ALABAMA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1993 FIRST MORTGAGE BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1993 $ 60,000 4-1/2% $ 60,000 3/1/96 1993 50,000 5-1/2% 50,000 2/1/98 1992 170,000 6-3/8% 170,000 8/1/99 1993 100,000 6% 100,000 3/1/00 1992 100,000 6.85% 100,000 8/1/02 1993 125,000 7% 125,000 1/1/03 1993 175,000 6-3/4% 175,000 2/1/03 1992 175,000 7-1/4% 175,000 8/1/07 1987 200,000 10-5/8% 15,243 11/1/17 1991 100,000 9-1/4% 100,000 5/1/21 1991 150,000 8-3/4% 150,000 12/1/21 1992 200,000 8-1/2% 200,000 5/1/22 1992 100,000 8.3% 100,000 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 $ 2,055,000 $1,870,243 POLLUTION CONTROL BONDS Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1978 $ 5,600 7.25% $ 5,600 5/1/03 1974 19,600 6% 18,550 2/1/04 1976 3,000 7.20% 2,900 2/1/06 1989 35,000 7.20% 35,000 7/1/14 1984 100,000 10.875% 100,000 11/1/14 1985 50,000 9.375% 50,000 6/1/15 1985 81,500 9.25% 81,500 12/1/15 1989 18,700 7.20% 18,700 6/1/16 1986 21,000 7.40% 21,000 11/1/16 1993 12,100 Variable 12,100 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 96,990 6.05% 96,990 5/1/23 1993 9,800 5.80% 9,800 6/1/22 $ 477,290 $ 476,140 PREFERRED STOCK Shares Dividend Amount Series Outstanding Rate Outstanding (Thousands) 1946-1952 364,000 4.20% $ 36,400 1950 100,000 4.60% 10,000 1961 80,000 4.92% 8,000 1963 50,000 4.52% 5,000 1964 60,000 4.64% 6,000 1965 50,000 4.72% 5,000 1966 70,000 5.96% 7,000 1968 50,000 6.88% 5,000 1988 500,000 Auction 50,000 1992 4,000,000 7.60% 100,000 1992 2,000,000 7.60% 50,000 1993 1,520,000 6.80% 38,000 1993 2,000,000 6.40% 50,000 1993 200 Auction 20,000 1993 2,000,000 Adjustable 50,000 12,844,200 $ 440,400
II-90 121 ALABAMA POWER COMPANY SECURITIES RETIRED DURING 1993 FIRST MORTGAGE BONDS
Principal Interest Series Amount Rate (Thousands) 1964 $ 24,105 4.625% 1965 33,284 4.875% 1966 29,374 6.25% 1967 28,000 6.50% 1968 25,000 7% 1972 25,500 7.50% 1972 65,000 7.75% 1973 75,000 8.25% 1972 98,000 7.875% 1986 125,000 9.375% 1987 21,525 10.625% 1988 150,000 10% $ 699,788 POLLUTION CONTROL BONDS Principal Interest Series Amount Rate (Thousands) 1974 $ 300 6% 1976 9,800 7.20% 1976 50 7.20% 1976 10,415 7.25% 1977 40,000 7.20% 1978 48,000 7.375% 1980 4,250 9.20% 1983 22,500 9.375% $ 135,315 PREFERRED STOCK Principal Dividend Series Amount Rate (Thousands) 1972 $ 38,000 8.28% 1972 20,000 8.04% 1973 50,000 8.16% 1977 49,000 8.72% 1988 50,000 Adjustable $ 207,000
II-91 122 GEORGIA POWER COMPANY FINANCIAL SECTION II-92 123 MANAGEMENT'S REPORT Georgia Power Company 1993 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 five 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 the financial position, results of operations and cash flows of Georgia Power Company in conformity with generally accepted accounting principles. As discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of regulators regarding recoverability of the Company's investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until regulatory proceedings are concluded. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ H. Allen Franklin /s/ Warren Y. Jobe - --------------------- -------------------------- H. Allen Franklin Warren Y. Jobe President and Chief Executive Vice President, Executive Officer Treasurer and Chief Financial Officer II-93 124 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) as of December 31, 1993 and 1992, 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, 1993. 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-102 through II-122) referred to above present fairly, in all material respects, the financial position of Georgia Power Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 7 to the financial statements, effective January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. As more fully discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of the regulators regarding the recoverability of the Company's investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until regulatory proceedings are concluded. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ Arthur Andersen & Co. Atlanta, Georgia February 16, 1994 II-94 125 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Georgia Power Company 1993 Annual Report RESULTS OF OPERATIONS EARNINGS Georgia Power Company's 1993 earnings totaled $570 million, representing a $49 million (9.5 percent) increase over the prior year. This improvement is primarily a result of higher retail revenues and lower financing costs. Also, during the period, the Company had an $18 million after-tax gain on the sale of a portion of Plant Scherer Unit 4. Higher retail revenues reflect growth in energy sales of 6.1 percent from 1992 levels primarily due to exceptionally hot summer weather during 1993. Interest expense and preferred stock dividends decreased in 1993 due to the redemption and refinancing of higher-cost debt and preferred stock. These positive events were partially offset by higher operating expenses. In comparing 1992 earnings to the prior year, it should be noted that 1991 earnings included two unusual items that significantly affect this comparison. Earnings in 1991 were $89 million higher due to the completion of a settlement agreement with Gulf States Utilities Company (Gulf States) related to power sales contracts. This increase was partially offset by an after-tax charge of $33 million in 1991 for a work force reduction program. A comparison of 1992 to 1991 -- excluding these unusual items -- would reflect a 1992 increase in earnings of $102 million. REVENUES The following table summarizes the factors impacting operating revenues for the 1991-1993 period: Increase (Decrease) From Prior Year 1993 1992 1991 (in millions) Retail - Change in base rates $ - $ 95 $ 27 Sales growth 45 76 67 Weather 126 (58) (16) Fuel cost recovery 76 (26) (54) Demand-side option programs 15 - - Total retail 262 87 24 Sales for resale - Non-affiliates (106) (96) (47) Affiliates (6) 2 (103) Total sales for resale (112) (94) (150) Other operating revenues 4 3 (18) Total operating revenues $ 154 $ (4) $ (144) Percent change 3.6% (0.1)% (3.2)%
Retail revenues of $3.8 billion in 1993 increased $262 million (7.4 percent) over the prior year, compared with an increase of $87 million (2.5 percent) in 1992. The exceptionally hot weather during the summer of 1993 was the primary factor affecting the increase in retail revenues over 1992. The increase in retail revenues for 1992 was a result of higher retail rates and sales growth, partially offset by mild weather and lower fuel revenues. 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 options programs generally represent the direct recovery of program costs. See Note 3 to the financial statements for further information on these programs. Revenues from sales to non-affiliated utilities decreased in both 1993 and 1992. Contractual unit power sales to Florida utilities for 1993 and 1992 are down compared with prior years, primarily due to scheduled reductions that corresponded with the sales to these utilities of portions of Plant Scherer Unit 4 in July 1991 and June II-95 126 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report 1993. Sales to municipalities and cooperatives increased slightly in 1993 due to the hot summer weather. Generally, these sales have been decreasing as these customers retain more of their own generation at facilities jointly owned with the Company. Revenues from sales to non-affiliated utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components were as follows:
1993 1992 1991 (in millions) Capacity $152 $233 $274 Energy 113 168 204 Total $265 $401 $478
Revenues from sales to affiliated companies within the Southern electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. Sales to affiliated companies do not have a significant impact on earnings. Changes in revenues are a function of the amount of energy sold each year. Kilowatt-hour (KWH) sales for 1993 and the percent change by year were as follows:
Percent Change 1993 KWH 1993 1992 1991 (in billions) Residential 16.7 11.5% 0.8% 0.3% Commercial 18.3 5.9 2.2 1.6 Industrial 23.6 2.9 3.1 0.8 Other 0.5 5.7 1.7 0.1 Total retail 59.1 6.1 2.2 0.9 Sales for resale - Non-affiliates 14.3 (9.8) (15.2) (7.1) Affiliates 3.0 (8.8) (14.6) (53.0) Total sales for resale 17.3 (9.7) (15.1) (20.5) Total sales 76.4 2.1 (2.9) (6.5)
The hot summer weather during 1993 contributed primarily to the sales growth in the residential and commercial classes. Continued improvement in economic conditions positively impacted sales growth in the commercial and industrial classes. Residential energy sales growth in 1992 reflected mild weather. Commercial and industrial sales growth in 1992 is attributable to improved economic conditions. The decrease in energy sales to non-affiliated utilities reflects scheduled reductions in contractual power sales. EXPENSES Fuel expense increased 2.3 percent in 1993 due to higher generation, which was partially offset by lower nuclear fuel costs. In 1992, fuel expense decreased 6.9 percent due to lower generation and lower fuel costs. Purchased power expense has decreased significantly since 1991, reflecting declining contractual capacity purchases from the co-owners of plants Vogtle and Scherer. Purchased power expense decreased $88 million in 1993 and $43 million in 1992. The declines in Plant Vogtle contractual capacity purchases did not have a significant impact on earnings in 1993 or 1992 as these costs are being levelized over six years under the terms of the 1991 Georgia Public Service Commission (GPSC) retail rate order. The levelization is reflected in the amortization of deferred Plant Vogtle expenses in the income statements. See Note 3 to the financial statements for additional information. Other Operation and Maintenance (O & M) expenses increased 9.0 percent in 1993 after remaining relatively flat in 1992. The increase in 1993 is primarily the result of environmental remediation costs at various current and former operating sites, the one- time costs of an automotive fleet reduction program and the recognition of higher employee benefit costs under new accounting rules adopted in 1993. See Note 2 to the financial statements for additional information concerning these new rules. Also, during 1993, O & M expenses reflect costs associated with new demand-side option programs. These costs were offset by increases in retail revenues. See Note 3 to the financial statements for additional information on the recovery of demand-side option program costs. Depreciation and amortization expense increased slightly due to additional plant investment. The 1992 decrease is due to the effects of lower depreciation rates effective in October 1991. Taxes other than income taxes increased 7.4 percent in 1993 and 3.8 percent in 1992. II-96 127 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report These increases reflect higher ad valorem taxes. The 1993 increase also includes higher taxes paid to municipalities as a result of increased sales. Income tax expense increased $62 million in 1993 due primarily to higher earnings and the effect of a one percent increase in the federal tax rate effective January, 1993. Also, the Company incurred $27 million of tax expense in connection with the second in a series of four separate transactions to sell Plant Scherer Unit 4. The sale resulted in an after-tax gain of $18 million. Interest expense and dividends on preferred stock decreased $19 million (4.0 percent) and $49 million (9.3 percent) in 1993 and 1992, respectively. These reductions are due to significant refinancing of long-term debt and preferred stock. The Company refinanced $1.7 billion of securities in both 1993 and 1992. In addition, the Company has retired $544 million of long-term debt with the proceeds from the 1991 and 1993 Plant Scherer Unit 4 sales. Other interest charges in 1993 include interest related to the settlement of an Internal Revenue Service audit. The settlement, in total, did not have an effect on 1993 net income. The Company has deferred certain expenses and recorded a deferred return related to Plant Vogtle under phase-in plans. See Note 3 to the financial statements under "Plant Vogtle Phase-In-Plans" for information regarding the deferral and subsequent amortization of costs related to Plant Vogtle. EFFECTS OF INFLATION The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize either this economic loss or the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. FUTURE EARNINGS POTENTIAL The results of operations for the past three years are not necessarily indicative of future earnings. The level of future earnings depends on numerous factors ranging from growth in energy sales to regulatory matters. Growth in energy sales is subject to a number of factors which traditionally have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the Company's service area. Assuming normal weather, retail sales growth is projected to be approximately 2 percent annually on average during 1994 through 1996. The scheduled addition of four combustion turbine generating units in 1994, four units in 1995 and one unit in 1996, as well as the Rocky Mountain pumped storage hydroelectric project in 1995, will increase related O & M and depreciation expenses. See Note 4 to the financial statements for information on regulatory uncertainties related to the Rocky Mountain project. The GPSC has certified the construction of the 1994 and 1995 combustion turbine generating units for meeting peak generating needs. In addition, the Company has completed a demonstration competitive bidding process for its supply-side requirements expected for 1996. The Company has filed with the GPSC for certification of a four-year purchase power agreement beginning in 1996, and for construction of a jointly owned combustion turbine to be completed in 1996 to meet these needs. As part of efforts to curtail growth in operating expenses, the Company is reducing its work force through an early-retirement program announced in January 1994. The program resulted in a first quarter 1994 after-tax charge to earnings of $39 million. The program has an expected payback period of approximately two years. Pursuant to an Integrated Resource Plan approved by the GPSC in 1992, the Company has implemented various demand-side option programs and has been authorized by the GPSC to recover associated program costs through rate riders. On October 15, 1993, a superior court judge ruled that recovery of these costs through rate riders is unlawful. The Company has ceased collection of the rate riders and is deferring program costs as ordered by the II-97 128 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report GPSC pending the final outcome of this matter. See Note 3 to the financial statements for additional information. The Company has completed two in a series of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. The remaining transactions are scheduled to take place in 1994 and 1995. If the sales take place as planned, the Company would realize an additional after-tax gain estimated to total approximately $20 million. See Note 5 to the financial statements for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs cannot be billed to customers. The Clean Air Act is discussed later under "Environmental Issues." The Energy Policy Act of 1992 (Energy Act) will have a profound effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition among electric utilities. The law also includes provisions to streamline the licensing process for new nuclear generating plants. The Energy Act marks the beginning of a major change in the traditional business practices of selling electricity. The Energy Act allows Independent Power Producers (IPPs) and other electric suppliers access to a utility's transmission lines to sell their electricity to other utilities. This may enhance the incentives for IPPs to build cogeneration plants for the Company's large industrial and commercial customers. If the Company does not remain a low cost producer and provide quality service, the Company's sales growth could be limited and this could significantly erode earnings. The Company continues to compete with other electric suppliers within the state. In Georgia, most new retail customers with more than 900 kilowatts of connected load may choose their electricity supplier. In addition, the bulk power market has become very competitive as utilities, IPPs and cogenerators seek to supply future capacity needs. Competition can create new business opportunities, but it increases risk and has the potential to adversely affect earnings. The 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. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be adopted by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental unemployment benefits, disability-related benefits, job training, and health and life insurance coverage. In 1993, the Company adopted Statement No. 112, with no material effect on the financial statements. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which will be effective in 1994. Statement No. 115 supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The Company adopted the new rules in January, 1994, with no material effect on the financial statements. FINANCIAL CONDITION OVERVIEW The principal changes in the Company's financial condition in 1993 were gross utility plant additions of $674 million and the lowering of the cost of capital achieved through the refinancing or retirement of $1.7 billion of long-term debt and preferred stock. On January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. See Notes 2 and 7 to the financial statements regarding the impact of these changes. The funds needed for gross property additions are currently provided from operations. The Statements of Cash Flows provide additional details. II-98 129 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report FINANCING ACTIVITIES In 1993, the Company continued to lower its financing costs by issuing new securities and other debt, and retiring or repaying high-cost issues. New issues during 1991 through 1993 totaled $3.0 billion and retirement or repayment of securities totaled $4.2 billion. The retirements included the redemption of $253 million and $291 million in 1993 and 1991, respectively, of first mortgage bonds with the proceeds from the Plant Scherer Unit 4 sales. Composite financing rates for the years 1991 through 1993, as of year-end, were as follows:
1993 1992 1991 Composite interest rate on long-term debt 7.86% 8.49% 9.05% Composite preferred stock dividend rate 6.76% 7.52% 7.99%
The Company's current securities ratings are as follows:
Duff & Standard Phelps Moody's & Poor's First Mortgage Bonds A+ A3 A- Preferred Stock A- baa1 BBB+ Unsecured Bonds A Baa1 BBB+ Commercial Paper * P2 A2
* Not rated by Duff & Phelps LIQUIDITY AND CAPITAL REQUIREMENTS Cash provided from operations increased by $236 million in 1993, primarily due to higher retail sales, lower interest costs, decreasing capacity purchases from the co-owners of plants Vogtle and Scherer and the receipt of cash payments from Gulf States that completed the settlement of litigation. The Company estimates that construction expenditures for the years 1994 through 1996 will total $688 million, $555 million and $629 million, respectively. The Company will continue to invest in transmission and distribution facilities and enhance existing generating plants. These expenditures also include amounts for nine combustion turbine generating units and equipment that will be required to comply with the provisions of the Clean Air Act. The Company's contractual capacity purchases will decline by $113 million over the next three years. Cash requirements for sinking fund requirements, redemptions announced, and maturities of long-term debt are expected to total $377 million during 1994 through 1996. As a result of requirements by the Nuclear Regulatory Commission, the Company has established external sinking funds for the purpose of funding nuclear decommissioning costs. For 1994 through 1996, the amount to be funded for the Company totals $16 million annually. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "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 $540 million of unused credit arrangements with banks at the beginning of 1994. See Note 8 to the financial statements for additional information. Completing the remaining two transactions for the sale of Plant Scherer Unit 4 will generate approximately $130 million in both 1994 and in 1995. The Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's ability to satisfy all coverage requirements is such that it could issue new first mortgage bonds and preferred stock to provide sufficient funds for all anticipated requirements. ENVIRONMENTAL ISSUES In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995 and affects eight generating plants -- some 10,000 megawatts II-99 130 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing slower than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, Georgia Power's construction expenditures are estimated to total approximately $150 million through 1995. Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance could require total Georgia Power construction expenditures ranging from approximately $150 million to $325 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 2 percent in Georgia Power's annual revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. There can be no assurance that all Clean Air Act costs will be recovered. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules by November 1994 -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state has issued rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules require nitrogen oxide controls, above Title IV requirements, on some Company plants. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions as early as 1997. Compliance with any new rules could result in significant additional costs. The impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a II-100 131 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1993 Annual Report new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standards will depend on the level chosen for the standards and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the nonhazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either nonhazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. These laws include the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA or Superfund). 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 costs to clean-up known sites in the financial statements. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; and the Resource Conservation and Recovery Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential for lawsuits alleging damages caused by electromagnetic fields exists. II-101 132 STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 Georgia Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING REVENUES: Revenues (Note 1) $ 4,389,513 $ 4,229,601 4,235,842 Revenues from affiliates 61,668 67,835 65,586 Total operating revenues 4,451,181 4,297,436 4,301,428 OPERATING EXPENSES: Operation -- Fuel 951,507 929,780 998,701 Purchased power from non-affiliates 313,170 436,761 444,920 Purchased power from affiliates 194,024 158,306 193,114 Provision for separation benefits - 9,778 52,952 Proceeds from settlement of disputed contracts (Note 3) - (4,982) (142,183) Other 675,284 616,116 596,565 Maintenance 284,521 264,757 295,012 Depreciation and amortization 379,425 375,460 382,549 Amortization of deferred Plant Vogtle expenses, net (Note 3) 36,284 (30,804) 16,008 Taxes other than income taxes 192,671 179,460 172,893 Federal and state income taxes 452,122 377,542 349,284 Total operating expenses 3,479,008 3,312,174 3,359,815 OPERATING INCOME 972,173 985,262 941,613 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 3,168 5,855 9,083 Income from subsidiary (Note 5) 4,127 4,635 4,576 Deferred return on Plant Vogtle - - 34,549 Interest income 3,806 12,475 10,563 Other, net 11,902 (30,527) 13,551 Income taxes applicable to other income 37,661 25,163 (7,522) INCOME BEFORE INTEREST CHARGES 1,032,837 1,002,863 1,006,413 INTEREST CHARGES: Interest on long-term debt 343,634 402,541 459,184 Allowance for debt funds used during construction (8,271) (8,310) (10,385) Interest on interim obligations 15,530 9,694 4,906 Amortization of debt discount, premium, and expense, net 14,024 8,033 6,214 Other interest charges 47,393 12,425 9,938 Net interest charges 412,310 424,383 469,857 NET INCOME 620,527 578,480 536,556 DIVIDENDS ON PREFERRED STOCK 50,674 57,942 61,701 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 569,853 $ 520,538 474,855
The accompanying notes are an integral part of these statements. II-102 133 BALANCE SHEETS At December 31, 1993 and 1992 Georgia Power Company 1993 Annual Report
ASSETS 1993 1992 (in thousands) UTILITY PLANT: Plant in service (Note 1) $ 13,743,521 $ 13,613,361 Less accumulated provision for depreciation 3,822,344 3,569,717 9,921,177 10,043,644 Nuclear fuel, at amortized cost (Note 1) 135,742 155,194 Construction work in progress (Note 4) 584,013 405,606 Total 10,640,932 10,604,444 Less property-related accumulated deferred income taxes (Note 7) - 1,589,743 Total 10,640,932 9,014,701 OTHER PROPERTY AND INVESTMENTS: Southern Electric Generating Company, at equity (Note 5) 29,201 30,703 Nuclear decommissioning trusts (Note 1) 37,937 20,311 Miscellaneous 31,941 24,760 Total 99,079 75,774 CURRENT ASSETS: Cash and cash equivalents 5,896 22,114 Investment securities - 108,206 Receivables- Customer accounts receivable 486,947 357,923 Other accounts and notes receivable 117,249 96,915 Affiliated companies 14,832 22,674 Accumulated provision for uncollectible accounts (4,300) (4,121) Fossil fuel stock, at average cost 111,620 197,332 Materials and supplies, at average cost 287,551 284,272 Prepayments 65,269 91,447 Vacation pay deferred (Note 1) 41,575 40,169 Total 1,126,639 1,216,931 DEFERRED CHARGES: Deferred charges related to income taxes (Note 7) 992,510 - Deferred Plant Vogtle costs (Note 3) 506,980 383,025 Debt expense, being amortized 20,730 17,719 Premium on reacquired debt, being amortized 153,146 116,940 Miscellaneous 196,094 139,352 Total 1,869,460 657,036 TOTAL ASSETS $ 13,736,110 $ 10,964,442
The accompanying notes are an integral part of these statements. II-103 134 BALANCE SHEETS At December 31, 1993 and 1992 Georgia Power Company 1993 Annual Report
CAPITALIZATION AND LIABILITIES 1993 1992 (in thousands) CAPITALIZATION (SEE ACCOMPANYING STATEMENTS): Common stock equity $ 4,045,458 $ 3,888,237 Preferred stock 692,787 692,792 Preferred stock subject to mandatory redemption - 6,250 Long-term debt 4,031,387 4,131,016 Total 8,769,632 8,718,295 CURRENT LIABILITIES: Preferred stock due within one year (Note 8) - 63,750 Long-term debt due within one year (Note 8) 10,543 95,823 Notes payable to banks (Note 8) 406,700 400,200 Commercial paper (Note 8) 75,527 133,471 Accounts payable- Affiliated companies 38,115 33,258 Other 285,929 284,093 Customer deposits 45,922 45,145 Taxes accrued- Federal and state income 31,639 43,779 Other 121,854 94,510 Interest accrued 110,497 132,319 Vacation pay accrued 40,060 38,694 Miscellaneous 64,527 89,355 Total 1,231,313 1,454,397 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 7) 2,479,720 - Accumulated deferred investment tax credits 478,334 515,539 Disallowed Plant Vogtle capacity buyback costs (Note 5) 63,067 72,201 Deferred credits related to income taxes (Note 7) 452,819 - Miscellaneous 261,225 204,010 Total 3,735,165 791,750 COMMITMENTS AND CONTINGENT MATTERS (NOTES 2, 3, 4, 5, 6) TOTAL CAPITALIZATION AND LIABILITIES $ 13,736,110 $ 10,964,442
The accompanying notes are an integral part of these statements. II-104 135 STATEMENTS OF CAPITALIZATION AT December 31, 1993 and 1992 Georgia Power Company 1993 Annual Report
1993 1992 1993 1992 (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 2,384,348 2,384,140 Premium on preferred stock 413 467 Retained earnings (Note 8) 1,316,447 1,159,380 Total common stock equity 4,045,458 3,888,237 46.1 % 44.6 % CUMULATIVE PREFERRED STOCK, WITHOUT PAR VALUE: Authorized -- 55,000,000 shares in 1993; 52,200,000 shares in 1992 Outstanding -- 21,027,923 shares in 1993; $100 stated value -- 4.60% to 5.64% 95,787 95,792 6.48% to 7.80% 127,000 127,000 8.20% to 9.08% - 25,000 $25 stated value -- $1.90 to $2.125 295,000 295,000 Adjustable rate -- at January 1, 1994: 4.98% 100,000 - 5.42% 75,000 - 6.57% - 50,000 7.02% - 50,000 7.57% - 50,000 Total (annual dividend requirement -- $46,851,000) 692,787 692,792 7.9 7.9 CUMULATIVE PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION, WITHOUT PAR VALUE: Authorized and Outstanding -- 2,800,000 shares in 1992 $25 stated value -- $2.43 - 45,000 $2.50 - 25,000 Total - 70,000 Less amount due within one year - 63,750 Total excluding amount due within one year - 6,250 - 0.1
II-105 136 STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 Georgia Power Company 1993 Annual Report 1993 1992 1993 1992 LONG-TERM DEBT: (in thousands) (percent of total) First mortgage bonds -- Maturity Interest Rates October 1, 1994 4 5/8% - 28,000 September 1, 1995 4 7/8% - 36,500 September 1, 1995 5 1/8% 130,000 130,000 March 1, 1996 4 3/4% 150,000 - July 1, 1996 5 3/4% - 45,368 September 1, 1997 6 1/2% - 50,000 April 1, 1998 5 1/2% 100,000 - September 1, 1998 6 5/8% - 50,000 1999 through 2003 6 % to 7 7/8% 820,000 929,500 2008 6 7/8% 50,000 - 2016 through 2018 10% to 10 3/4% 69,716 663,170 2019 through 2023 7.55% to 9.23% 760,000 300,000 2020 variable rate - 50,000 2032 variable rates 200,000 200,000 Total first mortgage bonds 2,279,716 2,482,538 Pollution control obligations (Note 8) 1,661,250 1,661,290 Other long-term debt (Note 8) 135,058 117,344 Unamortized debt premium (discount), net (34,094) (34,333) Total long-term debt (annual interest requirement -- $320,505,000) 4,041,930 4,226,839 Less amount due within one year (Note 8) 10,543 95,823 Long-term debt excluding amount due within one year 4,031,387 4,131,016 46.0 47.4 TOTAL CAPITALIZATION $ 8,769,632 $ 8,718,295 100.0 % 100.0%
The accompanying notes are an integral part of these statements. II-106 137 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991 Georgia Power Company 1993 Annual Report
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 1,159,380 $ 1,038,012 $ 944,774 Net income after dividends on preferred stock 569,853 520,538 474,855 Cash dividends on common stock (402,400) (384,000) (375,200) Preferred stock transactions, net (10,386) (15,170) (6,417) BALANCE AT END OF PERIOD (NOTE 8) $ 1,316,447 $ 1,159,380 $ 1,038,012 STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1993, 1992, and 1991 Georgia Power Company 1993 Annual Report 1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 2,384,140 $ 2,383,800 $ 2,383,800 Contributions to capital by parent company 208 340 - BALANCE AT END OF PERIOD $ 2,384,348 $ 2,384,140 $ 2,383,800
The accompanying notes are an integral part of these statements. II-107 138 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993, 1992, and 1991 Georgia Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING ACTIVITIES: Net income $ 620,527 $ 578,480 $ 536,556 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 475,152 471,014 480,318 Deferred income taxes and investment tax credits, net 150,735 189,251 43,695 Allowance for equity funds used during construction (3,168) (5,855) (9,083) Deferred Plant Vogtle costs 36,284 (30,804) (18,541) Non-cash proceeds from settlement of disputed contracts (Note 3) - (4,982) (103,846) Provision for separation benefits - - 52,952 Gain on asset sales (35,514) (12) (36,835) Other, net (10,713) (9,756) (42,141) Changes in certain current assets and liabilities -- Receivables, net 27,088 (31,348) 23,920 Inventories 82,433 (65,621) 24,130 Payables 17,364 25,303 (23,075) Taxes accrued 15,377 (22,828) 76,932 Energy cost recovery, retail (74,260) (46,615) (4,594) Other (35,691) (16,518) (17,561) Net cash provided from operating activities 1,265,614 1,029,709 982,827 INVESTING ACTIVITIES: Gross property additions (674,432) (508,444) (548,051) Sales of property 261,687 46 291,075 Other (43,154) 42,892 931 Net cash used for investing activities (455,899) (465,506) (256,045) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: Preferred stock 175,000 195,000 100,000 First mortgage bonds 1,135,000 975,000 - Pollution control bonds 145,425 161,955 80,420 Long-term notes 37,000 - - Retirements: Preferred stock (245,005) (165,004) (100,000) First mortgage bonds (1,337,822) (1,381,300) (598,384) Pollution control bonds (145,465) (160,205) (83,265) Other long-term debt (19,451) (567) (1,130) Interim obligations, net (51,444) 334,671 199,000 Payment of preferred stock dividends (53,123) (60,475) (60,766) Payment of common stock dividends (402,400) (384,000) (375,200) Miscellaneous (63,648) (70,986) (17,613) Net cash used for financing activities (825,933) (555,911) (856,938) NET CHANGE IN CASH AND CASH EQUIVALENTS (16,218) 8,292 (130,156) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 22,114 13,822 143,978 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,896 $ 22,114 $ 13,822 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for -- Interest (net of amount capitalized) $420,107 $435,203 $488,431 Income taxes 275,867 190,674 214,809
The accompanying notes are an integral part of these statements. II-108 139 NOTES TO FINANCIAL STATEMENTS Georgia Power Company 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), Southern Electric International (Southern Electric), and Southern Nuclear Operating Company (Southern Nuclear), and various other subsidiaries related to foreign utility operations and domestic non-utility operations. 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. Intracompany contracts dealing with jointly owned generating facilities, transmission lines and exchange of electric power are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission. SCS provides, at cost, specialized services to The Southern Company and each of the subsidiary companies. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides support services for nuclear power plants in the Southern electric system. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935. Both The Southern Company and its subsidiaries are subject to the regulatory provisions of this act. The Company is also subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective regulatory commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 fuel is used. The Company is authorized by state law and FERC regulations to recover fuel costs and the fuel component of purchased energy costs through fuel cost recovery provisions, which are periodically adjusted to reflect increases or decreases in such costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. Fuel costs were under recovered by $79 million and $4 million at December 31, 1993, and 1992, respectively. These amounts are included in customer accounts receivable on the balance sheets. The fuel cost recovery rate was increased effective December 6, 1993. The cost of nuclear fuel is amortized to fuel expense based on estimated thermal units used to generate electric energy and includes a provision for the disposal of spent fuel. Total charges for nuclear fuel amortized to expense were $75 million in 1993, $84 million in 1992, and $93 million in 1991. The Company has contracted with the U.S. Department of Energy (DOE) for permanent disposal of spent fuel beginning in 1998; however, the actual year this service will begin is uncertain. Pending permanent disposition of the spent fuel, sufficient storage capacity is available at Plant Hatch into 2003 and at Plant Vogtle into 2009. 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 law provides that utilities will recover these payments in the same manner as any other fuel expense. The Company -- based on its ownership interest -- estimates its total assessment under this law to be approximately $42 million to be paid over a 15-year period beginning in 1993. This obligation is recognized in the accompanying Balance Sheets and is being recovered through the fuel cost recovery provisions. The remaining liability at December 31, 1993, is $39 million. II-109 140 NOTES (continued) Georgia Power Company 1993 Annual Report NUCLEAR REFUELING OUTAGE COSTS Prior to 1992, the Company expensed nuclear refueling outage costs as incurred during the outage period. Pursuant to the 1991 GPSC retail rate order, the Company began accounting for these costs on a normalized basis in 1992. Under this method of accounting, refueling outage costs are deferred and subsequently amortized to expense over the operating cycle of each unit, which is normally 18 months. Deferred nuclear outage costs were $17 million and $6 million at December 31, 1993 and 1992, respectively. DEPRECIATION Depreciation is provided on the cost of depreciable utility plant in service and is calculated primarily on the straight-line basis over the estimated composite service life of the property. The composite rate of depreciation was 3.1 percent in 1993 and 1992, and 3.2 percent in 1991. Effective October 1991, the Company adopted lower depreciation rates consistent with the 1991 GPSC retail rate order. When a property unit is retired or otherwise disposed of in the normal course of business, its costs and the costs of removal, less salvage, are charged to the accumulated provision for depreciation. Minor items of property included in the cost of the plant are retired when the related property unit is retired. NUCLEAR DECOMMISSIONING 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. Reasonable assurance may be in the form of an external sinking fund, a surety method, or prepayment. The Company has established external trust funds to comply with the NRC's regulations. Prior to the enactment of these regulations, the Company had internally reserved nuclear decommissioning costs. 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 estimated cost of decommissioning and the amounts being recovered through rates at December 31, 1993, for the Company's ownership interest in plants Hatch and Vogtle were as follows:
Plant Plant Hatch Vogtle Site study basis (year) 1990 1990 Estimated completion of decommissioning (year) 2027 2037 Cost of decommissioning: (in millions) Radiated structures $184 $155 Non-radiated structures 35 62 Contingency 55 54 Total costs $274 $271 (in millions) Approved for ratemaking $184 $155 Amount expensed in 1993 $ 6 $ 6 Balance in external trust fund $ 22 $ 16 Balance in internal reserve $ 33 $ 11
The amounts in the internal reserve are being transferred into the external trust fund over a period of approximately nine years as approved by the GPSC in its 1991 retail rate order. The estimates approved by the GPSC for ratemaking exclude costs of non-radiated structures and site contingency costs. The actual decommissioning cost may vary from the above estimates because of regulatory requirements, changes in technology, and increased costs of labor, materials, and equipment. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The Company expects the GPSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. PLANT VOGTLE PHASE-IN PLANS In 1987 and 1989, the GPSC ordered that the costs of Plant Vogtle Units 1 and 2 be phased into rates under plans that meet the requirements of Financial Accounting Standards Board (FASB) Statement No. 92, Accounting for Phase-In Plans. In 1991, the GPSC modified the phase-in plans. In addition, the Company deferred certain Plant Vogtle operating expenses and financing costs under accounting orders issued by the GPSC. See Note 3 for further information. II-110 141 NOTES (continued) Georgia Power Company 1993 Annual Report INCOME TAXES The Company 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. See Note 7 to the financial statements for further information. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AND DEFERRED RETURN 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 1993, 1992 and 1991, the average AFUDC rates were 4.87 percent, 7.16 percent and 9.90 percent, respectively. The reduction in the average AFUDC rate since 1991 reflects the Company's greater use of lower cost short-term debt. The Company also imputed a return on its investment in Plant Vogtle Units 1 and 2 after they began commercial operation, under short-term cost deferrals and phase-in plans as described in Note 3. AFUDC and the Vogtle deferred returns, net of taxes, as a percentage of net income after dividends on preferred stock, amounted to 1.4 percent, 2.1 percent and 9.2 percent for 1993, 1992 and 1991, respectively. UTILITY PLANT Utility plant is stated at original cost with the exception of Plant Vogtle, which is stated at cost less regulatory disallowances. Original cost includes materials; labor; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. 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 All financial instruments of the Company -- for which the carrying amount does not approximate fair value -- are shown in the table below at December 31:
1993 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 38 $ 40 Long-term debt 3,954 4,197 1992 Carrying Fair Amount Value (in millions) Nuclear decommissioning trusts $ 20 $ 21 Investment securities 108 121 Long-term debt 4,130 4,404 Preferred stock subject to mandatory redemption 70 76
The fair values of nuclear decommissioning trusts and investment securities were based on listed closing market prices. The fair values for long-term debt and preferred stock subject to mandatory redemption were based on either closing market prices or closing prices of comparable instruments. MATERIALS AND SUPPLIES Generally, materials and supplies include the cost of transmission, distribution and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. In December 1992, the Company converted to the inventory method of accounting for certain emergency spare parts. This conversion resulted in a regulatory liability that is being amortized as credits to income over II-111 142 NOTES (continued) Georgia Power Company 1993 Annual Report approximately four years. This conversion will not have a material effect on income in any year. VACATION PAY Company employees earn vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current asset representing the future recoverability of this cost. This amount was $42 million at December 31, 1993, and $40 million at December 31, 1992. In 1994, approximately 72 percent of the 1993 deferred vacation costs will be expensed, and the balance will be charged to construction and other accounts. 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 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 "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 fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the projected unit credit actuarial method for financial reporting purposes. 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. For medical care benefits, a qualified trust has been established for funding amounts to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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 expense was recognized -- approximately $6 million -- in 1993 and the remaining additional expense was deferred. An additional one-fifth of the costs will be expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The cost deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. As a result of the regulatory treatment allowed by the GPSC, the adoption of Statement No. 106 did not have a material impact on net income. Prior to 1993, the Company recognized these cost on a cash basis as payments were made. The total costs of such benefits recognized by the Company in 1993, 1992, and 1991 were $56 million, $13 million, and $9 million, respectively. STATUS AND COST OF BENEFITS Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown only for 1993 because Statement No. 106 was adopted as II-112 143 NOTES (continued) Georgia Power Company 1993 Annual Report of January 1, 1993, on a prospective basis. The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in millions) Actuarial present value of benefit obligations: Vested benefits $ 655 $ 557 Non-vested benefits 35 26 Accumulated benefit obligation 690 583 Additional amounts related to projected salary increases 257 293 Projected benefit obligation 947 876 Less: Fair value of plan assets 1,495 1,341 Unrecognized net gain (490) (413) Unrecognized prior service cost 31 33 Unrecognized transition asset (62) (67) Prepaid asset recognized in the Balance Sheets $ 27 $ 18
Postretirement Medical Life 1993 (in millions) Actuarial present value of benefit obligation: Retirees and dependents $136 $32 Employees eligible to retire 12 - Other employees 206 40 Accumulated benefit obligation 354 72 Less: Fair value of plan assets 30 1 Unrecognized net loss (gain) 40 (6) Unrecognized transition obligation 251 69 Accrued liability recognized in the Balance Sheets $ 33 $ 8
Weighted average rates used in actuarial calculations:
1993 1992 1991 Discount 7.5% 8.0% 8.0% Annual salary increase 5.0 6.0 6.0 Long-term return on plan assets 8.5 8.5 8.5
An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1993, by $68 million and the aggregate of the service and interest cost components of the net retiree medical cost by $7 million. The components of the plans' net costs are shown below:
Pension 1993 1992 1991 (in millions) Benefits earned during the $ 33 $ 34 $ 32 year Interest cost on projected benefit obligation 69 65 61 Actual return on plan assets (194) (61) (334) Net amortization and deferral 84 (38) 247 Net pension cost (income) $ (8) $ - $ 6
Of net pension costs (income) recorded, $(6) million in 1993 and $5 million in 1991, were recorded to operating expense, with the balance being recorded to construction and other accounts.
Postretirement Medical Life 1993 (in millions) Benefits earned during the year $11 $ 3 Interest cost on accumulated benefit obligation 23 6 Amortization of transition obligation over 20 years 12 3 Actual return on plan assets (4) - Net amortization and deferral 2 - Net postretirement cost $44 $12
II-113 144 NOTES (continued) Georgia Power Company 1993 Annual Report Of the above net postretirement medical and life insurance costs recorded in 1993, $21 million was charged to operating expenses, $21 million was deferred, and the remainder was charged to construction and other accounts. 3. LITIGATION AND REGULATORY MATTERS DEMAND-SIDE CONSERVATION PROGRAMS In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of the Company's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. The Company has suspended collection of the demand-side conservation costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved the Company's request for an accounting order allowing the Company to defer all current unrecovered and future costs related to these programs until the court's decision is reversed or until the next general rate case proceeding. An association of industrial customers has filed a petition for review of such accounting order in the Superior Court of Fulton County, Georgia. The Company's costs related to these conservation programs through 1993 were $60 million of which $15 million has been collected and the remainder deferred. The estimated costs, assuming no change in the programs certified by the GPSC, are $38 million in 1994 and $40 million in 1995. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on these financial statements. RETAIL RATEPAYERS' SUIT CONCLUDED In March 1993, several retail ratepayers of Georgia Power filed a civil complaint in the Superior Court of Fulton County, Georgia, against Georgia Power, The Southern Company, the system service company, and Arthur Andersen & Co. The complaint alleged that Georgia Power obtained excessive rate increases by improper accounting for spare parts and sought actual damages estimated by the plaintiffs to be in excess of $60 million -- plus treble and punitive damages -- for alleged violations of the Georgia Racketeer Influenced and Corrupt Organizations Act and other state statutes, statutory and common law fraud, and negligence. These state law allegations were substantially the same as those included in a 1989 suit brought in federal district court in Georgia. That suit and similar ones filed in Alabama, Florida, and Mississippi federal courts were subsequently dismissed. The defendants' motions to dismiss the current complaint were granted by the Superior Court of Fulton County, Georgia, in July 1993. In January 1994, the plaintiffs' appeal of the dismissal to the Supreme Court of Georgia was rejected. This matter is now concluded. GULF STATES SETTLEMENT On November 7, 1991, subsidiaries of The Southern Company entered into a settlement agreement with Gulf States that resolved litigation between the companies that had been pending since 1986 and arose out of a dispute over certain unit power and long-term power sales contracts. In 1993, all remaining terms and obligations of the settlement agreement were satisfied. Based on the value of the settlement proceeds received, the Company recorded increases of $3 million in 1992 and $89 million in 1991 net income. FERC REVIEW OF EQUITY RETURNS In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any changes in the rate of return on common equity that may occur as a result of this proceeding would be effective 60 days after a proper notice of the proceeding is published. A notice was published on May 10, 1991. 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. II-114 145 NOTES (continued) Georgia Power Company 1993 Annual Report The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the Company's financial statements. PLANT VOGTLE PHASE-IN PLANS Pursuant to orders from the GPSC, the Company recorded a deferred return under phase-in plans for Plant Vogtle Units 1 and 2 until October 1991 when the allowed investment was fully reflected in rates. In addition, the GPSC issued two separate accounting orders that required the Company to defer substantially all operating and financing costs related to both units until rate orders addressed these costs. These GPSC orders provide for the recovery of deferred costs within 10 years. The GPSC modified the phase-in plans in 1991 to accelerate the recognition of costs previously deferred under the Plant Vogtle Unit 2 phase-in plan and to levelize the remaining Plant Vogtle declining capacity buyback expenses. Under these orders, the Company has deferred and begun amortizing these costs (as recovered through rates) as follows:
1993 1992 1991 (in millions) Deferred expenses: Capacity buybacks $(38) $(100) $(30) Other operating - - (7) Amortization of previously deferred return and expenses 74 69 53 Deferred expenses, net 36 (31) 16 Deferred return - - 35 Less income taxes - 23 8 Net (deferral) amortization 36 (8) (11) Effect of adoption of FASB Statement No. 109 160 - - Deferred costs at beginning of year 383 375 364 Deferred costs at end of year $507 $ 383 $375
NUCLEAR PERFORMANCE STANDARDS In October 1989, the GPSC adopted a nuclear performance standard for the Company's nuclear generating units under which the performance of plants Hatch and Vogtle will be evaluated every three years. The performance standard is based on each unit's capacity factor as compared to the average of all U.S. nuclear units operating at a capacity factor of 50% or higher during the three-year period of evaluation. Depending on the performance of the units, the Company could receive a monetary reward or penalty under the performance standards criteria. The first evaluation was conducted in 1993 for performance during the 1990-92 period. During this three-year period, the Company's units performed at an average capacity factor of 81 percent compared to an industry average of approximately 73 percent. Based on these results, the GPSC approved a performance reward of approximately $8.5 million for the Company. This reward is being collected through the retail fuel cost recovery provision and recognized in income over a 36- month period beginning November, 1993. 4. COMMITMENTS AND CONTINGENCIES CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program and currently estimates property additions to be approximately $688 million in 1994, $555 million in 1995 and $629 million in 1996. These estimated additions include AFUDC of $19 million in 1994, $27 million in 1995, and $18 million in 1996. The estimates for property additions for the three-year period include $88 million committed to meeting the requirements of the Clean Air Act. While the Company has no new baseload generating plants under construction, the construction of nine combustion turbine peaking units is planned to be completed by 1996. In addition, significant construction of transmission and distribution facilities, and upgrading and extending the useful life of generating plants will continue. 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. II-115 146 NOTES (continued) Georgia Power Company 1993 Annual Report 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 were approximately $4.8 billion at December 31, 1993. Additional commitments for coal and for nuclear fuel will be required in the future to supply the Company's fuel needs. OPERATING LEASES The Company has entered into coal rail car rental agreements with various terms and expiration dates. Rental expense totaled $8 million, $7 million, and $5 million for 1993, 1992, and 1991, respectively. Minimum annual rental commitments for noncancellable rail car leases are $9 million annually for years 1994 through 1998, and total approximately $191 million thereafter. ROCKY MOUNTAIN PROJECT STATUS In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric project 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 project. 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 project, as discussed in Note 5. The joint ownership agreement significantly reduces the risk of the project being canceled. However, full recovery of the Company's costs depends on the GPSC's treatment of the project's cost and disposition of the project's capacity output. In the event the Company cannot demonstrate to the GPSC the project's economic viability based on current ownership, construction schedule, and costs, then part or all of such costs may have to be written off in accordance with FASB Statement No. 90, Accounting for Abandonments and Disallowed Plant Costs. At December 31, 1993, the Company's investment in the project amounted to approximately $197 million. AFUDC accrued on the Rocky Mountain project has not been credited to income or included in the project cost since December 1985. If accrual of AFUDC is not resumed, the Company's portion of the estimated total plant additions at completion would be approximately $199 million. The plant is currently scheduled to begin commercial operation in 1995. The Company has held preliminary discussions with other parties regarding the potential disposition of its remaining interest in the project. The ultimate outcome of this matter cannot now be determined. 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 limits to $9.4 billion public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $79 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment for the Company -- based on its ownership and buyback interests -- is $171 million per incident but not more than an aggregate of $22 million to be paid for each incident in any one year. The Company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium adjustment in the event that losses exceed accumulated reserve funds. The Company's maximum assessment per incident is limited to $18 million under current policies. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million NML coverage. This excess insurance is provided by Nuclear Electric II-116 147 NOTES (continued) Georgia Power Company 1993 Annual Report Insurance Limited (NEIL), a mutual insurance company, and American Nuclear Insurers/Mutual Atomic Energy Liability Underwriters. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 21 weeks after the outage -- for one year and up to $2.3 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 assessments per incident under the current policies for the Company would be $15 million for excess property damage and $13 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. The Company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the Company could be subject to a maximum total assessment of $7 million. 5. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS Since 1975, the Company has sold undivided interests in plants Hatch, Wansley, Vogtle, and Scherer Units 1 and 2, together with transmission facilities, to OPC, an electric membership generation and transmission corporation; the Municipal Electric Authority of Georgia (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, an affiliate. Additionally, the Company has completed two of four separate transactions to sell Unit 4 of Plant Scherer to Florida Power & Light Company (FPL) and Jacksonville Electric Authority (JEA) for a total price of approximately $806 million, including any gains on these transactions. FPL will eventually own approximately 76.4 percent of the unit, with JEA owning the remainder. Georgia Power will continue to operate the unit. The completed and scheduled remaining transactions are as follows:
Closing Percent After-Tax Date Capacity Ownership Amount Gain (in megawatts) (in millions) July 1991 290 35.46% $291 $14 June 1993 258 31.44 253 18 June 1994 135 16.55 132 10 June 1995 135 16.55 130 10 Total 818 100.00% $806 $52
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 4, the Company and OPC have a joint ownership arrangement for the Rocky Mountain pumped storage hydroelectric project under which the Company will retain its present investment in the project and OPC will finance and complete the remainder of the project and operate the completed facility. Based on current cost estimates the Company's ownership will be approximately 25% of the project (194 megawatts of capacity) at completion. The Company will own six of eight 80 megawatt combustion turbine generating units and 75% of the related common facilities being jointly constructed with Savannah Electric, an affiliate. The Company's investment in the project at December 31, 1993, was $100 million and is expected to total approximately $182 million when the project is completed. All units are II-117 148 NOTES (continued) Georgia Power Company 1993 Annual Report expected to be completed by June, 1995. Savannah Electric will operate these units. In connection with the joint ownership arrangements for plants Vogtle and Scherer, the Company has made commitments to purchase declining fractions of OPC's and MEAG's capacity and energy from these units. These commitments are in effect during periods of up to 10 years following commercial operation (and with regard to a portion of a 5 percent interest in Plant Vogtle owned by MEAG, until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest). The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Except as noted below, the cost of such capacity and energy is included in purchased power from non-affiliates in the Company's Statements of Income. Capacity payments totaled $183 million, $289 million and $320 million in 1993, 1992 and 1991, respectively. The Plant Scherer buyback agreements ended in 1993. The current projected Plant Vogtle capacity payments for the next five years are as follows: $132 million in 1994, $77 million in 1995, $70 million in 1996, $59 million in 1997 and $59 million in 1998. 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. Additionally, the Plant Vogtle declining capacity buyback expense is being levelized over a six-year period. See Note 3 for further information. At December 31, 1993, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation, were as follows:
Total Company Facility (Type) Capacity Ownership (megawatts) Plant Vogtle (nuclear) 2,320 45.7% Plant Hatch (nuclear) 1,630 50.1 Plant Wansley (coal) 1,779 53.5 Plant Scherer (coal) Units 1 and 2 1,636 8.4 Unit 3 818 75.0 Unit 4 818 33.1 Accumulated Facility (Type) Investment Depreciation (in millions) Plant Vogtle (nuclear) $3,285 (1) $540 Plant Hatch (nuclear) 840 325 Plant Wansley (coal) 286 125 Plant Scherer (coal) Units 1 and 2 111 33 Unit 3 539 107 Unit 4 236 31
(1) Investment net of write-offs. The Company and an affiliate, Alabama Power, 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 expiring in 1994, 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. An amended contract has been filed with the FERC with substantially the same provisions, but the term thereof would be extended automatically for two year periods, subject to any 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 II-118 149 NOTES (continued) Georgia Power Company 1993 Annual Report Income, is as follows:
1993 1992 1991 (in millions) Energy $ 81 $ 66 $ 74 Capacity 9 9 10 Total $ 90 $ 75 $ 84 Kilowatt-hours 3,352 2,664 2,911
At December 31, 1993, the capitalization of SEGCO consisted of $58 million of equity and $84 million of long-term debt on which the annual interest requirement is $3.8 million. 6. LONG-TERM POWER SALES AGREEMENTS The Company and the operating affiliates of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service territory. Certain of these agreements are non-firm and are based on the capacity of the Southern system. Other agreements are firm and pertain to capacity related to 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 capacity revenues have been as follows:
Unit Power Other Year Sales Long-Term (in millions) 1993 $135 $17 1992 223 10 1991 263 11
Long-term non-firm power of 400 megawatts was sold by the Southern electric system in 1993 to Florida Power Corporation (FPC). This amount decreases to 200 megawatts in 1994 and the contract expires at year-end. Sales under these long-term non-firm power sales agreements are made from available power pool energy, and the revenues from the sales are shared by the operating affiliates. Unit power from specific generating plants is being sold to FPL, JEA, and the City of Tallahassee, Florida and beginning in 1994 to FPC. Under these agreements, the Company sold approximately 830 megawatts of capacity in 1993 and is scheduled to sell approximately 403 megawatts of capacity in 1994. Thereafter, these sales will decline to an estimated 157 megawatts by the end of 1996 and will remain at that approximate level through 1999. After 2000, capacity sales will decline to approximately 101 megawatts -- unless reduced by FPL and JEA -- until the expiration of the contracts in 2010. 7. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no material effect on net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $993 million are revenues to be received from customers. These assets are attributable to tax benefits flowed-through to customers in prior years, and taxes applicable to capitalized AFUDC. The related liabilities of $453 million are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. Details of the federal and state income tax provisions are as follows:
1993 1992 1991 Total provision for income taxes: (in millions) Federal: Currently payable $223 $139 $267 Deferred - Current year 181 170 97 Reversal of prior years (40) (6) (52) Deferred investment tax credits (18) (6) (10) 346 297 302 State: Currently payable 41 24 47 Deferred - Current year 31 35 17 Reversal of prior years (3) (3) (9) 69 56 55 Total 415 353 357 Less: Income taxes charged (credited) to other income (37) (25) 8 Federal and state income taxes charged to operations $452 $378 $349
II-119 150 NOTES (continued) Georgia Power Company 1993 Annual Report The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax basis, which give rise to deferred tax assets and liabilities are as follows:
1993 (in millions) Deferred tax liabilities: Accelerated depreciation $1,458 Property basis differences 1,163 Deferred Plant Vogtle costs 161 Premium on reacquired debt 63 Fuel clause underrecovered 32 Other 62 Total 2,939 Deferred tax assets: Other basis differences 263 Federal effect of state deferred taxes 92 Other deferred costs 61 Disallowed plant buybacks 29 Accrued interest 24 Other 12 Total 481 Net deferred tax liabilities (assets) 2,458 Portion included in current assets (22) Accumulated deferred income taxes in the Balance Sheets $2,480
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 $19 million in 1993, $19 million in 1992, and $27 million in 1991. At December 31, 1993, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory tax rate to effective income tax rate is as follows:
1993 1992 1991 Federal statutory rate 35% 34% 34% State income tax, net of federal deduction 4 4 4 Non-deductible book depreciation 3 3 4 Difference in prior years' deferred and current tax rate (1) (1) (1) Other (1) (2) (1) Effective income tax rate 40% 38% 40%
The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 8. CAPITALIZATION COMMON STOCK DIVIDEND RESTRICTIONS The Company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 1993, $742 million of retained earnings were restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. The Company's charter limits cash dividends on common stock to the lesser of the retained earnings balance or 75 percent of net income available for such stock during a prior period of 12 months if the ratio of common stock equity to total capitalization, including retained earnings, adjusted to reflect the payment of the proposed dividend, is below 25 percent, and to 50 percent of such net income if such ratio is less than 20 percent. At December 31, 1993, the ratio as defined was 46.1 percent. II-120 151 NOTES (continued) Georgia Power Company 1993 Annual Report REMARKETED BONDS In 1992, the Company issued two series of variable rate first mortgage bonds each with principal amounts of $100 million due 2032. The current composite interest rate on the bonds is 6.20 percent and is fixed for the first three years of the issues. POLLUTION CONTROL BONDS The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control and industrial development revenue bonds. The Company has authenticated and delivered to trustees an aggregate of $407.7 million of its first mortgage bonds, which are pledged as security for its obligations under pollution control and industrial development contracts. No interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase or loan agreements. An aggregate of approximately $1.3 billion of the pollution control and industrial development bonds is secured by a subordinated interest in specific property of the Company. Details of pollution control bonds are as follows:
Maturity Interest Rates 1993 1992 (in millions) 2003-2007 5.70% to 6.75% $ 90 $ 103 2008-2011 6.375% & Variable 19 32 2014-2018 6.00% to 12.25% 1,237 1,283 2019-2023 5.75% to 7.25% & Variable 315 243 Total pollution control bonds $ 1,661 $ 1,661
BANK CREDIT ARRANGEMENTS At the beginning of 1994, the Company had unused credit arrangements with banks totaling $540 million, of which $10 million expires June 30, 1994, $130 million expires at May 1, 1996, and $400 million expires at June 30, 1996. The $400 million expiring June 30, 1996, is under revolving credit arrangements with several banks providing the Company, Alabama Power, and The Southern Company up to a total credit amount of $400 million. To provide liquidity support for commercial paper programs and for other short-term cash needs, $165 million and $135 million of the $400 million available credit are currently dedicated for the Company and Alabama Power, respectively. However, the allocations can be changed among the borrowers by notifying the respective banks. During the term of the agreements expiring in 1996, short-term borrowings may be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. The $10 million credit arrangement expiring in 1994 allows borrowings for up to 90 days. Commitment fees are based on the unused portion of the commitment. In addition, the Company borrows under uncommitted lines of credit with banks and through a $150 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 1993. 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, 1993, the Company had a capitalized lease obligation for its corporate headquarters building of $88 million with an interest rate of 8.1 percent. Other capitalized lease obligations were $137 thousand with a composite interest rate of 6.8 percent. The maturities of capital lease obligations through 1998 are approximately as follows: $423 thousand in 1994, $309 thousand in 1995, $335 thousand in 1996, $362 thousand in 1997, and $392 thousand in 1998. The lease agreement for the corporate headquarters building provides for payments that are minimal in early years and escalate through the first 21 years of the lease. For ratemaking purposes, the GPSC has treated the lease as an operating lease and has allowed only the lease II-121 152 NOTES (continued) Georgia Power Company 1993 Annual Report payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes is being deferred as a cost to be recovered in the future as ordered by the GPSC. At December 31, 1993, and 1992, the interest and lease amortization deferred on the Balance Sheets are $47 million and $48 million, respectively. In December 1993, the Company borrowed $37 million through a long-term note due in 1995. ASSETS SUBJECT TO LIEN The Company's mortgage dated as of March 1, 1941, as amended and supplemented, securing the first mortgage bonds issued by the Company, constitutes a direct lien on substantially all of the Company's fixed property and franchises. LONG-TERM DEBT DUE WITHIN ONE YEAR The current portion of the Company's long-term debt is as follows:
1993 1992 (in millions) First mortgage bonds: Redemption of 10.75% issue due 2018 $ - $3.7 Redemption of variable rate issue due 2020 - 50.0 Improvement fund requirement - 30.4 Pollution control bonds 5.95% series sinking fund requirement - 0.3 6.4% series sinking fund requirement * 0.2 6.75% series sinking fund requirement * - 6.375% series sinking fund requirement * - Other long-term debt 10.5 11.2 Total $10.5 $95.8
*Less than .1 million The indenture's first mortgage bond improvement 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 or reacquired bonds, or by pledging additional property equal to 1 2/3 times the requirement. The 1993 and 1992 requirements were met in the first quarter of each year by depositing cash subsequently used to redeem bonds. The 1994 requirement was funded in December 1993. REDEMPTION OF HIGH-COST SECURITIES The Company plans to continue a program of redeeming or replacing high-cost debt and preferred stock in cases where opportunities exist to reduce financing costs. High-cost issues may be repurchased in the open market or called at premiums as specified under terms of the issue. They may also be redeemed at face value to meet improvement fund and sinking fund requirements, to meet replacement provisions of the mortgage, or by use of proceeds from the sale of property pledged under the mortgage. In general, for the first five years a series is outstanding the Company is prohibited from redeeming for improvement fund purposes more than 1 percent annually of the original issue amount. 9. QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial information for 1993 and 1992 is as follows:
Net Income After Dividends on Operating Operating Preferred Quarter Ended Revenues Income Stock (in millions) MARCH 1993 $1,004 $221 $108 JUNE 1993 1,096 219 141 SEPTEMBER 1993 1,376 356 245 DECEMBER 1993 975 176 76 March 1992 $ 957 $211 $ 91 June 1992 1,068 235 116 September 1992 1,280 342 227 December 1992 992 197 87
The Company's business is influenced by seasonal weather conditions and the timing of rate increases. II-122 153 SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS) $ 4,451,181 $ 4,297,436 $ 4,301,428 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK (IN THOUSANDS) $ 569,853 $ 520,538 $ 474,855 CASH DIVIDENDS ON COMMON STOCK (IN THOUSANDS) $ 402,400 $ 384,000 $ 375,200 RETURN ON AVERAGE COMMON EQUITY (PERCENT) 14.37 13.60 12.76 TOTAL ASSETS (IN THOUSANDS) $13,736,110 $10,964,442 $10,842,538 GROSS PROPERTY ADDITIONS (IN THOUSANDS) $ 674,432 $ 508,444 $ 548,051 CAPITALIZATION (IN THOUSANDS): Common stock equity $ 4,045,458 $ 3,888,237 $ 3,766,551 Preferred stock 692,787 692,792 607,796 Preferred stock subject to mandatory redemption - 6,250 118,750 Long-term debt 4,031,387 4,131,016 4,553,189 Total (excluding amounts due within one year) $ 8,769,632 $ 8,718,295 $ 9,046,286 CAPITALIZATION RATIOS (PERCENT): Common stock equity 46.1 44.6 41.7 Preferred stock 7.9 8.0 8.0 Long-term debt 46.0 47.4 50.3 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 1,337,822 1,381,300 598,384 PREFERRED STOCK (IN THOUSANDS): Issued 175,000 195,000 100,000 Retired 245,005 165,004 100,000 SECURITY RATINGS: First Mortgage Bonds - Moody's A3 A3 Baa1 Standard and Poor's A- A- BBB+ Duff & Phelps A+ A- BBB+ Preferred Stock - Moody's baa1 baa1 baa1 Standard and Poor's BBB+ BBB+ BBB Duff & Phelps A- BBB BBB- CUSTOMERS (YEAR-END): Residential 1,441,972 1,421,175 1,397,682 Commercial 188,820 183,784 179,933 Industrial 11,217 11,479 11,946 Other 2,322 2,269 2,190 Total 1,644,331 1,618,707 1,591,751 EMPLOYEES (YEAR-END) 12,528 12,600 13,700
II-123 154 SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 4,445,809 $ 4,145,240 $ 3,897,479 $ 3,786,485 $ 3,561,603 $ 3,609,140 $ 3,319,699 $ 2,869,883 $ 208,066 $ 449,099 $ 479,532 $ 240,057 $ 535,003 $ 493,717 $ 421,719 $ 304,555 $ 389,600 $ 394,500 $ 386,600 $ 377,800 $ 325,500 $ 277,500 $ 225,500 $ 189,600 5.52 11.72 13.06 6.85 16.51 17.95 18.43 15.86 $11,176,619 $11,372,346 $11,130,539 $11,197,494 $10,465,063 $ 9,030,618 $ 7,880,072 $ 6,746,247 $ 558,727 $ 727,631 $ 929,019 $ 1,034,059 $ 1,598,309 $ 1,384,182 $ 1,396,846 $ 1,015,274 $ 3,673,913 $ 3,860,657 $ 3,806,070 $ 3,538,182 $ 3,469,201 $ 3,013,707 $ 2,486,172 $ 2,089,171 607,796 607,844 657,844 657,844 732,844 632,844 482,844 432,844 125,000 155,000 162,500 166,250 112,500 120,000 127,500 131,250 5,000,225 5,054,001 4,861,378 4,825,760 4,464,857 3,878,066 3,432,606 3,128,500 $ 9,406,934 $ 9,677,502 $ 9,487,792 $ 9,188,036 $ 8,779,402 $ 7,644,617 $ 6,529,122 $ 5,781,765 39.1 39.9 40.1 38.5 39.5 39.4 38.1 36.1 7.8 7.9 8.6 9.0 9.6 9.9 9.3 9.8 53.1 52.2 51.3 52.5 50.9 50.7 52.6 54.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 300,000 250,000 150,000 500,000 500,000 - 150,000 125,000 91,117 91,516 206,677 217,949 377,538 17,738 26,084 18,273 - - - 125,000 100,000 150,000 50,000 - 83,750 7,500 3,750 150,000 7,500 3,750 2,380 4,378 Baa1 Baa2 Baa2 Baa2 Baa1 Baa1 Baa1 Baa1 BBB+ BBB+ BBB BBB BBB+ BBB+ BBB+ BBB+ BBB BBB 9 9 9 9 8 8 baa1 baa2 baa2 baa2 baa1 baa1 baa1 baa1 BBB BBB BBB- BBB- BBB BBB BBB BBB BBB- BBB- 10 10 10 10 9 9 1,378,888 1,355,211 1,329,173 1,303,721 1,268,983 1,231,140 1,189,670 1,154,953 178,391 177,814 174,147 169,014 162,258 155,399 148,536 142,305 12,115 12,311 12,353 12,307 12,315 12,309 12,276 12,109 2,114 2,050 1,993 1,858 1,816 1,789 1,753 1,696 1,571,508 1,547,386 1,517,666 1,486,900 1,445,372 1,400,637 1,352,235 1,311,063 13,746 13,900 15,110 14,924 14,773 14,947 14,562 14,535
II-124 155 SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS): Residential $ 1,291,035 $ 1,128,396 $ 1,111,358 Commercial 1,354,130 1,285,681 1,243,067 Industrial 1,113,067 1,083,856 1,057,702 Other 41,399 39,504 37,861 Total retail 3,799,631 3,537,437 3,449,988 Sales for resale - non-affiliates 534,370 640,308 736,643 Sales for resale - affiliates 61,668 67,835 65,586 Total revenues from sales of electricity 4,395,669 4,245,580 4,252,217 Other revenues 55,512 51,856 49,211 Total $ 4,451,181 $ 4,297,436 $ 4,301,428 KILOWATT-HOUR SALES (IN THOUSANDS): Residential 16,649,859 14,939,172 14,815,089 Commercial 18,278,508 17,260,614 16,885,833 Industrial 23,635,363 22,978,312 22,298,062 Other 460,801 436,144 429,016 Total retail 59,024,531 55,614,242 54,428,000 Sales for resale - non-affiliates 14,307,030 15,870,222 18,719,924 Sales for resale - affiliates 3,027,733 3,320,060 3,885,892 Total 76,359,294 74,804,524 77,033,816 AVERAGE REVENUE PER KILOWATT-HOUR (CENTS): Residential 7.75 7.55 7.50 Commercial 7.41 7.45 7.36 Industrial 4.71 4.72 4.74 Total retail 6.44 6.36 6.34 Sales for resale 3.44 3.69 3.55 Total sales 5.76 5.68 5.52 RESIDENTIAL AVERAGE ANNUAL KILOWATT-HOUR USE PER CUSTOMER 11,630 10,603 10,675 RESIDENTIAL AVERAGE ANNUAL REVENUE PER CUSTOMER $ 901.79 $ 800.88 $ 800.78 PLANT NAMEPLATE CAPACITY RATINGS (YEAR-END) (MEGAWATTS) 13,759 14,076 14,076 MAXIMUM PEAK-HOUR DEMAND (MEGAWATTS) (NOTE): Winter 9,067 8,938 10,001 Summer 12,573 11,448 13,090 ANNUAL LOAD FACTOR (PERCENT) 58.5 60.5 55.2 PLANT AVAILABILITY (PERCENT): Fossil-steam 85.9 86.6 93.3 Nuclear 85.5 87.7 81.6 SOURCE OF ENERGY SUPPLY (PERCENT): Coal 62.1 61.4 63.6 Nuclear 16.2 17.0 15.3 Hydro 2.3 2.5 2.3 Oil and gas 0.2 * * Purchased power - From non-affiliates 10.2 12.2 10.3 From affiliates 9.0 6.9 8.5 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA: BTU per net kilowatt-hour generated 9,912 9,900 9,960 Cost of fuel per million BTU (cents) 153.62 153.08 157.97 Average cost of fuel per net kilowatt-hour generated (cents) 1.52 1.52 1.57
Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand * Less than one-tenth of one percent. II-125 156 SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 1,109,165 $ 1,022,781 $ 979,047 $ 904,218 $ 874,231 $ 786,500 $ 754,163 $ 686,269 1,218,441 1,143,727 1,054,995 915,540 854,755 797,540 739,035 649,932 1,061,830 1,006,416 983,822 911,933 897,646 873,554 858,536 747,305 36,773 34,775 31,743 29,350 27,948 26,766 24,388 20,972 3,426,209 3,207,699 3,049,607 2,761,041 2,654,580 2,484,360 2,376,122 2,104,478 784,086 760,809 707,076 822,696 780,049 941,743 779,028 666,739 168,251 150,394 86,751 159,998 91,753 149,463 136,047 70,784 4,378,546 4,118,902 3,843,434 3,743,735 3,526,382 3,575,566 3,291,197 2,842,001 67,263 26,338 54,045 42,750 35,221 33,574 28,502 27,882 $ 4,445,809 $ 4,145,240 $ 3,897,479 $ 3,786,485 $ 3,561,603 $3,609,140 $3,319,699 $2,869,883 14,771,648 14,134,195 13,800,038 13,675,730 13,234,248 12,006,462 11,548,787 11,443,257 16,627,128 15,843,181 14,790,561 13,799,379 12,945,926 11,945,938 10,902,163 10,181,953 22,126,604 21,801,404 21,412,845 20,884,454 20,339,235 19,517,543 18,862,531 17,415,441 428,459 414,107 397,669 385,514 381,917 382,238 342,047 331,804 53,953,839 52,192,887 50,401,113 48,745,077 46,901,326 43,852,181 41,655,528 39,372,455 20,158,681 20,479,412 18,544,705 20,910,185 18,198,186 21,526,865 19,138,575 16,197,259 8,272,528 7,489,948 3,327,814 6,032,889 3,160,242 5,999,834 4,970,928 2,938,120 82,385,048 80,162,247 72,273,632 75,688,151 68,259,754 71,378,880 65,765,031 58,507,834 7.51 7.24 7.09 6.61 6.61 6.55 6.53 6.00 7.33 7.22 7.13 6.63 6.60 6.68 6.78 6.38 4.80 4.62 4.59 4.37 4.41 4.48 4.55 4.29 6.35 6.15 6.05 5.66 5.66 5.67 5.70 5.35 3.35 3.26 3.63 3.65 4.08 3.96 3.80 3.85 5.31 5.14 5.32 4.95 5.17 5.01 5.00 4.86 10,795 10,530 10,484 10,623 10,577 9,923 9,855 10,049 $ 810.56 $ 761.96 $ 743.82 $ 702.36 $ 698.72 $ 650.01 $ 643.53 $ 602.66 14,366 14,366 13,018 13,018 11,875 11,875 11,767 11,698 8,977 10,101 9,866 9,446 10,551 10,049 8,462 7,556 13,196 12,735 12,295 12,390 11,910 11,079 10,443 10,933 55.5 56.3 59.1 56.1 57.5 56.3 56.9 51.9 92.5 93.0 94.5 92.7 91.2 91.2 91.0 91.7 81.3 89.2 69.4 85.4 64.7 79.5 47.3 68.6 65.1 64.0 72.0 70.9 74.6 72.7 74.4 72.2 13.7 14.1 9.6 9.1 5.0 6.7 4.0 6.3 2.2 2.1 1.2 1.7 1.2 1.5 2.7 3.1 0.1 0.1 0.1 0.1 0.6 * * 0.1 11.0 10.2 8.2 8.5 8.9 9.4 9.2 8.4 7.9 9.5 8.9 9.7 9.7 9.7 9.7 9.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 9,939 10,020 9,969 9,932 10,016 10,089 10,002 10,100 166.22 164.27 166.28 168.81 175.81 178.11 184.63 179.92 1.65 1.65 1.66 1.68 1.76 1.80 1.85 1.82
II-126 157 STATEMENTS OF INCOME Georgia Power Company
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Thousands of Dollars) OPERATING REVENUES: Revenues $ 4,389,513 $4,229,601 $4,235,842 Revenues from affiliates 61,668 67,835 65,586 Total operating revenues 4,451,181 4,297,436 4,301,428 OPERATING EXPENSES: Operation -- Fuel 951,507 929,780 998,701 Purchased power from non-affiliates 313,170 436,761 444,920 Purchased power from affiliates 194,024 158,306 193,114 Provision for separation benefits - 9,778 52,952 Proceeds from settlement of disputed contracts - (4,982) (142,183) Other 675,284 616,116 596,565 Maintenance 284,521 264,757 295,012 Depreciation and amortization 379,425 375,460 382,549 Deferred Plant Vogtle expenses, net 36,284 (30,804) 16,008 Taxes other than income taxes 192,671 179,460 172,893 Federal and state income taxes 452,122 377,542 349,284 Total operating expenses 3,479,008 3,312,174 3,359,815 OPERATING INCOME 972,173 985,262 941,613 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 3,168 5,855 9,083 Income from subsidiary 4,127 4,635 4,576 Deferred return on Plant Vogtle - - 34,549 Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 3,806 12,475 10,563 Other, net (See note) 11,902 (30,527) 13,551 Income taxes applicable to other income 37,661 25,163 (7,522) INCOME BEFORE INTEREST CHARGES 1,032,837 1,002,863 1,006,413 INTEREST CHARGES: Interest on long-term debt 343,634 402,541 459,184 Allowance for debt funds used during construction (8,271) (8,310) (10,385) Interest on interim obligations 15,530 9,694 4,906 Amortization of debt discount, premium, and expense, net 14,024 8,033 6,214 Other interest charges 47,393 12,425 9,938 Net interest charges 412,310 424,383 469,857 NET INCOME 620,527 578,480 536,556 DIVIDENDS ON PREFERRED STOCK 50,674 57,942 61,701 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 569,853 $ 520,538 $ 474,855
Note: Reflects major sales of facilities to Jacksonville Electric Authority, Florida Power & Light Company, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $18,391,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, $3,851,000 in 1987, and $21,250,000 in 1984. II-127 158 STATEMENTS OF INCOME Georgia Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 4,277,558 $ 3,994,846 $3,810,728 $ 3,626,487 $3,469,850 $ 3,459,677 $ 3,183,652 $ 2,799,099 168,251 150,394 86,751 159,998 91,753 149,463 136,047 70,784 4,445,809 4,145,240 3,897,479 3,786,485 3,561,603 3,609,140 3,319,699 2,869,883 1,120,933 1,078,586 1,023,173 1,064,552 1,012,949 1,077,092 1,000,434 884,037 626,989 543,448 546,511 530,051 344,708 415,406 427,403 274,643 173,716 195,355 164,873 199,831 192,297 204,848 188,938 204,624 - - - - - - - - - - - - - - - - 524,665 504,743 541,975 575,182 513,974 482,468 412,803 361,642 280,304 233,680 246,877 274,672 275,533 254,510 228,377 190,266 380,394 346,091 306,492 254,929 215,763 201,524 191,205 176,735 31,146 (39,211) (8,333) (141,977) - - - - 151,124 128,518 146,759 143,289 119,768 120,320 106,908 95,797 270,561 273,287 204,222 250,093 319,374 311,151 268,654 231,565 3,559,832 3,264,497 3,172,549 3,150,622 2,994,366 3,067,319 2,824,722 2,419,309 885,977 880,743 724,930 635,863 567,237 541,821 494,977 450,574 6,985 40,525 96,530 159,414 275,183 227,950 162,057 107,682 4,182 3,750 3,302 3,440 2,967 3,417 3,181 3,088 82,721 48,096 107,310 115,028 - - - - (281,254) - - (357,821) - - - - 63,231 - - 128,923 - - - - 7,552 10,333 28,445 55,388 44,615 41,546 34,074 37,234 (21,199) (20,603) (3,746) (55,081) (28,464) (6,815) 45,132 (3,983) 20,859 15,573 6,583 17,344 5,154 (9,114) (37,678) (14,928) 769,054 978,417 963,354 702,498 866,692 798,805 701,743 579,667 480,174 475,991 471,897 480,519 472,744 421,764 351,855 315,443 (9,325) (34,244) (95,818) (130,756) (225,897) (216,233) (150,931) (99,845) 8,512 1,059 15,084 16,362 1,954 20,516 13,387 - 6,100 5,865 5,466 3,573 2,681 2,335 1,680 1,485 9,404 8,868 14,556 12,239 4,610 10,593 8,416 2,461 494,865 457,539 411,185 381,937 256,092 238,975 224,407 219,544 274,189 520,878 552,169 320,561 610,600 559,830 477,336 360,123 66,123 71,779 72,637 80,504 75,597 66,113 55,617 55,568 $ 208,066 $ 449,099 $ 479,532 $ 240,057 $ 535,003 $ 493,717 $ 421,719 $ 304,555
II-128 159 STATEMENTS OF CASH FLOWS Georgia Power Company
For the Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) OPERATING ACTIVITIES: Net income $ 620,527 $ 578,480 $ 536,556 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 475,152 471,014 480,318 Deferred income taxes, net 169,009 194,955 53,219 Deferred investment tax credits, net (18,274) (5,704) (9,524) Allowance for equity funds used during construction (3,168) (5,855) (9,083) Deferred Plant Vogtle costs 36,284 (30,804) (18,541) Write-off of Plant Vogtle costs - - - Non-cash proceeds from settlement of disputed contracts - (4,982) (103,846) Other, net (46,227) (9,768) (26,024) Changes in certain current assets and liabilities: Receivables, net 27,088 (31,348) 23,920 Inventories 82,433 (65,621) 24,130 Payables 17,364 25,303 (23,075) Other (94,574) (85,961) 54,777 Net cash provided from operating activities 1,265,614 1,029,709 982,827 INVESTING ACTIVITIES: Gross property additions (674,432) (508,444) (548,051) Sales of property 261,687 46 291,075 Other (43,154) 42,892 931 Net cash used for investing activities (455,899) (465,506) (256,045) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: Preferred stock 175,000 195,000 100,000 First mortgage bonds 1,135,000 975,000 - Pollution control bonds 145,425 161,955 80,420 Other long-term debt 37,000 - - Capital contributions from parent company - - - Retirements: Preferred stock (245,005) (165,004) (100,000) First mortgage bonds (1,337,822) (1,381,300) (598,384) Pollution control bonds (145,465) (160,205) (83,265) Other long-term debt (19,451) (567) (1,130) Interim obligations, net (51,444) 334,671 199,000 Payment of preferred stock dividends (53,123) (60,475) (60,766) Payment of common stock dividends (402,400) (384,000) (375,200) Miscellaneous (63,648) (70,986) (17,613) Net cash provided from (used for) financing activities (825,933) (555,911) (856,938) NET CHANGE IN CASH AND CASH EQUIVALENTS (16,218) 8,292 (130,156) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 22,114 13,822 143,978 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,896 $ 22,114 $ 13,822
( ) Denotes use of cash. II-129 160 STATEMENTS OF CASH FLOWS Georgia Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 274,189 $ 520,878 $ 552,169 $ 320,561 $ 610,600 $ 559,830 $ 477,336 $ 360,123 502,098 484,870 400,665 336,647 260,945 248,256 219,301 209,733 88,667 184,490 160,774 76,445 236,822 104,102 145,266 143,511 (52) (8,017) 11,605 (5,075) 106,407 115,144 61,252 83,266 (6,985) (40,525) (96,530) (159,414) (275,183) (227,950) (162,057) (107,682) (51,575) (87,307) (115,643) (257,005) - - - - 281,254 - - 357,821 - - - - - - - - - - - - (50,804) (38,046) 6,983 (759) 5,554 34,311 (81,166) (2,543) 1,444 (59,035) 11,225 (6,880) (7,474) (27,928) (68,325) (51,925) (23,498) (33,123) (10,044) (72,540) (26,863) 77,667 (65,772) 12,275 (43,470) (38,976) (2,065) 74,341 133,044 (9,182) 161,479 (28,993) (9,991) 36,015 1,161 2,751 19,682 21,289 99,191 9,674 961,277 921,224 920,300 666,893 1,063,534 895,539 786,505 627,439 (558,727) (727,631) (929,019) (1,034,059) (1,598,309) (1,384,182) (1,396,846) (1,015,274) 34,573 - - 12,276 - - 320,708 - 1,937 47,260 35,328 45,801 168,518 92,826 82,741 53,148 (522,217) (680,371) (893,691) (975,982) (1,429,791) (1,291,356) (993,397) (962,126) - - - 125,000 100,000 150,000 50,000 - 300,000 250,000 150,000 500,000 500,000 - 150,000 125,000 - 50,000 69,526 191,736 350,001 500,962 190,577 28,827 - - - - 113,000 - - - - - 175,000 228,000 250,000 315,000 202,000 223,000 (83,750) (7,500) (3,750) (150,000) (7,500) (3,750) (2,380) (4,378) (91,117) (91,516) (206,677) (217,949) (377,538) (17,738) (26,084) (18,273) (535) (505) (475) (90,000) - - - - (114,452) (3,806) (2,878) (2,824) (108) (843) (276) 3,617 - - (302,261) 302,261 (36,715) (72,956) 109,356 - (67,757) (72,259) (72,931) (80,420) (73,665) (62,337) (55,433) (55,946) (389,600) (394,500) (386,600) (377,800) (325,500) (277,500) (225,500) (189,600) (7,663) (4,742) (13,440) (51,745) (33,773) (17,503) (17,975) (1,874) (454,874) (274,828) (594,486) 376,259 458,202 513,335 374,285 110,373 (15,814) (33,975) (567,877) 67,170 91,945 117,518 167,393 (224,314) 159,792 193,767 761,644 694,474 602,529 485,011 317,618 541,932 $ 143,978 $ 159,792 $ 193,767 $ 761,644 $ 694,474 $ 602,529 $ 485,011 $ 317,618
II-130 161 BALANCE SHEETS Georgia Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) ASSETS ELECTRIC PLANT: Production- Fossil $ 2,976,806 $ 3,144,405 $ 3,128,594 Nuclear 4,069,299 4,051,020 4,051,043 Hydro 442,888 434,341 432,674 Total production 7,488,993 7,629,766 7,612,311 Transmission 1,713,122 1,646,904 1,566,173 Distribution 3,600,115 3,413,681 3,252,111 General 941,291 923,010 896,477 Construction work in progress 584,013 405,606 390,437 Nuclear fuel, at amortized cost 135,742 155,194 191,726 Total electric plant 14,463,276 14,174,161 13,909,235 STEAM HEAT PLANT - - - Total utility plant 14,463,276 14,174,161 13,909,235 ACCUMULATED PROVISION FOR DEPRECIATION: Electric 3,822,344 3,569,717 3,315,247 Steam heat - - - Total accumulated provision for depreciation 3,822,344 3,569,717 3,315,247 Total 10,640,932 10,604,444 10,593,988 Less property-related accumulated deferred income taxes - 1,589,743 1,465,408 Total 10,640,932 9,014,701 9,128,580 OTHER PROPERTY AND INVESTMENTS: Securities received from settlement of disputed contracts - - 107,993 Nuclear decommissioning trusts 37,937 20,311 10,007 Miscellaneous 61,142 55,463 71,880 Total 99,079 75,774 189,880 CURRENT ASSETS: Cash and cash equivalents 5,896 22,114 13,822 Investment securities - 108,206 - Receivables, net 515,178 385,227 330,411 Accrued utility revenues 99,550 88,164 79,099 Fossil fuel stock, at average cost 111,620 197,332 200,248 Materials and supplies, at average cost 287,551 284,272 215,735 Prepayments 65,269 91,447 96,750 Vacation pay deferred 41,575 40,169 39,769 Total current assets 1,126,639 1,216,931 975,834 DEFERRED CHARGES: Deferred charges related to income taxes 992,510 - - Deferred Plant Vogtle costs 506,980 383,025 375,028 Debt expense, being amortized 20,730 17,719 12,368 Premium on reacquired debt, being amortized 153,146 116,940 70,855 Miscellaneous 196,094 139,352 89,993 Total deferred charges 1,869,460 657,036 548,244 Total Assets $ 13,736,110 $ 10,964,442 $ 10,842,538
II-131 162 BALANCE SHEETS Georgia Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 3,350,018 $ 3,319,876 $ 2,638,725 $ 2,616,741 $ 2,138,511 $ 2,118,863 $ 2,105,551 $ 2,039,200 4,025,862 4,189,723 3,225,945 3,220,632 739,835 652,756 647,020 585,646 412,157 411,235 407,771 404,291 399,120 388,832 303,334 297,622 7,788,037 7,920,834 6,272,441 6,241,664 3,277,466 3,160,451 3,055,905 2,922,468 1,522,157 1,431,485 1,322,034 1,248,976 1,176,479 1,004,329 949,802 859,656 3,056,825 2,863,011 2,598,714 2,318,185 2,096,498 1,892,127 1,722,546 1,589,387 876,989 859,013 737,621 657,258 578,236 501,477 452,119 425,947 370,243 403,365 1,963,283 1,710,769 4,430,152 3,581,065 2,694,628 2,038,763 210,320 254,101 307,109 287,492 314,225 253,418 231,456 204,162 13,824,571 13,731,809 13,201,202 12,464,344 11,873,056 10,392,867 9,106,456 8,040,383 - - - 7 15,266 14,709 15,419 15,617 13,824,571 13,731,809 13,201,202 12,464,351 11,888,322 10,407,576 9,121,875 8,056,000 3,040,298 2,762,937 2,445,404 2,193,395 2,001,605 1,851,649 1,693,788 1,536,342 - - - (5) 7,841 7,517 7,696 7,347 3,040,298 2,762,937 2,445,404 2,193,390 2,009,446 1,859,166 1,701,484 1,543,689 10,784,273 10,968,872 10,755,798 10,270,961 9,878,876 8,548,410 7,420,391 6,512,311 1,397,647 1,313,626 1,178,291 1,077,747 1,020,271 920,047 873,024 771,671 9,386,626 9,655,246 9,577,507 9,193,214 8,858,605 7,628,363 6,547,367 5,740,640 - - - - - - - - - - - - - - - - 78,895 69,839 66,677 54,148 50,749 39,357 38,143 22,523 78,895 69,839 66,677 54,148 50,749 39,357 38,143 22,523 143,978 159,792 193,767 761,644 694,474 602,529 485,011 317,618 - - - - - - - - 356,236 347,899 320,018 342,315 374,590 367,226 350,197 270,512 78,067 93,786 66,265 68,370 55,513 55,403 44,504 55,864 225,966 214,487 225,274 262,752 220,206 210,604 289,807 230,758 220,103 208,084 164,174 116,652 86,658 69,397 67,861 61,138 121,646 116,342 121,840 113,381 44,800 8,506 6,697 8,093 33,677 35,238 34,418 30,100 29,800 28,700 26,600 24,800 1,179,673 1,175,628 1,125,756 1,695,214 1,506,041 1,342,365 1,270,677 968,783 - - - - - - - - 364,446 322,116 269,958 172,990 - - - - 12,708 13,032 12,476 12,985 12,860 12,450 11,218 8,837 60,653 61,889 62,352 51,509 26,914 - - - 93,618 74,596 15,813 17,434 9,894 8,083 12,667 5,464 531,425 471,633 360,599 254,918 49,668 20,533 23,885 14,301 $ 11,176,619 $ 11,372,346 $ 11,130,539 $11,197,494 $ 10,465,063 $ 9,030,618 $ 7,880,072 $ 6,746,247
II-132 163 BALANCE SHEETS Georgia Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock $ 344,250 $ 344,250 $ 344,250 Other paid-in capital 2,384,348 2,384,140 2,383,800 Premium on preferred stock 413 467 489 Earnings retained in the business 1,316,447 1,159,380 1,038,012 Total common equity 4,045,458 3,888,237 3,766,551 Preferred stock 692,787 692,792 607,796 Preferred stock subject to mandatory redemption - 6,250 118,750 Long-term debt 4,031,387 4,131,016 4,553,189 Total capitalization 8,769,632 8,718,295 9,046,286 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 406,700 400,200 199,000 Commercial paper 75,527 133,471 - Preferred stock due within one year - 63,750 6,250 Long-term debt due within one year 10,543 95,823 54,976 Accounts payable 324,044 317,351 275,932 Customer deposits 45,922 45,145 41,623 Taxes accrued 153,493 138,289 161,117 Interest accrued 110,497 132,319 151,171 Vacation pay accrued 40,060 38,694 38,531 Miscellaneous 64,527 89,355 106,810 Total current liabilities 1,231,313 1,454,397 1,035,410 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 2,479,720 - - Accumulated deferred investment tax credits 478,334 515,539 540,134 Disallowed Plant Vogtle capacity buyback costs 63,067 72,201 109,537 Deferred credits related to income taxes 452,819 - - Miscellaneous 261,225 204,010 111,171 Total deferred credits and other liabilities 3,735,165 791,750 760,842 TOTAL CAPITALIZATION AND LIABILITIES $ 13,736,110 $ 10,964,442 $ 10,842,538
II-133 164 BALANCE SHEETS Georgia Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 344,250 $ 344,250 $ 344,250 $ 344,250 $ 344,250 $ 344,250 $ 344,250 $ 344,250 2,383,800 2,383,800 2,383,800 2,208,800 1,980,800 1,730,800 1,415,800 1,213,800 1,089 1,089 1,089 1,089 3,074 3,074 3,058 2,898 944,774 1,131,518 1,076,931 984,043 1,141,077 935,583 723,064 528,223 3,673,913 3,860,657 3,806,070 3,538,182 3,469,201 3,013,707 2,486,172 2,089,171 607,796 607,844 657,844 657,844 732,844 632,844 482,844 432,844 125,000 155,000 162,500 166,250 112,500 120,000 127,500 131,250 5,000,225 5,054,001 4,861,378 4,825,760 4,464,857 3,878,066 3,432,606 3,128,500 9,406,934 9,677,502 9,487,792 9,188,036 8,779,402 7,644,617 6,529,122 5,781,765 - - - 302,261 - 36,400 109,356 - - - - - - - - - - 53,750 3,750 3,750 7,500 7,500 3,750 2,380 204,906 54,712 42,001 65,774 47,683 48,229 21,324 24,100 310,676 372,968 429,807 446,004 488,910 355,866 365,048 203,569 38,144 36,255 34,221 31,106 29,520 29,752 34,838 31,851 84,185 91,424 130,686 114,947 140,968 92,028 151,438 107,753 175,959 162,513 170,090 162,439 150,145 136,279 117,759 89,626 33,677 35,238 34,418 30,100 29,800 28,700 26,600 24,800 135,392 130,546 51,289 62,364 70,595 60,965 37,874 30,204 982,939 937,406 896,262 1,218,745 965,121 795,719 867,987 514,283 - - - - - - - - 576,837 601,248 632,111 640,694 665,447 572,509 471,640 421,821 135,926 73,111 80,585 79,376 - - - - - - - - - - - - 73,983 83,079 33,789 70,643 55,093 17,773 11,323 28,378 786,746 757,438 746,485 790,713 720,540 590,282 482,963 450,199 $ 11,176,619 $ 11,372,346 $ 11,130,539 $11,197,494 $ 10,465,063 $ 9,030,618 $ 7,880,072 $ 6,746,247
II-134 165 GEORGIA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1993 FIRST MORTGAGE BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1992 $ 130,000 5-1/8% $ 130,000 9/1/95 1993 150,000 4.75% 150,000 3/1/96 1993 100,000 5.50% 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 6.625% 200,000 4/1/03 1993 75,000 6.35% 75,000 8/1/03 1993 50,000 6.875% 50,000 4/1/08 1986 250,000 10% 69,716 7/1/16 1989 250,000 9.23% 100,000 12/1/19 1992 100,000 8-3/4% 100,000 4/1/22 1992 100,000 8-5/8% 100,000 6/1/22 1993 160,000 7.95% 160,000 2/1/23 1993 100,000 7.625% 100,000 3/1/23 1993 75,000 7.75% 75,000 4/1/23 1993 125,000 7.55% 125,000 8/1/23 1992 100,000 Variable 100,000 4/1/32 1992 100,000 Variable 100,000 7/1/32 $2,610,000 $2,279,716 POLLUTION CONTROL BONDS Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1992 $ 38,800 5.70% $ 38,800 9/1/04 1993 46,790 5.375% 46,790 3/1/05 1976 40,800 6.75% 1,960 11/1/06 1977 24,100 6.40% 1,980 6/1/07 1978 21,600 6.375% 8,200 4/1/08 1991 10,450 Variable 10,450 7/1/11 1984 40,000 11.625% 28,065 3/1/14 1984 125,000 12.25% 113,745 8/1/14 1984 125,000 11.625% 123,175 9/1/14 1984 150,000 12% 126,735 10/1/14 1984 100,000 11.75% 75,070 11/1/14 1985 150,000 10.125% 148,535 6/1/15 1985 200,000 10.50% 200,000 9/1/15 1985 100,000 10.60% 100,000 10/1/15 1985 100,000 10.50% 99,585 11/1/15 1986 56,400 8% 56,400 10/1/16 1987 90,000 8.375% 90,000 7/1/17 1987 50,000 9.375% 50,000 12/1/17 1993 26,700 6% 26,700 3/1/18 1989 50,000 Variable 50,000 5/1/19 1991 8,500 Variable 8,500 7/1/19 1991 51,345 7.25% 51,345 7/1/21 1991 10,125 Variable 10,125 7/1/21 1992 13,155 Variable 13,155 5/1/22 1992 75,000 6.20% 75,000 8/1/22 1992 35,000 6.20% 35,000 9/1/22 1993 11,935 5.75% 11,935 9/1/23 1993 60,000 5.75% 60,000 9/1/23 $1,810,700 $1,661,250
II-135 166 GEORGIA POWER COMPANY OUTSTANDING SECURITIES (Continued) AT DECEMBER 31, 1993
PREFERRED STOCK --------------- Shares Dividend Amount Series Outstanding Rate Outstanding (Thousands) (1) 14,090 $5.00 $ 1,409 1953 100,000 $4.92 10,000 1954 411,564 $4.60 41,157 1954 22,214 $4.60 2,221 1961 70,000 $4.96 7,000 1962 70,000 $4.60 7,000 1963 70,000 $4.60 7,000 1964 50,000 $4.60 5,000 1965 60,000 $4.72 6,000 1966 90,000 $5.64 9,000 1967 120,000 $6.48 12,000 1968 100,000 $6.60 10,000 1971 300,000 $7.72 30,000 1972 750,000 $7.80 75,000 1991 4,000,000 $2.125 100,000 1992 2,000,000 $1.90 50,000 1992 2,200,000 $1.9875 55,000 1992 2,400,000 $1.9375 60,000 1992 1,200,000 $1.925 30,000 1993 3,000,000 Adjustable 75,000 1993 4,000,000 Adjustable 100,000 21,027,868 $ 692,787
(1) Issued in exchange for $5.00 preferred outstanding at the time of company formation. II-136 167 GEORGIA POWER COMPANY SECURITIES RETIRED DURING 1993 FIRST MORTGAGE BONDS
Principal Interest Series Amount Rate (Thousands) 1964 $ 28,000 4.625% 1965 36,500 4.875% 1966 45,368 5.75% 1967 50,000 6.50% 1968 50,000 6.625% 1971 49,500 7.375% 1971 95,000 7.625% 1972 75,000 7.50% 1972 150,000 7.50% 1973 115,000 7.875% 1986 172,284 10.00% 1986 200,000 10.00% 1987 176,235 10.75% 1988 44,935 10.75% 1990 50,000 Variable $1,337,822 POLLUTION CONTROL BONDS Principal Interest Series Amount Rate (Thousands) 1973 $ 37,990 5.95% 1976 20 6.75% 1977 22,120 6.40% 1978 13,400 6.375% 1984 11,050 12.25% 1984 11,935 11.625% 1984 1,500 11.625% 1984 22,550 12.00% 1984 24,900 11.75% $ 145,465 PREFERRED STOCK Principal Dividend Series Amount Rate (Thousands) (1) $ * $5.00 1954 5 $4.60 1969 15,000 $8.20 1970 10,000 $8.76 1984 50,000 Adjustable 1985 50,000 Adjustable 1985 50,000 Adjustable 1987 25,000 $2.50 1987 45,000 $2.43 $ 245,005
(1) Issued in exchange for $5.00 preferred outstanding at the time of company formation. * Less than $500. II-137 168 GULF POWER COMPANY FINANCIAL SECTION II-138 169 MANAGEMENT'S REPORT Gulf Power Company 1993 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 the 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/ D. L. McCrary /s/ A. E. Scarbrough - -------------------------- ------------------------ Douglas L. McCrary Arlan E. Scarbrough Chairman of the Board Vice President - Finance and Chief Executive Officer II-139 170 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 The Southern Company) as of December 31, 1993 and 1992, 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, 1993. 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-148 through II-165) referred to above present fairly, in all material respects, the financial position of Gulf Power Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 8 to the financial statements, effective January 1, 1993, Gulf Power Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen & Co. Atlanta, Georgia February 16, 1994 II-140 171 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Gulf Power Company 1993 Annual Report RESULTS OF OPERATIONS EARNINGS Gulf Power Company's net income after preferred stock dividends was $54.3 million for 1993, a $0.2 million increase over 1992 net income. Earnings reflect a $2.3 million gain on the sale of Gulf States Utilities Company (Gulf States) stock and the reversal of a $1.7 million wholesale rate refund as the result of a court order which is further discussed in Note 3 to the financial statements under "Recovery of Contract Buyout Costs". The company also experienced growth in residential and commercial sales and a decrease in interest expense on long-term debt as a result of security refinancings, offset by higher operation and maintenance expense, and decreased industrial sales reflecting the loss of the Company's largest industrial customer, Monsanto, which began cogeneration in August of 1993. The Company's 1992 net income after dividends on preferred stock decreased $3.7 million compared to the prior year. The 1991 earnings included an after-tax gain of $12.7 million representing the settlement of litigation with Gulf States. See Note 7 to the financial statements under "Gulf States Settlement Completed" for further details. Excluding this settlement from 1991, earnings for 1992 increased $8.4 million -- or approximately -- 18.7 percent over 1991. This improvement was due to increased energy sales; lower interest expense and preferred dividends as a result of security refinancings; and continued emphasis on cost controls. The Company's return on average common equity was 13.29 percent for 1993, a slight decrease from the 13.62 percent return earned in 1992, which was up from the 12.03 percent earned in 1991 (excluding the Gulf States settlement). REVENUES Changes in operating revenues over the last three years are the result of the following factors:
Increase (Decrease) From Prior Year 1993 1992 1991 (in thousands) Retail -- Change in base rates $ 1,571 $ 722 $ 3,137 Sales growth 7,671 12,965 2,387 Weather 4,049 (6,448) 1,845 Regulatory cost recovery and other (3,079) (1,839) 13,947 Total retail 10,212 5,400 21,316 Sales for resale-- Non-affiliates 2,131* 442 (4,219) Affiliates (909) (5,268) (9,220) Total Sales for resale 1,222 (4,826) (13,439) Other operating revenues 806 5,121 (10,495) Total operating revenues $12,240 $ 5,695 $ (2,618) Percent change 2.1% 1.0% (0.5)%
* Includes the non-interest portion of the wholesale rate refund reversal discussed in "Earnings." Retail revenues of $471.7 million in 1993 increased $10.2 million or 2.2 percent from last year, compared with an increase of 1.2 percent in 1992 and 4.9 percent in 1991. Revenues increased in the residential and commercial classes primarily due to customer growth, and favorable weather and economic conditions. Revenues in the industrial class declined due to the loss of the Company's largest industrial customer, Monsanto, which began operating its cogeneration facility in August 1993. See "Future Earnings Potential" for further details. The change in base rates for 1993 and 1992 reflects the expiration of a retail rate penalty in September 1992. Sales for resale were $95.4 million in 1993, increasing $1.2 million or 1.3 percent over 1992. Sales to affiliated companies vary from year to year depending on demand and the availability and cost of generating resources at each company. The majority of non-affiliated energy sales arise from long-term contractual agreements. Non-affiliated long-term contracts include capacity and energy components. Capacity revenues reflect the recovery of II-141 172 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report fixed costs and return on investment. Energy is sold at its variable cost. The capacity and energy components under these long-term contracts were as follows:
1993 1992 1991 (in thousands) Capacity $33,805 $34,180 $32,651 Energy 21,202 22,933 23,311 Total $55,007 $57,113 $55,962
Beginning in June 1992, all the capacity from the Company's ownership portion of Plant Scherer Unit No. 3 was sold through unit power sales, resulting in increased capacity revenues. In 1993, changes in other operating revenues are primarily due to the recognition of $2.6 million under the Environmental Cost Recovery (ECR) clause which is fully discussed in Note 3 to the financial statements under "Environmental Cost Recovery", which is offset by true-ups of other regulatory cost recovery clauses. The increase in other operating revenues in 1992 was primarily due to true-ups of regulatory cost recovery clauses and the changes in franchise fee collections and Florida gross receipts taxes (discussed under "Expenses") which had no effect on earnings. Energy sales for 1993 and percent changes in sales since 1991 are reported below.
Amount Percent Change (millions of kilowatt-hours) 1993 1993 1992 1991 Residential 3,713 3.2% 4.1% 2.8% Commercial 2,433 2.7 4.2 2.5 Industrial 2,030 (6.9) 2.9 (2.8) Other 17 - (2.7) (9.3) Total retail 8,193 0.4 3.8 1.1 Sales for resale Non-affiliates 1,460 2.0 (7.7) (12.7) Affiliates 1,030 (14.8) (2.2) (13.9) Total 10,683 (1.1) 1.4 (3.1)
Overall retail sales remained relatively flat in 1993. Increases in residential and commercial sales -- reflecting customer growth, favorable weather and an improving economy -- were offset by the decreased sales in the industrial class reflecting the loss of Monsanto. Retail sales increased 3.8 percent in 1992 primarily due to an increase in the number of customers served and a moderately improving economy. Energy sales for resale to non-affiliates increased 2.0 percent and are predominantly unit power sales under long-term contracts to Florida utilities which are discussed above. Energy sales to affiliated companies vary from year to year as mentioned above. EXPENSES Total operating expenses for 1993 increased $16.6 million or 3.5 percent over 1992 primarily due to increased operation and maintenance expenses and higher taxes. Other operation expenses increased $10.9 million or 11.1 percent from the 1992 level. The increase is attributable to additional costs of $7.4 million related to increases in the buyout of coal supply contracts and $1.4 million of environmental clean-up costs. Also, higher employee benefit costs and the costs of an automotive fleet reduction program increased expenses by $2.1 million. Operating expenses for 1992 increased by approximately $16 million over 1991. Excluding the Gulf States settlement, an after-tax reduction of $0.6 million in 1992 and $12.7 million in 1991, 1992 total operating expenses increased $4.3 million or 0.9 percent over 1991. Fuel and purchased power expenses decreased $3.8 million or 1.8 percent from 1992 reflecting the lower cost of fuel. Total 1992 fuel and purchased power increased $1.4 million or 0.7 percent from 1991. Maintenance expense increased $4.1 million or 9.7 percent over 1992 due to scheduled maintenance of production facilities. The 1992 maintenance expense was down $3.5 million or 7.7 percent from 1991 due to a decrease in scheduled maintenance. Federal income taxes increased $0.7 million primarily due to a corporate federal income tax rate increase from 34 percent to 35 percent effective January 1993. Taxes other than income taxes increased $2.3 million in 1993, an increase of 6.1 percent over the 1992 expense II-142 173 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report primarily due to increases in property taxes and gross receipt taxes. Taxes other than income taxes decreased $4.5 million, or 10.5 percent in 1992 compared to 1991 due primarily to the Company discontinuing the collection of franchise fees for two Florida counties which was partially offset by an increase in gross receipt taxes. Changes in franchise fee collections and gross receipt taxes had no impact on earnings. Interest expense decreased $3.2 million or 8.1 percent from the 1992 level and 1992 interest expense decreased $5.6 million or 12.5 percent from 1991. The decrease in both years is primarily attributable to refinancing some of the Company's higher cost securities. EFFECTS OF INFLATION The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its cost of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. 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 a number of factors. It is expected that higher operating costs and carrying charges on increased investment in plant, if not offset by proportionate increases in operating revenues (either by periodic rate increases or increases in sales), will adversely affect future earnings. Growth in energy sales will be subject to a number of factors, including the volume of sales to neighboring utilities, energy conservation practiced by customers, the elasticity of demand, customer growth, weather, competition, and the rate of economic growth in the service area. In addition to the traditional factors discussed above, the Energy Policy Act of 1992 (Energy Act) will have a profound 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 preparing to meet the challenges of a major change in the traditional business practices 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, and this may enhance the incentive for IPPs to build cogeneration plants for the Company's large industrial and commercial customers and sell excess energy generation to the Company or other utilities. Although the Energy Act does not require transmission access to retail customers, pressure for legislation to allow retail wheeling will continue. If the Company does not remain a low-cost producer and provide quality service, the Company's retail energy sales growth, its ability to retain large industrial and commercial customers, and obtain new long-term contracts for energy sales outside the Company's service area, could be limited, and this could significantly erode earnings. The future effect of cogeneration and small-power production facilities cannot be fully determined at this time, but may be adverse. One effect of cogeneration which the Company has experienced is the loss of its largest industrial customer, Monsanto, in August of 1993. The loss of the Monsanto load reduced revenues, and will result in a reduction in net income of approximately $3 million in the first twelve months. 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 is currently reviewing the rate of return on common equity included in these schedules and contracts that have a return on common equity of 13.75 percent or greater, and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Reviews Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters". II-143 174 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report Also, recently enacted legislation that provides for recovery of prudent environmental compliance costs is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." The Company filed a notice with the Florida Public Service Commission (FPSC) of its intent to obtain rate relief in February 1993. On May 4, 1993, the FPSC approved a stipulation between the Company, the Office of Public Counsel, and the Florida Industrial Power Users Group to cancel the filing of the rate case. The stipulation also allowed the Company to retain, for the next four years, its existing method for calculating accruals for future power plant dismantlement costs. The existing method provides a more even allocation of expenses over the life of the plants and results in an avoided increase in expenses of about $6 million annually over the next four years when compared to the FPSC method. The stipulation also provided for the reduction of the Company's allowed return on equity midpoint from 12.55 percent to 12.0 percent. After the February 1993 filing date, interest rates continued to remain low, resulting in lower cost of capital. Also, the Florida legislature adopted legislation which allows utilities to petition the FPSC for recovery of environmental costs through an adjustment clause if these costs are not being recovered in base rates. See Note 3 to the financial statements under "Environmental Cost Recovery" for further details. The combination of the circumstances discussed above, placed the Company in a better position to manage its finances without an increase in base rates while still providing a fair return for the Company's investors. Consequently, the Company agreed, as a part of this stipulation, to cancel the filing of the rate case. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be effective by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental benefits, disability-related benefits, job training, and health and life insurance coverage. In 1993, the Company adopted Statement No. 112, which resulted in a decrease in earnings of $0.3 million. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which is effective in 1994. Statement No. 115 supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The Company does not have any investments that qualify for FASB Statement No. 115 treatment. FINANCIAL CONDITION OVERVIEW The principal changes in the Company's financial condition during 1993 were gross property additions of $79 million. Funds for these additions were provided by internal sources. The Company continued to refinance higher cost securities to lower the Company's cost of capital. See "Financing Activities" below and the Statements of Cash Flows for further details. On January 1, 1993, the Company changed its method of calculating the accruals for postretirement benefits other than pensions and its method of accounting for income taxes. See Notes 2 and 8 to the financial statements, regarding the impact of these changes. FINANCING ACTIVITIES As mentioned above, the Company continued to lower its financing costs by issuing new securities and other debt, and retiring higher-cost issues in 1993. The Company sold $75 million of first mortgage bonds and, through public authorities, $53.4 million of pollution control revenue bonds, issued $35 million of preferred stock, and obtained $25 million with a long-term bank note. Retirements, including maturities during 1993, totaled $88.8 million of first mortgage bonds, $40.7 million of pollution control revenue bonds, and $21.1 million of preferred stock. (See the Statements of Cash Flows for further details.) II-144 175 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report Composite financing rates for the years 1991 through 1993 as of year end were as follows:
1993 1992 1991 Composite interest rate on 7.1% 8.0% 8.4% long-term debt Composite preferred stock 6.5% 7.3% 8.0% dividend rate
CAPITAL REQUIREMENTS FOR CONSTRUCTION The Company's gross property additions, including those amounts related to environmental compliance, are budgeted at $200 million for the three years beginning 1994 ($77 million in 1994, $55 million in 1995, and $68 million in 1996). The estimates of property additions for the three-year period include $25 million committed to meeting the requirements of the Clean Air Act, the cost of which is expected to be recovered through the ECR clause which is discussed in Note 3 to the financial statements under "Environmental Cost Recovery". Actual construction costs may vary from this estimate because of factors such as the granting of timely and adequate rate increases; changes in environmental regulations; revised load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. The Company does not have any baseload generating plants under construction. However, the Company plans to construct two 80 megawatt combustion turbine peaking units. The first is scheduled to be completed in 1998, and the second in 1999. Significant construction of transmission and distribution facilities and upgrading of generating plants will be continuing. OTHER CAPITAL REQUIREMENTS In addition to the funds needed for the construction program, approximately $86 million will be required by the end of 1996 in connection with maturities of long-term debt and preferred stock subject to mandatory redemption. Also, the Company plans to continue a program to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital. ENVIRONMENTAL MATTERS In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995 and affects eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing slower than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $275 million for The Southern Company including $34 million for Gulf Power Company through 1995. II-145 176 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance could require total construction expenditures ranging from approximately $450 million to $800 million for The Southern Company including approximately $30 million to $40 million for Gulf Power Company. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. Following adoption of legislation in April of 1992, allowing electric utilities in Florida to seek FPSC approval of their Clean Air Act Compliance Plans, the Company filed its petition for approval. The Commission approved the Company's plan for Phase I compliance, deferring until a later date approval of its Phase II Plan. An average increase of up to 4 percent in annual revenue requirements from Gulf Power Company customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. The Florida Legislature recently adopted legislation that allows a utility to petition the FPSC for recovery of prudent environmental compliance costs through an ECR clause without lengthy regulatory full revenue requirements rate proceedings. The legislation is discussed in Note 3 to the financial statements under "Environmental Cost Recovery". Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. Gulf Power 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. II-146 177 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1993 Annual Report Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; and the Resource Conservation and Recovery Act. Changes to these laws could affect many areas of Gulf Power Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect Gulf Power Company. The impact of new legislation - -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential for lawsuits alleging damages caused by electromagnetic fields exists. COAL STOCKPILE DECREASES To reduce the working capital invested in the coal stockpile inventory, the Company implemented a coal stockpile reduction program in 1992. The Company's actual year end inventory at December 31, 1993 was $20.7 million which is considerably lower than the desired level of $31.4 million. This situation exists because a limited supply of coal was available at competitive prices primarily due to the United Mine Workers strike from July to December 1993. In addition, barge transportation was stranded due to floods in the Midwest. As a result of these circumstances, management chose to allow the existing coal inventory to decline until coal prices stabilized. Current market conditions indicate that substantial coal supplies at competitive prices are now available. Therefore, the Company plans to increase purchases and return the coal stockpile inventory to the desired level by the end of the third quarter, 1994. SOURCES OF CAPITAL At December 31, 1993, the Company had $5.6 million of cash and cash equivalents to meet its short-term cash needs. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations; the sale of additional first mortgage bonds, pollution control bonds, and preferred stock; and capital contributions from The Southern Company. The Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficient to permit, at present interest and preferred dividend levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-147 178 STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 Gulf Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING REVENUES: Revenues $ 559,976 $ 546,827 $ 535,864 Revenues from affiliates 23,166 24,075 29,343 Total operating revenues 583,142 570,902 565,207 OPERATING EXPENSES: Operation- Fuel 170,485 182,754 176,038 Purchased power from non-affiliates 4,386 1,394 896 Purchased power from affiliates 32,273 26,788 32,579 Proceeds from settlement of disputed contracts (Note 7) - (920) (20,385) Other 109,164 98,230 94,411 Maintenance 46,004 41,947 45,468 Depreciation and amortization 55,309 53,758 52,195 Taxes other than income taxes 40,204 37,898 42,359 Federal and state income taxes (Note 8) 32,730 32,078 33,893 Total operating expenses 490,555 473,927 457,454 OPERATING INCOME 92,587 96,975 107,753 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction (Note 1) 512 14 54 Interest income 1,328 2,733 2,427 Other, net (1,238) (1,487) (3,484) Gain on sale of investment securities 3,820 - - Income taxes applicable to other income (921) 187 1,104 INCOME BEFORE INTEREST CHARGES 96,088 98,422 107,854 INTEREST CHARGES: Interest on long-term debt 31,344 35,792 41,665 Allowance for debt funds used during construction (Note 1) (454) (46) (95) Interest on notes payable 870 1,041 280 Amortization of debt discount, premium, and expense, net 1,412 1,032 699 Other interest charges 2,877 1,410 2,272 Net interest charges 36,049 39,229 44,821 NET INCOME 60,039 59,193 63,033 DIVIDENDS ON PREFERRED STOCK 5,728 5,103 5,237 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 54,311 $ 54,090 $ 57,796
The accompanying notes are an integral part of these statements. II-148 179 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993, 1992, and 1991 Gulf Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING ACTIVITIES: Net income $ 60,039 $ 59,193 $ 63,033 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 72,111 68,021 65,584 Deferred income taxes and investment tax credits 5,347 3,322 (3,392) Allowance for equity funds used during construction (512) (14) (54) Non-cash proceeds from settlement of disputed contracts (Note 7) - (920) (19,734) Other, net (864) 185 3,079 Changes in certain current assets and liabilities -- Receivables, net 12,867 (11,041) 12,421 Inventories 5,574 23,560 (2,397) Payables 5,386 1,580 (2,003) Other (9,504) (13,637) 8,012 Net cash provided from operating activities 150,444 130,249 124,549 INVESTING ACTIVITIES: Gross property additions (78,562) (64,671) (64,323) Other (5,328) 3,970 (8,097) Net cash used for investing activities (83,890) (60,701) (72,420) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: Preferred stock 35,000 29,500 - First mortgage bonds 75,000 25,000 50,000 Pollution control bonds 53,425 8,930 21,200 Capital contributions from parent 11 121 - Other long-term debt 25,000 - - Retirements: Preferred stock (21,060) (15,500) (2,500) First mortgage bonds (88,809) (117,693) (32,807) Pollution control bonds (40,650) (9,205) (21,250) Other long-term debt (7,736) (5,783) (7,981) Notes payable, net (37,947) 44,000 - Payment of preferred stock dividends (5,728) (5,103) (5,237) Payment of common stock dividends (41,800) (39,900) (38,000) Miscellaneous (6,888) (8,760) (3,715) Net cash used for financing activities (62,182) (94,393) (40,290) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,372 (24,845) 11,839 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,204 26,049 14,210 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,576 $ 1,204 $ 26,049 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for -- Interest (net of amount capitalized) $28,470 $38,164 $39,814 Income taxes $27,865 $37,569 $26,915
( ) Denotes use of cash. The accompanying notes are an integral part of these statements. II-149 180 BALANCE SHEETS At December 31, 1993 and 1992 Gulf Power Company 1993 Annual Report
ASSETS 1993 1992 (in thousands) UTILITY PLANT: Plant in service (Notes 1 and 6) $ 1,611,704 $ 1,561,491 Less accumulated provision for depreciation 610,542 578,851 1,001,162 982,640 Construction work in progress 34,591 29,564 Total 1,035,753 1,012,204 Less property-related accumulated deferred income taxes (Note 8) - 200,904 Total 1,035,753 811,300 OTHER PROPERTY AND INVESTMENTS 13,242 7,074 CURRENT ASSETS: Cash and cash equivalents 5,576 1,204 Investment securities (Notes 1 and 7) - 22,322 Receivables- Customer accounts receivable 57,226 55,103 Other accounts and notes receivable 5,904 3,237 Affiliated companies 1,241 2,063 Accumulated provision for uncollectible accounts (447) (356) Fossil fuel stock, at average cost 20,652 29,492 Materials and supplies, at average cost 36,390 33,124 Current portion of deferred coal contract costs (Note 5) 12,535 3,071 Regulatory clauses under recovery (Note 1) 3,244 1,680 Prepayments 2,160 1,395 Vacation pay deferred (Note 1) 4,022 3,779 Total 148,503 156,114 DEFERRED CHARGES: Deferred charges related to income taxes (Note 8) 31,334 - Debt expense, being amortized 3,693 3,253 Premium on reacquired debt, being amortized 17,554 15,319 Deferred coal contract costs (Note 5) 52,884 63,723 Miscellaneous 4,846 5,916 Total 110,311 88,211 TOTAL ASSETS $ 1,307,809 $ 1,062,699
The accompanying notes are an integral part of these statements. II-150 181 BALANCE SHEETS (continued) At December 31, 1993 and 1992 Gulf Power Company 1993 Annual Report
CAPITALIZATION AND LIABILITIES 1993 1992 (in thousands) CAPITALIZATION (SEE ACCOMPANYING STATEMENTS): Common stock equity (Note 11) $ 414,196 $ 403,190 Preferred stock 89,602 74,662 Preferred stock subject to mandatory redemption 1,000 2,000 Long-term debt 369,259 382,047 Total 874,057 861,899 CURRENT LIABILITIES: Preferred stock due within one year 1,000 1,000 Long-term debt due within one year (Note 10) 41,552 13,820 Notes payable 6,053 44,000 Accounts payable- Affiliated companies 18,560 5,323 Other 20,139 28,138 Customer deposits 15,082 15,532 Taxes accrued- Federal and state income 10,330 3,326 Other 2,685 8,093 Interest accrued 5,420 6,370 Regulatory clauses over recovery (Note 1) 840 - Vacation pay accrued (Note 1) 4,022 3,779 Miscellaneous 8,527 3,950 Total 134,210 133,331 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 8) 151,743 - Deferred credits related to income taxes (Note 8) 76,876 - Accumulated deferred investment tax credits 40,770 43,117 Accumulated provision for property damage (Note 1) 10,509 9,692 Accumulated provision for postretirement benefits (Note 2) 10,749 7,662 Miscellaneous 8,895 6,998 Total 299,542 67,469 COMMITMENTS AND CONTINGENT MATTERS (NOTES 1, 2, 3, 4, 5, AND 7) TOTAL CAPITALIZATION AND LIABILITIES $ 1,307,809 $ 1,062,699
The accompanying notes are an integral part of these statements. II-151 182 STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 Gulf Power Company 1993 Annual Report
1993 1992 1993 1992 (in thousands) (percent of total) COMMON STOCK EQUITY: Common stock, without par value -- Authorized and outstanding -- 992,717 shares in 1993 and 1992 $ 38,060 $ 38,060 Paid-in capital 218,282 218,271 Premium on preferred stock 81 88 Retained earnings (Note 11) 157,773 146,771 Total common stock equity 414,196 403,190 47.4 % 46.8 % CUMULATIVE PREFERRED STOCK: $10 par value, authorized 10,000,000 shares, Outstanding 2,580,000 shares at December 31, 1993 $25 stated capital -- 7.00% 14,500 14,500 7.30% 15,000 15,000 6.72% 20,000 - Adjustable Rate -- at January 1, 1994: 4.80% 15,000 - $100 par value -- Authorized -- 781,626 shares Outstanding -- 251,026 shares at December 31, 1993 4.64% 5,102 5,102 5.16% 5,000 5,000 5.44% 5,000 5,000 7.52% 5,000 5,000 7.88% 5,000 5,000 8.28% - 15,000 8.52% - 5,060 Total (annual dividend requirement -- $5,711,000) 89,602 74,662 10.3 8.7 CUMULATIVE PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION: $100 par value -- Authorized -- 20,000 shares Outstanding -- 20,000 shares at December 31, 1993 11.36% Series 2,000 3,000 Total (annual dividend requirement -- $227,000) 2,000 3,000 Less amount due within one year 1,000 1,000 Total excluding amount due within one year 1,000 2,000 0.1 0.2
II-152 183 STATEMENTS OF CAPITALIZATION (CONTINUED) At December 31, 1993 and 1992 Gulf Power Company 1993 Annual Report
1993 1992 1993 1992 (in thousands) (percent of total) First mortgage bonds -- Maturity Interest Rates October 1, 1994 4 5/8% 12,000 12,000 June 1, 1996 6% 15,000 15,000 August 1, 1997 5 7/8% 25,000 25,000 April 1, 1998 9.20% 19,486 22,845 April 1, 1998 5.55% 15,000 - July 1, 1998 5.00% 30,000 - 1999 through 2003 6.125% to 8.875% 30,000 83,000 September 1, 2008 9% 5,050 7,500 December 1, 2021 8 3/4% 50,000 50,000 Total first mortgage bonds 201,536 215,345 Pollution control obligations (Note 9) 169,855 157,080 Other long-term debt (Note 9) 42,520 25,256 Unamortized debt premium (discount), net (3,100) (1,814) Total long-term debt (annual interest requirement -- $29,378,000) 410,811 395,867 Less amount due within one year (Note 10) 41,552 13,820 Long-term debt excluding amount due within one year 369,259 382,047 42.2 44.3 TOTAL CAPITALIZATION $ 874,057 $ 861,899 100.0 % 100.0 %
The accompanying notes are an integral part of these statements. II-153 184 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991 Gulf Power Company 1993 Annual Report
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF YEAR $ 146,771 $ 134,372 $ 114,576 Net income after dividends on preferred stock 54,311 54,090 57,796 Cash dividends on common stock (41,800) (39,900) (38,000) Preferred stock transactions, net (1,509) (1,791) - BALANCE AT END OF YEAR (NOTE 11) $ 157,773 $ 146,771 $ 134,372
STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1993, 1992, and 1991 Gulf Power Company 1993 Annual Report
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF YEAR $ 218,271 $ 218,150 $ 218,150 Contributions to capital by parent company 11 121 - BALANCE AT END OF YEAR $ 218,282 $ 218,271 $ 218,150
The accompanying notes are an integral part of these statements. II-154 185 NOTES TO FINANCIAL STATEMENTS At December 31, 1993, 1992 and 1991 Gulf Power Company 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: GENERAL Gulf Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services, Inc. (SCS), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear) and various other subsidiaries related to foreign utility operations and domestic non-utility operations. At this time, the operations of the other subsidiaries are not material. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission. SCS provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Electric designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Florida Public Service Commission (FPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by these commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 fuel is used. The Company's electric rates include provisions to periodically adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. The FPSC has also approved the recovery of purchased power capacity costs, energy conservation costs, and environmental compliance costs in cost recovery clauses that are similar to the method used to recover fuel costs. DEPRECIATION AND AMORTIZATION Depreciation of the original cost of depreciable utility plant in service is provided primarily using composite straight-line rates which approximated 3.8 percent in 1993, 1992, and 1991. 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. INCOME TAXES The Company 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 8 for additional information about Statement No. 109. The Company is included in the consolidated federal income tax return of The Southern Company. II-155 186 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of certain new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of plant through a higher rate base and higher depreciation expense. The FPSC-approved composite rate used to calculate AFUDC was 7.27 percent effective on July 1, 1993 and 8.03 percent for the first half of 1993, and for 1992, and 1991. AFUDC amounts for 1993, 1992, and 1991 were $966 thousand, $60 thousand, and $149 thousand, respectively. The increase in 1993 is due to an increase in construction projects at Plant Daniel. 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 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 -- are shown in the table below as of December 31:
1993 Carrying Fair Amount Value (in thousands) Long-term debt $410,811 $431,251 Preferred stock subject to mandatory redemption 2,000 2,040
1992 Carrying Fair Amount Value (in thousands) Investment securities $ 22,322 $ 26,387 Long-term debt 395,867 410,724 Preferred stock subject to mandatory redemption 3,000 3,060
The fair values of investment securities were based on listed closing market prices. The fair values for long-term debt and preferred stock subject to mandatory redemption were based on either closing market prices or closing prices of comparable instruments. MATERIALS AND SUPPLIES Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. VACATION PAY The Company's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current asset representing the future recoverability of this cost. The amount was $4.0 million and $3.8 million at December 31, 1993 and 1992, respectively. In 1994, an estimated 84 percent of the 1993 deferred vacation cost II-156 187 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report will be expensed and the balance will be charged to construction. 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 is providing 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 $2.2 million and $2.5 million at December 31, 1993 and 1992, respectively, is included in miscellaneous current liabilities in the accompanying Balance Sheets. PROVISION FOR PROPERTY DAMAGE Due to a significant increase in the cost of traditional insurance, effective in 1993, the Company became self-insured for the full cost of storm and other damage to its transmission and distribution property. As permitted by regulatory authorities, the Company provides for the estimated cost of uninsured property damage by charges to income amounting to $1.2 million annually. At December 31, 1993 and 1992, the accumulated provision for property damage amounted to $10.5 million and $9.7 million, respectively. The expense of repairing such damage as occurs from time to time is charged to the provision to the extent it is available. 2. RETIREMENT BENEFITS: PENSION PLAN The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. 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. A qualified trust for medical benefits has been established for funding amounts to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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." Prior to the adoption of Statement No. 106, Gulf Power Company recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The costs of such benefits recognized by the Company in 1993, 1992, and 1991 were $3.9 million, $3.1 million, and $2.7 million, respectively. STATUS AND COST OF BENEFITS Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown only for 1993 because Statement No. 106 was adopted as of January 1, 1993, on a prospective basis. II-157 188 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in thousands) Actuarial present value of benefit obligation: Vested benefits $ 73,925 $ 63,459 Non-vested benefits 3,217 2,900 Accumulated benefit obligation 77,142 66,359 Additional amounts related to projected salary increases 25,648 28,719 Projected benefit obligation 102,790 95,078 Less: Fair value of plan assets 159,192 142,614 Unrecognized net gain (49,376) (40,764) Unrecognized prior service cost 3,152 3,346 Unrecognized transition asset (8,765) (9,495) Prepaid asset recognized in the Balance Sheets $ 1,413 $ 623
Postretirement Medical Life 1993 1993 (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $ 7,857 $ 2,929 Employees eligible to retire 4,054 - Other employees 14,927 5,058 Accumulated benefit obligation 26,838 7,987 Less: Fair value of plan assets 5,638 52 Unrecognized net loss (gain) 2,653 (641) Unrecognized transition obligation 13,420 2,954 Accrued liability recognized in the Balance Sheets $ 5,127 $ 5,622
The weighted average rates assumed in the actuarial calculations were:
1993 1992 1991 Discount 7.5% 8.0% 8.0% Annual salary increase 5.0% 6.0% 6.0% Long-term return on plan assets 8.5% 8.5% 8.5%
An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1993, by $4.8 million and the aggregate of the service and interest cost components of the net retiree medical cost by $543 thousand. Components of the plans' net cost are shown below:
Pension 1993 1992 1991 (in thousands) Benefits earned during the year $ 3,710 $ 3,550 $ 3,396 Interest cost on projected benefit obligation 7,319 6,939 6,516 Actual return on plan assets (20,672) (6,431) (35,560) Net amortization and deferral 8,853 (4,054) 26,322 Net pension cost (income) $ (790) $ 4 $ 674
Of the above net pension amounts, $(601) thousand in 1993, $3 thousand in 1992, and $518 thousand in 1991, were recorded in operating expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical Life 1993 1993 (in thousands) Benefits earned during the year $ 874 $ 292 Interest cost on accumulated benefit obligation 1,714 625 Amortization of transition obligation over 20 years 706 148 Actual return on plan assets (726) (5) Net amortization and deferral 309 1 Net postretirement cost $2,877 $1,061
Of the above net postretirement medical and life insurance amounts recorded in 1993, $3.0 million was recorded in operating expenses, and the remainder was recorded in construction and other accounts. II-158 189 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report 3. LITIGATION AND REGULATORY MATTERS: COAL BARGE TRANSPORTATION SUIT On August 19, 1993, a complaint against the Company and Southern Company Services, an affiliate, was filed in federal district court in Ohio by two companies with which the Company had contracted for the transportation by barge for certain of the Company's coal supplies. The complaint alleges breach of the contract by the Company and seeks damages estimated by the plaintiffs to be in excess of $85 million. The final outcome of this matter cannot now be determined; however, in management's opinion the final outcome will not have a material adverse effect on the Company's financial statements. FPSC APPROVES STIPULATION In February 1993, the Company filed a notice with the FPSC of its intent to obtain rate relief. On May 4, 1993, the FPSC approved a stipulation between the Company, the Office of Public Counsel, and the Florida Industrial Power Users Group to cancel the filing of the rate case and to allow the Company to retain for the next four years its existing method for calculating accruals for future power plant dismantlement costs. The stipulation also required the reduction of the Company's allowed return on equity midpoint from 12.55 percent to 12.0 percent. See Management's Discussion and Analysis under "Future Earnings Potential" for further details of circumstances that contributed to the company canceling the rate case. FERC REVIEWS EQUITY RETURNS In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any changes in the rate of return on common equity that may occur as a result of this proceeding would be effective 60 days after a proper notice of the proceeding is published. A notice was published on May 10, 1991. 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. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the Company's financial statements. RECOVERY OF CONTRACT BUYOUT COSTS In July 1990, the Company filed a request for waiver of FERC's fuel adjustment charge regulation to permit recovery of coal contract buyout costs from wholesale customers. On April 4, 1991, the FERC issued an order granting recovery of the buyout costs from wholesale customers from July 19, 1990, forward, but denying retroactive recovery of the buyout costs from January 1, 1987 through July 18, 1990. The Company's request for rehearing was denied by the FERC. The Company refunded $2.7 million (including interest) in June 1991 to its wholesale customers. On July 31, 1991, the Company filed a petition for review of the FERC's decision to the U.S. Court of Appeals for the District of Columbia Circuit. On January 22, 1993, the Court vacated the Commission's order, finding FERC's denial of the Company's request for a retroactive waiver to be arbitrary and capricious. The Court remanded the matter to FERC for consideration consistent with its opinion. Management expects that the commission will ultimately allow the Company to recover the amount refunded plus interest. Accordingly, the Company recorded the reversal of the $2.7 million refund to income in 1993. ENVIRONMENTAL COST RECOVERY In April 1993, the Florida Legislature adopted legislation for an Environmental Cost Recovery (ECR) clause, 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 rate-adjustment clause. Such environmental costs include operation and maintenance expense, depreciation, and a return on invested capital. II-159 190 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report On January 12, 1994, the FPSC approved the Company's petition under the ECR clause for recovery of environmental costs that were projected to be incurred from July 1993 through September 1994. The order allows the recovery from customers of such costs amounting to $7.8 million during the period, February through September 1994. Thereafter, recovery under ECR will be determined semi-annually and will include a true-up of the prior period and a projection of the ensuing six-month period. In December 1993, the Company recorded $2.6 million as additional revenue for the portion of costs incurred during 1993. 4. CONSTRUCTION PROGRAM: The Company is engaged in a continuous construction program, the cost of which is currently estimated to total $77 million in 1994, $55 million in 1995, and $68 million in 1996. These estimates include AFUDC of approximately $0.7 million, $0.3 million, and $0.2 million, in 1994, 1995, and 1996, respectively. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment and materials; and cost of capital. The Company does not have any new baseload generating plants under construction. However, the Company plans to construct two 80 megawatt combustion turbine peaking units. The first is scheduled to be completed in 1998, and the second in 1999. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. See Management's Discussion and Analysis under "Environmental Matters" for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. 5. FINANCING AND COMMITMENTS: GENERAL Current projections indicate that funds required for construction and other purposes, including compliance with environmental regulations will be derived primarily from internal sources. Requirements not met from internal sources will be financed from the sale of additional first mortgage bonds, preferred stock, and capital contributions from The Southern Company. In addition, the Company may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and redemptions of higher-cost securities. Because of the attractiveness of current short term interest rates, the Company may maintain a higher level of short term indebtedness than has historically been true. At December 31, 1993, the Company had $49 million of lines of credit with banks of which $6.1 million was committed to cover checks presented for payment. These credit arrangements are subject to renewal June 1 of each year. In connection with these committed lines of credit, the Company has agreed to pay certain fees and/or maintain compensating balances with the banks. The compensating balances, which represent substantially all 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 eight major money center banks that total $180 million, of which, none was committed at December 31, 1993. 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 were approximately $1.4 billion at December 31, 1993. Additional commitments will be required in the future to supply the Company's fuel needs. To take advantage of lower-cost coal supplies, agreements were reached in 1986 to terminate two long-term contracts for the supply of coal to Plant Daniel, which is jointly owned by the Company and Mississippi Power, an operating affiliate. The Company's portion of II-160 191 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report this payment was some $60 million. This amount is being amortized to expense on a per ton basis over a nine-year period. The remaining unamortized amount included in deferred charges, including the current portion, was $18 million at December 31, 1993. In 1988, the Company made an advance payment of $60 million to another coal supplier under an arrangement to lower the cost of future coal purchased under an existing contract. This amount is being amortized to expense on a per ton basis over a ten-year period. The remaining unamortized amount included in deferred charges, including the current portion, was $36 million at December 31, 1993. Also, in 1993 the Company made a payment of $16.4 million to a coal supplier under an arrangement to suspend the purchase of coal under an existing contract for one year. This amount is being amortized to expense on a per ton basis over a one year period. The remaining unamortized amount, which is included in current assets, was $11 million at December 31, 1993. The amortization of these payments is being recovered through the fuel cost recovery clause discussed under "Revenues and Fuel Costs" in Note 1. LEASE AGREEMENT In 1989, the Company entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars to transport coal to Plant Daniel. Mississippi Power, as joint owner of Plant Daniel, is responsible for one half of the lease costs. The Company's share of the lease is charged to fuel inventory and allocated to fuel expense as the fuel is used. The lease costs charged to inventory were $1.2 million in 1993, $1.2 million in 1992 and $1.3 million in 1991. For the year 1994, the Company's annual lease payment will be $1.2 million. The Company's annual lease payment for 1995 will be $2.4 million and for 1996, 1997, and 1998 the payment will be $1.2 million. Lease payments after 1998 total approximately $17.4 million. The Company has the option, after three years from the date of the original contract, to purchase the railcars at the greater of termination value or fair market value. Additionally, at the end of the lease term, the Company has the option to renew the lease. 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, 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, 1993, the Company's percentage ownership and its amount of investment in these jointly owned facilities were as follows:
Plant Plant Scherer Unit Daniel No. 3 (coal- (coal-fired) fired) (in thousands) Plant-In-Service $185,725(1) $208,956 Accumulated Depreciation $ 41,970 $ 91,730 Construction Work in Progress $ 643 $ 10,356 Nameplate Capacity (2) (in 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 II-161 192 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report 7. LONG-TERM POWER SALES AGREEMENTS: GENERAL The Company and the other operating affiliates of The Southern Company have contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside of the system's service area. Certain of these agreements are non-firm and are based on the capacity of the system in general. Other agreements are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, the capacity revenues from these sales primarily affect profitability. The Company's capacity revenues have been as follows:
Unit Other Year Power Long-Term Total (in thousands) 1993 $31,162 $2,643 $33,805 1992 32,679 1,501 34,180 1991 31,288 1,363 32,651
Long-term non-firm power of 400 megawatts was sold in 1993 to Florida Power Corporation (FPC) by the Southern electric system. In 1994, this amount decreased to 200 megawatts, and the contract will expire at year-end 1994. Capacity and energy sales under these long-term non-firm power sales agreements are made from available power pool capacity, and the revenues from the sales are shared by the operating affiliates. Unit power from specific generating plants is currently being sold to FPC, Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA), and the City of Tallahassee, Florida. Under these agreements, 209 megawatts of net dependable capacity were sold by the Company during 1993, and sales will remain at that approximate level until the expiration of the contracts in 2010, unless reduced by FPC, FP&L and JEA after 1999. Capacity and energy sales to FP&L, the Company's largest single customer, provided revenues of $39.5 million in 1993, $46.2 million in 1992, and $42.1 million in 1991, or 6.8 percent, 8.1 percent, and 7.5 percent of operating revenues, respectively. GULF STATES SETTLEMENT COMPLETED On November 7, 1991, the subsidiaries of The Southern Company entered into a settlement agreement with Gulf States Utilities Company (Gulf States) that resolved litigation between the companies that had been pending since 1986 and arose out of a dispute over certain unit power and other long-term power sales contracts. In 1993, all remaining terms and obligations of the settlement agreement were satisfied. Based on the value of the settlement proceeds received - less the amounts previously included in income - the Company recorded increases in net income of approximately $0.6 million in 1992 and $12.7 million in 1991. In 1993, the Company sold all of its remaining Gulf States common stock received in the settlement, resulting in a gain of $2.3 million after tax. 8. INCOME TAXES: Effective January 1, 1993, Gulf Power Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no effect on net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $31.3 million are revenues to be received from customers. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The related liabilities of $76.9 million are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. II-162 193 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report Details of the federal and state income tax provisions are as follows:
1993 1992 1991 (in thousands) Total provision for income taxes: Federal -- Currently payable $24,354 $24,287 $30,721 Deferred: Current year 26,396 18,173 18,141 Reversal of prior years (22,102) (15,506) (21,404) 28,648 26,954 27,458 State Currently payable 3,950 4,282 5,460 Deferred: Current year 3,838 2,662 2,688 Reversal of prior years (2,785) (2,007) (2,817) 5,003 4,937 5,331 Total 33,651 31,891 32,789 Less income taxes charged (credited) to other income 921 (187) (1,104) Federal and state income taxes charged to operations $32,730 $32,078 $33,893
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:
1993 (in thousands) Deferred tax liabilities: Accelerated depreciation $146,657 Property basis differences 15,140 Coal contract buyout 15,427 Other 6,724 Total 183,948 Deferred tax assets: Federal effect of state deferred taxes 10,136 Pension and other benefits 3,406 Property insurance 4,730 Other 6,500 Total 24,772 Net deferred tax liabilities 159,176 Portion included in current liabilities, net 7,433 Accumulated deferred income taxes in the Balance Sheets $151,743
Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $2.3 million in 1993, 1992 and 1991. At December 31, 1993, 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:
1993 1992 1991 Federal statutory rate 35% 34% 34% State income tax, net of federal deduction 3 4 4 Non-deductible book depreciation 1 1 1 Differences in prior years' deferred and current tax rate (2) (2) (3) Other (1) (2) (2) Effective income tax rate 36% 35% 34%
Gulf Power Company and the other subsidiaries of The Southern Company file a consolidated federal tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. II-163 194 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report 9. LONG-TERM DEBT: POLLUTION CONTROL OBLIGATIONS Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds are as follows:
December 31 1993 1992 (in thousands) Collateralized - 6 3/4% due 2006 $ - $ 12,675 6% due 2006* 12,300 12,400 10% due 2013 - 20,000 8 1/4% due 2017 32,000 32,000 7 1/8% due 2021 21,200 21,200 6 3/4% due 2022 8,930 8,930 5.70% due 2023 7,875 - 5.80% due 2023 32,550 - 6.20% due 2023 13,000 - Non-collateralized 5.9% due 1992-2003 - 7,875 10 1/2% due 2014 42,000 42,000 Total $169,855 $157,080
* Sinking fund requirement applicable to the 6 percent pollution control bonds is $100 thousand for 1994 with increasing increments thereafter through 2005, with the remaining balance due in 2006. With respect to the collateralized pollution control revenue bonds, the Company has authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. OTHER LONG-TERM DEBT Long-term debt also includes $17.5 million for the Company's portion of notes payable issued in connection with the termination of Plant Daniel coal contracts (see Note 5 for information on fuel commitments). The notes bear interest at 8.25 percent with the principal being amortized through 1995. Also included in long-term debt is a 30-month note payable for $25 million which was obtained to refinance higher cost securities. The principal is due in June 1996 and bears interest at 4.69 percent which is payable quarterly beginning March 1994. The estimated annual maturities of the notes payable through 1996 are as follows: $8.4 million in 1994, $9.1 million in 1995, and $25 million in 1996. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR: A summary of the improvement fund requirement and scheduled maturities and redemptions of long-term debt due within one year is as follows:
December 31 1993 1992 (in thousands) Bond improvement fund requirement $ 2,370 $ 2,450 Less: Portion to be satisfied by bonding property additions - - Cash improvement fund requirement 2,370 2,450 Maturities of first mortgage bonds 3,676 3,359 Redemptions of first mortgage bonds 27,000 - Current portion of notes payable 8,406 7,736 (Note 9) Pollution control bond maturity 100 275 (Note 9) Total $41,552 $13,820
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. In 1994, $12 million of 4 5/8 percent First Mortgage Bonds due October 1, 1994 and $15 million of 6 percent First Mortgage Bonds due June 1, 1996 are scheduled to be redeemed. II-164 195 NOTES (CONTINUED) Gulf Power Company 1993 Annual Report 11. COMMON STOCK DIVIDEND RESTRICTIONS: The Company's first mortgage bond indenture contains various common stock dividend restrictions which remain in effect as long as the bonds are outstanding. At December 31, 1993, $101 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the mortgage indenture. The Company's charter limits cash dividends on common stock to 50 percent of net income available for such stock during a prior period 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, 1993, the ratio was 44.4 percent. 12. QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for 1993 and 1992 are as follows:
Net Income After Dividends Operating Operating on Preferred Quarter Ended Revenues Income Stock (in thousands) MARCH 31, 1993 $127,036 $17,646 $10,426 JUNE 30, 1993 138,863 19,562 7,312 SEPT. 30, 1993 175,964 32,783 22,366 DEC. 31, 1993 141,279 22,596 14,207 March 31, 1992 $126,536 $20,684 $ 9,576 June 30, 1992 137,123 22,914 12,120 Sept. 30, 1992 162,785 32,446 21,442 Dec. 31, 1992 144,458 20,931 10,952
The Company's business is influenced by seasonal weather conditions and the timing of rate changes, among other factors. II-165 196 SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS) $ 583,142 $ 570,902 $ 565,207 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK (IN THOUSANDS) $ 54,311 $ 54,090 $ 57,796 CASH DIVIDENDS ON COMMON STOCK (IN THOUSANDS) $ 41,800 $ 39,900 $ 38,000 RETURN ON AVERAGE COMMON EQUITY (PERCENT) 13.29 13.62 15.17 TOTAL ASSETS (IN THOUSANDS) $1,307,809 $1,062,699 $1,095,736 GROSS PROPERTY ADDITIONS (IN THOUSANDS) $ 78,562 $ 64,671 $ 64,323 CAPITALIZATION (IN THOUSANDS): Common stock equity $ 414,196 $ 403,190 $ 390,981 Preferred stock 89,602 74,662 55,162 Preferred stock subject to mandatory redemption 1,000 2,000 7,500 Long-term debt 369,259 382,047 434,648 Total (excluding amounts due within one year) $ 874,057 $ 861,899 $ 888,291 CAPITALIZATION RATIOS (PERCENT): Common stock equity 47.4 46.8 44.0 Preferred stock 10.4 8.9 7.1 Long-term debt 42.2 44.3 48.9 Total (excluding amounts due within one year) 100.0 100.0 100.0 FIRST MORTGAGE BONDS (IN THOUSANDS): Issued 75,000 25,000 50,000 Retired 88,809 117,693 32,807 PREFERRED STOCK (IN THOUSANDS): Issued 35,000 29,500 - Retired 21,060 15,500 2,500 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 274,194 267,591 261,210 Commercial 39,253 37,105 34,685 Industrial 274 270 264 Other 86 74 72 Total 313,807 305,040 296,231 EMPLOYEES (YEAR-END) 1,565 1,613 1,598
II-166 197 SELECTED FINANCIAL AND OPERATING DATA (CONTINUED) Gulf Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 567,825 $ 527,821 $ 550,827 $ 587,860 $ 542,919 $ 562,068 $ 505,812 $ 469,696 $ 38,714 $ 37,361 $ 45,698 $ 42,217 $ 46,421 $ 45,484 $ 40,336 $ 35,511 $ 37,000 $ 37,200 $ 35,400 $ 34,200 $ 33,100 $ 30,800 $ 27,200 $ 24,900 10.51 10.32 13.41 13.23 15.06 15.61 15.11 14.70 $ 1,084,579 $1,093,430 $1,097,225 $1,051,182 $1,028,864 $ 921,635 $ 892,924 $ 841,628 $ 62,462 $ 70,726 $ 67,042 $ 97,511 $ 90,160 $ 92,541 $ 156,443 $ 51,131 $ 371,185 $ 365,471 $ 358,310 $ 323,012 $ 314,995 $ 301,674 $ 280,990 $ 252,831 55,162 55,162 55,162 55,162 55,162 55,162 55,162 55,162 9,250 11,000 12,750 14,000 16,500 18,250 19,000 21,250 475,284 484,608 497,069 474,640 482,869 410,917 394,859 382,293 $ 910,881 $ 916,241 $ 923,291 $ 866,814 $ 869,526 $ 786,003 $ 750,011 $ 711,536 40.8 39.9 38.8 37.2 36.2 38.4 37.5 35.5 7.1 7.2 7.4 8.0 8.3 9.3 9.9 10.8 52.1 52.9 53.8 54.8 55.5 52.3 52.6 53.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - - 35,000 - 50,000 - - - 6,455 9,344 9,369 - 46,640 2,860 10,415 - - - - - - - - - 1,750 1,250 1,750 2,500 750 750 1,500 858 A2 A1 A1 A1 A1 A1 A1 A2 A A A A A+ A+ A+ A+ A AA- 4 4 4 4 4 4 a2 a1 a1 a1 a1 a1 a1 a2 A- A- A- A- A A A A- A- A+ 5 5 5 5 5 5 256,111 251,341 246,450 241,138 235,329 227,845 217,138 205,292 34,019 33,678 33,030 32,139 31,142 29,603 27,939 26,217 252 240 206 206 197 183 177 179 67 67 61 61 62 62 63 62 290,449 285,326 279,747 273,544 266,730 257,693 245,317 231,750 1,615 1,614 1,601 1,603 1,544 1,509 1,460 1,463
II-167 198 SELECTED FINANCIAL AND OPERATING DATA (CONTINUED) Gulf Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS): Residential $ 244,967 $ 235,296 $ 231,220 Commercial 137,308 133,071 130,691 Industrial 87,526 91,320 92,300 Other 1,882 1,784 1,860 Total retail 471,683 461,471 456,071 Sales for resale - non-affiliates 72,209 70,078 69,636 Sales for resale - affiliates 23,166 24,075 29,343 Total revenues from sales of electricity 567,058 555,624 555,050 Other revenues 16,084 15,278 10,157 Total $ 583,142 $ 570,902 $ 565,207 KILOWATT-HOUR SALES (IN THOUSANDS): Residential 3,712,980 3,596,515 3,455,100 Commercial 2,433,382 2,369,236 2,272,690 Industrial 2,029,936 2,179,435 2,117,408 Other 16,944 16,649 17,118 Total retail 8,193,242 8,161,835 7,862,316 Sales for resale - non-affiliates 1,460,105 1,430,908 1,550,018 Sales for resale - affiliates 1,029,787 1,208,771 1,236,223 Total 10,683,134 10,801,514 10,648,557 AVERAGE REVENUE PER KILOWATT-HOUR (CENTS): Residential 6.60 6.54 6.69 Commercial 5.64 5.62 5.75 Industrial 4.31 4.19 4.36 Total retail 5.76 5.65 5.80 Sales for resale 3.83 3.57 3.55 Total sales 5.31 5.14 5.21 AVERAGE ANNUAL KILOWATT-HOUR USE PER RESIDENTIAL CUSTOMER 13,671 13,553 13,320 AVERAGE ANNUAL REVENUE PER RESIDENTIAL CUSTOMER $ 901.96 $ 886.66 $ 891.38 PLANT NAMEPLATE CAPACITY RATINGS (YEAR-END) (MEGAWATTS) 2,174 2,174 2,174 MAXIMUM PEAK-HOUR DEMAND (MEGAWATTS): Winter 1,571 1,533 1,418 Summer 1,898 1,828 1,740 ANNUAL LOAD FACTOR (PERCENT) 54.5 55.0 57.0 PLANT AVAILABILITY - FOSSIL-STEAM (PERCENT) 88.9 91.2 92.2 SOURCE OF ENERGY SUPPLY (PERCENT): Coal 84.5 87.7 82.0 Oil and gas 0.5 0.1 0.1 Purchased power - From non-affiliates 1.5 0.8 0.5 From affiliates 13.5 11.4 17.4 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA: BTU per net kilowatt-hour generated 10,390 10,347 10,636 Cost of fuel per million BTU (cents) 197.37 200.30 203.60 Average cost of fuel per net kilowatt-hour generated (cents) 2.05 2.07 2.17
II-168 199 SELECTED FINANCIAL AND OPERATING DATA (CONTINUED) Gulf Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 217,843 $ 203,781 $ 184,036 $ 199,701 $ 200,725 $ 186,415 $ 174,302 $ 169,127 124,066 118,897 107,615 116,057 116,253 109,631 98,408 95,426 91,041 84,671 72,634 80,295 79,873 81,621 83,538 77,035 1,805 1,586 1,402 1,357 1,343 1,346 1,334 1,334 434,755 408,935 365,687 397,410 398,194 379,013 357,582 342,922 73,855 67,554 117,466 134,456 106,892 126,789 106,802 84,334 38,563 39,244 48,277 55,955 27,113 43,844 35,712 36,286 547,173 515,733 531,430 587,821 532,199 549,646 500,096 463,542 20,652 12,088 19,397 39 10,720 12,422 5,716 6,154 $ 567,825 $ 527,821 $ 550,827 $ 587,860 $ 542,919 $ 562,068 $ 505,812 $ 469,696 3,360,838 3,293,750 3,154,541 3,055,041 2,963,502 2,736,432 2,560,648 2,471,714 2,217,568 2,169,497 2,088,598 1,986,332 1,913,139 1,777,418 1,559,344 1,498,762 2,177,872 2,094,670 1,968,091 1,839,931 1,745,074 1,770,587 1,771,100 1,612,393 18,866 17,209 16,257 15,241 14,903 14,702 14,555 14,637 7,775,144 7,575,126 7,227,487 6,896,545 6,636,618 6,299,139 5,905,647 5,597,506 1,775,703 1,640,355 1,911,759 2,138,390 1,609,146 2,388,591 2,183,631 1,570,598 1,435,558 1,461,036 2,326,238 2,689,487 1,078,500 1,562,452 1,308,410 1,272,906 10,986,405 10,676,517 11,465,484 11,724,422 9,324,264 10,250,182 9,397,688 8,441,010 6.48 6.19 5.83 6.54 6.77 6.81 6.81 6.84 5.59 5.48 5.15 5.84 6.08 6.17 6.31 6.37 4.18 4.04 3.69 4.36 4.58 4.61 4.72 4.78 5.59 5.40 5.06 5.76 6.00 6.02 6.05 6.13 3.50 3.44 3.91 3.94 4.99 4.32 4.08 4.24 4.98 4.83 4.64 5.01 5.71 5.36 5.32 5.49 13,173 13,173 12,883 12,763 12,729 12,221 12,057 12,254 $ 853.86 $ 815.00 $ 751.60 $ 834.31 $ 862.16 $ 832.55 $ 820.71 $ 838.45 2,174 2,174 2,174 2,174 1,969 1,969 1,969 1,969 1,310 1,814 1,395 1,354 1,406 1,517 1,209 1,292 1,778 1,691 1,613 1,617 1,678 1,448 1,381 1,341 55.2 52.6 56.5 54.4 50.5 53.4 54.9 53.2 89.2 89.1 88.2 92.8 90.5 84.8 87.7 85.8 69.8 78.3 93.2 93.5 85.8 79.7 83.9 87.1 0.5 0.2 0.4 0.4 0.5 0.2 0.2 0.6 0.6 0.4 0.4 0.4 1.9 0.4 (1.4) (2.2) 29.1 21.1 6.0 5.7 11.8 19.7 17.3 14.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10,765 10,621 10,461 10,512 10,639 10,609 10,639 10,721 206.06 193.70 178.00 197.53 239.26 254.53 240.40 240.14 2.22 2.06 1.86 2.08 2.55 2.70 2.60 2.57
II-169 200 STATEMENTS OF INCOME Gulf Power Company
For the Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) OPERATING REVENUES: Revenues $ 559,976 $ 546,827 $ 535,864 Revenues from affiliates 23,166 24,075 29,343 Total operating revenues 583,142 570,902 565,207 OPERATING EXPENSES: Operation -- Fuel 170,485 182,754 176,038 Purchased power from non-affiliates 4,386 1,394 896 Purchased power from affiliates 32,273 26,788 32,579 Proceeds from settlement of disputed contracts - (920) (20,385) Other 109,164 98,230 94,411 Maintenance 46,004 41,947 45,468 Depreciation and amortization 55,309 53,758 52,195 Taxes other than income taxes 40,204 37,898 42,359 Federal and state income taxes 32,730 32,078 33,893 Total operating expenses 490,555 473,927 457,454 OPERATING INCOME 92,587 96,975 107,753 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 512 14 54 Interest income 1,328 2,733 2,427 Other, net (1,238) (1,487) (3,484) Gain on sale of investment securities 3,820 - - Income taxes applicable to other income (921) 187 1,104 INCOME BEFORE INTEREST CHARGES 96,088 98,422 107,854 INTEREST CHARGES: Interest on long-term debt 31,344 35,792 41,665 Allowance for debt funds used during construction (454) (46) (95) Interest on notes payable 870 1,041 280 Amortization of debt discount, premium, and expense, net 1,412 1,032 699 Other interest charges 2,877 1,410 2,272 Net interest charges 36,049 39,229 44,821 NET INCOME 60,039 59,193 63,033 DIVIDENDS ON PREFERRED STOCK 5,728 5,103 5,237 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 54,311 $ 54,090 $ 57,796
II-170 201 STATEMENTS OF INCOME Gulf Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 529,262 $ 488,577 $ 502,550 $ 531,905 $ 515,806 $ 518,224 $ 470,100 $ 433,410 38,563 39,244 48,277 55,955 27,113 43,844 35,712 36,286 567,825 527,821 550,827 587,860 542,919 562,068 505,812 469,696 156,712 158,858 191,687 227,233 215,262 230,944 214,885 198,554 1,427 1,251 1,468 1,792 4,533 1,638 (3,698) (6,051) 67,729 48,972 27,267 28,326 37,172 55,119 42,967 32,476 - - - - - - - - 90,045 82,231 93,028 100,032 70,117 59,851 56,352 54,967 45,491 44,295 41,919 38,748 35,251 35,654 28,773 28,378 50,899 48,760 47,530 44,619 39,386 37,775 33,061 31,479 39,110 30,718 27,087 26,246 24,854 22,886 21,696 21,370 24,780 23,621 26,239 31,703 39,948 40,061 35,831 34,434 476,193 438,706 456,225 498,699 466,523 483,928 429,867 395,607 91,632 89,115 94,602 89,161 76,396 78,140 75,945 74,089 - (446) 457 1,013 7,809 6,893 2,877 679 4,508 3,271 2,858 4,507 2,445 3,235 8,777 7,250 (6,360) (3,800) (3,491) (1,207) (1,077) (1,131) (704) (1,191) - - - - - - - - 1,303 779 1,001 (642) (648) (862) (3,524) (2,694) 91,083 88,919 95,427 92,832 84,925 86,275 83,371 78,133 43,215 43,265 42,538 43,689 39,479 40,769 36,952 35,719 1 242 (808) (1,004) (8,651) (7,676) (3,261) (543) 693 180 182 - 106 - 1,628 - 603 613 600 555 488 287 265 237 2,422 1,636 1,456 1,350 869 1,120 1,111 674 46,934 45,936 43,968 44,590 32,291 34,500 36,695 36,087 44,149 42,983 51,459 48,242 52,634 51,775 46,676 42,046 5,435 5,622 5,761 6,025 6,213 6,291 6,340 6,535 $ 38,714 $ 37,361 $ 45,698 $ 42,217 $ 46,421 $ 45,484 $ 40,336 $ 35,511
II-171 202 STATEMENTS OF CASH FLOWS Gulf Power Company
For the Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) OPERATING ACTIVITIES: Net income $ 60,039 $ 59,193 $ 63,033 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 72,111 68,021 65,584 Deferred income taxes, net 5,347 3,322 (3,392) Deferred investment tax credits, net - - - Allowance for equity funds used during construction (512) (14) (54) Non-cash proceeds from settlement of disputed contracts - (920) (19,734) Other, net (864) 185 3,079 Changes in certain current assets and liabilities -- Receivables, net 12,867 (11,041) 12,421 Inventories 5,574 23,560 (2,397) Payables 5,386 1,580 (2,003) Other (9,504) (13,637) 8,012 Net cash provided from operating activities 150,444 130,249 124,549 INVESTING ACTIVITIES: Gross property additions (78,562) (64,671) (64,323) Other (5,328) 3,970 (8,097) Net cash used for investing activities (83,890) (60,701) (72,420) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: Preferred stock 35,000 29,500 - First mortgage bonds 75,000 25,000 50,000 Pollution control bonds 53,425 8,930 21,200 Capital contributions from parent company 11 121 - Other long-term debt 25,000 - - Retirements: Preferred stock (21,060) (15,500) (2,500) First mortgage bonds (88,809) (117,693) (32,807) Pollution control bonds (40,650) (9,205) (21,250) Other long-term debt (7,736) (5,783) (7,981) Notes payable, net (37,947) 44,000 - Payment of preferred stock dividends (5,728) (5,103) (5,237) Payment of common stock dividends (41,800) (39,900) (38,000) Miscellaneous (6,888) (8,760) (3,715) Net cash provided from (used for) financing activities (62,182) (94,393) (40,290) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,372 (24,845) 11,839 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,204 26,049 14,210 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,576 $ 1,204 $ 26,049 ( ) Denotes use of cash.
II-172 203 STATEMENTS OF CASH FLOWS Gulf Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 44,149 $ 42,983 $ 51,459 $ 48,242 $ 52,634 $ 51,775 $ 46,676 $ 42,046 63,650 59,955 56,260 51,672 41,619 39,595 34,784 32,975 1,837 5,319 10,138 2,377 45,213 18,467 3,877 11,996 - - - 868 1,634 5,716 10,667 2,292 - 446 (457) (1,013) (7,809) (6,893) (2,877) (679) - - - - - - - - 1,544 3,827 11,449 12,913 5,860 (2,535) 243 7,362 (2,468) 492 8,984 (8,849) (6,012) (5,401) 19,173 (32,356) (11,807) 16,306 (16,160) 23,691 (1,342) 1,870 2,053 5,170 (3,440) 6,142 (5,340) 10,173 449 1,756 601 4,839 5,781 4,466 (18,432) 6,208 (113) (13,331) 11,169 4,432 99,246 139,936 97,901 146,282 132,133 91,019 126,366 78,077 (62,462) (70,726) (67,042) (97,511) (90,160) (92,541) (156,443) (51,131) (1,597) 419 (62,782) (692) (55,652) 7,693 2,086 1,601 (64,059) (70,307) (129,824) (98,203) (145,812) (84,848) (154,357) (49,530) - - - - - - - - - - 35,000 - 50,000 - - - - - 3,677 35,996 9,900 18,776 16,424 14,840 4,000 7,000 25,000 - - 6,000 15,000 12,000 - - - - 60,663 - - - (1,750) (1,250) (1,750) (2,500) (750) (750) (1,500) (858) (6,455) (9,344) (9,369) - (46,640) (2,860) (10,415) - (50) (50) (50) (32,050) (50) (50) (50) (50) (6,083) (5,611) (5,175) (4,774) - - - - - - - - - - - - (5,435) (5,622) (5,761) (6,025) (6,213) (6,291) (6,340) (6,535) (37,000) (37,200) (35,400) (34,200) (33,100) (30,800) (27,200) (24,900) 5 (3) (233) (1,632) (6,064) (227) (680) (613) (52,768) (52,080) 5,939 (45,185) 27,746 (16,202) (14,761) (6,116) (17,581) 17,549 (25,984) 2,894 14,067 (10,031) (42,752) 22,431 31,791 14,242 40,226 37,332 23,265 33,296 76,048 53,617 $ 14,210 $ 31,791 $ 14,242 $ 40,226 $ 37,332 $ 23,265 $ 33,296 $ 76,048
II-173 204 BALANCE SHEETS Gulf Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) ASSETS UTILITY PLANT: Production-fossil $ 863,223 $ 841,489 $ 837,712 Transmission 154,304 148,824 143,275 Distribution 464,182 443,352 419,228 General 129,995 127,826 125,330 Construction work in progress 34,591 29,564 13,684 Total utility plant 1,646,295 1,591,055 1,539,229 Accumulated provision for depreciation 610,542 578,851 535,408 Total 1,035,753 1,012,204 1,003,821 Less property-related accumulated deferred income taxes - 200,904 197,138 Total 1,035,753 811,300 806,683 OTHER PROPERTY AND INVESTMENTS: Securities received from settlement of disputed contracts - - 19,938 Miscellaneous 13,242 7,074 6,410 Total 13,242 7,074 26,348 CURRENT ASSETS: Cash and cash equivalents 5,576 1,204 26,049 Investment securities - 22,322 - Receivables, net 63,924 60,047 49,006 Fossil fuel stock, at average cost 20,652 29,492 52,106 Materials and supplies, at average cost 36,390 33,124 34,070 Current portion of deferred coal contract costs 12,535 3,071 4,626 Regulatory clauses under recovery 3,244 1,680 - Prepayments 2,160 1,395 1,410 Vacation pay deferred 4,022 3,779 3,776 Total current assets 148,503 156,114 171,043 DEFERRED CHARGES: Deferred charges related to income taxes 31,334 - - Debt expense, being amortized 3,693 3,253 3,232 Premium on reacquired debt, being amortized 17,554 15,319 8,855 Deferred coal contract costs 52,884 63,723 74,502 Miscellaneous 4,846 5,916 5,073 Total deferred charges 110,311 88,211 91,662 TOTAL ASSETS $ 1,307,809 $ 1,062,699 $ 1,095,736
II-174 205 BALANCE SHEETS Gulf Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 817,490 $ 807,546 $ 796,052 $ 801,600 $ 608,340 $ 599,613 $ 582,139 $ 563,381 136,813 133,926 113,177 106,352 99,507 98,683 96,686 96,356 400,016 375,521 343,421 325,037 295,052 274,656 241,557 213,403 123,059 119,779 115,273 102,664 66,092 56,427 43,539 39,480 16,868 10,166 29,572 10,113 188,966 148,969 130,027 31,711 1,494,246 1,446,938 1,397,495 1,345,766 1,257,957 1,178,348 1,093,948 944,331 501,739 464,944 425,520 388,248 350,117 318,308 287,349 259,250 992,507 981,994 971,975 957,518 907,840 860,040 806,599 685,081 192,749 186,084 178,657 166,707 152,589 135,388 112,684 103,355 799,758 795,910 793,318 790,811 755,251 724,652 693,915 581,726 - - - - - - - - 5,439 6,933 6,756 2,932 2,619 601 2,216 1,955 5,439 6,933 6,756 2,932 2,619 601 2,216 1,955 14,210 31,791 14,242 40,226 37,332 23,265 33,296 76,048 - - - - - - - - 61,427 58,959 59,451 68,435 59,586 53,574 48,173 67,346 50,469 37,526 55,286 43,290 69,785 73,890 76,039 82,389 33,310 34,446 32,992 28,828 26,024 20,577 20,298 16,001 6,212 5,534 6,194 2,642 - - - - 7,008 4,503 1,218 - - - - - 2,168 2,490 3,577 677 788 633 474 588 3,631 3,425 3,340 3,200 3,000 2,775 2,517 2,200 178,435 178,674 176,300 187,298 196,515 174,714 180,797 244,572 - - - - - - - - 2,954 3,117 3,281 3,203 2,736 2,768 2,636 2,669 6,256 6,574 6,892 7,210 - - - - 87,102 97,833 106,263 55,889 60,663 - - - 4,635 4,389 4,415 3,839 11,080 18,900 13,360 10,706 100,947 111,913 120,851 70,141 74,479 21,668 15,996 13,375 $ 1,084,579 $ 1,093,430 $ 1,097,225 $ 1,051,182 $ 1,028,864 $ 921,635 $ 892,924 $ 841,628
II-175 206 BALANCE SHEETS Gulf Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock $ 38,060 $ 38,060 $ 38,060 Other paid-in capital 218,282 218,271 218,150 Premium on preferred stock 81 88 399 Earnings retained in the business 157,773 146,771 134,372 Total common equity 414,196 403,190 390,981 Preferred stock 89,602 74,662 55,162 Preferred stock subject to mandatory redemption 1,000 2,000 7,500 Long-term debt 369,259 382,047 434,648 Total capitalization 874,057 861,899 888,291 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 6,053 44,000 - Preferred stock due within one year 1,000 1,000 1,000 Long-term debt due within one year 41,552 13,820 59,111 Accounts payable 38,699 33,461 25,315 Customer deposits 15,082 15,532 15,513 Taxes accrued 13,015 11,419 19,274 Interest accrued 5,420 6,370 9,720 Regulatory clauses over recovery 840 - 1,114 Vacation pay accrued 4,022 3,779 3,776 Miscellaneous 8,527 3,950 3,545 Total current liabilities 134,210 133,331 138,368 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 151,743 - 1,775 Deferred credits related to income taxes 76,876 - - Accumulated deferred investment tax credits 40,770 43,117 45,446 Miscellaneous 30,153 24,352 21,856 Total deferred credits and other liabilities 299,542 67,469 69,077 TOTAL CAPITALIZATION AND LIABILITIES $ 1,307,809 $ 1,062,699 $ 1,095,736
II-176 207 BALANCE SHEETS Gulf Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 38,060 $ 38,060 $ 38,060 $ 38,060 $ 38,060 $ 38,060 $ 38,060 $ 38,060 218,150 214,150 207,150 182,150 182,150 182,150 176,150 161,150 399 399 399 399 399 399 399 376 114,576 112,862 112,701 102,403 94,386 81,065 66,381 53,245 371,185 365,471 358,310 323,012 314,995 301,674 280,990 252,831 55,162 55,162 55,162 55,162 55,162 55,162 55,162 55,162 9,250 11,000 12,750 14,000 16,500 18,250 19,000 21,250 475,284 484,608 497,069 474,640 482,869 410,917 394,859 382,293 910,881 916,241 923,291 866,814 869,526 786,003 750,011 711,536 - - - - - - - - 1,750 1,750 1,250 1,750 1,750 750 750 - 9,452 12,588 15,005 13,225 4,823 2,910 2,910 9,965 27,447 34,764 29,595 34,500 24,014 23,565 21,809 21,208 15,551 15,752 15,316 15,565 14,715 13,753 12,624 11,078 19,610 12,388 10,683 7,850 10,986 13,240 22,038 19,462 10,820 10,105 10,247 9,584 11,024 11,783 11,707 11,566 - - - 9,330 - - - - 3,631 3,425 3,340 3,200 3,000 2,775 2,517 2,200 12,177 7,759 2,748 2,144 3,869 4,966 4,474 4,130 100,438 98,531 88,184 97,148 74,181 73,742 78,829 79,609 6,736 13,381 17,678 22,992 23,550 - - - - - - - - - - - 47,776 50,109 52,451 54,597 55,843 55,846 53,242 43,752 18,748 15,168 15,621 9,631 5,764 6,044 10,842 6,731 73,260 78,658 85,750 87,220 85,157 61,890 64,084 50,483 $ 1,084,579 $ 1,093,430 $ 1,097,225 $ 1,051,182 $ 1,028,864 $ 921,635 $ 892,924 $ 841,628
II-177 208 GULF POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1993 FIRST MORTGAGE BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1964 $ 12,000 4-5/8% $ 12,000 10/1/94 1966 15,000 6% 15,000 6/1/96 1992 25,000 5-7/8% 25,000 8/1/97 1988 35,000 9.20% 19,486 4/1/98 1993 15,000 5.55% 15,000 4/1/98 1993 30,000 5.00% 30,000 7/1/98 1993 30,000 6.125% 30,000 7/1/03 1978 25,000 9% 5,050 9/1/08 1991 50,000 8-3/4% 50,000 12/1/21 $ 237,000 $ 201,536
POLLUTION CONTROL BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1976 $ 12,500 6% $ 12,300 10/1/06 1984 42,000 10.50% 42,000 12/1/14 1987 32,000 8.25% 32,000 6/1/17 1991 21,200 7.125% 21,200 4/1/21 1992 8,930 6.75% 8,930 3/1/22 1993 13,000 6.20% 13,000 4/1/23 1993 32,550 5.80% 32,550 6/1/23 1993 7,875 5.70% 7,875 11/1/23 $ 170,055 $ 169,855
PREFERRED STOCK
Shares Dividend Amount Series Outstanding Rate Outstanding (Thousands) 1950 51,026 4.64% $ 5,102 1960 50,000 5.16% 5,000 1966 50,000 5.44% 5,000 1969 50,000 7.52% 5,000 1972 50,000 7.88% 5,000 1980 (1) 20,000 11.36% 2,000 1992 580,000 7.00% 14,500 1992 600,000 7.30% 15,000 1993 800,000 6.72% 20,000 1993 600,000 Adjustable 15,000 2,851,026 $ 91,602
(1) Subject to mandatory redemption of 5% annually on or before February 1. II-178 209 GULF POWER COMPANY SECURITIES RETIRED DURING 1993 FIRST MORTGAGE BONDS
Principal Interest Series Amount Rate (Thousands) 1969 $ 15,000 7.75% 1971 21,000 7.50% 1972 22,000 7.50% 1973 25,000 7.50% 1978 2,450 9% 1988 3,359 9.20% $ 88,809
POLLUTION CONTROL BONDS
Principal Interest Series Amount Rate (Thousands) 1973 $ 7,875 5.90% 1976 12,675 6.75% 1976 100 6.00% 1983 20,000 10% $ 40,650
PREFERRED STOCK
Principal Dividend Series Amount Rate (Thousands) 1971 $ 5,060 8.52% 1977 15,000 8.28% 1980 1,000 11.36% $ 21,060
II-179 210 MISSISSIPPI POWER COMPANY FINANCIAL SECTION II-180 211 MANAGEMENT'S REPORT Mississippi Power Company 1993 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, however, in any system of internal control, 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/ David M. Ratcliffe -------------------------------------------------- David M. Ratcliffe President and Chief Executive Officer /s/ Thomas A. Fanning -------------------------------------------------- Thomas A. Fanning Vice President and Chief Financial Officer II-181 212 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF MISSISSIPPI POWER COMPANY: We have audited the accompanying balance sheets and statements of capitalization of Mississippi Power Company (a Mississippi corporation and a wholly owned subsidiary of The Southern Company) as of December 31, 1993 and 1992, 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, 1993. 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-190 through II-206) referred to above present fairly, in all material respects, the financial position of Mississippi Power Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 9 to the financial statements, effective January 1, 1993, Mississippi Power Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen & Co. Atlanta, Georgia February 16 , 1994 II-182 213 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Mississippi Power Company 1993 Annual Report RESULTS OF OPERATIONS EARNINGS Mississippi Power Company's net income after dividends on preferred stock for 1993 totaled $42.4 million, an increase of $5.6 million over the prior year. This improvement is attributable primarily to increased energy sales and retail rate increases. A retail rate increase under the Company's Performance Evaluation Plan (PEP-1A) of $6.4 million annually became effective in July 1993. Under the Environmental Compliance Overview Plan (ECO Plan) retail rates increased by $2.6 million annually effective April 1993. A comparison of 1992 to 1991 - excluding the events occurring in 1991 discussed below - would reflect a 1992 increase in earnings of $4.9 million or 15.5 percent. The Company's financial performance in 1991 reflected the after-tax operating and disposal losses of $11.9 million recorded by the Company's former merchandise subsidiary. These losses were partially offset by a $2.6 million positive impact on earnings from the settlement of the contract dispute with Gulf States Utilities Company (Gulf States). REVENUES The following table summarizes the factors impacting operating revenues for the past three years:
Increase (Decrease) from Prior Year 1993 1992 1991 (in thousands) Retail - Change in base rates $ 5,079* $ 6,605 $ 4,627 Sales growth 5,606 7,181 1,304 Weather 4,735 (3,915) 178 Fuel cost recovery and other 15,028 (2,743) (11,209) Total retail 30,448 7,128 (5,100) Sales for resale -- Non-affiliates 3,298 1,387 (7,368) Affiliates 5,464 (7,989) (2,113) Total sales for resale 8,762 (6,602) (9,481) Other operating revenues 1,226 1,535 96 Total operating revenues $ 40,436 $ 2,061 $(14,485) Percent change 9.3% 0.5% (3.2)%
*Includes the effect of the retail rate increase approved under the ECO Plan. Retail revenues of $368 million in 1993 increased 9.0 percent over the prior year, compared with an increase of 2.2 percent for 1992 and a decrease of 1.5 percent in 1991. The increase in retail revenues for 1993 was a result of growth in energy sales and customers, the favorable impact of weather, and retail rate increases. Changes in base rates reflect rate changes made under the PEP plans and the ECO Plan as approved by the Mississippi Public Service Commission (MPSC). The increase in revenues for the recovery of fuel costs for 1993 reversed two years of decline. 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. II-183 214 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report 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 in 1993 increased 9.0 percent over the prior year with the related revenues rising 14.1 percent. The customer demand experienced by these utilities is determined by factors very similar to Mississippi Power's. Sales for resale to non-affiliated 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. The capacity and energy components were:
1993 1992 1991 (in thousands) Capacity $ 4,191 $ 3,573 $2,714 Energy 12,120 19,538 19,856 Total $16,311 $23,111 $22,570
Capacity revenues for Mississippi Power increased in 1993 and 1992 due to a change in the allocation of transmission capacity revenues throughout the Southern electric system. Most of the Company's capacity revenues are derived from transmission charges. Sales to affiliated companies within the Southern electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have no material impact on earnings. The increase in other operating revenues for 1993 was due to increased rents collected from microwave equipment use and the transmission of non-associated companies' electricity. Below is a breakdown of kilowatt-hour sales for 1993 and the percent change for the last three years:
(millions of Amount Percent Change kilowatt-hours) 1993 1993 1992 1991 Residential 1,930 6.9% (1.5)% 1.5% Commercial 1,934 6.8 2.4 2.9 Industrial 3,623 2.5 7.3 (0.4) Other 38 0.3 (57.2) 4.0 Total retail 7,525 4.7 2.9 1.0 Sales for resale -- Non-affiliates 2,545 (5.3) (0.7) (6.1) Affiliates 427 52.2 (54.6) (13.5) Total 10,497 3.3% (1.5)% (2.0)%
Total retail energy sales in 1993 increased compared to the previous year, due primarily to weather influences and the improvement in the economy. The increase in commercial energy sales also reflects the impact of recently established casinos within the Company's service area. Industrial sales increased in 1992 as a result of new contracts with two large industrial customers. The decrease in energy sales for resale to non-affiliates is predominantly due to reductions in unit power sales under long-term contracts to Florida utilities. Economy sales and amounts sold under short-term contracts are also sold for resale to non-affiliates. Sales for resale to non-affiliates are influenced by those utilities' own customer demand, plant availability, and the cost of their predominant fuels -- oil and natural gas. EXPENSES Total operating expenses for 1993 were higher than the previous year because of higher production expenses, which reflects increased demand, an increase in the federal income tax rate, and higher employee-related costs. (See Note 2 to the financial statements for information regarding employee and retiree benefits.) Additionally, included in other operation expenses are increased costs associated with environmental remediation of a Southern electric system research facility. Expenses in 1992 were lower than 1991, excluding the Gulf States settlement, primarily because of lower production expenses stemming from decreased demand. II-184 215 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report Fuel costs constitute the single largest expense for Mississippi Power. These costs increased in 1993 due to an 11.0 percent increase in generation, which reflects higher demand. Fuel expenses in 1992, compared to 1991, were lower because of less generation and the negotiation of new coal contracts. Generation decreased primarily because of the availability of lower cost generation elsewhere within the Southern electric system. Purchased power consists primarily of energy purchases from the affiliates of the Southern electric system. Purchased power transactions (both sales and purchases) among Mississippi Power and its affiliates will vary from period to period depending on demand and the availability and variable production cost at each generating unit in the Southern electric system. Taxes other than income taxes increased in 1993 because of higher ad valorem taxes, which are property based, and municipal franchise taxes, which are revenue based. The decline in 1992 was attributable to lower franchise taxes. Income tax expense in 1993 increased because of the enactment of a higher corporate income tax rate retroactive to January 1, 1993, coupled with higher earnings. The change in income taxes for 1992 and 1991 reflected the change in operating income. EFFECTS OF INFLATION Mississippi Power is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. Conventional accounting for historical costs does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. FUTURE EARNINGS POTENTIAL The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from regulatory matters to growth in energy sales. Expenses are subject to constant review and cost control programs. Among the efforts to control costs are utilizing employees more effectively through a functionalization program for the Southern electric system, redesigning compensation and benefit packages, and re- engineering work processes. 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 curbing the construction budget. Operating revenues will be affected by any changes in rates under the PEP-2, the Company's revised performance based ratemaking plan. The PEP plans have proved to be a stabilizing force on electric rates, with only moderate changes in rates taking place. The ECO Plan, approved by the MPSC in 1992, provides for recovery of costs associated with environmental projects approved by the MPSC, most of which are required to comply with Clean Air Act Amendments of 1990 regulations. The ECO Plan is operated independently of PEP-2. The FERC regulates wholesale rate schedules and power sales contracts that Mississippi Power has with its sales for resale customers. The FERC is currently reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. Also, pending before the FERC is the Company's request for a $3.6 million wholesale rate increase. Further discussion of the PEP plans, the ECO Plan, and proceedings before the FERC is made in Note 3 to the financial statements herein. Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in Mississippi Power's service area. However, the Energy II-185 216 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report Policy Act of 1992 (Energy Act) will have a profound 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 Energy Act allows Independent Power Producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities, and this may enhance the incentive of IPPs to build cogeneration plants for a utility's large industrial and commercial customers. Although the Energy Act does not require transmission access to retail customers, pressure for legislation to allow retail wheeling will continue. Mississippi Power is preparing to meet the challenge of this major change in the traditional business practices of selling electricity. If Mississippi Power does not remain a low-cost producer and provider of quality service, the Company's retail energy sales growth, as well as new long-term contracts for energy sales outside the service area, could be limited, which could significantly reduce earnings. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be effective by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental unemployment benefits, disability-related benefits, job training, and health and life insurance coverage. In 1993, Mississippi Power adopted Statement No. 112, with no material effect on the financial statements. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which is effective in 1994. Statement No. 115 supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. In January 1994, Mississippi Power adopted the new rules, with no material effect on the financial statements. On January 1, 1993, Mississippi Power changed its methods of accounting for postretirement benefits other than pensions and income taxes. See Notes 2 and 9 to the financial statements regarding the impact of these changes. FINANCIAL CONDITION OVERVIEW The principal changes in Mississippi Power's financial condition during 1993 were gross property additions of $140 million to utility plant, a significant lowering of cost of capital through refinancings, and the resolution of PEP and ratepayer litigation. Funding for gross property additions came primarily from capital contributions from The Southern Company, earnings and other operating cash flows. The Statements of Cash Flows provide additional details. FINANCING ACTIVITY Mississippi Power continued to lower its financing costs in 1993 by issuing new debt and equity securities and retiring high- cost issues. The Company sold $132 million of first mortgage bonds, preferred stock and, through public authorities, pollution control revenue bonds. Retirements, including maturities during 1993, totaled some $101 million of such securities. (See the Statements of Cash Flows for further details.) Composite financing rates for the years 1991 through 1993 as of year-end were as follows:
1993 1992 1991 Composite interest rate on long-term debt 6.57% 6.91% 7.90% Composite preferred stock dividend rate 6.58% 7.29% 7.32%
II-186 217 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report CAPITAL STRUCTURE At year-end 1993, the Company's ratio of common equity to total capitalization was 49.8 percent, compared to 47.3 percent in 1992 and 44.4 percent in 1991. The increase in the ratio in 1993 can be attributed primarily to the receipt of $30 million of capital contributions from The Southern Company. CAPITAL REQUIREMENTS FOR CONSTRUCTION The Company's projected construction expenditures for the next three years total $256 million ($96 million in 1994, $62 million in 1995, and $98 million in 1996). The major emphasis within the construction program will be on complying with Clean Air Act regulations, completion of a 78-megawatt combustion turbine, and upgrading existing facilities. The estimates for property additions for the three-year period include $39 million committed to meeting the requirements of Clean Air Act regulations. Revisions may be necessary because of factors such as revised load projections, the availability and cost of capital, and changes in environmental regulations. OTHER CAPITAL REQUIREMENTS In addition to the funds required for the Company's construction program, approximately $51 million will be required by the end of 1996 for present sinking fund requirements and maturities of long-term debt. Mississippi Power plans to continue, when economically feasible, to retire high-cost debt and preferred stock and replace these obligations with lower-cost capital. ENVIRONMENTAL MATTERS In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on Mississippi Power and the other operating companies of The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995, and affects eight generating plants -- some 10 thousand megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing more slowly than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $275 million through 1995 for The Southern Company, of which Mississippi Power's portion is approximately $60 million. Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance for The Southern Company could require total construction expenditures ranging from approximately $450 million to $800 million, II-187 218 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report of which Mississippi Power's portion is approximately $25 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 3 percent in revenue requirements from customers could be necessary to fully recover The Southern Company's costs of compliance for both Phase I and II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Mississippi Power's ECO Plan is designed to allow recovery of costs of compliance with the Clean Air Act, as well as other environmental statutes and regulations. The MPSC reviews environmental projects and the Company's environmental policy through the ECO Plan. Under the ECO Plan, any increase in the annual revenue requirement is limited to 2 percent of retail revenues. However, the plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. Mississippi Power's management believes that the ECO Plan will provide for recovery of the Clean Air Act costs. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standard could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provisions of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean up properties currently or previously owned. The Company conducts studies to determine the extent of any required clean-up costs and has recognized in the financial statements costs to clean up known sites. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Resource Conservation and Recovery Act; and the Comprehensive Environmental Response, Compensation, and Liability Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the II-188 219 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1993 Annual Report potential for lawsuits alleging damages caused by electromagnetic fields exists. SOURCES OF CAPITAL At December 31, 1993, the Company had $70 million of committed credit in revolving credit agreements and also had $21 million of committed short-term credit lines. The $40 million of notes payable outstanding at year end 1993 were apart from the committed credit facilities. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations will be derived from operations, the sale of additional first mortgage bonds, pollution control obligations, and preferred stock, and the receipt of additional capital contributions from The Southern Company. Mississippi Power is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficiently high enough to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-189 220 STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 Mississippi Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING REVENUES (NOTES 1, 3, AND 7): Revenues $ 459,364 $ 424,392 $ 414,342 Revenues from affiliates 15,519 10,055 18,044 Total operating revenues 474,883 434,447 432,386 OPERATING EXPENSES: Operation -- Fuel 113,986 96,743 120,485 Purchased power from non-affiliates 2,198 1,337 851 Purchased power from affiliates 58,019 60,689 45,506 Proceeds from settlement of disputed contracts (Note 7) - (189) (4,205) Other 100,381 90,581 86,932 Maintenance 44,001 43,165 44,166 Depreciation and amortization 33,099 32,789 32,147 Taxes other than income taxes 37,145 34,664 35,414 Federal and state income taxes (Note 9) 22,668 16,378 13,976 Total operating expenses 411,497 376,157 375,272 OPERATING INCOME 63,386 58,290 57,114 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 1,010 642 728 Interest income 517 766 1,093 Other, net 3,971 5,501 3,845 Income taxes applicable to other income (1,158) (1,427) (863) INCOME BEFORE INTEREST CHARGES 67,726 63,772 61,917 INTEREST CHARGES: Interest on long-term debt 17,688 22,357 23,656 Allowance for debt funds used during construction (788) (563) (584) Interest on notes payable 1,000 362 603 Amortization of debt discount, premium, and expense, net 1,262 630 377 Other interest charges 728 339 285 Net interest charges 19,890 23,125 24,337 NET INCOME FROM CONTINUING OPERATIONS 47,836 40,647 37,580 DISCONTINUED OPERATIONS (NOTE 1): Loss from operations of discontinued subsidiary, net of taxes - - (6,404) Loss on disposal of subsidiary, net of taxes - - (5,455) Net loss from discontinued subsidiary - - (11,859) NET INCOME 47,836 40,647 25,721 DIVIDENDS ON PREFERRED STOCK 5,400 3,857 3,094 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 42,436 $ 36,790 $ 22,627
The accompanying notes are an integral part of these statements. II-190 221 STATEMENTS OF CASH FLOWS For the Years ended December 31, 1993, 1992, and 1991 Mississippi Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING ACTIVITIES: Net income $ 47,836 $ 40,647 $ 25,721 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 45,660 41,472 41,773 Deferred income taxes and investment tax credits 5,039 (5,473) (11,871) Allowance for equity funds used during construction (1,010) (642) (728) Non-cash proceeds from settlement of disputed contracts (Note 7) - (189) (4,071) Other, net 3,005 8,093 (4,982) Changes in certain current assets and liabilities -- Receivables, net (4,347) 1,002 35,343 Inventories 11,119 975 10,518 Payables 4,133 460 (4,949) Other (8,033) 6,095 11,433 Net cash provided from operating activities 103,402 92,440 98,187 INVESTING ACTIVITIES: Gross property additions (139,976) (68,189) (53,675) Other 7,562 4,235 2,148 Net cash used for investing activities (132,414) (63,954) (51,527) FINANCING ACTIVITIES: Proceeds: Capital contributions 30,036 26 - Preferred stock 23,404 35,000 - First mortgage bonds 70,000 40,000 50,000 Pollution control bonds 38,875 23,300 - Other long-term debt - - 844 Retirements: Preferred stock (23,404) - (4,118) First mortgage bonds (51,300) (104,703) - Pollution control bonds (25,885) (23,650) (300) Other long-term debt (8,170) (6,212) (8,958) Notes payable, net 9,000 26,500 (25,603) Payment of preferred stock dividends (5,400) (3,857) (3,094) Payment of common stock dividends (29,000) (28,000) (28,500) Miscellaneous (5,683) (7,821) (839) Net cash provided from (used for) financing activities 22,473 (49,417) (20,568) NET CHANGE IN CASH AND CASH EQUIVALENTS (6,539) (20,931) 26,092 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,417 28,348 2,256 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 878 $ 7,417 $ 28,348 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for -- Interest (net of amount capitalized) $15,697 $22,941 $24,802 Income taxes 29,009 19,514 17,980
( ) Denotes use of cash. The accompanying notes are an integral part of these statements. II-191 222 BALANCE SHEETS At December 31, 1993 and 1992 Mississippi Power Company 1993 Annual Report
ASSETS 1993 1992 (in thousands) UTILITY PLANT: Plant in service, at original cost (Notes 1 and 6) $ 1,238,847 $ 1,180,505 Less accumulated provision for depreciation 462,725 440,777 776,122 739,728 Construction work in progress 108,063 41,692 Total 884,185 781,420 Less property-related accumulated deferred income taxes (Note 9) - 142,338 Total 884,185 639,082 OTHER PROPERTY AND INVESTMENTS (NOTE 10) 11,289 4,539 CURRENT ASSETS: Cash and cash equivalents 878 7,417 Investment securities - 3,622 Receivables- Customer accounts receivable 31,376 26,336 Other accounts and notes receivable 5,581 5,757 Affiliated companies 6,698 3,532 Accumulated provision for uncollectible accounts (737) (508) Fossil fuel stock, at average cost 11,185 21,341 Materials and supplies, at average cost 21,145 22,108 Current portion of deferred fuel charges (Note 5) 440 1,861 Prepayments 7,843 5,869 Vacation pay deferred (Note 1) 4,797 4,651 Total 89,206 101,986 DEFERRED CHARGES: Debt expense and loss, being amortized 11,666 10,906 Deferred fuel charges (Note 5) 17,520 25,255 Deferred charges related to income taxes (Note 9) 25,267 - Miscellaneous 10,073 9,515 Total 64,526 45,676 TOTAL ASSETS $ 1,049,206 $ 791,283
The accompanying notes are an integral part of these statements. II-192 223 BALANCE SHEETS At December 31, 1993 and 1992 Mississippi Power Company 1993 Annual Report
CAPITALIZATION AND LIABILITIES 1993 1992 (in thousands) CAPITALIZATION (SEE ACCOMPANYING STATEMENTS): Common stock equity $ 321,768 $ 280,640 Preferred stock 74,414 74,414 Long-term debt 250,391 238,650 Total 646,573 593,704 CURRENT LIABILITIES: Long-term debt due within one year (Note 11) 19,345 8,878 Notes payable (Note 5) 40,000 31,000 Accounts payable- Affiliated companies 10,197 6,202 Other 50,731 37,348 Customer deposits 2,786 2,976 Taxes accrued- Federal and state income (Note 9) 186 6,364 Other 26,952 25,671 Interest accrued 4,237 3,961 Miscellaneous 14,120 15,614 Total 168,554 138,014 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 9) 123,206 169 Accumulated deferred investment tax credits 32,710 34,242 Deferred credits related to income taxes (Note 9) 48,228 - Accumulated provision for property damage (Note 1) 10,538 9,294 Miscellaneous 19,397 15,860 Total 234,079 59,565 COMMITMENTS AND CONTINGENT MATTERS (NOTES 2, 3, 4, 5, AND 8) TOTAL CAPITALIZATION AND LIABILITIES $ 1,049,206 $ 791,283 The accompanying notes are an integral part of these statements.
II-193 224 STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 Mississippi Power Company 1993 Annual Report
1993 1992 1993 1992 (in thousands) (percent of total) COMMON STOCK EQUITY: Common stock, without par value -- Authorized -- 1,130,000 shares Outstanding -- 1,121,000 shares in 1993 and 1992 $ 37,691 $ 37,691 Paid-in capital 154,362 124,326 Premium on preferred stock 372 194 Retained earnings (Note 12) 129,343 118,429 Total common stock equity 321,768 280,640 49.8 % 47.3 % CUMULATIVE PREFERRED STOCK: $100 par value -- Authorized -- 1,244,139 shares Outstanding -- 744,139 shares in 1993 and 1992 4.40% 4,000 4,000 4.60% 2,010 2,010 4.72% 5,000 5,000 6.32% 15,000 - 6.65% 8,404 - 7.00% 5,000 5,000 7.25% 35,000 35,000 8.44% - 8,404 8.80% - 15,000 Total (annual dividend requirement -- $4,899,000) 74,414 74,414 11.5 12.5 LONG-TERM DEBT: First mortgage bonds -- Maturity Interest Rates June 1, 1994 4 5/8% 10,000 10,000 July 1, 1995 4 3/4% 11,000 11,000 August 1, 1996 6% 10,000 10,000 November 1, 1997 7 1/8% - 10,000 March 1, 1998 5 3/8% 35,000 - 2000 to 2003 6 5/8% to 7 5/8% 40,000 80,000 May 1, 2021 9 1/4% 48,700 50,000 June 1, 2023 7.45% 35,000 - Total first mortgage bonds 189,700 171,000 Pollution control obligations (Note 10) 63,165 50,175 Other long-term debt (Note 10) 19,678 27,848 Unamortized debt premium (discount), net (2,807) (1,495) Total long-term debt (annual interest requirement--$17,913,000) 269,736 247,528 Less amount due within one year (Note 11) 19,345 8,878 Long-term debt excluding amount due within one year 250,391 238,650 38.7 40.2 TOTAL CAPITALIZATION $ 646,573 $ 593,704 100.0 % 100.0 %
The accompanying notes are an integral part of these statements. II-194 225 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991 Mississippi Power Company 1993 Annual Report
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 118,429 $ 111,670 $ 117,543 Net income after dividends on preferred stock 42,436 36,790 22,627 Cash dividends on common stock (29,000) (28,000) (28,500) Preferred stock transactions and other, net (2,522) (2,031) - BALANCE AT END OF PERIOD (NOTE 12) $ 129,343 $ 118,429 $ 111,670
STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1993, 1992, and 1991
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 124,326 $ 124,300 $ 124,300 Contributions to capital by parent company 30,036 26 - BALANCE AT END OF PERIOD $ 154,362 $ 124,326 $ 124,300
The accompanying notes are an integral part of these statements. II-195 226 NOTES TO FINANCIAL STATEMENTS Mississippi Power Company 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL Mississippi Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and various other subsidiaries related to foreign utility operations and domestic non-utility operations. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four southeastern states. Contracts among the companies--dealing with jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power--are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission. SCS provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. Mississippi Power is also subject to regulation by the FERC and the Mississippi Public Service Commission (MPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective commissions. The 1991 financial statements of the Company included the accounts of Electric City Merchandise Company, Inc. (Electric City), which discontinued operations in 1991. All significant intercompany transactions were eliminated in consolidation. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. REVENUES Mississippi Power accrues revenues for service rendered but unbilled at the end of each fiscal period. The Company's retail and wholesale rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power. Retail rates also include provisions to adjust billings for fluctuations in costs for ad valorem taxes. Revenues are adjusted for differences between the recoverable fuel and ad valorem expenses and the amounts actually recovered in current rates. DEPRECIATION Depreciation of the original cost of depreciable utility plant in service is provided by using composite straight-line rates which approximated 3.1 percent in 1993 and 3.3 percent in 1992 and 1991. 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. INCOME TAXES Mississippi Power 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 9 to the financial statements for additional information about Statement No. 109. II-196 227 NOTES (continued) Mississippi Power Company 1993 Annual Report ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used to capitalize the cost of funds devoted to construction were 6.8 percent in 1993, 8.2 percent in 1992, and 9.8 percent in 1991. AFUDC (net of income taxes), as a percent of net income after dividends on preferred stock, was 3.5 percent in 1993, 2.7 percent in 1992, and 4.8 percent in 1991. UTILITY PLANT Utility plant is stated at original cost. This cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repair, and replacement of minor items of property is charged to maintenance expense except for the maintenance of coal cars and a portion of the railway track maintenance, which are charged to fuel stock. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. CASH AND CASH EQUIVALENTS For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. FINANCIAL INSTRUMENTS In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, all financial instruments of the Company -- for which the carrying amount does not approximate fair value -- are shown in the table below as of December 31:
1993 1992 Carrying Fair Carrying Fair Amount Value Amount Value (in thousands) Investment securities - - $ 3,622 $ 3,745 Long-term debt $269,736 $278,025 247,529 249,489
The fair value of investment securities was based on listed closing market prices. The fair value for long-term debt 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 used or installed. VACATION PAY Mississippi Power's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current asset representing the future recoverability of this cost. Such amounts were $4.8 million and $4.7 million at December 31, 1993 and 1992, respectively. In 1994, an estimated 80 percent of the 1993 deferred vacation cost will be expensed, and the balance will be charged to construction and other accounts. II-197 228 NOTES (continued) Mississippi Power Company 1993 Annual Report PROVISION FOR PROPERTY DAMAGE Due to the significant increase in the cost of traditional insurance, effective in 1993, Mississippi Power became self-insured for the full cost of storm and other damage to its transmission and distribution property. As permitted by regulatory authorities, the Company provided for the cost of storm, fire and other uninsured casualty damage by charges to income of $1.5 million in 1993, 1992, and 1991. 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. As of December 31, 1993, the accumulated provision amounted to $10.5 million. Regulatory treatment by the MPSC allows a maximum accumulated provision of $10.9 million. DISCONTINUED OPERATIONS Electric City began operating as a subsidiary of Mississippi Power in October 1987 and was formally dissolved as of December 31, 1991. Under an agreement reached in October 1991, a portion of Electric City's assets, including inventory and fixed assets, was sold to a concern independent of Mississippi Power. The remaining assets and liabilities, which were not material, were transferred to the Company. The impact of Electric City on Mississippi Power's consolidated earnings in 1991 consisted of (a) a pretax operating loss of $10.2 million ($6.4 million after income taxes) and (b) the pretax loss of $8.7 million ($5.5 million after income taxes) resulting from the disposal of Electric City. 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 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 "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 fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. 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. A qualified trust for medical benefits has been established for funding amounts to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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." Because the adoption of Statement No. 106 was reflected in rates, it did not have a material impact on net income. Prior to 1993, Mississippi Power recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The total costs of such benefits recognized by the Company in 1992 and 1991 were $3.6 million and $3.0 million, respectively. II-198 229 NOTES (continued) Mississippi Power Company 1993 Annual Report STATUS AND COST OF BENEFITS Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown only for 1993 because Statement No. 106 was adopted as of January 1, 1993, on a prospective basis. The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in thousands) Actuarial present value of benefit obligation: Vested benefits $ 73,735 $62,840 Non-vested benefits 3,245 2,773 Accumulated benefit obligation 76,980 65,613 Additional amounts related to projected salary increases 24,434 28,721 Projected benefit obligation 101,414 94,334 Less: Fair value of plan assets 154,224 138,507 Unrecognized net gain (49,239) (40,456) Unrecognized prior service cost 3,590 3,809 Unrecognized transition asset (7,188) (7,741) Prepaid asset (accrued liability) recognized in the Balance Sheets $ (27) $ (215)
Postretirement Medical Life 1993 1993 Actuarial present value of benefit obligation: Retirees and dependents $10,408 $3,315 Employees eligible to retire 3,752 - Other employees 19,389 4,596 Accumulated benefit obligation 33,549 7,911 Less: Fair value of plan assets 6,271 84 Unrecognized net loss 3,500 (632) Unrecognized transition obligation 16,540 3,606 Accrued liability recognized in the Balance Sheets $ 7,238 $4,853
The weighted average rates assumed in the above actuarial calculations were:
1993 1992 1991 Discount 7.5% 8.0% 8.0% Annual salary increase 5.0 6.0 6.0 Long-term return on plan assets 8.5 8.5 8.5
An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1993, by $6.4 million and the aggregate of the service and interest cost components of the net retiree medical cost by $722 thousand. Components of the plans' net cost are shown below:
Pension 1993 1992 1991 (in thousands) Benefits earned during the year $ 3,792 $ 3,595 $ 3,361 Interest cost on projected benefit obligation 7,296 6,886 6,345 Actual return on plan assets (20,017) (5,812) (34,773) Net amortization and deferral 8,741 (4,265) 25,833 Net pension cost (income) $ (188) $ 404 $ 766
II-199 230 NOTES (continued) Mississippi Power Company 1993 Annual Report Of the above net pension amounts recorded, ($170 thousand) in 1993, $269 thousand in 1992, and $576 thousand in 1991 were recorded in operating expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical Life 1993 1993 (in thousands) Benefits earned during the year $1,149 $299 Interest cost on accumulated benefit obligation 2,187 624 Amortization of transition obligation over 20 years 871 180 Actual return on plan assets (808) (6) Net amortization and deferral 343 - Net postretirement cost $3,742 $1,097
Of the above net postretirement medical and life insurance costs recorded in 1993, $3.9 million was charged to operating expense and the remainder was charged to construction and other accounts. 3. LITIGATION AND REGULATORY MATTERS: RETAIL RATE ADJUSTMENT PLANS Mississippi Power's retail base rates have been set under a Performance Evaluation Plan (PEP) since 1986. During 1993, all matters related to the original PEP case were finally resolved when the Supreme Court of Mississippi granted a joint motion to dismiss pending appeals. Also in 1993, the MPSC ordered Mississippi Power to review and propose changes to the plan that would reduce the impact of rate changes on the customer and provide incentives for Mississippi Power to keep customer prices low. In response, Mississippi Power filed a revised plan and, on January 4, 1994, the MPSC approved PEP-2. The revised plan 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 performance indicators that emphasize those factors which most directly impact the customers. PEP-2 provides for semiannual evaluations of Mississippi's performance-based return on investment, rather than on common equity as previously calculated. As in previous plans, any change in rates is limited to 2 percent of retail revenues per evaluation period before a public hearing is required. PEP-2 will remain in effect until the MPSC modifies or terminates the plan. ENVIRONMENTAL COMPLIANCE OVERVIEW PLAN The MPSC approved Mississippi Power's ECO Plan in 1992. The plan establishes procedures to facilitate the MPSC's overview of the Company's environmental strategy and provides for recovery of costs associated with environmental projects approved by the MPSC. 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 resulted in an annual retail rate increase of $2.6 million effective April 1993. FERC REVIEWS EQUITY RETURNS AND OTHER REGULATORY MATTERS 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 equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts, including the Company's Transmission Facilities Agreement (TFA) discussed in Note 8 under "Lease Agreements." Any changes in rate of return on common equity that may occur as a result of this proceeding would be effective 60 days after a proper notice of the proceeding is published. A notice was published on May 10, 1991. In August 1992, an 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. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on Mississippi Power's financial statements. In 1988, the Company and its operating affiliates filed with the FERC a contract governing the pricing and other aspects of power transactions among the companies. In 1989, the FERC ordered hearings on the contract and made revenues collected under the contract subject to refund. In 1992, the II-200 231 NOTES (continued) Mississippi Power Company 1993 Annual Report FERC ruled that certain production costs under the contract had not been properly classified and ordered that the contract be revised and that refunds be made. Under reconsideration, the FERC determined that refunds were not necessary and ordered that its mandated changes in computing certain expenses under the system interchange contract become effective in August 1993. The changes mandated by the FERC will not materially affect the Company's net income. WHOLESALE RATE FILING On September 1, 1993, Mississippi Power filed a $3.6 million wholesale rate increase request with the FERC. Prior to this filing, the Company conferred and negotiated a settlement with all of its wholesale all requirements customers, who have executed a Settlement Agreement and Certificates of Concurrence to be included in this filing with the FERC. The Company is awaiting a response from the FERC. RETAIL RATEPAYERS' SUITS CONCLUDED In 1989, three retail ratepayers of the Company filed a civil complaint in the U.S. District Court for the Southern District of Mississippi against Mississippi Power and other parties. The complaint alleged that Mississippi Power obtained excessive rate increases by improper accounting for spare parts and sought actual damages estimated to be at least $10 million, plus treble and punitive damages, on behalf of all retail ratepayers of the Company for alleged violations of the federal Racketeer Influenced and Corrupt Organizations Act, federal and state antitrust laws, other federal and state statutes, and common law fraud. Mississippi Power also was named as a defendant, together with other parties in a similar civil action filed in the U.S. District Court for the Northern District of Florida. The defendants' motions for dismissal were granted by the courts, resolving these suits. 4. CONSTRUCTION PROGRAM: Mississippi Power is engaged in continuous construction programs, the costs of which are currently estimated to total some $96 million in 1994, $62 million in 1995, and $98 million in 1996. These estimates include AFUDC of $1.6 million in 1994, $1.6 million in 1995, and $2.7 million in 1996. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment and materials; and cost of capital. The Company does not have any new baseload generating plants under construction. However, the construction of a combustion turbine generation unit of 78 megawatts was completed in February 1994. In addition, 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 and other environmental matters. 5. FINANCING AND COMMITMENTS: FINANCING Mississippi Power's construction program is expected to be financed from internal and other sources, such as the issuance of additional long-term debt and preferred stock and the receipt of capital contributions from The Southern Company. The amounts of first mortgage bonds and preferred stock which can be issued in the future will be contingent upon market conditions, adequate earnings levels, regulatory authorizations and other factors. See Management's Discussion and Analysis under "Sources of Capital" for information regarding the Company's coverage requirements. At December 31, 1993, Mississippi Power had committed credit agreements (360 day committed lines) with banks for $21 million. Additionally, Mississippi Power had $70 million of unused committed credit agreements in the form of revolving credit agreements expiring December 1, 1996. 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. As of December 31, 1993, Mississippi Power had $40 million in short-term bank borrowings all of which were made apart from committed credit arrangements. II-201 232 NOTES (continued) Mississippi Power Company 1993 Annual Report 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. FUEL COMMITMENTS To supply a portion of the fuel requirements of its generating plants, Mississippi Power has entered into various long-term commitments for the procurement of fuel. In most cases, these contracts contain provisions for price escalations, minimum production levels, and other financial commitments. Total estimated obligations were approximately $243 million at December 31, 1993. Additional commitments for fuel will be required in the future to supply the Company's fuel needs. In order to take advantage of lower cost coal supplies, agreements were reached in December 1986 to terminate two contracts for the supply of coal to Plant Daniel, which is jointly owned by Mississippi Power and Gulf Power, an operating affiliate. The Company's portion of this payment was about $60 million. In accordance with the ratemaking treatment, the cost to terminate the contracts is being amortized through 1995 to match costs with savings achieved. The remaining unamortized amount of Mississippi Power's share of principal payments to the suppliers including the current portion totaled $18 million at December 31, 1993. 6. JOINT OWNERSHIP AGREEMENTS: Mississippi Power and Alabama Power own as tenants in common Greene County Electric Generating Plant (coal) located in Alabama; and Mississippi Power and Gulf Power own as tenants in common Daniel Electric Generating Plant (coal) located in Mississippi. At December 31, 1993, Mississippi Power's percentage ownership and investment in these jointly owned facilities were as follows:
Total Company's Generating Megawatts Percent Gross Accumulated Plant Capacity Ownership Investment Depreciation (in thousands) Greene County 500 40% $59,897 $28,365 Daniel 1,000 50% 218,462 82,778
Mississippi Power's share of plant operating expenses is included in the corresponding operating expenses in the Statements of Income. 7. LONG-TERM POWER SALES AGREEMENTS: GENERAL Mississippi Power and the other operating affiliates of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside of the system's service area. Some of these agreements (unit power sales) are firm commitments and pertain to capacity related to specific generating units. Mississippi Power's participation in firm production capacity unit power sales ended in January 1989. However, the Company continues to participate in transmission and energy sales under the unit power sales agreements. The other agreements (other long-term sales) are non-firm commitments and are based on capacity of the system in general. Because the energy is generally sold at variable costs under these agreements, only revenues from capacity sales affect profitability. Off-system capacity revenues for the Company have been as follows:
Other Year Unit Power Long-Term Total (in thousands) 1993 $1,571 $2,620 $4,191 1992 2,168 1,405 3,573 1991 1,510 1,204 2,714
Long-term non-firm power of 400 megawatts was sold in 1993 by the Southern electric system to Florida Power Corporation. In January 1994, this amount decreased to 200 megawatts, and the contract will expire at year-end. II-202 233 NOTES (continued) Mississippi Power Company 1993 Annual Report GULF STATES SETTLEMENT COMPLETED On November 7, 1991, subsidiaries of The Southern Company entered into a settlement agreement with Gulf States that resolved litigation between the companies that had been pending since 1986 and arose out of a dispute over certain unit power and other long-term power sales contracts. In 1993, all remaining terms and obligations of the settlement agreement were satisfied. Based on the value of the settlement proceeds received -- less the amounts previously included in income -- Mississippi Power recorded an increase in net income of approximately $2.6 million in 1991. 8. LEASE AGREEMENTS: In 1984, Mississippi Power and 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. In 1993, 1992, and 1991 the use fees collected under the agreement, net of related expenses, amounted to $3.9 million, $3.9 million and $4.0 million, respectively, and are included with other income, net, in the Statements of Income. For other information see Note 3 under "FERC Reviews Equity Returns and Other Regulatory Matters." In 1989, Mississippi Power entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars to transport coal to Plant Daniel. Gulf Power, as joint owner of Plant Daniel, is responsible for one half of the lease costs. The Company's share of the lease is charged to fuel inventory and allocated to fuel expense as the fuel is used. The lease costs charged to inventory were $1.2 million in 1993, $1.2 million for 1992 and $1.3 million for 1991. For the year 1994, the Company's annual lease payment will be $1.2 million. The Company's annual lease payment for 1995 will be $2.4 million and for 1996, 1997, and in 1998 the payment will be $1.2 million. Lease payments after 1998 total approximately $17.4 million. The Company has the option after three years to purchase the railcars at the greater of termination value or fair market value. Additionally, at the end of the lease term, Mississippi Power has the option to renew the lease. 9. INCOME TAXES: Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no effect on net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $25 million are revenues to be received from customers. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The related liabilities of $48 million are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. II-203 234 NOTES (continued) Mississippi Power Company 1993 Annual Report Details of the federal and state income tax provisions are shown below:
1993 1992 1991 (in thousands) Total provision for income taxes Federal -- Currently payable $15,842 $20,286 $16,984 Deferred --current year 5,158 (1,578) (2,404) --reversal of prior years (820) (3,931) (8,446) Deferred investment tax credits - - (2) 20,180 14,777 6,132 State -- Currently payable 2,945 2,992 2,709 Deferred --current 1,339 218 (223) --reversal of prior years (638) (182) (796) 3,646 3,028 1,690 Total 23,826 17,805 7,822 Less income taxes charged (credited) to: - Disposal of subsidiary - (3,245) Other income 1,158 1,427 (2,909) Federal and state income taxes charged to operations $22,668 $16,378 $13,976
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:
1993 (in thousands) Deferred tax liabilities: Accelerated depreciation $130,299 Basis differences 11,332 Coal contract buyouts 6,870 Other 18,719 Total 167,220 Deferred tax assets: Other property basis differences 28,779 Pension and other benefits 4,625 Property insurance 4,031 Unbilled fuel 4,205 Other 5,562 Total 47,202 Net deferred tax liabilities (assets) 120,018 Portion included in current assets, net 3,188 Accumulated deferred income taxes in the Balance Sheets $123,206
In 1989, under order of the MPSC, Mississippi Power began amortizing deferred income taxes not covered by the Internal Revenue Service normalization requirements, that had been recorded at rates higher than those specified by the current statutory income tax rules. This amortization occurred over a 60-month period, the effect of which was a reduction of income tax expense of approximately $2.7 million per year. At December 31, 1993, this tax rate differential was fully amortized. Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $1.5 million in 1993, $1.4 million in 1992 and $1.5 million in 1991. At December 31, 1993, all investment tax credits available to reduce federal income taxes payable had been utilized. II-204 235 NOTES (continued) Mississippi Power Company 1993 Annual Report The total provision for income taxes as a percentage of pre-tax income and the differences between those effective rates and the statutory federal tax rates were as follows:
1993 1992 1991 Total effective tax rate 33% 30% 23% State income tax, net of federal income tax benefit (3) (3) (3) Tax rate differential 4 6 11 Other 1 1 3 Statutory federal tax rate 35% 34% 34%
Mississippi Power and its affiliates file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 10. OTHER LONG-TERM DEBT: Details of other long-term debt are as follows:
December 31, 1993 1992 (in thousands) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized -- 5.80% due 2007 $ 990 $19,000 Variable rate due 2020 6,550 6,550 Variable rate due 2022 16,750 16,750 6.20% due 2023 13,000 - 5.65% due 2023 25,875 - Non-collateralized -- 5.90% due 2003 - 7,875 63,165 50,175 Notes payable: 8.25% due 1993-1995 17,520 25,255 7.50% due 1993-1995 2,158 2,593 19,678 27,848 Total $82,843 $78,023
Pollution control obligations represent installment or lease purchases of pollution control facilities financed by application of funds derived from sales by public authorities of tax-exempt revenue bonds. Mississippi Power has authenticated and delivered to the Trustee a like principal amount of first mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under these agreements. The 5.8% Series of pollution control obligations has a cash sinking fund requirement of $10 thousand annually through 1997 and $20 thousand in 1998. At December 31, 1993, under "Other Property and Investments" approximately $6 million related to the 6.20% Series of Pollution Control Obligations remains available for completion of certain solid waste disposal facilities. The 8.25 percent notes payable relate to the termination of two coal contracts. See Note 5 under "Fuel Commitments" for information on these coal contracts. The annual estimated maturities of total notes payable are $8.8 million in 1994 and $10.8 million in 1995. II-205 236 NOTES (continued) Mississippi Power Company 1993 Annual Report 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:
1993 1992 (in thousands) Bond improvement fund requirements $1,902 $1,710 Less: Portion to be satisfied by certifying property additions 1,402 1,210 Cash improvement fund requirements 500 500 First mortgage bond maturities and redemptions 10,000 - Pollution control bond cash sinking fund requirements (Note 10) 10 245 Current portion of notes payable (Note 10) 8,835 8,133 Total $19,345 $8,878
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 Articles of Incorporation contain various common stock dividend restrictions. At December 31, 1993, $86 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 Articles of Incorporation. 13. QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for 1993 and 1992 are as follows:
Net Income After Dividends Quarter Operating Operating On Ended Revenues Income Preferred Stock March 1993 $101,552 $ 9,529 $ 4,424 June 1993 117,764 18,147 11,852 September 1993 148,102 22,377 16,560 December 1993 107,465 13,333 9,600 March 1992 $ 94,931 $11,400 $ 6,001 June 1992 109,199 17,011 11,422 September 1992 129,018 18,911 13,008 December 1992 101,299 10,968 6,359
Mississippi Power's business is influenced by seasonal weather conditions and the timing of rate changes. II-206 237 SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS) $ 474,883 $ 434,447 $432,386 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK (IN THOUSANDS) $ 42,436 $ 36,790 $ 22,627 CASH DIVIDENDS ON COMMON STOCK (IN THOUSANDS) $ 29,000 $ 28,000 $ 28,500 RETURN ON AVERAGE COMMON EQUITY (PERCENT) 14.09 13.27 8.17 TOTAL ASSETS (IN THOUSANDS) $1,049,206 $ 791,283 $790,641 GROSS PROPERTY ADDITIONS (IN THOUSANDS) $ 139,976 $ 68,189 $ 53,675 CAPITALIZATION (IN THOUSANDS): Common stock equity $ 321,768 $ 280,640 $273,855 Preferred stock 74,414 74,414 39,414 Preferred stock subject to mandatory redemption - - - Long-term debt 250,391 238,650 304,150 Total (excluding amounts due within one year) $ 646,573 $ 593,704 $617,419 CAPITALIZATION RATIOS (PERCENT): Common stock equity 49.8 47.3 44.4 Preferred stock 11.5 12.5 6.4 Long-term debt 38.7 40.2 49.2 Total (excluding amounts due within one year) 100.0 100.0 100.0 FIRST MORTGAGE BONDS (IN THOUSANDS): Issued 70,000 40,000 50,000 Retired 51,300 104,703 - PREFERRED STOCK (IN THOUSANDS): Issued 23,404 35,000 - Retired 23,404 - 4,118 Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A A A CUSTOMERS (YEAR-END): Residential 151,692 150,248 148,978 Commercial 28,648 28,056 27,441 Industrial 570 573 562 Other 190 189 400 Total 181,100 179,066 177,381 EMPLOYEES (YEAR-END) 1,586 1,619 1,630
II-207 238
SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1993 Annual Report 1990 1989 1988 1987 1986 1985 1984 1983 $446,871 $442,650 $437,939 $455,843 $476,265 $475,610 $442,507 $414,595 $ 34,176 $ 38,576 $ 36,081 $ 35,200 $ 33,814 $ 33,330 $ 31,380 $ 35,404 $ 27,500 $ 27,000 $ 27,600 $ 24,700 $ 23,700 $ 22,600 $ 21,000 $ 18,900 12.36 14.43 14.03 14.68 15.28 15.83 15.74 19.74 $800,026 $786,570 $779,319 $764,068 $767,110 $679,577 $660,530 $649,373 $ 49,009 $ 43,916 $ 54,550 $ 53,288 $ 62,488 $ 57,791 $ 37,290 $ 72,277 $279,833 $273,157 $261,473 $252,992 $226,601 $216,087 $205,018 $193,609 39,414 39,414 39,414 39,414 39,414 39,414 39,414 39,414 3,750 4,500 5,250 6,750 8,250 9,750 10,500 11,250 270,724 277,693 287,525 294,811 299,684 261,594 267,051 267,271 $593,721 $594,764 $593,662 $593,967 $573,949 $526,845 $521,983 $511,544 47.1 45.9 44.1 42.6 39.5 41.0 39.3 37.9 7.3 7.4 7.5 7.8 8.3 9.3 9.5 9.9 45.6 46.7 48.4 49.6 52.2 49.7 51.2 52.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - - - - 35,000 - - - 4,000 3,823 - 29,701 29,250 250 250 3,246 - - - - - - - - 750 750 1,500 1,500 1,500 1,111 639 750 A1 A1 A1 A1 A1 A1 A1 A3 A+ A+ A+ A+ A+ A A A A+ A+ 5 5 5 5 5 6 a1 a1 a1 a1 a1 a1 a1 a3 A A A A A A A A A A 6 6 6 6 6 6 147,738 147,308 146,750 146,273 145,809 145,071 142,846 140,730 27,134 26,867 26,751 26,342 26,217 25,629 25,404 24,467 574 525 478 438 393 371 348 344 411 404 399 389 363 356 356 366 175,857 175,104 174,378 173,442 172,782 171,427 168,954 165,907 1,842 1,750 1,831 1,898 1,882 1,801 1,669 1,653
II-208 239
SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1993 Annual Report 1993 1992 1991 OPERATING REVENUES (IN THOUSANDS): Residential $ 118,793 $ 109,781 $ 103,820 Commercial 115,152 107,131 103,666 Industrial 130,198 117,010 116,972 Other 3,760 3,533 5,869 Total retail 367,903 337,455 330,327 Sales for resale - non-affiliates 83,511 80,213 78,826 Sales for resale - affiliates 15,519 10,055 18,044 Total revenues from sales of electricity 466,933 427,723 427,197 Other revenues 7,950 6,724 5,189 Total $ 474,883 $ 434,447 $ 432,386 KILOWATT-HOUR SALES (IN THOUSANDS): Residential 1,929,835 1,804,858 1,832,266 Commercial 1,933,685 1,811,042 1,768,441 Industrial 3,623,543 3,536,634 3,297,247 Other 38,357 38,261 89,375 Total retail 7,525,420 7,190,795 6,987,329 Sales for resale - non-affiliates 2,544,982 2,687,917 2,706,320 Sales for resale - affiliates 426,919 280,443 617,696 Total 10,497,321 10,159,155 10,311,345 AVERAGE REVENUE PER KILOWATT-HOUR (CENTS): Residential 6.16 6.08 5.67 Commercial 5.96 5.92 5.86 Industrial 3.59 3.31 3.55 Total retail 4.89 4.69 4.73 Total sales 4.45 4.21 4.14 RESIDENTIAL AVERAGE ANNUAL KILOWATT-HOUR USE PER CUSTOMER 12,780 12,066 12,338 RESIDENTIAL AVERAGE ANNUAL REVENUE PER CUSTOMER $ 786.71 $ 733.90 $ 699.11 PLANT NAMEPLATE CAPACITY RATINGS (YEAR-END) (MEGAWATTS) 2,011 2,011 2,011 MAXIMUM PEAK-HOUR DEMAND (MEGAWATTS): Winter 1,401 1,386 1,267 Summer 1,872 1,755 1,682 Annual Load Factor (percent) 60.0 60.8 61.5 Plant Availability - Fossil-Steam (percent) 88.0 92.0 89.8 SOURCE OF ENERGY SUPPLY (PERCENT): Coal 63.5 60.4 64.1 Oil and gas 7.6 5.8 8.1 Purchased power - From non-affiliates 1.3 1.2 0.7 From affiliates 27.6 32.6 27.1 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA: BTU per net kilowatt-hour generated 10,075 9,888 10,142 Cost of fuel per million BTU (cents) 170.13 162.27 177.52 Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.60 1.80
II-209 240
SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1993 Annual Report 1990 1989 1988 1987 1986 1985 1984 1983 $ 102,243 $ 100,068 $ 96,711 $ 98,338 $ 101,984 $ 96,878 $ 92,955 $ 92,868 103,352 103,403 98,772 98,669 100,521 96,883 91,500 91,822 123,754 128,983 123,038 129,004 134,501 129,495 128,951 117,336 6,078 5,992 5,874 5,723 5,882 5,884 5,704 5,784 335,427 338,446 324,395 331,734 342,888 329,140 319,110 307,810 86,194 82,111 75,525 88,060 107,270 115,757 106,691 81,511 20,157 16,938 33,747 31,278 21,669 27,277 13,226 20,425 441,778 437,495 433,667 451,072 471,827 472,174 439,027 409,746 5,093 5,155 4,272 4,771 4,438 3,436 3,480 4,849 $ 446,871 $ 442,650 $ 437,939 $ 455,843 $ 476,265 $ 475,610 $ 442,507 $ 414,595 1,804,838 1,741,855 1,686,722 1,658,327 1,674,407 1,603,539 1,535,329 1,488,945 1,718,074 1,686,302 1,607,988 1,555,044 1,544,899 1,500,972 1,415,153 1,384,385 3,311,460 3,204,208 2,879,457 2,862,632 2,877,026 2,786,883 2,768,877 2,405,915 85,938 87,611 86,049 81,153 81,352 83,142 78,198 79,605 6,920,310 6,719,976 6,260,216 6,157,156 6,177,684 5,974,536 5,797,557 5,358,850 2,883,581 2,798,086 2,280,341 2,615,058 2,382,443 2,819,439 2,656,738 2,097,287 714,365 527,970 1,100,808 955,303 704,461 733,142 285,562 303,487 10,518,256 10,046,032 9,641,365 9,727,517 9,264,588 9,527,117 8,739,857 7,759,624 5.66 5.74 5.73 5.93 6.09 6.04 6.05 6.24 6.02 6.13 6.14 6.35 6.51 6.45 6.47 6.63 3.74 4.03 4.27 4.51 4.68 4.65 4.66 4.88 4.85 5.04 5.18 5.39 5.55 5.51 5.50 5.74 4.20 4.35 4.50 4.64 5.09 4.96 5.02 5.28 12,228 11,842 11,499 11,356 11,498 11,135 10,814 10,650 $ 692.70 $ 680.32 $ 659.30 $ 673.41 $ 700.32 $ 672.71 $ 654.74 $ 664.27 1,998 1,998 1,966 1,966 1,966 1,966 1,966 1,966 1,201 1,556 1,284 1,224 1,208 1,310 1,210 1,156 1,724 1,682 1,621 1,548 1,612 1,444 1,421 1,445 59.0 58.8 57.6 59.0 56.8 61.0 59.8 54.8 93.3 94.0 93.0 93.5 93.2 92.4 93.1 93.7 62.6 63.4 86.3 79.4 74.1 74.1 67.5 69.9 14.0 13.5 4.8 5.3 5.1 2.8 2.5 4.3 0.8 0.5 0.4 0.3 2.0 0.4 0.2 0.5 22.6 22.6 8.5 15.0 18.8 22.7 29.8 25.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10,319 10,159 10,220 10,525 10,569 10,396 10,385 10,491 183.27 178.38 185.13 194.46 224.63 235.24 236.45 240.47 1.89 1.81 1.89 2.05 2.37 2.45 2.46 2.52
II-210 241 STATEMENTS OF INCOME Mississippi Power Company
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Thousands of Dollars) OPERATING REVENUES: Revenues $ 459,364 $ 424,392 $ 414,342 Revenues from affiliates 15,519 10,055 18,044 Total operating revenues 474,883 434,447 432,386 OPERATING EXPENSES: Operation -- Fuel 113,986 96,743 120,485 Purchased power from non-affiliates 2,198 1,337 851 Purchased power from affiliates 58,019 60,689 45,506 Proceeds from settlement of disputed contracts - (189) (4,205) Other 100,381 90,581 86,932 Maintenance 44,001 43,165 44,166 Depreciation and amortization 33,099 32,789 32,147 Taxes other than income taxes 37,145 34,664 35,414 Federal and state income taxes 22,668 16,378 13,976 Total operating expenses 411,497 376,157 375,272 OPERATING INCOME: 63,386 58,290 57,114 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 1,010 642 728 Interest income 517 766 1,093 Other, net 3,971 5,501 3,845 Income taxes applicable to other income (1,158) (1,427) (863) INCOME BEFORE INTEREST CHARGES 67,726 63,772 61,917 INTEREST CHARGES: Interest on long-term debt 17,688 22,357 23,656 Allowance for debt funds used during construction (788) (563) (584) Interest on notes payable 1,000 362 603 Amortization of debt discount, premium, and expense, net 1,262 630 377 Other interest charges 728 339 285 Net interest charges 19,890 23,125 24,337 NET INCOME FROM CONTINUING OPERATIONS 47,836 40,647 37,580 DISCONTINUED OPERATIONS: Loss from operations of discontinued subsidiary, net of taxes - - (6,404) Loss on disposal of discontinued subsidiary, net of taxes - - (5,455) NET LOSS FROM DISCONTINUED OPERATIONS - - (11,859) INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN METHOD OF RECORDING REVENUES 47,836 40,647 25,721 Cumulative effect as of January 1, 1983, of accruing unbilled revenues--less income taxes of $6,326(000) - - - NET INCOME 47,836 40,647 25,721 DIVIDENDS ON PREFERRED STOCK 5,400 3,857 3,094 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 42,436 $ 36,790 $ 22,627 Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 42,436 $ 36,790 $ 22,627
II-211 242 STATEMENTS OF INCOME Mississippi Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 426,714 $ 425,712 $ 404,192 $ 424,565 $ 454,596 $ 448,333 $ 429,281 $ 394,170 20,157 16,938 33,747 31,278 21,669 27,277 13,226 20,425 446,871 442,650 437,939 455,843 476,265 475,610 442,507 414,595 138,303 133,671 165,912 167,165 183,515 188,477 158,793 153,816 1,406 1,266 1,257 1,108 4,671 1,807 836 834 49,547 47,066 19,270 36,114 46,322 56,522 70,202 49,637 - - - - - - - - 83,730 84,820 83,542 81,331 70,009 58,528 53,447 53,922 33,368 35,658 33,412 33,974 31,368 39,509 31,826 24,921 30,770 28,001 26,610 26,210 30,293 25,412 24,170 23,322 32,709 32,435 29,638 27,882 26,145 23,930 24,495 24,426 17,144 18,387 20,313 23,888 30,881 29,142 26,525 29,067 386,977 381,304 379,954 397,672 423,204 423,327 390,294 359,945 59,894 61,346 57,985 58,171 53,061 52,283 52,213 54,650 307 903 850 608 1,030 693 820 1,845 829 1,096 1,030 1,121 864 1,326 1,325 3,120 6,297 6,013 6,399 7,065 8,983 9,867 6,482 (369) (1,666) (1,392) (1,148) (2,507) (3,517) (3,880) (2,555) (1,233) 65,661 67,966 65,116 64,458 60,421 60,289 58,285 58,013 22,221 21,685 22,271 24,139 22,707 22,684 22,678 22,816 (600) (821) (595) (652) (770) (434) (1,800) (1,858) 1,142 689 341 558 252 - 1,082 - 359 362 363 388 245 146 148 148 333 566 522 601 283 562 754 4,152 23,455 22,481 22,902 25,034 22,717 22,958 22,862 25,258 42,206 45,485 42,214 39,424 37,704 37,331 35,423 32,755 (4,669) (3,459) (2,549) (487) - - - - - - - - - - - - (4,669) (3,459) (2,549) (487) - - - - 37,537 42,026 39,665 38,937 37,704 37,331 35,423 32,755 - - - - - - - 6,799 37,537 42,026 39,665 38,937 37,704 37,331 35,423 39,554 3,361 3,450 3,584 3,737 3,890 4,001 4,043 4,150 $ 34,176 $ 38,576 $ 36,081 $ 35,200 $ 33,814 $ 33,330 $ 31,380 $ 35,404 $ 34,176 $ 38,576 $ 36,081 $ 35,200 $ 33,814 $ 33,330 $ 31,380 $ 28,605
II-212 243 STATEMENTS OF CASH FLOWS Mississippi Power Company
For the Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) OPERATING ACTIVITIES: Net income $ 47,836 $ 40,647 $ 25,721 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 45,660 41,472 41,773 Deferred income taxes, net 5,039 (5,473) (11,869) Deferred investment tax credits, net - - (2) Allowance for equity funds used during construction (1,010) (642) (728) Non-cash proceeds from settlement of disputed contracts - (189) (4,071) Other, net 3,005 8,093 (4,982) Changes in certain current assets and liabilities -- Receivables, net (4,347) 1,002 35,343 Inventories 11,119 975 10,518 Payables 4,133 460 (4,949) Other (8,033) 6,095 11,433 Net cash provided from operating activities 103,402 92,440 98,187 INVESTING ACTIVITIES: Gross property additions (139,976) (68,189) (53,675) Other 7,562 4,235 2,148 Net cash used for investing activities (132,414) (63,954) (51,527) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: Preferred stock 23,404 35,000 - First mortgage bonds 70,000 40,000 50,000 Pollution control bonds 38,875 23,300 - Other long-term debt - - 844 Capital contributions 30,036 26 - Redemptions: Preferred stock (23,404) - (4,118) First mortgage bonds (51,300) (104,703) - Pollution control bonds (25,885) (23,650) (300) Other long-term debt (8,170) (6,212) (8,958) Notes payable, net 9,000 26,500 (25,603) Payment of preferred stock dividends (5,400) (3,857) (3,094) Payment of common stock dividends (29,000) (28,000) (28,500) Miscellaneous (5,683) (7,821) (839) Net cash provided from (used for) financing activities 22,473 (49,417) (20,568) NET CHANGE IN CASH AND CAHS EQUIVALENTS (6,539) (20,931) 26,092 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,417 28,348 2,256 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 878 $ 7,417 $ 28,348 ( ) Denotes use of cash.
II-213 244 STATEMENTS OF CASH FLOWS Mississippi Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 37,537 $ 42,026 $ 39,665 $ 38,937 $ 37,704 $ 37,331 $ 35,423 $ 39,554 41,079 35,878 34,440 33,971 33,432 28,229 26,487 24,918 2,756 (294) (3,053) 10,035 41,059 11,246 10,156 6,161 (26) (38) 571 896 2,442 1,749 6,336 3,223 (307) (903) (850) (608) (1,030) (693) (820) (1,845) - - - - - - - - 7,257 4,306 3,503 1,965 (14,162) (2,709) 3,802 10,325 (6,252) (18,506) 816 12,000 (1,708) (5,050) 8,734 (26,866) (8,922) 3,687 283 13,708 (8,499) 12,281 (23,307) 10,092 (5,552) 1,307 (5,241) 7,487 (14,502) 4,656 (5,506) (14,378) (1,461) 2,172 (2,294) (9,342) 11,546 (3,725) (3,651) 14,230 66,109 69,635 67,840 109,049 86,282 83,315 57,654 65,414 (49,009) (43,916) (54,550) (53,288) (62,488) (57,791) (37,290) (72,277) 4,481 1,860 8,368 (1,461) (61,162) 3,825 388 1,647 (44,528) (42,056) (46,182) (54,749) (123,650) (53,966) (36,902) (70,630) - - - - - - - - - - - - 35,000 - - - - - - - - - - - - 844 - 130 60,663 1,000 - - - - - 16,000 400 400 1,000 12,000 (750) (750) (1,500) (1,500) (1,500) (1,111) (639) (750) (4,000) (3,823) - (29,701) (29,250) (250) (250) (3,246) (288) (62) (50) (50) (50) (50) (50) (50) (6,416) (5,919) (5,401) (4,974) (200) - - - 17,146 6,457 6,500 - - - - - (3,361) (3,450) (3,584) (3,737) (3,890) (4,001) (4,043) (4,150) (27,500) (27,000) (27,600) (24,700) (23,700) (22,600) (21,000) (18,900) 2 - - (2,696) (2,929) (18) - - (25,167) (33,703) (31,635) (51,228) 34,544 (26,630) (24,982) (15,096) (3,586) (6,124) (9,977) 3,072 (2,824) 2,719 (4,230) (20,312) 5,842 11,966 21,943 18,871 21,695 18,976 23,206 43,518 $ 2,256 $ 5,842 $ 11,966 $ 21,943 $ 18,871 $ 21,695 $ 18,976 $ 23,206
II-214 245 BALANCE SHEETS Mississippi Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) ASSETS UTILITY PLANT: Production-fossil $ 597,425 $ 576,848 $ 567,588 Transmission 188,375 173,278 162,379 Distribution 295,799 279,335 259,929 General 157,248 151,044 141,564 Construction work in progress 108,063 41,692 33,078 Total utility plant 1,346,910 1,222,197 1,164,538 Accumulated provision for depreciation 462,725 440,777 415,135 Total 884,185 781,420 749,403 Less property-related accumulated deferred income taxes - 142,338 138,616 Total 884,185 639,082 610,787 OTHER PROPERTY AND INVESTMENTS: Securities received from settlement of disputed contracts - - 4,113 Miscellaneous 11,289 4,539 3,954 Total 11,289 4,539 8,067 CURRENT ASSETS: Cash and cash equivalents 878 7,417 28,348 Investment securities - 3,622 - Receivables, net 28,021 20,219 27,152 Accrued utility revenues 14,897 14,898 12,420 Fossil fuel stock, at average cost 11,185 21,341 22,373 Materials and supplies, at average cost 21,145 22,108 22,051 Current portion of deferred fuel commitments 440 1,861 933 Prepayments 7,843 5,869 6,137 Vacation pay deferred 4,797 4,651 4,406 Total current assets 89,206 101,986 123,820 DEFERRED CHARGES: Debt expense, being amortized 1,103 804 981 Premium on reacquired debt, being amortized 10,563 10,102 4,676 Deferred fuel commitments 17,520 25,255 31,039 Deferred charges related to income taxes 25,267 - - Miscellaneous 10,073 9,515 11,271 Total deferred charges 64,526 45,676 47,967 TOTAL ASSETS $1,049,206 $ 791,283 $ 790,641
II-215 246 BALANCE SHEETS Mississippi Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 560,537 $ 547,946 $ 529,742 $ 524,198 $ 509,128 $ 485,665 $ 477,618 $ 468,536 151,949 147,288 134,674 130,963 125,304 121,405 118,552 111,266 247,705 229,238 221,327 207,810 195,042 183,003 169,545 160,062 136,815 133,361 137,333 127,690 114,042 99,788 90,626 31,765 26,816 27,057 35,204 27,755 33,544 34,862 17,054 70,463 1,123,822 1,084,890 1,058,280 1,018,416 977,060 924,723 873,395 842,092 392,440 366,193 348,085 328,761 312,571 293,167 266,844 245,171 731,382 718,697 710,195 689,655 664,489 631,556 606,551 596,921 139,970 138,071 134,220 127,912 120,990 107,633 98,494 88,940 591,412 580,626 575,975 561,743 543,499 523,923 508,057 507,981 - - - - - - - - 8,631 7,792 8,153 4,122 1,738 641 630 354 8,631 7,792 8,153 4,122 1,738 641 630 354 2,256 5,842 11,966 21,943 18,871 21,695 18,976 23,206 - - - - - - - - 67,734 58,425 43,246 42,218 48,158 42,407 39,137 44,627 10,797 13,854 10,527 12,371 18,431 22,474 20,694 23,938 29,812 24,788 26,587 29,989 46,067 40,638 57,225 36,550 25,130 21,232 23,120 20,001 17,631 14,561 10,255 7,623 1,430 3,017 - - - - - - 11,392 12,512 12,341 830 973 805 497 679 3,955 3,910 3,815 3,956 3,559 3,337 2,910 2,587 152,506 143,580 131,602 131,308 153,690 145,917 149,694 139,210 824 886 949 1,012 1,212 1,208 1,260 1,329 4,919 5,161 5,404 5,647 2,800 - - - 39,020 45,103 50,714 55,889 60,663 - - - - - - - - - - - 2,714 3,422 6,522 4,347 3,508 7,888 889 499 47,477 54,572 63,589 66,895 68,183 9,096 2,149 1,828 $ 800,026 $ 786,570 $ 779,319 $ 764,068 $ 767,110 $ 679,577 $ 660,530 $ 649,373
II-216 247 BALANCE SHEETS Mississippi Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock $ 37,691 $ 37,691 $ 37,691 Other paid-in capital 154,362 124,326 124,300 Premium on preferred stock 372 194 194 Earnings retained in the business 129,343 118,429 111,670 Total common equity 321,768 280,640 273,855 Preferred stock 74,414 74,414 39,414 Preferred stock subject to mandatory redemption - - - Long-term debt 250,391 238,650 304,150 Total capitalization 646,573 593,704 617,419 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 40,000 31,000 4,500 Preferred stock due within one year - - - Long-term debt due within one year 19,345 8,878 14,650 Accounts payable 60,928 43,550 38,213 Customer deposits 2,786 2,976 3,109 Taxes accrued 27,138 32,035 29,609 Interest accrued 4,237 3,961 4,602 Vacation pay accrued 4,797 4,651 4,406 Miscellaneous 9,323 10,963 10,236 Total current liabilities 168,554 138,014 109,325 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 123,206 169 4,117 Accumulated deferred investment tax credits 32,710 34,242 35,657 Deferred tax related to income taxes 48,228 - - Miscellaneous 29,935 25,154 24,123 Total deferred credits and other liabilities 234,079 59,565 63,897 TOTAL CAPITALIZATION AND LIABILITIES $1,049,206 $ 791,283 $ 790,641
II-217 248 BALANCE SHEETS Mississippi Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 37,691 $ 37,691 $ 37,691 $ 37,691 $ 37,691 $ 37,691 $ 37,691 $ 37,691 124,300 124,300 124,300 124,300 108,300 107,900 107,500 106,500 299 299 299 299 299 299 360 331 117,543 110,867 99,183 90,702 80,311 70,197 59,467 49,087 279,833 273,157 261,473 252,992 226,601 216,087 205,018 193,609 39,414 39,414 39,414 39,414 39,414 39,414 39,414 39,414 3,750 4,500 5,250 6,750 8,250 9,750 10,500 11,250 270,724 277,693 287,525 294,811 299,684 261,594 267,051 267,271 593,721 594,764 593,662 593,967 573,949 526,845 521,983 511,544 30,103 12,957 6,500 - - - - - 368 368 368 368 368 368 729 618 7,039 10,717 9,789 5,451 34,724 6,532 300 300 45,763 47,019 46,937 45,659 36,490 50,992 46,336 51,842 3,430 3,906 3,904 3,857 3,720 3,521 4,240 4,167 24,935 23,843 21,130 21,351 29,029 32,015 24,850 21,631 4,315 4,280 4,016 4,474 5,064 5,502 5,577 6,928 3,955 3,910 3,815 3,956 3,559 3,337 2,910 2,587 6,833 7,746 9,347 6,005 5,746 5,464 6,453 7,786 126,741 114,746 105,806 91,121 118,700 107,731 91,395 95,859 18,992 22,085 24,556 27,411 25,922 - - - 37,187 38,752 40,435 41,427 42,183 41,311 41,063 36,135 - - - - - - - - 23,385 16,223 14,860 10,142 6,356 3,690 6,089 5,835 79,564 77,060 79,851 78,980 74,461 45,001 47,152 41,970 $ 800,026 $ 786,570 $ 779,319 $ 764,068 $ 767,110 $ 679,577 $ 660,530 $ 649,373
II-218 249 MISSISSIPPI POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1993 FIRST MORTGAGE BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1964 $ 10,000 4-5/8% $ 10,000 6/1/94 1965 11,000 4-3/4% 11,000 7/1/95 1966 10,000 6% 10,000 8/1/96 1993 35,000 5-3/8% 35,000 3/1/98 1992 40,000 6-5/8% 40,000 8/1/00 1991 50,000 9-1/4% 48,700 5/1/21 1993 35,000 7.45% 35,000 6/1/23 $ 191,000 $ 189,700
POLLUTION CONTROL BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1977 $ 1,000 5.80% $ 990 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 $ 63,175 $ 63,165
PREFERRED STOCK
Shares Dividend Amount Series Outstanding Rate Outstanding (Thousands) 1947 20,099 4.60% $ 2,010 1956 40,000 4.40% 4,000 1965 50,000 4.72% 5,000 1968 50,000 7.00% 5,000 1992 350,000 7.25% 35,000 1993 150,000 6.32% 15,000 1993 84,040 6.65% 8,404 744,139 $ 74,414
II-219 250 MISSISSIPPI POWER COMPANY SECURITIES RETIRED DURING 1993 FIRST MORTGAGE BONDS
Principal Interest Series Amount Rate (Thousands) 1967 $ 10,000 7.125% 1972 25,000 7.625% 1973 15,000 7.625% 1991 1,300 9.25% $ 51,300
POLLUTION CONTROL BONDS
Principal Interest Series Amount Rate (Thousands) 1973 $ 7,875 5.90% 1977 18,000 5.80% 1977 10 5.80% $ 25,885
PREFERRED STOCK
Principal Dividend Series Amount Rate (Thousands) 1971 $ 8,404 8.44% 1974 15,000 8.80% $ 23,404
II-220 251 SAVANNAH ELECTRIC AND POWER COMPANY FINANCIAL SECTION II-221 252 MANAGEMENT'S REPORT Savannah Electric and Power Company 1993 Annual Report The management of Savannah Electric and Power Company has prepared -- and is responsible for -- the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of four directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls and financial reporting matters. The internal auditors and the independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Savannah Electric and Power Company in conformity with generally accepted accounting principles. /s/ Arthur M. Gignilliat, Jr. /s/ K. R. Willis - -------------------------------- ------------------------------------- Arthur M. Gignilliat, Jr. K. R. Willis President Vice-President and Chief Executive Officer Treasurer and Chief Financial Officer II-222 253 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) as of December 31, 1993 and 1992, 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, 1993. 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-231 through II-244) referred to above present fairly, in all material respects, the financial position of Savannah Electric and Power Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 7 to the financial statements, effective January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen & Co. Atlanta, Georgia, February 16, 1994 II-223 254 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Savannah Electric and Power Company 1993 Annual Report RESULTS OF OPERATIONS Earnings Savannah Electric and Power Company's net income after dividends on preferred stock for 1993 totaled $21.5 million, representing a $1.0 million (4.6 percent) increase from the prior year. The revenue impact of an increase in retail energy sales due to exceptionally hot summer weather was partially offset by the implementation of a work force reduction program which resulted in a one-time charge to operating expenses of approximately $4.5 million. In 1992, earnings were $20.5 million, representing a $3.5 million (14.6 percent) decrease from the prior year. This decrease resulted primarily from increases in maintenance and administrative and general expenses, partially offset by a 4.6 percent increase in retail operating revenues. Operating revenues increased despite the negative impact of a $2.8 million annual reduction in retail base rates effective in June 1992, and mild weather. REVENUES Total revenues for 1993 were $218.4 million, reflecting a 10.5 percent increase over 1992, primarily due to an increase in retail energy sales. The following table summarizes the factors impacting operating revenues compared to the prior year for the 1991-1993 period:
Increase (Decrease) From Prior Years 1993 1992 1991 (in thousands) Retail -- Change in base rates $(1,450) $(1,350) $(5,232) Sales growth 5,980 5,467 5,057 Weather 4,567 (3,116) (1,014) Fuel cost recovery and other 12,404 7,270 (8,934) Total retail 21,501 8,271 (10,123) Sales for resale-- Non-affiliates (1,800) 8 (1,669) Affiliates 928 75 (4,136) Total sales for resale (872) 83 (5,805) Other operating revenues 52 (239) (61) Total operating revenues $20,681 $8,115 $(15,989) Percent change 10.5% 4.3% (7.8)%
Total retail revenues increased 11.5 percent in 1993, compared to a 4.6 percent increase in 1992. The increase in 1993 retail revenues attributable to growth in both retail customers and average use per customer was enhanced by exceptionally hot weather during the summer. The substantial increase in fuel cost recovery and other revenues reflects increases in net generation and the unit cost of purchased power. The increase in 1992 retail revenues resulted from growth in both retail customers and average use per customer, but was substantially offset by mild weather and the June 1992 base rate reduction. II-224 255 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report Under the Company's fuel cost recovery provisions, fuel revenues equal fuel expense, including the fuel and capacity components of purchased energy, and have no effect on earnings. Revenues from sales to non-affiliated utilities 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:
1993 1992 1991 (in thousands) Capacity $ 978 $ 537 $ 516 Energy 4,262 7,040 6,729 Total $5,240 $7,577 $7,245
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. Kilowatt-hour sales for 1993 and the percent change by year were as follows:
(millions of Amount Percent Change kilowatt-hours) 1993 1993 1992 1991 Residential 1,329 9.2% 1.8% 1.0% Commercial 1,016 6.5 3.0 3.7 Industrial 854 (0.8) 4.3 28.1 Other 117 5.2 3.4 3.0 Total retail 3,316 5.5 2.9 8.1 Sales to non-affiliates 247 (32.7) (1.3) (15.6) Sales to affiliates 75 100.3 15.5 (88.9) Total 3,638 2.6% 2.6% (2.9)%
The increases in energy sales in 1993 and 1992 continue to reflect a growing customer base, an increase in average energy sales per customer, and improved economic conditions in the Company's service area. Sales were enhanced in 1993 by temperature extremes in the summer months and in December. EXPENSES Total operating expenses for 1993 increased $20.3 million (12.4 percent) over the prior year. This increase includes a $10.8 million increase in fuel expense, and an $8.7 million increase in other operation expenses. Fuel expenses increased primarily because of higher generation due to extremely hot weather and higher cost fuel sources. In 1992 an increase in purchased power reflected a 15.4 percent decrease in generation compared to 1991. Despite the decrease in generation, total 1992 fuel expenses were substantially unchanged from the prior year reflecting generation from higher cost fuel sources. The increase in other operation expenses reflects a $4.5 million cost associated with a one-time charge related to a work force reduction program. The Company also recognized higher employee benefits costs under new accounting rules adopted in 1993. See Note 2 to the financial statements for additional information on these new rules. In 1992, the increase in other operation expenses was primarily a result of increases in outside services and administrative and general expenses, which reflected higher employee training and benefits expenses. Total interest expense on long-term debt was reduced by 5.4 percent in 1992, as the Company refinanced higher-cost debt. II-225 256 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report 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 and the average cost of fuel per net kilowatt-hour generated and purchased power were as follows:
1993 1992 1991 Total energy supply (millions of kilowatt-hours) 3,863 3,764 3,677 Sources of energy supply (percent) Coal 21 12 16 Oil 2 1 - Gas 3 2 2 Purchased Power 74 85 82 Average cost of fuel per net kilowatt-hour generated (cents) Coal 2.02 2.28 2.05 Oil 4.11 2.40 3.97 Gas 4.87 4.28 3.32 Total average cost of energy supply 2.12 1.78 1.64
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 growth in energy sales to regulatory matters. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the Company's service area. However, the Energy Policy Act of 1992 (Energy Act) will have a profound 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 Energy Act allows Independent Power Producers (IPPs) to access a utility's transmission network to sell electricity to other utilities. This may enhance the incentives for IPPs to build cogeneration plants for the Company's large industrial and commercial customers. Although the Energy Act does not require transmission access to retail customers, pressure for legislation to allow retail wheeling will continue. The Company is preparing now to meet the challenge of these major changes in the traditional business practices of selling electricity. If the Company does not remain a low-cost producer and provide quality service, the Company's retail energy sales growth, as well as new long-term contracts for energy sales outside the service area, could be limited, and this could significantly erode earnings. Demand-side options -- programs that enable customers to lower or alter their peak energy requirements -- have been initiated by the Company and are a significant part of integrated resource planning. Customers can receive cash incentives for participating in these programs in addition to reducing their energy requirements. Expansion and increased utilization of these programs will be contingent upon sharing of cost savings between the customers and the Company. Besides promoting energy efficiency, another benefit of these programs could be the ability to defer the need to construct baseload generating facilities further into the future. The ability to defer major construction projects, in conjunction with the precertification approval process for such projects by the Georgia Public Service Commission (GPSC), will II-226 257 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report diminish the possible exposure to prudency disallowances and the resulting impact on earnings. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." Rates to retail customers served by the Company are regulated by the GPSC. In May 1992, the Company requested, and subsequently received, approval by the GPSC to reduce annual base revenues by $2.8 million, effective June 1992. The reduction includes a base rate reduction of approximately $2.5 million spread among all classes of retail customers. An additional $0.3 million reduction resulted from the implementation of an experimental, time-of-use rate for certain commercial customers. As part of this rate settlement, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued Statement No. 112, Employers' Accounting for Postemployment Benefits, which must be implemented by 1994. The new standard requires that all types of benefits provided to former or inactive employees and their families prior to retirement be accounted for on an accrual basis. These benefits include salary continuation, severance pay, supplemental unemployment benefits, disability-related benefits, job training, and health and life insurance coverage. The FASB has issued Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which is effective in 1994. Statement No. 115, supersedes FASB Statement No. 12, Accounting for Certain Marketable Securities. The Company adopted the new rules January 1, 1994, with no material effect on the financial statements. On January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. See notes 2 and 7 to the financial statements regarding the impact of these changes. FINANCIAL CONDITION OVERVIEW The principal change in the Company's financial condition in 1993 was additions of $73 million to utility plant. The majority of funds needed for gross property additions since 1990 have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. See Statements of Cash Flows for additional information. CAPITAL STRUCTURE As of December 31, 1993, the Company's capital structure consisted of 45.3 percent common equity, 10.3 percent preferred stock and 44.4 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 45 percent, preferred stock at 10 percent and debt at 45 percent. Maturities and retirements of long-term debt were $4 million in 1993, $53 million in 1992 and $23 million in 1991. In November 1993, the Company issued 1,400,000 shares of 6.64 percent series preferred stock. In December 1993, the Company redeemed all 800,000 shares outstanding of its 9.5 percent series preferred stock at the prescribed redemption price of $26.57 plus accrued dividends. The composite interest rates for the years 1991 through 1993 as of year-end were as follows:
1993 1992 1991 Composite interest rates on long-term debt 8.0% 8.5% 9.7% Composite preferred stock dividend rate 6.6% 9.5% 9.5%
II-227 258 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report The Company's current securities ratings are as follows:
Standard Moody's & Poor's First Mortgage Bonds A1 A Preferred Stock "a2" A-
CAPITAL REQUIREMENTS FOR CONSTRUCTION The Company's projected construction expenditures for the next three years total $98 million ($33 million in 1994, $32 million in 1995, and $33 million in 1996). Actual construction costs may vary from this estimate because of such factors as changes in environmental regulations; revised load projections; the cost and efficiency of construction labor, equipment and materials; and the cost of capital. The largest project during this period is the addition of two 80 megawatt combustion turbine units, to be placed into service in 1994. The estimated cost of this project is $61 million. The Company is also constructing six combustion turbine units for Georgia Power Company. OTHER CAPITAL REQUIREMENTS In addition to the funds needed for the construction program, approximately $5.9 million will be needed by the end of 1996 for present sinking fund requirements and maturities. 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 new law -- will have a significant impact on the Company and other subsidiaries of the Southern electric system. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance must be implemented in 1995, and affects eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. Beginning in 1995, the Environmental Protection Agency (EPA) will allocate annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for allocating allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The market for emission allowances is developing slower than expected. However, The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as the market develops. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this would require some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment would be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $275 million through 1995 for The Southern Company, of which the Company's portion is approximately $2 million. Phase II compliance costs are expected to be higher because requirements are stricter and all fossil-fired generating plants are affected. For sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I and increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 through 2000, compliance could require total construction expenditures ranging from approximately $450 million to $800 million of which the Company's portion is expected to be approximately $25 million. However, the full impact of II-228 259 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report Phase II compliance cannot now be determined with certainty, pending the development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 5 percent in annual revenue requirements from customers could be necessary to fully recover the Company's costs of compliance for both Phase I and II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. There can be no assurance that all Clean Air Act costs will be recovered. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The study will serve as the basis for a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any - -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA is expected to take some action on this issue in 1994. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matters, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1994 or 1995, the EPA is expected to issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes--coal ash and other utility wastes--as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. Savannah Electric and Power 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 will recognize in the financial statements any costs to clean up known sites. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act, and the Resource Conservation and Recovery Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern Company. The impact of new legislation - -- if any -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential for lawsuits alleging damages caused by electromagnetic fields exists. SOURCES OF CAPITAL At December 31, 1993, the Company had $3.9 million of cash and $14.5 million of unused credit arrangements with banks to meet its short-term cash needs. The Company had $3 million of short-term bank borrowings at December 31, 1993. In January 1994, the Company renegotiated a two-year revolving credit arrangement with four of its II-229 260 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1993 Annual Report existing banks for a total credit line of $20 million. The primary purpose of this additional credit is to provide interim funding for the Company's combustion turbine construction program. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations and the sale of additional first mortgage bonds and preferred stock and capital contributions from The Southern Company. The Company is required to meet certain 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 levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. II-230 261 STATEMENTS OF INCOME For the Years Ended December 31, 1993, 1992, and 1991 Savannah Electric and Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING REVENUES (NOTES 1, 3, AND 6): Revenues $ 216,009 $ 196,256 $ 188,216 Revenues from affiliates 2,433 1,505 1,430 Total operating revenues 218,442 197,761 189,646 OPERATING EXPENSES: Operation -- Fuel 24,976 14,162 14,415 Purchased power from non-affiliates 793 494 297 Purchased power from affiliates 56,274 56,492 49,007 Other (Notes 2 and 5) 45,610 36,884 32,945 Maintenance 13,516 14,232 12,475 Depreciation and amortization (Notes 1 and 7) 16,467 16,829 16,549 Taxes other than income taxes 11,136 10,231 10,122 Federal and state income taxes (Note 7) 15,436 14,566 16,195 Total operating expenses 184,208 163,890 152,005 OPERATING INCOME 34,234 33,871 37,641 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction (Note 1) 958 446 170 Interest income 209 276 589 Other, net (Note 2) (1,841) (1,450) (879) Income taxes applicable to other income 1,117 758 722 INCOME BEFORE INTEREST CHARGES 34,677 33,901 38,243 INTEREST CHARGES: Interest on long-term debt 10,696 10,870 11,486 Allowance for debt funds used during construction (Note 1) (699) (289) (103) Interest on notes payable 240 15 25 Amortization of debt discount, premium, and expense, net 535 427 380 Other interest charges 340 466 525 Net interest charges 11,112 11,489 12,313 NET INCOME 23,565 22,412 25,930 DIVIDENDS ON PREFERRED STOCK 2,106 1,900 1,900 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 21,459 $ 20,512 $ 24,030
The accompanying notes are an integral part of these statements. II-231 262 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993, 1992, and 1991 Savannah Electric and Power Company 1993 Annual Report
1993 1992 1991 (in thousands) OPERATING ACTIVITIES: Net income $ 23,565 $ 22,412 $ 25,930 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 17,482 17,757 17,501 Deferred income taxes and investment tax credits 607 5,947 1,601 Allowance for equity funds used during construction (958) (446) (170) Other, net 2,853 (1,312) (1,876) Changes in certain current assets and liabilities -- Receivables, net (16,839) (4,107) 5,291 Special deposits - 350 1,348 Inventories (3,947) 4,435 (1,082) Payables 18,742 351 568 Other 3,282 2,083 3,710 Net cash provided from operating activities 44,787 47,470 52,821 INVESTING ACTIVITIES: Gross property additions (72,858) (30,132) (19,478) Other 1,676 (1,073) 407 Net cash provided (used) for investing activities (71,182) (31,205) (19,071) FINANCING ACTIVITIES AND CAPITAL CONTRIBUTIONS: Proceeds: First mortgage bonds 45,000 30,000 30,000 Preferred stock 35,000 - - Pollution control bonds 4,085 13,870 - Other long-term debt 10,000 - - Retirements: Preferred stock (20,000) - - First mortgage bonds - (38,750) (22,500) Pollution control bonds (4,085) (14,550) (515) Other long-term debt (10,356) (217) (275) Notes payable, net (4,500) 7,500 (1,500) Payment of preferred stock dividends (2,222) (1,900) (1,900) Payment of common stock dividends (21,000) (22,000) (22,000) Miscellaneous (3,400) (3,985) (477) Net cash provided (used) for financing activities 28,522 (30,032) (19,167) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,127 (13,767) 14,583 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,788 15,555 972 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,915 $ 1,788 $ 15,555 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for- Interest (net of amount capitalized) $ 10,712 $ 9,932 $ 10,506 Income taxes 13,947 6,646 15,095
( ) Denotes use of cash. The accompanying notes are an integral part of these statements. II-232 263 BALANCE SHEETS At December 31, 1993 and 1992 Savannah Electric and Power Company 1993 Annual Report
ASSETS 1993 1992 (in thousands) UTILITY PLANT: Plant in service, at original cost (Notes 1, 4, 5, 7, and 9) $ 622,521 $ 599,596 Less accumulated provision for depreciation 251,565 240,094 370,956 359,502 Construction work in progress 49,797 5,966 Total 420,753 365,468 Less property-related accumulated deferred income taxes - 65,725 Total 420,753 299,743 OTHER PROPERTY AND INVESTMENTS 1,793 1,795 CURRENT ASSETS: Cash and cash equivalents 3,915 1,788 Receivables- Customer accounts receivable 18,551 16,795 Other accounts and notes receivable 790 1,359 Affiliated companies 12,924 263 Accumulated provision for uncollectible accounts (762) (536) Fuel cost under recovery 7,112 3,895 Fossil fuel stock, at average cost 8,419 4,895 Materials and supplies, at average cost (Note 1) 9,358 8,935 Prepayments 4,849 1,599 Total 65,156 38,993 DEFERRED CHARGES: Deferred charges related to income taxes (Note 7) 24,890 - Premium on reacquired debt, being amortized 3,792 4,236 Miscellaneous 10,803 7,408 Total 39,485 11,644 TOTAL ASSETS $ 527,187 $ 352,175
The accompanying notes are an integral part of these statements. II-233 264 BALANCE SHEETS At December 31, 1993 and 1992 Savannah Electric and Power Company 1993 Annual Report
CAPITALIZATION AND LIABILITIES 1993 1992 (in thousands) CAPITALIZATION (SEE ACCOMPANYING STATEMENTS): Common stock equity $ 154,269 $ 158,376 Preferred stock 35,000 20,000 Long-term debt 151,338 110,767 Total 340,607 289,143 CURRENT LIABILITIES: Long-term debt due within one year (Note 10) 4,499 1,319 Notes payable (Note 5) 3,000 7,500 Accounts payable- Affiliated companies 6,041 5,136 Other 24,401 6,043 Customer deposits 4,714 4,541 Taxes accrued- Federal and state income 342 567 Other 1,187 2,449 Interest accrued 6,730 5,733 Vacation pay accrued 1,638 1,790 Pensions accrued 1,792 1,643 Work Force Reduction Costs Accrued (Note 2) 3,926 - Miscellaneous 2,985 3,382 Total 61,255 40,103 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes (Note 7) 66,947 - Accumulated deferred investment tax credits 15,301 15,964 Deferred credits related to income taxes (Note 7) 26,173 - Deferred compensation plans 6,117 4,671 Deferred under-funded accrued benefit obligation (Note 2) 5,855 - Miscellaneous 4,932 2,294 Total 125,325 22,929 COMMITMENTS AND CONTINGENT MATTERS (NOTES 2, 4, 5, AND 9) TOTAL CAPITALIZATION AND LIABILITIES $ 527,187 $ 352,175
The accompanying notes are an integral part of these statements. II-234 265 STATEMENTS OF CAPITALIZATION At December 31, 1993 and 1992 Savannah Electric and Power Company 1993 Annual Report
1993 1992 1993 1992 (in thousands) (percent of total) COMMON STOCK EQUITY (NOTES 2 AND 11): Common stock, par value $5 per share -- Authorized -- 16,000,000 shares Outstanding -- 10,844,635 shares in 1993 and 1992 $ 54,223 $ 54,223 Paid-in capital 23 23 Paid-in for common stock in excess of par value 8,665 8,665 Additional minimum liability for under-funded pension obligations (2,121) - Retained Earnings 93,479 95,465 Total common stock equity 154,269 158,376 45.3 % 54.8 % CUMULATIVE PREFERRED STOCK (NOTE 8): $25 par value -- Authorized -- 2,200,000 shares 6.64% Series -- Outstanding -- 1,400,000 shares 35,000 - 9.50% Series -- Outstanding -- 800,000 shares - 20,000 Total (annual dividend requirement -- $2,324,000) 35,000 20,000 10.3 6.9 LONG-TERM DEBT (NOTE 9): First mortgage bonds -- Maturity Interest Rates April 1, 1994 4 5/8% 3,715 3,715 July 1, 2003 6 3/8% 20,000 - October 1, 2019 9 1/4% 30,000 30,000 July 1, 2021 9 3/8% 30,000 30,000 July 1, 2022 8.30% 30,000 30,000 July 1, 2023 7.40% 25,000 - Total first mortgage bonds 138,715 93,715 Pollution control obligations 17,955 17,955 Other long-term debt (Note 9) 2,311 2,667 Unamortized debt premium (discount), net (3,144) (2,251) Total long-term debt (annual interest requirement -- $12,700,800) 155,837 112,086 Less amount due within one year (Note 10) 4,499 1,319 Long-term debt excluding amount due within one year 151,338 110,767 44.4 38.3 TOTAL CAPITALIZATION $ 340,607 $ 289,143 100.0 % 100.0 %
The accompanying notes are an integral part of these statements. II-235 266 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1993, 1992, and 1991 Savannah Electric and Power Company 1993 Annual Report
1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 95,155 $ 96,643 $ 94,613 Net income after dividends on preferred stock 21,459 20,512 24,030 Cash dividends on common stock (21,000) (22,000) (22,000) Preferred stock transactions, net (2,135) - - BALANCE AT END OF PERIOD (NOTE 11) $ 93,479 $ 95,155 $ 96,643 STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1993, 1992, and 1991 1993 1992 1991 (in thousands) BALANCE AT BEGINNING OF PERIOD $ 23 $ - $ - Contributions to capital by parent company - 23 - BALANCE AT END OF PERIOD $ 23 $ 23 $ -
The accompanying notes are an integral part of these statements. II-236 267 NOTES TO FINANCIAL STATEMENTS Savannah Electric and Power Company 1993 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL Savannah Electric and Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and various other subsidiaries related to foreign utility operations and domestic non-utility operations. At this time, the operations of the other subsidiaries are not material. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with jointly owned generating facilities, interconnecting transmission lines and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Electric designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company also is subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the GPSC. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 capacity and the energy components of purchased power costs. Revenues include the actual cost of fuel and purchased power incurred. 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 1993 and 3.2 percent in 1992, and 1991. The decrease in 1993 reflects the Company's implementation of new depreciation rates approved by the GPSC. These new rates provide for a timely recovery of the investments in the Company's depreciable properties. 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. INCOME TAXES The Company, which is included in the consolidated federal income tax return filed by The Southern Company, 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. In years prior to 1993, income taxes were accounted for and reported under Accounting Principles Board Opinion No. 11. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 7 for additional information about Statement No. 109. II-237 268 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used by the Company to calculate AFUDC were 8.77 percent in 1993, 11.27 percent in 1992, and 11.38 percent in 1991. 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 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 In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, items for which the carrying amount does not approximate fair value must be disclosed. At December 31, 1993, the fair value of long-term debt was $164 million and the carrying amount was $154 million. The fair value of long-term debt was $117 million and the carrying amount was $109 million at December 31, 1992. The fair value for long-term debt 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. 2. RETIREMENT BENEFITS PENSION PLANS The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits under this plan reflect the employee's years of service, age at retirement and average compensation for the three years immediately preceding retirement. The Company uses the projected unit credit actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension fund are primarily invested in equity and debt 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. A qualified trust for medical benefits has been established for funding amounts to the extent deductible under federal income tax regulations. Accrued costs of life insurance benefits, other than current cash payments for retirees, currently are not being funded. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 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-238 269 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report Consistent with regulatory treatment, the Company recognized these costs on a cash basis as payments were made in 1992 and 1991. The total costs of such benefits recognized by the Company amounted to $375 thousand in 1992 and $487 thousand in 1991. STATUS AND COST OF BENEFITS Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statements Nos. 87 and 106, respectively. Retiree medical and life insurance information is shown for 1993 only because Statement No. 106 was adopted as of January 1, 1993, on a prospective basis. The funded status of the plans at December 31 was as follows:
Pension 1993 1992 (in thousands) Actuarial present value of benefit obligations: Vested benefits $35,818 $24,902 Non-vested benefits 1,992 1,772 Accumulated benefit obligation 37,810 26,674 Additional amounts related to projected salary increases 5,974 6,495 Projected benefit obligation 43,784 33,169 Less: Fair value of plan assets 26,446 23,494 Unrecognized net loss 9,449 5,546 Unrecognized prior service cost 1,685 1,823 Unrecognized net transition asset 710 799 Adjustment required to recognize additional minimum liability 5,871 - Accrued pension cost recognized in the Balance Sheets $11,365 $1,507
The weighted average rates assumed in the actuarial calculations were:
1993 1992 1991 Discount 7.50% 8.00% 8.00% Annual salary increase 4.75 5.00 5.00 Long-term return on plan assets 9.25 9.25 9.50
In accordance with Statement No. 87, an additional liability related to under-funded accumulated benefit obligations was recognized at December 31, 1993. A corresponding net-of-tax charge of $2.1 million was recognized as a separate component of Common Stock Equity in the Statements of Capitalization.
Postretirement Medical Life 1993 1993 (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $8,632 $2,536 Employees eligible to retire 898 - Other employees 6,489 1,577 Accumulated benefit obligation 16,019 4,113 Less Fair value of plan assets - - Unrecognized net loss 4,124 262 Unrecognized transition obligation 10,362 3,382 Accrued liability recognized in the Balance Sheets $1,533 $469
The assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 11.3 percent for 1993, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate by 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1993, by $1.7 million and the aggregate of the service and interest cost components of the net retiree medical cost by $0.2 million. II-239 270 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report Components of the plans' net costs are shown below:
Pension 1993 1992 1991 (in thousands) Benefits earned during the year $1,188 $1,053 $ 941 Interest cost on projected benefit obligation 2,741 2,429 2,149 Actual return on plan assets (2,199) (1,266) (3,027) Net amortization and deferral 716 (227) 1,736 Net pension cost $2,446 $1,989 $1,799
Of the above net pension amounts, $2.0 million in 1993, $1.7 million in 1992 and $1.5 million in 1991 were recorded in operating expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical Life 1993 1993 (in thousands) Benefits earned during the year $ 346 $ 97 Interest cost on accumulated benefit obligation 855 279 Amortization of transition obligation over 20 years 545 178 Net postretirement cost $1,746 $554
Net postretirement medical and life insurance costs of $1.8 million in 1993 were charged to operating expenses. The Company has a supplemental retirement plan for certain executive employees. The plan is unfunded and payable from the general funds of the Company. The Company has purchased life insurance on participating executives, and plans to use these policies to satisfy this obligation. Benefit costs associated with this plan for 1993, 1992 and 1991 were $980 thousand, $316 thousand and $338 thousand, respectively. The 1993 benefit costs reflect a one-time expense related to employees who were part of the work force reduction program. WORK FORCE REDUCTION PROGRAM The Company has incurred additional costs for a one-time charge related to the implementation of a work force reduction program. In 1993, $4.5 million was charged to operating expenses and $0.6 million was charged to other income (expense). 3. REGULATORY MATTERS RATE MATTERS In May 1992, the Company filed for, and subsequently received, GPSC approval to implement new base rates designed to decrease base operating revenues by $2.8 million annually. The reduction included a base rate reduction of approximately $2.5 million spread among all classes of customers, effective June 1992. An additional $0.3 million reduction resulted from the implementation of an experimental, time-of-use rate for certain commercial customers in August 1992. 4. CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program, currently estimated to total $33 million in 1994, $32 million in 1995 and $33 million in 1996. The estimates include AFUDC of $1.6 million in 1994, $0.6 million in 1995 and $0.7 million in 1996. 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 cost of capital. The construction of two combustion turbine peaking units totaling 160 megawatts is planned to be completed in mid 1994. The Company is also constructing six combustion turbine peaking units owned by Georgia Power Company. The construction is to be completed in 1996. 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. II-240 271 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report 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 and preferred stock and capital contributions from The Southern Company. Should the Company be unable to obtain funds from these sources, the Company would have to use short-term indebtedness or other alternative, and possibly costlier, means of financing. 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. See Management's Discussion and Analysis for information regarding the Company's earnings coverage requirements. BANK CREDIT ARRANGEMENTS At the beginning of 1994, unused credit arrangements with four banks totaled $14.5 million, and expire at various times during 1994. The Company has $20 million of revolving credit arrangements expiring December 31, 1995. These agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the Company's option. In connection with these credit arrangements, the Company agrees to pay commitments fees based on the unused portions of the commitments. In connection with all other lines of credit, the Company has the option of paying fees or maintaining compensating balances, which are substantially all the cash of the Company except for daily working funds and similar items. These balances are not legally restricted from withdrawal. 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. OPERATING LEASES The Company has rental agreements with various terms and expiration dates. Rental expenses totaled $1.5 million, $1.5 million, and $1.4 million for 1993, 1992, and 1991, respectively. At December 31, 1993, estimated future minimum lease payments for non-cancelable operating leases were as follows:
Amounts (in millions) 1994 $1.3 1995 0.3 1996 0.1 1997 and thereafter -
6. LONG-TERM POWER SALES AGREEMENTS The operating subsidiaries of The Southern Company, including the 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. Certain of these agreements are non-firm and are based on capacity of the system in general. Other agreements are firm and pertain to the capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The Company's portion of capacity revenues has been as follows:
Unit Other Year Power Long-Term Total (in thousands) 1993 $ 2 $976 $978 1992 3 534 537 1991 25 491 516
Long-term non-firm power of 400 megawatts was sold by the Southern electric system in 1993 to Florida Power Corporation (FPC). In January 1994, this amount decreased to 200 megawatts, and the contract will expire at year-end. II-241 272 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report 7. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption of Statement No. 109 resulted in cumulative adjustments that had no material effect on net income. The adoption also resulted in the recording of additional deferred income taxes and related assets and liabilities. The related assets of $25 million are revenues to be received from customers. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. The related liabilities of $26 million are revenues to be refunded to customers. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and unamortized investment tax credits. Additionally, deferred income taxes related to accelerated tax depreciation previously shown as a reduction to utility plant were reclassified. Details of the federal and state income tax provisions are as follows:
1993 1992 1991 (in thousands) Total provision for income taxes Federal -- Current payable $11,663 $6,630 $11,739 Deferred - current year 1,906 7,407 4,595 - reversal of prior years (1,383) (2,347) (3,155) 12,186 11,690 13,179 State -- Current payable 2,049 1,231 2,133 Deferred - current year 119 1,079 662 - reversal of prior years (35) (192) (501) 2,133 2,118 2,294 Total 14,319 13,808 15,473 Less income taxes charged (credited) to other income (1,117) (758) (722) Federal and state income taxes charged to operations $15,436 $14,566 $16,195
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:
1993 (IN THOUSANDS) Deferred tax liabilities: Accelerated depreciation $53,585 Property basis differences 13,871 Other 3,922 Total 71,378 Deferred tax assets: Pension and other benefits 4,237 Other 4,616 Total 8,853 Net deferred tax liabilities 62,525 Portions included in current assets, net 4,422 Accumulated deferred income taxes in the Balance Sheets $66,947
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 1993, 1992 and 1991. At December 31, 1993, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the effective income tax rate to the statutory tax rate is as follows:
1993 1992 1991 Total effective tax rate 38% 38% 37% State income tax, net of federal income tax benefit (4%) (4%) (4%) Other 1% - 1% Statutory federal tax rate 35% 34% 34%
The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. II-242 273 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report 8. CUMULATIVE PREFERRED STOCK In November 1993, the Company issued 1,400,000 shares of 6.64 percent Series Preferred stock which has redemption provisions of $26.66 per share plus accrued dividends if on or prior to November 1, 1998, and at $25 per share plus accrued dividends thereafter. In December 1993, the Company redeemed all 800,000 shares outstanding of its 9.5 percent Series Preferred stock at the prescribed redemption price of $26.57 plus accrued dividends. Cumulative preferred stock dividends are preferential to the payment of dividends on common stock. 9. LONG-TERM DEBT The Company's Indenture related to its First Mortgage Bonds is unlimited as to the authorized amount of bonds which may be issued, provided that required property additions, earnings and other provisions of such Indenture are met. On February 19, 1993, the Company refunded its $4.1 million, 6.25 percent Series Pollution Control Bonds, due 1998 with $4.1 million of variable rate Series Pollution Control Bonds due 2016. In 1994, there is a first mortgage bond maturity of $3.7 million. The sinking fund requirements of first mortgage bonds are being satisfied by certification of property additions. See Note 10 "Long-Term Debt Due Within One Year" for details. Details of other long-term debt are as follows:
December 31, 1993 1992 (in thousands) Collateralized obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds -- 6 1/4% due 1998 $ - $ 4,085 Variable rate (3.2% at 1/1/94) due 2016 4,085 - 6 3/4% due 2022 13,870 13,870 Total pollution control obligations $17,955 $17,955 Capital lease obligations -- Combustion turbine equipment $ 1,403 $ 1,786 Transportation fleet 908 881 Total other long-term debt $ 2,311 $ 2,667
Sinking fund requirements and /or maturities through 1998 applicable to long-term debt are as follows: $4.5 million in 1994; $0.7 million in 1995; $0.7 million in 1996; $0.1 million in 1997 and no requirement is needed for 1998. Assets acquired under capital leases are recorded as utility plant in service and the related obligation is classified as other long-term debt. Leases are capitalized at the net present value of the future lease payments. However, for ratemaking purposes, these obligations are treated as operating leases, and as such, lease payments are charged to expense as incurred. The Company leases combustion turbine generating equipment under a non-cancelable lease expiring in 1995, with renewal options extending until 2010. The Company also leases a portion of its transportation fleet. Under the terms of these leases, the Company is responsible for taxes, insurance and other expenses. II-243 274 NOTES (continued) Savannah Electric and Power Company 1993 Annual Report 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund/sinking fund requirements and scheduled maturities and redemptions of long-term debt due within one year is as follows:
1993 1992 (in thousands) Bond sinking fund requirements $1,350 $980 Less: Portion to be satisfied by certifying property additions 1,350 980 Cash sinking fund requirements - - Other long-term debt maturities 4,499 1,319 Total $4,499 $1,319
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 1 2/3 times the requirements. 11. COMMON STOCK DIVIDEND RESTRICTIONS The Company's Charter and Indentures contain certain limitations on the payment of cash dividends on the preferred and common stocks. At December 31, 1993, approximately $55 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the Mortgage Indenture. 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 1993 and 1992 are as follows (in thousands):
Net Income After Operating Operating Dividends on Quarter Ended Revenue Income Preferred Stock March 1993 $42,873 $6,123 $3,019 June 1993 52,875 9,301 6,211 September 1993 74,420 13,326 10,214 December 1993 48,274 5,484 2,015 March 1992 $41,965 $6,738 $3,200 June 1992 49,918 8,133 4,837 September 1992 63,814 14,794 11,378 December 1992 42,064 4,206 1,097
The Company's business is influenced by seasonal weather conditions, a seasonal rate structure and the timing of rate changes, among other factors. II-244 275 SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS) $218,442 $197,761 $189,646 NET INCOME AFTER DIVIDENDS ON PREFERRED AND PREFERENCE STOCKS (IN THOUSANDS) $ 21,459 $ 20,512 $ 24,030 CASH DIVIDENDS ON COMMON STOCK (IN THOUSANDS) $ 21,000 $ 22,000 $ 22,000 RETURN ON AVERAGE COMMON EQUITY (PERCENT) 13.73 12.89 15.13 TOTAL ASSETS (IN THOUSANDS) $527,187 $352,175 $352,505 GROSS PROPERTY ADDITIONS (IN THOUSANDS) $ 72,858 $ 30,132 $ 19,478 CAPITALIZATION (IN THOUSANDS): Common stock equity $154,269 $158,376 $159,841 Preferred stock 35,000 20,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 151,338 110,767 119,280 Total (excluding amounts due within one year) $340,607 $289,143 $299,121 CAPITALIZATION RATIOS (PERCENT): Common stock equity 45.3 54.8 53.4 Preferred and preference stock 10.3 6.9 6.7 Long-term debt 44.4 38.3 39.9 Total (excluding amounts due within one year) 100.0 100.0 100.0 FIRST MORTGAGE BONDS (IN THOUSANDS): Issued 45,000 30,000 30,000 Retired - 38,750 22,500 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 101,032 99,164 97,446 Commercial 12,702 12,416 12,153 Industrial 69 73 73 Other 957 940 897 Total 114,760 112,593 110,569 EMPLOYEES (YEAR-END) 655 670 672
Note: NR = Not Rated II-245 276 SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $205,635 $201,799 $182,440 $174,707 $174,847 $158,643 $148,721 $143,562 $ 26,254 $ 25,535 $ 24,272 $ 22,086 $ 20,452 $ 15,279 $ 14,907 $ 13,967 $ 22,000 $ 20,000 $ 11,700 $ 10,741 $ 9,353 $ 8,387 $ 8,010 $ 6,607 16.85 16.88 17.03 17.03 17.52 14.41 15.31 16.80 $340,050 $349,887 $347,051 $340,109 $341,826 $323,686 $323,318 $314,773 $ 20,086 $ 18,831 $ 23,254 $ 32,276 $ 26,800 $ 30,700 $ 29,724 $ 15,786 $157,811 $153,737 $148,883 $136,207 $123,133 $110,385 $101,664 $ 93,076 20,000 22,300 22,300 2,300 2,300 2,300 2,300 2,300 - 2,884 3,075 9,665 10,256 10,848 11,446 12,043 112,377 117,522 98,285 129,329 137,821 128,850 136,709 145,900 $290,188 $296,443 $272,543 $277,501 $273,510 $252,383 $252,119 $253,319 54.4 51.9 54.6 49.1 45.0 43.7 40.3 36.7 6.9 8.5 9.3 4.3 4.6 5.2 5.5 5.7 38.7 39.6 36.1 46.6 50.4 51.1 54.2 57.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - 30,000 - - 25,000 20,000 - 4,000 9,135 18,275 12,231 10,239 10,160 5,592 10,532 12,071 - - 20,000 - - - - - 5,374 6,591 553 588 610 588 525 558 A1 A1 A1 A3 A3 A3 A3 Baa2 A A A- A- A- A- BBB+ BBB- "a2" "a2" "a2" NR NR NR NR NR A- A- BBB+ BBB+ BBB+ BBB+ BBB+ BB+ 96,452 94,766 93,486 92,094 89,951 88,101 86,366 83,456 12,045 12,298 12,135 11,812 11,405 10,985 10,659 10,293 76 69 69 67 67 66 76 72 867 856 828 762 731 699 637 620 109,440 107,989 106,518 104,735 102,154 99,851 97,738 94,441 648 643 655 655 658 653 632 624
II-246 277 SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1993 Annual Report
1993 1992 1991 OPERATING REVENUES (IN THOUSANDS): Residential $ 93,883 $ 82,670 $ 80,541 Commercial 71,320 64,756 61,827 Industrial 36,180 33,171 30,492 Other 7,810 7,095 6,561 Total retail 209,193 187,692 179,421 Sales for resale - non-affiliates 6,021 7,821 7,813 Sales for resale - affiliates 2,433 1,505 1,430 Total revenues from sales of electricity 217,647 197,018 188,664 Other revenues 795 743 982 Total $ 218,442 $ 197,761 $ 189,646 KILOWATT-HOUR SALES (IN THOUSANDS): Residential 1,329,362 1,216,993 1,195,005 Commercial 1,015,935 953,840 925,757 Industrial 854,324 861,121 825,862 Other 115,969 110,270 106,683 Total retail 3,315,590 3,142,224 3,053,307 Sales for resale - non-affiliates 247,203 367,066 372,085 Sales for resale - affiliates 75,384 37,632 32,581 Total 3,638,177 3,546,922 3,457,973 AVERAGE REVENUE PER KILOWATT-HOUR (CENTS): Residential 7.06 6.79 6.74 Commercial 7.02 6.79 6.68 Industrial 4.23 3.85 3.69 Total retail 6.31 5.97 5.88 Sale for resale 2.62 2.30 2.28 Total sales 5.98 5.55 5.46 RESIDENTIAL AVERAGE ANNUAL KILOWATT-HOUR USE PER CUSTOMER 13,269 12,369 12,323 RESIDENTIAL AVERAGE ANNUAL REVENUE PER CUSTOMER $ 937.07 $ 840.23 $ 830.54 PLANT NAMEPLATE CAPACITY RATINGS (YEAR-END) (MEGAWATTS) 628 628 605 MAXIMUM PEAK-HOUR DEMAND (MEGAWATTS): Winter 524 533 526 Summer 747 695 691 ANNUAL LOAD FACTOR (PERCENT) 54.1 55.0 54.1 PLANT AVAILABILITY - FOSSIL-STEAM (PERCENT) 90.2 89.1 78.9 SOURCE OF ENERGY SUPPLY (PERCENT): Coal 21.5 12.0 16.3 Oil and gas 4.5 2.9 1.7 Purchased power - From non-affiliates 0.9 1.0 0.4 From affiliates 73.1 84.1 81.6 Total 100.0 100.0 100.0 TOTAL FUEL ECONOMY DATA: BTU per net kilowatt-hour generated 11,515 12,547 10,917 Cost of fuel per million BTU (cents) 215.97 201.50 199.42 Average cost of fuel per net kilowatt-hour generated (cents) 2.49 2.53 2.18
II-247 278 SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1993 Annual Report
1990 1989 1988 1987 1986 1985 1984 1983 $ 87,063 $ 85,113 $ 81,098 $ 79,785 $ 80,348 $ 70,377 $ 65,059 $ 62,815 65,462 65,474 62,640 60,285 59,547 53,696 50,538 47,861 30,237 28,304 26,865 27,422 27,694 28,335 27,233 27,111 6,782 6,892 6,557 6,315 6,300 5,823 5,505 5,297 189,544 185,783 177,160 173,807 173,889 158,231 148,335 143,084 9,482 8,814 808 - - - - - 5,566 6,025 3,567 - - - - - 204,592 200,622 181,535 173,807 173,889 158,231 148,335 143,084 1,043 1,177 905 900 958 412 386 478 $ 205,635 $ 201,799 $ 182,440 $ 174,707 $ 174,847 $ 158,643 148,721 143,562 1,183,486 1,109,976 1,067,411 1,044,554 1,021,905 926,988 883,498 844,353 892,931 839,756 806,687 775,643 746,133 694,168 668,309 630,160 644,704 561,063 533,604 557,281 515,544 513,270 518,118 495,914 103,539 101,164 97,072 94,949 92,471 87,238 84,798 80,454 2,824,660 2,611,959 2,504,774 2,472,427 2,376,053 2,221,664 2,154,723 2,050,881 441,090 437,943 24,168 - - - - - 294,042 303,142 156,106 - - - - - 3,559,792 3,353,044 2,685,048 2,472,427 2,376,053 2,221,664 2,154,723 2,050,881 7.36 7.67 7.60 7.64 7.86 7.59 7.36 7.44 7.33 7.80 7.77 7.77 7.98 7.74 7.56 7.60 4.69 5.04 5.03 4.92 5.37 5.52 5.26 5.47 6.71 7.11 7.07 7.03 7.32 7.12 6.88 6.98 2.05 2.00 2.43 - - - - - 5.75 5.98 6.76 7.03 7.32 7.12 6.88 6.98 12,339 11,781 11,489 11,481 11,514 10,536 10,357 10,148 $ 907.68 $ 903.37 $ 872.87 $ 876.95 $ 905.27 $ 799.90 $ 762.67 $ 754.97 605 605 605 605 605 605 605 605 428 548 471 414 464 440 360 374 648 613 574 562 565 498 481 496 53.2 52.4 53.4 53.6 51.1 54.7 54.1 50.7 89.6 94.7 77.1 81.2 86.9 92.0 86.1 86.6 52.8 63.5 79.8 74.3 81.9 87.5 91.8 87.6 3.4 1.4 5.4 4.4 6.8 2.6 2.2 5.6 0.8 1.5 5.9 19.9 11.3 9.9 6.0 6.8 43.0 33.6 8.9 1.4 - - - - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10,741 10,611 10,683 10,551 10,607 10,581 10,498 10,642 188.18 180.48 178.31 176.10 186.30 198.80 196.20 201.01 2.02 1.92 1.90 1.86 1.98 2.10 2.06 2.14
II-248 279 STATEMENTS OF INCOME Savannah Electric and Power Company
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Thousands of Dollars) OPERATING REVENUES: Revenues $ 216,009 $ 196,256 $ 188,216 Revenues from affiliates 2,433 1,505 1,430 Total operating revenues 218,442 197,761 189,646 OPERATING EXPENSES: Operation -- Fuel 24,976 14,162 14,415 Purchased power from non-affiliates 793 494 297 Purchased power from affiliates 56,274 56,492 49,007 Other 45,610 36,884 32,945 Maintenance 13,516 14,232 12,475 Depreciation and amortization 16,467 16,829 16,549 Taxes other than income taxes 11,136 10,231 10,122 Federal and state income taxes 15,436 14,566 16,195 Total operating expenses 184,208 163,890 152,005 OPERATING INCOME 34,234 33,871 37,641 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 958 446 170 Interest income 209 276 589 Other, net (1,841) (1,450) (879) Income taxes applicable to other income 1,117 758 722 INCOME BEFORE INTEREST CHARGES 34,677 33,901 38,243 INTEREST CHARGES: Interest on long-term debt 10,696 10,870 11,486 Allowance for debt funds used during construction (699) (289) (103) Interest on notes payable 240 15 25 Amortization of debt discount, premium, and expense, net 535 427 380 Other interest charges 340 466 525 Net interest charges 11,112 11,489 12,313 INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN METHOD OF RECORDING REVENUES 23,565 22,412 25,930 Extraordinary item* - - - Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - NET INCOME 23,565 22,412 25,930 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK 2,106 1,900 1,900 NET INCOME AFTER DIVIDENDS ON PREFERRED AND PREFERENCE STOCK $ 21,459 $ 20,512 $ 24,030 Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 21,459 $ 20,512 $ 24,030
* Tax-free common stock/bond exchange II-249 280 STATEMENTS OF INCOME Savannah Electric and Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 200,069 $ 195,774 $ 178,873 $ 174,707 $ 174,847 $ 158,643 $ 148,721 $ 143,562 5,566 6,025 3,567 - - - - 4 205,635 201,799 182,440 174,707 174,847 158,643 148,721 143,566 42,630 44,224 46,578 38,597 44,393 45,232 44,183 44,152 611 616 3,593 11,453 6,069 7,577 3,810 - 34,648 26,361 6,586 1,186 2,071 1,526 2,255 5,675 30,630 29,371 28,271 25,642 24,114 20,292 18,424 18,028 12,754 12,281 14,261 13,629 12,591 12,029 11,195 10,711 16,118 20,343 19,771 18,152 16,443 15,798 14,104 12,721 9,798 9,152 9,209 9,088 7,863 6,724 6,098 5,441 17,611 17,571 14,017 16,969 21,405 15,495 15,026 13,862 164,800 159,919 142,286 134,716 134,949 124,673 115,095 110,590 40,835 41,880 40,154 39,991 39,898 33,970 33,626 32,976 193 - 273 512 27 646 624 229 741 719 355 925 924 943 1,200 1,013 (803) (672) (1,423) (464) (553) (107) (173) (133) 187 192 459 (317) (217) (389) (548) (461) 41,153 42,119 39,818 40,647 40,079 35,063 34,729 33,624 12,052 12,287 15,603 17,127 17,415 18,089 18,237 19,484 (194) (112) (330) (459) (73) (725) (551) (328) 116 402 230 70 315 437 172 367 241 274 196 237 234 302 241 255 665 1,313 336 251 335 213 188 220 12,880 14,164 16,035 17,226 18,226 18,316 18,287 19,998 28,273 27,955 23,783 23,421 21,853 16,747 16,442 13,626 - - - - - - - 1,935 - - 1,920 - - - - - 28,273 27,955 25,703 23,421 21,853 16,747 16,442 15,561 2,019 2,420 1,431 1,335 1,401 1,468 1,535 1,594 $ 26,254 $ 25,535 $ 24,272 $ 22,086 $ 20,452 $ 15,279 $ 14,907 $ 13,967 $ 26,254 $ 25,535 $ 22,352 $ 21,865 $ 20,606 $ 15,744 $ 14,665 $ 14,103
II-250 281 STATEMENTS OF CASH FLOWS Savannah Electric and Power Company
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 (Thousands of Dollars) OPERATING ACTIVITIES: Net income $ 23,565 $ 22,412 $ 25,930 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 17,482 17,757 17,501 Deferred income taxes, net 607 5,947 1,601 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (958) (446) (170) Other, net 2,853 (1,312) (1,876) Changes in certain current assets and liabilities -- Receivables, net (16,839) (4,107) 5,291 Special deposits - 350 1,348 Inventories (3,947) 4,435 (1,082) Payables 18,742 351 568 Other 3,282 2,083 3,710 Net cash provided from operating activities 44,787 47,470 52,821 INVESTING ACTIVITIES: Gross property additions (72,858) (30,132) (19,478) Sales of property - - - Other 1,676 (1,073) 407 Net cash provided (used) for investing activities (71,182) (31,205) (19,071) FINANCIING ACTIVITIES: Proceeds: Preferred stock 35,000 - - First mortgage bonds 45,000 30,000 30,000 Pollution control bonds 4,085 13,870 - Other long-term debt 10,000 - - Common Stock - - - Redemptions: Preferred and preference stock (20,000) - - First mortgage bonds - (38,750) (22,500) Pollution control bonds (4,085) (14,550) (515) Other long-term debt (10,356) (217) (275) Notes payable, net (4,500) 7,500 (1,500) Payment of preferred and preference stock dividends (2,222) (1,900) (1,900) Payment of common and class A stock dividends (21,000) (22,000) (22,000) Miscellaneous (3,400) (3,985) (477) Net cash provided from (used for) financing activities 28,522 (30,032) (19,167) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,127 (13,767) 14,583 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,788 15,555 972 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,915 $ 1,788 $ 15,555 () Denotes use of cash
II-251 282 STATEMENTS OF CASH FLOWS Savannah Electric and Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 28,273 $ 27,955 $ 25,703 $ 23,421 $ 21,853 $ 16,747 $ 16,442 $ 15,561 16,995 21,310 20,592 19,126 16,855 16,484 14,216 12,147 2,782 3,476 3,568 925 4,443 3,034 3,104 5,000 - - - (5) 489 3,084 2,043 6,900 (193) - (273) (512) (27) (646) (624) (229) 511 (775) 718 (1,016) 474 (1,730) 35 (1,165) 1,541 (6,949) (7,062) 1,360 1,456 (1,122) 180 (2,714) 185 2,708 (558) (587) (53) (916) (27) 966 1,246 (1,503) 3,063 (503) 663 5,563 (7,006) (172) (228) 1,086 (1,151) (78) (1,750) 2,135 1,637 342 (319) 1,544 (1,684) (757) 1,916 2 521 1,666 50,793 48,852 42,916 41,374 46,319 42,635 30,521 38,302 (20,086) (18,831) (23,254) (32,276) (26,800) (30,700) (29,724) (15,786) - - - - - 1,145 193 - (120) 381 (4,042) 1,296 (824) 2,682 1,561 420 (20,206) (18,450) (27,296) (30,980) (27,624) (26,873) (27,970) (15,366) - - 20,000 - - - - - - 30,000 - - 25,000 20,000 - 4,000 - - - - - - - - - - - - - - - 23,500 - - 403 1,693 1,691 1,777 1,639 12,396 (5,374) (6,591) (553) (588) (610) (588) (525) (558) (9,135) (18,275) (12,231) (10,239) (10,160) (5,592) (10,532) (12,071) (485) (455) (430) (405) (380) (360) (335) - (364) (7,656) (4,401) (3,954) (3,075) (17,721) (2,965) (30,635) 1,500 - - - (4,500) (4,500) 9,000 (2,000) (2,113) (2,318) (1,284) (1,351) (1,418) (1,485) (1,552) (1,611) (22,000) (20,000) (14,407) (10,383) (9,114) (8,347) (7,763) (6,103) 47 (1,071) (269) - (436) (383) - (376) (37,924) (26,366) (13,172) (25,227) (3,002) (17,199) (13,033) (13,458) (7,337) 4,036 2,448 (14,833) 15,693 (1,437) (10,482) 9,478 8,309 4,273 1,825 16,658 965 2,402 12,884 3,406 $ 972 $ 8,309 $ 4,273 $ 1,825 $ 16,658 $ 965 $ 2,402 $ 12,884
II-252 283 BALANCE SHEETS Savannah Electric and Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) ASSETS UTILITY PLANT: Production-fossil $ 257,708 $ 258,539 $ 247,017 Transmission 99,791 93,182 90,198 Distribution 237,012 222,024 212,576 General 28,010 25,851 24,283 Construction work in progress 49,797 5,966 4,211 Total utility plant 672,318 605,562 578,285 Accumulated provision for depreciation 251,565 240,094 225,605 Total 420,753 365,468 352,680 Less property-related accumulated deferred income taxes - 65,725 62,737 Total 420,753 299,743 289,943 OTHER PROPERTY AND INVESTMENTS 1,793 1,795 39 CURRENT ASSETS: Cash and cash equivalents 3,915 1,788 15,555 Receivables, net 27,714 14,480 14,549 Accrued unbilled revenues 3,789 3,401 3,252 Fuel cost under recovery 7,112 3,895 - Fossil fuel stock, at average cost 8,419 4,895 9,196 Materials and supplies, at average cost 9,358 8,935 9,069 Prepayments 4,849 1,599 4,544 Total current assets 65,156 38,993 56,165 DEFERRED CHARGES: Deferred charges related to income taxes 24,890 - - Miscellaneous 14,595 11,644 6,358 Total deferred charges 39,485 11,644 6,358 TOTAL ASSETS $ 527,187 $ 352,175 $ 352,505
II-253 284 BALANCE SHEETS Savannah Electric and Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 246,278 $ 242,988 $ 241,833 $ 236,587 $ 232,316 $ 229,765 $ 215,908 $ 212,917 73,358 72,299 71,601 69,822 65,215 61,843 55,047 49,554 217,913 204,611 192,335 177,163 160,346 147,563 136,807 126,293 22,990 22,482 21,686 17,513 14,838 13,153 10,585 9,414 1,354 2,880 1,684 7,214 5,270 1,915 10,609 2,341 561,893 545,260 529,139 508,299 477,985 454,239 428,956 400,519 211,725 198,228 178,888 161,531 144,232 130,279 116,576 102,967 350,168 347,032 350,251 346,768 333,753 323,960 312,380 297,552 58,106 54,418 51,487 49,255 46,496 41,026 32,859 30,503 292,062 292,614 298,764 297,513 287,257 282,934 279,521 267,049 39 49 49 49 39 39 52 - 972 8,309 4,273 1,825 16,658 965 2,402 12,884 14,450 14,300 15,714 14,419 13,806 14,472 12,350 11,910 3,831 4,501 3,889 - - - - - 5,662 6,881 1,838 - 787 1,524 1,609 2,249 8,071 9,706 8,455 12,359 12,642 13,615 19,554 12,855 9,112 8,723 8,471 7,630 6,844 6,534 6,157 5,850 1,492 585 1,240 2,786 978 383 117 324 43,590 53,005 43,880 39,019 51,715 37,493 42,189 46,072 - - - - - - - - 4,359 4,219 4,358 4,127 2,815 3,220 1,556 1,652 4,359 4,219 4,358 4,127 2,815 3,220 1,556 1,652 $ 340,050 $ 349,887 $ 347,051 $ 340,708 $ 341,826 $ 323,686 $ 323,318 $ 314,773
II-254 285 BALANCE SHEETS Savannah Electric and Power Company
At December 31, 1993 1992 1991 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPTIALIZATION: Common stock $ 54,223 $ 54,223 $ 54,223 Paid-in capital 23 23 - Paid-in for common stock in excess of par value 8,665 8,665 8,665 Additional minimum liability for under-funded pension obligations (2,121) - - Retained Earnings 93,479 95,465 96,953 Total common equity 154,269 158,376 159,841 Preferred stock 35,000 20,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 151,338 110,767 119,280 Total capitalization 340,607 289,143 299,121 (excluding amount due within one year) CURRENT LIABILITIES: Notes payable to banks 3,000 7,500 - Preferred and preference stock due within one year - - - Long-term debt due within one year 4,499 1,319 2,442 Accounts payable 30,442 11,179 10,176 Customer deposits 4,714 4,541 4,528 Fuel cost over recovery - - 1,603 Taxes accrued 1,529 3,016 724 Interest accrued 6,730 5,733 4,657 Vacation pay accrued 1,638 1,790 1,672 Miscellaneous 8,703 5,025 4,823 Total current liabilities 61,255 40,103 30,625 DEFERED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 66,947 - - Accumulated deferred investment tax credits 15,301 15,964 16,628 Deferred credits related to income taxes 26,173 - - Deferred under-funded accrued benefit obligation 5,855 - - Miscellaneous 11,049 6,965 6,131 Total deferred credits and other liabilities 125,325 22,929 22,759 TOTAL CAPITALIZATION AND LIABILITIES $ 527,187 $ 352,175 $ 352,505
II-255 286 BALANCE SHEETS Savannah Electric and Power Company
1990 1989 1988 1987 1986 1985 1984 1983 $ 54,223 $ 54,223 $ 54,223 $ 54,131 $ 53,174 $ 52,332 $ 51,271 $ 49,462 - - - - - - - - 8,665 8,665 8,665 8,353 7,623 6,774 6,059 6,229 - - - - - - - - 94,923 90,849 85,995 73,723 62,336 51,279 44,334 37,385 157,811 153,737 148,883 136,207 123,133 110,385 101,664 93,076 20,000 22,300 22,300 2,300 2,300 2,300 2,300 2,300 - 2,884 3,075 9,665 10,256 10,848 11,446 12,043 112,377 117,522 98,285 129,329 137,821 128,850 136,709 145,900 290,188 296,443 272,543 277,501 273,510 252,383 252,119 253,319 1,500 - - - - 4,500 9,000 - - 190 6,590 553 550 568 558 486 2,358 7,091 23,217 8,956 14,836 12,636 8,510 12,910 8,786 9,078 7,950 9,427 10,329 12,584 9,956 7,558 4,472 4,296 3,983 3,729 3,403 3,256 2,846 2,537 - - - 599 - - - - 1,387 1,749 1,899 3,713 4,834 3,595 8,663 7,789 3,415 4,287 4,154 4,599 4,906 4,984 5,253 5,460 1,604 1,477 1,412 1,306 1,255 1,150 1,086 997 3,398 2,880 1,705 6,257 3,650 3,356 3,336 3,107 26,920 31,048 50,910 39,139 43,763 46,629 49,208 40,844 - - - - - - - - 17,292 17,971 19,106 20,264 21,663 22,265 20,117 19,040 - - - - - - - - - - - - - - - - 5,650 4,425 4,492 3,804 2,890 2,409 1,874 1,570 22,942 22,396 23,598 24,068 24,553 24,674 21,991 20,610 $ 340,050 $ 349,887 $ 347,051 $ 340,708 $ 341,826 $ 323,686 $ 323,318 $ 314,773
II-256 287 SAVANNAH ELECTRIC AND POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1993 FIRST MORTGAGE BONDS
Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1964 $ 8,000 4-5/8% $ 3,715 4/1/94 1993 20,000 6-3/8% 20,000 7/1/03 1989 30,000 9-1/4% 30,000 10/1/19 1991 30,000 9-3/8% 30,000 7/1/21 1992 30,000 8.30% 30,000 7/1/22 1993 25,000 7.40% 25,000 7/1/23 $ 143,000 $ 138,715
POLLUTION CONTROL BONDS Amount Interest Amount Series Issued Rate Outstanding Maturity (Thousands) (Thousands) 1993 $ 4,085 Variable $ 4,085 1/1/16 1992 13,870 6-3/4% 13,870 2/1/22 $ 17,955 $ 17,955
PREFERRED STOCK Shares Dividend Amount Series Outstanding Rate Outstanding (Thousands) 1993 1,400,000 6.64% $ 35,000
II-257 288 SAVANNAH ELECTRIC AND POWER COMPANY SECURITIES RETIRED DURING 1993 POLLUTION CONTROL BONDS
Principal Interest Series Amount Rate (Thousands) 1978 $ 4,085 6.25%
PREFERRED STOCK Principal Dividend Series Amount Rate (Thousands) 1988 $ 20,000 9.50%
II-258 289 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 1994 annual meeting of stockholders. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS ALABAMA (a) (1) Identification of directors of ALABAMA. ELMER B. HARRIS (1) President and Chief Executive Officer of ALABAMA Age 54 Served as Director since 3-1-89. BILL M. GUTHRIE Executive Vice President of ALABAMA Age 60 Served as Director since 12-16-88 EDWARD L. ADDISON (2) Age 63 Served as Director since 11-1-83 WHIT ARMSTRONG (2) Age 46 Served as Director since 9-24-82 PHILIP E. AUSTIN (2) Age 52 Served as Director since 1-25-91 MARGARET A. CARPENTER (2) Age 69 Served as Director since 2-26-93 PETER V. GREGERSON, SR. (2) Age 65 Served as Director since 10-22-93 CRAWFORD T. JOHNSON, III (2) Age 68 Served as Director since 4-18-69 CARL E. JONES, JR. (2) Age 53 Served as Director since 4-22-88 WALLACE D. MALONE, JR. (2) Age 57 Served as Director since 6-22-90 WILLIAM V. MUSE (2) Age 54 Served as Director since 2-26-93 JOHN T. PORTER (2) Age 62 Served as Director since 10-22-93 GERALD H. POWELL (2) Age 67 Served as Director since 2-28-86 ROBERT D. POWERS (2) Age 43 Served as Director since 1-24-92 JOHN W. ROUSE (2) Age 56 Served as Director since 4-22-88 WILLIAM J. RUSHTON, III (2) Age 64 Served as Director Since 9-18-70 JAMES H. SANFORD (2) Age 49 Served as Director since 8-1-83 JOHN C. WEBB, IV (2) Age 51 Served as Director since 4-22-77 LOUIS J. WILLIE (2) Age 70 Served as Director since 3-23-84 JOHN W. WOODS (2) Age 62 Served as Director since 4-20-73 (1) Previously served as Director of ALABAMA from 1980 to 1985. (2) No position other than Director. Each of the above is currently a director of ALABAMA, serving a term running from the last annual meeting of ALABAMA's stockholder (April 23, 1993) for III-1 290 meeting of ALABAMA's stockholder (April 23, 1993) for one year until the next annual meeting or until a successor is elected and qualified, except for the individuals elected in October 1993. 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. (b)(1) Identification of executive officers of ALABAMA. ELMER B. HARRIS (1) President, Chief Executive Officer and Director Age 54 Served as Executive Officer since 3-1-89 BANKS H. FARRIS Senior Vice President Age 59 Served as Executive Officer since 12-3-91 WILLIAM B. HUTCHINS, III Senior Vice President and Chief Financial Officer Age 50 Served as Executive Officer since 12-3-91 T. HAROLD JONES Senior Vice President Age 63 Served as Executive Officer since 12-1-91 CHARLES D. MCCRARY Senior Vice President Age 42 Served as Executive Officer since 1-1-91 (1) Previously served as executive officer of ALABAMA from 1979 to 1985. Each of the above is currently an executive officer of ALABAMA, serving a term running from the last annual meeting of the directors (April 23, 1993) for one year until the next annual meeting or until his successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of ALABAMA acting solely in their capacities as such. (c)(1) Identification of certain significant employees. None. (d)(1) Family relationships. None. (e)(1) Business experience. ELMER B. HARRIS - Elected in 1989; Chief Executive Officer. He previously served as Senior Executive Vice President of GEORGIA from 1986 to 1989. Director of SOUTHERN and AmSouth Bancorporation. BILL M. GUTHRIE - Elected in 1988; also served since 1991 as Chief Production Officer of SOUTHERN system and Executive Vice President and Chief Production Officer of SCS; 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. EDWARD L. ADDISON - Elected in 1983; President of SOUTHERN from 1983 until elected Chairman of the Board in 1994. Director of SOUTHERN, GEORGIA, Phelps Dodge Corporation, Protective Life Corporation, Wachovia Bank of Georgia, N.A., Wachovia Corporation of Georgia and CSX Corporation. WHIT ARMSTRONG - President, Chairman and Chief Executive Officer of The Citizens Bank, Enterprise, Alabama. Also, President and Chairman of the Board of Enterprise Capital Corporation, Inc. PHILIP E. AUSTIN - Chancellor, The University of Alabama System. Previously President and Chancellor of Colorado State University. MARGARET A. CARPENTER - President, Compos-it, Inc. (typographics), Montgomery, Alabama. PETER V. GREGERSON, SR. - Chairman Emeritus of Gregerson's Foods, Inc. (retail groceries), Gadsden, Alabama. Director of AmSouth Bank of Gadsden, Alabama. III-2 291 CRAWFORD T. JOHNSON, III - Chairman of Coca-Cola Bottling Company United, Inc., Birmingham, Alabama. Director of Protective Life Corporation, AmSouth Bancorporation and Russell Corporation. CARL E. JONES, JR. - Chairman and Chief Executive Officer of First Alabama Bank, Mobile, Alabama. WALLACE D. MALONE, JR. - Chairman and Chief Executive Officer of SouthTrust Corporation, bank holding company, Birmingham, Alabama. WILLIAM V. MUSE - President and Chief Executive Officer of Auburn University. He previously served as President of the University of Akron from 1984 to 1992. JOHN T. PORTER - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama. Director of Citizen Federal Bank. GERALD H. POWELL - President, Dixie Clay Company of Alabama, Inc. (refractory clay producer), Jacksonville, Alabama. ROBERT D. POWERS - President, The Eufaula Agency, Inc. (real estate and insurance), Eufaula, Alabama. JOHN W. ROUSE - President and Chief Executive Officer of Southern Research Institute (non-profit research institute), Birmingham, Alabama. Director of Protective Life Corporation. WILLIAM J. RUSHTON, III - Chairman of the Board, Protective Life Corporation (insurance holding company), Birmingham, Alabama. Director of SOUTHERN and AmSouth Bancorporation. JAMES H. SANFORD - President, HOME Place Farms Inc. (diversified farmers and ginners), Prattville, Alabama. JOHN C. WEBB, IV - President, Webb Lumber Company, Inc. (wholesale lumber), Demopolis, Alabama. LOUIS J. WILLIE - Chairman of the Board and President of Booker T. Washington Insurance Co. Director of SOUTHERN. JOHN W. WOODS - Chairman and Chief Executive Officer, AmSouth Bancorporation (multi-bank holding company), Birmingham, Alabama. Director of Protective Life Corporation. BANKS H. FARRIS - Elected in 1991; responsible primarily for providing the overall management of the Human Resources, Information Resources, Power Delivery and Marketing Departments and the six geographic divisions. He previously served as Vice President - Human Resources from 1989 to 1991 and Division Vice President from 1985 to 1989. WILLIAM B. HUTCHINS, III - Elected in 1991; Chief Financial Officer, responsible primarily for providing the overall management of accounting and financial planning activities. He previously served as Vice President and Treasurer from 1983 to 1991. T. HAROLD JONES - Elected in 1991; responsible primarily for providing the overall management of the Fossil Generation, Hydro Generation, Power Generation Services and Fuels Departments. He previously served as Vice President - Fossil Generation from 1986 to 1991. CHARLES D. MCCRARY - Elected in 1991; responsible for the External Relations Department, Operating Services and Corporate Services. Also, assumes responsibility for financial matters while Mr. Hutchins is on medical leave. He previously served as Vice President of Administrative Services - Nuclear of SCS from 1988 to 1991. (f)(1) Involvement in certain legal proceedings. None. III-3 292 GEORGIA (a)(2) Identification of directors of GEORGIA. H. ALLEN FRANKLIN President and Chief Executive Officer. Age 49 Served as Director since 1-1-94. WARREN Y. JOBE Executive Vice President, Treasurer and Chief Financial Officer. Age 53 Served as Director since 8-1-82 EDWARD L. ADDISON (1) Age 63 Served as Director since 11-1-83 BENNETT A. BROWN (1) Age 64 Served as Director since 5-15-80 WILLIAM P. COPENHAVER (1) Age 69 Served as Director since 6-18-86 A. W. DAHLBERG (1) Age 53 Served as Director since 6-1-88 WILLIAM A. FICKLING, JR. (1) Age 61 Served as Director since 4-18-73 L. G. HARDMAN, III (1) Age 54 Served as Director since 6-25-79 JAMES R. LIENTZ, JR. (1) Age 50 Served as Director since 7-1-93 WILLIAM A. PARKER, JR. (1) Age 66 Served as Director since 5-19-65 G. JOSEPH PRENDERGAST (1) Age 48 Served as Director since 1-20-93 HERMAN J. RUSSELL (1) AGE 63 Served as Director since 5-18-88 GLORIA M. SHATTO (1) Age 62 Served as Director since 2-20-80 ROBERT STRICKLAND (1) Age 66 Served as Director since 11-21-79 WILLIAM JERRY VEREEN (1) Age 53 Served as Director since 5-18-88 THOMAS R. WILLIAMS (1) Age 65 Served as Director since 3-17-82 (1) No position other than Director. Each of the above is currently a director of GEORGIA, serving a term running from the last annual meeting of GEORGIA's stockholder (May 19, 1993) for one year until the next annual meeting or until a successor is elected and qualified, except Messrs. Franklin and Lientz. 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. (b)(2) Identification of executive officers of GEORGIA. H. ALLEN FRANKLIN President, Chief Executive Officer and Director Age 49 Served as Executive Officer since 1-1-94 WARREN Y. JOBE Executive Vice President, Treasurer, Chief Financial Officer and Director Age 53 Served as Executive Officer since 5-19-82 III-4 293 DWIGHT H. EVANS Executive Vice President - External Affairs Age 45 Served as Executive Officer since 4-19-89 GENE R. HODGES Executive Vice President - Customer Operations Age 55 Served as Executive Officer since 11-19-86 KERRY E. ADAMS Senior Vice President - Fossil and Hydro Power Age 49 Served as Executive Officer since 5-1-89 WAYNE T. DAHLKE Senior Vice President - Power Delivery Age 53 Served as Executive Officer since 4-19-89 JAMES K. DAVIS Senior Vice President - Corporate Relations Age 53 Served as Executive Officer since 10-1-93 ROBERT H. HAUBEIN Senior Vice President - Administrative Services Age 54 Served as Executive Officer since 2-19-92 GALE E. KLAPPA Senior Vice President - Marketing Age 43 Served as Executive Officer since 2-19-92 FRED D. WILLIAMS Senior Vice President - Bulk Power Markets Age 49 Served as Executive Officer since 11-18-92 Each of the above is currently an executive officer of GEORGIA, serving a term running from the last annual meeting of the directors (May 19,1993) for one year until the next annual meeting or until his successor is elected and qualified, except Messrs. Franklin and Davis. 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. (c)(2) Identification of certain significant employees. None. (d)(2) Family relationships. None. (e)(2) Business experience. H. ALLEN FRANKLIN - President and Chief Executive Officer since January 1994. He previously served as President and Chief Executive Officer of SCS from 1988 through 1993. Director of SOUTHERN and SouthTrust Bank. WARREN Y. JOBE - Executive Vice President and Chief Financial Officer since 1982 and Treasurer since 1992. Responsible for financial and accounting operations and planning, internal auditing, procurement, corporate secretary and treasury operations. EDWARD L. ADDISON - President of SOUTHERN from 1983 until his election as Chairman of Board in 1994. Director of SOUTHERN, ALABAMA, Wachovia Bank of Georgia, N.A., Wachovia Corporation of Georgia, Phelps Dodge Corporation, Protective Life Corporation and CSX Corporation. BENNETT A. BROWN - Retired from serving as Chairman of the Board of NationsBank on December 31, 1992. Previously Chairman of the Board and Chief Executive Officer of C&S/Sovran Corporation. Director of Confederation Life Insurance Company. WILLIAM P. COPENHAVER - Director, Arcadian Fertilizer, L.P. (agricultural and industrial chemicals). Director of SOUTHERN and Georgia Bank & Trust Company. A. W. DAHLBERG - President of SOUTHERN effective in 1994. He previously served as President and Chief Executive Officer of GEORGIA from 1988 through 1993. Director of SOUTHERN, Trust Company Bank, Trust Company of Georgia, Protective Life Corporation and Equifax, Inc. WILLIAM A. FICKLING, JR. - Chairman of the Board, Mulberry Street Investment Company, Macon, Georgia, and Co-chairman of Beech Street Corporation (insurance). III-5 294 L. G. HARDMAN, III - Chairman of the Board of First National Bank of Commerce, Georgia and Chairman of the Board and Chief Executive Officer of First Commerce Bancorp. 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, and from 1987 to 1990, he was head of Corporate Bank Group of NationsBank of Georgia, N.A. WILLIAM A. PARKER, JR. - Chairman of the Board, Cherokee Investment Company, Inc. (private investments), Atlanta, Georgia. Director of SOUTHERN, Genuine Parts Company, Life Insurance Company of Georgia, First Union Real Estate Investment Trust, Atlantic Realty Company, ING North America Insurance Company, Post Properties, Inc. and Haverty Furniture Companies, Inc. G. JOSEPH PRENDERGAST - President and Chief Executive Officer, Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A. since 1993. From 1988 to 1993, he served as Executive Vice President of Wachovia Corporation and President of Wachovia Corporate Services, Inc. HERMAN J. RUSSELL - Chairman of the Board and Chief Executive Officer, H. J. Russell & Company (construction), Atlanta, Georgia. Chairman of the Board, Citizens Trust Bank, and Citizens Bancshares Corporation Atlanta, Georgia. Director of Wachovia Corporation. GLORIA M. SHATTO - President, Berry College, Mount Berry, Georgia. Director of SOUTHERN, Becton Dickinson & Company, Kmart Corporation and Texas Instruments, Inc. ROBERT STRICKLAND - Retired Chairman of the Board and Chief Executive Officer of SunTrust Banks, Inc. Director of Georgia US Corporation, Equifax, Inc., Life Insurance Company of Georgia, Oxford Industries, Inc. and The Investment Centre. WILLIAM JERRY VEREEN - President and Chief Executive Officer of Riverside Manufacturing Company (manufacture and sale of uniforms), Moultrie, Georgia. Director of Gerber Garment Technology, Inc. and Textile Clothing Technology Corp. THOMAS R. WILLIAMS - President of The Wales Group, Inc. (investments) Atlanta, Georgia. Director of ConAgra, Inc., BellSouth Corporation, National Life Insurance Company of Vermont, AppleSouth, Inc., and American Software, Inc. DWIGHT H. EVANS - Executive Vice President - External Affairs since 1989. Senior Vice President - Public Affairs from 1988 to 1989. GENE R. HODGES - Executive Vice President - Customer Operations since 1992. Senior Vice President - Region/Land Operations from 1990 to 1992. Senior Vice President - Division Operations from 1986 to 1990. KERRY E. ADAMS - Senior Vice President - Fossil and Hydro Power since 1989. WAYNE T. DAHLKE - Senior Vice President - Power Delivery since February 1992. Senior Vice President - Marketing from 1989 to 1992. JAMES K. DAVIS - Senior Vice President - Corporate Relations since October 1993. Vice President of Corporate Relations from 1988 to 1993. ROBERT H. HAUBEIN - Senior Vice President - Administrative Services since 1992. Vice President - Northern Region from 1990 to 1992. Division Vice President of ALABAMA from 1985 to 1990. GALE E. KLAPPA - Senior Vice President - Marketing since 1992. Vice President - - Public Relations of SCS from 1981 to 1992. FRED D. WILLIAMS - Senior Vice President - Bulk Markets since 1992. Vice President - Bulk Power Markets from 1984 to 1992. (f)(2) Involvement in certain legal proceedings. None. III-6 295 GULF (a)(3) Identification of directors of GULF. D. L. MCCRARY (1) Chairman of the Board and Chief Executive Officer Age 64 Served as Director since 4-28-83 TRAVIS J. BOWDEN President Age 55 Served as Director since 2-1-94 PAUL J. DENICOLA (2) Age 45 Served as Director since 4-19-91 REED BELL, SR., M.D. (2) Age 67 Served as Director since 1-17-86 FRED C. DONOVAN, SR. (2) Age 53 Served as Director since 1-18-91 W. D. HULL, JR. (2) Age 61 Served as Director since 10-14-83 C. W. RUCKEL (2) Age 66 Served as Director since 4-20-62 J. K. TANNEHILL (2) Age 60 Served as Director since 7-19-85 (1) Retires May 1, 1994. (2) 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 29, 1993) for one year until the next annual meeting or until a successor is elected and qualified, except for Mr. Bowden. 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. (b)(3) Identification of executive officers of GULF. D. L. MCCRARY Chairman of the Board and Chief Executive Officer Age 64 Served as Executive Officer since 5-1-83 TRAVIS J. BOWDEN President Age 55 Served as Executive Officer since 2-1-94 F. M. FISHER, JR. Vice President - Employee and External Relations Age 45 Served as Executive Officer since 5-19-89 JOHN E. HODGES, JR. Vice President - Customer Operations Age 50 Served as Executive Officer since 5-19-89 G. EDISON HOLLAND, JR. Vice President and Corporate Counsel Age 41 Served as Executive Officer since 4-25-92 EARL B. PARSONS, JR. Vice President - Power Generation and Transmission Age 55 Served as Executive Officer since 4-14-78 A. E. SCARBROUGH Vice President - Finance Age 57 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 23, 1993) for one year until the next annual meeting or until his successor is elected and qualified, except for Mr. Bowden. III-7 296 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. (c)(3) Identification of certain significant employees. None. (d)(3) Family relationships. None. (e)(3) Business experience. D. L. MCCRARY - Elected Chairman of the Board effective February 1994. He previously served as President and Chief Executive Officer from 1983 to 1994; responsible primarily for formation of overall corporate policy. TRAVIS J. BOWDEN - Elected President effective February 1994 and, upon Mr. McCrary's retirement 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 effective January 1994. He previously served as Executive Vice President of SCS from 1991 through 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, MISSISSIPPI and SAVANNAH. REED BELL, SR., M.D. - Medical Doctor and since 1989, employee of the State of Florida. He serves as Medical Director of Children's Medical Services, District 1. He previously served as Medical Director of the Escambia County Public Health Unit until July 1992. He also previously maintained a private medical practice and served as Medical Director of Children's Medical Services from 1988 to 1989. FRED C. DONOVAN, SR. - President of Baskerville - Donovan, Inc., Pensacola, Florida, an architectural and engineering firm. Director of Baptist Health Care, Inc. W. D. HULL, JR. - Vice Chairman of the Sun Bank/West Florida, Panama City, Florida. He previously served as President and Chief Executive Officer and Director of the Sun Commercial Bank, Panama City, Florida from 1987 to 1992. C. W. RUCKEL - Chairman of the Board of The Vanguard Bank and Trust Company, Valparaiso, Florida. President and owner of Ruckel Properties, Inc., Valparaiso, Florida. J. K. TANNEHILL - President and Chief Executive Officer of Tannehill International Industries, Lynn Haven, Florida. He previously served as President and Chief Executive Officer of Stock Equipment Company, Chagrin Falls, Ohio, until 1991. Director of Sun Bank/West Florida, Panama City, Florida. F. M. FISHER, JR. - Elected Vice President - Employee and External Relations in 1989. He previously served as General Manager of Central Division from 1988 to 1989. JOHN E. HODGES, JR. - Elected Vice President - Customer Operations in 1989. He previously served as General Manager of Western Division from 1986 to 1989. G. EDISON HOLLAND, JR. - Elected Vice President and Corporate Counsel in 1992; responsible for all legal matters associated with GULF and serves as compliance officer. Also served, since 1982, as a partner in the law firm, Beggs & Lane. EARL B. PARSONS, JR. - Elected Vice President - Power Generation and Transmission in 1989; responsible for generation and transmission of electrical energy. He previously served as Vice President - Electric Operations from 1978 to 1989. A. E. SCARBROUGH - Elected Vice President - Finance in 1980; responsible for all accounting and financial services of GULF. (f)(3) Involvement in certain legal proceedings. None. III-8 297 MISSISSIPPI (a)(4) Identification of directors of MISSISSIPPI. DAVID M. RATCLIFFE President and Chief Executive Officer Age 45 Served as Director since 4-24-91 PAUL J. DENICOLA (1) Age 45 Served as Director since 5-1-89 EDWIN E. DOWNER (1) Age 62 Served as Director since 4-24-84 ROBERT S. GADDIS (1) Age 62 Served as Director since 1-21-86 WALTER H. HURT, III (1) Age 58 Served as Director since 4-6-82 AUBREY K. LUCAS (1) Age 59 Served as Director since 4-24-84 EARL D. MCLEAN, JR. (1) Age 68 Served as Director since 10-21-78 GERALD J. ST. Pe (1) Age 54 Served as Director since 1-21-86 LEO W. SEAL, JR. (1) Age 69 Served as Director since 4-4-67 N. EUGENE WARR (1) Age 58 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 6, 1993) 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 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. (b)(4) Identification of executive officers of MISSISSIPPI. DAVID M. RATCLIFFE President, Chief Executive Officer and Director Age 45 Served as Executive Officer since 4-24-91 H. E. BLAKESLEE Vice President - Customer Services and Marketing Age 53 Served as Executive Officer since 1-25-84 THOMAS A. FANNING Vice President and Chief Financial Officer Age 37 Served as Executive Officer since 4-1-92 DON E. MASON Vice President - External Affairs and Corporate Services Age 52 Served as Executive Officer since 7-27-83 Each of the above is currently an executive officer of MISSISSIPPI, serving a term running from the last annual meeting of the directors (April 28, 1993) 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. (c)(4) Identification of certain significant employees. None. (d)(4) Family relationships. None. (e)(4) Business experience. III-9 298 DAVID M. RATCLIFFE - President and Chief Executive Officer since 1991. He previously served as Executive Vice President of SCS from 1989 to 1991 and Vice President of SCS from 1985 to 1989. PAUL J. DENICOLA - President and Chief Executive Officer of SCS effective 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, SAVANNAH and GULF. EDWIN E. DOWNER - Business consultant specializing in economic analysis, management controls and procedural studies since 1990. President and Chief Executive Officer, Unifirst Bank for Savings, F.A., Midland Division, Meridian, Mississippi from 1985 to 1990. ROBERT S. GADDIS - President of the Trustmark National Bank - Laurel, Mississippi. WALTER H. HURT, III - President and Director of NPC Inc. (Investments). Vicar, All Saints Church, Inverness, Mississippi, and St. Thomas Church, Belzoni, Mississippi. Retired newspaper editor and publisher. AUBREY K. LUCAS - President of the University of Southern Mississippi, Hattiesburg, Mississippi. EARL D. MCLEAN, JR. - Co-owner of the T. C. Griffith Insurance Agency, Inc. (insurance and real estate), Columbia, Mississippi. Director of SOUTHERN. GERALD J. ST. Pe - President of Ingalls Shipbuilding and Corporate Vice President of Litton Industries, Inc. since 1985. Director of Merchants and Marine Bank, Pascagoula, Mississippi. LEO W. SEAL, JR. - Chairman of the Board and Chief Executive Officer of Hancock Bank, Gulfport, Mississippi, and Chairman of the Board of Harrison Life Insurance Company. Director of Hancock Bank and Bank of Wiggins. N. EUGENE WARR - Retailer (Biloxi and Gulfport, Mississippi.) Chairman of the Board of First Jefferson Corporation and the Jefferson Bank of Biloxi, Mississippi. H. E. BLAKESLEE - Elected Vice President in 1984. Primarily responsible for rate design, economic analysis and revenue forecasting, economic development, marketing and district operations. THOMAS A. FANNING - Elected Vice President in 1992; responsible primarily for accounting, treasury, finance, information resources and risk management. He previously served as Treasurer of SEI from 1986 to 1992 and Director of Corporate Finance of SCS from 1988 to 1992. DON E. MASON - Elected Vice President in 1983. Primarily responsible for the external affairs functions, including governmental and regulatory affairs, corporate communications, security, materials and general services, as well as the human resources function. (f)(4) Involvement in certain legal proceedings. None. SAVANNAH (a)(5) Identification of directors of SAVANNAH. ARTHUR M. GIGNILLIAT, JR. President and Chief Executive Officer Age 61 Served as Director since 8-31-82 HELEN QUATTLEBAUM ARTLEY (1) Age 66 Served as Director since 5-17-77 PAUL J. DENICOLA (1) Age 45 Served as Director since 3-14-91 BRIAN R. FOSTER (1) Age 44 Served as Director since 5-16-89 WALTER D. GNANN (1) Age 58 Served as Director since 5-17-83 JOHN M. MCINTOSH (1) Age 69 Served as Director since 2-27-68 III-10 299 ROBERT B. MILLER, III (1) Age 48 Served as Director since 5-17-83 JAMES M. PIETTE (1) Age 69 Served as Director since 6-12-73 ARNOLD M. TENEBAUM (1) Age 57 Served as Director since 5-17-77 FREDERICK F. WILLIAMS, JR. (1) Age 66 Served as Director since 7-2-75 (1) No Position other than Director. Each of the above is currently a director of SAVANNAH, serving a term running from the last annual meeting of SAVANNAH's stockholder (May 18, 1993) 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. (b)(5) Identification of executive officers of SAVANNAH. ARTHUR M. GIGNILLIAT, JR. President, Chief Executive Officer and Director Age 61 Served as Executive Officer since 2-15-72 W. MILES GREER Vice President - Marketing and Customer Services Age 50 Served as Executive Officer since 11-20-85 LARRY M. PORTER Vice President - Operations Age 49 Served as Executive Officer since 7-1-91 KIRBY R. WILLIS Vice President, Treasurer and Chief Financial Officer Age 42 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 (May 18, 1993) for one year until the next annual meeting or until his successor is elected and qualified, except Mr. Willis. 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. (c)(5) Identification of certain significant employees. None. (d)(5) Family relationships. None. (e)(5) Business experience. ARTHUR M. GIGNILLIAT, JR. - Elected President and Chief Executive Officer in 1985. Director of Savannah Foods and Industries, Inc. HELEN QUATTLEBAUM ARTLEY - Homemaker and Civic Worker. PAUL J. DENICOLA - President and Chief Executive Officer of SCS effective January 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, GULF and MISSISSIPPI. BRIAN R. FOSTER - President of NationsBank of Georgia, N.A., in Savannah since 1988. WALTER D. GNANN - President of Walt's TV, Appliance and Furniture Co., Inc., Springfield, Georgia. Past Chairman of the Development Authority of Effingham County, Georgia. III-11 300 JOHN M. MCINTOSH - Chairman of the Executive Committee, SAVANNAH; retired Chairman of the Board of Directors and Chief Executive Officer, SAVANNAH from 1974 to 1984. Director of SOUTHERN. ROBERT B. MILLER, III - President of American Builders of Savannah. JAMES M. PIETTE - Vice President - Special Projects, Union Camp Corporation, since 1989. Retired Vice Chairman, Board of Directors, Union Camp Corporation from 1987 to 1989. ARNOLD M. TENENBAUM - President of Chatham Steel Corporation. Director of First Union National Bank of Georgia and Savannah Foods and Industries, Inc. FREDERICK F. WILLIAMS, JR. - Retired Partner and Consultant, Hilb, Rogal and Hamilton Employee Benefits, Incorporated (Insurance Brokers), formerly Jones, Hill & Mercer. W. MILES GREER - Vice President - Marketing and Customer Services effective January 1994. Formerly served as Vice President - Economic Development and Corporate Services from 1989 through 1993 and Vice President - Economic Development and Governmental Affairs from 1985 to 1989. LARRY M. PORTER - Vice President - Operations since 1991. Responsible for managing the areas of fuel procurement, power production, transmission and distribution, engineering and system operation. Previously he served as Assistant Plant Manager of GEORGIA's Plant Scherer from 1984 to 1991. KIRBY R. WILLIS - Vice President, Treasurer and Chief Financial Officer effective January 1994. Responsible for all financial activities, Information Resources, Human Resources, Corporate Services, and Environmental Affairs and Safety. He previously served as Treasurer, Controller and Assistant Secretary from 1991 to 1993 and Treasurer and Secretary from 1987 to 1991. (f)(5) Involvement in certain legal proceedings. None. III-12 301 ITEM 11. EXECUTIVE COMPENSATION (A) SUMMARY COMPENSATION TABLES. The following tables set forth information concerning the Chief Executive Officer and the four most highly compensated executive officers for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH), serving as of December 31, 1993 whose total annual salary and bonus exceeded $100,000. No information is provided for any person for any year in which such person did not serve as an executive officer of the operating affiliate. The number of SOUTHERN common shares do not reflect the stock distribution resulting from the two-for-one common stock split approved by SOUTHERN's board of directors in January, 1994. KEY TERMS used in this Item will have the following meanings:- AME........... ABOVE-MARKET EARNINGS ON DEFERRED COMPENSATION ESP........... EMPLOYEE SAVINGS PLAN ESOP.......... EMPLOYEE STOCK OWNERSHIP PLAN SBP........... SUPPLEMENTAL BENEFIT PLAN VBP........... VEHICLE BUYOUT PROGRAM ALABAMA SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SECURITIES LONG- NAME UNDERLYING TERM AND OTHER ANNUAL STOCK INCENTIVE ALL OTHER PRINCIPAL COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR SALARY($) BONUS($) ($)(1) (SHARES) ($)(2) ($)(3) - -------------------------------------------------------------------------------------------------------------------- ELMER B. HARRIS President, Chief Executive 1993 418,818 117,630 23,469 13,446 198,131 39,388 Officer, 1992 397,499 96,615 9,161 15,018 147,278 24,435 Director 1991 371,491 45,147 - 18,344 107,729 - TRAVIS J. BOWDEN(4) Executive Vice 1993 257,089 23,161 16,118 6,119 61,524 31,271 President, 1992 244,139 35,804 1,636 6,802 44,345 13,550 Director 1991 215,002 34,593 - 5,883 34,775 - BANKS H. FARRIS 1993 176,041 17,642 24,222 3,151 28,394 27,418 Senior Vice 1992 165,746 27,274 6,211 3,453 19,021 8,916 President 1991 141,818 21,411 - - 13,607 -
III-13 302 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) - -------------------------------------------------------------------------------------------------------------------- T. HAROLD JONES 1993 170,266 11,400 4,032 3,037 27,350 14,093 Senior Vice 1992 163,164 15,000 32,611 3,392 19,181 8,631 President 1991 146,643 15,136 - - 14,560 - WILLIAM B. HUTCHINS, III Senior Vice President, 1993 164,972 16,103 14,791 2,948 26,429 26,817 Chief Financial 1992 156,520 24,893 973 2,826 17,347 8,307 Officer 1991 - - - - - -
(1) Tax reimbursement by ALABAMA and certain personal benefits, including membership fee of $28,402 for Mr. Jones in 1992. In accordance with the transition rules of the SEC, information for 1991 is omitted. (2) Payouts made in 1992, 1993 and 1994 for the four-year performance periods ending December 31, 1991, 1992 and 1993, respectively. (3) ALABAMA contributions to the ESP, ESOP, non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the Employee Savings and Stock Ownership Plans), and payments under a VBP for the following:- Name ESP ESOP SBP VBP - ---- --- ---- --- --- E. B. Harris $6,746 $1,709 $12,933 $18,000 T. J. Bowden 8,369 1,709 3,193 18,000 B. H. Farris 7,193 1,499 726 18,000 T. H. Jones 6,908 1,331 754 5,100 W. B. Hutchins, III 6,746 1,400 671 18,000 In accordance with the transition rules of the SEC, information for 1991 is omitted. (4) Effective January 31, 1994, Mr. Bowden resigned to become president of GULF. III-14 303 GEORGIA SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SECURITIES LONG- NAME UNDERLYING TERM AND OTHER ANNUAL STOCK INCENTIVE ALL OTHER PRINCIPAL COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR SALARY($)(1) BONUS($) ($)(2) (SHARES) ($)(3) ($)(4) - -------------------------------------------------------------------------------------------------------------------- A. W. DAHLBERG(5) President, 1993 477,967 96,331 17,707 15,322 225,406 44,547 Chief Executive 1992 469,178 110,094 6,508 17,113 171,243 26,979 Officer, Director 1991 418,968 67,958 - 20,710 126,085 - DWIGHT H. EVANS 1993 210,544 34,763 14,642 3,749 48,282 29,519 Executive 1992 206,980 40,598 3,505 4,207 36,284 10,925 Vice President 1991 178,777 36,058 - 4,910 25,081 - WARREN Y. JOBE Executive Vice President, Treasurer, 1993 210,200 27,038 15,645 3,740 48,282 29,258 Chief Financial 1992 209,249 30,521 2,566 4,217 37,320 11,535 Officer, Director 1991 192,458 21,635 - 5,249 29,428 - GENE R. HODGES 1993 206,727 28,228 14,903 3,439 35,285 30,629 Executive 1992 177,966 27,666 2,471 3,606 29,367 9,600 Vice President 1991 158,339 18,117 - 4,364 20,899 - KERRY E. ADAMS 1993 183,845 24,699 15,034 3,281 35,285 28,300 Senior Vice 1992 177,919 30,652 2,206 3,630 25,736 9,539 President 1991 153,970 23,058 - 3,671 17,857 -
(1) Due to the pay schedules at GEORGIA, 1992 salary reflects one additional pay period compared with 1991. (2) Tax reimbursement by GEORGIA on certain personal benefits. In accordance with the transition rules of the SEC, information for 1991 is omitted. (3) Payouts made in 1992, 1993 and 1994 for the four-year performance periods ending December 31, 1991, 1992 and 1993, respectively. (4) GEORGIA contributions to the ESP, ESOP, non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the Employee Savings and Stock Ownership Plans) and payments under a VBP for the following:- Name ESP ESOP SBP VBP - ---- --- ---- --- --- A. W. Dahlberg $6,746 $1,709 $18,092 $18,000 D. H. Evans 8,592 1,709 1,218 18,000 W. Y. Jobe 7,667 1,709 1,882 18,000 G. R. Hodges 7,349 1,620 3,660 18,000 K. E. Adams 7,204 1,634 1,462 18,000 In accordance with the transition rules of the SEC, information for 1991 is omitted. (5) Effective December 31, 1993, Mr. Dahlberg resigned to become president of SOUTHERN. III-15 304 GULF SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SECURITIES LONG- NAME UNDERLYING TERM AND OTHER ANNUAL STOCK INCENTIVE ALL OTHER PRINCIPAL COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR SALARY($) BONUS($) ($)(1) (SHARES) ($)(2) ($)(3) - -------------------------------------------------------------------------------------------------------------------- DOUGLAS L. MCCRARY President, 1993 310,701 40,856 3,639 7,406 104,719 19,854 Chief Executive 1992 299,960 42,307 1,719 8,351 80,942 16,386 Officer, Director 1991 290,568 37,774 - 10,495 68,429 - G. E. HOLLAND, JR. 1993 162,651 20,934 9,504 2,920 - 21,015 Vice President, 1992 101,725 17,980 724 2,795 n/e(4) -(5) Corporate Counsel 1991 - - - - - - EARL B. PARSONS, JR. 1993 160,089 19,129 9,572 - 22,072 25,430 Vice President 1992 155,495 22,050 420 - 17,875 8,460 1991 159,962 17,979 - - 16,768 - A. E. SCARBROUGH 1993 155,565 19,129 11,582 - 22,072 24,729 Vice President 1992 147,418 23,173 185 - 17,060 7,891 1991 139,349 17,334 - - 14,422 - JOHN E. HODGES, JR. 1993 147,144 20,934 9,726 2,289 32,206 24,327 Vice President 1992 139,296 25,360 448 2,532 23,218 7,425 1991 130,903 20,384 - 2,388 16,232 -
(1) Tax reimbursement by GULF on certain personal benefits. In accordance with the transition rules of the SEC, information for 1991 is omitted. (2) Payouts made in 1992, 1993 and 1994 for the four-year performance periods ending December 31, 1991, 1992 and 1993, respectively. (3) GULF contributions to the ESP, ESOP, non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the Employee Savings and Stock Ownership Plans) and payments under a VBP for the following:- Name ESP ESOP SBP VBP - ---- --- ---- --- --- D. L. McCrary $9,300 $1,709 $6,057 $ 2,788 G. E. Holland, Jr. 4,652 - - 16,363 E. B. Parsons, Jr 6,948 1,709 410 16,363 A. E. Scarbrough 6,746 1,338 282 16,363 J. E. Hodges, Jr. 6,651 1,313 - 16,363 In accordance with the transition rules of the SEC, information for 1991 is omitted. (4) Employee and executive officer of GULF since April 25, 1992. Not eligible to participate in the Long-Term Incentive Plan until January 1, 1993. (5) "All Other Compensation" previously reported as $4,149 for Mr. Holland in the Form 10-K for the year ended December 31, 1992, should have been $0 since Mr. Holland was not yet eligible to participate in ESP and ESOP. III-16 305 MISSISSIPPI SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SECURITIES LONG- NAME UNDERLYING TERM AND OTHER ANNUAL STOCK INCENTIVE ALL OTHER PRINCIPAL COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR SALARY($) BONUS($) ($)(1) (SHARES) ($)(2) ($)(3) - -------------------------------------------------------------------------------------------------------------------- DAVID M. RATCLIFFE President, Chief 1993 226,373 45,917 8,722 4,057 75,378 17,887 Executive 1992 213,095 33,395 6,380 4,326 48,722 10,860 Officer, Director 1991 163,805 26,564 - 5,140 30,268 - ROBERT G. DAWSON(4) 1993 154,668 14,996 4,539 2,390 25,661 15,043 Vice President 1992 147,771 14,002 10,841(5) - 15,685 20,714 1991 - - - - - - H. E. BLAKESLEE 1993 154,332 15,271 3,528 2,384 32,206 15,650 Vice President 1992 151,176 15,558 507 2,642 23,728 7,756 1991 138,749 12,029 - 3,287 18,091 - DON E. MASON 1993 148,305 11,016 4,321 - 22,072 15,409 Vice President 1992 146,153 9,951 1,352 - 17,060 7,505 1991 133,567 11,450 - - 14,422 - THOMAS A. FANNING 1993 122,724 28,244 3,016 - 15,233 14,655 Vice President 1992 89,089 15,574 16,539(5) - 10,085 18,364 1991 - - - - - -
(1) Tax reimbursement by MISSISSIPPI on certain personal benefits. In accordance with the transition rules of the SEC, information for 1991 is omitted. (2) Payouts made in 1992, 1993 and 1994 for the four-year performance periods ending December 31, 1991, 1992 and 1993, respectively. (3) MISSISSIPPI contributions to the ESP, ESOP, non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the Employee Savings and Stock Ownership Plans) and payments under a VBP for the following:- Name ESP ESOP SBP VBP - ---- --- ---- --- --- David M. Ratcliffe $7,895 $1,709 $2,774 $5,509 R. G. Dawson 6,746 1,252 - 7,045 H. E. Blakeslee 6,843 1,355 - 7,452 D. E. Mason 6,671 1,286 - 7,452 T. A. Fanning 5,520 1,019 - 8,116 In accordance with the transition rules of the SEC, information for 1991 is omitted. (4) Effective March 1, 1994, Mr. Dawson resigned to become a vice president of SEI. (5) Benefits under MISSISSIPPI's VBP for 1992 in the amounts of $13,169 and $12,425 to Messrs. Dawson and Fanning, respectively, previously reported in the Form 10-K for the year ended December 31, 1992, under the "Other Annual Compensation" column have been moved to the "All Other Compensation" column. III-17 306 SAVANNAH SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SECURITIES LONG- NAME UNDERLYING TERM AND OTHER ANNUAL STOCK INCENTIVE ALL OTHER PRINCIPAL COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR SALARY($) BONUS($) ($)(1) (SHARES) ($)(2) ($)(3) - -------------------------------------------------------------------------------------------------------------------- ARTHUR M. GIGNILLIAT, JR. President, 1993 202,259 26,470 12,231 3,599 64,932 31,512 Chief Executive 1992 201,338 27,409 - 4,058 50,269 14,466 Officer, Director 1991 184,634 24,232 - 5,051 42,498 - E. OLIN VEALE(4) Senior Vice President, 1993 174,870 12,447 299 - 21,711 14,224 Chief Financial 1992 150,349 12,803 34 - 16,410 12,282 Officer, Director 1991 137,992 10,684 - - 13,558 - LARRY M. PORTER 1993 126,133 10,070 7,251 - 7,810 21,570 Vice President 1992 122,274 11,621 4,818 - n/e(5) 6,142 1991 105,465 8,993 - - n/e - W. MILES GREER 1993 117,766 10,337 7,458 - 12,202 21,881 Vice President 1992 115,114 10,776 34 - 9,243 6,599 1991 104,371 7,869 - - 7,571 - JAMES L. RAYBURN(6) 1993 113,470 - 7,467 - 11,153 20,040 Vice President 1992 109,624 8,934 34 - 7,432 4,281 1991 100,520 7,248 - - 5,278 -
(1) Tax reimbursement by SAVANNAH on certain personal benefits. In accordance with the transition rules of the SEC, information for 1991 is omitted. (2) Payouts made in 1992, 1993 and 1994 for the four-year performance periods ending December 31, 1991, 1992 and 1993, respectively. (3) SAVANNAH contributions to the ESP, under Section 401(k) of the Internal Revenue Code, ESOP, AME and payments under a VBP for the following:- Name ESP ESOP AME VBP - ---- --- ---- --- --- A. M. Gignilliat $6,746 $3,092 $7,479 $14,195 E. O. Veale 6,163 2,359 5,702 - L. M. Porter 4,943 1,774 658 14,195 W. M. Greer 5,045 1,764 877 14,195 J. L. Rayburn 2,284 1,650 1,911 14,195 In accordance with the transition rules of the SEC, information for 1991 is omitted. (4) Retired effective December 31, 1993. (5) Not eligible for Long-term Incentive Payout until January 1, 1994. (6) Resigned effective December 31, 1993. III-18 307 STOCK OPTION GRANTS IN 1993 (B) STOCK OPTION GRANTS. The following table sets forth all stock option grants to the named executive officers of each operating subsidiary during the year ending December 31, 1993. The number of SOUTHERN common shares shown and the per share exercise price and market price do not reflect the stock distribution resulting from the two-for-one common stock split approved by SOUTHERN's board of directors in January, 1994.
INDIVIDUAL GRANTS GRANT DATE VALUE # OF % OF TOTAL SECURITIES OPTIONS EXERCISE UNDERLYING GRANTED TO OR OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) PRESENT VALUE($)(3) - ------------------------------------------------------------------------------------------------------------------------------------ ALABAMA Elmer B. Harris 13,446 7.5% $42.4375 07/19/2003 54,187 Travis Bow 6,119 3.4% $42.4375 07/19/2003 24,660 Banks H. Farris 3,151 1.8% $42.4375 07/19/2003 12,699 T. H. Jones 3,037 1.7% $42.4375 04/01/1998 12,178 W. B. Hutchins, III 2,948 1.6% $42.4375 07/19/2003 11,880 GEORGIA A. W. Dahlberg 15,322 8.5% $42.4375 07/19/2003 61,748 Dwight H. Evans 3,749 2.1% $42.4375 07/19/2003 15,108 Warren Y. Jobe 3,740 2.1% $42.4375 07/19/2003 15,072 Gene R. Hodges 3,439 1.9% $42.4375 07/19/2003 13,859 Kerry E. Adams 3,281 1.8% $42.4375 07/19/2003 13,222 GULF Douglas L. McCrary 7,406 4.1% $42.4375 05/01/1997 26,736 G. E. Holland, Jr. 2,920 1.6% $42.4375 07/19/2003 11,768 Earl B. Parsons, Jr. - - - - - A. E. Scarbrough - - - - - John E. Hodges, Jr. 2,289 1.3% $42.4375 07/19/2003 9,225
See next page for footnotes. III-19 308 STOCK OPTION GRANTS IN 1993
INDIVIDUAL GRANTS GRANT DATE VALUE # OF % OF TOTAL SECURITIES OPTIONS EXERCISE UNDERLYING GRANTED TO OR OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) PRESENT VALUE($)(3) - ------------------------------------------------------------------------------------------------------------------------------------ MISSISSIPPI David M. Ratcliffe 4,057 2.0% $42.4375 07/19/2003 16,350 Robert G. Dawson 2,390 1.3% $42.4375 07/19/2003 9,632 H. E. Blakeslee 2,384 1.2% $42.4375 07/19/2003 9,608 Don E. Mason - - - - - Thomas A. Fanning - - - - - SAVANNAH A. M. Gignilliat, Jr. 3,599 2.0% $42.4375 09/03/2000 15,080 E. Olin Veale - - - - - Larry M. Porter - - - - - W. Miles Greer - - - - - James L. Rayburn - - - - - - ----------------------------------
(1) Grants were made on July 19, 1993, and vest 25% per year on the anniversary date of the grant. Grants fully vest upon termination incident to death, disability, or retirement. The exercise price is the average of the high and low fair market value of SOUTHERN's common stock on the date granted. In accordance with the terms of the Executive Stock Plan, Mr. Jones' unexercised options expire on April 1, 1998, three years after his normal retirement date; Mr. McCrary's unexercised options expire on May 1, 1997, three years after his normal retirement date; and Mr. Gignilliat's unexercised options expire on September 3, 2000, three years after his normal retirement date. (2) A total of 179,746 stock options were granted in 1993 to key executives participating in SOUTHERN's Executive Stock Plan. (3) Based on the Black-Scholes option valuation model. The actual value, if any, an executive officer may realize ultimately depends on the market value of SOUTHERN's common stock at a future date. This valuation is provided pursuant to SEC disclosure rules and 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 - 12.45%; risk-free rate of return - 5.81%; dividend yield - 5.37%; and time to exercise - ten years. III-20 309 AGGREGATED STOCK OPTION EXERCISES IN 1993 AND YEAR-END OPTION VALUES (C) AGGREGATED STOCK OPTION EXERCISES. The following table sets forth information concerning options exercised during the year ending December 31, 1993, by the named executive officers and the value of unexercised options held by them as of December 31, 1993. The number of SOUTHERN common shares shown and the per share exercise price and market price do not reflect the stock distribution resulting from the two-for-one common stock split approved by SOUTHERN's board of directors in January, 1994.
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT YEAR-END (#) YEAR-END($)(1) SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (#) REALIZED($)(2) UNEXERCISABLE UNEXERCISABLE - --------------------------------------------------------------------------------------------------------- ALABAMA Elmer B. Harris - - 14,215/37,398 211,494/330,107 Travis J. Bowden - - 5,763/15,708 84,560/128,730 Banks H. Farris - - 863/5,741 6,850/22,875 T. H. Jones - - 848/5,581 6,731/25,318 W. B. Hutchins, III - - 706/5,068 5,604/21,802 GEORGIA A. W. Dahlberg 14,211 252,088 4,278/43,871 33,957/400,435 Dwight H. Evans 3,982 57,454 0/10,380 0/91,239 Warren Y. Jobe 4,741 75,241 0/11,934 0/101,456 Gene R. Hodges 3,449 52,973 0/9,287 0/81,520 Kerry E. Adams 3,257 49,639 0/8,742 0/75,346 GULF D. L. McCrary - - 9,668/21,814 149,219/203,868 G. E. Holland, Jr. - - 698/5,017 5,540/21,572 Earl B. Parsons, Jr. 700 11,769 - - A. E. Scarbrough - - - - John E. Hodges, Jr. - - 5,429/6,008 89,119/50,535
See next page for footnotes. III-21 310 AGGREGATED STOCK OPTION EXERCISES IN 1993 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT YEAR-END (#) YEAR-END($)(1) SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (#) REALIZED($)(2) UNEXERCISABLE UNEXERCISABLE - ------------------------------------------------------------------------------------------------------------------------------------ MISSISSIPPI David M. Ratcliffe 2,996 58,422 5,643/10,871 83,817/93,954 Robert G. Dawson - - 0/2,390 0/4,033 H. E. Blakeslee 2,310 36,298 660/6,677 5,239/59,535 Don E. Mason - - - - Thomas A. Fanning - - - - SAVANNAH A. M. Gignilliat, Jr. - - 8,556/10,502 136,063/97,250 E. Olin Veale - - - - Larry M. Porter - - - - W. Miles Greer - - - - James L. Rayburn - - - -
(1) This represents the excess of the fair market value of SOUTHERN's common stock of $44.125 per share, as of December 31, 1993, above the exercise price of the options. One column reports the "value" of options that are vested and therefore could be exercised; the other "value" of options that are not vested and therefore could not be exercised as of December 31, 1993. (2) The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value of the shares at the time of exercise over the exercise price. III-22 311 LONG-TERM INCENTIVE PLANS - AWARDS IN 1993 (D) LONG-TERM INCENTIVE PLANS. The following table sets forth the long-term incentive plan awards made to the named executive officers for the performance period January 1, 1993 through December 31, 1996.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS ------------------------------ NUMBER PERFORMANCE OR OF OTHER PERIOD UNITS UNTIL MATURATION THRESHOLD TARGET MAXIMUM NAME (#)(1) OR PAYOUT ($)(2) ($)(2) ($)(2) - ------------------------------------------------------------------------------------------------------------------ ALABAMA Elmer B. Harris 234,145 4 years 117,073 234,145 292,681 Travis J. Bowden 78,536 4 years 39,268 78,536 98,170 Banks H. Farris 39,883 4 years 19,942 39,883 49,854 T. Harold Jones 36,401 4 years 18,201 36,401 45,501 W. B. Hutchins, III 36,401 4 years 18,201 36,401 45,501 GEORGIA A. W. Dahlberg 265,675 4 years 132,838 265,675 332,094 Dwight H. Evans 54,574 4 years 27,287 54,574 68,218 Warren Y. Jobe 54,574 4 years 27,287 54,574 68,218 Gene R. Hodges 39,883 4 years 19,942 39,883 49,854 Kerry E. Adams 39,883 4 years 19,942 39,883 49,854 GULF D. L. McCrary 118,364 4 years 59,182 118,364 147,955 G. E. Holland, Jr. 36,401 4 years 18,201 36,401 45,501 E. B. Parsons, Jr. 24,947 4 years 12,474 24,947 31,184 A. E. Scarbrough 24,947 4 years 12,474 24,947 31,184 J. E. Hodges, Jr. 36,401 4 years 18,201 36,401 45,501
See next page for footnotes. III-23 312 LONG-TERM INCENTIVE PLANS - AWARDS IN 1993
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS ------------------------------ NUMBER PERFORMANCE OR OF OTHER PERIOD UNITS UNTIL MATURATION THRESHOLD TARGET MAXIMUM NAME (#)(1) OR PAYOUT ($)(2) ($)(2) ($)(2) - --------------------------------------------------------------------------------------------------------------- MISSISSIPPI D. M. Ratcliffe 100,514 4 years 50,257 100,514 125,643 Robert G. Dawson 36,401 4 years 18,201 36,401 45,501 H. E. Blakeslee 36,401 4 years 18,201 36,401 45,501 Don E. Mason 24,947 4 years 12,474 24,947 31,184 Thomas A. Fanning 22,774 4 years 11,387 22,774 28,468 SAVANNAH A. M. Gignilliat, Jr. 73,509 4 years 36,755 73,509 91,886 E. Olin Veale 24,947 4 years 12,474 24,947 31,184 Larry M. Porter 22,774 4 years 12,387 22,774 28,468 W. Miles Greer 13,999 4 years 7,000 13,999 17,499 James L. Rayburn 12,896 4 years 6,448 12,896 16,120 (1) A performance unit is a method of asigning a dollar value to a performance award opportunity. The actual number of units granted to a participant will be based on an award percentage of an individual's base salary range control mid-point over the performance period. For illustration purposes, the base salary range mid-points have been projected at a four percent growth rate for the four-year term. (2) The threshold, target and maximum value of a unit is $0.50, $1.00, and $1.25, respectively, and can vary based on SOUTHERN's return on common equity relative to a selected group of electric and gas utilities in the Southeastern United States. If certain minimum performance relative to the selected group is not achieved, there will be no payout; nor is there a payout if the current earnings of SOUTHERN are not sufficient to fund the dividend rate paid in the last calendar year. All awards are payable in cash at the end of the performance period.
III-24 313 PENSION PLAN TABLE (e)(1) The following table sets forth the estimated combined annual pension benefits under the pension and supplemental defined benefit plans in effect during 1993 for ALABAMA, GEORGIA, GULF and MISSISSIPPI. Employee compensation covered by the pension and supplemental benefit plans for pension purposes is limited to the average of the highest three of the final 10 years' base salary and wages (reported under column titled "Salary" in the Summary Compensation Tables on pages III-13 through III-18). The amounts shown in the table were calculated according to the final average pay formula and are based on a single life annuity without reduction for joint and survivor annuities (although married employees are required to have their pension benefits paid in one of various joint and survivor annuity forms, unless the employee elects otherwise with the spouse's consent) or computation of the Social Security offset which would apply in most cases. This offset amounts to one-half of the estimated Social Security benefit (primary insurance amount) in excess of $3,000 per year times the number of years of accredited service, divided by the total possible years of accredited service to normal retirement age.
YEARS OF ACCREDITED SERVICE REMUNERATION 15 20 25 30 35 40 - ------------ ------------------------------------------------------------------------------- $ 50,000 $ 12,750 $ 17,000 $ 21,250 $ 25,500 $ 29,750 $ 34,000 $100,000 25,500 34,000 42,500 51,000 59,500 68,000 $300,000 76,500 102,000 127,500 153,000 178,500 204,000 $500,000 127,500 170,000 212,500 255,000 297,500 340,000 $700,000 178,500 238,000 297,500 357,000 416,500 476,000 $850,000 216,750 289,000 361,250 433,500 505,750 578,000
As of December 31, 1993, the applicable compensation levels and years of accredited service are presented in the following tables:
ALABAMA COMPENSATION NAME LEVEL YEARS OF SERVICE ---- ------------ ---------------- Harris $415,980 29 Bowden 255,180 17 Farris 174,396 34 Jones 169,116 41 Hutchins 163,644 23
III-25 314 GEORGIA COMPENSATION NAME LEVEL YEARS OF SERVICE ---- ------------ ---------------- Dahlberg $474,012 33 Evans 209,076 24 Jobe 208,896 22 Hodges 187,716 29 Adams 182,160 29 GULF COMPENSATION NAME LEVEL YEARS OF SERVICE ---- ------------ ---------------- McCrary $302,352 39 Holland 160,404 11(1) Parsons 156,684 32 Scarbrough 149,208 30 Hodges 140,880 27 MISSISSIPPI COMPENSATION NAME LEVEL YEARS OF SERVICE ---- ------------ ---------------- Ratcliffe $209,352 21 Dawson 144,900 25 Blakeslee 147,576 27 Mason 142,200 27 Fanning 113,712 12
SAVANNAH has in effect a qualified, trusteed, noncontributory, defined benefit pension plan which provides pension benefits to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. The plan provides pension benefits under a formula which includes each participant's years of service with the Southern system and average annual earnings of the highest three of the final ten years of service with the Southern system preceding retirement. Plan benefits are reduced by a portion of the benefits participants are entitled to receive under Social Security. The plan provides for reduced early retirement benefits at age 55 and a pension for the surviving spouse equal to one-half of the deceased retiree's pension. The following table sets forth the estimated annual pension benefits under the pension plan in effect during 1993 which are payable by SAVANNAH to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. (1)The number of accredited years of service includes ten years credited to Mr. Holland pursuant to a supplemental pension agreement. III-26 315
ANNUAL BENEFITS EXCLUSIVE OF SOCIAL SECURITY(1) AVERAGE ANNUAL SALARY YEARS OF SERVICE FOR LAST 36 MONTHS OF ----------------------------------------------- EMPLOYMENT 15 25 35 - --------------------- -- -- -- $ 90,000 $22,505 $37,508 $ 52,511 120,000 30,006 50,010 70,014 150,000 37,508 62,513 87,518 180,000 45,009 75,015 105,021 200,000 50,010 83,350 116,690 230,000 57,512 95,853 134,194
As of December 31, 1993, the applicable compensation levels and years of accredited service is presented in the following table:
SAVANNAH COMPENSATION NAME LEVEL YEARS OF SERVICE ---- ------------- ---------------- Gignilliat $180,077 35 Veale 144,404 38 Porter 102,500 16 Greer 107,750 9 Rayburn 97,605 26
(e)(2) DEFERRED COMPENSATION PLAN; SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. SAVANNAH has in effect a voluntary deferred compensation plan for certain executive employees pursuant to which such employees may defer a portion of their respective annual salaries. In addition, SAVANNAH has a supplemental executive retirement plan for certain of its executive employees which became effective January 1, 1984. The deferred compensation plan is designed to provide supplemental retirement or survivor benefit payments. The supplemental executive retirement plan is also designed to provide retiring executives of SAVANNAH with a supplemental retirement benefit, which, in conjunction with social security and benefits under SAVANNAH's qualified pension plan, will equal 70 percent of the highest three of the final ten years average annual compensation (including deferrals under the deferred compensation plan). Both of these plans are unfunded and the liability is payable from general funds of SAVANNAH. The deferred compensation plan became effective December 1, 1983, and all of SAVANNAH's executive officers are participating in the plan. In addition, all executives are participating in the supplemental executive retirement plan. In order to provide for its liabilities under the deferred compensation plan and the supplemental executive retirement plan, SAVANNAH has purchased life insurance on participating executive employees in actuarially determined amounts which, based upon assumptions as to mortality experience, policy dividends, tax effects, and other factors which, if realized, along with compensation deferred by employees and the death benefits payable to (1) The plan benefits are subject to the maximum benefit limitations set forth in Section 415 of the Internal Revenue Code. III-27 316 SAVANNAH, are expected to cover all such insurance premium payments, and all benefit payments to participants, plus a factor for the cost of funds of SAVANNAH. (f) COMPENSATION OF DIRECTORS. (1) Standard Arrangements. The following table presents compensation paid to the directors, during 1993 for service as a member of the board of directors and any board committee(s), except that employee directors received no fees or compensation for service as a member of the board of directors or any board committee. All or a portion of these fees may be deferred until membership on the board is terminated.
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH RETAINER FEE $15,000 $18,000 $8,000 $8,000 $8,000 MEETING FEE 800 900 500 500 500 COMMITTEES: Audit 800 900 500 500 500(1) Compensation 800 900 500 500 500(1) Corporate Governance(2) - 900 - - - Executive 800 900 - - 500(1,3) Finance - 900 - 500 - Nominating 800 - - - - Nuclear Safety 800 - - - - Nuclear Operations Overview - 1,800 - - -
ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH also provide retirement benefits to non-employee directors who are credited with a minimum of 60 months of service on the board of directors of one or more system companies, under the Outside Directors Pension Plan. Eligible directors are entitled to benefits under the Plan upon retirement from the board on the retirement date designated in the respective companies by-laws. The annual benefit payable ranges from 75 to 100 percent of the annual retainer fee in effect on the date of retirement, based upon length of service. Payments continue for the greater of the lifetime of the participant or 10 years. (2) Other Arrangements. No director received other compensation for services as a director during the year ending December 31, 1993 in addition to or in lieu of that specified by the standard arrangements specified above. (1) Committee Chairmen receive an additional $500 per year fee. (2) Established for period September 15, 1993 through May 31, 1994. (3) Chairman of Executive Committee receives an additional $3,000 per month fee. III-28 317 (g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS. None. (h) REPORT ON REPRICING OF OPTIONS. None. (i) ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISION. ALABAMA Elmer B. Harris serves on the Compensation Committee of AmSouth Bancorporation. John W. Woods, a director of ALABAMA is an executive officer of AmSouth Bancorporation. GULF Messrs. Paul J. DeNicola and Douglas L. McCrary are ex officio members of its Compensation Committee. III-29 318 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (A) 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% 64 Perimeter Center East Atlanta, Georgia 30346 REGISTRANTS: ------------ ALABAMA 5,608,955 GEORGIA 7,761,500 GULF 992,717 MISSISSIPPI 1,121,000 SAVANNAH 10,844,635
(B) 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, 1993. 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, 1993. The number of SOUTHERN common shares shown do not reflect the stock distribution resulting from the two-for-one common stock split approved by SOUTHERN'S board of directors in January, 1994.
NAME OF DIRECTOR, NUMBER OF SHARES NOMINEES AND BENEFICIALLY EXECUTIVE OFFICERS TITLE OF CLASS OWNED 1,2 - ------------------ -------------- --------------------------- ALABAMA Edward L. Addison SOUTHERN Common 125,032 Whit Armstrong SOUTHERN Common 7,410 Travis Bowden SOUTHERN Common 16,185 Bill M. Guthrie SOUTHERN Common 23,003 Elmer B. Harris SOUTHERN Common 35,545
III-30 319
NAME OF DIRECTOR, NUMBER OF SHARES NOMINEES AND BENEFICIALLY EXECUTIVE OFFICERS TITLE OF CLASS OWNED 1,2 - ------------------ -------------- -------------------------- Crawford T. Johnson, III SOUTHERN Common 286 Carl E. Jones, Jr. SOUTHERN Common 3,945 Gerald H. Powell SOUTHERN Common 2,000 John W. Rouse, Jr. SOUTHERN Common 1,688 William J. Rushton, III SOUTHERN Common 3,000 ALABAMA Preferred 20 John C. Webb, IV SOUTHERN Common 3,660 ALABAMA Preferred 985 Louis J. Willie SOUTHERN Common 1,587 ALABAMA Preferred 391 GEORGIA Preferred 200 GULF Preferred 50 Banks H. Farris SOUTHERN Common 15,693 William B. Hutchins, III SOUTHERN Common 9,458 Thomas H. Jones SOUTHERN Common 21,029 The directors, nominees, and executive officers as a group SOUTHERN Common 275,837 shares ALABAMA Preferred 1,376 shares GEORGIA Preferred 200 shares GULF Preferred 50 shares GEORGIA Edward L. Addison SOUTHERN Common 125,032 W. P. Copenhaver SOUTHERN Common 1,350 A. W. Dahlberg SOUTHERN Common 29,287 W. A. Fickling, Jr. GEORGIA Preferred 50 L. G. Hardman, III SOUTHERN Common 3,053
III-31 320
NAME OF DIRECTOR, NUMBER OF SHARES NOMINEES AND BENEFICIALLY EXECUTIVE OFFICERS TITLE OF CLASS OWNED 1,2 - ------------------ -------------- -------------------------- Warren Y. Jobe SOUTHERN Common 12,824 GEORGIA Preferred 203 James R. Lientz, Jr. SOUTHERN Common 21 W. A. Parker, Jr. SOUTHERN Common 16,822 GEORGIA Preferred 2 Gloria M. Shatto SOUTHERN Common 6,003 W. J. Vereen SOUTHERN Common 2,500 GEORGIA Preferred 1,701 Kerry E. Adams SOUTHERN Common 8,963 GEORGIA Preferred 200 Dwight E. Evans SOUTHERN Common 7,495 GEORGIA Preferred 100 Gene R. Hodges SOUTHERN Common 11,678 GEORGIA Preferred 800 The directors, nominees and executive officers as a group SOUTHERN Common 270,626 shares GEORGIA Preferred 3,256 shares GULF Paul J. DeNicola SOUTHERN Common 10,846 W. Deck Hull, Jr. SOUTHERN Common 957 Douglas L. McCrary SOUTHERN Common 31,298 Joseph K. Tannehill SOUTHERN Common 2,000 J. E. Hodges, Jr. SOUTHERN Common 14,242 GULF Preferred 3 G. Edison Holland, Jr. SOUTHERN Common 807
III-32 321
NAME OF DIRECTOR, NUMBER OF SHARES NOMINEES AND BENEFICIALLY EXECUTIVE OFFICERS TITLE OF CLASS OWNED 1,2 - ------------------ -------------- ------------------------- Earl B. Parsons, Jr. SOUTHERN Common 7,200 A. E. Scarbrough SOUTHERN Common 9,216 GULF Preferred 100 MISSISSIPPI Preferred 5 The directors, nominees SOUTHERN Common 78,488 shares and executive officers GULF Preferred 105 shares as a group MISSISSIPPI Preferred 5 shares MISSISSIPPI Paul J. DeNicola SOUTHERN Common 10,846 Edwin E. Downer SOUTHERN Common 322 Robert S. Gaddis SOUTHERN Common 1,547 Walter H. Hurt, III SOUTHERN Common 200 MISSISSIPPI Preferred 33 Aubrey K. Lucas SOUTHERN Common 416 Earl D. McLean, Jr. SOUTHERN Common 7,051 David M. Ratcliffe SOUTHERN Common 11,363 Leo W. Seal, Jr. SOUTHERN Common 1,000 Gerald J. St. Pe SOUTHERN Common 8,000 H. E. Blakeslee SOUTHERN Common 4,102 Robert G. Dawson SOUTHERN Common 7,660 Thomas A. Fanning SOUTHERN Common 1,827 Don E. Mason SOUTHERN Common 8,499 The directors, nominees and executive officers SOUTHERN Common 62,834 shares as a group MISSISSIPPI Preferred 33 shares
III-33 322
NAME OF DIRECTOR, NUMBER OF SHARES NOMINEES AND BENEFICIALLY EXECUTIVE OFFICERS TITLE OF CLASS OWNED 33,34 - ------------------ -------------- ------------------------ SAVANNAH Helen Quattlebaum Artley SOUTHERN Common 1,209 Paul J. DeNicola SOUTHERN Common 10,846 A. M. Gignilliat, Jr. SOUTHERN Common 18,134 Walter D. Gnann SOUTHERN Common 735 Robert B. Miller, III SOUTHERN Common 982 John C. Monroe SOUTHERN Common 420 John M. McIntosh SOUTHERN Common 7,016 James M. Piette SOUTHERN Common 563 Arnold M. Tenenbaum SOUTHERN Common 177 E. Olin Veale SOUTHERN Common 5,319 Fred F. Williams SOUTHERN Common 1,079 W. Miles Greer SOUTHERN Common 504 Larry M. Porter SOUTHERN Common 5,244 The directors, nominees and executive officers as a group SOUTHERN Common 52,228 shares
(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 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. Addison, 86,357 shares; Mr. Blakeslee, 660 shares; Mr. Bowden, 5,763 shares; Mr. Dahlberg, 4,278 shares; Mr. Farris, 863 shares; Mr. Gignilliat, 8,556 shares; Mr. Guthrie 15,720 shares; Mr. Harris, 14,215 shares; Mr. Haubein, 835 shares; Mr. Hodges, 5,429 shares; Mr. Holland, 698 shares; Mr. Hutchins, 706 shares; Mr. Jones, 848 shares; Mr. Klappa, 671 shares, Mr. C. D. McCrary, 691 shares; Mr. D. L. McCrary, 9,668 shares; and Mr. Ratcliffe, 5,643 shares. Also included are shares of SOUTHERN common stock held by the spouses of the following directors: Mr. Addison, 670 shares; Mr. Copenhaver, 350 shares; Mr. Harris, 155 shares; Mr. Parker, 22 shares; and Dr. Shatto, 5,067 shares. III-34 323 (C) CHANGES IN CONTROL. The operating affiliates know of no arrangements which may at a subsequent date result in any change in control. GEORGIA'S Mr. Russell failed to file on a timely basis a single report disclosing one transaction on Form 4 as required by Section 16 of the Securities Exchange Act of 1934. MISSISSIPPI'S Messrs. McLean, Jr., Hurt and Seal, Jr. each failed to file on a timely basis a single report disclosing one transaction on Form 4 as required by Section 16 of the Securities Exchange Act of 1934. SAVANNAH'S Mr. Gnann failed to file on a timely basis a single report disclosing one transaction on Form 4 as required by Section 16 of the Securities Exchange Act of 1934. MR. DENICOLA, a director of GULF, MISSISSIPPI and SAVANNAH, failed to file on a timely basis a single report, disclosing one transaction on Form 4 as required by Section 16 of the Securities Exchange Act of 1934. III-35 324 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ALABAMA (a) Transactions with management and others. During 1993, ALABAMA, in the ordinary course of business, paid premiums amounting to approximately $400,000 for various types of insurance policies purchased from Protective Life Insurance Company, a subsidiary of Protective Life Corporation, a company in which Mr. William J. Rushton, III, a director of ALABAMA, owns an interest and of which he serves as Chairman. The firm of Inzer, Stivender, Haney & Johnson, P.A., performed certain legal services for ALABAMA during 1993. Mr. James C. Inzer, Jr., partner in this firm, is also a director of ALABAMA. ALABAMA purchased automobiles and parts in the amount of approximately $200,000 from companies in which Mr. Blount, a director of ALABAMA, owns 85% interests. ALABAMA purchased electrical supplies in the amount of approximately $200,000 from L & K Electric Supply Company, Ltd. during 1993. Mr. Willie, director of ALABAMA and SOUTHERN, owns an interest in and serves as president of this firm. ALABAMA believes that these transactions have been on terms representing competitive market prices that are no less favorable than those available from others. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. GEORGIA (a) Transactions with management and others. In 1993, GEORGIA was indebted in a maximum amount of $105 million to Wachovia Bank and its affiliates, of which G. Joseph Prendergast serves as President and Chief Executive Officer of Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A. In 1993, GEORGIA was indebted in a maximum amount of $285 million to NationsBank and its affiliates of which Mr. James R. Lientz, Jr. serves as President of NationsBank of Georgia. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. GULF (a) Transactions with management and others. The firm of Beggs & Lane, P.A. serves as local counsel for GULF and received from GULF approximately $800,000 for services rendered. Mr. G. Edison Holland, Jr. is a partner in the firm and also serves as Vice President and Corporate Counsel of GULF. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. MISSISSIPPI (a) Certain business relationships. During 1993, MISSISSIPPI was indebted in a maximum amount of $12.4 million to Hancock Bank, of which Leo W. Seal, Jr. serves as Chairman of the Board and Chief Executive Officer. (b) Certain business relationships. None. (c) Indebtedness of management. None. III-36 325 (d) Transactions with promoters. None. SAVANNAH (a) Transactions with management and others. Mr. Tenenbaum is a Director of First Union national Bank of Georgia, and Mr. Foster is President of NationsBank of Georgia, N.A., in Savannah. During 1993, these banks furnished a number of regular banking services in the ordinary course of business to SAVANNAH. SAVANNAH intends to maintain normal banking relations with all of the aforesaid banks in the future. (b) Certain business relationships. (c) Indebtedness of management. None. (d) Transactions with promoters. None. III-37 326 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 1993 the registrants filed Current Reports on Form 8-K as follows: ALABAMA filed Forms 8-K dated October 27, 1993, and November 16, 1993, to facilitate security sales. GEORGIA filed a Form 8-K dated October 20, 1993, to facilitate a security sale. GULF filed a Form 8-K dated November 3, 1993, to facilitate a security sale. SAVANNAH filed a Form 8-K dated November 9, 1993, to facilitate a security sale. IV-1 327 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 Edward L. Addison, Chairman By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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. Edward L. Addison Chairman of the Board (Principal Executive Officer) W. L. Westbrook Financial Vice President (Principal Financial and Accounting Officer) Directors: W. P. Copenhaver John M. McIntosh. A. W. Dahlberg Earl D. McLean, Jr. Paul J. DeNicola William A. Parker Jack Edwards William J. Rushton, III H. Allen Franklin Gloria M. Shatto L. G. Hardman, III Herbert Stockham Elmer B. Harris Louis J. Willie By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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 By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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) Charles D. McCrary Senior Vice President (Principal Financial Officer) David L. Whitson Vice President and Comptroller (Principal Accounting Officer) Directors: Edward L. Addison William V. Muse Whit Armstrong John T. Porter Philip E. Austin Gerald H. Powell Margaret A. Carpenter Robert D. Powers Peter V. Gregerson, Sr. John W. Rouse Bill M. Guthrie James H. Sanford Crawford T. Johnson, III John Cox Webb, IV Carl E. Jones, Jr. Louis J. Willie Wallace D. Malone, Jr. John W. Woods By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 IV-2 328 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 By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. H. Allen Franklin President, Chief Executive Officer and Director (Principal Executive Officer) Warren Y. Jobe Executive Vice President, Treasurer, Chief Financial Officer and Director (Principal Financial Officer) C. B. Harreld Vice President and Comptroller (Principal Accounting Officer) Directors: Edward L. Addison G. Joseph Prendergast Bennett A. Brown Herman J. Russell William P. Copenhaver Gloria M. Shatto A. W. Dahlberg Robert Strickland William A. Fickling, Jr. William Jerry Vereen L. G. Hardman, III Thomas R. Williams James R. Lientz, Jr. By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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 D. L. McCrary, Chairman of the Board By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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. D. L. McCrary Chairman of the Board and Chief Executive Officer (Principal Executive Officer) A. E. Scarbrough Vice President - Finance (Principal Financial and Accounting Officer) Directors: Reed Bell Travis J. Bowden Paul J. DeNicola Fred C. Donovan W. D. Hull, Jr. C. W. Ruckel J. K. Tannehill By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25,1994 IV-3 329 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 David M. Ratcliffe, President By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 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. David M. Ratcliffe President, Chief Executive Officer and Director (Principal Executive Officer) Thomas A. Fanning Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Paul J. DeNicola Edwin E. Downer Robert S. Gaddis Walter H. Hurt, III Aubrey K. Lucas Earl D. McLean, Jr. Gerald J. St. Pe' Leo W. Seal, Jr. N. Eugene Warr By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SAVANNAH ELECTRIC AND POWER COMPANY By Arthur M. Gignilliat, Jr., President By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Arthur M. Gignilliat, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) Kirby R. Willis Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Helen Q. Artley Paul J. DeNicola Brian R. Foster Walter D. Gnann John M. McIntosh Robert B. Miller, III James M. Piette Arnold M. Tenenbaum Frederick F. Williams, Jr. By Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 25, 1994 IV-4 330 EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANTS.
Common Stock Jurisdiction of Owned by Name of Company Organization Southern --------------------------------------------------- --------------- ------------ ALABAMA POWER COMPANY Alabama 100% Alabama Property Company Alabama (1) Columbia Fuels, Inc. Alabama (1) GEORGIA POWER COMPANY Georgia 100 Piedmont-Forrest Corporation Georgia (2) GULF POWER COMPANY Maine 100 MISSISSIPPI POWER COMPANY Mississippi 100 SAVANNAH ELECTRIC AND POWER COMPANY Georgia 100 SEI HOLDINGS, INC. Delaware 100 Asociados de Electricidad, S. A. Argentina (3) SEI y Asociados de Argentina, S. A. Argentina (4) Hidroelectrica Alicura, S. A. Argentina (5) SEI HOLDINGS III, INC. Delaware 100 SEI Chile, S.A. Chile (6) Empressa Electricia del Norte Grande, S.A. Chile (7) SEI HOLDINGS IV, INC. Delaware 100 Inversores de Electricidad, S.A. Argentina (8) SEI Inversora, S.A. Argentina (9) SEI Bahamas Argentina I, Inc. Bahamas (8) SEI Bahamas Argentina II, Inc. Bahamas (8) Tesro Holding B.V. Netherlands (8) SOUTHERN COMPANY SERVICES, INC. Alabama 100 SOUTHERN ELECTRIC BAHAMAS HOLDINGS, LTD. Bahamas 100 Southern Electric Bahamas, Ltd. Bahamas (10) Freeport Power Company Limited Bahamas (11) SOUTHERN ELECTRIC GENERATING COMPANY Alabama (12) SOUTHERN ELECTRIC INTERNATIONAL, INC. Delaware 100 SEI Operadora de Argentina, S.A. Argentina (13) SOUTHERN ELECTRIC RAILROAD COMPANY Delaware 100 SOUTHERN ELECTRIC WHOLESALE GENERATORS, INC. Delaware 100 Birchwood Development Corp. Delaware (14) Birchwood Power Partners, L.P. Delaware (14) SEI Birchwood, Inc. Delaware (14) SEI Hawaiian Cogenerators, Inc. Delaware (14) SOUTHERN NUCLEAR OPERATING COMPANY, INC. Delaware 100 THE SOUTHERN DEVELOPMENT AND INVESTMENT GROUP, INC. Georgia 100
(1) Owned by Alabama Power Company. (2) Owned by Georgia Power Company. (3) Owned by SEI Holdings, Inc. (4) 94% owned jointly by Asociados de Electricidad, S. A. (14%) and SEI Holdings, Inc. (80%) (5) 59% owned by SEI y Asociados de Argentina, S. A. (6) Owned by SEI Holdings III, Inc. (7) 36% owned by SEI Chile, S. A. (8) Owned by SEI Holdings IV, Inc. (9) Owned jointly by Inversores de Electricidad, S. A. (15%) and SEI Bahamas Argentina I, Inc. (85%) (10) Owned by Southern Electric Bahamas Holdings, Ltd. (11) 50% owned by Southern Electric Bahamas, Ltd. (12) Owned equally by Alabama Power Company and Georgia Power Company. (13) Owned by Southern Electric International, Inc. (14) Owned by Southern Electric Wholesale Generators, Inc. IV-5 331 ARTHUR ANDERSEN & CO. Exhibit 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of The Southern Company and its subsidiaries and the related financial statement schedules, included in this Form 10-K, into The Southern Company's previously filed Registration Statement File Nos. 2-78617, 33-3546, 33-23152, 33-30171, 33-23153 and 33-51433. /s/ Arthur Andersen & Co. Atlanta, Georgia March 25, 1994 IV-6 332 ARTHUR ANDERSEN & CO. Exhibit 23(b) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of Alabama Power Company and the related financial statement schedules, included in this Form 10-K, into Alabama Power Company's previously filed Registration Statement File No. 33-49653. /s/ Arthur Andersen & Co. Birmingham, Alabama March 25, 1994 IV-7 333 ARTHUR ANDERSEN & CO. Exhibit 23(c) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of Georgia Power Company and the related financial statement schedules, included in this Form 10-K, into Georgia Power Company's previously filed Registration Statement File No. 33-49661. /s/ Arthur Andersen & Co. Atlanta, Georgia March 25, 1994 IV-8 334 ARTHUR ANDERSEN & CO. Exhibit 23(d) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of Gulf Power Company and the related financial statement schedules, included in this Form 10-K, into Gulf Power Company's previously filed Registration Statement File No. 33-50165. /s/ Arthur Andersen & Co. Atlanta, Georgia March 25, 1994 IV-9 335 ARTHUR ANDERSEN & CO. Exhibit 23(e) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of Mississippi Power Company and the related financial statement schedules, included in this Form 10-K, into Mississippi Power Company's previously filed Registration Statement File Nos. 33-49320 and 33-49649. /s/ Arthur Andersen & Co. Atlanta, Georgia March 25, 1994 IV-10 336 ARTHUR ANDERSEN & CO. Exhibit 23(f) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 16, 1994 on the financial statements of Savannah Electric and Power Company and the related financial statement schedules, included in this Form 10-K, into Savannah Electric and Power Company's previously filed Registration Statement File Nos. 33-45757 and 33-52509. /s/ Arthur Andersen & Co. Atlanta, Georgia March 25, 1994 IV-11 337 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To The Southern Company: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of The Southern Company and its subsidiaries included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our report on the consolidated financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project, as discussed in Note 4 to The Southern Company's consolidated financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to The Southern Company and its subsidiaries (pages S-2 and S-3, S-11 through S-14, S-35 through S-37, S-53, and S-59) are the responsibility of The Southern Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state 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 & Co. Atlanta, Georgia February 16, 1994 IV-12 338 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Alabama Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Alabama Power Company included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Alabama Power Company (pages S-4, S-15 through S-18, S-38 through S-40, S-54, and S-60) are the responsibility of Alabama Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Birmingham, Alabama February 16, 1994 IV-13 339 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Georgia Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Georgia Power Company included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our report on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding the recoverability of Georgia Power Company's investment in the Rocky Mountain pumped storage hydroelectric project, as discussed in Note 4 to Georgia Power Company's financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Georgia Power Company (pages S-5, S-19 through S-22, S-41 through S-43, S-55, and S-61) are the responsibility of Georgia Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Atlanta, Georgia February 16, 1994 IV-14 340 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Gulf Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Gulf Power Company included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Gulf Power Company (pages S-6, S-23 through S-26, S-44 through S-46, S-56, and S-62) are the responsibility of Gulf Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Atlanta, Georgia February 16, 1994 IV-15 341 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Mississippi Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Mississippi Power Company included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Mississippi Power Company (pages S-7 and S-8, S-27 through S-30, S-47 through S-49, S-57, and S-63) are the responsibility of Mississippi Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Atlanta, Georgia February 16, 1994 IV-16 342 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Savannah Electric and Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Savannah Electric and Power Company included in this Form 10-K, and have issued our report thereon dated February 16, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Savannah Electric and Power Company (pages S-9 and S-10, S-31 through S-34, S-50 through S-52, S-58, and S-64) are the responsibility of Savannah Electric and Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Atlanta, Georgia February 16, 1994 IV-17 343 INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page - -------- ---- V Utility Plant, Including Intangibles 1993, 1992 and 1991 The Southern Company and Subsidiary Companies . . . . . . . . . . . . . . . . . . . . . . . . . S-2 Alabama Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4 Georgia Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5 Gulf Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6 Mississippi Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7 Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9 VI Accumulated Provision for Depreciation of Utility Plant 1993, 1992 and 1991 The Southern Company and Subsidiary Companies . . . . . . . . . . . . . . . . . . . . . . . . . S-11 Alabama Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15 Georgia Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19 Gulf Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23 Mississippi Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27 Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31 VIII Valuation and Qualifying Accounts and Reserves 1993, 1992 and 1991 The Southern Company and Subsidiary Companies . . . . . . . . . . . . . . . . . . . . . . . . . S-35 Alabama Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38 Georgia Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41 Gulf Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44 Mississippi Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-47 Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-50 IX Short-Term Borrowings 1993, 1992 and 1991 The Southern Company and Subsidiary Companies . . . . . . . . . . . . . . . . . . . . . . . . . S-53 Alabama Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-54 Georgia Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-55 Gulf Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-56 Mississippi Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-57 Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-58 X Supplementary Income Statement Information 1993, 1992 and 1991 The Southern Company and Subsidiary Companies . . . . . . . . . . . . . . . . . . . . . . . . . S-59 Alabama Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-60 Georgia Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-61 Gulf Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-62 Mississippi Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-63 Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-64
Schedules I through XIV 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-1 344 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
Column F Column F Column F Column F - ----------------------------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - ----------------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE Intangibles: Organization $ 2,334 $ 2,101 $ 2,889 $ 4,665 Franchises & Consents 71 71 71 71 Miscellaneous 25,689 27,142 30,422 30,746 Production Plant: Steam 7,511,289 7,848,674 7,882,552 7,854,330 Nuclear 5,820,402 5,902,360 5,911,852 5,930,141 Hydraulic 1,221,735 1,246,975 1,252,704 1,262,736 Other 149,372 148,151 150,490 151,378 Transmission Plant 2,824,596 2,954,395 3,092,940 3,224,009 Distribution Plant 5,737,724 6,091,816 6,430,557 6,847,653 General Plant: Coal Mine Plant 5,866 5,865 5,865 5,865 Other 1,848,629 1,974,669 2,064,594 2,165,114 Nuclear Fuel, at Unamortized Cost: Assemblies in Reactor 564,356 534,545 502,997 473,830 In-Process 93,559 54,838 34,226 24,171 Materials & Assemblies 9,611 23,154 17,557 2,663 Spent Nuclear Fuel 645,857 731,245 749,908 786,314 Construction Work in Progress 1,091,712 603,508 665,203 1,031,197 Plant Leased to Others 56,962 56,975 56,975 56,975 Plant Held for Future Use 41,977 38,419 40,136 40,152 Electric Plant Acquisition 59,289 52,835 52,612 44,391 Other Miscellaneous Plant 37,619 37,557 37,754 47,387 - ----------------------------------------------------------------------------------------------------- Total Electric Plant 27,748,649 28,335,295 28,982,304 29,983,788 STEAM HEAT PLANT: Plant-in-Service 20,091 20,214 20,924 20,926 Work-in-Progress 74 181 33 43 - ----------------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 27,768,814 $28,355,690 $29,003,261 $30,004,757 =====================================================================================================
See Summary of Transactions and Notes on Page S-3 S-2 345 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS) Total additions and total retirements for 1991, 1992 and 1993, as summarized below, were each less than 10% of the total balances as of the respective year-ends. Retirements include non-depreciable plant retirements and unamortized portions of retirements to acquisition adjustments. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress.
1991 1992 1993 ------------------------------------------------ Gross Property Additions $ 1,123,021 $ 1,104,840 $ 1,440,603 Retirements 532,461 382,885 596,259 Other Changes (Note 1) (3,684) (74,384) 157,152
(NOTE 1) OTHER CHANGES INCLUDE THE FOLLOWING (STATED IN THOUSANDS OF DOLLARS) 1993 Acquisition of Freeport Power Company $ 112,793 GEORGIA adjustment to plant for taxes applicable to capitalized AFUDC debt 46,473 Miscellaneous amortizations, property reclassifications and adjustments (2,114) ------------ 157,152 ============ 1992 Partial Sale of ALABAMA's Miller Steam Plant $ (61,960) Miscellaneous amortizations, property reclassifications and adjustments (12,424) ------------ (74,384) ============ 1991 Miscellaneous amortizations, property reclassifications and adjustments (3,684) ============
S-3 346 ALABAMA POWER COMPANY SCHEDULE V -- UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------------------------- Column F Column F Column F Column F - --------------------------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - --------------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Intangibles: Organization $ 342 $ 342 $ 1,213 $ 3,339 Production Plant: Steam 2,462,098 2,991,874 2,953,681 2,987,008 Nuclear 1,794,540 1,851,317 1,860,832 1,860,842 Hydraulic 809,578 814,301 818,363 819,848 Other 2 2 2 2 Transmission Plant 925,368 977,239 1,013,464 1,051,130 Distribution Plant 1,815,265 1,947,972 2,072,165 2,206,834 General Plant: Coal Mine Plant 3,636 3,635 3,635 3,635 Transportation Equipment 114,117 120,915 124,953 127,057 Other 526,170 572,832 601,445 647,876 Nuclear Fuel, at Unamortized Cost: Assemblies in Reactor 225,067 220,083 198,486 192,392 In-Process 45,959 27,879 11,221 14,918 Spent Nuclear Fuel 591,866 638,114 716,722 758,110 Construction Work in Progress 654,055 148,564 164,555 225,743 Plant Held for Future Use 11,095 11,793 16,378 25,019 Electric Plant Acquisition Adjustment 4,857 4,431 4,028 3,625 - --------------------------------------------------------------------------------------------------- Total Electric Plant 9,984,015 10,331,293 10,561,143 10,927,378 STEAM HEAT PLANT: Plant-in-Service 20,091 20,214 20,924 20,926 Work-in-Progress 74 181 33 43 - --------------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 10,004,180 $10,351,688 $10,582,100 $10,948,347 ===================================================================================================
Total additions and total retirements for 1991, 1992 and 1993, as summarized below, were each less than 10% of the total balances as of the respective year-ends. Retirements below include non-depreciable plant retirements. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress. Other changes include a reduction to utility plant of $61,960,000 for the partial sale of Miller Steam Plant in 1992.
1991 1992 1993 ----------------------------------------- Gross Property Additions $ 397,011 $ 367,463 $ 435,843 Retirements 53,739 66,477 65,353 Other Changes 4,236 (70,574) (4,243)
S-4 347 GEORGIA POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------- Column F Column F Column F Column F - ----------------------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - ----------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Intangibles: Organization $ 214 $ 214 $ 364 $ 214 Franchises & Consents 70 70 70 70 Miscellaneous 22,989 24,049 27,018 27,232 Production Plant: Steam 3,235,069 3,013,435 3,028,094 2,860,896 Nuclear 4,025,862 4,051,043 4,051,020 4,069,299 Hydraulic 412,157 432,674 434,341 442,888 Other 114,949 115,159 116,311 115,910 Transmission Plant 1,522,157 1,566,173 1,646,904 1,713,122 Distribution Plant 3,056,825 3,252,111 3,413,681 3,600,115 General Plant 744,488 772,839 798,784 823,534 Nuclear Fuel, at Unamortized Cost: Assemblies in Reactor 339,289 314,462 304,511 281,438 In-Process 47,600 26,959 23,005 9,253 Materials & Assemblies 9,611 23,154 17,557 2,663 Spent Nuclear Fuel 53,991 93,131 33,186 28,204 Construction Work in Progress 370,243 390,732 405,606 584,013 Plant Held for Future Use 25,080 20,697 17,829 9,225 Electric Plant Acquisition 46,529 40,756 41,191 33,629 Other Miscellaneous Plant 37,619 37,557 37,754 47,387 - ----------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 14,064,742 $14,175,215 $14,397,226 $14,649,092 ===============================================================================================
Total additions and total retirements for 1991, 1992 and 1993, as summarized below, were each less than 10% of the total balances as of the respective year-ends. Retirements include non-depreciable plant retirements and unamortized portions of Plant Scherer acquisition adjustment retired for sales in 1991 and 1993. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress. Other changes for 1993, include an increase to plant of $46,473,000 for the taxes applicable to capitalized AFUDC debt.
1991 1992 1993 ------------------------------------------ Gross Property Additions $ 548,051 $ 508,444 $ 674,432 Retirements 432,828 284,948 468,926 Other Changes (4,750) (1,485) 46,360
S-5 348 GULF POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------------------- Column F Column F Column F Column F - ---------------------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - ---------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Intangibles: Organization $ 7 $ 7 $ 7 $ 7 Franchises & Consents 1 1 1 1 Production Plant: Steam 813,266 833,496 837,280 858,972 Other 4,224 4,216 4,209 4,251 Transmission Plant 136,813 143,275 148,822 154,304 Distribution Plant 400,016 419,228 443,352 464,182 General Plant: Transportation 16,216 16,530 17,865 20,474 Other 94,429 96,455 97,873 97,687 Construction Work in Progress 16,868 13,684 29,564 34,591 Plant Held for Future Use 4,503 4,689 4,689 4,689 Electric Plant Acquisition Adjustment 7,903 7,648 7,393 7,137 - ---------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 1,494,246 $1,539,229 $1,591,055 $ 1,646,295 ==============================================================================================
Total additions and total retirements for 1991, 1992 and 1993, as summarized below, were each less than 10% of the total balances as of the respective year-ends. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress.
1991 1992 1993 ---------------------------------------- Gross Property Additions $ 64,323 $ 64,671 $ 78,562 Retirements 19,174 12,159 23,114 Other Changes (166) (686) (208)
S-6 349 MISSISSIPPI POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------------- Column F Column F Column F Column F - --------------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - --------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Production Plant: Steam $ 536,901 $ 545,058 $ 552,775 $ 571,722 Other 23,636 22,530 24,073 25,703 Transmission Plant 151,949 162,379 173,278 188,375 Distribution Plant 247,705 259,929 279,335 295,799 General Plant: Transportation 13,970 14,144 14,056 13,566 Other 65,249 69,870 79,438 86,153 Construction Work in Progress 26,816 33,078 41,692 108,063 Plant Leased to Others 56,962 56,975 56,975 56,975 Plant Held for Future Use 634 575 575 554 - --------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 1,123,822 $1,164,538 $1,222,197 $1,346,910 =======================================================================================
Total additions and total retirements for 1991 and 1992, as summarized below, were each less than 10% of the total balances as of the respective year-ends. Additions for 1993 were greater than 10% of the year-end balance and, consequently, 1993 is reported in full detail on page S-8. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress.
1991 1992 1993 --------------------------------------- Gross Property Additions $ 53,675 $ 68,189 $ 139,976 Retirements 12,918 10,530 15,386 Other Changes (41) - 123
S-7 350 MISSISSIPPI POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES FOR THE YEAR ENDED DECEMBER 31,1993 (STATED IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------------------------- Balance at Balance at Beginning Additions Other End of Classification of Period at Cost Retirements Changes Period - --------------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Production Plant: Steam $ 552,775 $ 24,746 $ 5,980 $ 181 $ 571,722 Other 24,073 1,820 194 4 25,703 Transmission Plant 173,278 15,861 821 57 188,375 Distribution Plant 279,335 22,306 5,783 (59) 295,799 General Plant: Transportation 14,056 903 1,463 70 13,566 Other 79,438 7,968 1,145 (108) 86,153 Construction Work in Progress 41,692 66,372 - (1) 108,063 Plant Leased to Others 56,975 - - - 56,975 Plant Held for Future Use 575 - - (21) 554 - --------------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 1,222,197 $ 139,976 $ 15,386 $ 123 $1,346,910 ===================================================================================================
S-8 351 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES (STATED IN THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------- Column F Column F Column F Column F - ----------------------------------------------------------------------------------- Balance at Balance at Balance at Balance at End of End of End of End of Classification 1990 1991 1992 1993 - ----------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Intangibles: Organization $ 1,755 $ 1,522 $ 1,289 $ 1,055 Miscellaneous 2,700 3,093 3,404 3,514 Production Plant: Steam 241,391 242,447 254,318 253,870 Other 4,887 4,570 4,221 3,838 Transmission Plant 73,358 90,198 93,182 99,791 Distribution Plant 217,913 212,576 222,024 237,012 General Plant 17,870 19,003 20,493 22,776 Construction Work in Progress 1,354 4,211 5,966 49,797 Plant Held for Future Use 665 665 665 665 - ----------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 561,893 $ 578,285 $ 605,562 $ 672,318 ===================================================================================
Total additions and total retirements for 1991 and 1992, as summarized below, were each less than 10% of the total balances as of the respective year-ends. Additions for 1993 were greater than 10% of the year-end balance and, consequently, 1993 is reported in full detail on page S-10. There were no additions to individual accounts in excess of two percent of total assets other than transfers from Construction Work in Progress.
1991 1992 1993 ----------------------------------- Gross Property Additions $ 19,478 $ 30,132 $ 72,858 Retirements 2,435 2,404 5,513 Other Changes (651) (451) (589)
S-9 352 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE V - UTILITY PLANT, INCLUDING INTANGIBLES FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------------------- Balance at Balance at Beginning Additions Other End of Classification of Period at Cost Retirements Changes Period - --------------------------------------------------------------------------------------------- ELECTRIC PLANT-IN-SERVICE: Intangibles: Organization $ 1,289 $ - $ - $ (234) $ 1,055 Miscellaneous 3,404 110 - - 3,514 Production Plant: Steam 254,318 2,058 2,506 - 253,870 Other 4,221 - - (383) 3,838 Transmission Plant 93,182 6,771 162 - 99,791 Distribution Plant 222,024 17,266 2,278 - 237,012 General Plant 20,493 2,822 567 28 22,776 Construction Work in Progress 5,966 43,831 - - 49,797 Plant Held for Future Use 665 - - - 665 - --------------------------------------------------------------------------------------------- TOTAL UTILITY PLANT $ 605,562 $ 72,858 $ 5,513 $ (589) $ 672,318 =============================================================================================
S-10 353 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------------------------------------------- Additions Deductions -------------------------------- --------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ---------------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam (Note 6) $ 2,884,892 $ 226,064 $ 224 $199,231 $262,552 $13,013 $(27,495) $3,062,341 Nuclear 1,622,060 191,278 - 11,545 17,496 4,141 499 1,802,747 Hydraulic 269,821 15,216 - 7 284 137 (5) 284,628 Other 118,812 2,007 - 1,378 2,194 105 1,023 118,875 Transmission Plant 889,731 85,834 - 8,752 26,397 7,560 (4,987) 955,347 Distribution Plant 1,768,771 242,520 - 22,216 89,464 31,737 (25,518) 1,937,824 General Plant 701,236 60,216 50,374 10,199 82,178 2,086 (6,992) 744,753 Plant Acquisition Adjustment 3,774 910 133 - 739 - - 4,078 Nuclear Fuel (Note 5) 1,048,366 - 111,384 - 102,065 - - 1,057,685 Plant Leased to Others 11,874 - 1,404 - - - - 13,278 - ---------------------------------------------------------------------------------------------------------------------- Total Electric Plant 9,319,337 824,045 163,519 253,328 583,369 58,779 (63,475) 9,981,556 STEAM HEAT PLANT 9,211 - 736 - 93 8 - 9,846 - ---------------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 9,328,548 $ 824,045 $164,255 $253,328 $583,462 $58,787 $(63,475) $9,991,402 ======================================================================================================================
See Notes on Page S-14 S-11 354 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------ Additions Deductions ----------------------------------- -------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 7) (Note 7) (Note 4) ELECTRIC PLANT Production Plant Steam $2,708,765 $227,091 $ 528 $ 43,799 $ 56,259 $13,502 $25,530 $2,884,892 Nuclear 1,447,771 190,589 - 19,380 29,928 2,002 3,750 1,622,060 Hydraulic 256,126 15,126 - 40 1,245 226 - 269,821 Other 117,194 1,919 - - 249 60 (8) 118,812 Transmission Plant 828,289 83,143 - 2,685 20,786 8,773 (5,173) 889,731 Distribution Plant 1,657,122 228,465 - 12,657 94,858 29,702 4,913 1,768,771 General Plant 646,976 55,211 50,011 8,346 58,173 990 145 701,236 Plant Acquisition Adjustment 2,651 1,003 120 - - - - 3,774 Nuclear Fuel (Note 5) 1,042,797 - 124,198 - 118,671 - (42) 1,048,366 Plant Leased to Others 10,470 - 1,404 - - - - 11,874 - ------------------------------------------------------------------------------------------------------------------------ Total Electric Plant 8,718,161 802,547 176,261 86,907 380,169 55,255 29,115 9,319,337 STEAM HEAT PLANT 8,492 - 719 - - - - 9,211 ======================================================================================================================== TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $8,726,653 $802,547 $176,980 $ 86,907 $380,169 $55,255 $29,115 $9,328,548 ========================================================================================================================
See Notes on Page S-14 S-12 355 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------ Additions Deductions ----------------------------- ------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam (Note 6) $ 2,533,546 $ 229,553 $ 966 $219,727 $266,722 $15,220 $ (6,915) $2,708,765 Nuclear 1,266,341 194,459 - 497 10,900 3,431 (805) 1,447,771 Hydraulic 239,072 17,016 - (22) 473 148 (681) 256,126 Other 116,713 1,886 - 142 1,454 93 - 117,194 Transmission Plant 765,117 79,979 - 16,922 35,154 6,931 (8,356) 828,289 Distribution Plant 1,562,262 219,116 - 11,245 104,167 28,410 2,924 1,657,122 General Plant 585,525 58,641 49,272 3,936 47,341 576 2,481 646,976 Plant Acquisition Adjustment 1,863 1,089 85 - 386 - - 2,651 Nuclear Fuel (Note 5) 959,352 - 136,891 - 53,991 - (545) 1,042,797 Plant Leased to Others 9,079 - 1,391 - - - - 10,470 - ------------------------------------------------------------------------------------------------------------------ Total Electric Plant 8,038,870 801,739 188,605 252,447 520,588 54,809 (11,897) 8,718,161 STEAM HEAT PLANT 7,861 - 716 (68) 17 - - 8,492 - ------------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 8,046,731 $ 801,739 $189,321 $252,379 $520,605 $54,809 $(11,897) $8,726,653 ==================================================================================================================
See Notes on Page S-14 S-13 356 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES NOTES TO SCHEDULE VI -ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- 1. See Note 1 to SOUTHERN's financial statements in Item 8 herein for the policy of SOUTHERN with respect to depreciation. 2. Amounts charged to electric operations as "Depreciation and Amortization" on the statements of income are as follows: Depreciation (Schedule VI) $ 824,045 $ 802,547 $801,739 Investment Tax Credits (24,611) (35,092) (39,355) Regulatory Assets and Liabilities (13,482) (347) - Alicura Investment Amortization 7,186 - - Other 344 1,418 753 ------------------------------------ $ 793,482 $ 768,526 $763,137 ==================================== 3. Depreciation and Amortization charged to Other Accounts are as follows: Nuclear Fuel $ 111,384 $ 124,198 $136,891 Transportation Expense 25,141 25,353 25,591 SCS - Depreciation 19,571 19,151 18,377 Fuel Stock 2,213 2,316 2,788 SNC - Depreciation 1,577 1,685 1,620 Leasehold Improvements 1,836 1,773 1,598 Plant Leased to Others 1,469 1,463 1,453 Steam Heat 736 719 716 Other 328 322 287 ------------------------------------ $ 164,255 $ 176,980 $189,321 ==================================== 4. Other Changes include the following: Freeport Power Company Acquisition $ (61,295) $ - $ - Retirement Adjustments - - (8,263) Santee-Cooper Refund (2,002) - - Partial Sale of Miller Steam Plant - 19,187 - Reclassification of Spare Parts Inventory - 12,506 - Property received from the City of Dalton - - (4,606) Likekind Exchange - - 2,400 Nuclear Decommissioning Trust Fund Earnings (3,303) (1,875) (688) Retirement Unit Conversion 8,931 - - Functional Gross-up of AFUDC Debt (6,656) - - Miscellaneous Adjustments 850 (703) (740) ------------------------------------ $ (63,475) $ 29,115 $(11,897) ==================================== 5. The accumulated amortization of nuclear fuel is netted against original cost of such fuel on the balance sheet. 6. Retirements and Salvage in 1991 and 1993 include the sale of a portion of Plant Scherer Unit 4. See Note 7 to SOUTHERN's financial statements in Item 8 herein for a discussion of this transaction. 7. Retirements and Salvage in 1992 include GEORGIA'S reclassification of capitalized spare parts to inventory. See Note 1 to GEORGIA's financial statements in Item 8 herein for a discussion of this transaction.
S-14 357 ALABAMA POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------ Additions Deductions ------------------------------ ----------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacement Cost Changes Period - ------------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 882,321 $ 87,163 $ - $ 64 $ 12,422 $ 3,974 $ - $ 953,152 Nuclear 878,472 71,230 - 3,164 4,707 215 (606) 948,550 Hydraulic 169,144 11,038 - - 233 48 - 179,901 Other - - - - - - - - Transmission Plant 325,425 32,227 - 4,327 4,862 2,868 (74) 354,323 Distribution Plant 662,444 80,143 - 14,240 23,217 12,808 - 720,802 General Plant Coal Mine Plant 1,981 - 60 - - - - 2,041 Transportation 45,634 - 9,393 2,075 13,593 - - 43,509 Other 156,911 20,120 1,115 336 6,216 452 (218) 172,032 - ------------------------------------------------------------------------------------------------------------------------ Total Electric Plant 3,122,332 301,921 10,568 24,206 65,250 20,365 (898) 3,374,310 STEAM HEAT PLANT 9,211 - 736 - 93 8 - 9,846 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 3,131,543 $ 301,921 $ 11,304 $ 24,206 $ 65,343 $ 20,373 $ (898) $3,384,156 ======================================================================================================================== ACCUMULATED PROVISION FOR AMORTIZATION OF NUCLEAR FUEL (NOTE 5) $ 825,301 $ - $ 46,568 $ - $ - $ - $ - $ 871,869 ========================================================================================================================
See Notes on Page S-18 S-15 358 ALABAMA POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------ Additions Deductions ------------------------------- ------------------------------ Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacement Cost Changes Period - ------------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 830,914 $ 86,773 $ - $ 706 $ 11,058 $ 6,182 $18,832 $ 882,321 Nuclear 815,216 70,492 - 234 8,096 225 (851) 878,472 Hydraulic 159,389 11,015 - 17 1,121 156 - 169,144 Other - - - - - - - - Transmission Plant 300,904 32,310 - 601 5,806 2,584 - 325,425 Distribution Plant 616,777 76,473 - 3,911 23,856 10,861 - 662,444 General Plant Coal Mine Plant 1,886 - 95 - - - - 1,981 Transportation 44,862 - 9,012 1,933 10,173 - - 45,634 Other 143,437 17,248 888 2,026 6,349 339 - 156,911 - ------------------------------------------------------------------------------------------------------------------------ Total Electric Plant 2,913,385 294,311 9,995 9,428 66,459 20,347 17,981 3,122,332 STEAM HEAT PLANT 8,492 - 719 - - - - 9,211 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 2,921,877 $ 294,311 $ 10,714 $ 9,428 $ 66,459 $20,347 $17,981 $3,131,543 ======================================================================================================================== ACCUMULATED PROVISION FOR AMORTIZATION OF NUCLEAR FUEL (NOTE 5) $ 776,817 $ - $ 48,442 $ - $ - $ - $ (42) $ 825,301 ========================================================================================================================
See Notes on Page S-18 S-16 359 ALABAMA POWER COMPANY SCHEDULE VI --ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------ Additions Deductions -------------------------------- --------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 752,908 $ 83,837 $ - $ 172 $ 6,674 $ 6,571 $(7,242) $ 830,914 Nuclear 747,079 69,294 - - 51 1,294 (188) 815,216 Hydraulic 148,287 10,956 - 1 411 125 (681) 159,389 Other - - - - - - - - Transmission Plant 278,609 30,095 - 424 5,244 2,942 38 300,904 Distribution Plant 579,911 71,348 - 4,908 29,162 10,269 (41) 616,777 General Plant Coal Mine Plant 1,832 - 54 - - - - 1,886 Transportation 42,044 - 8,666 1,050 6,898 - - 44,862 Other 126,287 21,053 1,237 316 5,280 172 4 143,437 - ------------------------------------------------------------------------------------------------------------------------ Total Electric Plant 2,676,957 286,583 9,957 6,871 53,720 21,373 (8,110) 2,913,385 STEAM HEAT PLANT 7,861 - 716 (68) 17 - - 8,492 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 2,684,818 $ 286,583 $ 10,673 $ 6,803 $ 53,737 $21,373 $(8,110) $2,921,877 ======================================================================================================================== ACCUMULATED PROVISION FOR AMORTIZATION OF NUCLEAR FUEL (Note 5) $ 719,181 $ - $ 57,091 $ - $ - $ - $ (545) $ 776,817 ========================================================================================================================
See Notes on Page S-18 S-17 360 ALABAMA POWER COMPANY NOTES TO SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- 1.See Note 1 to ALABAMA's financial statements in Item 8 herein for the policy of ALABAMA with respect to depreciation. 2.Amounts charged to electric operations as "Depreciation and Amortization" on the statements of income are as follows: Depreciation $ 301,921 $ 294,311 $ 286,583 Investment Tax Credits (12,014) (13,833) (15,552) Plant Acquisition Adjustment 403 403 402 ------------------------------------- $ 290,310 $ 280,881 $ 271,433 ===================================== 3.Depreciation and Amortization charged to Other Accounts are as follows: Fuel Stock $ 1,092 $ 898 $ 1,203 Transportation Expense 9,393 9,012 8,666 Shop Expense 83 85 88 Steam Heat Plant 736 719 716 ------------------------------------- $ 11,304 $ 10,714 $ 10,673 ===================================== Nuclear Fuel $ 46,568 $ 48,442 $ 57,091 ===================================== 4.Other Changes include the following: Retirement Adjustments $ - $ - $ (7,923) Partial sale of Miller Steam Plant - 19,187 - Nuclear Decommissioning Trust Fund Earnings (1,485) (851) (188) Miscellaneous Adjustments 587 (355) 1 -------------------------------------- $ (898) $ 17,981 $ (8,110) ===================================== Westinghouse Settlement (Nuclear Fuel) $ - $ (42) $ (545) ===================================== 5.The accumulated amortization of nuclear fuel is netted against original cost of such fuel on the balance sheet.
S-18 361 GEORGIA POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------------------------------------- Additions Deductions ------------------------------ -------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Retirements Cost Changes Period - ---------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam (Note 6) $ 1,141,658 $ 76,528 $ 46 $ 193,746 $ 232,941 $ 4,343 $ 5,395 $ 1,169,299 Nuclear 743,588 120,048 - 8,381 12,789 3,926 1,105 854,197 Hydraulic 100,677 4,178 - 7 51 89 (5) 104,727 Other 98,764 1,263 - 1,023 1,986 97 1,023 97,944 Transmission Plant 404,818 41,658 - 4,404 19,338 3,756 (4,870) 432,656 Distribution Plant 817,555 126,419 - 4,256 50,366 12,818 (2,641) 887,687 General Plant 258,883 29,943 14,920 7,004 38,507 1,603 (1,116) 271,756 Plant Acquisition Adjustment 3,774 910 133 - 739 - - 4,078 Nuclear Fuel (Note 5) 223,065 - 64,816 - 102,065 - - 185,816 - ---------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 3,792,782 $ 400,947 $ 79,915 $ 218,821 $ 458,782 $ 26,632 $ (1,109)$ 4,008,160 ================================================================================================================
See Notes on Page S-22 S-19 362 GEORGIA POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------------------------- Additions Deductions ----------------------------- ------------------------------ Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacement Cost Changes Period - ----------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 7) (Note 7) (Note 4) ELECTRIC PLANT Production Plant Steam $ 1,096,340 $ 77,508 $ 348 $ 15,827 $ 39,871 $ 1,910 $ 6,584 $ 1,141,658 Nuclear 632,555 120,097 - 19,146 21,832 1,777 4,601 743,588 Hydraulic 96,737 4,111 - 23 124 70 - 100,677 Other 97,771 1,264 - - 211 60 - 98,764 Transmission Plant 376,536 39,198 - 2,012 12,617 5,321 (5,010) 404,818 Distribution Plant 766,710 120,321 - 4,996 56,883 12,970 4,619 817,555 General Plant 245,947 27,284 15,399 3,732 32,717 610 152 258,883 Plant Acquisition Adjustment 2,651 1,003 120 - - - - 3,774 Nuclear Fuel (Note 5) 265,980 - 75,756 - 118,671 - - 223,065 - ----------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 3,581,227 $ 390,786 $ 91,623 $ 45,736 $ 282,926 $ 22,718 $ 10,946 $ 3,792,782 =================================================================================================================
See Notes on Page S-22 S-20 363 GEORGIA POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------------------------------------------- Additions Deductions --------------------------------- ---------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacement Cost Changes Period - ---------------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam (Note 6) $1,038,054 $ 84,195 $ 787 $ 218,246 $ 240,052 $ 4,543 $ 347 $1,096,340 Nuclear 519,262 125,165 - 497 10,849 2,137 (617) 632,555 Hydraulic 90,785 6,060 - (23) 62 23 - 96,737 Other 96,858 1,232 - 12 251 80 - 97,771 Transmission Plant 351,316 39,372 - 16,397 27,887 3,281 (619) 376,536 Distribution Plant 715,631 117,284 - 4,479 62,297 12,993 (4,606) 766,710 General Plant 226,529 27,351 15,831 2,428 25,721 379 92 245,947 Plant Acquisition Adjustment 1,863 1,089 85 - 386 - - 2,651 Nuclear Fuel (Note 5) 240,171 - 79,800 - 53,991 - - 265,980 - ---------------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $3,280,469 $401,748 $96,503 $ 242,036 $ 421,496 $23,436 $(5,403) $3,581,227 ======================================================================================================================
See Notes on Page S-22 S-21 364 GEORGIA POWER COMPANY NOTES TO SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------- 1.See Note 1 to GEORGIA's financial statements in Item 8 herein for the policy of GEORGIA with respect to depreciation. 2.Amounts charged to electric operations as "Depreciation and Amortization" on the statements of income are as follows: Depreciation $ 400,947 $ 390,786 $ 401,748 Investment Tax Credits (8,293) (17,039) (19,501) Nuclear Study Costs 562 519 396 Write-off of Future Use Property (51) 1,634 - Regulatory Liability (13,154) (347) - Transfer Reserve from Non-Utility Property (43) - - Charge Off Consulting Fees (412) - - Deferred Depreciation - Demand Side Options (40) - - Deferred Expense (Rome Headquarters) (91) (93) (94) ----------- ---------- ---------- $ 379,425 $ 375,460 $ 382,549 =========== ========== ========== 3.Depreciation and Amortization charged to Other Accounts are as follows: Nuclear Fuel $ 64,816 $ 75,756 $ 79,800 Transportation Expense 13,068 13,610 14,217 Leasehold Improvements 1,836 1,773 1,598 Amortization Of Rail Cars 46 348 787 Plant Acquisition Expense 133 120 85 Rental Expense 16 16 16 ----------- ---------- ---------- $ 79,915 $ 91,623 $ 96,503 =========== ========== ========== 4.Other Changes include the following: Property Received from City of Dalton $ - $ - $ (4,606) Santee-Cooper Refund (2,002) - - Nuclear Decommissioning Trust Fund Earnings (1,818) (1,024) (500) Reclassification of Spare Parts - 12,392 - Retirement Unit Conversion 8,931 - - Functional Gross-up of AFUDC Debt (6,656) - - Plant Transfers 22 (422) (297) Scherer and Hatch Material Retirements 414 - - ----------- ---------- ---------- $ (1,109) $ 10,946 $ (5,403) =========== ========== ========== 5.The accumulated amortization of nuclear fuel is netted against original cost of such fuel on the balance sheet. 6.Retirements and Salvage in 1991 and 1993 include the sale of a portion of Plant Scherer Unit 4. See Note 5 to GEORGIA's financial statements in Item 8 herein for a discussion of this transaction. 7.Retirements and Salvage in 1992 include GEORGIA'S reclassification of capitalized spare parts to inventory. See Note 1 to GEORGIA's financial statements in Item 8 herein for a discussion of this transaction.
S-22 365 GULF POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------- Additions Deductions ------------------------------ ------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $344,354 $30,490 $ 93 $ 395 $ 7,485 $ 2,863 $ (146) $ 365,130 Other 3,513 79 - - 14 3 - 3,575 Transmission Plant 53,556 4,412 - (2) 1,214 475 (43) 56,320 Distribution Plant 137,965 17,194 - 1,689 7,821 3,622 60 145,345 General Plant Transportation 5,983 - 1,451 385 1,562 - - 6,257 Other 33,480 5,377 96 2 5,018 25 (3) 33,915 - ------------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $578,851 $57,552 $1,640 $ 2,469 $23,114 $ 6,988 $ (132) $ 610,542 ===================================================================================================================
See Notes on Page S-26 S-23 366 GULF POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------------------------- Additions Deductions ------------------------------- --------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ----------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $315,782 $30,054 $ 93 $ 204 $ 1,251 $ 414 $ 114 $344,354 Other 3,426 79 - - - - (8) 3,513 Transmission Plant 50,627 4,215 - 22 920 551 (163) 53,556 Distribution Plant 131,174 16,301 - 1,879 7,699 3,396 294 137,965 General Plant Transportation 5,827 - 1,320 269 1,433 - - 5,983 Other 28,572 5,618 101 80 856 41 (6) $ 33,480 - ----------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $535,408 $56,267 $1,514 $2,454 $12,159 $4,402 $ 231 $578,851 =================================================================================================================
See Notes on Page S-26 S-24 367 GULF POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------ Additions Deductions ------------------------------- ------------------------------ Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $295,757 $29,592 $ 93 $ 108 $ 8,790 $ 999 $ (21) $ 315,782 Other 3,355 79 - - 8 - - 3,426 Transmission Plant 47,761 3,996 - 9 947 332 (140) 50,627 Distribution Plant 125,116 15,460 - 620 7,117 3,035 (130) 131,174 General Plant Transportation 5,809 - 1,285 197 1,464 - - 5,827 Other 23,941 5,309 98 7 848 8 (73) 28,572 - ------------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $501,739 $54,436 $1,476 $ 941 $ 19,174 $4,374 $ (364) $ 535,408 ==================================================================================================================
See Notes on Page S-26 S-25 368 GULF POWER COMPANY NOTES TO SCHEDULE VI -ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- ---------------------------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- 1. See Note 1 to GULF's financial statements in Item 8 herein for the policy of GULF with respect to depreciation. 2. Amounts charged to electric operations as "Depreciation and Amortization" on the statements are as follows: Depreciation $ 57,552 $56,267 $ 54,436 Investment Tax Credits (2,241) (2,241) (2,241) Reclassification of Spare Parts - (114) - Adjustment (2) (154) - ------------------------------------- $ 55,309 $53,758 $ 52,195 ===================================== 3.Depreciation and Amortization charged to Other Accounts are as follows: Transportation Expense $ 1,451 $ 1,320 $ 1,285 Merchandise and Appliance Service 96 101 98 Railroad Track System 93 93 93 ------------------------------------- $ 1,640 $ 1,514 $ 1,476 ===================================== 4.Other Changes include the following: Retirement Adjustment $ - $ (8) $ (340) Reclassification of Spare Parts - 114 - Miscellaneous Adjustments and Property Reclassifications (132) 125 (24) ------------------------------------- $ (132) $ 231 $ (364) =====================================
S-26 369 MISSISSIPPI POWER COMPANY SCHEDULE VI --ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------- Additions Deductions ---------------------------- -------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 225,455 $ 15,199 $ 85 $ 281 $ 5,980 $ 1,193 $ - $233,847 Other 13,064 634 - 355 194 5 - 13,854 Transmission Plant 61,424 4,547 - 26 821 308 - 64,868 Distribution Plant 98,221 10,675 - 1,805 5,783 1,442 - 103,476 General Plant Transportation 6,751 - 1,108 268 1,463 - - 6,664 Other 23,988 3,825 65 5 1,145 - - 26,738 Plant Leased to Others 11,874 - 1,404 - - - - 13,278 - ------------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 440,777 $ 34,880 $ 2,662 $ 2,740 $ 15,386 $ 2,948 $ - $462,725 ===================================================================================================================
See Notes on Page S-30 S-27 370 MISSISSIPPI POWER COMPANY SCHEDULE VI --ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------ Additions Deductions ---------------------------- ------------------------------ Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 214,123 $ 15,853 $ 87 $ 283 $ 3,402 $ 1,489 $ - $225,455 Other 12,626 476 - - 38 - - 13,064 Transmission Plant 58,197 4,669 - 42 1,261 223 - 61,424 Distribution Plant 93,084 9,858 - 1,552 4,453 1,820 - 98,221 General Plant Transportation 6,242 - 1,128 136 755 - - 6,751 Other 20,393 4,130 59 51 621 - 24 23,988 Plant Leased to Others 10,470 - 1,404 - - - - 11,874 - -------------------------------------------- --------- ---------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 415,135 $ 34,986 $ 2,678 $ 2,064 $ 10,530 $ 3,532 $ 24 $440,777 ============================================================================================================
See Notes on Page S-30 S-28 371 MISSISSIPPI POWER COMPANY SCHEDULE VI --ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- -------------------------------------------------------------------------------------------------------------------- Additions Deductions --------------------------------- -------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - -------------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 204,605 $ 15,743 $ 86 $ 396 $ 5,939 $ 767 $ 1 $214,123 Other 13,229 475 - 130 1,195 13 - 12,626 Transmission Plant 55,263 4,260 - 89 1,050 365 - 58,197 Distribution Plant 87,819 9,310 - 970 3,737 1,278 - 93,084 General Plant Transportation 5,635 - 1,126 145 666 - (2) 6,242 Other 16,810 3,815 62 41 331 4 - 20,393 Plant Leased to Others 9,079 - 1,391 - - - - 10,470 - ----------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISIONS FOR DEPRECIATION $ 392,440 $ 33,603 $ 2,665 $ 1,771 $ 12,918 $ 2,427 $ (1) $415,135 =================================================================================================================
See Notes on Page S-30 S-29 372 MISSISSIPPI POWER COMPANY NOTES TO SCHEDULE VI -ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PL FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - ------------------------------------------------------------------------------------------------------- 1.See Note 1 to MISSISSIPPI's financial statements in Item 8 herein for the policy of MISSISSIPPI with respect to depreciation. 2.Amounts charged to electric operation as "Depreciation and Amortization" on the statements of income are as follows: Depreciation $34,880 $34,986 $ 33,603 Investment Tax Credits (1,270) (1,186) (1,272) Property Losses (183) (988) (184) Regulatory Asset (328) - - Other - (23) - ----------------------------------- $33,099 $32,789 $ 32,147 =================================== 3.Depreciation and Amortization charged to Other Accounts are as follows: Plant Leased To Others $ 1,469 $ 1,463 $ 1,453 Transportation Expense 1,108 1,128 1,126 Fuel Stock 85 87 86 ----------------------------------- $ 2,662 $ 2,678 $ 2,665 =================================== 4.Other Changes include the following: Miscellaneous Adjustments $ - $ 24 $ (1) ===================================
S-30 373 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VI --ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1993 (STATED IN THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------------------- Additions Deductions -------------------------- --------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Account Recoveries Replacement Cost Changes Period - ----------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 141,795 $ 6,293 $ - $ 889 $ 2,506 $ 120 $ - $146,351 Other 1,797 31 - - - - - 1,828 Transmission Plant 34,756 2,591 - (3) 162 98 - 37,084 Distribution Plant 52,586 7,241 - 226 2,277 1,047 - 56,729 General Plant 9,160 742 121 124 568 6 - 9,573 - ------------------------------------------------------------------------------------------------------------ TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 240,094 $ 16,898 $ 121 $ 1,236 $ 5,513 $ 1,271 $ - $251,565 ===========================================================================================================
See Notes on Page S-34 S-31 374 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1992 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------- Additions Deductions ----------------------------- ------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------- (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $134,137 $ 8,335 $ - $ 26 $ 331 $ 372 $ - $ 141,795 Other 1,697 100 - - - - - 1,797 Transmission Plant 32,507 2,381 - 8 46 94 - 34,756 Distribution Plant 49,377 5,512 - 319 1,967 655 - 52,586 General Plant 7,887 931 283 119 60 - - 9,160 - ------------------------------------------------------------------------------------------------------------- TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $225,605 $17,259 $ 283 $ 472 $ 2,404 $ 1,121 $ - $ 240,094 =============================================================================================================
See Notes on Page S-34 S-32 375 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEAR ENDED DECEMBER 31, 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------ Additions Deductions --------------------------------- -------------------------------- Balance at Retirements, Balance at Beginning Operating Other Salvage Renewals and Removal Other End of Classification of Period Expenses Accounts Recoveries Replacements Cost Changes Period - ------------------------------------------------------------------------------------------------------------------ (Note 2) (Note 3) (Note 4) ELECTRIC PLANT Production Plant Steam $ 126,380 $ 8,152 $ - $ 5 $ 62 $ 338 $ - $ 134,137 Other 1,597 100 - - - - - 1,697 Transmission Plant 23,000 1,900 - 3 26 5 (7,635) 32,507 Distribution Plant 53,785 5,714 - 268 1,854 835 7,701 49,377 General Plant 6,963 1,113 297 20 493 13 - 7,887 TOTAL ACCUMULATED PROVISION FOR DEPRECIATION $ 211,725 $ 16,979 $ 297 $ 296 $ 2,435 $ 1,191 $ 66 $ 225,605 ==================================================================================================================
See Notes on Page S-34 S-33 376 SAVANNAH ELECTRIC AND POWER COMPANY NOTES TO SCHEDULE VI -- ACCUMULATED PROVISION FOR DEPRECIATION OF UTILITY PLANT FOR THE YEARS ENDING DECEMBER 31, 1993, 1992 AND 1991 (STATED IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------- Explanation 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- 1.See Note 1 to SAVANNAH's financial statements in Item 8 herein for the policy of SAVANNAH with respect to depreciation 2.Amounts charged to electric operation as "Depreciation and Amortization" on the statements of income are as follows: Depreciation $ 16,898 $17,259 $ 16,979 Amortization of Investment Tax Credits (664) (664) (663) Amortization of Intangible Plant (Merger Cost) 233 234 233 ---------------------------------- $ 16,467 $16,829 $ 16,549 ================================== 3.Depreciation and Amortization charged to Other Accounts are as follows: Transportation Expense $ 121 $ 283 $ 297 ================================== 4.Other Changes include the following: Miscellaneous Adjustments $ - $ - $ 66 ==================================
S-34 377 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ------------------------------------------------------------------------------------------------------------------------------------ Provision for uncollectible accounts $ 7,255 $24,040 $ 2 $ 22,230(1) $ 9,067 Deferred credit Provision for property insurance $23,594 $ 4,164 - $ 5,711 $22,047 Other property and investments Nuclear decommissioning trust (3) $52,701 $15,759 $19,351(4) $ 324 $87,487 Deferred charges Uranium enrichment, decontamination and decommissioning fund (5) $90,099 - $ 1,219 $ 4,976 $86,342
- ------------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) Insurance recoveries net of charges to reserve for purposes for which reserve was created. (3) See Note 1 to SOUTHERN's financial statements under "Nuclear Decommissioning" in Item 8 herein for further information. (4) Represents additional funding to reserve. (5) See Note 1 to SOUTHERN's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. S-35 378 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ------------------------------------------------------------------------------------------------------------------------------------ Provision for uncollectible accounts $12,568 $18,366 - $23,679(1) $ 7,255 Deferred credit Provision for property insurance $20,928 $ 3,298 $ 25(4) $ 657 $23,594 Other property and investments Nuclear decommissioning trust (2) $25,871 $14,782 $12,189 $ 141 $52,701 Deferred charges Uranium enrichment, decontamination and decommissioning - - $90,099 - $90,099 fund (3)
- ----------------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to SOUTHERN's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to SOUTHERN's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. (4) Capitalized. S-36 379 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in Thousands of Dollars) Additions --------------------------- Balance at Charge to Balance at Beginning of Charged to Other End Description Period Income Accounts Deductions of Period - ---------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts Gulf States $ 259,068 $ (256,067)(1) - $ 3,001 $ - Nu South 5,858 - - 5,858 - Other 12,759 - 33,172(2) 12,568 --------- ----------- -------- -------- 32,981 ----------- $ 277,685 $ (223,086) - $ 42,031 $ 12,568 ========= =========== ======== ======== Deferred credits Provision for property insurance $ 17,712 $ 3,945 - $ 729(3) $ 20,928 Other property and investments Nuclear decommissioning trust (4) $ 2,387 $ 14,173 $9,367 $ 56 $ 25,871
- ------------------ Notes: (1) See Note 8 to SOUTHERN's financial statements in Item 8 herein for a description of the Gulf States settlement. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (3) Insurance recoveries net of charges to reserve for purposes for which reserve was created. (4) See Note 1 to SOUTHERN's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. S-37 380 ALABAMA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions --------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ------------------------------------------------------------------------------------------------------------------------------------ Provision for uncollectible accounts $ 1,482 $ 7,157 - $6,007(1) $ 2,632 Other property and investments Nuclear decommissioning trust (2) $ 32,390 $ 13,617 $ 3,543(3) - $ 49,550 Deferred charges Uranium enrichment, decontamination and decommissioning fund (4) $ 47,730 - $ 1,873 $4,049 $ 45,554
- ------------------ Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) Represents additional funding to reserve. (4) See Note 1 to ALABAMA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. S-38 381 ALABAMA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $ 1,721 $ 4,878 - $ 5,117 (1) $ 1,482 Other property and investments Nuclear decommissioning trust (2) $ 15,864 $ 13,617 $ 2,909 - $ 32,390 Deferred charges Uranium enrichment, decontamination and decommissioning fund (3) - - $ 47,730 - $ 47,730
- ----------------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to ALABAMA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further Information. S-39 382 ALABAMA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in Thousands of Dollars)
Additions ----------------------------- Balance at Charged to Balance at Beginning of Charged to Other End Description Period Income Accounts Deductions of Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts Gulf States $73,324 $(73,324) - $ - $ - Other 1,656 4,020 - 3,955(2) 1,721 ------- -------- ------- ------- $74,980 $(69,304) - $ 3,955 $ 1,721 ======= ======== ======= ======= Other property and investments Nuclear decommissioning trust (3) - $ 13,617 $2,247 - $15,864
- ----------------------- Notes: (1) See Note 7 to the financial statements in Item 8 herein for a description of the Gulf States settlement. The provision for uncollectible was reversed. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (3) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. S-40 383 GEORGIA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ---------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $ 4,121 $ 14,310 - $ 14,131(1) $ 4,300 Other property and investments Nuclear decommissioning trust (2) $ 20,311 $ 2,142 $ 15,808(3) $ 324 $ 37,937 Deferred charges Uranium enrichment, decontamination and decommissioning fund (4) $ 42,369 - $ (654) $ 927 $ 40,788
- -------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to GEORGIA's financial statements under "Nuclear Decommissioning" in Item 8 herein for further information. (3) Represents additional funding to reserve. (4) See Note 1 to GEORGIA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. S-41 384 GEORGIA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions ----------------------------- Balance Charged to Balance at at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $ 7,519 $ 11,440 - $14,838(1) $ 4,121 Other property and investments Nuclear decommissioning trust (2) $ 10,007 $ 1,165 $ 9,280 $ 141 $20,311 Deferred charges Uranium enrichment, decontamination and decommissioning fund (3) - - $42,369 - $42,369
- ----------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to GEORGIA's financial statements under "Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to GEORGIA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. S-42 385 GEORGIA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in Thousands of Dollars)
Additions ----------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ------------------------------------------------------------------------------------------------------------------------------------ Provision for uncollectible accounts Gulf States $148,383 $(145,382)(1) - $ 3,001 $ - Other 8,063 22,492 - 23,036(2) 7,519 -------- --------- -------- -------- $156,446 $(122,890) - $ 26,037 $ 7,519 ======== ========= ======== ======== Other property and investments Nuclear decommissioning trust (3) $ 2,387 $ 556 $7,120 $ 56 $ 10,007
- ------------------ Note: (1) See Note 3 to GEORGIA's financial statements in Item 8 herein for a description of the Gulf States settlement. The provision for uncollectible accounts was reversed. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (3) See Note 1 to GEORGIA's financial statements under "Nuclear Decommissioning" in Item 8 herein for further information. S-43 386 GULF POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions -------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ---------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $ 356 $ 875 - $784 (Note) $ 447 Deferred credit Provision for property insurance $9,692 $1,200 - $383 $10,509
- --------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-44 387 GULF POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions -------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $ 660 $ 356 - $600 (Note) $ 356 Deferred credit Provision for property insurance $8,492 $1,200 - - $9,692
- -------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-45 388 GULF POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in Thousands of Dollars)
Additions --------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - --------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts Gulf States $30,375 $(30,375)(1) - $ - $ - Other 635 1,180 - 1,155(2) 660 ------- -------- ------ ------- $31,010 $(29,195) - $1,155 $ 660 ======= ======== ====== ======= Deferred credit Provision for property insurance $ 7,292 $ 1,200 - - $ 8,492
- ------------------ Notes: (1) See Note 7 to GULF's financial statements in Item 8 herein for a description of the Gulf States settlement. The provision for uncollectible was reversed. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-46 389 MISSISSIPPI POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions ----------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ------------------------------------------------------------------------------------------------------------------------------------ Provision for uncollectible accounts $ 508 $1,326 $2 $1,099 (Note) $ 737 Deferred credit Provision for property insurance $9,294 $1,244 - - $10,538
- --------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-47 390 MISSISSIPPI POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions --------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ---------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $2,102 $1,173 - $2,767 (Note) $ 508 Deferred credit Provision for property insurance $8,216 $1,078 - - $9,294
- ------------------ Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-48 391 MISSISSIPPI POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning of Charged to Other End of Description Period Income Accounts Deductions Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts Gulf States $ 6,986 $(6,986)(1) - $ - $ - Nu South 5,858 - - 5,858 (2) - Other 1,839 4,577 - 4,314 (2) 2,102 ------- -------- ------- ------- $14,683 $(2,409) - $10,172 $ 2,102 ======= ======== ======= ======= Deferred credit Provision for property insurance $ 6,716 $ 1,500 - - $ 8,216
- ----------------- Notes: (1) See Note 7 to MISSISSIPPI's financial statements in Item 8 herein for a description of the Gulf States settlement. The provision for uncollectible was reversed. (2) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. S-49 392 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (Stated in Thousands of Dollars)
Additions --------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ---------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $536 $330 - $104 (Note) $ 762 Deferred credit Provision for property insurance $300 $700 - - $1,000
- -------------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off. S-50 393 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (Stated in Thousands of Dollars)
Additions ---------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deduction Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $339 $455 - $258 (Note) $536 Deferred credit Provision for property insurance $300 - - - $300
- ---------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off. S-51 394 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (Stated in Thousands of Dollars)
Additions --------------------------- Balance at Charged to Balance at Beginning Charged to Other End of Description of Period Income Accounts Deductions Period - ----------------------------------------------------------------------------------------------------------------------------------- Provision for uncollectible accounts $367 $454 - $482 (Note) $339 Deferred credit Provision for property insurance $325 $225 - $250 $300
Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off. S-52 395 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE IX - SHORT-TERM BORROWINGS DECEMBER 31, 1993, 1992 AND 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category of Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-term At End of Interest During This During This During the Borrowings Period Rate Period (1) Period (2) Period (2) - ------------------------------------------------------------------------------------------------------------------------------ 1993 Notes payable to banks $735,953 Commercial paper 75,527 Other notes payable (3) 129,428 -------- $940,908 4.35% $1,122,489 $766,030 3.92% ======== 1992 Notes payable to banks $567,200 Commercial paper 259,388 -------- $826,588 3.92% $ 826,588 $394,575 4.06% ======== 1991 Notes payable to banks $301,500 Other notes payable (3) 188 -------- $301,688 5.18% $ 513,518 $322,249 6.50% ========
- ---------------------- Notes: (1) At month-end. (2) Average based on daily borrowings during period (averages and rates quoted on an actual day year basis). (3) This note payable is an obligation of SEI and does not include borrowings from SOUTHERN. (4) See Note 5 to SOUTHERN's financial statements in Item 8 herein for details regarding SOUTHERN's and its subsidiaries lines of credit and general terms of commitment agreements. S-53 396 ALABAMA POWER COMPANY SCHEDULE IX - SHORT -TERM BORROWINGS DECEMBER 31, 1993, 1992, 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category of Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-term At End of Interest During the During the During the Borrowings Period Rate Period (1) Period (2) Period (2) - ------------------------------------------------------------------------------------------------------------------------------- 1993 Notes payable to banks(3) $ 40,000 3.37% $257,319 $117,683 3.20% 1992 Notes payable to banks $ 71,000 Commercial 125,917 --------- paper $ 196,917 3.57% $196,917 $ 96,682 3.83% ========= 1991 Notes payable to banks $ 76,000 5.07% $337,000 $210,579 6.36%
- ----------------- Notes: (1) At month-end. (2) Average based on daily borrowings during the period (averages and rates quoted on an actual day year basis). (3) ALABAMA also issued commercial paper during 1993, although none was outstanding at year-end. The data shown reflects the issuance of commercial paper. (4) See Note 5 to ALABAMA's financial statements in Item 8 herein for details regarding ALABAMA's lines of credit. S-54 397 GEORGIA POWER COMPANY SCHEDULE IX - SHORT -TERM BORROWINGS DECEMBER 31, 1993, 1992 AND 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category of Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-Term At End of Interest During This During This During the Borrowings Period Rate Period (1) Period (2) Period (2) - ------------------------------------------------------------------------------------------------------------------------------ 1993 Notes payable to banks $406,700 Commercial paper 75,527 -------- $482,227 3.52% $661,498 $425,180 3.65% ======== 1992 Notes payable to banks $400,200 Commercial paper 133,471 -------- $533,671 4.10% $533,671 $232,755 4.16% ======== 1991 Notes payable to banks $199,000 5.15% $199,000 $ 75,245 6.52%
- -------------------- Notes: (1) At month-end (2) Average based on daily borrowings during period (averages and rates quoted on an actual day year basis). (3) See Note 8 to GEORGIA's financial statements in Item 8 herein for details regarding GEORGIA's lines of credit and general terms of its commitment agreements. S-55 398 GULF POWER COMPANY SCHEDULE IX - SHORT -TERM BORROWINGS DECEMBER 31, 1993, 1992 AND 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-Term At End of Interest During This During This During the Borrowings Period Rate Period (1) Period (2) Period (2) - ---------------------------------------------------------------------------------------------------------------------------------- 1993 Notes payable to banks $ 6,053(3) 0.00% $61,500 $25,873 3.37% 1992 Notes payable to banks $44,000 3.63% $44,000 $26,045 4.00% 1991 Notes payable to banks - - $23,000 $ 4,511 6.21%
- ---------------------- Notes: (1) At month-end (2) Average based on daily borrowings during period (averages and rates quoted on an actual day year basis). (3) See Note 5 to GULF's financial statements in Item 8 herein for a description of this short-term indebtedness. (4) See Note 5 to GULF's financial statements in Item 8 herein for details regarding GULF's lines of credit and general terms of its commitment agreements. S-56 399 MISSISSIPPI POWER COMPANY SCHEDULE IX - SHORT -TERM BORROWINGS DECEMBER 31, 1993, 1992 AND 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-Term At End of Interest During This During This During the Borrowings Period Rate Period (1) Period (2) Period - ---------------------------------------------------------------------------------------------------------------------------------- 1993 Notes payable to banks $40,000 3.43% $56,000 $30,208 3.31% 1992 Notes payable to banks $31,000 3.48% $31,000 $10,086 3.60% 1991 Notes payable to banks $ 4,500 6.78% $48,161 $19,327 8.28%
- ---------------------- Notes: (1) At month-end (2) Average based on daily borrowings during period (averages and rates quoted on an actual day year basis). (3) See Note 5 to MISSISSIPPI's financial statements in Item 8 herein for details regarding MISSISSIPPI's lines of credit and general terms of its commitment agreements. S-57 400 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE IX - SHORT -TERM BORROWINGS DECEMBER 31, 1993, 1992 AND 1991 (Stated in Thousands of Dollars)
Weighted Maximum Average Average Category Weighted Amount Amount Interest Aggregate Balance Average Outstanding Outstanding Rate Short-Term At End of Interest During This During This During the Borrowings Period Rate Period (1) Period (2) Period (2) - -------------------------------------------------------------------------------------------------------------------------------- 1993 Notes payable to banks $3,000 3.30% $17,500 $7,738 3.44% 1992 Notes payable to banks $7,500 3.85% $ 7,500 $ 387 3.86% 1991 Notes payable to banks - - $ 5,000 $ 386 6.45%
Notes: (1) At month-end (2) Average based on daily borrowings during period (averages and rates quoted on an actual day year basis). (3) See Note 5 to SAVANNAH's financial statements in Item 8 herein for details regarding SAVANNAH's lines of credit and general terms of its commitment agreements. S-58 401 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $186,373 Municipal and state taxes on gross receipts 204,371 Other 12,544 -------- $403,288 ======== 1992 Real and personal property taxes $172,106 Municipal and state taxes on gross receipts 194,726 Other 12,553 -------- $379,385 ======== 1991 Real and personal property taxes $162,227 Municipal and state taxes on gross receipts 194,179 Other 13,514 -------- $369,920 ========
S-59 402 ALABAMA POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $ 55,921 Municipal and state taxes on gross receipts 96,933 Other 8,598 -------- $161,452 ======== 1992 Real and personal property taxes $ 51,043 Municipal and state taxes on gross receipts 95,031 Other 9,231 -------- $155,305 ======== 1991 Real and personal property taxes $ 48,600 Municipal and state taxes on gross receipts 91,656 Other 9,440 -------- $149,696 ========
S-60 403 GEORGIA POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $ 84,587 Municipal and state taxes on gross receipts 76,352 Other 1,210 -------- $162,149 ======== 1992 Real and personal property taxes $ 77,940 Municipal and state taxes on gross receipts 71,010 Other 902 -------- $149,852 ======== 1991 Real and personal property taxes $ 70,482 Municipal and state taxes on gross receipts 68,861 Other 1,186 -------- $140,529 ========
S-61 404 GULF POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $16,211 Municipal and state taxes on gross receipts 18,907 Other 988 ------- $36,106 ======= 1992 Real and personal property taxes $15,383 Municipal and state taxes on gross receipts 17,710 Other 790 ------- $33,883 ======= 1991 Real and personal property taxes $14,868 Municipal and state taxes on gross receipts 22,425 Other 1,185 ------- $38,478 =======
S-62 405 MISSISSIPPI POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $23,279 Municipal and state taxes on gross receipts 8,160 Other 1,477 ------- $32,916 ======= 1992 Real and personal property taxes $21,987 Municipal and state taxes on gross receipts 7,316 Other 1,388 ------- $30,691 ======= 1991 Real and personal property taxes $22,701 Municipal and state taxes on gross receipts 7,451 Other 1,432 ------- $31,584 =======
S-63 406 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DECEMBER 31, 1993, 1992 AND 1991 (Thousands of Dollars)
Item Charged to Costs and Expenses ---- ----------------------------- Taxes, other than payroll and income taxes: 1993 Real and personal property taxes $5,285 Municipal and state taxes on gross receipts 4,019 Other 84 ------ $9,388 ====== 1992 Real and personal property taxes $4,735 Municipal and state taxes on gross receipts 3,659 Other 64 ------ $8,458 ====== 1991 Real and personal property taxes $4,653 Municipal and state taxes on gross receipts 3,786 Other 112 ------ $8,551 ======
S-64 407 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. (3) ARTICLES OF INCORPORATION AND BY-LAWS SOUTHERN (a) 1 - Composite Certificate of Incorporation of SOUTHERN, reflecting all amendments to date. (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 November 19, 1993. (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) and in Form 8-K dated November 16, 1993, File No. 1-3164, as Exhibit 4(a).) (b) 2 - By-laws of ALABAMA as amended effective April 24, 1992, and as presently in effect. (Designated in Registration No. 33-48885 as Exhibit 4(c).) 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).) E-1 408 (c) 2 - By-laws of GEORGIA as amended effective July 18, 1990, and as presently in effect. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No.1-6468, as Exhibit 3.) GULF (d) 1 - Restated Articles of Incorporation of GULF and amendments thereto through November 8, 1993. (Designated in Registration No. 33-43739 as Exhibit 4(b)-1, in Form 8-K dated January 15, 1992, File No. 0-2429, as Exhibit 1(b), in Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(b)-2, in Form 8-K dated September 22, 1993, File No. 0-2429, as Exhibit 4 and in Form 8-K dated November 3, 1993, File No. 0-2429, as Exhibit 4.) *(d) 2 - By-laws of GULF as amended effective February 25, 1994, and as presently in effect. MISSISSIPPI (e) 1 - Articles of incorporation of MISSISSIPPI, articles of merger of Mississippi Power Company (a Maine corporation) into MISSISSIPPI and articles of amendment to the articles of incorporation of MISSISSIPPI through August 19, 1993. (Designated in Registration No. 2-71540 as Exhibit 4(a)-1, in Form U5S for 1987, File No. 30-222-2, as Exhibit B-10, in Registration No. 33-49320 as Exhibit 4(b)-(1), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibits 4(b)-2 and 4(b)-3, in Form 8-K dated August 4, 1993, File No. 0-6849, as Exhibit 4(b)-3 and in Form 8-K dated August 18, 1993, File No. 0-6849, as Exhibit 4(b)-3.) (e) 2 - By-laws of MISSISSIPPI as amended effective August 22, 1989, and as presently in effect. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1989, as Exhibit 3(b).) SAVANNAH (f) 1 - Charter of SAVANNAH and amendments thereto through November 10, 1993. (Designated in Registration Nos. 33-25183 as Exhibit 4(b)-(1), 33-45757 as Exhibit 4(b)-(2) and in Form 8-K dated November 9, 1993, File No. 1-5072, as Exhibit 4(b).) *(f) 2 - By-laws of SAVANNAH as amended effective February 16, 1994, and as presently in effect. (4) INSTRUMENTS DESCRIBING RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES ALABAMA (b) - Indenture dated as of January 1, 1942, between ALABAMA and Chemical Bank, as Trustee, and indentures supplemental thereto through that dated as of January 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 E-2 409 Exhibit 2(c), 2-68687 as Exhibit 2(c), 2-69599 as Exhibit 4(a)-2, 2-71364 as Exhibit 4(a)-2, 2- 73727 as Exhibit 4(a)-2, 33-5079 as Exhibit 4(a)-2, 33-17083 as Exhibit 4(a)-2, 33-22090 as Exhibit 4(a)-2, in ALABAMA's Form 10-K for the year ended December 31, 1990, File No. 1-3164, as Exhibit 4(c), in Registration Nos. 33-43917 as Exhibit 4(a)-2, 33-45492 as Exhibit 4(a)-2, 33- 48885 as Exhibit 4(a)-2, 33-48917 as Exhibit 4(a)-2, in Form 8-K dated January 20, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated February 17, 1993, File No.1-3436, as Exhibit 4(a)-3, in Form 8-K dated March 10, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Certificate of Notification, File No. 70-8069, as Exhibits A and B, in Form 8-K dated June 24, 1993, File No. 1- 3436, as Exhibit 4, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Form 8-K dated November 16, 1993, File No. 1-3436, as Exhibit 4(b) and in Certificate of Notification, File No. 70-8069, as Exhibits A and B.) GEORGIA (d) - Indenture dated as of March 1, 1941, between GEORGIA and Chemical Bank, as Trustee, and indentures supplemental thereto dated as of March 1, 1941, March 3, 1941 (3 indentures), March 6, 1941 (139 indentures), March 1, 1946 (88 indentures) and December 1, 1947, through January 1, 1994. (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 and in Certificate of Notification, File No. 70-7832, as Exhibit C.) GULF (e) - Indenture dated as of September 1, 1941, between GULF and The Chase Manhattan Bank (National Association) and The Citizens & Peoples National Bank of Pensacola, as Trustees, and indentures supplemental thereto through E-3 410 November 1, 1993. (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 and in Certificate of Notification, File No. 70-8229, as Exhibit A.) MISSISSIPPI (f) - Indenture dated as of September 1, 1941, between MISSISSIPPI and Morgan Guaranty Trust Company of New York, as Trustee, and indentures supplemental thereto through November 1, 1993. (Designated in Registration Nos. 2-4834 as Exhibit B-3, 2-62965 as Exhibit 2(b)-2, 2-66845 as Exhibit 2(b)-2, 2-71537 as Exhibit 4(a)-(2), 33-5414 as Exhibit 4(a)-(2), 33-39833 as Exhibit 4(a)-2, in MISSISSIPPI's Form 10-K for the year ended December 31, 1991, File No. 0-6849, as Exhibit 4(b), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibit 4(a)-2, in Second Certificate of Notification, File No. 70-7941, as Exhibit I, in MISSISSIPPI's Form 8-K dated February 26, 1993, File No. 0-6849, as Exhibit 4(a)-2, in Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated June 22, 1993, File No. 0-6849, as Exhibit 1 and in Certificate of Notification, File No. 70-8127, as Exhibit A.) SAVANNAH (g) - Indenture dated as of March 1, 1945, between SAVANNAH and NationsBank of Georgia, National Association, as Trustee, and indentures supplemental thereto through July 1, 1993. (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) and in Form 8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4.) (10) MATERIAL CONTRACTS SOUTHERN (a) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(a) and in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(3).) (a) 2 - Service contract dated as of July 17, 1981, between SCS and SEI. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(2).) E-4 411 (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 - 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) 6 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. (Designated in Registration No. 2-59634 as Exhibit 5(c) and in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(d)(2).) (a) 7 - 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) 8 - 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) 9 - 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) 10 - 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) 11 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit A.) (a) 12 - 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) 13 - 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).) E-5 412 (a) 14 - 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) 15 - 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) 16 - 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) 17 - 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) 18 - 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) 19 - 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) 20 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(8).) (a) 21 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K for February, 1977, File No. 1-6468, as Exhibit (b)(4).) (a) 22 - 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) 23 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(7).) (a) 24 - 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 and Amendment No. 3 dated as of August 1, 1988, 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 E-6 413 No. 1-3526, as Exhibit 10(o)(2) and in SOUTHERN's Form 10-K for the year ended December 31, 1989, File No. 1-3526, as Exhibit 10(n)(2).) (a) 25 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980 and Amendment No. 1 dated as of December 3, 1985, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-4 and in SOUTHERN's Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(4).) (a) 26 - 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) 27 - 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) 28 - 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) 29 - 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) 30 - 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. (Designated in Form U-1, File No. 70-7843, as Exhibit B-1.) (a) 31 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990. (Designated in Form U-1, File No. 70-7843, as Exhibit B-2.) (a) 32 - 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) 33 - 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 E-7 414 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) 34 - 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) 35 - 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) 36 - 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) 37 - 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) 38 - The Southern Company Executive Stock Plan For the Southern Electric System and the First Amendment thereto. (Designated in Registration No. 33-30171 as Exhibit 4(c).) (a) 39 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(1).) (a) 40 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(m).) (a) 41 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(x).) (a) 42 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(y).) E-8 415 (a) 43 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-1.) (a) 44 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-2.) (a) 45 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(f), in MISSISSIPPI's Form 10-K for the year ended December 31, 1982, File No. 0-6849, as Exhibit 10(f)(2) and in MISSISSIPPI's Form 10-K for the year ended December 31, 1983, File No. 0-6849, as Exhibit 10(f)(3).) (a) 46 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. (Designated in Form U-1, File No. 70-7738, as Exhibit A-5 and in Form U-1, File No. 70-7937, as A-5(b).) (a) 47 - Block Power Sale Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(cc).) (a) 48 - Coordination Services Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(dd).) *(a) 49 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton dated as of July 1, 1993. (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).) E-9 416 (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 - Amendment No. 4 to the Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of December 31, 1990. *(a) 55 - Amendment No. 2 to the Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of December 31, 1990. *(a) 56 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. *(a) 57 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. *(a) 58 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. *(a) 59 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. ALABAMA (b) 1 - Indenture dated as of June 1, 1959, between SEGCO and Citibank, N.A., as Trustee, and indentures supplemental thereto through December 1, 1962. (Designated in Registration No. 2-59843 as Exhibit 2(a)-8.) (b) 2 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (b) 3 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 herein. (b) 4 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)6 herein. (b) 5 - 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)32 herein. E-10 417 (b) 6 - 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)33 herein. (b) 7 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (b) 8 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (b) 9 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (b) 10 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (b) 11 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (b) 12 - 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) 13 - Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Certificate of Notification, File No. 70-7212, as Exhibit B.) (b) 14 - 1991 Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Form U-1, File No. 70- 7873, as Exhibit B-1.) (b) 15 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)43 herein. (b) 16 - 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) 17 - 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-11 418 (b) 18 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)53 herein. GEORGIA (c) 1 - Indenture dated as of June 1, 1959, between SEGCO and Citibank, N.A., as Trustee, and indentures supplemental thereto through December 1, 1962. See Exhibit 10(b)1 herein. (c) 2 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIP PI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (c) 3 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 herein. (c) 4 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)6 herein. (c) 5 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)7 herein. (c) 6 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)8 herein. (c) 7 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)9 herein. (c) 8 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. See Exhibit 10(a)10 herein. (c) 9 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a) 11 herein. (c) 10 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)12 herein. (c) 11 - 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)13 herein. (c) 12 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein. E-12 419 (c) 13 - 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)15 herein. (c) 14 - 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)16 herein. (c) 15 - 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)17 herein. (c) 16 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)18 herein. (c) 17 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)19 herein. (c) 18 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. See Exhibit 10(a)20 herein. (c) 19 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)21 herein. (c) 20 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)22 herein. (c) 21 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)23 herein. (c) 22 - 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 and Amendment No. 3 dated as of August 1, 1988, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)24 herein. (c) 23 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980 and Amendment No. 1 dated as of December 3, 1985, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)25 herein. (c) 24 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and MEAG. See Exhibit 10(a)26 herein. (c) 25 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton. See Exhibit 10(a)27 herein. E-13 420 (c) 26 - 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)28 herein. (c) 27 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit 10(a)29 herein. (c) 28 - 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. See Exhibit 10(a) 30 herein. (c) 29 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA dated as of December 31, 1990. See Exhibit 10(a)31 herein. (c) 30 - 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)32 herein. (c) 31 - 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)33 herein. (c) 32 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 34 herein. (c) 33 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 35 herein. (c) 34 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 36 herein. (c) 35 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. *(c) 36 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. See Exhibit 10(a) 59 herein. (c) 37 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 39 herein. E-14 421 (c) 38 - 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) 39 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)41 herein. (c) 40 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)42 herein. (c) 41 - 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) 42 - Block Power Sale Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)47 herein. (c) 43 - Coordination Services Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)48 herein. *(c) 44 - 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) 45 - 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) 46 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. See Exhibit 10(a)51 herein. (c) 47 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. See Exhibit 10(a)52 herein. *(c) 48 - Amendment No. 4 to the Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of December 31, 1990. See Exhibit 10(a)54 herein. *(a) 49 - Amendment No. 2 to the Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of December 31, 1990. See Exhibit 10(a)55 herein. *(c) 50 - 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)56 herein. E-15 422 *(c) 51 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)57 herein. *(c) 52 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)58 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)5 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)28 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)29 herein. (d) 5 - 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)32 herein. (d) 6 - 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)33 herein. (d) 7 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 34 herein. (d) 8 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 35 herein. (d) 9 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 36 herein. E-16 423 (d) 10 - 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) 11 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (d) 12 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 39 herein. (d) 13 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 40 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)5 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)32 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)33 herein. (e) 5 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 34 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) 35 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) 36 herein. E-17 424 (e) 8 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 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. 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)5 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) 34 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) 35 herein. (f) 5 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a) 36 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)37 herein. E-18 425 (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) 57 herein. *(f) 10 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated December 15, 1992. See Exhibit 10(a)58 herein. (21) *SUBSIDIARIES OF REGISTRANTS - Contained herein at page IV-5. (23) CONSENTS OF EXPERTS AND COUNSEL SOUTHERN *(a) - The consent of Arthur Andersen & Co. is contained herein at page IV-6. ALABAMA *(b) - The consent of Arthur Andersen & Co. is contained herein at page IV-7. GEORGIA *(c) - The consent of Arthur Andersen & Co. is contained herein at page IV-8. GULF *(d) - The consent of Arthur Andersen & Co. is contained herein at page IV-9. MISSISSIPPI *(e) - The consent of Arthur Andersen & Co. is contained herein at page IV-10. SAVANNAH *(f) - The consent of Arthur Andersen & Co. is contained herein at page IV-11. E-19 426 (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. E-20 EX-3.(D)2 2 GULF POWER COMPANY BY LAWS 1 Exhibit 3(d)2 GULF POWER COMPANY BY-LAWS ---------------- SECTION 1. The annual meeting of the stockholders of the corporation for the election of directors and for the transaction of such other corporate business as may properly come before such meeting shall be held at the corporation's office at Augusta, in the State of Maine, or at such other place within or without the State of Maine as the Board of Directors may determine, on the last Tuesday in June in each year; provided, however, that the Board of Directors may fix an earlier day for such annual meeting of stockholders in any particular year; and provided further that, if the day fixed for such annual meeting of stockholders is a legal holiday, such meeting shall be held on the first day thereafter which is not a legal holiday. SECTION 2. Special meetings of the stockholders of the corporation may be held at such time and at such place within or without the State of Maine as may be determined by the President or the Board of Directors or Executive Committee, or stockholders holding one-fourth of the then outstanding capital stock entitled to vote. SECTION 3. Notice of the time, place and purpose of every meeting of stockholders shall be mailed by the Secretary or the officer performing his duties at least ten days before the meeting to each stockholder of record entitled to vote, at his post office address as shown by the records of the corporation, but meetings may be held without notice if all stockholders entitled to vote are present or if notice is waived before or after the meeting by those not present. No stockholder shall be entitled to notice of any meeting of stockholders with respect to any shares registered in his name after the date upon which notice of such meeting is required by law or by these by-laws to have been mailed or otherwise given to stockholders. SECTION 4. Subject to the provisions of the articles of incorporation, as amended, the holders of a majority of the stock of the corporation entitled to vote, present in person or by proxy, shall constitute a quorum, but less than a quorum shall have power to adjourn. At all meetings of stockholders, each stockholder entitled to vote may vote and otherwise act either in person or by proxy. SECTION 5. The stock of the corporation shall be transferable or assignable on the books of the corporation by the holders in person or by attorney on the surrender of the 2 - 2 - certificates therefor duly endorsed. The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation and registered as they are issued. They shall exhibit the name of the registered holder and shall certify the number of shares owned by him and shall be signed by, or in the name of the corporation by, the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall be sealed with the corporate seal of the corporation. Where such certificate is signed by a Transfer Agent or by a Transfer Clerk acting on behalf of the corporation and by a Registrar, the signature of any such President, Vice-President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary and the seal of the corporation may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the corporation and the issuance and delivery of any such certificate or certificates shall be conclusive evidence of such adoption. The stock transfer books of the corporation may be closed by order of the Board of Directors for such period, not to exceed sixty days previous to any meeting of the stockholders or previous to the payment of any dividend upon the stock of the corporation, as the Board may determine, during which time no transfer of stock upon the books of the Corporation shall be made, and said books shall be re-opened the day following the date fixed for such meeting or for the payment of such dividend. If the stock transfer books of the corporation are ordered closed by the Board of Directors, every stockholder who appears of record at the time of closing said books shall be entitled to vote at the meeting or to receive the dividend on account of which the said books were ordered closed. In lieu of providing for the closing of the stock transfer books of the corporation, the Board of Directors may fix a date not exceeding sixty days preceding the date of any meeting of stockholders, or any dividend payment date, as the record date for the determination of the stockholders entitled to notice of and to vote at such meeting, or entitled to receive such dividend, as the case may be. If the stock transfer books of the corporation are not ordered closed by the Board of Directors of if the Board of Directors does not fix a date of record in lieu thereof, every stockholder who appears of record on the date of a stockholders' meeting shall be entitled to vote at such meeting and every stockholder who appears of record on the date specified by the Board of 3 - 3 - Directors in their declaration of a dividend shall be entitled to such dividend. SECTION 6. Upon receipt by this corporation of evidence, satisfactory to the Board of Directors, of the loss, destruction or mutilation of any certificate of stock of this corporation and, if required by the Board of Directors, upon receipt of indemnity satisfactory to the Board of Directors and upon surrender and cancellation of such certificate, if mutilated, the Board of Directors may, if it so determines, direct the officers of this corporation to execute and deliver a new certificate of like tenor and for the same number of shares of the same class of stock to be issued in lieu of such lost, destroyed or mutilated certificate. SECTION 7. The affairs of this corporation shall be managed by a Board consisting of not less than six directors, nor more than fifteen directors, their number to be fixed at the annual or any special meeting of the stockholders, who shall be elected annually by the stockholders entitled to vote, to hold office until their successors are elected and qualify. Directors need not be stockholders. A majority of the members of the Board then in office shall constitute a quorum. Vacancies in the Board of Directors may be filled by the Board at any meeting, except that vacancies arising from the election of fewer directors than the total number fixed shall be filled at a meeting of the stockholders called for the purpose of filling such vacancies, or by the Board of Directors under special authorization from the stockholders. Any and all of the directors may at any time be removed without cause assigned by the vote of the holders of a majority in number of all of the outstanding stock entitled to vote given at a meeting called for the purpose of considering such action. The foregoing provisions of this Section 7 relating to the election of directors and to the filling of vacancies in the Board of Directors shall be subject to the provisions of the Articles of Incorporation, as amended. Commencing April 14, 1965, a person being a full-time executive employee of the corporation or its parent company or any affiliated company when first elected a director of the corporation (hereinafter sometimes referred to as an "employee- director") shall not be eligible for election as a director when he ceases to be an executive employee, whether by reason of resignation, retirement or other cause; and a person not an employee-director shall not be eligible for election as a director of the corporation after his 70th birthday; provided, however, that directors presently in office who have attained age 70 shall be eligible to continue as advisory directors, until, but not beyond, the annual meeting of this Board of Directors in the year 1968. Any employee-director who is not eligible for election as a director by reason of the foregoing provisions shall be 4 - 4 - eligible for election and re-election by the Board of Directors as an advisory director, upon the recommendation of the Chief Executive Officer of the corporation, for a term ending at the first meeting of the Board of Directors following the annual meeting of stockholders next following such election. Any person eligible for election as an advisory director must be one whose services as such will be, in the opinion of the Board of Directors, of value to the corporation. An advisory director shall be entitled to notice of and to attend and advise but not to vote at, meetings of the Board of Directors, and of any committees thereof to which he shall be appointed, nor shall he be counted in determining the existence of a quorum, and for his services may be paid, in the discretion of the Board of Directors, compensation and reimbursement of expenses on the same basis as if he were a director. SECTION 8. The annual meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of the stockholders. Other meetings of the Board of Directors shall be held at the times fixed by resolution of the Board or upon call of the Chairman of the Board, the President or a Vice-President or any person upon whom powers have devolved pursuant to Section 12 hereof. The Secretary or officer performing his duties shall give at least two days' notice of all meetings of Directors, provided that a meeting may be held without notice immediately after the annual election of Directors, and notice need not be given of regular meetings held at times fixed by resolution of the Board. Meetings may be held at any time without notice if all the Directors are present or if those not present waive notice either before or after the meeting. Notice by mail or telegraph to the usual business or residence address of the director shall be sufficient. The purpose of special meetings of the Board of Directors need not be stated in such notice unless required by law and unless otherwise indicated in the notice any and all business may be transacted at a special meeting of the Board of Directors. SECTION 9. The Board of Directors, as soon as may be convenient after the election of directors in each year, may appoint one of their number Chairman of the Board and shall appoint one of their number President of the corporation, and shall also appoint one or more Vice-presidents, a Secretary, a Clerk and a Treasurer, none of whom need be members of the Board, and shall, from time to time, appoint such other officers as they may deem proper. The same person may be appointed to more than one office. The term of office of all officers shall be for one year and until their respective successors are chosen and qualified, but any officer may be removed from office at any time by the Board of Directors without cause assigned. Vacancies in the offices shall be filled by the Board of Directors. SECTION 10. The Board of Directors, as soon as may be 5 - 5 - after the election in each year, may appoint an executive committee to consist of the President and such number of directors as the Board may from time to time determine. Such committee shall have and may exercise all of the powers of the Board during the intervals between its meetings which may be lawfully delegated, subject to such limitations as may be provided by a resolution of the Board. The Board shall have the power at any time to change the membership of such committee and to fill vacancies in it. The executive committee may make rules for the conduct of its business and may appoint such committees and assistants as it may deem necessary. The Board may, from time to time, determine by resolution the number of members of such committee required to constitute a quorum. The Board shall designate the Chairman of the executive committee and the proceedings of the executive committee shall from time to time be reported to the Board of Directors. SECTION 11. Unless otherwise designated as separate offices by the Board of Directors, the President shall be the Chief Executive Officer of the corporation; he shall preside at all meetings of the stockholders and directors; he shall have general supervision of the business of the corporation; shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the rights of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer of the corporation. He shall, unless otherwise ordered, execute bonds, deeds, mortgages, and other contracts, and when required shall cause the seal of the corporation to be affixed thereto and shall sign certificates of stock. He shall be ex officio a member of all standing committees, and shall submit to the stockholders at their annual meeting a report of the year's business. Should the offices of President and Chief Executive Officer be held by different persons, the above duties shall be as delegated to each office by the Board of Directors. SECTION 12. Notwithstanding the provisions of Section 9 hereof, in the event of the absence or inability of the President to act, the powers and duties of the President shall, subject to the control of the Board of Directors, devolve successively upon such other persons as shall have been designated in a resolution adopted by the Board of Directors, and in accordance with the order of succession set forth therein. SECTION 13. The Secretary shall attend all sessions of the Board and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for standing committees when required. He shall give or cause to be given notice of all meetings of the stockholders and the Board of Directors, and of standing committees when required, and shall perform such other duties 6 - 6 - as may be prescribed by the Board of Directors or the President under whose supervision he shall act. He shall keep in safe custody the seal of the Corporation, and when authorized, affix the same to any instrument requiring a seal, and attest the signatures thereof, when directed or required to do so. SECTION 14. The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation, in such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President, and to the directors at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. He shall give the corporation a bond for the faithful performance of the duties of his office, and for the restoration to the corporation in case of his death, resig- nation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind, in his possession or under his control belonging to the corporation. SECTION 15. It shall be the duty of the Controller to supervise and be responsible for accounting transactions of the corporation; to have charge of the installation and supervision of all accounting and statistical records, the preparation of all financial and statistical statements and reports, and the accounting methods, systems and forms in use by all departments; he shall perform such other duties as may be assigned to him from time to time by the President. SECTION 16. One or more Assistant Secretaries or Assistant Treasurers or Assistant Controllers may be elected by the Board or appointed by the President to hold office until the next annual meeting of the Board of Directors and until their successors are elected or appointed, but may be removed at any time. They shall perform any or all of the duties of the Secretary or Treasurer, or Controller as the case may be, and such other duties as may be assigned to them from time to time. SECTION 17. The Clerk of the corporation shall be a resident of Maine, and shall be sworn to the faithful performance of his duties. He need not be a stockholder. He shall keep a full and accurate record of all stockholders' meetings, shall keep an office in said Augusta as required by law, and shall have the custody of all books and papers belonging to the corporation which are located in said office. He shall receive as compensation for his services in acting as proxy at annual meetings, keeping an office in Maine, preparing 7 - 7 - records of annual meetings and furnishing the Secretary with duplicate copies of same and of necessary blanks and forms at proper times the sum of fifty dollars annually, payable in advance. He shall receive a reasonable compensation for all additional services. In the absence of the Clerk, a Clerk pro tempore may be chosen, who shall be a resident of Maine, and shall be duly sworn. SECTION 18. In the case of the absence of any officer of the corporation, or for any other reason that the Board may deem sufficient, the Board may delegate the powers or duties of such officers to any other officer or to any director, for the time being. SECTION 19. If the office of any director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining directors then in office, even though less than a quorum, by a majority vote may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred; but vacancies in the Board of Directors arising from the election of fewer directors than the total number fixed shall be filled in the manner prescribed by Section 7 thereof. SECTION 20. The Board of Directors shall have power to authorize the payment of compensation to the directors for services to the corporation, including fees for attendance at meetings of the Board of Directors, of the executive committee and all other committees and to determine the amount of such compensation and fees. SECTION 21. A. Indemnity To the fullest extent permitted by law, the Company shall indemnify each person made, or threatened to be made, a party to any threatened, pending, or completed claim, action, suit or proceeding, whether civil or criminal, administrative or investigative, and whether by or in the right of the Company or otherwise, by reason of the fact that such person, or such person's testator or intestate, is or was a director, officer or was an employee of the Company holding one or more management positions through and inclusive of managers (but not positions below the level of managers) (such positions being hereinafter referred to as "Management Positions") or is or was serving at the request of the Company as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity at the request of the Company, against all loss and expense actually or reasonably incurred by him including, without limiting the generality of the foregoing, judgments, fines, penalties, liabilities, sanctions, 8 - 8 - and amounts paid in settlement and attorneys fees and disbursements actually and necessarily incurred by him in defense of such action or proceeding, or any appeal therefrom. The indemnification provided by this Section shall inure to the benefit of the heirs, executors and administrators of such person. In any case in which a director, officer of the Company or employee of the Company holding one or more Management Positions requests indemnification with respect to the defense of any such claim, action, suit or proceedings, the Company may advance expenses (including attorney's fees) incurred by such person prior to the final disposition of such claim, action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of a written undertaking by or on behalf of such person to repay amounts advanced if it shall ultimately be determined that such person was not entitled to be indemnified by the Company under this Section or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the Company. Such a person claiming indemnification shall be entitled to indemnification upon a determination that no judgment or other final adjudication adverse to such person has established that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or such person personally obtained an economic benefit including a financial profit or other advantage to which such person was not legally entitled. Without limiting the generality of the foregoing provision, no former, present or future director or officer of the Company or employee of the Company holding one or more management positions, or his heirs, executors or administrators, shall be liable for any undertaking entered into by the Company or its subsidiaries or affiliates as required by the Securities and Exchange Commission pursuant to any rule or regulation of the Securities and Exchange Commission now or hereafter in effect or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any undertaking entered into by the Company due to environmental requirements including all legally enforceable environmental compliance obligations imposed by federal, state or local statute, regulation, permit, judicial or administrative decree, order and judgment or other similar means, or any undertaking entered into by the Company pursuant to any approved Company compliance plan or any federal or state or municipal ordinance which directly or indirectly regulates the Company, or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies or subsidiaries of public utility holding companies. The foregoing rights shall not be exclusive of any other rights to which any such director, officer or employee 9 - 9 - may otherwise be entitled and shall be available whether or not the director, officer or employee continues to be a director, officer or employee at the time of incurring any such expenses and liabilities. If any word, clause or provision of the By-laws or any indemnification made under this Section 21 shall for any reason be determined to be invalid, the remaining provisions of the By-Laws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the By-Laws, means the masculine and feminine wherever applicable. B. Insurance The Company may purchase and maintain insurance on behalf of any person described in Section 21 against any liability or expense (including attorney fees) which may be asserted against such person whether or not the Company would have the power to indemnify such person against such liability or expense under this Section 21 or otherwise. SECTION 22. The Board of Directors are authorized to select such depositaries as they shall deem proper for the funds of the corporation. All checks and drafts against such deposited funds shall be signed by such officers or such other persons as may be specified by the Board of Directors. SECTION 23. The corporate seal shall be circular in form, and shall have inscribed thereon the name of the corporation, followed by the word "Maine" and shall have the word "Seal" inscribed in the center thereof. SECTION 24. A director of this corporation shall not be disqualified by his office from dealing or contracting with the corporation, either as vendor, purchaser or otherwise, nor shall any transaction or contract of this corporation be void or voidable by reason of the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder or director is in any way interested in such transaction or shall be authorized, ratified or approved either (a) by vote of a majority of a quorum of the Board of Directors or the executive committee, without counting in such majority or quorum any directors so interested or being a member of a firm so interested or a shareholder or director of a corporation so interested, or (b) by vote at a stockholders' meeting of the holders of a majority of all the outstanding shares of the stock of the corporation entitled to vote or by a writing or writings signed by a majority of such holders; nor shall any director be liable to account to the corporation for any profit realized by him from or through any transaction or contract of this corporation authorized, ratified or approved as aforesaid, by reason of the fact that he or any firm of which he is a member or any corporation of 10 - 10 - which he is a shareholder or director was interested in such transaction or contract. Nothing herein contained shall create any liability in the events above described or prevent the authorization, ratification or approval of such contracts or transactions in any other manner provided by law. SECTION 25. These by-laws may be altered or amended (a) by a majority vote of the outstanding stock entitled to vote at any annual meeting or upon notice at any special meeting of stockholders, or (b) at any meeting of the Board of Directors by a majority vote of the entire Board then in office. 11 I N D E X --------- Section Page ------- ---- 1. ANNUAL MEETING OF STOCKHOLDERS - LOCATION AND DATE . . . . . . . . . . . . . . . . . . . . . 1 (The annual meeting of stockholders is to be held at the office of the Corporation in Augusta, Maine, or at such other place within or without the State of Maine as the Board of Directors may determine, on the last Tuesday in June each year; provided, however, that the Board of Directors may fix an earlier day in any year.) 2. SPECIAL MEETINGS OF STOCKHOLDERS - LOCATION AND METHOD OF CALL . . . . . . . . . . . . . . 1 3. NOTICE OF MEETING OF STOCKHOLDERS - TIME, PLACE AND PURPOSE . . . . . . . . . . . . . . . . . 1 (Notice of the time, place and purpose of every meeting of stockholders shall be mailed by the Secretary or the Officer performing his duties at least ten days before the meeting to each stockholder of record entitled to vote.) 4. QUORUM . . . . . . . . . . . . . . . . . . . . . 1 5. STOCK. . . . . . . . . . . . . . . . . . . . . . 1 (a) Regulations governing issuance of stock (b) Dividends - Declaration, payment, limitations and definitions 6. REPLACEMENT OF LOST, DESTROYED OR MUTILATED CERTIFICATES . . . . . . . . . . . . . . . . . 3 7. ELECTION OF BOARD OF DIRECTORS - TOTAL NUMBER OF DIRECTORS ALLOWED, AND NUMBER CONSTITUTING A QUORUM . . . . . . . . . . . . . . . . . . . . 3 8. BOARD OF DIRECTORS' MEETINGS, ANNUAL AND OTHER - NOTICES OF MEETINGS, ETC . . . . . . . . . . . 4 12 9. APPOINTMENT AND TERM OF OFFICE . . . . . . . . . . 4 10. APPOINTMENT AND DUTIES OF EXECUTIVE COMMITTEE. . . 4 11. DUTIES AND POWERS OF THE PRESIDENT . . . . . . . . 5 12. SUCCESSION OF OFFICERS IN EVENT OF INABILITY OF PRESIDENT TO ACT . . . . . . . . . . . . . . . . 5 13. DUTIES AND POWERS OF THE SECRETARY . . . . . . . . 5 14. DUTIES AND POWERS OF THE TREASURER . . . . . . . . 6 15. DUTIES AND POWER OF THE CONTROLLER . . . . . . . . 6 16. DUTIES AND POWERS OF ASSISTANT SECRETARIES, ASSISTANT TREASURERS, AND ASSISTANT CONTROLLER . 6 17. QUALIFICATIONS, DUTIES AND POWERS OF THE CLERK . . 6 18. DELEGATION OF DUTIES AND POWERS BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . 7 19. SELECTION OF SUCCESSOR DIRECTORS TO FILL VACANCIES BY REASON OF DEATH, RESIGNATION, ETC . . . . . . 7 20. POWER TO AUTHORIZE COMPENSATION FOR DIRECTORS. . . 7 21. INDEMNIFICATION. . . . . . . . . . . . . . . . . . 7 22. POWER TO SELECT DEPOSITARIES AND DESIGNATE REQUIRED SIGNATURES. . . . . . . . . . . . . . . 9 23. CORPORATE SEAL - DESCRIPTION . . . . . . . . . . . 9 24. BUSINESS TRANSACTIONS BETWEEN CORPORATION AND ITS DIRECTORS . . . . . . . . . . . . . . . . . . . 9 25. AMENDMENT TO BY-LAWS . . . . . . . . . . . . . . . 10 EX-3.F2 3 EXHIBIT 3(F)2 - BYLAWS OF SAVANNAH ELECTRIC 2/16/94 Exhibit 3(f)2 _________________________________________________ BY LAWS of Savannah Electric and Power Company _________________________________________________ as Amended to February 16, 1994 _____________________________________ BYLAWS of Savannah Electric and Power Company _____________________________________ ARTICLE I Name The name of this Corporation shall be Savannah Electric and Power Company. ARTICLE II Stockholders' Meeting All meetings of the Stockholders shall be held at the principal office of the Corporation in Savannah, Georgia, unless some other place in Georgia is stated in the call. ARTICLE III Annual Meetings The annual meeting of the Stockholders of this Corporation shall be held on the third Tuesday in May in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding Tuesday not a legal holiday. In the event that such annual meeting is omitted by oversight or otherwise on the date herein provided therefor, a subsequent meeting may be held in place thereof, and any business transacted or elections held at such meeting shall be as valid as if transacted or held at the annual meeting. Such subsequent meeting shall be called in the same manner and as provided for special Stockholders' meetings. ARTICLE IV Special Meetings Special meetings of the Stockholders of this Corporation shall be held whenever the Chairman of the Board, the President or a Vice President, a majority of the Board of Directors, or the holders of at least one-fourth (1/4) part in interest of the capital stock issued and outstanding and entitled to vote thereat shall make application therefor to the Secretary or an Assistant Secretary, stating the time, place and purpose of the meeting applied for. Special meetings of the Stockholders shall also be held following the accrual of the rights of the Preferred Stock of the Corporation, voting as a class, to elect the smallest number of Directors of this Corporation necessary to constitute a majority of the members of the Board of Directors, whenever required to be held in accordance with the provisions of the Charter of the Corporation and/or any resolution of the Stockholders setting forth the powers, preferences, etc. of the various classes of stock of the Corporation. ARTICLE V Notice of Stockholders' Meetings Notice of all Stockholders' meetings, stating the time and 2 place, and, in the case of special meetings, the objects for which such meetings are called, shall be given by the Secretary or an Assistant Secretary, by mail, to each Stockholder of record entitled to vote at said meeting at his or her registered address, at least ten (10) days prior to the date of the meeting, and the person giving such notice shall make affidavit in relation thereto; provided that notice of any such meeting shall be deemed to be sufficiently given to any Stockholder who, while the provisions of the Trading with the Enemy Act (Public Act No. 91 of the Sixty-fifth Congress of the United States of America, as now or hereafter amended) shall be operative, shall appear from the stock books to be or shall be known to the Corporation to be an "enemy" or "ally of enemy" as defined in the said Act and whose address appearing on such stock books is outside the United States, or the mailing to whom of notice shall at the time be prohibited by any other law of the United States of America or by any executive order or regulation issued or promulgated by any officer or agency of the United States of America (a) if, at least ten (10) days prior to the date of the meeting, a copy of the notice of the meeting shall be mailed to any person or agency who by any such law, order or regulation shall have been duly designated to receive such notice or duly designated or appointed as custodian of the property of such Stockholder; or (b) if a brief notice of such meeting, including, in the case of a special meeting, either a brief statement of the objects for which such meeting is called or a statement as to where there may be obtained a copy of a written notice containing a statement of such objects, shall be published by the Corporation at least once, not less than ten (10) days before the meeting in a daily newspaper published in the English language and of general circulation in the City of Savannah, Georgia; provided further, however, that notice of any Stockholders' meeting stating that an increase of the stock or an issuance of bonds will be considered, shall be published in a daily newspaper published in the English language and of general circulation in the City of Savannah, Georgia, once a week for four weeks prior to the time of holding such meeting. Any meeting at which all the Stockholders are present, either in person or represented by proxy, or of which those not present in person have waived notice in writing, shall be a legal meeting for the transaction of business, notwithstanding that notice has not been given as hereinbefore provided. ARTICLE VI Waiver of Notice Notice of any Stockholders' meeting may be waived by any Stockholder. ARTICLE VII Quorum At any meeting of the Stockholders a majority in interest of all the capital stock issued and outstanding and entitled to 3 vote, represented by Stockholders of record in person or by proxy, shall constitute a quorum, but a less interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the capital stock represented thereat shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law or of the Charter of this Corporation or these Bylaws, a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE VIII Proxy and Voting Stockholders of record may vote at any meeting either in person or by proxy in writing, which shall be filed with the Secretary of the meeting before being voted. The voting powers of the respective classes of stock of the Company shall be as provided in the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE IX Board of Directors A Board of not less than five nor more than fifteen Directors shall be chosen by ballot at the Annual Meeting of the Stockholders or at any meeting held in lieu thereof as herein-before provided. The number of Directors for each corporate year shall be fixed by vote at the meeting when elected, but the Stockholders may, at a special meeting called for the purpose during any such year, increase or decrease (within the limits above specified) the number of Directors as thus fixed and if necessary elect Directors to complete the number so fixed. A majority of the Directors shall be citizens and residents of Georgia. Each Director shall serve until the next Annual Meeting of the Stockholders and until his successor is duly elected and qualified. Directors need not be Stockholders of the Corporation. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE X Powers of Directors The Board of Directors shall have the entire management of the business of the Corporation. In the management and control of the property, business and affairs of the Corporation, the Board of Directors is hereby vested with all the powers possessed 4 by the Corporation itself, so far as this delegation of authority is not inconsistent with the laws of the State of Georgia, with the Charter of the Corporation or with these Bylaws. The Board of Directors shall have power to determine what constitutes net earnings, profits and surplus, respectively, what amount shall be reserved for working capital and for any other purposes, and what amount shall be declared as dividends, and such determination by the Board of Directors shall be final and conclusive. ARTICLE XI Executive and Other Committees The Board of Directors may elect from their number an Executive Committee of not less than three or more than seven members, which Committee may exercise the powers of the Board of Directors in the management of the business of the Corporation when the Board is not in session. The Executive Committee shall report its action to the Board of Directors for approval. The Executive Committee may make rules for the holding and conduct of its meetings and the keeping of the records thereof. The Board of Directors may likewise elect or appoint from their number other committees from time to time, the number composing such committees and the powers conferred upon the same to be determined by vote of the Board of Directors. ARTICLE XII Meetings Regular meetings of the Board of Directors shall be held at such places and at such times as the Board may by vote from time to time determine, and if so determined no notice thereof need be given. Special meetings of the Board of Directors may be held at any time or place whenever called by the Chairman of the Board, the President, a Vice President, the Secretary, an Assistant Secretary, or five or more Directors, reasonable notice thereof being given to each Director by the Secretary or an Assistant Secretary or officer calling the meeting, or at any time without formal notice provided all the Directors are present, or those not present have waived notice thereof in writing. Such special meetings shall be held at such times and places as the notice thereof or waiver shall specify. ARTICLE XIII Quorum A majority of the total number of members of the Board of Directors as constituted for the time being, but not less than three, shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time and the same may be held as adjourned without further notice. When a quorum is present at any meeting, a majority vote of the members in attendance thereat shall decide any questions brought before such meeting, except as otherwise provided by law, by the Charter of this Corporation or by these Bylaws. 5 ARTICLE XIV Officers The officers of this Corporation shall be a Chairman of the Board, subject to Article XVII hereof, and a President, one or more Vice Presidents, a Secretary and a Treasurer. All officers shall be elected by the Board of Directors after its election by the Stockholders, and a regular meeting may be held without notice for this purpose immediately after the Annual Meeting of the Stockholders and at the same place. ARTICLE XV Additional Officers and Agents The Board of Directors at its discretion may appoint a General Manager, one or more Assistant Treasurers and one or more Assistant Secretaries, and such other officers or agents as it may deem advisable and prescribe the duties thereof. ARTICLE XVI Eligibility of Officers The Chairman of the Board, if any, and the President, shall each be a Director of the Corporation. The Vice Presidents, Secretary and Treasurer and such other officers as may be appointed may be but need not be Directors of the Corporation. The same person may hold the offices of Secretary and Treasurer. ARTICLE XVII Chairman of the Board The Corporation may, in the discretion of the Board of Directors, have a Chairman of the Board who, in such case, shall be the chief executive officer of the Corporation and, as such, shall have supervision of its policies, business, and affairs, and such other powers and duties as are commonly incident to the office of chief executive officer. He shall preside at the meetings of the Board of Directors and may call meetings of the Board of Directors and of any committee thereof, whenever he deems it necessary and he shall call to order and act as chairman of all meetings of the Stockholders of the Corporation. In addition, he shall have such other powers and duties as the Board of Directors shall designate from time to time. The Chairman of the Board, unless some other person is thereunto specifically authorized by vote of the Board of Directors, shall have power to sign all bonds, deeds and contracts of the Corporation. Should the Board of Directors determine not to have, or upon a vacancy occurring in such office fail to elect, a Chairman of the Board, such office shall cease to exist pending subsequent action by the Board of Directors recreating such office. ARTICLE XVIII President The President shall, subject to the supervision of the Chairman of the Board, have the direction of and responsibility for, the operations of the Corporation, and such other powers and 6 duties as are commonly incident to that office. He shall also have such other powers and duties as the Board of Directors shall designate from time to time and, in the absence of the Chairman of the Board, or should such office fail to exist, shall have the powers and duties of the Chairman of the Board. The President or a Vice President, unless some other person is thereunto specifically authorized by vote of the Board of Directors, shall have power to sign all certificates of stock, bonds, deeds and contracts of the Corporation. ARTICLE XIX Vice Presidents A Vice President shall perform the duties and have the powers of the Chairman of the Board and the President during the absence or disability of the Chairman of the Board (or the nonexistence of said office) and the President and shall have power to sign all certificates of stock, bonds, deeds and contracts of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. ARTICLE XX Secretary The Secretary shall be present at all meetings of the Stockholders, of the Board of Directors and of the Executive Committee, and shall keep accurate records of the proceedings at such meetings in books provided for that purpose. He shall perform all the duties commonly incident to his office and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. In the absence of the Secretary, an Assistant Secretary or a Secretary pro tempore shall perform his duties. The Secretary, Assistant Secretary or Secretary pro tempore shall be sworn. ARTICLE XXI Treasurer The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds, valuable papers and documents of the Corporation (other than his own bond, which shall be in the custody of the President), and shall have and exercise under the supervision of the Board of Directors, all the powers and duties commonly incident to his office, and shall give bond in such form and with such sureties as shall be required by the Board of Directors. He shall deposit all funds of the Corporation in such bank or banks, trust company or trust companies, or with such firm or firms doing a banking business as the Board of Directors shall designate. He may endorse for deposit or collection all checks, notes, et cetera, payable to the Corporation or to its order, may accept drafts on behalf of the Corporation, and shall, together with the President or a Vice President, sign all certificates of stock. He shall keep accurate books of account of the Corporation's transactions, 7 which shall be the property of the Corporation, and, together with all its property in his possession, shall be subject at all times to the inspection and control of the Board of Directors. The Treasurer shall hold his office during the pleasure of the Board of Directors, and shall in every way be subject to their orders. All checks, notes, drafts or other obligations for the payment of money shall be signed by the Treasurer (except as the Board of Directors shall otherwise specifically order) and, with the exception of checks for the payment of not exceeding $10,000 (which require one signature) and notes, shall be countersigned as a condition to their validity by the Chairman of the Board or the President or such other officer or agent as the Board of Directors shall by resolution direct; notes shall be countersigned as a condition to their validity only by such officer or agent as the Board of Directors shall by resolution direct. Checks for the total amount of any payroll may be drawn in accordance with the foregoing provisions and deposited in a special fund. Checks upon this fund may be drawn by such person as the Treasurer shall designate, and need not be countersigned. The Directors may appoint one or more Assistant Treasurers with such powers and duties, including the powers and duties of the Treasurer as herein stated, as to them shall seem best. ARTICLE XXII Removals The Stockholders may, at any meeting called for the purpose, by vote of a majority of the capital stock issued and outstanding, remove any Director or other officer elected by them and elect his successor. The Board of Directors may, by vote of not less than a majority of the entire Board, remove from office any officer or agent elected or appointed by them. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE XXIII Vacancies If the office of any Director or officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the remaining Directors, although less than a quorum, may, by a majority vote, choose a successor or successors who shall hold office for the unexpired term, but vacancies in the Board of Directors may be filled for the unexpired term by the Stockholders at a meeting called for that purpose, unless such vacancy shall have been filled by the Directors. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. 8 ARTICLE XXIV Capital Stock The amount of capital stock shall be as fixed in the Charter of this Corporation or as the same may be increased or decreased from time to time in accordance with the provisions of law. ARTICLE XXV Certificates of Stock Every Stockholder shall be entitled to a certificate or certificates of stock of the Company in form prescribed by the Board of Directors, duly numbered and sealed with the corporate seal of the Company, and setting forth the number and kind of shares represented thereby to which each Stockholder is entitled. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its stock of any class or classes and may require stock certificates to be counter-signed and/or registered by one or more of such Transfer Agents and/or Registrars. If certificates of capital stock of the Company are signed by a Transfer Agent or by a Registrar, the signature of the officers of the Company and the seal of the Company thereon may be facsimiles, engraved, printed or otherwise reproduced. Any provisions of these Bylaws with reference to the signing and sealing of stock certificates shall include, in cases above permitted, such facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Company, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Company, such certificate or certificates may nevertheless be adopted by the Board of Directors of the Company and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Company. ARTICLE XXVI Transfer of Stock Shares of stock may be transferred by delivery of the certificate, accompanied either by an assignment in writing on the back of the certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the owner of the certificate. No transfer shall affect the right of the Corporation to pay any dividend due upon the stock, or to treat the holder of record as the holder in fact until such transfer is recorded upon the books of the Corporation or a new certificate is issued to the person to whom it has been so transferred. It shall be the duty of every Stockholder to notify the Corporation of his post office address. 9 ARTICLE XXVII Record Dates The Board of Directors or the Executive Committee may fix in advance (a) a date, not less than ten (10) nor more than forty-five (45) days preceding the date of any meeting of the Stockholders, as a record date for the determination of Stockholders entitled to notice of and to vote at any such meeting or any adjournment thereof; (b) a date, not less than ten (10) nor more than thirty (30) days prior to the date for the payment of any dividend, or other distribution, or the date for the allotment of rights, or the date when any change, conversion or exchange of capital stock (including any exchange of stock upon a merger, consolidation or sale of all, or substantially all, of the assets of the Corporation) shall go into effect, as a record date for the determination of the Stockholders entitled to receive payment of any such dividend, or distribution, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, as the case may be; and (c) a date, not less than ten (10) nor more than forty-five (45) days preceding the date for the taking of any other lawful corporate action not covered by the foregoing, as a record date for the determination of Stockholders entitled to act thereon and/or receive the benefit thereof; notwithstanding, in any such case, any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. ARTICLE XXVIII Loss of Certificates In case of the loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued therefor upon such terms as the Board of Directors shall prescribe. ARTICLE XXIX Seal The seal of this Corporation shall consist of a flat faced circular die with the words and figures "Savannah Electric and Power Company Corporate Seal 1921 Georgia" cut or engraved thereon. ARTICLE XXX Facsimile Signatures on Bonds and Debentures The signatures of any officer of this Corporation executing a corporate bond, debenture or other debt security of the Corporation or attesting the corporate seal thereon, or upon any interest coupons annexed to any such corporate bond, debenture or other debt security of the Corporation, and the corporate seal affixed to any such bond, debenture or other debt security of the Corporation, may be facsimiles, engraved or printed, provided that such bond, debenture or other debt security of the Corporation is authenticated or countersigned with the manual signature of an authorized officer of the corporate trustee 10 designated by the indenture or other agreement under which said security is issued or of an authenticating agent appointed by such corporate trustee to act in its behalf or by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer or officers whose signature or signatures, whether manual or facsimile, shall have been used on any corporate bond, debenture or other debt security shall cease to be an officer or officers of the Corporation for any reason before the same has been delivered by the Corporation, such bond, debenture or other debt security may nevertheless be issued and delivered as though the person or persons whose signatures were used thereon had not ceased to be such officer or officers. ARTICLE XXXI Indemnification and Related Matters Each person who is or was a director or officer of the Corporation or is or was an employee of the Corporation holding one or more positions of management through and inclusive of department managers (but not positions below the level of department managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or is or was an employee of the Corporation holding one or more Management Positions, or is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the Corporation as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this Article shall inure to the benefit of the heirs, executors and administrators of such person. Expenses (including attorneys' fees) incurred by a director or officer of the Corporation or employee of the Corporation holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the Corporation prior to the final disposition of such claim, action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation under this Article or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and 11 until it shall ultimately be determined that such person is entitled to be indemnified by the Corporation. The Corporation may purchase and maintain insurance at the expense of the Corporation on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or any person who is or was serving at the request of the Corporation as a director (or the equivalent), officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability or expense (including attorneys' fees) asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability or expense under this Article or otherwise. Without limiting the generality of the foregoing provisions, no present or future director or officer of the Corporation, or employee of the Corporation holding one or more Management Positions, or his heirs, executors, or administrators, shall be liable for any act, omission, step, or conduct taken or had in good faith, or for any undertaking entered into by the Corporation or its subsidiaries or affiliates which is required, authorized, or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any undertaking entered into by the Corporation due to environmental requirements including all legally enforceable environmental compliance obligations imposed by federal, state or local statute, regulation, permit, judicial or administrative decree, order and judgment or other similar means, or any undertaking entered into by the Corporation pursuant to any approved compliance plan, or any federal or state statute or municipal ordinance regulating the Corporation or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies, or subsidiaries of public utility holding companies. In any action, suit, or proceeding based on any act, omission, step, or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, or employee holding a Management Position, and his heirs, executors, and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit, or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, and attorneys' fees. The foregoing rights shall not be exclusive of any other rights to which any such director or officer or employee may otherwise be entitled and shall be available whether or not the 12 director or officer or employee continues to be a director or officer or employee at the time of incurring any such expenses and liabilities. If any word, clause or provision of the Bylaws or any indemnification made under this Article shall for any reason be determined to be invalid, the provisions of the Bylaws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the Bylaws, means the masculine and feminine wherever applicable. ARTICLE XXXII Amendments These Bylaws may be amended, added to, altered or repealed, at any annual or special meeting of the Corporation, by vote in either case of a majority of the capital stock issued and outstanding and entitled to vote thereat, provided notice of the proposed amendment, addition, alteration or repeal is given in the notice of said meeting. ### 13 EX-10.A49 4 EXHIBIT 10(A)49 - AM & RESTATED NUC MBA-GA,OPC,MEAG,DALT-7/1/93 Exhibit 10(a)49 AMENDED AND RESTATED NUCLEAR MANAGING BOARD AGREEMENT AMONG GEORGIA POWER COMPANY OGLETHORPE POWER CORPORATION MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA AND CITY OF DALTON, GEORGIA DATED AS OF JULY 1, 1993 TABLE OF CONTENTS ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.0 Definitions . . . . . . . . . . . . . . . . . . . 4 1.1 "Agency Functions" . . . . . . . . . . . . . . . . 4 1.2 "Agreement" . . . . . . . . . . . . . . . . . . . 5 1.3 "Dalton" . . . . . . . . . . . . . . . . . . . . . 5 1.4 "Each Plant" . . . . . . . . . . . . . . . . . . . 5 1.5 "Fuel Budget" . . . . . . . . . . . . . . . . . . 5 1.6 "Fuel Plan" . . . . . . . . . . . . . . . . . . . 5 1.7 "Fuel Services" . . . . . . . . . . . . . . . . . 5 1.8 "Governmental Authority" . . . . . . . . . . . . . 6 1.9 "GPC" . . . . . . . . . . . . . . . . . . . . . . 6 1.10 "Joint Committee Agreement" . . . . . . . . . . . 6 1.11 "Legal Requirements" . . . . . . . . . . . . . . . 6 1.12 "Major Contract" . . . . . . . . . . . . . . . . . 7 1.13 "MEAG" . . . . . . . . . . . . . . . . . . . . . . 8 1.14 "New Investment Budget" . . . . . . . . . . . . . 8 1.15 "New Investment Services" . . . . . . . . . . . . 8 1.16 "NRC" . . . . . . . . . . . . . . . . . . . . . . 9 1.17 "Nuclear Interface Procedure" . . . . . . . . . . 9 1.18 "Nuclear Managing Board", "Managing Board" or "Board". . . . . . . . . . . . . . . . . . . . . . 9 1.19 "Nuclear Operating Agreement" . . . . . . . . . . 9 1.20 "Nuclear Operating Services" . . . . . . . . . . . 9 1.21 "Nuclear Services Agreement" . . . . . . . . . . . 10 i 1.22 "Nuclear Services Contractor" . . . . . . . . . . 10 1.23 "Nuclear Support Services" . . . . . . . . . . . . 10 1.24 "OEMC" . . . . . . . . . . . . . . . . . . . . . . 10 1.25 "Oglethorpe" . . . . . . . . . . . . . . . . . . . 10 1.26 "Operating Agent" . . . . . . . . . . . . . . . . 11 1.27 "Operation and Maintenance Budget" . . . . . . . . 11 1.28 "Operation and Maintenance Services" . . . . . . . 11 1.29 "Participant" or "Participants" . . . . . . . . . 12 1.30 "Participants' Agent" . . . . . . . . . . . . . . 12 1.31 "Participation Agreements" . . . . . . . . . . . . 12 1.32 "Plant Hatch" . . . . . . . . . . . . . . . . . . 13 1.33 "Plant Vogtle" . . . . . . . . . . . . . . . . . . 14 1.34 "Prudent Utility Practice" . . . . . . . . . . . . 14 1.35 "Requisite Owner Action" . . . . . . . . . . . . . 14 1.36 "Services Plan" . . . . . . . . . . . . . . . . . 15 1.37 "Southern Electric System" . . . . . . . . . . . . 15 1.38 "Southern Nuclear" . . . . . . . . . . . . . . . . 15 1.39 "Southern Services" . . . . . . . . . . . . . . . 16 1.40 "Strategic Plan" . . . . . . . . . . . . . . . . . 16 1.41 "The Southern Company" . . . . . . . . . . . . . . 16 1.42 "Undivided Ownership Interest" . . . . . . . . . . 16 ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.0 Nuclear Managing Board . . . . . . . . . . . . . . 16 2.1 Establishment and Members of the Nuclear Managing Board. . . . . . . . . . . . . . . . . . . . . . . 16 ii 2.2 Authority of the Board . . . . . . . . . . . . . . 17 2.3 Functions of the Board . . . . . . . . . . . . . . 17 2.4 Actions of the Board . . . . . . . . . . . . . . . 24 2.5 Chairman of the Board . . . . . . . . . . . . . . 24 2.6 Duties of the Chairman of the Board . . . . . . . 25 2.7 Minutes of Meetings . . . . . . . . . . . . . . . 27 2.8 Expenses . . . . . . . . . . . . . . . . . . . . . 28 2.9 Procedures . . . . . . . . . . . . . . . . . . . . 28 2.10 Attendees at Meetings . . . . . . . . . . . . . . 28 2.11 Delegation of Authority . . . . . . . . . . . . . 29 2.12 Subcommittees . . . . . . . . . . . . . . . . . . 29 ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.0 Responsibilities of the Participants' Agent . . . 29 ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.0 Strategic Plans and Budgets . . . . . . . . . . . 31 4.1 Strategic Plans . . . . . . . . . . . . . . . . . 32 4.2 Fuel Plan . . . . . . . . . . . . . . . . . . . . 36 4.3 Operation and Maintenance Budget . . . . . . . . . 37 4.4 New Investment Budget . . . . . . . . . . . . . . 37 4.5 Fuel Budget . . . . . . . . . . . . . . . . . . . 38 ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . 39 5.0 Information and Access . . . . . . . . . . . . . . 39 5.1 Information to Be Provided to the Participants . . 39 iii 5.2 Access to Plant Hatch and Plant Vogtle . . . . . . 48 5.3 Management Audits . . . . . . . . . . . . . . . . 53 5.4 Cost Audits . . . . . . . . . . . . . . . . . . . 54 5.5 Civil Penalties and Meetings . . . . . . . . . . . 55 ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . 55 6.0 Recovery of Costs . . . . . . . . . . . . . . . . 55 ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.0 Relation To Existing Agreements . . . . . . . . . 56 ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . 60 8.0 Term, Termination, and Effective Date . . . . . . 60 ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . 61 9.0 Miscellaneous . . . . . . . . . . . . . . . . . . 61 9.1 Required Approvals . . . . . . . . . . . . . . . . 61 9.2 Further Assurances . . . . . . . . . . . . . . . . 61 9.3 Governing Law . . . . . . . . . . . . . . . . . . 61 9.4 Notice . . . . . . . . . . . . . . . . . . . . . . 61 9.5 Section Headings Not To Affect Meaning . . . . . . 63 9.6 Time of Essence . . . . . . . . . . . . . . . . . 63 9.7 Amendments . . . . . . . . . . . . . . . . . . . . 63 9.8 Successors and Assigns . . . . . . . . . . . . . . 63 9.9 Counterparts . . . . . . . . . . . . . . . . . . . 63 iv 9.10 Computation of Percentage Undivided Ownership Interest . . . . . . . . . . . . . . . . . . . . . 63 9.11 Several Agreements . . . . . . . . . . . . . . . . 64 9.12 Confidentiality . . . . . . . . . . . . . . . . . 64 9.13 Effect on Joint Committee Agreement . . . . . . . 65 9.14 Arbitration . . . . . . . . . . . . . . . . . . . 65 9.15 Accounting Methodology . . . . . . . . . . . . . . 71 EXECUTIONS v AMENDED AND RESTATED NUCLEAR MANAGING BOARD AGREEMENT FOR PLANT HATCH AND PLANT VOGTLE THIS AMENDED AND RESTATED NUCLEAR MANAGING BOARD AGREEMENT FOR PLANT HATCH AND PLANT VOGTLE is made and entered into as of July 1, 1993 among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia; OGLETHORPE POWER CORPORATION, an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated; the MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA, a public corporation and an instrumentality of the State of Georgia; and the CITY OF DALTON, a municipal political subdivision of the State of Georgia, acting by and through its Board of Water, Light and Sinking Fund Commissioners (hereinafter collectively called the "Participants" and individually sometimes called "Participant"). W I T N E S S E T H: WHEREAS, the Participants have previously entered into the Participation Agreements identified in Section 1.31 hereof concerning Plant Hatch and Plant Vogtle pursuant to which Oglethorpe, MEAG and Dalton have irrevocably appointed GPC as their agent in connection with the planning, licensing, design, construction, acquisition, completion, management, control, operation, maintenance, renewal, addition, replacement and disposal for Plant Hatch and Plant Vogtle (hereinafter the "Agency Functions"); and WHEREAS, the Participants have also previously entered into the Joint Committee Agreement, dated as of August 27, 1976, for the purpose of establishing a Joint Committee to coordinate steps taken to implement and administer the agreements identified in Attachment A to the Joint Committee Agreement including, among others, the Participation Agreements; and WHEREAS, the Participants have also previously entered into the Nuclear Managing Board Agreement, dated as of November 12, 1990, which among other things established a Nuclear Managing Board to coordinate the implementation and administration of the Participation Agreements in lieu of the Joint Committee; and WHEREAS, GPC and Southern Nuclear, an affiliate of GPC, have entered into the Nuclear Services Agreement, dated as of October 31, 1991, pursuant to which Southern Nuclear, as the Nuclear Services Contractor, agreed to provide Nuclear Support Services to GPC, which agreement was approved by the Nuclear Managing Board on the conditions that (i) GPC acknowledge that its contract with Southern Nuclear was a subcontract only and would not relieve GPC of any of its responsibilities to the Participants; (ii) GPC would continue to be responsible for its Agency Functions including, without limitation, the management, control, operation and maintenance of Plant Hatch and Plant Vogtle pursuant to the applicable Operating Licenses and Participation Agreements and shall be responsible for the 2 performance of the Nuclear Services Contractor; and (iii) the Nuclear Services Contractor shall become obligated to comply with the applicable terms and conditions of the Nuclear Managing Board Agreement; and WHEREAS, GPC has proposed, subject to all Legal Requirements, to enter into the Nuclear Operating Agreement for Plant Hatch and Plant Vogtle with Southern Nuclear, pursuant to which Southern Nuclear will become the Operating Agent and responsible for the operation and maintenance and the decommissioning of Plant Hatch and Plant Vogtle as the agent of GPC at such time as the NRC has authorized Southern Nuclear to operate and maintain Each Plant. Such proposal of GPC (a) contemplates that at the time that Southern Nuclear becomes the Operating Agent, the Nuclear Services Agreement will be terminated and (b) is made on the conditions that (i) GPC acknowledges that the Nuclear Operating Agreement is a subcontract only and does not relieve GPC of any of its responsibilities to the Participants; (ii) GPC shall continue to be responsible to the Participants for its Agency Functions, including, without limitation, the operation and maintenance and the decommissioning of Plant Hatch and Plant Vogtle pursuant to the Participation Agreements and shall be responsible for the performance of the Operating Agent; and (iii) the Operating Agent shall be obligated to comply with the applicable terms of this Amended and Restated Nuclear Managing Board Agreement; and 3 WHEREAS, the other Participants are willing to accept the foregoing proposal made by GPC upon the stated conditions thereof; and WHEREAS, the Participants now desire to enter into the Amended and Restated Nuclear Managing Board Agreement in order to implement the foregoing proposal of GPC upon the stated conditions thereof and to provide that the Board shall have the authority to administer the Nuclear Operating Agreement in the manner hereinafter set forth. NOW THEREFORE, in consideration of the premises and the mutual undertakings stated herein, the parties hereto intending to be legally bound do hereby agree as follows: ARTICLE I DEFINITIONS 1.0 Definitions. As used herein, the following terms and phrases shall have, respectively, the following meanings: 1.1 "Agency Functions" means the functions of the Participants' Agent described in the first recital of this Agreement. 4 1.2 "Agreement" shall mean the Amended and Restated Nuclear Managing Board Agreement unless the text clearly indicates otherwise. 1.3 "Dalton" shall mean the City of Dalton, Georgia, acting by and through its Board of Water, Light and Sinking Fund Commissioners, and their respective successors and assignees. 1.4 "Each Plant" shall mean and refer to, respectively, Plant Hatch and Plant Vogtle individually; provided, that should activities concerning Plant Hatch or Plant Vogtle be undertaken with respect to one unit of such plant individually, the phrase Each Plant means and refers to that unit and related common facilities. 1.5 "Fuel Budget" shall mean the budget described in Section 4.5 hereof. 1.6 "Fuel Plan" shall mean the plan described in Section 4.2 hereof. 1.7 "Fuel Services" shall mean work related to supplying and managing the nuclear fuel for Each Plant including, without limitation, planning, procurement, contract administration, fuel cycle design, fuel core and assembly design, fuel quality assurance, nuclear materials management and all activities 5 relating to procurement, conversion, enrichment, fabrication, transportation, installation, monitoring, repairing, storage, reprocessing and disposal of uranium, nuclear fuel, related materials and waste products. 1.8 "Governmental Authority" shall mean any local, state, regional or federal legislative, regulatory, administrative, legal, judicial, or executive agency, commission, department or other entity, and any person acting on behalf of any such entity. 1.9 "GPC" shall mean Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia, and its successors and assigns. 1.10 "Joint Committee Agreement" shall mean the Joint Committee Agreement among GPC, OEMC, MEAG and Dalton, dated as of August 27, 1976, as amended. 1.11 "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, written agreements, regulations and requirements of or issued by every Governmental Authority having jurisdiction over the matter in question, whether federal, regional, state or local, which may be applicable to the Operating Agent or any of the Participants, or to Plant Hatch or to Plant Vogtle or any of the real or personal property 6 comprising Plant Hatch or Plant Vogtle, or to Nuclear Operating Services, or to Nuclear Support Services, or the use, occupancy, possession, operation, maintenance, construction, decommissioning, acquisition, installation, alteration, replacement, reconstruction or disposal of Each Plant or any part thereof. 1.12 "Major Contract" shall mean (i) any contract for the procurement of a firm supply (excluding any options) of natural or enriched uranium (U3O8 or UF6) from foreign or domestic sources over a term of greater than five years and in an aggregate amount of greater than $50 million, (ii) any contract for the procurement from domestic or foreign sources of uranium enrichment services or fuel fabrication services (which may or may not include fuel core design services) over a term of greater than five years and in an aggregate amount of greater than $50 million, (iii) any contract for the procurement of major items of equipment (e.g., steam generators or reactor coolant pumps) in an amount of greater than $30 million for any single item of equipment, (iv) any contract for the procurement of outage services over a term of greater than five years and in an aggregate amount of greater than $50 million, or (v) any contract which will require the expenditure by Southern Nuclear (including any charges associated with a termination of such contract by Southern Nuclear without cause) in an amount of $50 million in any one year or an aggregate amount of $100 million; provided, 7 however, that if any contract permits the Operating Agent to cancel such contract on less than one year's advance notice, and the Operating Agent is not obligated to pay a fee or charge for the exercise of such cancellation alone, then the term of such contract for purposes of determining whether such contract is a Major Contract shall be the minimum term which could result if the Operating Agent were to exercise such cancellation right. 1.13 "MEAG" shall mean the Municipal Electric Authority of Georgia, a public corporation and an instrumentality of the State of Georgia, and its successors and assigns. 1.14 "New Investment Budget" shall mean the budget described in Section 4.4 hereof. 1.15 "New Investment Services" shall mean work undertaken with respect to Each Plant that relates to the planning, design, licensing, acquisition, construction, completion, renewal, improvement, addition, replacement, repair, retirement, enlargement or modification of any Unit of Property as described in the Retirement Unit Manual of the Southern Electric System, including any amendments thereof as may from time to time be appropriate or necessary to comply with Legal Requirements, under circumstances where expenditures for such work are to be capitalized in accordance with the Electric Plant Instructions of the Uniform System of Accounts prescribed for Class A and B 8 Public Utilities and Licensees by the Federal Energy Regulatory Commission. 1.16 "NRC" shall mean the United States Nuclear Regulatory Commission or any successor agency authorized to regulate and license utilization facilities pursuant to the Atomic Energy Act of 1954 as amended. 1.17 "Nuclear Interface Procedure" shall have the meaning assigned in Section 2.6 of the Nuclear Operating Agreement. 1.18 "Nuclear Managing Board", "Managing Board" or "Board" shall mean the board established pursuant to Section 2.1 of this Agreement. 1.19 "Nuclear Operating Agreement" shall mean that certain Nuclear Operating Agreement Between Georgia Power Company and Southern Nuclear Operating Company, Inc., dated as of the date hereof, for the procurement of Nuclear Operating Services for the operation and maintenance of Plant Hatch and Plant Vogtle as it may be amended from time to time. 1.20 "Nuclear Operating Services" shall mean New Investment Services, Fuel Services, and Operation and Maintenance Services with respect to Each Plant. 9 1.21 "Nuclear Services Agreement" shall mean that certain Nuclear Services Agreement Between Southern Nuclear Operating Company, Inc. and Georgia Power Company, dated as of October 31, 1991, for the procurement of Nuclear Support Services in support of the operation and maintenance of Plant Hatch and Plant Vogtle which agreement shall be terminated on the effective date of the Nuclear Operating Agreement in accordance with Section 9.2 of the Nuclear Operating Agreement. 1.22 "Nuclear Services Contractor" shall mean the entity who shall provide Nuclear Support Services pursuant to the Nuclear Services Agreement. 1.23 "Nuclear Support Services" shall mean those services to be performed by the Nuclear Services Contractor for the Operating Agent in accordance with the Nuclear Services Agreement. Nuclear Support Services shall not include any activity which is required by the NRC operating licenses to be performed directly by the licensee. 1.24 "OEMC" shall mean the Oglethorpe Electric Membership Corporation, now known as Oglethorpe Power Corporation. 1.25 "Oglethorpe" shall mean Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under 10 Title 46 of the Official Code of Georgia Annotated, and its successors or assigns. 1.26 "Operating Agent" shall mean the entity licensed by the NRC to operate and maintain Plant Hatch and Plant Vogtle. 1.27 "Operation and Maintenance Budget" shall mean the budget described in Section 4.3 hereof. 1.28 "Operation and Maintenance Services" shall mean work for the Participants relating to the possession, management, control, start up, operation, availability, production of energy, maintenance, modification, shutdown, retirements, and decommissioning, including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, environmental protection, and handling of any source material, special nuclear material or by-product material together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, and all other activity that is not included in or performed as New Investment Services or Fuel Services, but which is required for the operation and maintenance of Each Plant or that may be required to comply with Legal Requirements. 11 1.29 "Participant" or "Participants" shall mean any, some or all of the owners, each of which, as of the effective date of this Agreement, owns an Undivided Ownership Interest in Plant Hatch and Plant Vogtle in the following proportions: Participant Plant Hatch Plant Vogtle GPC 50.1% 45.7% Oglethorpe 30.0% 30.0% MEAG 17.7% 22.7% Dalton 2.2% 1.6% 1.30 "Participants' Agent" shall mean GPC acting on its own behalf and as agent for the other Participants in accordance with the Participation Agreements or any successor to that role appointed pursuant to the applicable Participation Agreements. 1.31 "Participation Agreements" shall mean the following construction, purchase and ownership, and operating contracts concerning Plant Hatch and Plant Vogtle: The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between GPC and OEMC, dated as of January 6, 1975, as heretofore or hereafter amended; The Edwin I. Hatch Nuclear Plant Agreement of Construction between GPC and MEAG, dated as of August 27, 1976, as heretofore or hereafter amended; 12 The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between GPC and MEAG, dated August 27, 1976; The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement, dated as of August 27, 1976, between GPC and Dalton, as heretofore or hereafter amended; The Edwin I. Hatch Nuclear Plant Agreement of Construction, dated as of August 27, 1976, between GPC and Dalton, as heretofore or hereafter amended; The Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among GPC, OEMC, MEAG and Dalton, dated as of August 27, 1976, as heretofore or hereafter amended; The Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase, Amendment, Assignment and Assumption Agreement between GPC and MEAG, dated as of November 16, 1983, as amended by Amendment Number One thereto dated as of April 9, 1985 as heretofore or hereafter amended; The Edwin I. Hatch Nuclear Plant Operating Agreement between GPC and OEMC, dated as of January 6, 1975, as heretofore or hereafter amended; The Edwin I. Hatch Nuclear Plant Operating Agreement between GPC and Dalton, dated as of August 27, 1976, as heretofore or hereafter amended; The Edwin I. Hatch Nuclear Plant Operating Agreement between GPC and MEAG, dated as of August 27, 1976, as heretofore or hereafter amended; and The Alvin W. Vogtle Nuclear Units Numbers One and Two Operating Agreement, dated as of August 27, 1976, among GPC, OEMC, MEAG and Dalton as heretofore or hereafter amended. 1.32 "Plant Hatch" shall mean the Edwin I. Hatch Nuclear Plant, Units 1 and 2, as described more fully in paragraph one and Exhibits B1 and B2 of that certain Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Oglethorpe and GPC dated as of January 6, 1975. 13 1.33 "Plant Vogtle" shall mean the Alvin W. Vogtle Nuclear Plant, Units 1 and 2, as described more fully in paragraph one and Exhibits A1 and A2 of that certain Alvin W. Vogtle Nuclear Units One and Two Purchase and Ownership Agreement, dated as of August 27, 1976, as amended, including any descriptions forwarded to the Participants pursuant to Section 4(g) of that agreement. 1.34 "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction. 1.35 "Requisite Owner Action" shall mean the written approval or disapproval, as the case may be, by those Participants which collectively own Undivided Ownership Interests in the aggregate proportion of not less than eighty-five percent 14 (except as otherwise provided in Section 9.10 hereof), which written approval or disapproval may be signified by the signatures of the members of the Nuclear Managing Board who represent such Participants and are not precluded in participating or taking action pursuant to Section 9.10 hereof to any resolution or motion acted upon by the Board pursuant to Section 2, or by approval of the minutes of any Board meeting. The failure to obtain any approval by Requisite Owner Action in any instance where such approval is required by the terms of this Agreement shall constitute disapproval. 1.36 "Services Plan" shall have the meaning assigned in Section 2.6 of the Nuclear Operating Agreement. 1.37 "Southern Electric System" shall mean the electric utility operating company subsidiaries of The Southern Company and Southern Services, collectively. 1.38 "Southern Nuclear" shall mean Southern Nuclear Operating Company, Inc., a corporation, organized and existing under the laws of the State of Delaware, and its successors and assigns. 15 1.39 "Southern Services" shall mean Southern Company Services, Inc., a corporation organized and existing under the laws of the State of Alabama, and its successors and assigns. 1.40 "Strategic Plan" shall mean the plan containing the information described in Section 4.1 hereof. 1.41 "The Southern Company" shall mean The Southern Company, a corporation organized and existing under the laws of the State of Delaware, the subsidiaries of which include, but are not limited to, GPC, Southern Nuclear and Southern Services. 1.42 "Undivided Ownership Interest" shall mean the interest each Participant owns as a tenant in common with the other Participants in Each Plant. ARTICLE II 2.0 Nuclear Managing Board. 2.1 Establishment and Members of the Nuclear Managing Board. There has been established a Nuclear Managing Board, which consists of a member and an alternate designated by each Participant. As of the effective date of this Agreement, the Board shall have the authorities, powers, and functions hereinafter provided. Each Participant having given written 16 notice of its designated member and alternate to all other Participants, each Participant may change its designated member or alternate effective upon delivery of written notice of such change to the other Participants. Each member of the Board shall be authorized to represent the Participant which appointed him or her and shall have the authority to obligate such Participant as hereinafter provided or as may otherwise be granted by such Participant in writing, a copy of which writing shall be furnished to all other members of the Board. In the event any member of the Board is unable to attend any meeting of the Board, the designated alternate for such member shall have the full power and authority of such member to act for and obligate the Participant which such member represents. 2.2 Authority of the Board. The Nuclear Managing Board shall have all authority and power necessary to perform the functions delegated to it by Section 2.3 hereof and any other authority explicitly delegated to it by this Agreement. Such authority shall be exercised by the Board in the manner as hereinafter provided in this Agreement. 2.3 Functions of the Board. The Nuclear Managing Board shall perform the following functions: 17 2.3.1 Implement and administer the Participation Agreements in accordance with the terms of such agreements, respectively. 2.3.2 Administer the previously approved Nuclear Services Agreement and administer the Nuclear Operating Agreement, which the Managing Board has approved. Approve by Requisite Owner Action i) any amendment of either of such agreements and any other contract between the Participants' Agent and Southern Nuclear whereby Southern Nuclear performs Nuclear Operating Services for and on behalf of the Participants' Agent and all changes to any such contract, and ii) a consent by the Participants' Agent to any assignment made pursuant to Section 11.3 of the Nuclear Operating Agreement; provided that approval of any of the foregoing which is necessary to comply with Legal Requirements shall not be unreasonably withheld. 2.3.3 Review and provide input to the Operating Agent prior to execution of (and the Participants may audit from time to time pursuant to Section 5.4 hereof) any of the 18 following agreements and any amendments thereof, provided that the Operating Agent shall have full authority to execute such agreements or amendments in its sole discretion after giving consideration to any comments of the Managing Board or any member thereof: 1) All Services Plans between Southern Nuclear and the Participants' Agent; 2) Except as to any agreement for which Managing Board approval is required hereunder, any agreement between Southern Nuclear and any entity with which it is affiliated (as defined by the Public Utility Holding Company Act of 1935, as amended, or regulations promulgated thereunder) entered into after the effective date of the Nuclear Operating Agreement. Southern Nuclear shall give timely notice to each Participant of the initiation of any proceeding before the U. S. Securities and Exchange Commission for the purpose of reviewing amendments to existing 19 contracts or any new contract between Southern Nuclear and any of its affiliates and shall not contest the standing of any Participant to intervene in any such proceeding. 2.3.4 Approve by Requisite Owner Action the following actions or functions of the Operating Agent. 1) The execution after the effective date of the Nuclear Operating Agreement of any Major Contract; provided, however, that if approval by Requisite Owner Action is not obtained after any such Major Contract has been submitted to the Nuclear Managing Board, then any Participant may request that such Major Contract be submitted to the chief executive officers (CEOs) of the Participants for resolution by Requisite Owner Action. 2) The taking of any action by the Operating Agent with respect to the sale, lease or disposal of any real or 20 personal property owned individually or jointly by any or all of the Participants; provided, however, that Board approval shall not be required before the Operating Agent takes any action to replace any facilities, equipment or materials with facilities, equipment or materials, as the case may be, of like kind and of value at least equal to that of the replaced facilities, equipment or materials; and provided further that this Section 2.3.4(2) shall not apply to actions taken pursuant to (a) NRC regulations respecting decommissioning (i.e., 10 C.F.R. Sections 50.75 or 50.82, or any successor regulations thereto), or (b) a decision to retire either or both units of Each Plant made in accordance with the Participation Agreements. Nothing in this Section 2.3.4(2) shall be construed as an authorization by the Managing Board for the Operating Agent to take any action inconsistent with plans and budgets adopted in accordance with Article IV hereof. 21 2.3.5 Conduct or undertake such studies, investigations or audits which the Board determines are appropriate or useful in carrying out its responsibilities or functions. The Board may employ independent consultants or utilize the personnel or other resources of any Participant for such studies, investigations or audits. The costs of such studies, investigations or audits allocable to Each Plant shall be borne by the Participants in the proportion of their respective ownership shares of such plant. 2.3.6 Review and approve, disapprove or revise and approve the Strategic Plan, the Fuel Plan, the Operation and Maintenance Budget, the New Investment Budget and the Fuel Budget to be submitted annually by the Operating Agent, all pursuant to Sections 4.0 through 4.5 hereof. 2.3.7 Perform those functions described in Sections 4.0, 4.1, 4.3, 4.4, 4.5, 5.1, 5.2, 9.14, and 9.15 hereof. 22 2.3.8 Approve any change from the existing plant basis of allocation of costs in the Southern Nuclear Cost Allocation Manual by Requisite Owner Action; provided, however, that approval of changes caused by Legal Requirements shall not be unreasonably withheld. 2.3.9 Approve the decommissioning plan for Each Plant, filed by the Operating Agent with the NRC, pursuant to 10 C.F.R. Section 50.75(f) or 10 C.F.R. Section 50.82, or any successor NRC regulation or pursuant to any other Legal Requirements, by Requisite Owner Action; provided, however, that approval of a decommissioning plan that meets Legal Requirements shall not be unreasonably withheld. 2.3.10 Approve by Requisite Owner Action the Nuclear Interface Procedure whereby GPC or any other affiliate of Southern Nuclear will provide support services as shall be described in written Services Plans, which shall be subject to Board review and input pursuant to Section 2.3.3 hereof. 23 2.3.11 Perform such other functions as the Participants may in writing delegate to the Board. 2.4 Actions of the Board. In performing the functions described in Section 2.3 hereof, the Nuclear Managing Board shall act by unanimous vote of all members not ineligible to participate in any action pursuant to Section 9.10 hereof except as otherwise provided (i) in Sections 2.3.2, 2.3.3, 2.3.4, 2.3.8, 2.3.9, 2.3.10, 4.0, 4.1, 4.3, 4.4 and 4.5 hereof or (ii) by any of the Participation Agreements, or (iii) any other written agreements as may hereinafter be entered into by all of the Participants. 2.5 Chairman of the Board. So long as GPC is the Operating Agent, the member of the Nuclear Managing Board representing GPC shall be the Chairman of the Board. In the event GPC is not the Operating Agent, then the Chairman of the Board shall be a member of the Board elected by a majority of the members of the Board for a term of twelve consecutive months. On the expiration of such term, the succeeding Chairman of the Board shall be a member of the Board elected by a majority vote of the members of the Board. There shall be no restriction upon the number of terms to which any member of the Board may be elected to serve as Chairman; provided that no member or no member and his or her predecessor representing a single Participant shall be 24 eligible for election as Chairman for more than two successive terms without the consent of all members of the Board. 2.6 Duties of the Chairman of the Board. The Chairman of the Nuclear Managing Board shall have the following duties: 2.6.1 Schedule meetings of the Board at such time and place as the Chairman may determine but not less frequently than once every two months unless all members of the Board shall otherwise agree. With the consent of all members, any meeting of the Board may be conducted by telephone conference and any members of the Board may participate in any meeting by telephone. 2.6.2 Provide notice to all other members of the Board of each scheduled Board meeting thirty days in advance of such meeting except in emergencies or unless all members consent to any shorter notice. 2.6.3 Provide all other members of the Board with a copy of each resolution or motion which the Chairman or any other member proposes to 25 submit to the Board for action at any meeting of the Board at least five business days prior to such meeting, provided such time requirement may be waived by the unanimous vote of all Board members at such meeting. 2.6.4 Preside at each Board meeting and conduct all Board meetings in accordance with the procedures and rules established in accordance with Section 2.9 hereof. 2.6.5 Establish the agenda for each Board meeting, including such items or matters as the Chairman shall deem appropriate or as may be requested by any other member of the Board. 2.6.6 Notify all members of the Board of the agenda for each meeting as much in advance of such meeting as may be possible, but in any event not less than five business days before such meeting. 2.6.7 Appoint a secretary for the Board who shall (i) prepare a draft of the minutes of each Board meeting and deliver or mail a copy of such draft minutes to each member of the 26 Board within five business days after the close of each meeting of Board and (ii) take custody of and maintain the records of all Board meetings. 2.7 Minutes of Meetings. The minutes of each Board meeting shall record the following: 2.7.1 The date, time and place of the meeting; 2.7.2 The agenda of the meeting and the items or matters discussed; 2.7.3 The resolutions and motions approved, actions approved, agreements reached and decisions made by the Board, including the votes of the members of the Board on each of such resolutions, motions, actions, agreements and decisions; 2.7.4 The date, time and place of the next meeting of the Board to be scheduled. Provided, (1) the minutes of any meeting of the Board shall not include any position advanced by any member on any matter which was not adopted by the Board at such meeting for any reason, and 27 (2) any written resolution or motion respecting a budget or Strategic Plan submitted to and approved by the Board shall be immediately effective and binding upon the Participants when the requisite number of members have affixed their signatures to such resolution or motion. At the next succeeding regular meeting at which each Participant is represented, the members of the Board in attendance shall consider the minutes of the preceding regular or called meeting and if they are found in order, shall signify approval of the minutes by affixing their signatures to same. 2.8 Expenses. Each Participant shall be responsible for the personal expenses of its member and alternate of the Nuclear Managing Board at any Board meeting. General meeting expenses shall be the responsibility of the Participant whose member is serving as Chairman at the time the meeting is held. All other expenses necessary in the performance of the Board functions shall be allocated and paid as determined by the Board. 2.9 Procedures. The Nuclear Managing Board shall develop and adopt and from time to time modify manuals or procedures as may be appropriate for the conduct of its meetings and the performance of its functions. 2.10 Attendees at Meetings. Attendance at meetings of the Nuclear Managing Board shall not be limited to members of the Board, but the Participants recognize the practical necessity of 28 limiting the participation of attendees at any Board meeting who are not members to those who are expected to take an active part on the agenda for such meeting. Subject to Legal Requirements, the Chairman, on his own motion or at the request of any member may conduct any portion of any meeting in executive session at which attendance may be restricted to members or their respective alternates and persons invited by the Chairman. 2.11 Delegation of Authority. The Nuclear Managing Board shall not delegate its authority to others. 2.12 Subcommittees. The Nuclear Managing Board shall have the authority to appoint and charge subcommittees to study and make recommendations on any subject. The purpose, charge and duty of each subcommittee so appointed shall not exist for more than one year unless reappointed by the Board. ARTICLE III 3.0 Responsibilities of the Participants' Agent. GPC shall continue to be the Participants' Agent and responsible for its Agency Functions under the Participation Agreements for so long as they shall remain in effect or until GPC has been removed as the Participants' Agent pursuant to the terms of such agreements. 29 Additionally, until the Nuclear Operating Agreement shall become effective, GPC shall continue to be the Operating Agent of Each Plant and in that capacity shall be obligated to operate and maintain Each Plant in accordance with the Participation Agreements and all Legal Requirements and shall comply with the terms hereof, and shall be responsible for the performance of the Nuclear Services Contractor. At such time as the Nuclear Operating Agreement shall become effective, GPC (i) shall cease to be and Southern Nuclear shall become the Operating Agent of Each Plant, but GPC shall continue to be the Participants' Agent, and (ii) shall become responsible for the performance of Southern Nuclear as the Operating Agent of Each Plant in accordance with this Agreement and the Participation Agreements and all Legal Requirements. Upon request from any member of the Board, the Participants' Agent shall advise the Board if additional amounts or scope of coverage of nuclear decontamination and property damage insurance are available to an individual Participant beyond that obtained by the Participants' Agent for Each Plant pursuant to the Participation Agreements; and, at the request of any Participant's member of the Board, the Participants' Agent shall obtain such additional amount or greater scope of coverage for such Participant as may be requested and available; provided that any increase in cost, including without limitation premiums or 30 retrospective premium calls, arising from such additional amount or greater scope of coverage shall be for the account of such Participant. ARTICLE IV PLANS AND BUDGETS 4.0 Strategic Plans and Budgets. By February 1 of each year, each Participant may provide to the Operating Agent input to be used in the formulation of the subsequent year's Strategic Plan and budgets. Strategic Plans, Fuel Plans and budgets shall be prepared and shall be submitted by the Operating Agent to the Nuclear Managing Board as provided in Sections 4.1 through 4.5 below. Plans and budgets shall conform to the requirements and guidelines stated in Appendix "A" attached hereto and made a part hereof and any revisions of such appendix as may be approved by the Board. Within 30 days after submittal, each Strategic Plan, Fuel Plan, Operation and Maintenance Budget, New Investment Budget, and Fuel Budget shall be approved, or revised and approved, by Requisite Owner Action or disapproved by the Board. In the event that the Board disapproves any plan or budget (except when such disapproval is by Requisite Owner Action) within thirty days after submittal, then the item(s) in dispute respecting any plan or budget shall be submitted to the chief executive officers (CEOs) of the Participants for resolution. A Review Group may be appointed by the Board to review all sides of 31 the items in dispute and make a presentation to the CEOs concerning various viewpoints and aspects of such items in dispute. If the CEOs are unable to resolve any item in dispute by Requisite Owner Action within thirty days after submittal to the CEOs, then such unresolved item in dispute shall be resolved by the Participants' Agent in a manner consistent with Prudent Utility Practice and all other elements of such plan or budget shall be deemed approved by the Board and binding on the Participants. 4.1 Strategic Plans. A Strategic Plan for Each Plant consisting of six elements described in Sections 4.1.1 through 4.1.6 shall be submitted by the Operating Agent to the Nuclear Managing Board by May 15 of each year. The Board may, by Requisite Owner Action, separately approve or disapprove individual projects which are classified as planned improvement projects pursuant to Section 4.1.4 below, but shall otherwise approve or disapprove each Strategic Plan in its entirety. In the event the Board shall by Requisite Owner Action disapprove any Strategic Plan in its entirety, the Operating Agent shall as promptly as possible, submit a revised Strategic Plan to the Board for approval or disapproval. In the event the Board shall by Requisite Owner Action disapprove separately one or more planned improvement projects of any Strategic Plan, the Operating Agent may submit to the Board for approval or disapproval a revision of such Strategic Plan with adjustments in any other 32 element that may be affected by the deletion of such disapproved planned improvement projects. The six elements of each Strategic Plan are described in the following Sections 4.1.1 through 4.1.6. 4.1.1 Five-year Operating and Planned Outage Schedule. This schedule shall identify the scheduled operating cycles and planned outages for refueling, maintenance and other work during the succeeding five years. The schedule shall describe in reasonable detail the time and duration of each planned outage and the maintenance and other work planned to be performed during such outage. 4.1.2 Availability and Performance Goals. This section shall contain overall performance goals which have been established for Each Plant, including, without limitation, goals relating to unit availability. 4.1.3 Planned Mandatory Projects. A mandatory project is any project with a total 33 estimated cost in excess of one million dollars or such greater amount as the Board may establish, including any modification, addition or program, which is needed in order to support normal operations (including, without limitation, facilities for spent fuel storage) in accordance with Prudent Utility Practice or in order to comply with regulatory or safety requirements. The associated schedule and estimated annual funding requirements shall be included. 4.1.4 Planned Improvement Projects. An improvement project is any project with a total estimated cost in excess of one million dollars or such greater amount as the Board may establish, including any modification, addition, or program, which is not mandatory as defined in Section 4.1.3 hereof. Examples of such projects include efforts to improve plant performance or conditions such as improved plant capacity or efficiency, enhanced working conditions, and 34 appearance. The associated schedule and estimated annual funding requirements shall be included. 4.1.5 Authorized Level of Staffing. This section shall provide the current authorized number of permanent staff positions in the organizations of the Operating Agent and of the Nuclear Services Contractor which are assigned to Each Plant. Such number of positions shall be broken down by functional areas (e.g., operations, maintenance, administrative, technical, corporate support), shall include positions which are located either on-site or off-site, and shall include all positions regardless of the actual employer. This section shall also show any planned changes in such authorized number of positions over the succeeding five years. 4.1.6 Low Level Radioactive Waste Disposal. This section shall provide information respecting plans for disposal or 35 reduction, or both, of low level radioactive wastes generated at Each Plant, including any plans for onsite disposal. 4.2 Fuel Plan. A ten year Fuel Plan for Plant Hatch and Plant Vogtle shall be submitted to the Nuclear Managing Board by September 15 of each year. Each Fuel Plan shall describe in reasonable detail each action or contemplated action and payment and the dates thereof, core usage and design burn up, estimated fueling dates and the energy expected to be generated by each unit for each fuel period of the Fuel Plan, a cash flow analysis of forecasted expenditures and credits for each Participant for each major component of the fuel cycle by years, and cash flow by months for the first five years. Each Fuel Plan will also provide the following information with respect to the spent fuel at Each Plant: the existing spent fuel storage capacity; the current spent fuel inventory; the projected date when the spent fuel storage capacity will be fully utilized; the projected dates when shipments of spent fuel for disposal will commence; and the projected date when additional spent fuel storage capacity may have to be provided. 4.3 Operation and Maintenance Budget. By August 15 of each year, the Operating Agent shall submit to the Nuclear Managing Board a written Operation and Maintenance Budget 36 estimate of the costs of Operation and Maintenance Services for Each Plant for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Such budget estimate and forecast shall be based on the Strategic Plan unless the Operating Agent determines that deviations from the Strategic Plan are appropriate, in which case, the Operating Agent shall identify such deviations to the Managing Board. The Board may, by Requisite Owner Action, approve or disapprove each budget in its entirety. In the event the Board shall by Requisite Owner Action disapprove an entire budget, the Operating Agent shall as promptly as possible, submit a revised budget to the Board for approval or disapproval. Each budget shall be supported by detail reasonably adequate for the purpose of review by the Board. 4.4 New Investment Budget. By August 15 of each year, the Operating Agent shall submit to the Nuclear Managing Board a written New Investment Budget estimate of the cost of New Investment Services for Each Plant for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Such budget estimate and forecast shall be based on the Strategic Plan unless the Operating Agent determines that deviations from the Strategic Plan are appropriate, in which case, the Operating Agent shall identify such deviations to the Managing Board. The Board may, by Requisite Owner Action, approve or disapprove each budget in its entirety. In the event 37 the Board shall by Requisite Owner Action disapprove an entire budget, the Operating Agent shall as promptly as possible, submit a revised budget to the Board for approval or disapproval. Each budget shall be supported by detail reasonably adequate for the purpose of review by the Board. 4.5 Fuel Budget. By August 15 of each year, the Operating Agent shall submit to the Nuclear Managing Board a written Fuel Budget estimate of the costs of Fuel Services for Each Plant for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. The Board may, by Requisite Owner Action, approve or disapprove each budget in its entirety. In the event the Board shall by Requisite Owner Action disapprove an entire budget, the Operating Agent shall as promptly as possible, submit a revised budget to the Board for approval or disapproval. Each budget shall be supported by detail reasonably adequate for the purpose of review by the Board. 38 ARTICLE V INFORMATION 5.0 Information and Access. The Participants' Agent shall furnish or cause to be furnished information, access to information and access to Plant Hatch and Plant Vogtle and the offices of the Operating Agent and the Nuclear Services Contractor as follows: 5.1 Information to Be Provided to the Participants. Three categories of information, i.e., Formal Routine, Formal Non-routine, and Informal, shall be provided to each member of the Nuclear Managing Board or to the Participants in the manner indicated below: 5.1.1 Formal Routine Information. In addition to the Strategic Plan and budget information provided routinely pursuant to Article IV, information in this category includes: 1) Energy Estimate - By August 15 of each year, the Participants' Agent will furnish a written energy estimate for Each Plant projecting the estimated generation for each unit during the 39 succeeding five calendar years, using the best available data at the time. 2) Plant Performance Data - At the time of submittal of each Strategic Plan, the Operating Agent will also furnish a comparison of the performance of Each Plant relative to other plants using performance indicators, including, without limitation, the unit cost of generation, in common use in the nuclear industry or as may be specified by the Nuclear Managing Board. 3) Plant Budget Reports - The Operating Agent will furnish monthly data showing actual costs for Operation and Maintenance Services, New Investment Services, and Fuel Services with comparisons to the respective budgets for such services. This report will normally be provided by the end of the succeeding month. 4) Plant Specific Strategic Plan Reports At least bimonthly, the Operating Agent 40 will furnish data showing actual performance for each unit at Each Plant compared to goals contained in the Strategic Plan for Each Plant. 5) INPO Evaluations and Assessments - The Operating Agent will make available for review by the representatives of each Participant copies of evaluations and assessments of Each Plant by the Institute of Nuclear Power Operations ("INPO"). 6) NRC and INPO Meetings - Each member of the Board will be notified by the Operating Agent and appropriate representatives of each Participant may attend executive exit meetings of INPO and the NRC as observers. Attendance by Participant representatives as observers at other NRC & INPO meetings with the Operating Agent will be permitted unless (i) such attendance is contrary to the policies of NRC or INPO, or (ii) the management of the Operating Agent requests that Participant 41 representatives not attend in which event any Participant may invoke the procedures specified in Section 5.2.3 hereof. 7) Audit Reports - The Operating Agent will make available for review by the Participants copies of financial or accounting reports concerning Each Plant containing the results of audits by or for GPC, Southern Nuclear, Southern Services or any affiliate of The Southern Company, for any Participant or its affiliates, or by any regulatory agency. 8) Correspondence to and from NRC - The Operating Agent shall furnish to any member of the Board at his or her request copies of all correspondence to and from the NRC concerning Plant Hatch or Plant Vogtle. 9) Meetings with the Board - In order to assure that the members of the Board are informed as to the status of operations 42 at Each Plant, an officer of the Operating Agent, together with any employees or consultants of the Operating Agent as such officer may designate, shall attend each meeting of the Board. At such meetings the Operating Agent shall present information concerning plant performance, the status and condition of Each Plant, including review of the problem status reports, and new capital projects, to convey an overview of Each Plant and its operations and to address items on the agenda for the meeting of the Board. The Operating Agent will inform the Board of events which are affecting or may affect the availability of any unit at Each Plant. 10) Responses to Participant Inquiries - In addition to the obligations of the Operating Agent to provide the information and access as explicitly required herein, the Operating Agent will respond to reasonable written requests from any Participant for 43 information not otherwise provided pursuant to this Agreement regarding Nuclear Operating Services for Each Plant. The Operating Agent will designate a person to be responsible for being responsive to inquiries from the Participants. 11) Incentive Compensation Plan - Operating Agent shall provide to each member of the Board a copy of the incentive compensation plan for its employees described in Section 2.7.1 of the Nuclear Operating Agreement and, with respect to each amendment or revision of such plan, Operating Agent shall consider any comments as may be offered by the Board or such member respecting such plan, but shall have full authority to implement such plan when in its sole discretion it decides it is appropriate to do so. Notwithstanding any other provision of this Agreement, the Operating Agent shall not provide copies of or access to Safeguards Information, as defined in 10 CFR Section 73.2, to any 44 member of the Board, or to any Participant or its employees, agents or contractors unless the Operating Agent is reasonably assured that the provision of such copies or access will not violate 10 CFR Section 73.21 and the person receiving such copies or access can and will comply with paragraphs (b) through (i) of 10 CFR Section 73.21. Information supplied to any member under this Agreement shall not be used in any manner that (a) would compromise any part of the safeguards plan for Each Plant, or (b) would be in contravention of applicable governmental regulations. Information requested by a Participant may not be refused on the grounds that a vendor, contractor or consultant claims such information to be proprietary if such Participant agrees to execute an agreement satisfactory to any such vendor, contractor or consultant to protect such information from unwarranted disclosure. 5.1.2 Formal Non-routine Information. Information in this category which is time sensitive and shall be promptly provided by the Operating Agent to the Participants includes: information on work disruptions or stoppages, and Notices of an Unusual Event, Alert, Site Area Emergency, or General Emergency (as such terms are defined in the emergency plan for Each Plant). The Operating Agent shall also inform the Participants and the dispatcher of 45 the power and energy generated by Each Plant as soon as practical, or in accordance with guidelines acceptable to the Nuclear Managing Board, after the occurrence at Each Plant of any unplanned outage of a unit, any significant extension of a planned unit outage, any unplanned reduction in the capacity of a unit for an extended period, or any event or regulatory action which may substantially affect the operation of Each Plant. Information in this category also includes informal reports concerning events which the Operating Agent believes may result in public interest or may lead to inquiries to Participants by members of the public, and news releases issued by the Participants' Agent, the Operating Agent or the Nuclear Services Contractor. Southern Nuclear shall inform the Nuclear Managing Board of any plan to change the organizational structure of Southern Nuclear to the extent that such change in any way effects the Southern Nuclear personnel who are dedicated to Each Plant and will consider any comments made by the Board, or any member 46 of the Board, respecting such plans, but shall have full authority to implement such plans when in its sole discretion it decides it is appropriate to do so. Southern Nuclear shall also inform the Managing Board of any plans to replace (1) the individual occupying the position of General Manager of Each Plant on the effective date of the Nuclear Operating Agreement, and the successors of such replacement, and (2) any Southern Nuclear officer having responsibility, on the effective date of the Nuclear Operating Agreement, for only Plant Hatch, only Plant Vogtle, or only Plants Hatch and Vogtle, and the successors of such replacement. The Managing Board shall review and the Board, or any member of the Board, may provide input to Southern Nuclear prior to the replacement of such individuals and shall be afforded access, on request, to Southern Nuclear's chief executive and senior nuclear operations officers and the Board of Directors or any of them; provided, however, that Southern Nuclear shall have full authority, in its 47 sole discretion, to make such replacements as it deems appropriate following such review, input and access by the Board; and provided further that such review, input and access shall not be required with respect to any replacement made on a temporary or interim basis to fill any vacancy which arises as a result of any occurrence (e.g., injury, promotion, dismissal or resignation). 5.1.3 Informal Information. Information in this category includes informal communications between representatives of any Participant and the Operating Agent's employees of a general nature and access by such representatives to routine reports and records on plant operations and conditions that are normally readily available at Each Plant. 5.2 Access to Plant Hatch and Plant Vogtle. 5.2.1 Each Participant shall be given the opportunity to have a reasonable number of representatives located at Each Plant ("Site Representatives") for the purpose of 48 observing and reporting to such Participant on plant conditions and activities. Reasonable office space and facilities will be made available to such Site Representatives. If a Participant elects to place representatives on site, such Participant will re-evaluate periodically the need for such onsite representation, and if the Participant determines that there is no longer a need for such onsite representation, the Participant will suspend its onsite representation. 5.2.2 It is a mutual objective of the parties to create and maintain a harmonious working environment so that plant management attention is not diverted from the responsibilities of safe and efficient operations of the plant. Since a Participant can unilaterally exercise its right to have a reasonable number of Site Representatives at Each Plant, it shall be the duty of any Participant that exercises such right to assure that each of its Site Representatives shall cooperate fully with plant management in achieving such mutual objective. In the 49 event that plant management reasonably considers that the conduct of any Site Representative is not conducive to achieving such mutual objective, the Operating Agent may bring such matters to the attention of the management of the Participant which has designated such Site Representative and request that appropriate measures be taken by such Participant to achieve such mutual objective. The management of such Participant in response to any such request shall thereupon take such measures, including at its discretion replacement of such Site Representative, as it deems appropriate to achieve such mutual objective. If issues of a continuing nature arise involving any Site Representative, the Managing Board will review the circumstances and make recommendations as appropriate to the Site Representative's Participant or to the Operating Agent. 5.2.3 As a matter of professional respect and courtesy, and in order to promote good relations with the personnel on site, Site Representatives of any Participant will be 50 invited to attend educational, professional and recreational functions at Each Plant. In order to assure that they are kept informed about management activities, Site Representatives will be provided copies of daily, weekly and monthly reports on plant operations that are routinely distributed to all plant management level personnel. Upon initial assignment, a new Site Representative will be invited by the plant manager to attend as an observer, one of each type of routine management meetings, except those devoted to personnel matters and staff working meetings involving conflict resolution activities where Site Representative presence would be obviously inappropriate that may be held on site, including without limitation meetings of any oversight group such as the Plant Review Board, Independent Safety Engineering Group, Safety Review Board and ALARA Committee. Thereafter, such Site Representative may attend any meeting other than (i) such personnel or conflict resolving meetings, and (ii) any other meetings that the General Manager at Each Plant or his senior 51 management shall reasonably request such Site Representative not attend. If the management of the Participant represented by Site Representatives disagrees that the closure of meetings or types of meetings was reasonable, then the management of such Participant may request the management of the Operating Agent to review the matter. If the management of the Operating Agent concludes that the closure of such meetings was not based on reasonable grounds, the Participant's Site Representative shall be permitted to attend such meetings. If the management of the Operating Agent concludes that the closure was reasonable, and the management of such Participant still disagrees, the matter may be referred to the Managing Board for review and recommendations. 5.2.4 Any Participant shall have the additional right to have its representatives and guests visit Each Plant, with prior approval of the Operating Agent, to tour the facilities and observe plant activities; provided that such visit and tour will not interfere with the operation of the plant, plant safety, or 52 security. Such representatives and guests shall comply with all applicable rules and regulations in effect at the plant whether imposed by Governmental Authority or by the Operating Agent. 5.3 Management Audits. Each Participant shall have the right to conduct management audits, at its own cost, of the performance of the Participants' Agent, the Operating Agent and the Nuclear Services Contractor either by such Participant's own officers and employees or by its duly authorized agents or representatives, including without limitation any auditor utilized by such Participant, or any nationally recognized accounting firm designated by such Participant or by the Administrator of the Rural Electrification Administration. The Participants' Agent, the Operating Agent and the Nuclear Services Contractor shall cooperate with such Participant in the conduct of such audits and, subject to the applicable regulations of the NRC and the requirements of vendors, give such Participant's representatives reasonable access to all contracts, records, and other documents relating to Each Plant. Following any such management audit, the Participants' Agent, the Operating Agent or the Nuclear Services Contractor shall respond to the findings of such audit if requested to do so by such Participant. Management audits by individual Participants shall be coordinated and 53 scheduled through the Participants' Agent so as to minimize the number of audits required. 5.4 Cost Audits. In addition to the right to conduct management audits pursuant to Section 5.3 hereof, each Participant shall have the right to conduct, at its own expense, audits of the costs of Agency Functions, Operation and Maintenance Services, New Investment Services and Fuel Services and any other costs charged to and paid by such Participant. To enable each Participant to conduct such audits, the Participants' Agent, the Operating Agent and the Nuclear Services Contractor will provide, during normal business hours and subject to conditions consistent with the conduct by the Participants' Agent, the Operating Agent and the Nuclear Services Contractor of their respective responsibilities, any Participant, its officers, employees, agents or representatives, including without limitation any auditor utilized by such Participant, or any nationally recognized accounting firm designated by such Participant or by the Administrator of the Rural Electrification Administration, with access to books, records, and other documents of the Participants' Agent, the Operating Agent and the Nuclear Services Contractor related to their respective performance (including, without limitation, all Services Plans, the Nuclear Interface Procedure and agreements between Southern Nuclear and any of its affiliates, and any amendments to the foregoing) and, upon such Participant's reasonable request, 54 copies thereof, which set forth (a) costs applicable to Operation and Maintenance Services, New Investment Services, Fuel Services, and other costs for Each Plant to the extent necessary to enable the auditors of such Participant to verify that the costs have been properly billed to the Participants' Agent or to such Participant pursuant to the provisions of applicable agreements, and (b) matters relating to the design, construction and operation and retirement of Each Plant in proceedings before any Governmental Authority having jurisdiction. 5.5 Civil Penalties and Meetings. In each case when a civil penalty is assessed against the Operating Agent, the Operating Agent shall provide the members of the Nuclear Managing Board with a description of the violation, the root cause determination of the violation, and the corrective action taken and to be taken to avoid repeat violations. The Board upon its request will be provided the opportunity to meet with the Operating Agent's chief executive and senior nuclear operations officers, the Board of Directors or both. The Operating Agent will provide for the Board to meet on the Board's request with the Board of Directors of the Nuclear Services Contractor. ARTICLE VI 6.0 Recovery of Costs. Any costs incurred by Southern Nuclear as the Operating Agent that would have been recoverable 55 from the Participants by GPC under any applicable Participation Agreement shall be recoverable from the Participants subject to the rights of the Participants under such agreement to audit and contest such costs incurred by Southern Nuclear and all remedies provided therein shall be available in the event any Participant shall default in the payment of such costs. ARTICLE VII 7.0 Relation To Existing Agreements. This Agreement, the Nuclear Services Agreement and the Nuclear Operating Agreement are not intended to nor do they modify, amend, or terminate any of the Participation Agreements and do not otherwise alter or impact rights and obligations of the Participants under any such agreements, including, without limitation, the obligations to make payments; the remedies for defaults; the authority and obligation to insure Each Plant; the authority to establish levels of output, to schedule and meter output; entitlements to output; authority to establish retirement dates for Each Plant; authority to repair (following substantial damage or destruction), replace or make additions to Each Plant; the authority to salvage, dispose and decommission Each Plant; the property rights established by the applicable Participation Agreements; and GPC's responsibility and authority as agent of the Participants under such agreements. Specifically, nothing in this Agreement or the Nuclear Services Agreement or the Nuclear 56 Operating Agreement or any other contract between GPC and Southern Nuclear shall be construed or applied to impair GPC's capacity to carry out its Agency Functions or to diminish or add to (i) the liabilities of GPC, or (ii) the remedies of OPC, MEAG and Dalton or any of them established by any of the several Participation Agreements. Therefore, the acts or omissions of employees of Southern Nuclear, including without limitation acts or omissions which constitute a breach of the Nuclear Services Agreement or the Nuclear Operating Agreement, as the case may be, shall be deemed to be, and treated as though they were, acts and omissions of employees of GPC and subject to (i) the same defenses which GPC would have under applicable laws respecting acts and omissions of its employees, and (ii) the same defenses as GPC may have or remedies that OPC, MEAG or Dalton have under the Participation Agreements that would have been applicable if such acts or omissions had been performed by employees of GPC. Nevertheless, so long as they are in effect, the audit, observation and information provisions herein and the budget and plan review and approval procedures contained herein shall supersede the equivalent provisions of and procedures established by the Participation Agreements. Accordingly, the Participants agree that the provisions hereof supersede the following sections of the following agreements: 1) Edwin I. Hatch Nuclear Plant Agreement of Construction dated as of August 27, 1976 between GPC and MEAG, as heretofore amended: Sections 2(h), 2(n), 3(c) and 3(f); 57 2) Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership , Participation Agreement dated as of August 27, 1976 among GPC, OEMC, MEAG and Dalton, as heretofore amended: Sections 4(d), 5(e), and 9(m); 3) Alvin W. Vogtle Nuclear Units Numbers One and Two Operating Agreement dated as of August 27, 1976 among GPC, OEMC, MEAG and Dalton, as heretofore or hereafter amended: Sections 3(c) (other than the last sentence thereof) 3(e), 3(k), 4(e), and 7(n). For as long as they are in effect, the provisions herein respecting Fuel Plans and Fuel Budgets, qualify and take precedence over The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement, dated as of January 6, 1975, between GPC and OEMC, as heretofore amended: Section 5(i). For as long as they are in effect, the provisions herein respecting agreements and contracts between the Participants' Agent and the Nuclear Services Contractor and between the Participants' Agent and the Operating Agent qualify and take precedence over the following: The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement, dated as of January 6, 1975, between GPC and OEMC, as heretofore amended: Section 5(c) insofar as it authorizes GPC to contract with itself or any of its affiliates; The Edwin I. Hatch Nuclear Plant Operating Agreement, dated as of January 6, 1975, between GPC and OEMC, as heretofore, amended: Section l(d) insofar as it authorized GPC to contract with itself or any of its affiliates; The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and Municipal Electric Authority of Georgia dated as of August 27, 1976 as heretofore amended: Section 5(c) insofar as it authorizes GPC to contract with itself or any of its affiliates; 58 The Edwin I. Hatch Nuclear Plant Operating Agreement between Georgia Power Company and Municipal Electric Authority of Georgia, dated as of August 27, 1976 as heretofore amended: Section l(d) insofar as it authorizes GPC to contract with itself or any of its affiliates; The Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and City of Dalton, Georgia dated as of August 27, 1976 as heretofore amended: Section 5(c) insofar as it authorizes GPC to contract with itself or any of its affiliates; The Edwin I. Hatch Nuclear Plant Operating Agreement between Georgia Power Company and City of Dalton, Georgia dated as of August 27, 1976 as heretofore amended: Section i(d) insofar as it authorizes GPC to contract with itself or any of its affiliates; The Alvin W. Vogtle Nuclear Unit Numbers One and Two Purchase and Ownership Participation Agreement, dated as of August 27, 1976, among GPC, OEMC, MEAG and Dalton, as heretofore amended: Section 4(b)(v); and The Alvin W. Vogtle Nuclear Units Numbers One and Two Operating Agreement, dated as of August 27, 1976, among GPC, OEMC, MEAG and Dalton, as heretofore amended: Section 2(b). No portion of any costs paid by GPC to the Nuclear Services Contractor pursuant to the indemnification provision of the Nuclear Services Agreement or to the Operating Agent pursuant to the Nuclear Operating Agreement as a result of a judgment of any court with competent jurisdiction against the Nuclear Services Contractor or the Operating Agent, as the case may be, for any breach of its no adverse distinction obligations under the Nuclear Services Agreement or the Nuclear Operating Agreement, respectively, shall be recoverable from OPC, MEAG and Dalton. No portion of any payment made by GPC to Southern Nuclear for costs incurred by Southern Nuclear for participation in industry groups shall be payable by OPC, MEAG or Dalton unless 59 such participation costs when incurred were reasonably expected to yield a present or future benefit, whether direct, indirect, general or specific, to Plant Hatch or Plant Vogtle, or both. ARTICLE VIII 8.0 Term, Termination, and Effective Date. Subject to Section 9.1 hereof, this Amended and Restated Nuclear Managing Board Agreement shall become effective upon the issuance by the NRC of amendments to the operating licenses for Each Plant in order to add Southern Nuclear to such licenses and to designate Southern Nuclear as the exclusive operating licensee of Each Plant and, unless terminated earlier as provided herein, shall end on June 28, 2014; provided, however, that the term of this Agreement shall be extended after June 28, 2014, from year to year in a fashion coextensive with the continuation of Agency Functions under any of the applicable Participation Agreements and any successor agreements. This Agreement shall be in full force and effect until the expiration of its term as set forth above or until: 1) it has been superseded by a subsequent agreement; or 2) any Participant gives the other Participants ten years advance written notice of its desire to terminate this Agreement, but no such termination shall be effective before July 1, 2009; or 60 3) upon termination of the Participation Agreements, if prior to June 28, 2014. ARTICLE IX 9.0 Miscellaneous. 9.1 Required Approvals. Notwithstanding anything in this Agreement to the contrary, this Agreement shall have no force and effect until (i) it is approved by the Administrator of the Rural Electrification Administration unless such Administrator rules that his approval is not required by law; and (ii) it is approved by the Trustee under each MEAG bond resolution pursuant to which MEAG's interests in Each Plant has been financed. 9.2 Further Assurances. From time to time the Participants will execute such instruments, upon the request of another Participant, as may be necessary or appropriate to carry out the intent of this Agreement. 9.3 Governing Law. The validity, interpretation, and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Georgia. 9.4 Notice. Any notice, request, consent or other communication permitted or required by this Agreement shall be in 61 writing and shall be deemed given when deposited in the United States Mail, first class postage prepaid, and if given to GPC shall be addressed to: Georgia Power Company 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 Attention: President and if given to Oglethorpe shall be addressed to: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer and if given to MEAG shall be addressed to: Municipal Electric Authority of Georgia 1470 Riveredge Parkway, N.W. Atlanta, Georgia 30328 Attention: President and General Manager and if given to Dalton shall be addressed to: The City of Dalton, Georgia P.O. Box 869 Dalton, Georgia 30720 Attention: Chairman, Utilities Commission and if given to Southern Nuclear shall be addressed to: Southern Nuclear Operating Company, Inc. P. O. Box 1299 40 Inverness Center Parkway Birmingham, Alabama 35201 Attention: President unless a different address shall have been designated by the respective Participant by notice in writing. 62 9.5 Section Headings Not To Affect Meaning. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof. 9.6 Time of Essence. Time is of the essence of this Agreement. 9.7 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of the Participants. 9.8 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon each of the Participants and its respective successors and assigns. 9.9 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 9.10 Computation of Percentage Undivided Ownership Interest. Except as may be provided by any Participation Agreement and notwithstanding any other provision of this Agreement, whenever, pursuant to any provision of the Agreement, 63 any action is required to be agreed to or taken by the Nuclear Managing Board or the Participants as to Each Plant (i) only those Participants not in default in the payment of any amounts (together with interest, if appropriate) required under any provisions of any applicable Participation Agreement at the time such action is to be agreed to or taken shall have the right to participate in such agreement or the taking of such action, and (ii) wherever it is provided in this Agreement for approval or disapproval by Requisite Owner Action, the approval or disapproval, as the case may be, of those Participants not in default which collectively own Undivided Ownership Interests in the aggregate proportion of not less than 85 percent of the sum of the Undivided Ownership Interests of all non-defaulting Participants shall be required. 9.11 Several Agreements. Notwithstanding anything to the contrary set forth herein, the agreements and obligations of the Participants set forth in this Agreement shall be the several, not the joint, agreements and obligations of the Participants. 9.12 Confidentiality. Realizing that publication of information furnished hereunder by one Participant to the others may detrimentally affect the furnishing Participant, the Participants pledge to each other to keep confidential all such information furnished and bearing the legend "Proprietary Information" except with the written consent of the furnishing 64 Participant or except when otherwise required by Governmental Authorities, including without limitation the Rural Electrification Administration, having appropriate jurisdiction. In the furtherance of this understanding, the receiving Participant shall obtain, and provide to the furnishing party, a written pledge to this effect from non-member employees, agents and other representatives to whom such data is disclosed and, if such non-member is not a full-time, salaried employee of a Participant, from such non-member's employer. At the specific request of the other party, the disclosing party will endeavor to secure the agreement of such Governmental Authority to maintain specified portions of such information in confidence. Public dissemination of information by the furnishing Participant before or after it is furnished shall constitute a termination of the confidentiality requirement as to that specific information. 9.13 Effect on Joint Committee Agreement. As of the effective date of this Agreement and while this Agreement is in effect, this Agreement shall supersede the Joint Committee Agreement, as amended, with respect to all matters affecting Plant Hatch or Plant Vogtle. 9.14 Arbitration. In the event a dispute arises among the Participants with respect to the implementation of this Agreement and the members of the Nuclear Managing Board and the chief executive officers of the respective Participants cannot agree 65 upon a solution, then any Participant may at its option call for the submittal of any such dispute to non-binding arbitration in accordance with the following procedures: 9.14.1 The Participant calling for arbitration shall give written notice to all other Participants, setting forth in such notice in adequate detail the nature of the dispute, the amount or amounts, if any, involved in such dispute, and the recommendation sought by such arbitration proceedings, and, within twenty days from receipt of such notice, any other Participant may, by written response to the first Participant and all other Participants, submit its statement of the matter at issue and set forth in adequate detail additional related matters or issues to be arbitrated. Thereafter, the Participant first submitting its notice of the matter at issue shall have ten days in which to submit a written rebuttal statement, copies of which shall be given to all other Participants. Within forty days following delivery of the written notice pursuant to Section 9.14.1 hereof, the Nuclear Managing Board shall meet for the purpose of selecting 66 arbitrators. Each member of the Board shall designate one arbitrator (hereinafter "Designated Arbitrator"). The Designated Arbitrators shall meet within twenty days following their designation and shall select an additional independent arbitrator (hereinafter the "Independent Arbitrator"). If the Designated Arbitrators shall fail to select an Independent Arbitrator within said twenty day period, then the Designated Arbitrators shall request from the American Arbitration Association (or a similar organization if the American Arbitration Association should not at the time exist) a list of arbitrators who are qualified and eligible to serve as hereinafter provided. The Designated Arbitrators selected by the Participants shall take turns striking names from the list of arbitrators furnished by the American Arbitration Association, and the last name remaining on said list shall be the Independent Arbitrator. The Independent Arbitrator shall be a person skilled and experienced in the field which gives rise to the dispute, and no person shall be eligible for appointment as the Independent Arbitrator 67 who is an officer, employee, or agent of any of the parties or any affiliate of any of the parties to the dispute or is otherwise interested in the matter to be arbitrated. 9.14.2 Except as otherwise provided in this Section 9.14, the arbitration shall be governed by the rules and practice of the American Arbitration Association (or the rules and practice of a similar organization if the American Arbitration Association should not at that time exist) from time to time in force, except that if such rules and practice, as modified herein, shall conflict with state or Federal law then in force which are specifically applicable to such arbitration proceedings, such law shall govern. 9.14.3 The arbitrators shall hear evidence submitted by the respective Participants and the Independent Arbitrator may call for additional information, which additional information shall be furnished by the Participant having such information. The recommendation of the arbitrators respecting 68 the dispute shall be determined by the Independent Arbitrator with the concurrence of not less than one of the Designated Arbitrators if there are only two of them or two of the Designated Arbitrators if there are more than two of them. 9.14.4 The recommendation of the arbitrators shall not be binding upon the Nuclear Managing Board or the Participants, nor shall the participation of any member of the Board or any Participant in the arbitration be deemed to constitute a waiver of any right, authority, obligation or remedy of such Participant, under this Agreement or any Participation Agreement. 9.14.5 Costs incurred by all of the arbitrators in conduct of any arbitration and the compensation paid to the Independent Arbitrator shall be paid as follows: 1) In the event the recommendations of the Independent Arbitrator are adverse to the Participant or Participants that initiated the arbitration then all of 69 such costs and compensation shall be paid by such Participant or Participants; provided that if two or more Participants have joined in the initiation of such arbitration, they shall share in the payment of such costs and compensation as they shall agree. 2) In the event the recommendations of the Independent Arbitrator are favorable to the Participant or Participants that initiated the arbitration, then each of the Participants that would be affected by the implementation of such recommendations shall pay a proportionate share of such costs equal to its joint ownership share in Each Plant divided by sum of the joint ownership shares in Each Plant of all Participants that are so affected. 9.14.6 All costs incurred by any Participant in participating in any arbitration shall be borne and paid by such Participant without recourse against any other Participant, except in the event that the Independent 70 Arbitrator shall find that any claim of the Participant or Participants that initiated such claim was frivolous or totally without merit, then such initiating Participant or Participants shall reimburse each other Participant for its costs reasonably incurred in its defense against such claim. 9.14.7 No arbitration shall delay performance in accordance with the Nuclear Operating Agreement, any Participation Agreement, this Agreement or any successor agreements with respect to Plant Hatch or Plant Vogtle, or otherwise affect rights arising under any such agreements. 9.15 Accounting Methodology. The agreements reached by the Joint Committee, as reflected in (i) the minutes of the Joint Committee meetings held on August 2, 1984, respecting the methodology for computing GPC's A&G expenses, and on April 18, 1983 and April 15, 1985, respecting the 180-Day Rule, (ii) the minutes of the Joint Subcommittee for Finance and Accounting meeting held November 13, 1986, respecting billing methodology for nuclear fines, (iii) the minutes of the Joint Subcommittee for Power Generation meeting on February 27, 1988, respecting Joint Owners Revenue Allocations and Plant Hatch inventory 71 accounting methodology, (iv) the January 18, 1990, revision to the A&G methodology, (v) the May 8, 1979, Compromise and Settlement Agreement between GPC and MEAG, and (vi) the minutes of the Joint Subcommittee for Finance and Accounting meeting on February 12, 1991, respecting A&G methodology, all of which shall remain in effect insofar as they apply to Plant Hatch or Plant Vogtle until such time as such agreements shall be amended, modified or revoked by the Board, or by GPC and the effected Participants, as appropriate. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers and their respective seals to be affixed as of the day and year first above written. GEORGIA POWER COMPANY By:________________________ Attest: Its:_______________________ _______________________ Secretary OGLETHORPE POWER CORPORATION By:________________________ Attest: Its:_______________________ _______________________ Secretary 72 MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA By:________________________ Attest: Its:_______________________ _______________________ Secretary CITY OF DALTON, GEORGIA By:________________________ Attest: Its:_______________________ _______________________ Clerk BOARD OF WATER, LIGHT AND SINKING FUND COMMISSIONERS By:________________________ Attest: Its:_______________________ _______________________ Clerk 73 APPENDIX "A" STANDARDIZED GUIDELINES FOR MAINTENANCE AND REFUELING OUTAGE SCHEDULES On or before August 15 of each calendar year, the Operating Agent shall prepare and submit to each Participant a written scheduled outage plan for each unit of Each Plant to be used in the Fuel Optimization and Evaluation System process for the ensuing five calendar years. Each plan shall describe in reasonable detail the estimated time and duration of each outage. Should any major changes be made to the maintenance and refueling schedules within a calendar year, the Operating Agent shall provide each Participant with a revised schedule. STANDARDIZED GUIDELINES FOR ENERGY ESTIMATES BY UNIT On or before August 15 of each calendar year, the Operating Agent shall prepare and submit to each Participant a written energy estimate for each unit of Each Plant as currently presented in the energy budget. This energy estimate shall be for the ensuing five calendar years for such units. The energy estimate shall project the estimated operating level of each unit during such period based on economic dispatch. The estimate will be developed utilizing the best available data at the time. 74 STANDARDIZED GUIDELINES FOR OPERATION AND MAINTENANCE BUDGET On or before August 15 of each calendar year, the Operating Agent shall prepare and submit to each Participant a written budget estimate of the costs of Operation and Maintenance Services (other than fuel) anticipated to be incurred for the ensuing five calendar years for each unit of Each Plant. Each budget estimate shall contain those expected costs which are anticipated to be chargeable, under the terms of one or more of the Participation Agreements, to such units including outage costs. Each budget also shall separately identify those costs which are anticipated to be incurred by Southern Nuclear pursuant to agreements with any of its affiliates. Each budget estimate to be submitted under this subsection shall be based on information reasonably available. Each budget shall be supported by detail reasonably adequate for the purpose of each party's review thereof and shall be formatted such that for the next calendar year each month's estimated costs are listed by applicable FERC account numbers. In addition, a report on materials and supplies purchases should be provided for the next calendar year. 75 STANDARDIZED GUIDELINES FOR NEW INVESTMENT BUDGETS On or before August 15 of each calendar year, the Operating Agent shall prepare and submit to each Participant of such jointly-owned plants and associated switchyards a written budget estimate of the costs of New Investment Services (other than nuclear fuel) anticipated to be incurred during the next calendar year at such plant. Also to be included in the New Investment Budget estimate are any associated projects which may be charged to a Participant on the basis of its ownership pursuant to one or more of the Participation Agreements. This budget estimate is to consist of project expenditure ("PE") sheets for each project and a FERC distribution table for each PE. For the five-year forecast period, a summary of estimates of capital expenditures and retirements will be provided. Each budget estimate to be submitted under this subsection shall be based on information reasonably available. Each budget estimate shall be supported by detail reasonably adequate for the purpose of each party's review thereof. The budget shall be formatted such that each month's estimated costs are listed by applicable FERC account number. 76 STANDARDIZED GUIDELINES FOR FUEL PLANS On or before September 15 of each calendar year, the Operating Agent shall prepare and submit to each of the Participants a ten-year fuel management plan for each unit of Each Plant. Each Fuel Plan shall describe in reasonable detail each action or contemplated action and payment and the dates thereof, core usage and design burnup, estimated fueling dates and the energy expected to be generated by each unit for each fuel period of the Fuel Plan, a cash flow analysis of forecasted expenditures and credits for each Participant for each major component of the fuel cycle by years, for the ten-year period covered by the Fuel Plan, and cash flow by months for the first five years of such ten-year plan period. The Operating Agent may amend the Fuel Plan from time to time as it deems appropriate and shall deliver to each of the Participants a copy of such amended Fuel Plan. A narrative of expected activity for the ensuing calendar year at Plants Hatch and Vogtle should be provided. 77 EX-10.A54 5 EXHIBIT 10(A)54 - AM4 12/31/90 SCHERER PUR&OWN AGT-GA,OPC,MEAG,DAL Exhibit 10(a)54 AMENDMENT NUMBER FOUR, DATED AS OF DECEMBER 31, 1990, TO THE PLANT ROBERT W. SCHERER UNITS NUMBER ONE AND TWO PURCHASE AND OWNERSHIP PARTICIPATION AGREEMENT among GEORGIA POWER COMPANY, OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA and CITY OF DALTON, GEORGIA AMENDMENT NUMBER FOUR TO THE PLANT ROBERT W. SCHERER UNITS NUMBER ONE AND TWO PURCHASE AND OWNERSHIP PARTICIPATION AGREEMENT TABLE OF CONTENTS Section No. Page 1. Certain Definitions . . . . . . . . . . . . . . . . . . 2 2. Amendment to Section 1 . . . . . . . . . . . . . . . . . 2 3. Amendment to Section 3(c) . . . . . . . . . . . . . . . 13 4. Amendment to Section 5(e) . . . . . . . . . . . . . . . 14 5. Amendment to Section 5(f) . . . . . . . . . . . . . . . 14 6. Amendment to Section 5(g) . . . . . . . . . . . . . . . 14 7. Amendment to Section 5(h) . . . . . . . . . . . . . . . 14 8. Amendment to Section 5(i) . . . . . . . . . . . . . . . 15 9. Amendment to Section 5(j) . . . . . . . . . . . . . . . 16 10. Amendment to Section 5(k) . . . . . . . . . . . . . . . 17 11. Amendment to Section 5(n) . . . . . . . . . . . . . . . 22 12. Amendment to Section 5(p) . . . . . . . . . . . . . . . 33 13. Amendment to Section 6(g) . . . . . . . . . . . . . . . 44 14. Amendment to Section 9 . . . . . . . . . . . . . . . . . 45 15. Amendment to Section 10(a) . . . . . . . . . . . . . . . 49 16. Effectiveness of this Amendment . . . . . . . . . . . . 49 17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 49 EXHIBITS I. Existing Contracts APPENDIX A. Capital Budget THIS AMENDMENT, dated as of December 31, 1990, is by and among Georgia Power Company ("GPC"), a corporation organized and existing under the laws of the State of Georgia, OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia ("OPC"), the MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA, a public corporation and an instrumentality of the State of Georgia ("MEAG"), and the CITY OF DALTON, GEORGIA, an incorporated municipality in the State of Georgia acting by and through its Board of Water, Light and Sinking Fund Commissioners ("Dalton"), and is Amendment Number Four to that certain Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement, dated as of May 15, 1980 (as previously amended, the "Ownership Agreement"), among GPC, OPC, MEAG and Dalton. W I T N E S S E T H: A. The Participants have previously entered into the Ownership Agreement and have previously entered into the Operating Agreement providing, among other things, for GPC to have sole authority to arrange for and acquire all fossil fuel for the Units and for all Participants and Additional Unit Participants to participate in the Plant Scherer Coal Stockpile. B. The Participants mutually desire to provide that certain Participants and Additional Unit Participants may elect to maintain separate coal stockpiles for accounting and other purposes and for purposes of payment of Separate Coal Stockpile Costs and to provide for such Participants and Additional Unit Participants to procure coal for use in connection with their undivided ownership interests in the Units and the Additional Units. NOW, THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the Participants, intending to be mutually bound among themselves and to the Additional Unit Participants, hereby agree and amend the Ownership Agreement as follows: 1. Certain Definitions. Capitalized terms and phrases used and not otherwise defined in this Amendment shall have the respective meanings assigned to them by the Ownership Agreement, the Operating Agreement, or both, unless the context or use clearly indicates otherwise. All rules of interpretation, construction, or both, set forth in the Ownership Agreement shall apply with equal force and effect to this Amendment. 2. Amendment to Section 1 of the Ownership Agreement. (a) Section 1(h) of the Ownership Agreement is hereby amended to delete the words "a 50% undivided ownership 2 interest in the Plant Scherer Coal Stockpile (provided, however, that from and after any contribution to the Plant Scherer Coal Stockpile pursuant to clause (i) or (ii) of Section 5(p) hereof, only that portion of the Plant Scherer Coal Stockpile that is owned by the owners of undivided ownership interests in Unit No. 2 pursuant to clause (iii) of Section 5(p) hereof shall constitute a part of Scherer Unit No. 2)". (b) Section 1(i) of the Ownership Agreement is hereby amended to delete the words "fuel (including a 50% undivided interest in the Plant Scherer Coal Stockpile)" and "provided, however, that from and after any contribution to the Plant Scherer Coal Stockpile pursuant to clause (i) or (ii) of Section 5(p) hereof, only that portion of the Plant Scherer Coal Stockpile that is owned by the owners of undivided ownership interests in Unit No. 1 pursuant to clause (iii) of Section 5(p) hereof shall constitute a part of Scherer Unit No. 1". (c) Section 1 of the Ownership Agreement is hereby amended by adding the following to the end thereof: (s) COMMON COAL STOCKPILE. "Common Coal Stockpile" shall refer to that portion of the Plant Scherer Coal Stockpile attributable to the ownership interests of the Common Coal Stockpile Participants from time to time pursuant to Section 5(p) of this Ownership Agreement. 3 (t) COMMON COAL STOCKPILE COSTS. "Common Coal Stockpile Costs" shall mean all costs incurred by GPC on its own behalf and as agent for the other Common Coal Stockpile Participants (or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of Section 2(c)(i) of the Operating Agreement) that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for the Common Coal Stockpile, including, without limitation, any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for the Common Coal Stockpile and for which the incurring party has not been otherwise reimbursed by the other Common Coal Stockpile Participants. Common Coal Stockpile Costs shall not include Other Fuel Costs, Separate Coal Stockpile Costs and amortization of the Plant Scherer initial fossil fuel supply, (including, without limitation, unrecoverable base coal). (u) COMMON COAL STOCKPILE PARTICIPANTS. "Common Coal Stockpile Participants" shall mean such Participants and Additional Unit Participants as are participating in the Common Coal Stockpile from time to time pursuant to Section 5(p) of this Ownership Agreement. 4 (v) COMMON PROCUREMENT. "Common Procurement" shall have the meaning assigned in Section 5(n)(i) of this Ownership Agreement. (w) COMMON PROCUREMENT PARTICIPANT. "Common Procurement Participant" shall mean, initially, the Common Coal Stockpile Participants and each Separate Coal Stockpile Participant (i) which has not exercised its rights under Section 2(c)(iii) of the Operating Agreement, Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Three Operating Agreement or Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Four Operating Agreement, (ii) which has not otherwise been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the then Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration), to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board or (iii) which has been reestablished as a Common Procurement Participant pursuant to Section 5(n) hereof. (x) CO-OWNERS' CONSENTS. "Co-Owners' Consents" shall mean those certain Consents, Amendments, and Assumptions Nos. 1-4 dated December 30, 1985 among GPC, OPC, MEAG, Dalton, Gulf Power Company, and Wilmington Trust Company and NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees, and those certain Amendment to Consents, Amendments, and Assumptions Nos. 1-4 dated August 16, 1993, among GPC, OPC, MEAG, Dalton, 5 Gulf Power Company, Jacksonville Electric Authority and Florida Power & Light Company and Wilmington Trust Company and NationsBank of Georgia, as Owner Trustees. (y) FERC. The "FERC" shall mean the Federal Energy Regulatory Commission or any entity succeeding to the powers and functions thereof. (z) GEORGIA INTEGRATED TRANSMISSION SYSTEM. "Georgia Integrated Transmission System" shall mean the integrated transmission system owned by GPC, OPC, MEAG and Dalton and established and operated pursuant to those certain Agreements between GPC and OPC dated as of January 6, 1975 and June 9, 1986, those certain Agreements between GPC and MEAG dated as of August 27, 1976, and those certain Agreements between GPC and Dalton dated as of August 27, 1976, as any one or more of those Agreements may be amended, modified, revised, restated or superseded from time to time, or any successor transmission system thereto. (aa) Governmental Authority. "Governmental Authority" shall mean any local, state, regional or federal administrative, legal, judicial, or executive agency, court, commission, department or other entity, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor, mortgagee and excluding any Participant or Additional Unit Participant. (ab) LESSOR. "Lessor" shall have the meaning assigned in the Co-Owners' Consents. 6 (ac) LESSOR POSSESSION DATE. "Lessor Possession Date" shall have the meaning assigned in the Co-Owners' Consents. (ad) OPERATING AGREEMENT. "Operating Agreement" shall refer to the Plant Robert W. Scherer Units Numbers One and Two Operating Agreement, dated as of May 15, 1980, among GPC, OPC, MEAG and Dalton, as amended as of December 31, 1985 and as of December 31, 1990. (ae) OPERATING COSTS. "Operating Costs" shall mean the aggregate of Scherer Unit No. 1 Operating Costs, Scherer Unit No. 2 Operating Costs and Common Facilities Operating Costs, but shall not include Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs nor any costs and expenses attributable to the Additional Units nor any costs and expenses in connection with the improvement of the land described in Exhibit G of this Ownership Agreement or in connection with the operation, maintenance, care, abandonment or removal of any improvements thereto (whether or not completed). "Scherer Unit No. 1 Operating Costs, "Scherer Unit No. 2 Operating Costs," and "Common Facilities Operating Costs" shall mean, respectively, all costs and expenses incurred by GPC on its own behalf and as agent for the other Participants in respect of the management, control, operation or maintenance of (i) Scherer Unit No. 1, in the case of Scherer Unit No. 1 Operating Costs, (ii) Scherer Unit No. 2, in the case of Scherer Unit No. 2 Operating Costs, and (iii) the Plant Scherer Common Facilities, in the case of Common Facilities Operating Costs, in each case including without limitation that 7 portion of administrative and general expenses incurred by GPC which is properly and reasonably allocable to Scherer Unit No. 1, Scherer Unit No. 2, and the Plant Scherer Common Facilities, respectively, for which GPC has not been otherwise reimbursed by the other Participants, and which are properly recordable in accordance with the Operating Expense Instructions and in appropriate accounts as set forth in the Uniform System of Accounts. (af) OTHER FUEL COSTS. "Other Fuel Costs" shall mean all costs and expenses, other than Common Coal Stockpile Costs and Separate Coal Stockpile Costs, incurred by GPC on its own behalf and as agent for the other Participants and Additional Unit Participants that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of fossil materials required for Plant Scherer, including, without limitation, any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of fossil fuel (other than coal for the Common Coal Stockpile and the Separate Coal Stockpiles) for Plant Scherer. Other Fuel Costs shall not include Common Coal Stockpile Costs, Separate Coal Stockpile Costs and amortization of the Plant Scherer initial fossil fuel supply (including, without limitation unrecoverable base coal). 8 (ag) OWNER TRUSTEE. "Owner Trustee" shall have the meaning assigned in the Co-Owners' Consents. (ah) OWNER TRUSTEE'S COAL SUPPLY. "Owner Trustee's Coal Supply" shall have the meaning assigned in Section 9(x) of this Ownership Agreement. (ai) OWNERSHIP AGREEMENT. "Ownership Agreement" shall refer to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Agreement, dated as of May 15, 1980, among GPC, OPC, MEAG and Dalton, as amended as of December 30, 1985, July 1, 1986, August 1, 1988 and as of December 31, 1990. (aj) PLANT SCHERER MANAGING BOARD AGREEMENT. The "Plant Scherer Managing Board Agreement" shall mean the Plant Scherer Managing Board Agreement, dated as of the date hereof, by and among the Participants and the Additional Unit Participants as such agreement may be amended from time to time. (ak) PLANT SCHERER PARTICIPATION AGREEMENTS. "Plant Scherer Participation Agreements" shall mean this Ownership Agreement, the Operating Agreement, the Unit Three Ownership Agreement, the Unit Three Operating Agreement, the Unit Four Ownership Agreement, the Unit Four Operating Agreement, the Co- Owners' Consents and the Plant Scherer Managing Board Agreement. (al) PRO FORMA OWNERSHIP INTEREST IN PLANT SCHERER. "Pro Forma Ownership Interest in Plant Scherer" shall mean for each Participant and Additional Unit Participant the percentage obtained by dividing by four the sum of (A) such Participant's or Additional Unit Participant's percentage undivided ownership 9 interest, if any, in Scherer Unit No. 1, plus (B) its percentage undivided ownership interest, if any, in Scherer Unit No. 2, plus (C) its percentage undivided ownership interest, if any, in Scherer Unit No. 3, plus (D) its percentage undivided ownership interest, if any, in Scherer Unit No. 4. (am) SEPARATE COAL PROCUREMENT. "Separate Coal Procurement" shall mean the procurement of coal pursuant to the standards and procedures set forth under Section 2(c)(iii) of the Operating Agreement. (an) SEPARATE COAL STOCKPILE. "Separate Coal Stockpile" shall have the meaning assigned in Section 5(p) of this Ownership Agreement. (ao) SEPARATE COAL STOCKPILE COSTS. "Separate Coal Stockpile Costs" shall mean with respect to each Separate Coal Stockpile Participant all costs incurred by GPC as agent for such Separate Coal Stockpile Participant or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of Section 2(c)(i) of the Operating Agreement that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for such Separate Coal Stockpile Participant, including, without limitation, all costs incurred by GPC in administering fuel and transportation contracts entered into by such Separate Coal Stockpile Participant pursuant to any one or more of Sections 5(n) or 5(p) of this Ownership Agreement or Section 2(c)(iii) of 10 the Operating Agreement, and including any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for such Separate Coal Stockpile Participant's Separate Coal Stockpile and for which the incurring party has not otherwise been reimbursed. Separate Coal Stockpile Costs shall not include Common Coal Stockpile Costs, Other Fuel Costs and amortization of the Plant Scherer initial fossil fuel supply, including, without limitation, unrecoverable base coal. (ap) SEPARATE COAL STOCKPILE PARTICIPANT. "Separate Coal Stockpile Participant" shall mean the Participants and Additional Unit Participants making an election to discontinue participation in the Common Coal Stockpile pursuant to Section 5(p) hereof or pursuant to the applicable provisions of the other Plant Scherer Participation Agreements, or which has otherwise entered into an agreement with GPC to become a Separate Coal Stockpile Participant pursuant to subsection (vii) of Section 5(p) of this Ownership Agreement. Such Participants and Additional Unit Participants are referred to individually as a "Separate Coal Stockpile Participant" and collectively as "Separate Coal Stockpile Participants". (aq) SEPARATE PROCUREMENT PARTICIPANT. "Separate Procurement Participant" shall mean each Separate Coal Stockpile Participant (i) which has exercised its rights under Section 11 2(c)(iii) of the Operating Agreement; Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Three Operating Agreement; or Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Four Operating Agreement or (ii) which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration) to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board and which has not been reestablished as a Common Procurement Participant pursuant to Section 5(n) of this Ownership Agreement. (ar) SPOT COAL. "Spot Coal" shall mean all coal purchased for the Common Coal Stockpile or any Separate Coal Stockpile under an arrangement of acquisition for a period of less than one year, or some other period agreed to by the written approval or consent of those members of the Plant Scherer Managing Board which collectively own at least a 76% Pro Forma Ownership Interest in Plant Scherer. (as) UNIFORM SYSTEM OF ACCOUNTS. The "Uniform System of Accounts" shall mean the FERC Uniform System of Accounts prescribed for Public Utilities and Licensees subject to the provisions of the Federal Power Act, as the same now exist or may be hereafter amended by the FERC. (at) UNIT FOUR OPERATING AGREEMENT. "Unit Four Operating Agreement" shall refer to the Plant Robert W. Scherer Unit Number 12 Four Operating Agreement, dated as of December 31, 1990, among GPC, FPL, and JEA as the same may be amended from time to time. (au) UNIT FOUR OWNERSHIP AGREEMENT. "Unit Four Ownership Agreement" shall refer to the Plant Robert W. Scherer Unit Number Four Amended and Restated Ownership Agreement, dated as of December 31, 1990, among GPC, FPL, and JEA as the same may be amended from time to time. (av) UNIT THREE OPERATING AGREEMENT. "Unit Three Operating Agreement" shall refer to the Plant Robert W. Scherer Unit Number Three Amended and Restated Operating Agreement, between GPC and Gulf, dated as of December 31, 1990. (aw) UNIT THREE OWNERSHIP AGREEMENT. "Unit Three Ownership Agreement" shall refer to the Plant Robert W. Scherer Unit Number Three Amended and Restated Ownership Agreement, between GPC and Gulf, dated as of December 31, 1990." 3. Amendment to Section 3(c) of the Ownership Agreement. Section 3(c) of the Ownership Agreement is hereby amended to add the following language to the definition of "Common Facility Cost of Construction" contained therein. In subsection (ii) of the definition, insert the language "prior to the completion of Plant Scherer" directly after the phrase "all amounts paid to SCSI in respect of engineering design services related to Plant Scherer." 13 4. Amendment to Section 5(e) of the Ownership Agreement. Section 5(e) of the Ownership Agreement is hereby amended by adding the following at the end of such Section 5(e). "Notwithstanding the foregoing provisions of this Section 5(e) with respect to information to be provided by GPC and applicable times and dates, the matters set forth in Appendix A attached hereto, as the same may be revised from time to time by agreement among all of the Participants and GPC as agent for the Participants, shall govern and control any such conflicting or contrary provisions of this Section 5(e)." 5. Amendment to Section 5(f) of the Ownership Agreement. Section 5(f) of the Ownership Agreement is hereby amended to delete the words "Fuel Costs" throughout and to substitute the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs" therefor. 6. Amendment to Section 5(g) of the Ownership Agreement. Section 5(g) of the Ownership Agreement is hereby amended to delete the words "and Fuel Costs" throughout and to substitute the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs" therefor. 7. Amendment to Section 5(h) of the Ownership Agreement. The first sentence of Section 5(h) of the Ownership 14 Agreement is hereby amended to delete the words "and Fuel Costs" and to substitute the words "Common Coal Stockpile Costs (which shall be available only to the Common Coal Stockpile Participants), Separate Coal Stockpile Costs (which shall be available only to each Separate Coal Stockpile Participant with respect to its Separate Coal Stockpile Costs) and Other Fuel Costs" therefor. 8. Amendment to Section 5(i) of the Ownership Agreement. Section 5(i) of the Ownership Agreement is hereby amended as follows: (a) The second sentence of Section 5(i)(iii) of the Ownership Agreement is hereby amended to delete the words "Fuel Costs" and to substitute the words "Common Coal Stockpile Costs or Separate Coal Stockpile Costs, as the case may be, Other Fuel Costs" therefor. (b) The second sentence of Section 5(i)(iv)(1) of the Ownership Agreement is hereby amended to delete the words "Fuel Costs" and to substitute the words "Common Coal Stockpile Costs or Separate Coal Stockpile Costs, as the case may be, Other Fuel Costs" therefor. (c) The second sentence of Section 5(i)(iv)(2) of the Ownership Agreement is hereby amended to delete the words 15 "Fuel Costs" and to substitute the words "Common Coal Stockpile Costs or Separate Coal Stockpile Costs, as the case may be, and Other Fuel Costs" therefor. (d) The first sentence of Section 5(i)(ix) of the Ownership Agreement is hereby amended to delete the words "and Fuel Costs" and to substitute the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs" therefor. (e) The third sentence of Section 5(i)(xii) of the Ownership Agreement is hereby amended to delete the words "Fuel Costs, or both," and to substitute the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs" therefor. 9. Amendment to Section 5(j) of the Ownership Agreement. Section 5(j) of the Ownership Agreement is hereby amended as follows: (a) To delete the words "and Fuel Costs" throughout and to substitute the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs" therefor. (b) To add the following at the end thereof: 16 "Provided, however, in no event shall the provisions of this Section 5(j) apply to any proposed sale of an undivided ownership interest in either or both of the Additional Units." 10. Amendment to Section 5(k) of the Ownership Agreement. Section 5(k) of the Ownership Agreement is hereby amended by deleting such Section 5(k) in its entirety and by substituting, in lieu thereof, the following: (k) Damage or Destruction. Subject to the receipt of all requisite approvals of any Governmental Authority having jurisdiction: (i) Decision to Repair or Reconstruct the Units. In the event the Units (each of which Scherer Unit No. 1 and Scherer Unit No. 2 are defined to include a 50% undivided ownership interest in the Unit Common Facilities) or any portion thereof are damaged or destroyed, and the cost of repairs or reconstruction is estimated to be fully covered by the aggregate amount of insurance coverage procured and maintained by the agent on behalf of the Participants (and for this purpose neither the existence nor the amount of any deductibles shall be taken into account in determining the aggregate amount of insurance coverage) covering such repairs or reconstruction, then, unless Participants owning at least in an aggregate 75% undivided ownership interest in 17 the Units, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Units, determine not to repair or reconstruct the Units, the Units shall be repaired or reconstructed. (ii) Decision not to Repair or Reconstruct the Units. In the event the Units (each of which Scherer Unit No. 1 and Scherer Unit No. 2 are defined to include a 50% undivided ownership interest in the Unit Common Facilities) or any portion thereof are damaged or destroyed, and the cost of repairs or reconstruction is estimated to be more than the aggregate amount of insurance coverage procured and maintained by the agent on behalf of the Participants (and for this purpose neither the existence nor the amount of any deductibles shall be taken into account in determining the aggregate amount of insurance coverage) covering such repairs or reconstruction, then, unless Participants owning at least in an aggregate 75% undivided ownership interest in the Units, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Units, determine to repair or reconstruct the Units, the Units shall not be repaired or reconstructed. (iii) Incomplete Identity of Ownership or Different Undivided Ownership Interests in Unit No. 1 and Unit No. 2. Notwithstanding the foregoing voting provisions, at such times as (a) there is not complete identity of ownership between the Participants which own 18 undivided ownership interests in Unit No. 1 and the Participants which own undivided ownership interests in Unit No. 2, or (b) a Participant owns a percentage undivided ownership interest in Unit No. 1 which is different from such Participant's percentage undivided ownership interest in Unit No. 2 (or owns an undivided ownership interest in either, but not both, of Unit No. 1 and Unit No. 2) a decision not to repair or reconstruct Unit No. 1 shall be made by Participants owning not less than an aggregate 75% undivided ownership interest in Unit No. 1, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in Unit No. 1, a decision not to repair or reconstruct Unit No. 2 shall be made by Participants owning not less than an aggregate 75% undivided ownership interest in Unit No. 2, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in Unit No. 2. (iv) Decision to Repair or Reconstruct the Plant Scherer Common Facilities. In the event the Plant Scherer Common Facilities or any portion thereof are damaged or destroyed, and the cost of repairs or reconstruction is estimated to be fully covered by the aggregate amount of insurance coverage procured and maintained by the agent on behalf of the Participants and Additional Unit Participants (and for this purpose neither the existence nor the amount of any deductibles shall be taken into account in determining the aggregate amount of insurance coverage) 19 covering such repairs or reconstruction, then, unless Participants and Additional Unit Participants owning at least an aggregate 76% undivided ownership interest in the Plant Scherer Common Facilities, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities determine not to repair or reconstruct the Plant Scherer Common Facilities, the Plant Scherer Common Facilities shall be repaired or reconstructed. (v) Decision not to Repair or Reconstruct the Plant Scherer Common Facilities. In the event the Plant Scherer Common Facilities or any portion thereof are damaged or destroyed, and the cost of repairs or reconstruction is estimated to be more than the aggregate amount of insurance coverage procured and maintained by the agent on behalf of the Participants and Additional Unit Participants (and for this purpose neither the existence nor the amount of any deductibles shall be taken into account in determining the aggregate amount of insurance coverage) covering such repairs or reconstruction, then, unless Participants and Additional Unit Participants owning at least an aggregate 76% undivided ownership interest in the Plant Scherer Common Facilities, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities determine to repair or reconstruct the 20 Plant Scherer Common Facilities, the Plant Scherer Common Facilities shall not be repaired or reconstructed. (vi) Reimbursement of the Repairing or Reconstructing Participants and Additional Unit Participants. If as a result of the preceding subsections (i) through (v), Scherer Unit No. 1, Scherer Unit No. 2, the Unit Common Facilities, the Plant Scherer Common Facilities or any combination of them are not to be repaired or reconstructed but one or more Participants or Additional Unit Participants desire the repair or reconstruction thereof, Scherer Unit No. 1, Scherer Unit No. 2, the Unit Common Facilities, the Plant Scherer Common Facilities or any combination thereof, as the case may be, shall be repaired or reconstructed; provided, however, that the Participants or Additional Unit Participants desiring to repair or reconstruct the Scherer Unit No. 1, Scherer Unit No. 2, the Unit Common Facilities, or the Plant Scherer Common Facilities, as the case may be, shall bear the full cost of such repair or reconstruction (after taking into account available insurance proceeds of such Participants and Additional Unit Participants); and provided further, that if any other Participant or Additional Unit Participant should thereafter desire to obtain its entitlement of energy from its Unit or Additional Unit but would not have been able to obtain such entitlement but for the repairs or reconstruction effected pursuant to this paragraph (vi), 21 such other Participant or Additional Unit Participant shall reimburse the repairing or reconstructing Participants and Additional Unit Participants their pro rata share of the net book value of the costs of such repairs or reconstruction, including the cost of capital actually incurred, of such repairing or reconstructing Participant or Additional Unit Participant. Except as otherwise agreed to by the Participants and Additional Unit Participants, the Participants may not repair or reconstruct the Additional Units or the Additional Unit Common Facilities and the Additional Unit Participants may not repair or reconstruct the Units or the Unit Common Facilities." 11. Amendment to Section 5(n) of the Ownership Agreement. Section 5(n) of the Ownership Agreement is hereby amended by deleting such Section 5(n) in its entirety and substituting, in lieu thereof, the following: (n) Fossil Fuel. (i) (A) Coal and Transportation Procurement by GPC - Initiation Until Receipt of Offers. Subject to the provisions of Section 4(c) of this Agreement and the provisions of Sections 2(c) and 4(c) of the Operating Agreement, GPC, on its own behalf and as agent for the other Participants, shall have sole authority to and shall arrange for and acquire all 22 fossil fuel and fuel transportation for the Units consistent with such policies and procedures with respect thereto as may be adopted from time to time by the Plant Scherer Managing Board and shall have sole authority to administer all fuel and fuel transportation standards for fossil fuel for the Units consistent with such standards with respect thereto as may be adopted from time to time by the Plant Scherer Managing Board. GPC, on its own behalf and as agent for the other Participants and Additional Unit Participants, shall procure coal and transportation from time to time for the Common Coal Stockpile and for each of the Separate Coal Stockpile Participants which is at such time a Common Procurement Participant. At such times as GPC deems it appropriate to procure coal or transportation for the Common Coal Stockpile, GPC shall consult with each of the Separate Coal Stockpile Participants which are then Common Procurement Participants to determine their procurement requirements for their Separate Coal Stockpiles and to determine the procurement strategy desired by each of the Common Procurement Participants. At any other time a Separate Coal Stockpile Participant which at such time is also a Common Procurement Participant may request that GPC commence a coal or transportation procurement for the requirements of such Separate Coal 23 Stockpile Participant's Separate Coal Stockpile, and GPC likewise shall consult with the other Separate Coal Stockpile Participants which are then Common Procurement Participants to determine their procurement requirements for their Separate Coal Stockpiles and to determine the procurement strategy desired by each of the other Common Procurement Participants. In each case, GPC, on its own behalf and as agent for the other Common Coal Stockpile Participants and for the Separate Coal Stockpile Participants which are then Common Procurement Participants expressing a desire to participate in such Common Procurement, shall use its reasonable best efforts to develop a procurement strategy to accommodate the requirements and procurement strategies of GPC for the Common Coal Stockpile and of the Separate Coal Stockpile Participants which are then Common Procurement Participants expressing a desire to participate in such Common Procurement; provided, however, that GPC shall not be required to accommodate the requirements or procurement strategy of any Separate Coal Stockpile Participant which is a Common Procurement Participant that is incompatible with the guidelines with respect to Common Procurement adopted from time to time by the Plant Scherer Managing Board or which is incompatible with the requirements or procurement strategy desired 24 by the Common Procurement Participants initiating the Common Procurement. GPC, on its own behalf and as agent for the other Common Coal Stockpile Participants and for the Separate Coal Stockpile Participants which are then Common Procurement Participants electing to participate in such Common Procurement, shall then initiate a Common Procurement in an effort to obtain offers from coal vendors to sell coal, offers from transporters to provide transportation, or both (individually, an "Offer" and collectively, "Offers") to meet the requirements and procurement strategy of GPC for the Common Coal Stockpile and of each of the Separate Coal Stockpile Participants which are Common Procurement Participants electing to participate in such Common Procurement for its Separate Coal Stockpile. (B) Coal and Transportation Procurement by GPC - After Receipt of Offers. Upon receipt of one or more Offers, GPC, on its own behalf and as agent for the other Participants and Additional Unit Participants, shall offer the Separate Coal Stockpile Participants which are Common Procurement Participants electing to participate in such Common Procurement the opportunity to participate in each such Offer. If two or more of such Common Procurement Participants (including, without limitation, GPC on behalf of the 25 Common Coal Stockpile) elect to participate in any particular Offer, GPC, as agent for the Common Coal Stockpile and each Separate Coal Stockpile Participant which is a Common Procurement Participant shall have the right to participate in such Offer up to the proportion that such Common Procurement Participant's Pro Forma Ownership Interest in Plant Scherer bears to the aggregate of the Pro Forma Ownership Interests in Plant Scherer of all Common Procurement Participants electing to participate in such Offer, and for such purpose, in computing GPC's Pro Forma Ownership Interest in Plant Scherer there shall be added to GPC's Pro Forma Ownership Interest in Plant Scherer the Pro Forma Ownership Interest in Plant Scherer of the other Participants and Additional Unit Participants which are then Common Coal Stockpile Participants. If GPC, as agent for the Common Coal Stockpile, or any of the Separate Coal Stockpile Participants which are Common Procurement Participants elect to participate in any such Offer on a timely basis, GPC will negotiate with the supplier of such Offer in an effort to develop final contract terms and conditions satisfactory to GPC, as agent for the Common Coal Stockpile, and the Separate Coal Stockpile Participants which are Common Procurement Participants electing to participate in such Offer, and GPC, as agent for the Common Coal 26 Stockpile, and each participating Separate Coal Stockpile Participant which is a Common Procurement Participant shall enter into a separate contract with such supplier, which contract for such Separate Coal Stockpile Participant shall provide that GPC shall be the exclusive agent on behalf of such Separate Coal Stockpile Participant for the administration of such contract upon such terms and conditions as are satisfactory to GPC; provided, however, that except as otherwise set forth herein and in the Operating Agreement, such Separate Coal Stockpile Participant shall have sole authority, subject to the policies and procedures adopted or revised from time to time by the Plant Scherer Managing Board, to make or direct major economic decisions which are not administrative in nature, including, without limitation, to extend, terminate or renegotiate the contract or exercise options thereunder and to sue the supplier. GPC makes no representation or warranty that any Common Procurement effort will satisfy either the requirements or the procurement strategy of any Participant or Additional Unit Participant, and GPC shall have no liability to any Participant or Additional Unit Participant in these regards. (C) Separate Procurement. Upon (i) exercise by any Separate Coal Stockpile Participant of a Separate 27 Procurement under Section 2(c)(iii) of the Operating Agreement or (ii) violation by any Separate Coal Stockpile Participant, which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration), of any policy or rule for Common Procurement Participants established from time to time by the Plant Scherer Managing Board, such Separate Coal Stockpile Participant shall immediately cease to be a Common Procurement Participant, and GPC shall have no obligation to procure coal or transportation on behalf of such Separate Coal Stockpile Participant other than for Spot Coal. The remaining Common Procurement Participants owning in the aggregate more than 50% Pro Forma Ownership Interest in Plant Scherer out of the total Pro Forma Ownership Interest in Plant Scherer of the then remaining Common Procurement Participants may vote to reestablish such Separate Coal Stockpile Participant's status as a Common Procurement Participant. Otherwise, GPC shall have no obligation to procure coal or transportation on behalf of any Separate Coal Stockpile Participant which has ceased to be a Common Procurement Participant, other than for Spot Coal. A Separate Procurement Participant shall 28 have no right to receive or review any information relating to any Common Procurement effort or any Offers or contracts resulting from a Common Procurement effort except as may otherwise be provided in subsection (i)(E) of this Section 5(n) relating to Spot Coal. (D) Review of Offers. Any Common Procurement Participant that initiates a Common Procurement and any Common Procurement Participant (other than GPC as agent) that elects to review information relating to any Offer shall pay that portion of the costs of the Common Procurement resulting in such Offer in the proportion that such Common Procurement Participant's Pro Forma Ownership Interest in Plant Scherer bears to the aggregate of the Pro Forma Ownership Interests in Plant Scherer of the Common Procurement Participants participating in such Common Procurement or reviewing any information relating to any Offer, whether or not such Common Procurement Participant elects to participate in any such Offer and all other Common Procurement Participants electing to participate in any such Offer (which shall include the Common Coal Stockpile Participants if GPC, as agent for the Common Coal Stockpile, elects to participate in such Offer) shall each pay a portion of such costs computed on the same basis. Upon request, GPC shall inform a Separate Coal Stockpile Participant which is a Common 29 Procurement Participant that did not initiate the subject Common Procurement of the approximate cost to review the information pertaining to the Offer. No Participant or Additional Unit Participant shall use any information furnished to it by or on behalf of GPC, or any other Common Procurement Participant concerning any such Offers in a manner to prejudice the efforts of GPC and the other Common Procurement Participants in any Common Procurement effort. As to any particular information such prohibition shall terminate two years following the date such information was received by such Participant or Additional Unit Participant. (E) Spot Coal Procurement. Notwithstanding the foregoing provisions of this Section 5(n), the provisions of Section 5(p) of this Agreement and the provisions of Section 2(c) of the Operating Agreement, GPC shall be the exclusive agent to act on behalf of itself and all other Participants and Additional Unit Participants for the procurement, transportation and delivery of Spot Coal. All Offers to sell Spot Coal shall be made available to GPC on its own behalf and on behalf of the other then Common Coal Stockpile Participants, and to each Separate Coal Stockpile Participant (whether or not such Separate Coal Stockpile Participant is then a Common Procurement Participant) on the same basis that an Offer under a 30 Common Procurement is made available to the Common Procurement Participants. GPC shall remain a Common Procurement Participant (both as buyer and seller) so long as there remains one or more other Common Procurement Participants. (ii) Each Participant and each Additional Unit Participant shall have the right to make whatever financial arrangements it may desire, whether by lease, security transaction or otherwise, for the discharge of its fossil fuel payment obligations so long as such arrangements do not adversely affect the rights of the other Participants and Additional Unit Participants. (iii) Except as otherwise agreed by the Common Coal Stockpile Participants or as otherwise provided in Sections 3(b) and 3(d) of the Operating Agreement, the Common Coal Stockpile Participants shall pay Common Coal Stockpile Costs and shall own coal in the Common Coal Stockpile in proportion to their respective undivided ownership interests in the Common Coal Stockpile. (iv) Except as otherwise agreed to by the Participants and Additional Unit Participants or as otherwise provided in Section 3(b) and 3(d) of the Operating Agreement, each Separate Coal Stockpile Participant shall pay all Separate 31 Coal Stockpile Costs which are properly and reasonably allocable to such Separate Coal Stockpile Participant's Separate Coal Stockpile, determined in accordance with GPC's standard accounting practices, which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. (v) Except as otherwise agreed to by the Participants and Additional Unit Participants or as otherwise provided in Section 3(b) and 3(d) of the Operating Agreement, the Participants and Additional Unit Participants shall pay Other Fuel Costs and shall own fossil fuel (other than coal allocated to the Common Coal Stockpile and to the Separate Coal Stockpiles) in proportion to their respective Pro Forma Ownership Interest in Plant Scherer. (vi)(A) If on or prior to 30 days following OPC's receipt of approval of this Amendment from the Administrator of the Rural Electrification Administration, any Participant or Additional Unit Participant exercises its election to become a Separate Coal Stockpile Participant, then within six months following the date of the first election by a Separate Coal Stockpile Participant, or (B) if earlier with respect to Section 3(e)(viii) of the Unit Four Operating Agreement GPC shall develop written procedures for Separate 32 Coal Procurement and Common Procurement and shall submit such procedures to the Plant Scherer Managing Board which shall adopt such procedures by vote of Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer within two months of submission or which shall revise such procedures, such revisions to be approved by Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer. In the absence of such adoption or approval of revisions within two months of submission, the procedures submitted by GPC shall go into effect as the procedures adopted by the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Participants and Additional Unit Participants owning at least an aggregate 76% Pro Forma Ownership Interest in Plant Scherer." 12. Amendment to Section 5(p) of the Ownership Agreement. Section 5(p) of the Ownership Agreement is hereby amended by deleting such Section 5(p) in its entirety and by substituting, in lieu thereof, the following: 33 "(p) Common Coal Stockpile and Separate Coal Stockpiles. (i) In order to provide for the ownership by the Participants and the Additional Unit Participants of interests in a Common Coal Stockpile and to provide for the sharing among the Participants and Additional Unit Participants of Common Coal Stockpile Costs, the Participants agree that initially, all Participants and all Additional Unit Participants shall participate in the Common Coal Stockpile. GPC shall cause an adjustment to be made to the account of each Common Coal Stockpile Participant (A) so that the quantity of coal in the Common Coal Stockpile shall thereafter be allocated to the Common Coal Stockpile Participants according to such Common Coal Stockpile Participant's percentage undivided ownership interest in the Common Coal Stockpile as set forth in the following sentence, and (B) so that the average cost per ton or, following a division of the Plant Scherer Coal Stockpile into the Common Coal Stockpile and one or more Separate Coal Stockpiles pursuant to Section 5(p)(iii) of this Agreement, the average cost per British Thermal Unit ("Btu") of the coal in the Common Coal Stockpile is the same for each Common Coal Stockpile Participant, with appropriate charges and credits to be made to the accounts of such 34 Common Coal Stockpile Participants, all in accordance with GPC's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. Following each such allocation, each Common Coal Stockpile Participant shall own a percentage undivided ownership interest in the Common Coal Stockpile in the proportion that such Common Coal Stockpile Participant's Pro Forma Ownership Interest in Plant Scherer bears to the aggregate of all Common Coal Stockpile Participants' Pro Forma Ownership Interest in Plant Scherer. (ii) All Common Coal Stockpile Costs incurred in connection with the Common Coal Stockpile shall be allocated among the Common Coal Stockpile Participants at the time such Common Coal Stockpile Costs are incurred in the same respective percentages of each Common Coal Stockpile Participant's undivided ownership interest from time to time in the Common Coal Stockpile at that particular time and, subject to the provisions of Sections 3(b) and 3(d) of the Operating Agreement, the Common Coal Stockpile Costs shall be paid as provided in Sections 5(f) and 5(n) of this Agreement; provided, however, that at the end of each calendar month, GPC shall cause an adjustment to be made among the Common Coal Stockpile Participants in accordance 35 with the amount of coal (or, following a division of the Plant Scherer Coal Stockpile into the Common Coal Stockpile and one or more Separate Coal Stockpiles pursuant to Section 5(p)(iii) of this Agreement, the amount of Btus) actually consumed by each of the Common Coal Stockpile Participant's undivided ownership interest in each of the Units and each of the Additional Units, all in accordance with GPC's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. All Other Fuel Costs incurred in connection with the Units and the Additional Units shall be allocated among the Participants and Additional Unit Participants at the time such Other Fuel Costs are incurred in the same respective percentages of each Participant's and Additional Unit Participant's Pro Forma Ownership Interest in Plant Scherer at that particular time, and the Other Fuel Costs shall be paid as provided in Sections 5(f) and 5(n) of this Agreement; provided, however, that at the end of each calendar month, GPC shall cause an adjustment to be made among the Participants and Additional Unit Participants in accordance with the amount of fuel (other than coal) actually consumed by each of the Participants and 36 Additional Unit Participants all in accordance with GPC's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. (iii) Each Participant (other than GPC) and each Additional Unit Participant (other than GPC) may elect to discontinue participation in the Common Coal Stockpile by delivery of written notice to GPC of such election not later than 30 days following OPC's receipt of approval of this Amendment from the Administrator of the Rural Electrification Administration. Within six months following the date of the first election by a Separate Coal Stockpile Participant, GPC, as agent for the other Participants and other Additional Unit Participants, shall cause an adjustment to be made to the Common Coal Stockpile and to the account of each Separate Coal Stockpile Participant so that (A) the quantity of coal allocated to the Common Coal Stockpile will equal the percentage undivided ownership interests of the remaining Common Coal Stockpile Participants and so that the quantity of coal allocated to each Separate Coal Stockpile Participant's account will equal its percentage undivided ownership interest in the Common Coal Stockpile at the time such adjustment is made, and (B) the average cost per ton and average cost per Btu 37 for the Common Coal Stockpile and for each Separate Coal Stockpile are the same. GPC shall notify each of the Participants and Additional Unit Participants immediately after such an adjustment has been made of (l) the quantity of coal in the Common Coal Stockpile and in each Separate Coal Stockpile and (2) the average cost per ton and average cost per Btu for the Common Coal Stockpile and for each Separate Coal Stockpile. Thereafter, each Separate Coal Stockpile Participant shall be entitled only to use coal available in its Separate Coal Stockpile account for the operation of its undivided ownership interests in the Units and the Additional Units, and the remaining Common Coal Stockpile Participants shall be entitled to use only coal available in the account of the Common Coal Stockpile for the operation of their undivided ownership interests in the Units and the Additional Units. Except as otherwise provided in subsection (ii) of this Section 5(p), no Participant or Additional Unit Participant shall be required to sell or otherwise supply coal to any other Participant or Additional Unit Participant; however, GPC, on its own behalf and as agent for the other Common Coal Stockpile Participants, and each Separate Coal Stockpile Participant may buy, sell, trade or otherwise supply coal in the Plant Scherer Coal Stockpile from their respective accounts 38 to one another upon such terms as they may agree and upon prior written notice to GPC; provided, however, that all offers to sell coal by a Common Procurement Participant must be offered to all of the Common Procurement Participants on the same basis as an Offer under a Common Procurement. There shall be allocated to each Separate Coal Stockpile Participant's account a portion of subsequent deliveries and associated costs (including, without limitation, "buy-out" costs, if any) from coal contracts identified in Exhibit I hereto (the "Existing Contracts") existing on September 1, 1990 equal to such Separate Coal Stockpile Participant's Pro Forma Ownership Interest in Plant Scherer, and there shall be allocated to each Separate Coal Stockpile Participant's account all coal procured on behalf of such Separate Coal Stockpile Participant by GPC pursuant to Section 5(n) of this Agreement or procured by such Separate Coal Stockpile Participant pursuant to Section 2(c)(iii) of the Operating Agreement; provided, however, that there shall not be added to any Separate Coal Stockpile Participant's Account any additional quantities of coal from Existing Contracts, over and above the deliveries called for from the Existing Contracts, as a result of amendments or modifications to the Existing Contracts after September 1, 1990 without the approval of the Plant 39 Scherer Managing Board by vote of Participants and Additional Unit Participants owning an aggregate of at least 85% Pro Forma Ownership Interests in Plant Scherer. GPC shall account for all coal allocated to the account of each Separate Coal Stockpile Participant and for coal consumed by such Separate Coal Stockpile Participant's undivided ownership interests in the Units and the Additional Units, all in accordance with GPC's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. No Separate Coal Stockpile Participant nor any purchaser of an undivided ownership interest in the Units or the Additional Units from a Separate Coal Stockpile Participant may elect to become a Common Coal Stockpile Participant without the written consent of a majority of the Pro Forma Ownership Interest in Plant Scherer of the then remaining Common Coal Stockpile Participants, including, without limitation, GPC so long as GPC is a Participant or Additional Unit Participant. (iv) Except as otherwise provided in subsection (vi) of this Section 5(p), unless otherwise agreed to by Participants and Additional Unit Participants owning in the aggregate at least an 85% Pro Forma Ownership Interest in Plant Scherer, the Participants recognize 40 and agree, as among themselves and for the benefit of the Additional Unit Participants, that the division of the Common Coal Stockpile and each Separate Coal Stockpile is for the purposes only of accounting, payment and settlement of costs and entitlement to use; that there will be no physical separation of coal at Plant Scherer among the Common Coal Stockpile and the Separate Coal Stockpiles and that the Common Coal Stockpile and the Separate Coal Stockpiles will be physically combined and commingled into one common coal stockpile at Plant Scherer; and that existing coal and future deliveries of coal at Plant Scherer allocated among the Common Coal Stockpile and the Separate Coal Stockpiles will all be physically commingled and may be used for the operation of the undivided ownership interests of any Participant or Additional Unit Participant so long as the account of such Participant or Additional Unit Participant demonstrates that there is sufficient coal credited to its account for such operation. Nothing in this Agreement or the Operating Agreement shall preclude Participants and Additional Unit Participants owning in the aggregate at least an 85% Pro Forma Ownership Interest in Plant Scherer from agreeing, upon such terms and conditions as they may agree to, to physically separate the Plant Scherer Coal Stockpile. 41 (v) All discrepancies between the book inventory and the physical inventory of the Plant Scherer Coal Stockpile shall be charged or credited, as appropriate, among the Common Coal Stockpile and the Separate Coal Stockpiles and to the respective accounts of each Participant and each Additional Unit Participant in accordance with the amount of coal actually consumed by the undivided ownership interests of each Participant and each Additional Unit Participant during the physical inventory period to which such discrepancy relates, all as determined in accordance with GPC's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time except as provided in subsection (viii) of Section 5(p) hereof. (vi) In the event GPC should be removed as agent for the Participants with respect to the Units, the Plant Scherer Common Facilities or both, the Additional Unit Participants shall have the right at any time thereafter, by vote of whatever percentage such Additional Unit Participants may agree to, not to utilize the Plant Scherer Coal Stockpile, the Common Coal Stockpile, or both, and, in such event, none of the other provisions contained in this Section 5(p) shall thereafter apply to the Additional Units or the Additional Unit Participants; provided, however, that 42 the Additional Unit Participants shall not be released from paying Common Coal Stockpile Costs and Separate Coal Stockpile Costs for which such Additional Unit Participants are otherwise obligated under this Section 5(p). (vii) GPC and each of the other Common Coal Stockpile Participants or any purchaser of an undivided ownership interest in the Units or the Additional Units may enter into whatever other arrangements GPC and such other Common Coal Stockpile Participant (or purchaser) may agree to with respect to such Common Coal Stockpile Participant's (or purchaser's) ownership interest in the Common Coal Stockpile, including, without limitation, the creation of further Separate Coal Stockpiles without requiring the consent of any other Participant or Additional Unit Participant, so long as such arrangement provides for Common Coal Stockpile Costs to be paid as contemplated by this Agreement. (viii)(A) If on or prior to 30 days following OPC's receipt of approval of this Amendment from the Administrator of the Rural Electrification Administration, any Participant or Additional Unit Participant exercises its election to become a Separate Coal Stockpile Participant, then within six months following the date of the first election by a Separate Coal Stockpile Participant, or (B) if earlier with 43 respect to Section 6(i)(viii) of the Unit Four Ownership Agreement, GPC shall develop written procedures for Separate Coal Stockpile accounting and Common Coal Stockpile accounting and shall submit such procedures to the Plant Scherer Managing Board which shall adopt such procedures by vote of Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer within two months of submission or which shall revise such procedures, such revisions to be approved by Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer. In the absence of such adoption or approval of revisions within two months of submission, the procedures submitted by GPC shall go into effect as the procedures adopted by the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Participants and Additional Unit Participants owning at least an aggregate 76% Pro Forma Ownership Interest in Plant Scherer." 13. Amendment to Section 6(g) of the Ownership Agreement. The first sentence of the second paragraph of Section 6(g) of the Ownership Agreement is hereby amended to delete the words "and Fuel Costs" and to substitute the words "Common Coal 44 Stockpile Costs, Separate Coal Stockpile Costs, and Other Fuel Costs" therefor. 14. Amendment to Section 9 of the Ownership Agreement. (a) The second sentence of Section 9(u) of the Ownership Agreement is hereby amended to delete the words "Fuel Costs" and to substitute "Common Coal Stockpile Costs, additional Separate Coal Stockpile Costs, additional Other Fuel Costs" therefor. (b) Section 9 of the Ownership Agreement is hereby amended by adding the following new subsection (x) to the end of such Section 9 as follows: "(x) Lessor in Possession. In the event that there occurs a Lessor Possession Date, the Owner Trustee, or any successor to the Owner Trustee's interest in Scherer Unit No. 2, shall become immediately and automatically a Common Coal Stockpile Participant, a Common Dispatch Participant and a Common Procurement Participant for all purposes under this Agreement and under the Operating Agreement. The parties hereto acknowledge that Section 3.1 of the Co-Owners' Consents requires the Owner Trustee to purchase from OPC, and OPC to sell to Owner Trustee, within 120 days after the Lessor Possession Date an amount of coal with a million Btu value equal to X (the "Owner Trustee's Coal Supply"). The amount of coal to be purchased and sold 45 as the Owner Trustee's Coal Supply will be determined by the formula, X = (OT/Y) x Z where: "OT" is equal to the Owner Trustee's Pro Forma Ownership Interest in Plant Scherer; "Y" is equal to the aggregate of the Pro Forma Ownership Interests in Plant Scherer of the then Common Coal Stockpile Participants other than the Owner Trustee (and for this purpose, if there are no Common Coal Stockpile Participants at such time, Y shall be equal to GPC's Pro Forma Ownership Interest in Plant Scherer); and "Z" is equal to the total number of million Btu's in the Common Coal Stockpile (and for this purpose, if there is no Common Coal Stockpile at such time, Z shall be equal to the number of million Btus in GPC's Separate Coal Stockpile); provided, however, if the result of the foregoing calculation would be X = 0, then the Owner Trustee's Coal Supply shall be (and X shall be) equal to the Million Btus in OPC's Separate Coal Stockpile at such time multiplied by a fraction the numerator of which shall be the Owner Trustee's percentage undivided ownership interest in Unit No. 2, and the denominator of which shall be OPC's aggregate 46 percentage undivided leasehold and ownership interest in each of Unit No. 1, Unit No. 2, Unit No. 3 and Unit No. 4 immediately prior to the Lessor Possession Date. If upon a Lessor Possession Date, OPC's coal supply attributable to its interest in Scherer Unit No. 2 is in a Separate Coal Stockpile, the Owner Trustee's Coal Supply shall be calculated as of such Lessor Possession Date and shall immediately and automatically be added to and become a part of the Common Coal Stockpile and shall be accounted for as having been contributed at the then average price per Million Btu of the Common Coal Stockpile. If upon such Lessor Possession Date there are no other Common Coal Stockpile Participants with respect to Scherer Unit No. 2, GPC's coal supply attributable to its interest in Scherer Unit No. 2 shall immediately and automatically be added to and become a part of the Common Coal Stockpile. From and after such Lessor Possession Date, the Owner Trustee shall be a Participant and shall be entitled and subject to the rights and obligations thereof, and the Owner Trustee (and GPC as agent for the Owner Trustee) shall be entitled to use such coal contributed to the Common Coal Stockpile for the benefit of the Owner Trustee even though the purchase and sale of such coal has not been consummated, and from and after such Lessor Possession Date, the Owner Trustee (and its successors and assigns) shall pay its proportionate share of Common Coal Stockpile Costs and Other Fuel Costs. 47 Notwithstanding the foregoing provisions of this Section 9(x), if at such Lessor Possession Date either (i) GPC is no longer a Participant or an Additional Unit Participant, or (ii) GPC has been removed as agent for the Units, and the Additional Unit Participants have discontinued using the Plant Scherer Coal Stockpile; and there is no longer a Common Coal Stockpile for the Units, then the Owner Trustee shall be a Separate Coal Stockpile Participant, the Owner Trustee's Coal Supply shall be equal to OPC's Separate Coal Stockpile as of such Lessor Possession Date multiplied by a fraction, the numerator of which shall be the Owner Trustee's percentage undivided ownership interest in Unit No. 2, and the denominator of which shall be OPC's aggregate percentage undivided leasehold and ownership interest in each of Unit No. 1, Unit No. 2, Unit No. 3 and Unit No. 4 immediately prior to the Lessor Possession Date, and the Owner Trustee shall pay its proportionate share of Separate Coal Stockpile Costs and Other Fuel Costs. OPC hereby agrees to indemnify and hold harmless the other Participants and the Additional Unit Participants (including, without limitation, GPC, as agent, whether it then is or is not a Participant or an Additional Unit Participant) from and against any and all loss, cost, expense or damage (including, without limitation, attorneys' fees and expenses, Cost of Construction, Operating Costs, Separate Coal Stockpile Costs, Common Coal Stockpile Costs or Other Fuel Costs) resulting directly or indirectly from the operation of this subsection, such Lessor's assumption of possession, or both." 48 15. Amendment to Section 10(a) of the Ownership Agreement. Section 10(a) of the Ownership Agreement is hereby amended to delete the last sentence of such Section 10(a). 16. Effectiveness of this Amendment. Neither this Amendment nor any of the obligations of the parties hereto shall be effective until the receipt of all requisite approvals, including, without limitation, the approval of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, the written approval of the Administrator of the Rural Electrification Administration and the approval of all other persons and entities having a right to approve or consent to an amendment to the Ownership Agreement, but upon receipt of such approvals this Amendment and the obligations of the parties hereto shall be effective. The parties hereto agree to use their respective best efforts to expeditiously obtain all such requisite approvals. 17. Miscellaneous. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment may refer to the Ownership Agreement without making specific reference to this Amendment, but nevertheless all such references shall be deemed to include this Amendment unless the context shall otherwise require. 49 This Amendment shall be construed in connection with and as a part of the Ownership Agreement, and all terms, conditions and covenants contained in the Ownership Agreement, except as herein modified, shall be and remain in full force and effect, and the parties hereto agree that they are bound by the terms and conditions of the Ownership Agreement as amended hereby. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but altogether one and the same instrument. [This space intentionally left blank.] 50 IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Amendment under seal as of the date first above written. Signed, sealed and delivered GEORGIA POWER COMPANY in the presence of: ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Title:________________________ Attest: ______________________ Name:_________________________ Title:________________________ (CORPORATE SEAL) Signed, sealed and delivered OGLETHORPE POWER CORPORATION in the presence of: (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Title:________________________ Attest: ______________________ Name:________________________ Title:_______________________ (CORPORATE SEAL) [Signatures continued on next page] 51 [Signatures continued from previous page] Signed, sealed and delivered MUNICIPAL ELECTRIC AUTHORITY in the presence of: OF GEORGIA ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its: _________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) Signed, sealed and delivered CITY OF DALTON, GEORGIA in the presence of: ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its:__________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) Signed, sealed and delivered BOARD OF WATER, LIGHT AND in the presence of: SINKING FUND COMMISSIONERS ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its:__________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) 52 EXHIBIT I EXISTING CONTRACTS The following is a listing of the coal purchase contracts in existence on September 1, 1990. 1. That certain contract effective on March 31, 1977 among Shell Mining Company, A.T. Massey Coal Company, Inc., Marrowbone Development Company and Georgia Power Company as amended on January 3, 1977, September 25, 1979, March 23, 1982, January 28, 1983, December 6, 1983, January 12, 1984, February 19, 1985, September 9, 1985, December 11, 1985, December 18, 1985, March 10, 1987, April 16, 1987, October 30, 1987, November 10, 1987, January 31, 1989, April 18, 1989, April 23, 1990, May 30, 1990, and the undated "Agreement To Provide For the Extension Of Negotiations Between GPC and Shell Mining Company." 2. That certain contract effective December 1, 1987 among Delta Coals Equity Company, Inc., Humphreys Enterprises, Inc., Greater Wise, Inc., Red River Coal Company, Inc., Pardee Coal Company, Inc., Delta Coals, Inc., and Georgia Power Company as amended on November 6, 1987 (Notice of Assignment), November 6, 1987 (Notice of Designation of Agent), November 23, 1987 (Response to Notice of Assignment), June 17, 1988, April 7, 1989, and July 24, 1990. 3. That certain contract effective July 1, 1989 between Mingo Logan Coal Company and Georgia Power Company as amended on August 21, 1990. APPENDIX A TO OWNERSHIP AGREEMENT CAPITAL BUDGET By August 15 of each calendar year, GPC shall use its reasonable best efforts to provide to each Participant a written budget estimate of capital costs anticipated to be incurred for the five-year budget period for Scherer Unit No. 1 and Scherer Unit No. 2. Each budget estimate shall be based on information reasonably available. Also to be included in the capital budget are any projects which may be charged to a Participant on the basis of its ownership pursuant to the Ownership Agreement. This budget estimate is to consist of project estimate sheets for each project. For the five-year budget period, a summary of estimates of capital expenditures and retirements will be provided, the first year by month and the remaining four years by annual total. The date for giving GPC written notice of approval or disapproval of such capital budget estimate shall be September 15 and the date for submission by the Participants of alternative capital budget estimates shall be October 15. All approvals, disapprovals and submissions of alternative capital budgets shall be by the percentages specified in Section 5(e) of the Ownership Agreement. Each budget estimate and final budget estimate shall be in a format such that for the next calendar year each month's estimated costs are listed by reference to the applicable Uniform System of Accounts account number. In addition, each budget estimate and final budget estimate shall be in a format showing expected amounts that the Participant will be billed. Section 5.1 and Appendix A of the Plant Scherer Managing Board Agreement dated as of December 31, 1990, as amended from time to time, shall govern and control any conflicting or contrary provisions of the Ownership Agreement with regard to capital budgets for the Plant Scherer Common Facilities. EX-10.A55 6 EXHIBIT 10(A)55 - AM2 12/31/90 SCHERER OP AGMT-GA,OPC,MEAG,DALT Exhibit 10(a)55 AMENDMENT NUMBER TWO, DATED AS OF DECEMBER 31, 1990, TO THE PLANT ROBERT W. SCHERER UNITS NUMBERS ONE AND TWO OPERATING AGREEMENT among GEORGIA POWER COMPANY, OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA and CITY OF DALTON, GEORGIA AMENDMENT NUMBER TWO TO THE PLANT ROBERT W. SCHERER UNITS NUMBERS ONE AND TWO OPERATING AGREEMENT TABLE OF CONTENTS Section No. Page 1. Certain Definitions . . . . . . . . . . . . . . . . 2 2. Amendment to Create Section 7 . . . . . . . . . . . 2 3. Amendment to Section 2(c) . . . . . . . . . . . . . 13 4. Amendment to Section 3(b) . . . . . . . . . . . . . 25 5. Amendment to Section 3(c) . . . . . . . . . . . . . 35 6. Amendment to Section 3(d) . . . . . . . . . . . . . 36 7. Amendment to Section 3(e) . . . . . . . . . . . . . 37 8. Amendment to Section 3(g) . . . . . . . . . . . . . 38 9. Amendment to Section 3(h) . . . . . . . . . . . . . 38 10. Amendment to Section 3(j) . . . . . . . . . . . . . 39 11. Amendment to Section 3(k) . . . . . . . . . . . . . 42 12. Amendment to Section 4 . . . . . . . . . . . . . . 42 13. Amendment to Section 6(q) . . . . . . . . . . . . . 43 14. Effectiveness of this Amendment . . . . . . . . . . 43 15. Miscellaneous . . . . . . . . . . . . . . . . . . . 43 APPENDICES A. Operating Budget; Maintenance Schedule; Fuel Plan and Scheduling and Dispatching Budget B. Plant Scherer Operations and Maintenance Expenses THIS AMENDMENT, dated as of December 31, 1990, is by and among GEORGIA POWER COMPANY ("GPC"), a corporation organized and existing under the laws of the State of Georgia, OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia ("OPC"), the MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA, a public corporation and an instrumentality of the State of Georgia ("MEAG"), and the CITY OF DALTON, GEORGIA, an incorporated municipality in the State of Georgia acting by and through its Board of Water, Light and Sinking Fund Commissioners ("Dalton"), and is Amendment Number Two to that certain Plant Robert W. Scherer Units Numbers One and Two Operating Agreement, dated as of May 15, 1980 (as previously amended, the "Operating Agreement"), among GPC, OPC, MEAG and Dalton. W I T N E S S E T H: A. The Participants have previously entered into the Operating Agreement and have previously entered into the Ownership Agreement providing, among other things, for fuel procurement by Participants other than GPC as agent for the other Participants and for scheduling and dispatching of the Units. B. The Participants mutually desire to alter and modify certain provisions of the Operating Agreement relating to fuel procurement and relating to scheduling and dispatching of the Units. NOW, THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the Participants, intending to be mutually bound among themselves and to the Additional Unit Participants, hereby agree and amend the Operating Agreement as follows: 1. Certain Definitions. Capitalized terms and phrases used and not otherwise defined in this Amendment shall have the respective meanings assigned to them by the Ownership Agreement, the Operating Agreement, or both, unless the context or use clearly indicates otherwise. All rules of interpretation, construction, or both, set forth in the Operating Agreement shall apply with equal force and effect to this Amendment. 2. Amendment to Create Section 7 of the Operating Agreement. Section 7 of the Operating agreement hereby reads as follows: "7. Certain Definitions. (a) APPLICABLE ACCOUNTING PERIOD. "Applicable Accounting Period" shall mean that period of operation which occasioned the need to incur the particular Operating Cost incurred. Depending on the particular Operating Cost involved, such period may be a 2 month, a calendar year or a longer period. For example, for planned, periodic maintenance of the Units, the Applicable Accounting Period shall be the time since the last planned maintenance outage during which the same or similar maintenance was last conducted. If such a period cannot be readily determined for a particular Operating Cost, then the Applicable Accounting Period shall be the most recent 12 calendar months. (b) COMMON COAL STOCKPILE. "Common Coal Stockpile" shall refer to that portion of the Plant Scherer Coal Stockpile attributable to the ownership interests of the Common Coal Stockpile Participants from time to time pursuant to Section 5(p) of the Ownership Agreement. (c) COMMON COAL STOCKPILE COSTS. "Common Coal Stockpile Costs" shall mean all costs incurred by GPC on its own behalf and as agent for the other Common Coal Stockpile Participants (or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of Section 2(c)(i) of this Operating Agreement) that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for the Common Coal Stockpile, including, without limitation, any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for the Common Coal Stockpile 3 and for which the incurring party has not been otherwise reimbursed by the other Common Coal Stockpile Participants. Common Coal Stockpile Costs shall not include Other Fuel Costs, Separate Coal Stockpile Costs and amortization of the Plant Scherer initial fossil fuel supply (including, without limitation, unrecoverable base coal). (d) COMMON COAL STOCKPILE PARTICIPANTS. "Common Coal Stockpile Participants" shall mean such Participants and Additional Unit Participants as are participating in the Common Coal Stockpile from time to time pursuant to Section 5(p) of the Ownership Agreement. (e) COMMON DISPATCH PARTICIPANT. "Common Dispatch Participant" shall mean those Participants which are not Separate Dispatch Participants. (f) COMMITTING PARTICIPANTS. "Committing Participants" shall have the meaning assigned in Section 3(b)(iii) of this Operating Agreement. (g) COMMON PROCUREMENT. "Common Procurement" shall have the meaning assigned in Section 5(n)(i) of the Ownership Agreement. (h) COMMON PROCUREMENT PARTICIPANT. "Common Procurement Participant" shall mean, initially, the Common Coal Stockpile Participants and each Separate Coal Stockpile Participant (i) which has not exercised its rights under Section 2(c)(iii) of this Operating Agreement, Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Three Operating Agreement or Section 4 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Four Operating Agreement, (ii) which has not otherwise been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the then Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration), to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board or (iii) which has been reestablished as a Common Procurement Participant pursuant to Section 5(n) of the Ownership Agreement. (i) CO-OWNERS' CONSENTS. "Co-Owners' Consents" shall mean those certain Consents, Amendments, and Assumptions Nos. 1-4 dated December 30, 1985 among GPC, OPC, MEAG, Dalton, Gulf Power Company, and Wilmington Trust Company and NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees, and those certain Amendment to Consents, Amendments, and Assumptions Nos. 1-4 dated August 16, 1993, among GPC, OPC, MEAG, Dalton, Gulf Power Company, Jacksonville Electric Authority and Florida Power & Light Company and Wilmington Trust Company and NationsBank of Georgia, N.A., as Owner Trustees. (j) FERC. The "FERC" shall mean the Federal Energy Regulatory Commission or any entity succeeding to the powers and functions thereof. (k) GEORGIA INTEGRATED TRANSMISSION SYSTEM. "Georgia Integrated Transmission System" shall mean the integrated transmission system owned by GPC, OPC, MEAG and Dalton and 5 established and operated pursuant to those certain Agreements between GPC and OPC dated as of January 6, 1975 and June 9, 1986, those certain Agreements between GPC and MEAG dated as of August 27, 1976, and those certain Agreements between GPC and Dalton dated as of August 27, 1976, as any one or more of those Agreements may be amended, modified, revised, restated or superseded from time to time, or any successor transmission system thereto. (l) NONCOMMITTING PARTICIPANTS. "Noncommitting Participants" shall mean as of any particular time, those Participants which at such time are not Committing Participants pursuant to Section 3(b)(iii) of this Operating Agreement. (m) OPERATING AGREEMENT. "Operating Agreement" shall refer to the Plant Robert W. Scherer Units Numbers One and Two Operating Agreement, dated as of May 15, 1980, among GPC, OPC, MEAG and Dalton, as amended as of December 31, 1985 and as of December 31, 1990. (n) OPERATING COSTS. "Operating Costs" shall mean the aggregate of Scherer Unit No. 1 Operating Costs, Scherer Unit No. 2 Operating Costs and Common Facilities Operating Costs, but shall not include Common Coal Stockpile Costs, Separate Coal Stockpile Costs and Other Fuel Costs or any costs and expenses attributable to the Additional Units or any costs and expenses in connection with the improvement of the land described in Exhibit G of the Ownership Agreement or in connection with the operation, maintenance, care, abandonment or removal of any 6 improvements thereto (whether or not completed). "Scherer Unit No. 1 Operating Costs," "Scherer Unit No. 2 Operating Costs," and "Common Facilities Operating Costs" shall mean, respectively, all costs and expenses incurred by GPC on its own behalf and as agent for the other Participants in respect of the management, control, operation or maintenance of (i) Scherer Unit No. 1, in the case of Scherer Unit No. 1 Operating Costs, (ii) Scherer Unit No. 2, in the case of Scherer Unit No. 2 Operating Costs, and (iii) the Plant Scherer Common Facilities, in the case of Common Facilities Operating Costs, in each case including without limitation that portion of administrative and general expenses incurred by GPC which is properly and reasonably allocable to Scherer Unit No. 1, Scherer Unit No. 2, and the Plant Scherer Common Facilities, respectively, for which GPC has not been otherwise reimbursed by the other Participants, and which are properly recordable in accordance with the Operating Expense Instructions and in appropriate accounts as set forth in the Uniform System of Accounts. (o) OTHER FUEL COSTS. "Other Fuel Costs" shall mean all costs and expenses, other than Common Coal Stockpile Costs and Separate Coal Stockpile Costs, incurred by GPC on its own behalf and as agent for the other Participants and Additional Unit Participants that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of fossil materials required for Plant Scherer, including, without limitation, any advance 7 payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of fossil fuel (other than coal for the Common Coal Stockpile and the Separate Coal Stockpiles) for Plant Scherer. Other Fuel Costs shall not include Common Coal Stockpile Costs, Separate Coal Stockpile Costs and amortization of the Plant Scherer initial fossil fuel supply (including, without limitation, unrecoverable base coal). (p) OWNERSHIP AGREEMENT. "Ownership Agreement" shall refer to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Agreement, dated as of May 15, 1980, among GPC, OPC, MEAG and Dalton, as amended as of December 30, 1985, July 1, 1986, August 1, 1988 and as of December 31, 1990. (q) PLANT SCHERER MANAGING BOARD AGREEMENT. The "Plant Scherer Managing Board Agreement" shall mean the Plant Scherer Managing Board Agreement, dated as of the date hereof, by and among the Participants and the Additional Unit Participants as such agreement may be amended from time to time. (r) PLANT SCHERER PARTICIPATION AGREEMENTS. "Plant Scherer Participation Agreements" shall mean the Ownership Agreement, this Operating Agreement, the Unit Three Ownership Agreement, the Unit Three Operating Agreement, the Unit Four Ownership Agreement, the Unit Four Operating Agreement, the Co-Owners' Consents and the Plant Scherer Managing Board Agreement. 8 (s) PRO FORMA OWNERSHIP INTEREST IN PLANT SCHERER. "Pro Forma Ownership Interest in Plant Scherer" shall mean for each Participant and Additional Unit Participant the percentage obtained by dividing by four the sum of (A) such Participant's or Additional Unit Participant's percentage undivided ownership interest, if any, in Scherer Unit No. 1, plus (B) its percentage undivided ownership interest, if any, in Scherer Unit No. 2, plus (C) its percentage undivided ownership interest, if any, in Scherer Unit No. 3, plus (D) its percentage undivided ownership interest, if any, in Scherer Unit No. 4. (t) SEPARATE COAL PROCUREMENT. "Separate Coal Procurement" shall mean the procurement of coal pursuant to the standards and procedures set forth under Section 2(c)(iii) of this Operating Agreement. (u) SEPARATE COAL STOCKPILE. "Separate Coal Stockpile" shall have the meaning assigned in Section 5(p) of the Ownership Agreement. (v) SEPARATE COAL STOCKPILE COSTS. "Separate Coal Stockpile Costs" shall mean with respect to each Separate Coal Stockpile Participant all costs incurred by GPC as agent for such Separate Coal Stockpile Participant or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of Section 2(c)(i) of this Operating Agreement that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for such 9 Separate Coal Stockpile Participant, including, without limitation, all costs incurred by GPC in administering fuel and transportation contracts entered into by such Separate Coal Stockpile Participant pursuant to any one or more of Sections 5(n) or 5(p) of the Ownership Agreement or Section 2(c)(iii) of this Operating Agreement, and including any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for such Separate Coal Stockpile Participant's Separate Coal Stockpile and for which the incurring party has not otherwise been reimbursed. Separate Coal Stockpile Costs shall not include Common Coal Stockpile Costs, Other Fuel Costs and amortization of the Plant Scherer initial fossil fuel supply, including, without limitation, unrecoverable base coal. (w) SEPARATE COAL STOCKPILE PARTICIPANT. "Separate Coal Stockpile Participant" shall mean the Participants and Additional Unit Participants making an election to discontinue participation in the Common Coal Stockpile pursuant to Section 5(p) of the Ownership Agreement or pursuant to the applicable provisions of the other Plant Scherer Participation Agreements, or which has otherwise entered into an agreement with GPC to become a Separate Coal Stockpile Participant pursuant to subsection (vii) of Section 5(p) of the Ownership Agreement. Such Participants and Additional Unit Participants are referred to individually as a 10 "Separate Coal Stockpile Participant" and collectively as "Separate Coal Stockpile Participants". (x) SEPARATE DISPATCH PARTICIPANT. "Separate Dispatch Participant" shall mean those Participants which have become Separate Coal Stockpile Participants pursuant to the provisions of 5(p) of the Ownership Agreement and exercise separate dispatch rights under Section 3(b)(iii) of this Operating Agreement. (y) SEPARATE PROCUREMENT PARTICIPANT. "Separate Procurement Participant" shall mean each Separate Coal Stockpile Participant (i) which has exercised its rights under Section 2(c)(iii) of this Operating Agreement; Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Three Operating Agreement; or Section 3(c), SEPARATE FUEL PROCUREMENT, of the Unit Four Operating Agreement or (ii) which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration) to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board and which has not been reestablished as a Common Procurement Participant pursuant to Section 5(n) of the Ownership Agreement. (z) SPOT COAL. "Spot Coal" shall mean all coal purchased for the Common Coal Stockpile or any Separate Coal Stockpile under an arrangement of acquisition for a period of less than one year, or some other period agreed to by the written approval or 11 consent of those members of the Plant Scherer Managing Board which collectively own at least a 76% Pro Forma Ownership Interest in Plant Scherer. (aa) UNIFORM SYSTEM OF ACCOUNTS. The "Uniform System of Accounts" shall mean the FERC Uniform System of Accounts prescribed for Public Utilities and Licensees subject to the provisions of the Federal Power Act, as the same now exist or may be hereafter amended by the FERC. (bb) UNIT FOUR OPERATING AGREEMENT. "Unit Four Operating Agreement" shall refer to the Plant Robert W. Scherer Unit Number Four Operating Agreement, dated as of December 31, 1990, among GPC, FPL, and JEA as the same may be amended from time to time. (ac) UNIT FOUR OWNERSHIP AGREEMENT. "Unit Four Ownership Agreement" shall refer to the Plant Robert W. Scherer Unit Number Four Amended and Restated Ownership Agreement, dated as of December 31, 1990, among GPC, FPL, and JEA as the same may be amended from time to time. (ad) UNIT THREE OPERATING AGREEMENT. "Unit Three Operating Agreement" shall refer to the Plant Robert W. Scherer Unit Number Three Amended and Restated Operating Agreement, between GPC and Gulf, dated as of December 31, 1990. (ae) UNIT THREE OWNERSHIP AGREEMENT. "Unit Three Ownership Agreement" shall refer to the Plant Robert W. Scherer Unit Number Three Amended and Restated Ownership Agreement between GPC and Gulf, dated as of December 31, 1990." 12 3. Amendment to Section 2(c) of the Operating Agreement. Section 2(c) of the Operating Agreement is hereby amended as follows: (a) Sections 2(c)(i) and 2(c)(ii) are hereby amended in entirety to read as follows: "(i) Common Procurement by Common Procurement Participants. In the event that any Common Procurement Participant (other than GPC as agent hereunder for the other Common Procurement Participants) should be able to locate and arrange for a source of coal for the Common Procurement Participants and (A) the total cost per Btu of such coal, including, without limitation, all brokerage, transportation, handling, testing and storage charges, is equal to or lower than that of the coal which GPC would be able to procure for the Common Procurement Participants for the same period of time; (B) the quality and characteristics of such coal are in all respects equal to or better than and compatible with those of the other coal being utilized or to be utilized for the Common Coal Stockpile during the period of such contract, and such coal is in all respects compatible with the Units and the Additional Units and will enable the Units and Additional Units to operate at their normal operational levels in compliance with all governmental regulations applying thereto; (C) trans- 13 portation for such coal can be arranged which is at least as reliable as transportation which would be available for the other sources of coal for the Common Coal Stockpile for the same period of time, and such transportation is compatible with the transportation and coal delivery facilities of the Units and Additional Units; (D) all parties materially associated with the supply of such coal, including, without limitation, the vendor, broker, mine operator and transporter, are at least as reliable and technically and financially qualified as those with whom GPC would be able to contract for the other coal for the Common Coal Stockpile during the same period of time; (E) procurement of such coal would not interfere with, diminish any benefits of or replicate any other coal arrangement which GPC has procured for or entered into for the Common Procurement Participants (or, if such Common Procurement Participant is a Common Coal Stockpile Participant, which GPC has procured for or entered into for the Common Coal Stockpile), including, without limitation, any options or rights for renewals or extensions of contracts, and would not interfere with, diminish any benefits of or replicate any transportation arrangements, agreements or tariffs; (F) procurement of such coal would not increase or diminish the level of coal supply in the Common Coal Stockpile determined by GPC to be the appropriate level therefor; and (G) the vendor of such coal is willing to enter into a contract or contracts with GPC 14 and such of the Separate Coal Stockpile Participants desiring to participate in such coal supply arrangement on terms and conditions no less favorable to the Common Procurement Participants than those then being bargained for by GPC; then GPC, on its own behalf and as agent for the other Common Procurement Participants, shall offer such coal supply arrangement to the Common Procurement Participants in accordance with the provisions of Section 5(n) of the Ownership Agreement. If GPC, on its own behalf and on behalf of the other Common Coal Stockpile Participants, or if a Separate Coal Stockpile Participant for its own account, shall enter into one or more contracts for such coal supply, then GPC shall thereafter exclusively administer such contract and all transportation arrangements associated therewith, and all costs and benefits of such coal supply arrangement shall be shared pursuant to the other provisions of this Agreement and of the Ownership Agreement. No Participant or Additional Unit Participant (other than GPC or a Separate Coal Stockpile Participant for its own account) shall enter into any arrangement or agreement with respect to the procurement of coal pursuant to this subsection (i) of Section 2(c), and any Participant or Additional Unit Participant (other than GPC or a Separate Coal Stockpile Participant for its own account) which shall enter into any such arrangement or agreement (or which is charged in any suit, action or other proceeding with having 15 done so) shall indemnify the other Participants and Additional Unit Participants for all costs, expenses, judg- ments and penalties associated therewith and incurred by them, including, without limitation, all legal fees incurred in connection with any suit, action or other proceeding. (ii) Special Procurement for Financial and Legal Reasons. Any Common Dispatch Participant which has an opportunity to procure or participate in a fuel supply arrangement which meets all of the conditions specified in clauses (B) through (F) of Section 2(c)(i) above, but for which such Common Dispatch Participant cannot, because of legal restrictions, obtain beneficial financing if the economic benefits, if any, of such fuel supply arrangement are shared with the other Participants and Additional Unit Participants, shall be permitted to supply, solely for its own account, up to its proportionate share of the fuel requirements for the Units, the Additional Units, or both, from such fuel supply arrangement, upon the following conditions: (A) Prior to entering into such fuel supply arrangement, such Common Dispatch Participant must demonstrate that such arrangement complies with the provisions of this Section 2(c)(ii) and must demonstrate the feasibility of an accounting procedure 16 for such proposed fuel supply arrangement which is compatible with the fuel accounting, billing and adjustment procedures provided for in this Agreement and the Ownership Agreement and which is satisfactory to the other Participants and Additional Unit Participants; (B) The Common Dispatch Participant proposing to participate in such fuel supply arrangement must give GPC written notice of its intention to supply part or all of its proportionate share of the fuel requirements for the Units, the Additional Units, or both, the period of time for which it proposes to supply such requirements and the percentage of its proportionate share of such requirements which it proposes to provide, at least three years prior to the date of the first contemplated delivery of fuel from such fuel supply arrangement; (C) The Common Dispatch Participant giving notice of its intention to participate in such fuel supply arrangement must thereafter give GPC written notice of any subsequent change in such percentage of its proportionate share of such requirements which it proposes to supply or in the period of time for which it proposes to supply such requirements at least two 17 years prior to the date of the first delivery of fuel originally contemplated from such fuel supply arrangement; and (D) At least one year prior to the first scheduled delivery of fuel from any such arrangement, the Common Dispatch Participant proposing to participate in the arrangement shall enter into a valid, binding and enforceable contract for such fuel consistent with the demonstrations and notices provided for in (A), (B) and (C) above and providing by its terms for GPC (or any successor agent hereunder) to be solely responsible for all administration with respect thereto, including coordination with the mine operator, scheduling of deliveries, transportation arrangements, testing and enforcement. Any Common Dispatch Participant which gives any such notice of intention to supply fuel shall indemnify the other Participants and Additional Unit Participants for any and all damages, costs and expenses which result, directly or indirectly, from any such notice of intention or change notice, from any such fuel supply arrangement or from the failure of supply of fuel as contemplated in such notices or arrangement. 18 If, at any time, any one or more deliveries of fuel from any such fuel supply arrangement fail in any respect to satisfy the requirements as to quality and characteristics specified in clause (B) of Section 2(c)(i) above, fail to comply with any material provision of a contract governing such fuel supply arrangements or are incompatible with the Units (or any Additional Unit to be served by the Plant Scherer Coal Stockpile) or any governmental regulations applying thereto, then GPC may decline to use the fuel from any such delivery, may order a suspension of any further deliveries from such fuel supply arrangement until receipt of adequate assurances satisfactory to it that all future deliveries of fuel will conform to the delivery schedules and to all of the other requirements of the Plant Scherer Coal Stockpile, the Units and the Additional Units, as the case may be, and may take any other action and exercise any other rights which may be permitted by law or by the provisions of any contracts with respect to such fuel supply arrangement. GPC shall not be liable to any other Participant or Additional Unit Participant for any actions taken by it under this Section 2(c)(ii), and the Common Dispatch Participant participating in any such fuel supply arrangement shall indemnify and hold GPC and the other Participants and the Additional Unit Participants harmless from and against any and all costs, expenses, claims, judgments and fines, including legal fees 19 incurred in defense of any lawsuit or other proceeding, as a result of any such action taken by GPC, except that GPC shall not be so indemnified and held harmless from the payment of legal fees incurred in defense of any lawsuit brought by a Common Dispatch Participant proposing to participate in such arrangement seeking specific performance or injunctive relief against GPC to reverse GPC's determination that such a proposed arrangement does not comply with the terms and conditions of this Section 2(c)(ii). Upon the exercise by any Common Dispatch Participant of a special procurement under this Section 2(c)(ii), GPC shall have no obligation to procure coal or transportation for that portion of such Common Dispatch Participant's supply which is provided from such procurement under this Section 2(c)(ii)." (b) To add the following new subsection (iii) to the end thereof: "(iii) Separate Procurement by Separate Procurement Participants - Generally. Any Separate Coal Stockpile Participant shall be permitted to supply, solely for its own account and solely for its Separate Coal Stockpile, its coal requirements for its undivided ownership interests in the Units, the Additional Units, or both, upon the following conditions: 20 (A) Prior to entering into each coal supply arrangement, such Separate Coal Stockpile Participant must demonstrate that such arrangement complies with the provisions of this Section 2(c)(iii) and must demonstrate (1) that the proposed coal to be procured meets or exceeds the quality and compatibility standards set by GPC, as approved or revised from time to time by the Plant Scherer Managing Board, and will enable the Units and the Additional Units to operate at their normal operational levels in compliance with all governmental regulations applying thereto; (2) that transportation for such coal can be arranged by such Separate Coal Stockpile Participant which is compatible with the transportation and fuel delivery facilities at Plant Scherer; and (3) all parties associated with the supply of such coal, including, without limitation, the vendor, broker, mine operator and transporter are reliable and technically and financially qualified. Within six months following the date of the first election by a Separate Coal Stockpile Participant to discontinue participation in the Common Coal Stockpile, GPC shall develop written guidelines setting forth standards and procedures for compliance by a Separate Coal Stockpile Participant with the provisions of this Section 2(c)(iii)(A), including, without limitation, standards relating to the operational characteristics 21 of the Units and the Additional Units and setting forth the standard contract terms and provisions referred to in Section 2(c)(iii)(B) and shall submit such guidelines to the Plant Scherer Managing Board which shall adopt such guidelines by vote of Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer within two months of submission or which shall revise such guidelines, such revisions to be approved by Participants and Additional Unit Participants owning at least an aggregate 85% Pro Forma Ownership Interest in Plant Scherer. In the absence of such adoption or approval of revisions within two months of submission, the guidelines submitted by GPC shall go into effect as the guidelines of the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Participants and Additional Unit Participants owning at least an aggregate 76% Pro Forma Ownership Interest in Plant Scherer. (B) At least 90 days prior to the first scheduled delivery of coal from any such arrangement, the Separate Coal Stockpile Participant proposing to participate in the arrangement shall give GPC written notice of its intent to enter into such coal supply arrangement, shall make the demonstrations set forth in (A) above to the reasonable satisfaction of GPC, as 22 agent, and, thereafter shall enter into a valid, binding and enforceable contract for such coal containing such standard terms and conditions as are required by the Plant Scherer Managing Board guidelines (other than price, quantity, and duration), which contract shall be consistent with the demonstrations provided for in (A) above and providing by its terms for GPC (or any successor agent hereunder) to have sole authority for all administration with respect thereto, including, without limitation, coordination with the mine operator, scheduling of deliveries, transportation arrangements and testing; provided, however, that except as otherwise set forth herein, the Separate Coal Stockpile Participant shall have sole authority, subject to the policies and procedures adopted or revised from time to time by the Plant Scherer Managing Board, to make or direct major economic decisions which are not administrative in nature, including, without limitation, to extend, terminate or renegotiate the contract or exercise options thereunder and to sue the supplier. Except as set forth in Section 5(n) of the Ownership Agreement, GPC shall have no obligation to purchase, arrange for or contract for the purchase of coal for any Separate Coal Stockpile Participant. 23 If, at any time, any one or more deliveries of coal from any such coal supply arrangement fail in any respect to satisfy the requirements as to quality and characteristics specified in clause (A) above, fail to comply with any material provision of a contract governing such coal supply arrangements or are incompatible with the Units or the Additional Units or any governmental regulations applying thereto, then, in accordance with such guidelines as may be adopted or revised from time to time by the Plant Scherer Managing Board, GPC may decline to use the coal from any such delivery, may order a suspension of any further deliveries from such coal supply arrangement until receipt of adequate assurances satisfactory to it that all future deliveries of coal will conform to the delivery schedules and to all of the other requirements of the Plant Scherer Coal Stockpile, the Units and the Additional Units, as the case may be, and may take any other action and exercise any other rights which may be permitted by law or by the provisions of any contracts with respect to such coal supply arrangement. GPC shall not be liable to any other Participant or Additional Unit Participant (except as otherwise set forth in Section 3(c)(ii) of the Unit Four Operating Agreement with respect to the Scherer Unit No. 4 Participants) for any actions taken by it under this Section 2(c)(iii), and the Separate Procurement Participant participating in any such coal supply arrangement shall indemnify and hold GPC and the other Participants and the Additional Unit Participants harmless from 24 and against any and all costs, expenses, claims, judgments and fines, including, without limitation, legal fees incurred in defense of any lawsuit or other proceeding, as a result of any such action taken by GPC, except that GPC shall not be so indemnified and held harmless from the payment of legal fees incurred in defense of any lawsuit brought by a Separate Procurement Participant proposing to participate in such arrangement seeking specific performance or injunctive relief against GPC to reverse GPC's determination that such a proposed arrangement does not comply with the terms and conditions of this Section 2(c)(iii)." 4. Amendment to Section 3(b) of the Operating Agreement. Section 3(b) of the Operating Agreement is hereby amended by deleting such Section 3(b) in its entirety and, in lieu thereof, substituting the following: "(b) Scheduling and Dispatching. (i) Subject to the further provisions of this Section 3(b), GPC, on its own behalf and as agent for the other Participants shall have sole authority for the scheduling and dispatching of the output of each of Scherer Unit No. 1 and Scherer Unit No. 2 and shall schedule and dispatch such outputs on a continuous economic dispatch basis, to the extent each such unit is capable of such dispatch, in accordance with GPC's 25 standard scheduling and dispatching procedures to serve, in part, the electric capacity and energy load within the State of Georgia. GPC shall give to the other Common Dispatch Participants written notification of the estimated operating level of the Units as set forth in Appendix A attached hereto, as the same may be revised from time to time with respect to such information by agreement among all of the Common Dispatch Participants and GPC as agent for the Common Dispatch Participants. (ii) Any Common Dispatch Participant having an undivided ownership interest in Scherer Unit No. 1, Scherer Unit No. 2, or both, shall have the right to request and receive during such calendar year energy on an hourly basis from either of Scherer Unit No. 1 or Scherer Unit No. 2 or both in excess of its proportionate share of the energy generated by such unit operating on an economic dispatch basis, up to a maximum of such Participant's proportionate share of the energy which could be generated by such unit operating at its maximum practicable capability at any given time, if (1) such Participant, gives GPC such advance notice as is reasonably acceptable to GPC of its desire to receive such additional energy from such unit and the amount of such additional energy and such increased generation can be reasonably accommodated 26 within GPC's scheduling and dispatching procedures; and (2) such Participant agrees to be responsible, as of the date of such notice, for any and all additional costs resulting from such increased generation of energy, including all prepayments in connection with the acquisition of coal and other fuel, whether or not it requires or takes the additional energy during such calendar year and whether or not any additional energy is generated. (iii) Subject to the provisions of Section 3(b)(iv) of this Agreement, commencing within six months following the date of the first election by a Separate Coal Stockpile Participant to discontinue participation in the Common Coal Stockpile, GPC shall use its reasonable best efforts to dispatch the undivided ownership interests of each Separate Dispatch Participant in Scherer Unit No. 1 and Scherer Unit No. 2 to match the schedules provided by such Separate Dispatch Participant. Except as provided for in Section 3(b)(iv) or in the third paragraph of this Section 3(b)(iii), GPC shall have no right to dispatch the undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, of the Separate Dispatch Participants on any basis or for any purpose other than to match the schedules provided by such Separate Dispatch Participants. The Separate Dispatch 27 Participants having undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, and GPC agree to develop software and to install any equipment at Scherer Unit No. 1 and Scherer Unit No. 2 which GPC and such Separate Dispatch Participants deem reasonable and necessary for the separate scheduling and dispatching of the undivided ownership interests of the Separate Dispatch Participants in Scherer Unit No. 1 and Scherer Unit No. 2. The costs associated with procuring, developing, installing and operating such equipment and software shall be borne solely by the Separate Dispatch Participants having undivided ownership interests in the Units, and each such Separate Dispatch Participant shall pay that portion of such costs in the proportion that its undivided ownership interest in the Units bears to the aggregate of undivided ownership interests of Separate Dispatch Participants in the Units. GPC and the Separate Dispatch Participants having undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, shall establish mutually agreeable notification procedures for the startup and shutdown of Scherer Unit No. 1 and Scherer Unit No. 2 as part of the separate dispatch procedures which shall be subject to approval by the Plant Scherer Managing Board by vote of Participants owning at least an 28 aggregate 75% undivided ownership interest in the Units, including MEAG, so long as MEAG owns at a least 15.1% undivided ownership interest in the Units and upon failure to secure such approval, such notification procedures shall be those proposed by GPC. Such procedures shall consider, among other things, operational characteristics of Scherer Unit No. 1 and Scherer Unit No. 2 as well as factors affecting the operation of Scherer Unit No. 1 and Scherer Unit No. 2 as a component of Plant Scherer integrated with the Georgia Integrated Transmission System. Either GPC, on its own behalf and as agent for the other Common Dispatch Participants, or any Separate Dispatch Participant having undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, may commit such of Scherer Unit No. 1, Scherer Unit No. 2, or both, in which it has an undivided ownership interest, when available, for start-up. The Participant or Participants committing a Unit for start-up shall pay and be solely responsible for all costs associated with the start-up of the Unit and bringing operations of the Unit to minimum operating levels, including, without limitation, start-up fuel and personnel costs, with each such Committing Participant being responsible for a portion of such costs in the proportion that its undivided ownership 29 interest in the committed Unit bears to the aggregate of the undivided ownership interests of the Committing Participants in the committed Unit. For this purpose, if GPC commits Scherer Unit No. 1, Scherer Unit No. 2, or both, for start-up, all Common Dispatch Participants having an undivided ownership interest in Scherer Unit No. 1 or Scherer Unit No. 2 shall be deemed Committing Participants. If one or more of the Committing Participants desire to shutdown Scherer Unit No. 1 or Scherer Unit No. 2 and one or more Committing Participant desires to maintain the commitment of such Unit, then the Committing Participant or Participants desiring to maintain the commitment may do so and shall be responsible for all costs associated therewith. During any period of commitment of Scherer Unit No. 1, Scherer Unit No. 2, or both, by Committing Participants, if another Participant or Participants having the right to schedule or dispatch output from the committed Unit or Units does so, then such Participant or Participants shall become Committing Participants and shall pay or reimburse the preexisting Committing Participants for that portion of the costs associated with start-up of the Unit and bringing operations of the Unit to minimum operating levels for which the preexisting Committing Participants were liable pursuant to the third paragraph of this Section 30 3(b)(iii), which is properly and reasonably allocable to each new Committing Participant, all in accordance with GPC's standard operating and accounting procedures which shall be submitted for approval to the Plant Scherer Managing Board by vote of Participants owning at least an aggregate 75% undivided ownership interest in the Units, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Units, and upon failure to secure such approval, such operating and accounting procedures shall be those proposed by GPC. Each Separate Dispatch Participant shall be responsible for any and all costs resulting from its operation of Scherer Unit No. 1, Scherer Unit No. 2, or both. (iv) It is recognized by the Participants that the operation of the Georgia Integrated Transmission System under both normal and abnormal conditions can be impacted by the operation of Scherer Unit No. 1 and Scherer Unit No. 2, and it is further recognized that the operation of Scherer Unit No. 1, Scherer Unit No. 2 and the remainder of Plant Scherer, including, without limitation, maintenance of voltage regulation and electrical and mechanical stability, can be impacted by the operation of the Georgia Integrated Transmission System. The Participants agree that GPC, as agent, shall have the right to take such actions relating to 31 the operation or shutdown of the Participants' undivided ownership interests in the Units as are reasonable for the safe and reliable operation of Scherer Unit No. 1, Scherer Unit No. 2, the remainder of Plant Scherer and the Georgia Integrated Transmission System. The Participants recognize and agree that (1) GPC shall have sole authority to control the reactive power output of Scherer Unit No. 1 and Scherer Unit No. 2 in order to control voltage at the Plant Scherer step-up substation and auxiliary electric systems, maintain reasonable voltage profiles on the Georgia Integrated Transmission System, and provide reactive power to the system, and (2) GPC may take actions to override the dispatch of the Participants' undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, including, without limitation, startup or shutdown of Scherer Unit No. 1, Scherer Unit No. 2, or both, in the event GPC reasonably determines that such action is necessary or appropriate to maintain reliability and integrity of Scherer Unit No. 1, Scherer Unit No. 2, the remainder of Plant Scherer, the Georgia Integrated Transmission System or any combination of them. GPC shall notify each Participant having an undivided ownership interest in Scherer Unit No. 1, Scherer Unit No. 2, or both, as soon as 32 reasonably practicable when such actions or similar actions with respect to the Additional Units are necessary. Procedures for such notification shall be included in the dispatch procedures to be developed by GPC and submitted to the Plant Scherer Managing Board for approval by the Participants by vote of Participants owning at least an aggregate 75% undivided ownership interest in the Units, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Units, and upon failure to secure such approval, such notification procedures shall be those proposed by GPC. All costs for any additional energy produced by operation of the Participants' undivided ownership interests in Scherer Unit No. 1, Scherer Unit No. 2, or both, pursuant to the foregoing provisions of this Section 3(b)(iv), shall be borne by the Participants in proportion to their undivided ownership interests in the Units and the Participants will be entitled to such additional energy in the same proportions whether or not any such Participant requires or can utilize such additional energy. The rights granted GPC pursuant to this Section 3(b)(iv) shall remain in full force and effect even if GPC is removed as agent for the Units, the Unit Common Facilities, the Plant Scherer Common Facilities, the 33 Plant Scherer Coal Stockpile, or any combination thereof. (v) The Participants agree that GPC shall have no obligation to generate energy which cannot be transmitted either due to transmission restrictions or lack of necessary transmission arrangements. (vi) The Participants recognize that GPC, as operating agent for the Participants and Additional Unit Participants, has various contractual obligations under the Plant Scherer Participation Agreements respecting operation and maintenance of Plant Scherer. The Participants agree that, in discharging its contractual obligations, GPC may take reasonable actions to resolve conflicts involving its various contractual obligations. In circumstances where GPC becomes aware of a conflict in its contractual obligations under the Plant Scherer Participation Agreements and GPC reasonably believes the conflict is material and is likely to have a significant, on-going impact on one or more Participants or Additional Unit Participants, GPC shall notify the Plant Scherer Managing Board of the conflict and of GPC's proposed action to resolve the conflict. The Plant Scherer Managing Board shall approve such action by vote of Participants and Additional Unit Participants owning at least an aggregate of 76% Pro Forma Ownership Interest 34 in Plant Scherer. In the absence of such approval within 30 days from the date GPC's proposal was submitted to the Plant Scherer Managing Board, GPC shall be authorized to take the action it proposed to resolve the reported conflict, and such action may be repeated as necessary until such time as GPC proposes a different action to the Managing Board or the Managing Board approves an alternative action consistent with the procedures set forth in Section 7.1, RESOLUTION OF CONFLICTING CONTRACTUAL OBLIGATIONS FOR GPC, AS AGENT, of the Plant Scherer Managing Board Agreement. (vii) For the purpose of this Section 3(b), the capacity associated with a Participant's undivided ownership interest in the Units shall include, in the case of GPC, the capacity purchased by GPC from time to time pursuant to Sections 3(g) and 3(h) of this Agreement, and shall exclude, in the case of MEAG and OPC, the capacity sold by MEAG and OPC, respectively from time to time, pursuant to Sections 3(g) and 3(h) of this Agreement." 5. Amendment to Section 3(c) of the Operating Agreement. Section 3(c) of the Operating Agreement is hereby amended by adding the following at the end of such Section 3(c): "Notwithstanding the foregoing provisions of this Section 3(c), with respect to information provided by GPC 35 and applicable times and dates, the matters set forth in Appendix A attached hereto relating to fuel plans, as the same may be revised from time to time by agreement among all of the Participants and GPC as agent for the Participants, shall govern and control any such conflicting or contrary provisions of this Section 3(c)." 6. Amendment to Section 3(d) of the Operating Agreement. Section 3(d) of the Operating Agreement is hereby amended in its entirety to read as follows: "(d) Common Coal Stockpile Costs, Separate Coal Stockpile Costs, and Other Fuel Costs. (i) Each Participant which is at any given time a Common Coal Stockpile Participant shall own an undivided ownership interest in the Common Coal Stockpile, and shall be responsible for the payment of Common Coal Stockpile Costs in the proportions set forth in Sections 5(n)(iii) and 5(p) of the Ownership Agreement. Each Participant which is at any given time a Separate Coal Stockpile Participant shall own the coal allocated to its account and shall be responsible for payment of Separate Coal Stockpile Costs pursuant to Sections 5(n)(iv) and 5(p) of the Ownership Agreement. Each Participant shall own other fossil 36 fuel and shall be responsible for payment of Other Fuel Costs for the Units in proportion to its percentage undivided ownership interest from time to time in the Units. Not later than 120 days prior to the beginning of each calendar year, GPC shall deliver to the other Participants an estimate of the Common Coal Stockpile Costs or Separate Coal Stockpile Costs, as the case may be, and Other Fuel Costs to be paid by each Participant for such calendar year; (ii) For each calendar year, GPC shall keep an hourly record of the kilowatt-hours of energy delivered to each Participant from each of Scherer Unit No. 1 and Scherer Unit No. 2 and shall report such amounts each month along with the cumulative amount of energy delivered to each Participant since the beginning of that calendar year." 7. Amendment to Section 3(e) of the Operating Agreement. Section 3(e) of the Operating Agreement is hereby amended by adding the following sentence after the third sentence of such Section 3(e): "Notwithstanding the foregoing provisions of this Section 3(e), with respect to information to be provided by GPC and applicable times and dates, the matters set forth in Appendix A attached hereto relating to maintenance 37 schedules, as the same may be revised from time to time by agreement among all of the Participants and GPC as agent for the Participants, shall govern and control any such conflicting or contrary provisions of this Section 3(e)." 8. Amendment to Section 3(g) of the Operating Agreement. Section 3(g) of the Operating Agreement is hereby amended as follows: (a) The first sentence of the second paragraph of Section 3(g)(i) of the Operating Agreement is hereby amended to delete the words "Fuel Costs" and to substitute the words "Common Coal Stockpile Costs or Separate Coal Stockpile Costs, as the case may be, and Other Fuel Costs" therefor. (b) The first sentence of Section 3(g)(ii)(C) of the Operating Agreement is hereby amended to delete the words "a Fuel Cost" and to substitute the words "a Common Coal Stockpile Cost, a Separate Coal Stockpile Cost, or an Other Fuel Cost" therefor. 9. Amendment to Section 3(h) of the Operating Agreement. The first sentence of the second paragraph of Section 3(h)(iii) of the Operating Agreement is hereby amended to delete the words "Fuel Costs" and to substitute the words "Common Coal Stockpile 38 Costs or Separate Coal Stockpile Cost, as the case may be, and Other Fuel Costs" therefor. 10. Amendment to Section 3(j) of the Operating Agreement. Section 3(j) of the Operating Agreement is hereby amended by deleting such Section 3(j) in its entirety and, in lieu thereof, substituting the following: "(j) Sharing of Costs - General. The Participants shall be responsible for payment of Cost of Construction in accordance with the provisions of the Ownership Agreement, and the Participants shall be responsible for the payment of Separate Coal Stockpile Costs, Common Coal Stockpile Costs and Other Fuel Costs in accordance with the provisions of Sections 3(d), 3(g) and 3(h) of this Agreement and Sections 5(f), 5(n) and 5(p) of the Ownership Agreement. Except as otherwise provided in this Section 3, each Participant shall be responsible for the payment of its respective share of all Operating Costs. Each Participant's respective share of such Operating Costs, to the extent feasible, shall be equivalent to the proportion that the output of energy from its undivided ownership interest in the Units bears to the total output of energy from the Units during the Applicable Accounting Period; provided, however, that if there is no output of energy from the Units during the Applicable Accounting Period, each Participant's 39 respective share of such Operating Costs shall be equivalent to its respective percentage undivided ownership interest during such accounting period in the Units, and, for those Operating Costs which cannot be feasibly allocated based on the Participant's output of energy from their respective undivided ownership interests in the Units, each Participant's respective share of such Operating Costs shall be equivalent to its respective percentage undivided ownership interest in the Units during such accounting period. Such Operating Costs incurred in connection with either or both of the Units, Operating Costs incurred in connection with the Unit Common Facilities and Common Facilities Operating Costs shall be allocated as provided in Appendix "B" attached hereto and incorporated herein by reference, as the same may be revised from time to time by (1) with respect to Operating Costs incurred in connection with any one or more of Scherer Unit No. 1, Scherer Unit No. 2 and the Unit Common Facilities, by approval of all of the Participants, and (2) with respect to Common Facilities Operating Costs, by approval of all of the Participants and Additional Unit Participants. It is the absolute intent of the Participants to share all items of cost, obligation and liability incurred in connection with the Units and the Plant Scherer Common Facilities (other than the financing of each participant's respective undivided ownership 40 interest in the Units and the Plant Scherer Common Facilities), and not otherwise expressly provided for, in the proportion equivalent to each Participant's undivided ownership interest in the Units. Notwithstanding the foregoing provisions of this Section 3(j) or any other provision of this Agreement, in the event any Participant sells to any other person (including, without limitation, a Participant) any undivided ownership interest in the Units or any portion thereof in accordance with the provisions of Section 5(j) of the Ownership Agreement (other than a sale or conveyance as security for an indebtedness or in connection with the financing of pollution control facilities), such selling Participant's rights and obligations hereunder as a Participant and co-owner of the Units and the Plant Scherer Common Facilities, including the obligation to make payments of the Operating Costs, Common Coal Stockpile Costs, Separate Coal Stockpile Costs, Other Fuel Costs and any other costs to be shared by the Participants hereunder, shall be reduced to the extent of such costs attributable to the undivided ownership interest so sold, and all Participants shall look solely to such purchaser for payment of the corresponding portion of the Operating Costs, Common Coal Stockpile Costs, Separate Coal Stockpile Costs, Other Fuel Costs and other costs to be shared by the Participants hereunder; provided, however, that no such sale shall 41 relieve any Participant from its obligations under Sections 3(g) and 3(h) hereof." 11. Amendment to Section 3(k) of the Operating Agreement. Section 3(k) of the Operating Agreement is hereby amended by adding the following at the end of such Section 3(k): "Notwithstanding the foregoing provisions of this Section 3(k) with respect to the information to be provided by GPC and applicable times and dates, the matters set forth in Appendix A attached hereto relating to operating budgets, as the same may be revised from time to time by agreement among all of the Participants and GPC as agent for the Participants, shall govern and control any such conflicting or contrary provisions of this Section 3(k)." 12. Amendment to Section 4 of the Operating Agreement. The first sentence of Section 4(e) of the Operating Agreement is hereby amended to delete the words "and Fuel Costs" and to substitute the words "Common Coal Stockpile Costs (which shall be made available only to Common Coal Stockpile Participants), Separate Coal Stockpile Costs (which shall be made available to each Separate Coal Stockpile Participant with respect to its Separate Coal Stockpile) and Other Fuel Costs" therefor. 42 13. Amendment to Section 6(q) of the Operating Agreement. The second sentence of Section 6(q) of the Operating Agreement is hereby amended to delete the words "Fuel Costs" and to substitute the words "Common Coal Stockpile Costs, additional Separate Coal Stockpile Costs, additional Other Fuel Costs" therefor. 14. Effectiveness of this Amendment. Neither this Amendment nor any of the obligations of the parties hereto shall be effective until the receipt of all requisite approvals, including, without limitation, the approval of the Securities and Exchange Commission ("SEC") under the Public Utility Holding Company Act of 1935, the written approval of the Administrator of the Rural Electrification Administration and the approval of all other persons and entities having a right to approve or consent to an amendment to the Operating Agreement, but upon receipt of such approvals this Amendment and the obligations of the parties hereto shall be effective. The parties hereby agree to use their respective best efforts to expeditiously obtain all such requisite approvals. 15. Miscellaneous. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment may refer to the Operating Agreement without making specific reference to this Amendment, but nevertheless all such references shall be deemed 43 to include this Amendment unless the context shall otherwise require. This Amendment shall be construed in connection with and as a part of the Operating Agreement, and all terms, conditions and covenants contained in the Operating Agreement, except as herein modified, shall be and remain in full force and effect, and the parties hereto agree that they are bound by the terms and conditions of the Operating Agreement as amended hereby. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but altogether one and the same instrument. [This space intentionally left blank.] 44 IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Amendment under seal as of the date first above written. Signed, sealed and delivered GEORGIA POWER COMPANY in the presence of: ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Title:________________________ Attest: ______________________ Name:_________________________ Title:________________________ (CORPORATE SEAL) Signed, sealed and delivered OGLETHORPE POWER CORPORATION in the presence of: (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Title:________________________ Attest: ______________________ Name:________________________ Title:_______________________ (CORPORATE SEAL) [Signatures continued on next page] 45 [Signatures continued from previous page] Signed, sealed and delivered MUNICIPAL ELECTRIC AUTHORITY in the presence of: OF GEORGIA ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its: _________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) Signed, sealed and delivered CITY OF DALTON, GEORGIA in the presence of: ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its:__________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) Signed, sealed and delivered BOARD OF WATER, LIGHT AND in the presence of: SINKING FUND COMMISSIONERS ______________________________ By: __________________________ ______________________________ Name:_________________________ Notary Public Its:__________________________ Attest: ______________________ Name:_________________________ Its:__________________________ (OFFICIAL SEAL) 46 APPENDIX A TO OPERATING AGREEMENT OPERATING BUDGET, MAINTENANCE SCHEDULE, FUEL PLAN AND SCHEDULING AND DISPATCHING BUDGET Operating Budget By August 15 of each calendar year, GPC shall use its reasonable best efforts to provide each Participant a written budget estimate of Operating Costs including, without limitation, scheduled outage costs (by month for the following year and in summary fashion for the succeeding four years) anticipated to be incurred for the five-year budget period for Scherer Unit No. 1 and Scherer Unit No. 2. Each operating budget estimate shall be based on information reasonably available. The date for giving GPC written notice of approval or disapproval of such operating budget estimate shall be September 15 and the date for submission by the Participants of alternative operating budget estimates shall be October 15. All approvals, disapprovals and submissions of alternative operating budgets shall be by the percentages specified in Section 3(k) of the Operating Agreement. Each budget estimate and final budget estimate shall be in a format such that each month's estimated costs are listed by reference to the applicable Uniform System of Accounts account number. In addition, each budget estimate and final budget estimate shall be in a format showing expected amounts that the Participant will be billed. Finally, a report on materials and 47 supplies purchased during the preceding calendar year shall be provided along with the operating budget estimate. Section 5.1 and Appendix A of the Plant Scherer Managing Board Agreement dated as of December 31, 1990, as amended from time to time, shall govern and control any conflicting or contrary provisions of the Operating Agreement with regard to operating budgets for the Plant Scherer Common Facilities. Maintenance Schedules In formulating the plan to be submitted to the Participants, GPC shall consider any comments submitted by the Participants to GPC prior to August 1 of each year, and GPC shall use its reasonable best efforts to minimize any period during which the Units are scheduled to be out of service for maintenance at the same time. On or before August 15 of each calendar year, GPC shall use its reasonable best efforts to provide to each Participant a written scheduled outage plan for Scherer Unit No. 1 and Scherer Unit No. 2. Should any major changes be made to the maintenance schedule within a calendar year, GPC shall use its reasonable best efforts to provide each Participant with a revised schedule. A Common Dispatch Participant shall receive maintenance schedules for the territory. Fuel Plan 48 The parties as of this particular time choose to utilize the provisions set forth in Section 3(c) of the Operating Agreement, as the same may be revised from time to time as provided therein, such revisions to be set forth in this Appendix. Scheduling and Dispatching Budget (Energy Budget) On or before August 15 of each calendar year, GPC shall use its reasonable best efforts to provide to each Common Dispatch Participant a written budget estimate of the estimated operating levels of Scherer Unit No. 1 and Scherer Unit No. 2 based upon the anticipated economic dispatch of such Units for the five-year budget period. Each budget estimate shall be based on information reasonably available. 49 APPENDIX B TO OPERATING AGREEMENT OPERATIONS AND MAINTENANCE COSTS Operation and Maintenance costs at Plant Scherer are accumulated by Location Code by FERC account. The Location Codes, what they represent and the allocation basis are: Location 8010 - General to Steam - 25% to Location 8100 (as such percentage may change from time to time based on the nameplate capacity of GPC's total fossil steam) Location 8100 - General to Scherer - 25% to each Unit Location 8101 - Unit 1 Specific - 100% to Unit 1 Location 8102 - Unit 2 Specific - 100% to Unit 2 Location 8103 - Unit 3 Specific - 100% to Unit 3 Location 8104 - Unit 4 Specific - 100% to Unit 4 Location 8107 - Unique to Units 1&2 - 50% to Unit 1 50% to Unit 2 Location 8108 - Unique to Units 3&4 - 50% to Unit 3 50% to Unit 4 Location 8109 - Common Facilities - allocation to Units based on 12-month generation The component systems that make up each of these location codes are listed in Pages 3 through 7 of Appendix B. The source document for this listing was the 1989 Plant Scherer Continuing Property Records (CPR). The CPR can be tied back to the Plant Scherer Retirement Unit Manual. When construction is complete, the various work orders are unitized into retirement units and then grouped into schedule numbers. The schedule numbers which compose a larger system are grouped to a major system for purposes of this listing. This listing is intended to be a high level summary of the items included in each location. Within each Location Code are the various FERC Accounts: Steam Power Generation - operation FERC 500 - Operations Supervision and Engineering FERC 501 - Fuel Handling FERC 502 - Steam Expenses (Boiler) FERC 505 - Electric Expenses (Turbine) FERC 506 - Miscellaneous Steam Power Expenses FERC 507 - Steam Power Generation Rents Steam Power Generation - Maintenance FERC 510 - Maintenance Supervision and Engineering FERC 511 - Maintenance of Structures FERC 512 - Maintenance of Boiler Plant FERC 513 - Maintenance of Electric Plant (Turbine) FERC 514 - Maintenance of Miscellaneous Steam Plant 50 After the allocation process is complete, all operations and maintenance costs become a part of the Unit Specific Locations, but still retain their FERC account identity. For the purposes of allocating costs, all FERC accounts other than Operations and Maintenance on the Boiler and Turbine (FERC's 502, 505, 512, and 513) are designated as fixed costs to be allocated based upon the respective undivided ownership interests in Scherer Units 1 and 2. The Operations and Maintenance on Boiler and Turbine costs shall be between labor and nonlabor. All labor, both straight time and overtime, shall be designated as fixed costs. All other costs charged to these FERC Accounts (502, 505, 512, 513) shall be considered variable, and allocated to owner based on relative generation during the "applicable accounting period". A flowchart of this information is attached hereto. 51 Plant Scherer Common Facilities These facilities are classified as part of Plant Scherer Common Facilities and their O&M costs vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to the individual units based on the most recent 12-month generation or in appropriate cases, a different applicable accounting period generation of the unit as a percent of the total Plant Scherer generation for the same period. Permanent Railroad System Chemical Waste Treatment Control House Coal Handling Equipment Buildings and System Treated Water System Ash Handling System 52 Plant Scherer Common Facilities These facilities are classified as part of Plant Scherer common Facilities, but their O&M costs do not vary with generation. Therefore, O&M costs incurred in the operation and maintenance of these facilities shall be allocated to the individual units based on the nameplate capacity of 818 MW per unit (1/4 to each unit). Raceway Systems - Equipment and Buildings Site Grounding System Plant Welding System Hydrogen House River Pumping System Well Pump House Lifting System - Turbine Room Cranes Lube Oil Building Storage and Transfer Facilities Potable Water System Fire Protection System and Tanks Distribution System - To Header Auxiliary Boiler System Startup Site Improvements Service Bay Maintenance Building Warehouse Service Water System Visitors Center Security Building Sewage Treatment Facility Environmental Monitoring Facility Utility Trench Nitrogen Storage Building Nitrogen System Lake Juliette Retention and Ash Disposal Pond Recreation Facilities Intrasite Communication Settling and Storage Pond Plant Service Facilities Service Building Fee Simple Land 500kv Switchyard Facilities 53 Facilities Common to Units 1 and 2 These facilities are classified as common to Scherer Units No. 1 and No. 2, or "Cost Unique to 1 and 2" and their O&M costs do not vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to Scherer Unit No. 1 and No. 2 based on nameplate capacity of 818 MW per unit (1/2 to each unit). Waste Water Treatment Facilities Scherer Unit No. 1 and No. 2 Coal Handling-Building Equipment and System Treated Water System Filtered Water System Chemical Wash System Chemical Cleaning Header Site Maintenance and Improvements Emergency Generating Building Raceway System Site Collection System Ground System Fee Simple Land Scherer Unit No. 1 and No. 2 Railroad System Scherer Unit No. 1 and No. 2 Fire Protection System Scherer Unit No. 1 and No. 2 Ash Handling Facility Scherer Unit No. 1 and No. 2 Service Water System Cooling Water Chlorination House and System Fuel Oil Facilities Fuel Storage Facilities Stack 54 Facilities Common to Units 3 and 4 These facilities are classified as common to Scherer Units No. 3 and No. 4, or "Cost Unique to 3 and 4" and their O&M costs do not vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to Scherer Unit No. 3 and No. 4 based on nameplate capacity of 818 NW per unit (1/2 to each unit). Waste Water Treatment Facilities Scherer Unit No. 3 and No. 4 Coal Handling-Building Equipment and System Treated Water System Filtered Water System Chemical Wash System Chemical Cleaning Header Site Maintenance and Improvements Emergency Generating Building Raceway System Site Collection System Ground System Fee Simple Land Scherer Unit No. 3 and No. 4 Railroad System Scherer Unit No. 3 and No. 4 Fire Protection System Scherer Unit No. 3 and No. 4 Ash Handling Facility Scherer Unit No. 3 and No. 4 Service Water System Cooling Water Chlorination House and System Fuel Oil Facilities Fuel Storage Facilities Stack 55 Plant Scherer Unit Specific Facilities These facilities are classified as specific to the particular unit. O&M costs associated with these facilities are charged directly to the specific unit. Site Fire Protection System Roof Pressurizing System Boiler Duct System Boiler Water Circulating System Pulverizes Oil Handling and Firing System Plant Welding System Draft System Induced Draft Main Turbine Steam System Extraction Steam System Vent and Drain System Condensate System Turbine Generator System Cooling Water Passageways Cooling Water Pumps and Drives Cooling Water Chlorination System Cooling Tower Storage Tanks Distribution System Raceway System Ground System Generator Bus System Cathodic Protection System Sluice Water System Site Improvements Service Air Systems Sewage Treatment Facilities Coal Handling System Instrument/Control System Turbine Building Water Analysis System Chemical Wash System Metering Control System Computer Systems-Electrical Local Racks and Panels DC Power Systems Emergency Generator Systems 56 AC Distribution Systems Intrasite Communications Plant Service Facilities Steam Generator Building Service Water System Fee Simple Land Control House Precipitator Control House Boiler Enclosure Air Heaters Step-up Substation 500kv Switchyard Facilities 57 EX-10.A56 7 EXHIBIT 10(A)56-SCHERER MBA-GA,OPC,MEAG,DALT,GULF,FPL,JEA-12/31/90 Exhibit 10(a)56 PLANT SCHERER MANAGING BOARD AGREEMENT AMONG GEORGIA POWER COMPANY, OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA, CITY OF DALTON, GEORGIA, GULF POWER COMPANY, FLORIDA POWER & LIGHT COMPANY AND JACKSONVILLE ELECTRIC AUTHORITY DATED AS OF DECEMBER 31, 1990 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS . . . . . . . . . . . 4 1.1 Additional Units . . . . . . . . . . . . . . . . . 4 1.2 Additional Unit Common Facilities . . . . . . . . 4 1.3 Additional Unit Participant . . . . . . . . . . . 4 1.4 Agency Functions . . . . . . . . . . . . . . . . . 4 1.5 Agent . . . . . . . . . . . . . . . . . . . . . . 5 1.6 Business Day . . . . . . . . . . . . . . . . . . . 5 1.7 Capital Budget . . . . . . . . . . . . . . . . . . 5 1.8 Common Facilities Agency Functions . . . . . . . . 5 1.9 Common Facilities Agent . . . . . . . . . . . . . 6 1.10 Common Facility Cost of Construction . . . . . . . 6 1.11 Common Procurement . . . . . . . . . . . . . . . . 6 1.12 Common Procurement Participant . . . . . . . . . . 6 1.13 Co-Owners' Consents . . . . . . . . . . . . . . . 6 1.14 Cost of Construction . . . . . . . . . . . . . . . 7 1.15 Each Unit . . . . . . . . . . . . . . . . . . . . 7 1.16 FERC . . . . . . . . . . . . . . . . . . . . . . . 7 1.17 Governmental Authority . . . . . . . . . . . . . . 7 1.18 Legal Requirements . . . . . . . . . . . . . . . . 8 1.19 Operating Budget . . . . . . . . . . . . . . . . . 8 1.20 Operating Costs . . . . . . . . . . . . . . . . . 8 1.21 Owner . . . . . . . . . . . . . . . . . . . . . . 9 1.22 Participant . . . . . . . . . . . . . . . . . . . 9 1.23 Participation Agreements . . . . . . . . . . . . . 9 1.24 Plant Scherer . . . . . . . . . . . . . . . . . . 9 1.25 Plant Scherer Coal Stockpile . . . . . . . . . . . 10 1.26 Plant Scherer Common Facilities . . . . . . . . . 10 1.27 Plant Scherer Common Facilities Site . . . . . . . 10 1.28 Plant Scherer Managing Board . . . . . . . . . . . 10 1.29 Pro Forma Ownership Interest in Plant Scherer . . 10 1.30 Prudent Utility Practice . . . . . . . . . . . . . 11 1.31 Requisite Additional Units Owner Approval . . . . 11 1.32 Requisite Owner Approval . . . . . . . . . . . . . 12 1.33 Requisite Owner Fuel Approval . . . . . . . . . . 12 1.34 Requisite Units Owner Approval . . . . . . . . . . 13 1.35 Scherer Unit No. 1 . . . . . . . . . . . . . . . . 13 1.36 Scherer Unit No. 2 . . . . . . . . . . . . . . . . 13 1.37 Scherer Unit No. 3 . . . . . . . . . . . . . . . . 13 1.38 Scherer Unit No. 4 . . . . . . . . . . . . . . . . 14 1.39 Separate Coal Procurement . . . . . . . . . . . . 14 1.40 Separate Coal Stockpile . . . . . . . . . . . . . 14 1.41 Separate Coal Stockpile Participants . . . . . . . 14 1.42 Separate Procurement Participants . . . . . . . . 14 1.43 Spot Coal . . . . . . . . . . . . . . . . . . . . 14 1.44 Uniform System of Accounts . . . . . . . . . . . . 15 1.45 Unit Common Facilities . . . . . . . . . . . . . . 15 1.46 Unit Four Participation Agreements . . . . . . . . 15 1.47 Unit Three Participation Agreements . . . . . . . 15 1.48 Units . . . . . . . . . . . . . . . . . . . . . . 16 1.49 Units Participation Agreements . . . . . . . . . . 16 - i - ARTICLE 2 PLANT SCHERER MANAGING BOARD . . . . . . . 17 2.1 Establishment and Members of the Plant Scherer Managing Board . . . . . . . . . . . . . . . . . . 17 2.2 Authority of the Board . . . . . . . . . . . . . . 18 2.3 Functions of the Board . . . . . . . . . . . . . . 19 2.4 Chairman of the Board . . . . . . . . . . . . . . . 20 2.5 Duties of the Chairman of the Board . . . . . . . . 21 2.6 Minutes of Meetings . . . . . . . . . . . . . . . . 23 2.7 Expenses . . . . . . . . . . . . . . . . . . . . . 24 2.8 Procedures . . . . . . . . . . . . . . . . . . . . 25 2.9 Attendees at Meetings . . . . . . . . . . . . . . . 25 2.10 Delegation of Authority . . . . . . . . . . . . . . 25 2.11 Committees . . . . . . . . . . . . . . . . . . . . 25 2.12 Abstention . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 3 RESPONSIBILITIES OF THE COMMON FACILITIES AGENT . . 26 ARTICLE 4 INFORMATION . . . . . . . . . . . 27 4.1 Information and Access . . . . . . . . . . . . . . 27 4.2 Information to be Provided to the Owners . . . . . 27 ARTICLE 5 VOTING ISSUES ADDRESSED BY CURRENT PARTICIPATION AGREEMENTS . . . . . . . . 30 5.1 Capital Budgets and Operating Budgets for the Plant Scherer Common Facilities . . . . . . . . . . 30 5.2 Damage or Destruction of the Plant Scherer Common Facilities . . . . . . . . . . . . . . . . . . . . 33 5.3 Disposal (including Retirement and Salvage) of the Plant Scherer Common Facilities . . . . . . . . . . 33 5.4 Removal of GPC as Common Facilities Agent . . . . . 34 ARTICLE 6 VOTING ISSUES CONCERNING FUEL MATTERS . . . . . 34 6.1 Separate Procurement . . . . . . . . . . . . . . . 34 6.2 Common Procurement . . . . . . . . . . . . . . . . 35 6.3 Switch to an Alternative Fuel Source; Physical Separation of the Plant Scherer Coal Stockpile . . 37 6.4 Amendment, Modification, or Termination of Existing Coal Contracts . . . . . . . . . . . . . . 38 6.5 Resolution of Incompatible Procurement Strategies . 38 - ii - 6.6 Qualifications of Parties Associated with Separate Procurement . . . . . . . . . . . . . . . . . . . . 39 6.7 Coal Contract and Transportation Administration if GPC is Removed as Agent for any Unit . . . . . . . 39 ARTICLE 7 OTHER ISSUES REQUIRING MANAGING BOARD APPROVAL . . 40 7.1 Resolution of Conflicting Contractual Obligations for GPC as Agent . . . . . . . . . . . . . . . . . 40 7.2 Insurance Procurement by Owners . . . . . . . . . . 41 7.3 Allocation of Insurance Proceeds . . . . . . . . . 42 7.4 Managing Board Jurisdiction Over Additional Matters . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE 8 UNIT AND UNIT COMMON FACILITIES ISSUES . . . . 44 8.1 Capital Budgets and Operating Budgets for the Unit Common Facilities . . . . . . . . . . . . . . . . . 44 8.2 Damage or Destruction of the Unit Common Facilities . . . . . . . . . . . . . . . . . . . . 47 8.3 Disposal (including Retirement and Salvage) of the Unit Common Facilities . . . . . . . . . . . . . . 47 8.4 Separate Dispatch Procedures . . . . . . . . . . . 47 ARTICLE 9 ADDITIONAL UNIT COMMON FACILITIES ISSUES . . . . 49 9.1 Capital Budgets and Operating Budgets for the Additional Unit Common Facilities . . . . . . . . . 49 9.2 Damage or Destruction of the Additional Unit Common Facilities . . . . . . . . . . . . . . . . . 52 9.3 Disposal (including Retirement and Salvage) of the Additional Unit Common Facilities . . . . . . . . . 52 9.4 Removal of GPC as Additional Unit Common Facilities Agent . . . . . . . . . . . . . . . . . 52 9.5 Information to be provided to the Additional Unit Participants . . . . . . . . . . . . . . . . . . . 52 ARTICLE 10 RECOVERY OF COSTS . . . . . . . . . . 53 ARTICLE 11 RELATION TO EXISTING AGREEMENTS . . . . . . 53 - iii - ARTICLE 12 EFFECTIVE DATE AND TERMINATION . . . . . . 55 ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . 55 13.1 Required Approvals . . . . . . . . . . . . . . . 55 13.2 Further Assurances . . . . . . . . . . . . . . . 55 13.3 Governing Law . . . . . . . . . . . . . . . . . . 55 13.4 Notice . . . . . . . . . . . . . . . . . . . . . 56 13.5 Section Headings Not To Affect Meaning . . . . . 58 13.6 Time of Essence . . . . . . . . . . . . . . . . . 58 13.7 Amendments . . . . . . . . . . . . . . . . . . . 58 13.8 Successors and Assigns . . . . . . . . . . . . . 58 13.9 Counterparts . . . . . . . . . . . . . . . . . . 58 13.10 Computation of Percentage Undivided Ownership Interest . . . . . . . . . . . . . . . . . . . . . 58 13.11 Several Agreements . . . . . . . . . . . . . . . 59 13.12 Confidentiality . . . . . . . . . . . . . . . . . 59 APPENDICES Appendix A Guidelines for Capital Budgets and Operating Budgets for Plant Scherer EXHIBITS Exhibit A Existing Contracts Exhibit B Joint Committee Procedures Exhibit C Operating Costs Allocation - iv - PLANT SCHERER MANAGING BOARD AGREEMENT THIS PLANT SCHERER MANAGING BOARD AGREEMENT ("Agreement") is made and entered into as of December 31, 1990, among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("GPC" or "Georgia"); OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated ("OPC"); the MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA, a public corporation and an instrumentality of the State of Georgia ("MEAG"); the CITY OF DALTON, a municipal political subdivision of the State of Georgia, acting by and through its Board of Water, Light and Sinking Fund Commissioners ("Dalton"); GULF POWER COMPANY, a corporation organized and existing under the laws of the State of Maine ("Gulf"); FLORIDA POWER & LIGHT COMPANY, a corporation organized and existing under the laws of the State of Florida ("FPL"); and JACKSONVILLE ELECTRIC AUTHORITY, a body corporate and politic and an independent agency of the City of Jacksonville, Florida, organized and existing under the laws of the State of Florida ("JEA"). WITNESSETH: WHEREAS, OPC, GPC, MEAG and Dalton have previously entered into the Units Participation Agreements concerning the Units, the Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile pursuant and subject to which OPC, MEAG and Dalton have irrevocably appointed GPC as their - 1 - Agent in connection with the planning, licensing, design, construction, acquisition, completion, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal for the Units, the Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile; WHEREAS, GPC and Gulf have previously entered into the Unit Three Participation Agreements concerning Scherer Unit No. 3, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile pursuant and subject to which Gulf has irrevocably appointed GPC as its Agent in connection with the planning, licensing, design, construction, acquisition, completion, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of Scherer Unit No. 3, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile; WHEREAS, GPC, FPL and JEA have entered into the Unit Four Participation Agreements dated as of the date hereof, concerning Scherer Unit No. 4, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile pursuant and subject to which FPL and JEA irrevocably appoint GPC as their Agent in connection with the planning, licensing, design, construction, acquisition, completion, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of Scherer Unit No. 4, the - 2 - - 2 - Additional Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile; and WHEREAS, the Participants and Additional Unit Participants now desire to provide for and establish a Plant Scherer Managing Board (i) to coordinate the implementation and administration of the Agency Functions with respect to the Plant Scherer Common Facilities, (ii) to establish standards, rules and policies for fuel and fuel procurement, (iii) for the Participants to coordinate the implementation and administration of the Agency Functions with respect to the Units and the Unit Common Facilities, (iv) for the Additional Unit Participants to coordinate the implementation and administration of the Agency Functions with respect to the Additional Units and the Additional Unit Common Facilities and (v) to perform the functions hereinafter provided. NOW THEREFORE, in consideration of the promises and the mutual undertakings stated herein, the parties hereto intending to be legally bound do hereby agree as follows: - 3 - - 3 - ARTICLE 1 DEFINITIONS As used herein, the following terms and phrases shall have, respectively, the following meanings: 1.1 Additional Units. "Additional Units" shall consist of Scherer Unit No. 3 and Scherer Unit No. 4, each of which is an Additional Unit. 1.2 Additional Unit Common Facilities. "Additional Unit Common Facilities" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.3 Additional Unit Participant. "Additional Unit Participant" and "Additional Unit Participants" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.4 Agency Functions. "Agency Functions" shall mean those activities which the Agent shall undertake on behalf of the Participants and Additional Unit Participants, as the case may be, and which relate to the planning, licensing, design, construction, acquisition, completion, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of the Units, the Unit Common Facilities, the Additional Units, the Additional Unit Common Facilities, the Plant Scherer Common Facilities, and the Plant - 4 - - 4 - Scherer Coal Stockpile, as the case may be, under the Participation Agreements. 1.5 Agent. "Agent" shall mean GPC or its successors, with respect to its rights and obligations in the performance of the Agency Functions. 1.6 Business Day. "Business Day" shall be any Monday, Tuesday, Wednesday, Thursday or Friday other than a day which has been established by law or required by executive order as a holiday for any commercial banking institution in the State of Florida or the State of Georgia. 1.7 Capital Budget. "Capital Budget" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.8 Common Facilities Agency Functions. "Common Facilities Agency Functions" shall mean the Agency Functions with respect to the Unit Common Facilities, the Additional Unit Common Facilities, the Plant Scherer Common Facilities or the Plant Scherer Coal Stockpile. 1.9 Common Facilities Agent. "Common Facilities Agent" shall mean GPC or its successor, (i) acting on its own behalf for so long as GPC (or its successor as Agent) continues to own an undivided ownership interest in the Plant Scherer Common - 5 - - 5 - Facilities and (ii) as Agent for the other Owners in the performance of the Common Facilities Agency Functions. 1.10 Common Facility Cost of Construction. "Common Facility Cost of Construction" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.11 Common Procurement. "Common Procurement" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.12 Common Procurement Participant. "Common Procurement Participant" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.13 Co-Owners' Consents. "Co-Owners' Consents" shall mean those certain Consents, Amendments, and Assumptions Nos. 1-4 dated December 30, 1985 among GPC, OPC, MEAG, Dalton, Gulf Power Company, and Wilmington Trust Company and NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees, and those certain Amendment to Consents, Amendments, and Assumptions Nos. 1-4 dated August 16, 1993 among GPC, OPC, MEAG, Dalton, Gulf Power Company, Jacksonville Electric Authority and Florida Power & Light Company and Wilmington Trust Company and NationsBank of Georgia, as Owner Trustees. - 6 - - 6 - 1.14 Cost of Construction. "Cost of Construction" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.15 Each Unit. "Each Unit" shall mean and refer to, respectively, the Units, the Unit Common Facilities, Scherer Unit No. 3, Scherer Unit No. 4 and the Additional Unit Common Facilities. 1.16 FERC. The "FERC" shall be defined as the Federal Energy Regulatory Commission or any entity succeeding to the powers and functions thereof. 1.17 Governmental Authority. "Governmental Authority" shall mean any local, state, regional or federal administrative, legal, judicial, or executive agency, court, commission, department or other entity, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor, mortgagee and excluding any Participant or Additional Unit Participant. 1.18 Legal Requirements. "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to any Agent or any of the Participants or Additional Unit Participants, as required by the context in - 7 - - 7 - which used, or to Each Unit, the Plant Scherer Common Facilities or the Plant Scherer Coal Stockpile, or to the use, manner of use, occupancy, possession, operation, maintenance, management, control, construction, acquisition, installation, alteration, improvement, addition, renewal, modification, replacement, repair, reconstruction or disposal of Each Unit, the Plant Scherer Common Facilities, the Plant Scherer Coal Stockpile, or any part thereof. 1.19 Operating Budget. "Operating Budget" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.20 Operating Costs. "Operating Costs" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. Operating Costs shall be allocated among and between the Units, the Unit Common Facilities, the Additional Units, the Additional Unit Common Facilities and the Plant Scherer Common Facilities as described in Exhibit C attached hereto and incorporated herein by reference. 1.21 Owner. "Owner" shall mean, individually, any owner of an undivided ownership interest in Plant Scherer; and "Owners" shall mean all of them. 1.22 Participant. "Participant" and "Participants" shall refer individually or collectively, as the case may be, to GPC, OPC, MEAG, and Dalton (in their capacities as Owners of the - 8 - - 8 - Units) and to any transferee or assignee of any of them of an interest in the Units pursuant to the Units Participation Agreements, provided, however, such references shall only refer to an entity for so long as said entity is an owner of any of the Units. 1.23 Participation Agreements. "Participation Agreements" shall mean collectively the Units Participation Agreements, the Unit Three Participation Agreements and the Unit Four Participation Agreements. 1.24 Plant Scherer. "Plant Scherer" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.25 Plant Scherer Coal Stockpile. "Plant Scherer Coal Stockpile" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.26 Plant Scherer Common Facilities. "Plant Scherer Common Facilities" shall have the meaning assigned in the relevant provisions of the Participation Agreements. 1.27 Plant Scherer Common Facilities Site. "Plant Scherer Common Facilities Site" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. - 9 - - 9 - 1.28 Plant Scherer Managing Board. "Plant Scherer Managing Board", "Managing Board" or "Board" shall mean the board established pursuant to Section 2.1 of this Agreement. 1.29 Pro Forma Ownership Interest in Plant Scherer. "Pro Forma Ownership Interest in Plant Scherer" shall mean for each Participant and Additional Unit Participant the percentage obtained by dividing by four (i) the sum of (A) such Participant's or Additional Unit Participant's percentage undivided ownership interest, if any, in Scherer Unit No. 1, plus (B) its percentage undivided ownership interest, if any, in Scherer Unit No. 2, plus (C) its percentage undivided ownership interest, if any, in Scherer Unit No. 3, plus (D) its percentage undivided ownership interest, if any, in Scherer Unit No. 4. 1.30 Prudent Utility Practice. "Prudent Utility Practice" at a particular time shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the - 10 - - 10 - requirements of Governmental Authorities of competent jurisdiction and the requirements of the Participation Agreements. 1.31 Requisite Additional Units Owner Approval. "Requisite Additional Units Owner Approval" shall mean the written approval or consent by those Owners who collectively own at least an aggregate 51% of the undivided ownership interest in the Additional Unit Common Facilities, which written approval or consent may be signified by the signatures of the members of the Plant Scherer Managing Board who represent such Owners and are not precluded in participating or taking action pursuant to Section 13.10 hereof respecting any resolution or motion acted upon by the Board pursuant to this Agreement or the approval of the minutes of any Board meeting. 1.32 Requisite Owner Approval. "Requisite Owner Approval" shall mean the written approval or consent by those Owners who collectively hold at least 76% of the undivided ownership interest in the Units and Additional Units, which written approval or consent may be signified by the signatures of the members of the Plant Scherer Managing Board who represent such Owners and are not precluded in participating or taking action pursuant to Section 13.10 hereof respecting any resolution or motion acted upon by the Board pursuant to this Agreement or the approval of the minutes of any Board meeting. - 11 - - 11 - 1.33 Requisite Owner Fuel Approval. "Requisite Owner Fuel Approval" shall mean the written approval or consent by those Owners who collectively hold at least 85% of the undivided ownership interest in the Units and Additional Units, which written approval or consent may be signified by the signatures of the members of the Plant Scherer Managing Board who represent such Owners and are not precluded in participating or taking action pursuant to Section 13.10 hereof respecting any resolution or motion acted upon by the Board pursuant to this Agreement or the approval of the minutes of any Board meeting. 1.34 Requisite Units Owner Approval. "Requisite Units Owner Approval" shall mean the written approval or consent by those Owners who collectively hold at least an aggregate 75% of the undivided ownership interest in the Units, including MEAG so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, which written approval or consent may be signified by the signatures of the members of the Plant Scherer Managing Board who represent such Owners and are not precluded in participating or taking action pursuant to Section 13.10 hereof respecting any resolution or motion acted upon by the Board pursuant to this Agreement or the approval of the minutes of any Board meeting. 1.35 Scherer Unit No. 1. "Scherer Unit No. 1" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. - 12 - - 12 - 1.36 Scherer Unit No. 2. "Scherer Unit No. 2" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.37 Scherer Unit No. 3. "Scherer Unit No. 3" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.38 Scherer Unit No. 4. "Scherer Unit No. 4" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.39 Separate Coal Procurement. "Separate Coal Procurement" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.40 Separate Coal Stockpile. "Separate Coal Stockpile" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.41 Separate Coal Stockpile Participants. "Separate Coal Stockpile Participants" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.42 Separate Procurement Participants. "Separate Procurement Participants" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. - 13 - - 13 - 1.43 Spot Coal. "Spot Coal" shall mean all coal purchased for the Common Coal Stockpile and the Separate Coal Stockpiles which is acquired under an arrangement of acquisition for a period of less than one year, or some other period agreed to by Requisite Owner Approval pursuant to this Agreement. 1.44 Uniform System of Accounts. The "Uniform System of Accounts" shall mean the FERC Uniform System of Accounts prescribed for Public Utilities and Licensees subject to the provisions of the Federal Power Act, as the same now exist or may be hereafter amended by the FERC. 1.45 Unit Common Facilities. "Unit Common Facilities" shall have the meaning assigned in the relevant provisions of the respective Participation Agreements. 1.46 Unit Four Participation Agreements. "Unit Four Participation Agreements" shall mean the following purchase and ownership and operating contracts concerning Scherer Unit No. 4: Plant Robert W. Scherer Unit Number Four Amended and Restated Purchase and Ownership Participation Agreement among GPC, FPL and JEA, dated as of December 31, 1990, as amended; Plant Robert W. Scherer Unit Number Four Substation Purchase Agreement among GPC, FPL and JEA, dated December 31, 1990; and Plant Robert W. Scherer Unit Number Four Operating Agreement among GPC, FPL and JEA, dated as of December 31, 1990, as amended. - 14 - - 14 - 1.47 Unit Three Participation Agreements. "Unit Three Participation Agreements" shall mean the following purchase and ownership and operating contracts concerning Scherer Unit No. 3: Amended and Restated Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement among GPC and Gulf, dated as of December 31, 1990; and Amended and Restated Plant Robert W. Scherer Unit Number Three Operating Agreement among GPC and Gulf, dated as of December 31, 1990; 1.48 Units. "Units" shall consist of Scherer Unit No. 1 and Scherer Unit No. 2, each of which is a Unit. 1.49 Units Participation Agreements. "Units Participation Agreements" shall mean the following purchase and ownership and operating contracts concerning the Units: Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among GPC, OPC, MEAG and Dalton, dated as of May 15, 1980; Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia, OPC, MEAG and Dalton, dated as of May 15, 1980; Amendment to Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among GPC, OPC, MEAG and Dalton, dated as of December 30, 1985; Amendment to Plant Robert W. Scherer Units One and Two Operating Agreement among GPC, OPC, MEAG and Dalton, dated as of December 30, 1985; Amendment Number Two to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement and Amendment Number One to Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement, dated as of July 1, 1986; Amendment Number Three to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership - 15 - - 15 - Participation Agreement and Amendment Number Two to Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement, dated as of August 1, 1988; Amendment Number Four to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement, dated as of December 31, 1990; Amendment Number Two to the Plant Robert W. Scherer Units Numbers One and Two Operating Agreement dated as of December 31, 1990; and The Consents, Amendments and Assumptions Nos. 1-4, dated December 30, 1985 among GPC, OPC, MEAG, Dalton, Gulf Power Company and Wilmington Trust Company and NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees. Amendment to Consents, Amendments and Assumptions Nos. 1-4 dated August 16, 1993, among, GPC, OPC, MEAG, Dalton, Gulf Power Company, Jacksonville Electric Authority and Florida Power & Light Company and Wilmington Trust Company and NationsBank of Georgia, N.A., as Owner Trustees. ARTICLE 2 PLANT SCHERER MANAGING BOARD 2.1 Establishment and Members of the Plant Scherer Managing Board. As of the effective date of this Agreement there shall be established a Plant Scherer Managing Board, which shall consist of a member and an alternate designated by each Owner. The Board shall have the authorities, powers, and functions hereinafter provided. Each Owner shall within 30 days after the effective date of this Agreement give written notice of its designated member and alternate to the Common Facilities Agent which shall distribute a consolidated list of such members and alternates to all Owners, within five Business Days thereafter. Each Owner may change its designated member or alternate by giving written - 16 - - 16 - notice of the change to the Common Facilities Agent which shall promptly distribute a revised consolidated list to all Owners. Each member of the Board shall be authorized to represent the Owners which appointed him or her and shall have the authority to obligate such Owner. In the event any member of the Board is unable to attend any meeting of the Board, the designated alternate for such member shall have the full power and authority of such member to act for and obligate the Owner which such member represents or if any member is to represent another Owner, he shall provide an affidavit to such effect stating the scope and term of such representation. If an Owner has contracted with a third party to transfer one or more undivided ownership interests in one or more of the Units, the Additional Units, or both, such Owner may also contract with such third party that it will not vote under this Agreement with respect to the undivided ownership interest or interests contracted to be transferred in a manner with which such third party disagrees or such Owner will vote as directed by such third party with respect to the undivided ownership interest or interests to be transferred. Such Owner may otherwise vote as it chooses with respect to its undivided ownership interests not contracted to be transferred. Provided, however, such Owner contracting with such third party shall notify the other Owners when such Owner votes or does not vote at the direction of such third party. 2.2 Authority of the Board. The Plant Scherer Managing Board shall have all authority and power necessary to perform the - 17 - - 17 - functions delegated to it by Section 2.3 hereof and any other functions explicitly delegated to it by this Agreement or the Participation Agreements. Such authority and power shall be exercised by the Board in the manner as hereinafter provided in this Agreement. Those functions that solely relate to the Units or the Unit Common Facilities, on the one hand, or to the Additional Units or the Additional Unit Common Facilities, on the other, shall be voted by Requisite Units Owner Approval or Requisite Additional Units Owner Approval, respectively. 2.3 Functions of the Board. The Plant Scherer Managing Board shall perform the following functions: 2.3.1 By Requisite Owner Approval, conduct or undertake such studies, investigations or audits which the Board determines are appropriate or useful in carrying out its responsibilities or functions. By Requisite Owner Approval, the Board may employ independent consultants or utilize the personnel or other resources of the Common Facilities Agent or any Owner for such studies, investigations or audits. The costs of such studies, investigations or audits shall be borne by the Owners in the proportion of their respective undivided ownership interest in the Plant Scherer Common Facilities. 2.3.2 By Requisite Owner Approval, review and approve, disapprove or revise and approve the Capital Budgets and Operating Budgets with respect to the Plant - 18 - - 18 - Scherer Common Facilities to be submitted annually (or more often upon revision by the Common Facilities Agent) by the Common Facilities Agent, all pursuant to Article 5.1 hereof. 2.3.3 Perform those functions described in Articles 4, 5, 6, 7, 8 and 9 hereof by such percentage votes as are set forth therein. 2.4 Chairman of the Board. So long as GPC is an Owner and is the Common Facilities Agent, the member of the Plant Scherer Managing Board representing GPC shall be the Chairman of the Board. In the event GPC is not an Owner and the Common Facilities Agent, then the Chairman of the Board shall be a member of the Board elected, by members of the Board representing in the aggregate at least a majority of the undivided ownership interests in the Units and Additional Units, for a term of twelve consecutive months or until his successor is elected. In the event of the death, disability, or resignation of the Chairman of the Board prior to the expiration of such term or on the expiration of such term, the succeeding Chairman of the Board shall be a member of the Board elected, by members representing in the aggregate at least a majority of the undivided ownership interests in the Units and Additional Units, for a term of twelve consecutive months or until his successor is elected. There shall be no restriction upon the number of terms to which any member of the Board may be elected to serve as Chairman of the Board. - 19 - - 19 - 2.5 Duties of the Chairman of the Board. The Chairman of the Managing Board shall have the following duties: 2.5.1 Schedule meetings of the Board at such time and place as the Chairman of the Board may determine but (1) not less frequently than once every three months unless all members of the Board shall otherwise agree and (2) not less frequently than reasonably required to consider and vote on any alternative proposal pursuant to Articles 5, 6, 7, 8 or 9 of this Agreement within the required time period for such vote if requested by any member in writing to the Chairman. Any meeting of the Board may be conducted by telephone conference and any members of the Board may participate in any meeting by telephone. All members of the Board shall have the right to vote on all resolutions and motions by proxy. 2.5.2 Provide notice to all other members of the Board of each scheduled Board meeting at least 30 calendar days in advance of such meeting except (1) in emergencies, (2) as required for meetings under clause (2) of Section 2.5.1 or (3) unless all members consent to a shorter notice. The attendance of a member of the Board at a Board meeting is a waiver of such notice, unless such member's attendance is to protest the holding of the meeting. 2.5.3 Provide all other members of the Board with a copy of each resolution or motion which the Chairman of the - 20 - - 20 - Board or any other member proposes to submit to the Board for action at any Board meeting at least five Business Days prior to such meeting or such shorter time as may be reasonably required for any meeting called pursuant to clauses (1), (2) or (3) under Section 2.5.2; provided such time requirement may be waived by Requisite Owner Approval. 2.5.4 Preside at each Board meeting and conduct all Board meetings in accordance with the procedures and rules established in accordance with Section 2.8 hereof. 2.5.5 Establish the agenda for each Board meeting, including such items or matters as the Chairman of the Board shall deem appropriate and such items or matters as may be requested by any other member of the Board. 2.5.6 Notify all members of the Board of the agenda for each meeting as much in advance of such meeting as may be possible, but in any event not less than five Business Days before such meeting. 2.5.7 Appoint a secretary for the Board who need not be a member of the Board and who shall (i) prepare a draft of the minutes for each Board meeting and deliver or mail a copy of such draft minutes to each member of the Board within five Business Days after the close of each Board meeting and (ii) take custody of and maintain the records of all Board meetings. - 21 - - 21 - 2.6 Minutes of Meetings. The minutes of each Board meeting shall record the following: 2.6.1 The date, time and place of the meeting; 2.6.2 The agenda of the meeting and the items or matters discussed; 2.6.3 The resolutions and motions approved, actions approved, agreements reached and decisions made by the Board, including the votes of the members of the Board on each of such resolutions, motions, actions, agreements and decisions; and 2.6.4 The date, time and place of the next meeting of the Board to be scheduled; provided, however, that (1) the minutes of any meeting of the Board shall not include any position advanced by any member on any matter which was not adopted by the Board at such meeting for any reason, and (2) the effectiveness of any action taken by the Board to approve any matter shall be immediate upon such action being taken (unless a specific effective date is part of the approved resolution) and shall not be deferred until approval of the minutes reflecting such action or approval. At the next succeeding regular meeting at which each Owner has an opportunity to be represented, the members of the Board in attendance shall consider the minutes of the preceding regular or called meeting - 22 - - 22 - and if they are found in order, shall signify approval of the minutes by affixing their signatures to same. The minutes of each Board Meeting shall be kept in a central, permanent repository. The secretary shall give notice to all members of the Board of the location of such repository and provide all members of the Board access to the minutes of all meetings and shall provide copies of such minutes to each of the Owners. 2.7 Expenses. Each Owner shall be responsible for the personal expenses of its member and alternate of the Managing Board at any Board meeting. General meeting expenses and all other expenses necessary in the performance of the Board functions shall be allocated and paid as determined by the Board. 2.8 Procedures. By Requisite Owner Approval, the Managing Board shall develop and adopt and, from time to time, modify procedures as may be appropriate for the conduct of its meetings and the performance of its functions, including any general procedures for allocating Board expenses pursuant to Section 2.7. 2.9 Attendees at Meetings. Attendance at meetings of the Managing Board shall not be limited to members of the Board, but the Owners recognize the practical necessity of limiting the participation of attendees at any Board meeting who are not members to those who are expected to take an active part on the agenda for such meeting. Subject to Legal Requirements, the Chairman of the Board, on his own motion or at the request of any - 23 - - 23 - member may conduct any portion of any meeting in executive session at which attendance may be restricted to members or their respective alternates (including their counsel) and persons invited by the Chairman of the Board. 2.10 Delegation of Authority. The Managing Board shall not delegate its authority to others. 2.11 Committees. The Managing Board shall have the authority to appoint and charge committees to study and make recommendations on any subject concerning the (1) Plant Scherer Common Facilities by Requisite Owner Approval, (2) the Unit Common Facilities by Requisite Units Owner Approval, (3) the Additional Unit Common Facilities by Requisite Additional Units Owner Approval or (4) the Plant Scherer Coal Stockpile by Requisite Owner Approval. The purpose, charge and duty of each committee so appointed shall not exist for more than one year unless reappointed by the Board by the same approval set forth in this Section 2.11. 2.12 Abstention. Any Owner, in its sole discretion, may abstain from voting on any issue presented to the Managing Board. ARTICLE 3 RESPONSIBILITIES OF THE COMMON FACILITIES AGENT GPC shall continue to be the Common Facilities Agent and shall continue to perform the Common Facilities Agency Functions - 24 - - 24 - subject to the provisions of the Participation Agreements and pursuant to the provisions of this Agreement. ARTICLE 4 INFORMATION 4.1 Information and Access. The Common Facilities Agent shall furnish or cause to be furnished information, access to information and access to Plant Scherer and the offices of the Common Facilities Agent in accordance with this Article 4. 4.2 Information to be Provided to the Owners. The Common Facilities Agent shall provide information to each member of the Managing Board in the manner indicated below: 4.2.1 Formal Routine Information. In addition to the Capital Budget and Operating Budget provided routinely pursuant to Articles 5, 8 and 9, the Common Facilities Agent will also furnish: 4.2.1.1 Plant Budget Reports. The Common Facilities Agent will furnish to each member of the Managing Board monthly information showing actual Operating Costs and Cost of Construction for each month with comparisons to the respective Operating Budget and Capital Budget. This report will normally be provided by the end of the succeeding month. 4.2.1.2 Audit Reports. The Common Facilities Agent will make available for review by the Owners - 25 - - 25 - copies of financial or accounting reports concerning the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile containing the results of audits which are otherwise in the public domain. 4.2.1.3 Meetings with the Board. In order to assure that the members of the Board are informed as to the status of operations at Plant Scherer, a management employee of the Common Facilities Agent responsible for the operation of Plant Scherer shall meet with the Board at its request. At such meetings the Common Facilities Agent shall present information concerning plant performance and the status and condition of the Plant Scherer Common Facilities, and the Plant Scherer Coal Stockpile, including review of any problems, status reports and new capital property, and shall present an overview of Plant Scherer and its operations and address items on the agenda for the meeting of the Board. The Common Facilities Agent will inform the Board of material events and conditions which are affecting or may reasonably be expected to affect the availability, status and condition or which would result in a material increase in costs associated with the Plant Scherer Common Facilities or the Plant Scherer Coal Stockpile, and of changes in the senior management of Plant Scherer. 4.2.1.4 Responses to Owner Inquiries. In addition to the obligations of the Common Facilities Agent to provide the information and access as - 26 - - 26 - explicitly required herein, the Common Facilities Agent will respond to reasonable written requests from any Owner for information not otherwise provided pursuant to this Agreement regarding the Plant Scherer Common Facilities, and, any additional costs associated with the gathering and furnishing of such information shall be paid by the Owner(s) requesting the same. The Common Facilities Agent shall within 30 days after the effective date hereof designate a person to be responsible for being responsive and providing reasonably adequate and complete information to inquiries from the Owners. 4.2.2 Formal Non-routine Information. Information which is time sensitive, including information on plant trips, power reductions, work disruptions or stoppages, deratings of any Unit or Additional Unit, failures of major equipment, and emergencies at Plant Scherer shall be provided as soon as practicable by the Common Facilities Agent to the Owners. Information in this category also includes informal reports concerning events which the Common Facilities Agent believes may result in public interest or may lead to inquiries to Owners by members of the public, and news releases with respect to Plant Scherer issued by the Common Facilities Agent. 4.2.3 Informal Information. The Common Facilities Agent shall provide the authorized representatives of each - 27 - - 27 - Owner with reasonable access to the Common Facilities Agent's Plant Scherer management employees for informal communications of a general nature and with access to routine reports and records on plant operations and conditions that are normally readily available. ARTICLE 5 VOTING ISSUES ADDRESSED BY CURRENT PARTICIPATION AGREEMENTS 5.1 Capital Budgets and Operating Budgets for the Plant Scherer Common Facilities. By the date set forth therefor in Appendix A of each year, each Owner may provide the Common Facilities Agent information to be used in the formulation of the subsequent year's Capital Budget and Operating Budget for the Plant Scherer Common Facilities. Such budgets shall conform to the requirements and guidelines stated in Appendix A attached hereto and any revisions of such appendix as may be approved by the Board by Requisite Owner Approval and agreed to by the Common Facilities Agent. By the date set forth therefor in Appendix A of each year, the Capital Budget and the Operating Budget shall be approved or disapproved, each in its entirety, by the Board by Requisite Owner Approval, which shall include MEAG so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities. If the Capital Budget or Operating Budget is disapproved, the Board shall then have until the date set forth therefor in Appendix A to adopt by Requisite Owner Approval, which shall include MEAG so long as MEAG owns at - 28 - - 28 - least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, a revised Capital Budget or Operating Budget which shall comply with Prudent Utility Practice and Legal Requirements. In the event that the Board is unable to approve any budget by Requisite Owner Approval, which shall include MEAG so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, by the date set forth therefor in Appendix A, then the budget to be utilized shall be the one submitted by the Common Facilities Agent, and such budget shall be deemed approved by the Board and binding on the Owners. The Operating Budget, the Capital Budget, or both, for each calendar year shall be revised as deemed necessary by the Common Facilities Agent to reflect changed conditions in such calendar year, and promptly upon any such revision, the Common Facilities Agent shall provide to each of the other Owners a revised Operating Budget, Capital Budget, or both, as the case may be. Each revised Operating Budget, Capital Budget, or both, shall include Operating Costs, Cost of Construction, or both, as the case may be, incurred by the Common Facilities Agent in the operation and maintenance or replacement, modification, addition, renewal, completion or disposal of the Plant Scherer Common Facilities prior to the time such revised Operating Budget or Capital Budget becomes effective but not included in prior Operating Budgets or Capital Budgets, as the case may be, and shall be supported by detail reasonably adequate for the purpose of each Owner's reasonable review thereof, as described in Appendix A. Any such revised Operating Budget, Capital Budget, - 29 - - 29 - or both, shall be approved or disapproved, and if disapproved, an alternative revised Operating Budget, Capital Budget, or both, adopted or otherwise chosen for utilization, all in accordance with the procedure set forth in this Section 5.1, except that such approval or disapproval and submission of alternative revisions must be completed by the Board by Requisite Owner Approval, which shall include MEAG so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, within 15 days of the Owners' receipt of the proposed revisions from the Common Facilities Agent. All budgets for Plant Scherer and each component thereof shall be established and approved so as to permit each Participant and each Additional Unit Participant to obtain its desired energy output entitlement from its owned capacity at Plant Scherer. The Common Facilities Agent shall attempt to manage, control, operate and maintain the Plant Scherer Common Facilities in accordance with the then current Operating Budget and attempt to replace, modify, add, renew, complete and dispose of the Plant Scherer Common Facilities in accordance with the then current Capital Budget and the schedules of expenditures contained therein. Notwithstanding the foregoing, the Common Facilities Agent makes no representation, warranty or promise of any kind as to the accuracy of any estimate contained in an Operating Budget or Capital Budget or in a revised Operating Budget or revised Capital Budget or that any such attempt referred to in the preceding sentence will be successful, and in no event shall the Common Facilities Agent have any liability to any of the Owners in these regards. - 30 - - 30 - 5.2 Damage or Destruction of the Plant Scherer Common Facilities. Determinations concerning damage and destruction of the Plant Scherer Common Facilities shall be made by the Participants and Additional Unit Participants who are members of the Plant Scherer Managing Board in accordance with the relevant provisions of the respective Participation Agreements. 5.3 Disposal (including Retirement and Salvage) of the Plant Scherer Common Facilities. The Common Facilities Agent shall have sole authority and responsibility with respect to the disposal (including retirement and salvaging) of all or any part of the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile; provided, however, that any action taken with respect thereto shall require the consent of the Managing Board by Requisite Owner Approval, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities. 5.4 Removal of GPC as Common Facilities Agent. The removal of GPC as Common Facilities Agent and the appointment of a successor for the Common Facilities Agency Functions shall require Requisite Owner Approval of the Managing Board, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, and the same shall be carried out only for the violations set forth in and in accordance with all of the applicable provisions of the Participation Agreements. - 31 - - 31 - ARTICLE 6 VOTING ISSUES CONCERNING FUEL MATTERS 6.1 Separate Procurement. The Participation Agreements provide that each Separate Coal Stockpile Participant may become a Separate Procurement Participant and make its own arrangements for coal procurement in accordance with the applicable provisions of the Participation Agreements. The Owners recognize that coal procured by any Owner will affect the Plant Scherer Coal Stockpile. Accordingly, by and pursuant to the terms established by the Participation Agreements, the Common Facilities Agent shall prepare and submit to the Plant Scherer Managing Board coal procurement policies, coal quality standards, and coal accounting procedures governing separate procurement of coal for Plant Scherer ("Separate Procurement Procedures"). The Separate Procurement Procedures shall be approved or revised and approved by Requisite Owner Fuel Approval within 60 days after such Separate Procurement Procedures have been submitted to the Plant Scherer Managing Board by the Common Facilities Agent. In the absence of such adoption or approval of revisions within such 60 day period, the Separate Procurement Procedures proposed by the Common Facilities Agent shall immediately go into effect as the Separate Procurement Procedures of the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Requisite Owner Approval. 6.2 Common Procurement. The Participation Agreements provide that the Common Facilities Agent shall procure coal for - 32 - - 32 - such Owners as are, from time to time, Common Procurement Participants and Spot Coal for all Owners. The Owners recognize that such coal will affect the Plant Scherer Coal Stockpile. Accordingly, by and pursuant to the terms established by the Participation Agreements, the Common Facilities Agent shall prepare and submit to the Plant Scherer Managing Board coal procurement policies, coal quality standards, and coal accounting procedures governing common procurement of coal for Plant Scherer ("Common Procurement Procedures"). The Common Procurement Procedures shall be approved or revised and approved by Requisite Owner Fuel Approval, within 60 days after such Common Procurement Procedures have been submitted to the Plant Scherer Managing Board by the Common Facilities Agent. In the absence of such adoption or approval of revisions within such 60 day period, the Common Procurement Procedures proposed by the Common Facilities Agent shall immediately go into effect as the Common Procurement Procedures of the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Requisite Owner Approval. Upon (i) exercise by any Separate Coal Stockpile Participant of a Separate Coal Procurement or (ii) violation by any Separate Coal Stockpile Participant, which has been found by the then remaining Common Procurement Participants owning in the aggregate more than 50% Pro Forma Ownership Interest in Plant Scherer out of the total Pro Forma Ownership Interest in Plant Scherer of the then remaining Common Procurement Participants (without taking into account for such purpose in either the numerator or the denominator the Pro Forma Ownership Interest in Plant Scherer of the Owner under consideration) of any of the - 33 - - 33 - Common Procurement Procedures, such Owner shall immediately cease to be a Common Procurement Participant, and GPC, as Common Facilities Agent, shall have no obligation to procure coal or transportation on behalf of such Owner, other than for Spot Coal. The remaining Common Procurement Participants owning in the aggregate more than 50% Pro Forma Ownership Interest in Plant Scherer of the then remaining Common Procurement Participants may vote to reestablish such Owner's status as a Common Procurement Participant. The Separate Procurement Procedures and Common Procurement Procedures shall be generally consistent and to the extent possible shall contain the same coal quality standards and coal accounting procedures. 6.3 Switch to an Alternative Fuel Source; Physical Separation of the Plant Scherer Coal Stockpile. Notwithstanding the foregoing, any Owner may submit to the Plant Scherer Managing Board a request to change the Separate Procurement Procedures and the Common Procurement Procedures to provide for the change from an existing coal source to a type of coal which under Prudent Utility Practice should not be commingled with the coal comprising the Plant Scherer Coal Stockpile or to physically separate the Plant Scherer Coal Stockpile to accommodate both such coal sources at Plant Scherer. Such a request shall be subject to approval by the Plant Scherer Managing Board by Requisite Owner Fuel Approval and upon such terms and conditions as may be approved by Requisite Owner Fuel Approval. In the event that any Owner brings a proposal to the Managing Board with respect to a complete switch from an existing - 34 - - 34 - coal source to a type of coal which under Prudent Utility Practice should not be commingled with the coal comprising the Plant Scherer Coal Stockpile so that only the new coal source is to be used in the Plant Scherer Coal Stockpile and, as a result, "buy-out" costs would be incurred by the Owners in connection with existing coal contracts, then such proposed action would require approval of the Managing Board by Requisite Owner Fuel Approval. 6.4 Amendment, Modification, or Termination of Existing Coal Contracts. The Plant Scherer Managing Board shall approve or disapprove any amendment, modification (including, without limitation, deliveries of additional quantities of coal), or termination of coal contracts identified in Exhibit A hereto (the "EXISTING CONTRACTS") by Requisite Owner Fuel Approval. 6.5 Resolution of Incompatible Procurement Strategies. In the event that a procurement strategy submitted to GPC by a Separate Coal Stockpile Participant for its Separate Coal Stockpile is incompatible with the procurement strategy desired by the Common Procurement Participants initiating a Common Procurement, GPC as Common Facilities Agent shall notify the Plant Scherer Managing Board of the conflict and of GPC's proposed action to resolve it. The Managing Board shall approve or disapprove such action by Requisite Owner Approval. In the absence of such approval within 30 days from the date GPC's proposal was submitted to the Plant Scherer Managing Board, GPC as Common Facilities Agent shall be authorized to take the action - 35 - - 35 - it proposed to resolve the reported conflict, and such action may be repeated as necessary until such time as GPC as Common Facilities Agent proposes a different action to the Managing Board or the Managing Board approves an alternative action consistent with the procedures set forth in this Section 6.5. 6.6 Qualifications of Parties Associated with Separate Procurement. In the event of a disagreement between GPC as Common Facilities Agent and any Separate Procurement Participant as to whether any party associated with a proposed separate procurement (including, without limitation, the vendor, broker, mine operator and transporter) is reliable and technically and financially qualified, GPC as Common Facilities Agent or such Separate Procurement Participant may submit such dispute to the Plant Scherer Managing Board. Such party shall not be considered reliable and technically and financially qualified unless the Plant Scherer Managing Board, by Requisite Owner Approval, determines that such party is reliable and technically and financially qualified. The standards employed to determine whether such party is reliable, and technically and financially qualified shall be no stricter in regards to the parties associated with Separate Coal Procurement than in regards to parties associated with Common Procurement. 6.7 Coal Contract and Transportation Administration if GPC is Removed as Agent for any Unit. In the event that GPC is removed as Agent for any Unit, GPC will continue to procure coal and administer transportation for the Plant Scherer Coal - 36 - - 36 - Stockpile as Common Facilities Agent. GPC will perform the Common Facilities Agency Functions of coal procurement and fuel transportation unless removed as Common Facilities Agent, for one or more of the reasons set forth in the Participation Agreements, by Requisite Owner Approval, including MEAG, so long as MEAG owns at least a 15.1% undivided ownership interest in the Plant Scherer Common Facilities, such removal to be in accordance with all of the applicable provisions of the Participation Agreements. ARTICLE 7 OTHER ISSUES REQUIRING MANAGING BOARD APPROVAL 7.1 Resolution of Conflicting Contractual Obligations for GPC as Agent. The Owners recognize that GPC, as Agent for the Participants and Additional Unit Participants, has various contractual obligations under the Participation Agreements respecting GPC's performance of the Agency Functions for Plant Scherer and the various components thereof. The Participants and Additional Unit Participants agree that, in discharging its contractual obligations, GPC may take reasonable actions to resolve conflicts involving its various contractual obligations. In circumstances where GPC becomes aware of a conflict in its contractual obligations under the Participation Agreements and GPC in its capacity as Agent reasonably believes the conflict is material and is likely to have a significant, on-going impact on one or more Participants or Additional Unit Participants, GPC shall notify the Plant Scherer Managing Board of the conflict and of GPC's proposed action to resolve the conflict. The Plant - 37 - - 37 - Scherer Managing Board shall approve such action by Requisite Owner Approval. In the absence of such approval within 30 days from the date GPC's proposal was submitted to the Plant Scherer Managing Board, GPC shall be authorized to take the action it proposed to resolve the reported conflict, and such action may be repeated as necessary until such time as GPC proposes a different action to the Managing Board or the Managing Board approves an alternative action consistent with the procedures set forth in this Section 7.1. Insofar as practicable, the Participation Agreements and this Agreement shall be construed and interpreted to be harmonious and consistent each with the other and among all of them. 7.2 Insurance Procurement by Owners. In the event that any Owner can procure insurance for Plant Scherer with substantially the same coverage, policy limits and deductibles with a financially sound insurer as that maintained by GPC as Agent for the Owners, but at significantly less cost to the Owners, the Owner may submit a request to the Managing Board to allow such Owner to procure insurance on behalf of all Owners. The Owners may procure such insurance and no longer pay any cost of insurance maintained by GPC with respect to Plant Scherer if such request is approved by written approval or consent of those Owners who collectively hold at least an 85% undivided ownership interest in the Plant Scherer Common Facilities. 7.3 Allocation of Insurance Proceeds. The Plant Scherer Managing Board may adopt rules, policies and procedures, by - 38 - - 38 - written approval or consent of those Owners who collectively hold at least an 85% undivided ownership interest in the Plant Scherer Common Facilities, for allocation of insurance proceeds among Owners in those situations where deductible amounts and available proceeds do not fully cover a casualty or loss with respect to more than one of the Units, the Additional Units, the Unit Common Facilities, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile or to any other third party claim; provided, however, that the Plant Scherer Managing Board shall not adopt any rules, policies and procedures which would deprive any Owner of insurance proceeds to which it would otherwise have been entitled, without that Owner's specific consent to such rules, policies and procedures. In the event the Plant Scherer Managing Board does not adopt rules, policies or procedures pursuant to the first sentence of this Section 7.3, then insurance proceeds shall be allocated among the Owners in proportion to their undivided ownership interest in the property suffering the casualty or loss for which the insurance proceeds were received. 7.4 Managing Board Jurisdiction Over Additional Matters. The Plant Scherer Managing Board shall have jurisdiction over the matters expressly granted to it by this Agreement. The Common Facilities Agent or any Owner may submit a request that the Plant Scherer Managing Board be granted jurisdiction over other matters concerning Plant Scherer (other than matters that relate solely to a specific unit), and the Plant Scherer Managing Board shall - 39 - - 39 - gain jurisdiction over such matters which are approved by Requisite Owner Approval. Additional matters not expressly provided for in this Agreement which the Plant Scherer Managing Board has gained jurisdiction over as provided for in this section shall be governed by the following requisite approvals: (i) With respect to additional matters affecting the Plant Scherer Common Facilities and the Plant Scherer Coal Stockpile, Requisite Owner Approval shall be required; and (ii) With respect to additional matters that solely relate to Unit Common Facilities or Additional Unit Common Facilities, a Requisite Units Owner Approval or a Requisite Additional Units Owner Approval, as the case may be, shall be required. Notwithstanding the foregoing paragraphs of this Section 7.4, (A) in no event shall the Plant Scherer Managing Board take any action or make any determination which could increase the obligations, duties or responsibilities of GPC as Agent or as Common Facilities Agent for the Owners (or any of them), which could limit or impair the authority of GPC as Agent or as Common Facilities Agent for the Owners (or any of them) under any of the Participation Agreements or which could add to the risks or liability of or the costs and expenses (unless reimbursed by the Participants and Additional Unit Participants) to be incurred by - 40 - - 40 - GPC as Agent or as Common Facilities Agent for the Owners (or any of them) without GPC's prior written consent in each instance; and (B) in no event shall the Plant Scherer Managing Board assert jurisdiction over additional matters under this Section 7.4 or take action with respect to any such additional matter in a manner which would adversely impair any Owner's voting rights under any Participation Agreement to which it is a party without such Owner's prior written consent in each instance. ARTICLE 8 UNIT AND UNIT COMMON FACILITIES ISSUES 8.1 Capital Budgets and Operating Budgets for the Unit Common Facilities. By the date set forth therefor in Appendix A of each year, each Participant may provide the Common Facilities Agent information to be used in the formulation of the subsequent year's Capital Budget and Operating Budget for the Unit Common Facilities. Such budgets shall conform to the requirements and guidelines stated in Appendix A attached hereto and any revisions of such appendix as it applies to the Unit Common Facilities as may be approved by the Board by Requisite Units Owner Approval and agreed to by the Common Facilities Agent. By the date set forth therefor in Appendix A of each year, the Capital Budget and the Operating Budget for the Unit Common Facilities shall be approved or disapproved, each in its entirety, by the Board by Requisite Units Owner Approval. If the Capital Budget or Operating Budget is disapproved, the Board shall then have until the date set forth therefor in Appendix A to adopt by Requisite - 41 - - 41 - Units Owner Approval a revised Capital Budget or Operating Budget which shall comply with Prudent Utility Practice and Legal Requirements. In the event that the Board is unable to approve any budget by Requisite Units Owner Approval by the date set forth therefor in Appendix A, then the budget to be utilized shall be the one submitted by the Common Facilities Agent, and such budget shall be deemed approved by the Board and binding on the Participants. The Operating Budget, the Capital Budget, or both, with respect to Unit Common Facilities, for each calendar year shall be revised as deemed necessary by the Common Facilities Agent to reflect changed conditions in such calendar year, and promptly upon any such revision, the Common Facilities Agent shall provide to each of the other Participants a revised Operating Budget, Capital Budget, or both, as the case may be. Each revised Operating Budget, Capital Budget, or both, shall include Operating Costs, Cost of Construction, or both, as the case may be, incurred by the Common Facilities Agent in the operation and maintenance or replacement, modification, addition, renewal, completion or disposal of the Unit Common Facilities prior to the time such revised Operating Budget or Capital Budget becomes effective but not included in prior Operating Budgets or Capital Budgets, as the case may be, and shall be supported by detail reasonably adequate for the purpose of each Participant's reasonable review thereof, as described in Appendix A. Any such revised Operating Budget, Capital Budget, or both, shall be approved or disapproved, and if disapproved, an alternative revised Operating Budget, Capital Budget, or both, adopted or - 42 - - 42 - otherwise chosen for utilization, all in accordance with the procedure set forth in this Section 8.1, except that such approval or disapproval and submission of alternative revisions must be completed by the board by Requisite Units Owner Approval within 15 business days of the Participants' receipt of the proposed revisions from the Common Facilities Agent. All budgets for Plant Scherer and each component thereof shall be established and approved so as to permit each Participant and each Additional Unit Participant to obtain its desired energy output entitlement from its owned capacity at Plant Scherer. The Common Facilities Agent shall attempt to manage, control, operate and maintain the Unit Common Facilities in accordance with the then current Operating Budget and attempt to replace, modify, add, renew, complete and dispose of the Unit Common Facilities in accordance with the then current Capital Budget and the schedules of expenditures contained therein. Notwithstanding the foregoing, the Common Facilities Agent makes no representation, warranty or promise of any kind as to the accuracy of any estimate contained in an Operating Budget or Capital Budget or in a revised Operating Budget or revised Capital Budget or that any such attempt referred to in the preceding sentence will be successful, and in no event shall the Common Facilities Agent have any liability to any of the other Participants in these regards. 8.2 Damage or Destruction of the Unit Common Facilities. The Participants who are members of the Plant Scherer Managing Board shall vote in accordance with the relevant - 43 - - 43 - provisions of the respective Participation Agreements concerning the damage and destruction of the Unit Common Facilities. 8.3 Disposal (including Retirement and Salvage) of the Unit Common Facilities. The Common Facilities Agent shall have sole authority and responsibility with respect to the disposal (including retirement and salvaging) of all or any part of the Unit Common Facilities; provided, however, that any action taken with respect thereto shall require the consent of the Managing Board by Requisite Units Owner Approval. 8.4 Separate Dispatch Procedures. The Units Participation Agreements provide that certain Separate Coal Stockpile Participants may become Separate Dispatch Participants and that GPC will use its reasonable best efforts to dispatch the undivided ownership interests of each Separate Dispatch Participant in Scherer Unit No. 1 and Scherer Unit No. 2 to match the schedules provided by such Separate Dispatch Participant. Accordingly, by and pursuant to the terms established by the Units Participation Agreements, GPC shall prepare and submit to the Plant Scherer Managing Board startup and shutdown notice, operating and accounting procedures governing the separate dispatch of undivided ownership interests in Scherer Unit No. 1 and Scherer Unit No. 2 ("Unit No. 1 and Unit No. 2 Separate Dispatch Procedures"). The Unit No. 1 and Unit No. 2 Separate Dispatch Procedures shall be approved or revised and approved by Requisite Units Owner Approval within 60 days after such Unit No. 1 and Unit No. 2 Separate Dispatch Procedures have been submitted - 44 - - 44 - to the Plant Scherer Managing Board by GPC. In the absence of such adoption or approval of revisions within such 60 day period, the Unit No. 1 and Unit No. 2 Separate Dispatch Procedures proposed by GPC shall immediately go into effect as the Unit No. 1 and Unit No. 2 Separate Dispatch Procedures of the Plant Scherer Managing Board and may be revised thereafter only by approval of such revisions by Requisite Units Owner Approval." - 45 - - 45 - ARTICLE 9 ADDITIONAL UNIT COMMON FACILITIES ISSUES 9.1 Capital Budgets and Operating Budgets for the Additional Unit Common Facilities. By the date set forth therefor in Appendix A of each year, each Additional Unit Participant may provide the Common Facilities Agent information to be used in the formulation of the subsequent year's Capital Budget and Operating Budget for the Additional Unit Common Facilities. Such budgets shall conform to the requirements and guidelines stated in Appendix A attached hereto and any revisions of such appendix as it applies to the Additional Unit Common Facilities, as may be approved by the Board by Requisite Additional Units Owner Approval and agreed to by the Common Facilities Agent. By the date set forth therefor in Appendix A of each year, the Capital Budget and the Operating Budget for the Additional Unit Common Facilities shall be approved or disapproved, each in its entirety, by the Board by Requisite Additional Units Owner Approval. If the Capital Budget or Operating Budget is disapproved, the Board, shall then have until the date set forth therefor in Appendix A to adopt by Requisite Additional Units Owner Approval a revised Capital Budget or Operating Budget which shall comply with Prudent Utility Practice and Legal Requirements. In the event that the Board is unable to approve any budget by Requisite Additional Units Owner Approval by the date set forth therefor in Appendix A, then the budget to be utilized shall be the one submitted by the Common Facilities - 46 - - 46 - Agent, and such budget shall be deemed approved by the Board, and binding on the Additional Unit Participants. The Operating Budget, the Capital Budget, or both, with respect to Additional Unit Common Facilities for each calendar year shall be revised as deemed necessary by the Common Facilities Agent to reflect changed conditions in such calendar year, and promptly upon any such revision, the Common Facilities Agent shall provide to each of the other Additional Unit Participants a revised Operating Budget, Capital Budget, or both, as the case may be. Each revised Operating Budget, Capital Budget, or both, shall include Operating Costs, Cost of Construction, or both, as the case may be, incurred by the Common Facilities Agent in the operation and maintenance or replacement, modification, addition, renewal, completion or disposal of the Additional Unit Common Facilities prior to the time such revised Operating Budget or Capital Budget becomes effective but not included in prior Operating Budgets or Capital Budgets, as the case may be, and shall be supported by detail reasonably adequate for the purpose of each Additional Unit Participant's reasonable review thereof, as described in Appendix A. Any such revised Operating Budget, Capital Budget, or both, shall be approved or disapproved, and if disapproved, an alternative revised Operating Budget, Capital Budget, or both, adopted or otherwise chosen for utilization, all in accordance with the procedure set forth in this Section 9.1, except that such approval or disapproval and submission of alternative revisions must be completed by the Board by Requisite Additional Units Owner Approval within 15 days - 47 - - 47 - of the Additional Unit Participants' receipt of the proposed revisions from the Common Facilities Agent. All budgets for Plant Scherer and each component thereof shall be established and approved so as to permit each Participant and each Additional Unit Participant to obtain its desired energy output entitlement from its owned capacity at Plant Scherer. The Common Facilities Agent shall attempt to manage, control, operate and maintain the Additional Unit Common Facilities in accordance with the then current Operating Budget and attempt to replace, modify, add, renew, complete and dispose of the Additional Unit Common Facilities in accordance with the then current Capital Budget and the schedules of expenditures contained therein. Notwithstanding the foregoing, the Common Facilities Agent makes no representation, warranty or promise of any kind as to the accuracy of any estimate contained in an Operating Budget or Capital Budget or in a revised Operating Budget or revised Capital Budget or that any such attempt referred to in the preceding sentence will be successful, and subject to the provisions of the Unit Four Participation Agreements with respect to the Unit No. 4 Owners, in no event shall the Common Facilities Agent have any liability to any of the other Additional Unit Participants in these regards. 9.2 Damage or Destruction of the Additional Unit Common Facilities. The Additional Unit Participants who are members of the Plant Scherer Managing Board shall vote in accordance with the relevant provisions of the respective Participation - 48 - - 48 - Agreements concerning the damage and destruction of the Additional Unit Common Facilities. 9.3 Disposal (including Retirement and Salvage) of the Additional Unit Common Facilities. The Common Facilities Agent shall have sole authority and responsibility with respect to the disposal (including retirement and salvaging) of all or any part of the Additional Unit Common Facilities; provided, however, that any action taken with respect thereto shall require the consent of the Managing Board by Requisite Additional Units Owner Approval. 9.4 Removal of GPC as Additional Unit Common Facilities Agent. The removal of GPC as Agent for the Additional Unit Common Facilities shall require approval by the Board by vote of all Additional Unit Participants other than GPC. The appointment of a successor to GPC as agent for the Agency Functions as it pertains to the Additional Unit Common Facilities shall require approval by vote of Requisite Additional Units Owner Approval. 9.5 Information to be provided to the Additional Unit Participants. The information provided to the Owners pursuant to Sections 4.2.1.2, 4.2.1.3 and 4.2.1.4 of this Agreement shall also be provided to the Additional Unit Participants with respect to the Additional Unit Common Facilities. ARTICLE 10 RECOVERY OF COSTS - 49 - - 49 - Any costs incurred hereunder by the Common Facilities Agent in accordance with the Participation Agreements shall be recoverable from the Owners under the Participation Agreements as may be applicable and all remedies provided therein shall be available in the event any Owner shall default in the payment of such costs; provided, however, that an Owner which is not in default shall not be obligated to pay for any costs which should have been paid by an Owner in default. ARTICLE 11 RELATION TO EXISTING AGREEMENTS This Agreement is not intended to nor does it modify, amend, or terminate any of the Participation Agreements and does not otherwise alter or impact rights and obligations of the Agent, the Common Facilities Agent, Participants and Additional Unit Participants under any such agreements, including, without limitation, the obligations to make payments; the remedies for defaults; the authority and obligation to insure Each Unit; the authority to establish levels of output and to schedule and meter output; entitlement to output; authority to establish retirement dates for Each Unit; authority to repair (following substantial damage or destruction), replace or make additions to Each Unit; the authority to salvage and dispose of Each Unit; the property rights established by the applicable Participation Agreements; and GPC's responsibility, liability and authority as Agent and Common Facilities Agent under such agreements. No Participation Agreement shall be amended without 30 days prior written notice - 50 - - 50 - to the other Owners and no Participation Agreement shall be amended in a manner materially adverse to other Owners without such other Owners' consent. The Agent shall not be impaired in its capacity to carry out its Agency Functions, nor shall this Agreement diminish or add to (i) the liabilities of GPC or (ii) the remedies of OPC, MEAG, Dalton, Gulf, FPL and JEA or any of their successors established by any of the several Participation Agreements. Further, the provisions of this Agreement shall supersede the provisions concerning the Joint Committee established by the Units Participation Agreements; provided, however, the procedures heretofore adopted by the Joint Committee set forth in Exhibit B attached hereto and made a part hereof shall remain in full force and effect unless modified, terminated or superseded by the Plant Scherer Managing Board by vote of such percentage of Owners as is required under this Agreement. ARTICLE 12 EFFECTIVE DATE AND TERMINATION This Agreement shall become effective upon the execution and delivery of this Agreement by all undersigned parties and shall terminate upon the final decommissioning of Plant Scherer and each component thereof. ARTICLE 13 MISCELLANEOUS - 51 - - 51 - 13.1 Required Approvals. This Agreement shall have no force and effect until (i) it is approved by the Administrator of the Rural Electrification Administration unless such Administrator rules that his approval is not required by law; (ii) it is approved by the Trustee under each MEAG bond resolution pursuant to which MEAG's interests in the Units has been financed. 13.2 Further Assurances. From time to time the Owners will execute such instruments, upon the request of the Common Facilities Agent or another Owner, as may be necessary or appropriate to carry out the intent of this Agreement. 13.3 Governing Law. The validity, interpretation, and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Georgia. 13.4 Notice. Any notice, request, consent or other communication permitted or required by this Agreement shall be in writing and shall be deemed given when sent by registered or certified mail. All notices pertaining to or affecting the provisions of this Agreement shall be addressed to: GPC: (in its capacity as an Owner and as Common Facilities Agent) Georgia Power Company 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 Attention: President Telephone Number: 404-526-6000 Telecopy Number: 404-526-7407 - 52 - - 52 - OPC: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer Telephone Number: 404-270-7900 Telecopy Number: 404-270-7872 MEAG: Municipal Electric Authority of Georgia 1470 Riveredge Parkway, N.W. Atlanta, Georgia 30328 Attention: President and General Manager Telephone Number: 404-952-5445 Telecopy Number: 404-953-3141 Dalton: The City of Dalton, Georgia P.O. Box 869 Dalton, Georgia 30720 Attention: Chairman, Utilities Commission Telephone Number: 404-278-1313 Telecopy Number: 404-278-7230 Gulf: Gulf Power Company 500 Bayfront Parkway Pensacola, Florida 32501 Attention: Earl B. Parsons, Jr. Telephone Number: 904-444-6383 Telecopy Number: 904-444-6744 FPL: Florida Power and Light Company 700 Universe Blvd. Juno Beach, Florida 33408 Attention: Senior Vice President - Power Generation Telephone Number: 407-694-3838 Telecopy Number: 407-694-4999 with a courtesy copy (which shall not be required for effective notice to be given to FPL) to : Director of Bulk Power Markets Florida Power & Light Company 9250 West Flagler Street Miami, Florida 33174 Telephone Number: 305-522-3847 Telecopy Number: 305-552-2905 - 53 - - 53 - JEA: Jacksonville Electric Authority 21 West Church Street Jacksonville, Florida 32202 Attention: Managing Director Telephone Number: 904-632-6441 Telecopy Number: 904-632-7366 unless a different address, phone number or telecopy number shall have been designated by the respective Owner by notice in writing. 13.5 Section Headings Not To Affect Meaning. The descriptive headings of the various sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof. 13.6 Time of Essence. Time is of the essence of this Agreement. 13.7 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of the Owners. 13.8 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon each of the Owners and its respective successors and assigns. Each such successor and assign shall assume all rights and obligations established by this Agreement. 13.9 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall - 54 - - 54 - be deemed an original but all of which together shall constitute one and the same instrument. 13.10 Computation of Percentage Undivided Ownership Interest. Except as may be provided by any Participation Agreement and except as otherwise specifically provided in this Agreement, whenever, pursuant to any provision of this Agreement, any action is required to be agreed to or taken by the Managing Board or the Owners (i) only those Owners not in default in the payment of any amounts (together with interest, if appropriate) required under any provisions of any applicable Participation Agreement at the time such action is to be agreed to or taken shall have the right to participate in such agreement or the taking of such action and (ii) the computation of the aggregate percentage undivided ownership interest in the Units, the Additional Units, or the Additional Unit Common Facilities by Owners agreeing to or taking any such action shall be based solely upon the respective undivided ownership interests in the Units, the Additional Units, or the Additional Unit Common Facilities owned by Owners not so in default. 13.11 Several Agreements. Notwithstanding anything to the contrary set forth herein, the agreements and obligations of the Participants and Additional Unit Participants set forth in this Agreement shall be the several, and not joint, agreements and obligations of the Participants and Additional Unit Participants. - 55 - - 55 - 13.12 Confidentiality. Realizing that publication of information furnished hereunder by the Common Facilities Agent to the Owners or by one Owner to the other Owners may detrimentally affect the furnishing Common Facilities Agent or Owner, the Common Facilities Agent and the Owners pledge to each other to comply with the confidentiality provisions of the Participation Agreements to which they are a party. Any party desiring JEA to maintain such information as confidential shall mark such information as "proprietary confidential business information" at the time it is furnished to JEA. [This space intentionally left blank] - 56 - - 56 - IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this Managing Board Agreement under seal as of the date first above written. "GPC" GEORGIA POWER COMPANY Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [CORPORATE SEAL] "OPC" OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [CORPORATE SEAL] [Signatures continued on next page] - 57 - - 57 - [Signatures continued from previous page] "MEAG" MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [OFFICIAL SEAL] "Dalton" CITY OF DALTON, GEORGIA Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [OFFICIAL SEAL] BOARD OF WATER, LIGHT AND SINKING FUND COMMISSIONERS Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [OFFICIAL SEAL] [Signatures continued on next page] - 58 - - 58 - [Signatures continued from previous page] "Gulf" GULF POWER CORPORATION Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [CORPORATE SEAL] "FPL" FLORIDA POWER & LIGHT COMPANY Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ [CORPORATE SEAL] "JEA" JACKSONVILLE ELECTRIC AUTHORITY Signed, sealed and delivered By:___________________________ in the presence of: Name:_________________________ ____________________________ Its:__________________________ ____________________________ Attest:_______________________ Notary Public Name:_________________________ Its:__________________________ Approved as to Form: ______________________________ [OFFICIAL SEAL] - 59 - - 59 - APPENDIX A GUIDELINES FOR CAPITAL BUDGETS AND OPERATING BUDGETS FOR PLANT SCHERER Prior to August 15 of each year, each Owner may provide the Common Facilities Agent with such information (whether in person or in writing as determined by the respective Owner) as such Owner wishes to be utilized in formulation of Budgets for the following calendar year. By August 15 of each calendar year, GPC shall attempt to prepare and submit to each Owner a written budget estimate of Operating Costs and Cost of Construction for the Plant Scherer Common Facilities, the Unit Common Facilities, and the Additional Unit Common Facilities anticipated to be incurred for the following year and in summary form for the ensuing four calendar years. Each budget estimate to be submitted under this subsection shall be based on information reasonably available. The Budget estimates submitted and the Budgets approved under the Managing Board Agreement, consistent with this Appendix A, shall be in a format that reflects the amounts GPC would expect to bill each Owner pursuant to the underlying Participation Agreements. Each budget estimate shall be supported by detail reasonably adequate for the purpose of each Owner's review thereof and shall be formatted such that for the next calendar year each month's estimated costs are listed by reference to applicable Uniform System of Accounts account numbers. - 60 - By September 15 of each year, the Capital Budget and the Operating Budget for the following calendar year shall be approved or disapproved, each in its entirety, by the Board by Requisite Owner Approval, Requisite Units Owner Approval, or Requisite Additional Units Owner Approval, as the case may be as is set forth in the Managing Board Agreement. If the Capital Budget or the Operating Budget is disapproved, the Board, by approval of such majority, shall then have until October 15 to submit an alternative revised Capital Budget or Operating Budget which shall comply with Prudent Utility Practice, Legal Requirements and all other requirements set forth in the Managing Board Agreements and the applicable Participation Agreements, in the failure of which, the Budget to be used, shall be the one submitted by the Common Facilities Agent, and such Budget be deemed approved by the Board and binding on all of the Owners to which such Budget applies. Compliance by the Common Facilities Agent with the provisions of any Capital Budget or Operating Budget which has been altered by the Participants, the Additional Unit Participants or any of them from any such estimate submitted by the Common Facilities Agent, shall not, in and of itself, constitute a breach by the Common Facilities Agent of its obligations to discharge its responsibilities as Common Facilities Agent for the Participants and Additional Unit Participants in accordance with Prudent Utility Practice. - 61 - EXHIBIT A EXISTING CONTRACTS The following is a listing of the coal purchase contracts in existence on September 1, 1990. 1. That certain contract effective on March 31, 1977 among Shell Mining Company, A.T. Massey Coal Company, Inc., Marrowbone Development Company and Georgia Power Company as amended on January 3, 1977, September 25, 1979, March 23, 1982, January 28, 1983, December 6, 1983, January 12, 1984, February 19, 1985, September 9, 1985, December 11, 1985, December 18, 1985, March 10, 1987, April 16, 1987, October 30, 1987, November 10, 1987, January 31, 1989, April 18, 1989, April 23, 1990, May 30, 1990, and the undated "Agreement To Provide For The Extension Of Negotiations Between GPC and Shell Mining Company." 2. That certain contract effective December 1, 1987 among Delta Coals Equity Company, Inc., Humphreys Enterprises, Inc., Greater Wise, Inc., Red River Coal Company, Inc., Pardee Coal Company, Inc., Delta Coals, Inc., and Georgia Power Company as amended on November 6, 1987 (Notice of Assignment), November 6, 1987 (Notice of Designation of Agent), November 23, 1987 (Response to Notice of Assignment), June 17, 1988, April 7, 1989, and July 24, 1990. 3. That certain contract effective July 1, 1989 between Mingo Logan Coal Company and Georgia Power Company as amended on August 21, 1990. EXHIBIT B JOINT COMMITTEE PROCEDURES 1. The revisions to depository account procedures presented to the Joint Subcommittee for Finance and Accounting on February 2, 1981 and April 2, 1982. 2. The General Operating Guidelines concerning the 180-day audit provisions approved by the Joint Subcommittee for Finance and Accounting on April 1, 1985. 3. The Joint Subcommittee for Power Generation Document Distribution Form as revised on September 18, 1991. - 2 - EXHIBIT C OPERATING COSTS ALLOCATION The Owners agree that Operating Cost shall be allocated among and between the Units, the Unit Common Facilities, the Additional Units, the Additional Unit Common Facilities and the Plant Scherer Common Facilities as described in this EXHIBIT C, as the same may be revised from time to time by Agreement: (1) with respect to Operating Costs incurred in connection with any one or more of Scherer Unit No. 1, Scherer Unit No. 2 and the Unit Common Facilities, by approval of all of the Participants (2) with respect to Operating Costs incurred in connection with any one or more of Scherer Unit No. 3, Scherer Unit No. 4 and the Additional Unit Common Facilities, by approval of all of the Additional Unit Participants, and (3) with respect to Operating Cost incurred in connection with the Plant Scherer Common Facilities, by approval of all of the Owners. OPERATIONS AND MAINTENANCE COSTS Operation and Maintenance costs at Plant Scherer are accumulated by Location Code by FERC account. The Location Codes, what they represent and the allocation basis are: Location 8010 - General to Steam - 25% to Location 8100 (as such percentage may change from time to time based on the nameplate capacity of GPC's total fossil steam) Location 8100 - General to Scherer - 25% to each Unit Location 8101 - Unit 1 Specific - 100% to Unit 1 Location 8102 - Unit 2 Specific - 100% to Unit 2 Location 8103 - Unit 3 Specific - 100% to Unit 3 Location 8104 - Unit 4 Specific - 100% to Unit 4 50% to Unit 2 Location 8107 - Unique to Units 1&2 - 50% to Unit 1 50% to Unit 2 Location 8108 - Unique to Units 3&4 - 50% to Unit 3 50% to Unit 4 Location 8109 - Common Facilities - allocation to Units based on 12-month generation The component systems that make up each of these location codes are listed in Pages 4 through 9 of this Appendix C. The source document for this listing was the 1989 Plant Scherer Continuing Property Records (CPR). The CPR can be tied back to the Plant Scherer Retirement Unit Manual. When construction is complete, the various work orders are unitized into retirement units and then grouped into schedule numbers. The schedule numbers which compose a larger system are grouped to a major system for purposes of this listing. This listing is intended to be a high level summary of the items included in each location. Within each Location Code are the various FERC Accounts: Steam Power Generation - operation FERC 500 - Operations Supervision and Engineering FERC 501 - Fuel Handling FERC 502 - Steam Expenses (Boiler) FERC 505 - Electric Expenses (Turbine) FERC 506 - Miscellaneous Steam Power Expenses FERC 507 - Steam Power Generation Rents Steam Power Generation - Maintenance FERC 510 - Maintenance Supervision and Engineering FERC 511 - Maintenance of Structures FERC 512 - Maintenance of Boiler Plant FERC 513 - Maintenance of Electric Plant (Turbine) FERC 514 - Maintenance of Miscellaneous Steam Plant After the allocation process is complete, all operations and maintenance costs become a part of the Unit Specific Locations, but still retain their FERC account identity. -2- For the purposes of allocating costs between Scherer Units 1 and 2, all FERC accounts other than Operations and Maintenance on the Boiler and Turbine (FERC's 502, 505, 512, and 513) are designated as fixed costs to be allocated based upon the respective undivided ownership interests in Scherer Units 1 and 2. The Operations and Maintenance on Boiler and Turbine costs shall be between labor and nonlabor. All labor, both straight time and overtime, shall be designated as fixed costs. All other costs charged to these FERC Accounts (502, 505, 512, 513) shall be considered variable, and allocated to Owner based on relative generation during the "applicable accounting period". A flow chart of this information is attached hereto. -3- Plant Scherer Common Facilities These facilities are classified as part of Plant Scherer Common Facilities and their O&M costs vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to the individual units based on the most recent 12-month generation or in appropriate cases, a different applicable accounting period generation of the unit as a percent of the total Plant Scherer generation for the same period. Permanent Railroad System Chemical Waste Treatment Control House Coal Handling Equipment Buildings and System Treated Water System Ash Handling System -4- Plant Scherer Common Facilities These facilities are classified as part of Plant Scherer common Facilities, but their O&M costs do not vary with generation. Therefore, O&M costs incurred in the operation and maintenance of these facilities shall be allocated to the individual units based on the nameplate capacity of 818 MW per unit (1/4 to each unit). Raceway Systems - Equipment and Buildings Site Grounding System Plant Welding System Hydrogen House River Pumping System Well Pump House Lifting System - Turbine Room Cranes Lube Oil Building Storage and Transfer Facilities Potable Water System Fire Protection System and Tanks Distribution System - To Header Auxiliary Boiler System Startup Site Improvements Service Bay Maintenance Building Warehouse Service Water System Visitors Center Security Building Sewage Treatment Facility Environmental Monitoring Facility Utility Trench Nitrogen Storage Building Nitrogen System Lake Juliette Retention and Ash Disposal Pond Recreation Facilities Intrasite Communication Settling and Storage Pond Plant Service Facilities Service Building Fee Simple Land 500kv Switchyard Facilities -5- Facilities Common to Units 1 and 2 These facilities are classified as common to Scherer Units No. 1 and No. 2, or "Cost Unique to 1 and 2" and their O&M costs do not vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to Scherer Unit No. 1 and No. 2 based on nameplate capacity of 818 MW per unit (1/2 to each unit). Waste Water Treatment Facilities Scherer Unit No. 1 and No. 2 Coal Handling-Building Equipment and System Treated Water System Filtered Water System Chemical Wash System Chemical Cleaning Header Site Maintenance and Improvements Emergency Generating Building Raceway System Site Collection System Ground System Fee Simple Land Scherer Unit No. 1 and No. 2 Railroad System Scherer Unit No. 1 and No. 2 Fire Protection System Scherer Unit No. 1 and No. 2 Ash Handling Facility Scherer Unit No. 1 and No. 2 Service Water System Cooling Water Chlorination House and System Fuel Oil Facilities Fuel Storage Facilities Stack -6- Facilities Common to Units 3 and 4 These facilities are classified as common to Scherer Units No. 3 and No. 4, or "Cost Unique to 3 and 4" and their O&M costs do not vary with generation. O&M costs incurred in the operation and maintenance of these facilities shall be allocated to Scherer Unit No. 3 and No. 4 based on nameplate capacity of 818 NW per unit (1/2 to each unit). Waste Water Treatment Facilities Scherer Unit No. 3 and No. 4 Coal Handling-Building Equipment and System Treated Water System Filtered Water System Chemical Wash System Chemical Cleaning Header Site Maintenance and Improvements Emergency Generating Building Raceway System Site Collection System Ground System Fee Simple Land Scherer Unit No. 3 and No. 4 Railroad System Scherer Unit No. 3 and No. 4 Fire Protection System Scherer Unit No. 3 and No. 4 Ash Handling Facility Scherer Unit No. 3 and No. 4 Service Water System Cooling Water Chlorination House and System Fuel Oil Facilities Fuel Storage Facilities Stack -7- Plant Scherer Unit Specific Facilities These facilities are classified as specific to the particular unit. O&M costs associated with these facilities are charged directly to the specific unit. Site Fire Protection System Roof Pressurizing System Boiler Duct System Boiler Water Circulating System Pulverizes Oil Handling and Firing System Plant Welding System Draft System Induced Draft Main Turbine Steam System Extraction Steam System Vent and Drain System Condensate System Turbine Generator System Cooling Water Passageways Cooling Water Pumps and Drives Cooling Water Chlorination System Cooling Tower Storage Tanks Distribution System Raceway System Ground System Generator Bus System Cathodic Protection System Sluice Water System Site Improvements Service Air Systems Sewage Treatment Facilities Coal Handling System Instrument/Control System Turbine Building Water Analysis System Chemical Wash System Metering Control System Computer Systems-Electrical Local Racks and Panels DC Power Systems Emergency Generator Systems -8- AC Distribution Systems Intrasite Communications Plant Service Facilities Steam Generator Building Service Water System Fee Simple Land Control House Precipitator Control House Boiler Enclosure Air Heaters Step-up Substation 500kv Switchyard Facilities -9- EX-10.A57 8 EXHIBIT 10(A)57-MCINTOSH CT PURCH&OWN PART AGMT-GPC&SAV-12/15/92 Exhibit 10(a)57 PLANT MCINTOSH COMBUSTION TURBINE PURCHASE AND OWNERSHIP PARTICIPATION AGREEMENT between GEORGIA POWER COMPANY and SAVANNAH ELECTRIC AND POWER COMPANY Dated as of December 15, 1992 Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement Table of Contents Page 1. DEFINITIONS 1 (a) ADDITIONAL PLANT MCINTOSH CTS 1 (b) AFFILIATE 3 (c) AGENCY FUNCTIONS 3 (d) AGENT 3 (e) ARMY CORPS OF ENGINEERS 3 (f) ASSIGNMENT OF CT PURCHASE AGREEMENT 3 (g) BUSINESS DAY 3 (h) CAPITAL ACCOUNT 4 (i) CAPITAL BUDGET 4 (j) CLOSING 4 (k) COLLATERAL DOCUMENTS 4 (l) COMMERCIAL OPERATION 4 (m) CONSTRUCTION ACCOUNT 4 (n) CONSTRUCTION BUDGET 5 (o) COST OF CONSTRUCTION 5 (p) CT COMMON FACILITIES 6 (q) CT COMMON FACILITIES SITE 7 (r) CT FUEL SUPPLY 7 (s) DUE DILIGENCE 7 (t) EXECUTION AND DELIVERY 7 (u) FERC 7 (v) FORCE MAJEURE EVENT 7 (w) FUEL COSTS 8 (x) FUEL OIL TANK 8 (y) GEPD 8 (z) GOVERNMENTAL AUTHORITY 8 (aa) GPC PLANT MCINTOSH CTS 9 (ab) GPC PLANT MCINTOSH CTS SITE 9 (ac) GPSC 9 (ad) INDENTURE 9 (ae) LEASE 9 (af) LEGAL REQUIREMENTS 9 (ag) OPERATING ACCOUNT 10 (ah) OPERATING AGREEMENT 10 (ai) OPERATING BUDGET 10 (aj) OPERATING COSTS 10 (ak) PARTICIPANTS 10 -i- (al) PARTY 10 (am) PLANT MCINTOSH 10 (an) PLANT MCINTOSH CT NOS. 01 AND 02 11 (ao) PLANT MCINTOSH CT NOS. 03 AND 04 12 (ap) PLANT MCINTOSH CT NOS. 05 AND 06 14 (aq) PLANT MCINTOSH CT NOS. 07 AND 08 15 (ar) PLANT MCINTOSH CT PROJECT 17 (as) PLANT MCINTOSH CTS 17 (at) PLANT MCINTOSH CTS SITE 17 (au) 1994 PLANT MCINTOSH CTS 17 (av) 1995 PLANT MCINTOSH CTS 17 (aw) PLANT MCINTOSH SITE 17 (ax) PRIME RATE 17 (ay) PRO FORMA OWNERSHIP INTEREST 18 (az) PROJECT MANAGEMENT BOARD 18 (ba) PRUDENT UTILITY PRACTICE 18 (bb) PURCHASE PRICE 19 (bc) RELEASE 19 (bd) RENT 19 (be) SAVANNAH PLANT MCINTOSH CTS 19 (bf) SAVANNAH PLANT MCINTOSH CTS SITE. 19 (bg) SCSI 19 (bh) SEC 20 (bi) SITE REPRESENTATIVE 20 (bj) THE SOUTHERN COMPANY 20 (bk) UNIFORM SYSTEM OF ACCOUNTS 20 2. REPRESENTATIONS AND WARRANTIES 20 (a) GPC REPRESENTATIONS AND WARRANTIES 20 (i) Organization and Existence 20 (ii) Due Authorization 20 (iii) Litigation 21 (iv) No Material Violation, No Material Impairment. 21 (v) Approvals 22 (b) SAVANNAH REPRESENTATIONS AND WARRANTIES 22 (i) Organization and Existence 22 (ii) Due Authorization 22 (iii) Litigation 23 (iv) No Material Violation, No Material Impairment 23 (v) Approvals 24 3. SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT 24 (a) SALE OF ASSETS 24 (b) PURCHASE PRICE AND PAYMENT 24 (c) CLOSING 25 -ii- 4. LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE 26 (a) LEASE OF LAND 26 (b) RENT AND PAYMENT 27 (c) EXECUTION AND DELIVERY 27 (d) AMENDMENT OF LEASE IN CONNECTION WITH THE CONSTRUCTION OF ONE OR MORE ADDITIONAL PLANT MCINTOSH CTS 28 5. AGENCY 29 (a) APPOINTMENT 29 (b) AUTHORITY AND RESPONSIBILITY 29 (c) LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY 31 (d) MANAGEMENT AND CONSTRUCTION AUDITS 33 (e) ON-SITE OBSERVATION AND INSPECTION 33 (f) INDEMNIFICATION 34 (g) AVAILABILITY OF RECORDS 34 (h) RIGHT TO COPIES 34 (i) PLANT TOURS 35 (j) BILLING AND ACCOUNTING 35 (k) PLANT MCINTOSH CT PROJECT MANAGEMENT BOARD 35 (l) RECORD KEEPING 35 6. OWNERSHIP, RIGHTS AND OBLIGATIONS 36 (a) OWNERSHIP 36 (b) NONPAYMENT 37 (c) ALIENATION AND ASSIGNMENT 39 (d) DAMAGE OR DESTRUCTION 43 (e) TAXES 44 (f) INSURANCE 45 (g) RESERVED 46 (h) POLLUTION CONTROL AND OTHER FACILITIES 46 (i) NO IMPUTATION OF KNOWLEDGE 46 (j) CONSTRUCTION BUDGETS AND SCHEDULES 47 (k) PAYMENTS MADE DURING CONSTRUCTION 48 (l) CONSTRUCTION ACCOUNT 52 (m) SHARING OF COSTS - GENERAL 54 7. CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTICIPANTS 55 (a) NO ADVERSE DISTINCTION 55 (b) COOPERATION 55 (c) APPROVALS 55 (d) COMPLIANCE WITH LAWS AND ENVIRONMENTAL MATTERS 55 (e) SAFETY 56 (f) EQUAL EMPLOYMENT OPPORTUNITY AND CIVIL RIGHTS 57 8. CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY 57 (a) SAVANNAH'S CONDITIONS 57 -iii- (i) Representations and Warranties Correct; Performance by GPC 57 (ii) Litigation Certificate 58 (iii) Other Documents 58 (iv) Opinion of GPC's Counsel 58 (b) GPC'S CONDITIONS 59 (i) Representations and Warranties Correct; Performance by Savannah 59 (ii) Litigation Certificate 59 (iii) Collateral Documents 60 (iv) Title Insurance 60 (v) No Material Change 60 (vi) Opinion of Savannah's Counsel 60 (vii) Due Diligence Satisfactory 61 (c) MUTUAL CONDITIONS 61 9. CONDITIONS PRECEDENT TO CLOSING 62 (a) SAVANNAH'S CONDITIONS 62 (i) Representations and Warranties Correct; Performance by GPC 62 (ii) Litigation Certificate 62 (iii) Other Documents 63 (iv) Opinion of GPC's Counsel 63 (b) GPC'S CONDITIONS 64 (i) Representations and Warranties Correct; Performance by Savannah 64 (ii) Litigation Certificate 64 (iii) Collateral Documents 64 (iv) No Material Change 65 (v) Opinion of Savannah's Counsel 65 (vi) Due Diligence Satisfactory 66 (c) MUTUAL CONDITIONS 66 10. MISCELLANEOUS 66 (a) SURVIVAL 66 (b) FURTHER ASSURANCES 67 (c) GOVERNING LAW 67 (d) NOTICE 67 (e) SECTION HEADINGS NOT TO AFFECT MEANING 68 (f) NO PARTNERSHIP 68 (g) TIME OF ESSENCE 68 (h) AMENDMENTS 68 (i) SUCCESSORS AND ASSIGNS 68 (j) COUNTERPARTS 68 (k) "AS IS" SALE 68 (l) COMPUTATION OF PERCENTAGE UNDIVIDED OWNERSHIP INTEREST 69 (m) SUCCESSOR AGENT 69 (n) THE PLANT MCINTOSH CT UNITS 70 -iv- (o) INSPECTION PRIOR TO EXECUTION AND DELIVERY AND PRIOR TO CLOSING 70 (p) CONTINUING DUE DILIGENCE 70 (q) SEVERAL AGREEMENTS 71 (r) SPECIAL PROVISIONS RELATING TO THE CT COMMON FACILITIES 71 (s) CONSTRUCTION OF "INCLUDING" 71 (t) NO DELAY 71 (u) OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES 72 -v- Exhibits A Description of land for Plant McIntosh CTs A1/2 Drawing depicting approximate location of land for Plant McIntosh CT Nos. 01 and 02 A3/4 Drawing depicting approximate location of land for Plant McIntosh CT Nos. 03 and 04 A5/6 Drawing depicting approximate location of land for Plant McIntosh CT Nos. 05 and 06 A7/8 Drawing depicting approximate location of land for Plant McIntosh CT Nos. 07 and 08 A9-16 Drawing depicting approximate location of land for Additional Plant McIntosh CTs B Drawing depicting approximate location of land constituting the CT Common Facilities Site C DELETED D Form of bill of sale for sale to GPC of undivided ownership interest in certain of the CT Common Facilities E Form of lease for conveyance to GPC of leasehold interests in the GPC Plant McIntosh CTs Site and the CT Common Facilities Site F Description of land constituting the Plant McIntosh Site G Schedule of Permitted Exceptions -vi- THIS PLANT MCINTOSH COMBUSTION TURBINE PURCHASE AND OWNERSHIP PARTICIPATION AGREEMENT (the "Agreement"), dated as of December 15, 1992, is between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("GPC"), and SAVANNAH ELECTRIC AND POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("Savannah"). W I T N E S S E T H: A. GPC and Savannah desire and intend to establish their respective ownership rights in the Plant McIntosh CTs, in the CT Common Facilities and in the CT Fuel Supply on and subject to the terms and provisions hereof and by an Operating Agreement, dated as of the date hereof between GPC and Savannah pertaining to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, to provide for the planning, licensing, design, procurement, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply and for the entitlement and use of capacity and energy from the Plant McIntosh CTs and the sharing of the costs thereof and of the CT Common Facilities and the CT Fuel Supply. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, GPC and Savannah hereby agree as follows: 1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated which meanings shall be equally applicable to both singular and plural forms of such terms except when otherwise expressly provided: (a) ADDITIONAL PLANT MCINTOSH CTS. The "Additional Plant McIntosh CTs" shall consist of: (i) That certain real property upon which may be constructed and located one or more of eight (8) complete combustion turbine-generator units to be known as the Additional Plant McIntosh CTs, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land approximately 800 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "Additional CTs Parcel" on Exhibit A9-16 hereof and incorporated herein (which parcel shall be reduced, as necessary, to suit the actual number of individual Additional Plant McIntosh CTs constructed), together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(a). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A9-16 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as the Additional Plant McIntosh CTs, including, without limitation, eight complete combustion turbine-generator units, the enclosures housing the same and the main step-up transformers which are to be used solely in connection with the Additional Plant McIntosh CTs, all as the foregoing list of personal property may be modified or supplemented at the closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with the Additional Plant McIntosh CTs or any one or more of them; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participants having an ownership interest in the personal property comprising the Additional Plant McIntosh CTs under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep the Additional Plant McIntosh CTs (or any one or more of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over the Additional Plant McIntosh CTs, or (2) be agreed to by the Participants having an ownership interest in the personal property comprising the Additional Plant McIntosh CTs; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(a). -2- (b) AFFILIATE. An "Affiliate" of a Participant shall mean any corporation, partnership (limited or general) or other person or entity controlling, under common control with, or controlled by such Participant. (c) AGENCY FUNCTIONS. The "Agency Functions" shall mean those activities which the Agent shall undertake on behalf of the Participants which relate to the planning, design, licensing, procurement, acquisition (other than acquisition by GPC of a leasehold interest in the GPC Plant McIntosh CTs Site and the CT Common Facilities Site and of an undivided ownership interest in certain of the CT Common Facilities equipment pursuant to this Agreement), construction, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, as the case may be, under this Agreement, and the Operating Agreement. (d) AGENT. "Agent" shall mean Savannah or its successors with respect to its rights and obligations in the performance of the Agency Functions on behalf of the Participants with respect to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply. The term "Agent" shall also mean and refer to Savannah (or its successor as Agent) acting on its own behalf with respect to the Savannah Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply for so long as Savannah (or its successor as Agent) owns an undivided ownership interest in the Savannah Plant McIntosh CTs, the CT Common Facilities, and the CT Fuel Supply, respectively. (e) ARMY CORPS OF ENGINEERS. The "Army Corps of Engineers" shall refer to the United States Army Corps of Engineers, a subdivision of the United States Department of Defense, or any entity succeeding to the powers and functions thereof. (f) ASSIGNMENT OF CT PURCHASE AGREEMENT. The "Assignment of CT Purchase Agreement" shall refer to that certain Assignment of Contract between SCSI and Savannah dated April 22, 1992 under which SCSI assigned to Savannah that certain Agreement for the Purchase and Sale of Combustion Turbine Generators and Auxiliaries between ABB Energy Services, Inc. and SCSI dated as of January 31, 1991, as amended by that certain Amendment Number One, dated as of April 22, 1992. (g) BUSINESS DAY. A "Business Day" shall be any Monday, Tuesday, Wednesday, Thursday or Friday other than a day which has been established by law or required by executive order as a -3- holiday for any commercial banking institution in the State of Georgia. (h) CAPITAL ACCOUNT. The "Capital Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of the Operating Agreement, for the payment of additional Cost of Construction and Fuel Costs. (i) CAPITAL BUDGET. The "Capital Budget" shall refer to the budgets pertaining to additional Cost of Construction and Fuel Costs for that portion of the Plant McIntosh CT Project which has achieved Commercial Operation to be delivered to the Participants pursuant to the terms of Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, of the Operating Agreement. (j) CLOSING. The "Closing" shall have the meaning assigned in Section 3(c), CLOSING, hereof. (k) COLLATERAL DOCUMENTS. The "Collateral Documents" shall refer to the Operating Agreement and the Assignment of the CT Purchase Agreement, collectively. (l) COMMERCIAL OPERATION. "Commercial Operation" shall refer to the date or dates when any of the Plant McIntosh CTs are completed and declared fully operable by Savannah, as Agent for the Participants with respect to construction; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Plant McIntosh CTs until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs. It is the intent of the Parties that Plant McIntosh CT Nos. 07 and 08 achieve Commercial Operation on January 24, 1994 (unit No. 08) and February 28, 1994 (unit No. 07), that Plant McIntosh CT Nos. 05 and 06 achieve Commercial Operation on March 9, 1994 (unit No. 06) and April 7, 1994 (unit No. 05), that Plant McIntosh CT Nos. 03 and 04 achieve Commercial Operation on May 5, 1994 (unit No. 04) and June 3, 1994 (unit No. 03), and that Plant McIntosh CT Nos. 01 and 02 achieve Commercial Operation on April 13, 1995 (unit No. 02) and May 26, 1995 (unit No. 01). (m) CONSTRUCTION ACCOUNT. The "Construction Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, -4- subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of this Agreement, for the payment of Cost of Construction. (n) CONSTRUCTION BUDGET. The "Construction Budget" shall refer to the budgets pertaining to the Cost of Construction to be delivered to the Participants pursuant to the terms of Section 6(j), CONSTRUCTION BUDGETS AND SCHEDULES, hereof. (o) COST OF CONSTRUCTION. The "Cost of Construction" shall refer to all costs incurred by Savannah, as Agent, for the Participants in connection with the planning, design, licensing, procurement, acquisition, construction, completion, testing, startup, renewal, addition, modification, replacement or disposal of the Plant McIntosh CTs and the CT Common Facilities, or any portion thereof, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to the Plant McIntosh CTs and the CT Common Facilities and for which Savannah has not been otherwise reimbursed by the Participants, which costs are properly recordable in accordance with the Electric Plant Instructions and in appropriate accounts as set forth in the Uniform System of Accounts, and shall also include all costs incurred by Savannah, as Agent for the Participants in connection with the purchase and acquisition of (i) the initial supply of fuel for the Plant McIntosh CTs to the extent such fuel is consumed by any of the Plant McIntosh CTs prior to the respective dates of Commercial Operation of such Plant McIntosh CTs, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to such acquisition of fuel for the Plant McIntosh CTs and for which Savannah has not been otherwise reimbursed by the Participants, and (ii) the initial supply of spare parts, and any replacements for such spare parts utilized during pre-Commercial Operation construction activities, for the Plant McIntosh CTs and the CT Common Facilities, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to such acquisition of spare parts and for which Savannah has not been otherwise reimbursed by the Participants; provided, however, that Cost of Construction shall not include (i) costs incurred by Savannah in connection with the draining and cleaning (except sand-blasting) of the existing Fuel Oil Tank as preparatory to its becoming part of the CT Common Facilities, (ii) interest cost attributable to the carrying of any Participant's respective investment in the Plant McIntosh CTs or the CT Common Facilities, or (iii) costs and -5- expenses incurred by any Participant in connection with the development of this Agreement or the Collateral Documents. (p) CT COMMON FACILITIES. The "CT Common Facilities" shall consist of: (i) All the property, both real and personal, used or intended to be used in common by, or in connection with, the Plant McIntosh CTs, including, without limitation, (A) all that certain real property which is used or intended to be used in connection with the Plant McIntosh CTs, which real property is approximately shown as crosshatched on the site plan attached hereto as Exhibit B and made a part hereof, the exact legal description of which land shall be determined upon completion of construction of the equipment and facilities comprising a portion of the CT Common Facilities, GPC and Savannah hereby agreeing that the exact legal description for such parcel shall be substituted for Exhibit B hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC and Savannah, and such legal description shall become a part hereof automatically upon such substitution, and (B) starting modules, service building, the fuel oil storage tank or tanks, the fuel oil distribution system, the improvements to the fire protection system, the water storage tank and water distribution system, the natural gas system, all switchyard equipment and facilities excluding the generator step-up transformers, the transmission line or lines connecting the Plant McIntosh CT Project switchyard to the existing Plant McIntosh 230 kv switchyard, and all miscellaneous property improvements such as roadways, fencing and lighting but excluding the CT Fuel Supply; (ii) Such additional land or rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced, and which are used or intended to be used in common by, or in connection with, the Plant McIntosh CTs, (but excluding any such additional tangible property as may constitute a portion of the CT Fuel Supply), provided that (A) the cost of such additional land or rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land or rights therein or such additional facilities or other tangible property shall have been acquired, constructed, installed or replaced for the common use of the Participants under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land or rights therein or the acquisition, -6- construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep the Plant McIntosh CT Project in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over the Plant McIntosh CT Project, or (2) be mutually agreed to by the Participants; and (iii) Existing intangible property rights, and such additional intangible property rights as may hereafter be acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, operation, renewal, addition, replacement, modification and disposal of any of the items described in clauses (i) through (iii) of this Section 1(p). (q) CT COMMON FACILITIES SITE. The "CT Common Facilities Site" shall refer to so much of the CT Common Facilities as constitutes real property. The CT Common Facilities Site is a subset of the Plant McIntosh Site and is a separate and distinct parcel of land from the GPC Plant McIntosh CTs Site and the Savannah Plant McIntosh CTs Site. (r) CT FUEL SUPPLY. The "CT Fuel Supply" shall mean the fossil fuel supply of oil maintained in the fuel oil storage tank or of natural gas provided by pipeline, as the case may be, for the Plant McIntosh CTs pursuant to Section 3(c), FOSSIL FUEL, of the Operating Agreement. (s) DUE DILIGENCE. "Due Diligence" shall have the meaning assigned in Section 10(p), CONTINUING DUE DILIGENCE, hereof. (t) EXECUTION AND DELIVERY. The "Execution and Delivery" shall have the meaning assigned in Section 4(c), EXECUTION AND DELIVERY, hereof. (u) FERC. The "FERC" shall mean the Federal Energy Regulatory Commission or any entity succeeding to the powers and functions thereof. (v) FORCE MAJEURE EVENT. A "Force Majeure Event" shall refer to any event which occurs due to no fault of the Party asserting the occurrence of such event, and which is beyond the reasonable control of such Party, including, but not limited to: strike or other labor difficulty or dispute; lockout; act of God; change in Legal Requirements; absence as of any particular time of precise engineering and scientific knowledge generally available to fashion a method for compliance with Legal Requirements or absence as of any particular time of appropriate -7- technology generally available which may be required for compliance with Legal Requirements; act or omission of any Governmental Authority; act or omission of any third party other than the Party asserting a Force Majeure Event; act of a public enemy; expropriation or confiscation of facilities; riot; rebellion; sabotage; embargo; blockade; quarantine; restriction; epidemic; accident; wreck or delay in transportation; unavailability or shortage of fuel, power, material or labor; equipment failure; declared or undeclared war; or damage resulting from wind, lightning, fire, flood, earthquake, explosion or other physical disaster; provided, however, that no Party shall be required by the foregoing provisions to settle a strike, lockout or other labor difficulty or dispute except when, according to its own best judgment, such a settlement seems advisable. (w) FUEL COSTS. The "Fuel Costs" shall mean all costs incurred by the Agent for the Participants that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of fuel for the CT Fuel Supply, including, without limitation, any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of fuel for the CT Fuel Supply and for which the Agent has not been otherwise reimbursed by the Participants; provided, however, that Fuel Costs shall not include any costs allocable to the purchase and acquisition of the initial supply of fuel for the Plant McIntosh CT Project to the extent such fuel is consumed by any of the Plant McIntosh CTs prior to the respective dates of Commercial Operation of such Plant McIntosh CTs. (x) FUEL OIL TANK. The "Fuel Oil Tank" shall refer to the existing nine million gallon fuel oil storage tank, wholly owned by Savannah prior to the Closing, a percentage undivided ownership interest in which will be conveyed to GPC at the Closing, and which shall be used to store water for the Plant McIntosh CTs. (y) GEPD. The "GEPD" shall refer to the Georgia Environmental Protection Division of the Georgia Natural Resources Department, a subdivision of the State of Georgia, or any entity succeeding to the powers and functions thereof. (z) GOVERNMENTAL AUTHORITY. A "Governmental Authority" shall mean any local, state, regional or federal administrative, legal, judicial, or executive agency, court, commission, -8- department or other entity, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee. (aa) GPC PLANT MCINTOSH CTS. The "GPC Plant McIntosh CTs" shall refer collectively to Plant McIntosh CT Nos. 01 and 02, Plant McIntosh CT Nos. 03 and 04, Plant McIntosh CT Nos. 07 and 08, and one or more of the Additional Plant McIntosh CTs, any one of which shall be a GPC Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the GPC Plant McIntosh CTs until such time as GPC provides written notice to Savannah that GPC is planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve GPC's energy needs; and provided further that the GPC Plant McIntosh CTs shall not include any GPC Plant McIntosh CT which GPC decides shall not be constructed and which is so identified in a written notice to Savannah. (ab) GPC PLANT MCINTOSH CTS SITE. The "GPC Plant McIntosh CTs Site" shall refer to so much of the GPC Plant McIntosh CTs as constitutes real property. (ac) GPSC. The "GPSC" shall mean the Georgia Public Service Commission or any governmental agency succeeding to the powers and functions thereof. (ad) INDENTURE. The "Indenture" shall refer to that certain Indenture dated as of March 1, 1945, from Savannah to NationsBank of Georgia, National Association, as Trustee, as amended and supplemented to the date hereof. (ae) LEASE. The "Lease" shall have the meaning assigned in Section 4(a), LEASE OF LAND, hereof. (af) LEGAL REQUIREMENTS. "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to Savannah, as Agent, or any Participant, as required by the context in which used, or to the Plant McIntosh CT Project, or to the use, manner of use, occupancy, possession, planning, licensing, design, procurement, construction, acquisition, testing, startup, operation, maintenance, management, control, addition, renewal, modification, replacement or disposal of the Plant McIntosh CT Project, or any portion or portions thereof. -9- (ag) OPERATING ACCOUNT. The "Operating Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of the Operating Agreement, for the payment of Operating Costs. (ah) OPERATING AGREEMENT. "Operating Agreement" shall refer to that certain Plant McIntosh Combustion Turbine Operating Agreement, dated as of the date hereof, between GPC and Savannah, as such agreement may be amended from time to time. (ai) OPERATING BUDGET. The "Operating Budget" shall refer to the budgets pertaining to Operating Costs to be delivered to the Participants pursuant to the terms of Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, of the Operating Agreement. (aj) OPERATING COSTS. "Operating Costs" shall have the meaning given in Section 1(af), OPERATING COSTS, of the Operating Agreement. (ak) PARTICIPANTS. "Participant" and "Participants" shall refer individually or collectively, as the case may be, to GPC and Savannah (in their capacities as owners of one or more of the Plant McIntosh CTs) and to any permitted transferee or assignee of either of them of an ownership or leasehold interest in the Plant McIntosh CT Project pursuant to Section 6(c), ALIENATION AND ASSIGNMENT, hereof made in conformity with those provisions of this Agreement and the Operating Agreement pertaining to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, provided, however, such references shall only refer to an entity for so long as said entity has an ownership or an ownership and a leasehold interest in the Plant McIntosh CT Project. (al) PARTY. A "Party" shall refer to any entity which is now or hereafter a party to this Agreement; provided, however, such reference shall only refer to an entity for so long as such entity is a party to this Agreement. (am) PLANT MCINTOSH. "Plant McIntosh" shall refer to the Plant McIntosh Site plus all improvements thereon including, without limitation, the Plant McIntosh CT Project and that certain Plant McIntosh 170 Mw coal-fired generating plant, owned by Savannah, together with its supporting facilities and equipment. -10- (an) PLANT MCINTOSH CT NOS. 01 AND 02. Plant McIntosh CT Nos. 01 and 02 shall refer to: (i) That certain real property upon which shall be constructed and located two (2) complete combustion turbine- generator units to be known as Plant McIntosh CT Nos. 01 and 02, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land approximately 200 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "CT Nos. 01 and 02 Parcel" on Exhibit A1/2 hereof and incorporated herein, together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(an). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A1/2 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as Plant McIntosh CT Nos. 01 and 02, including, without limitation, two complete combustion turbine-generator units (each comprised of a gas turbine block, a combustion chamber, a generator exciter block, a stack, a fin fan cooler, an auxiliary skid, a water injection block, a cooling water block, a power and control module, a battery module, a generator breaker module, a generator bus duct, unit auxiliary transformer secondary switchgear, a fuel oil pump block, an air intake filter, a unit auxiliary transformer and a transfer switch module), the enclosures housing the same and a main step-up transformer which are to be used solely in connection with Plant McIntosh CT Nos. 01 and 02, all as the foregoing list of personal property may be modified or supplemented at the Closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with Plant McIntosh CT Nos. 01 or 02 or both; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional -11- facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 01 and 02 under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep Plant McIntosh CT Nos. 01 and 02 (or either of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over Plant McIntosh CT Nos. 01 and 02, or (2) be agreed to by the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 01 and 02; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(an). (ao) PLANT MCINTOSH CT NOS. 03 AND 04. Plant McIntosh CT Nos. 03 and 04 shall refer to: (i) That certain real property upon which shall be constructed and located two (2) complete combustion turbine- generator units to be known as Plant McIntosh CT Nos. 03 and 04, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land approximately 200 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "CT Nos. 03 and 04 Parcel" on Exhibit A3/4 hereof and incorporated herein, together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(ao). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A3/4 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as Plant McIntosh CT Nos. 03 and 04, including, without limitation, two complete -12- combustion turbine-generator units (each comprising a gas turbine block, a combustion chamber, a generator exciter block, a stack, a fin fan cooler, an auxiliary skid, a water injection block, a cooling water block, a power and control module, a battery module, a generator breaker module, a generator bus duct, unit auxiliary transformer secondary switchgear, a fuel oil pump block, an air intake filter, a unit auxiliary transformer and a transfer switch module), the enclosures housing the same and a main step-up transformer which are to be used solely in connection with Plant McIntosh CT Nos. 03 and 04, all as the foregoing list of personal property may be modified or supplemented at the Closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with Plant McIntosh CT Nos. 03 or 04 or both; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 03 and 04 under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep Plant McIntosh CT Nos. 03 and 04 (or either of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over Plant McIntosh CT Nos. 03 and 04, or (2) be agreed to by the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 03 and 04; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(ao). -13- (ap) PLANT MCINTOSH CT NOS. 05 AND 06. Plant McIntosh CT Nos. 05 and 06 shall refer to: (i) That certain real property upon which shall be constructed and located two (2) complete combustion turbine- generator units to be known as Plant McIntosh CT Nos. 05 and 06, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land approximately 200 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "CT Nos. 05 and 06 Parcel" on Exhibit A5/6 hereof and incorporated herein, together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(ap). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A5/6 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as Plant McIntosh CT Nos. 05 and 06, including, without limitation, two complete combustion turbine-generator units (each comprising a gas turbine block, a combustion chamber, a generator exciter block, a stack, a fin fan cooler, an auxiliary skid, a water injection block, a cooling water block, a power and control module, a battery module, a generator breaker module, a generator bus duct, unit auxiliary transformer secondary switchgear, a fuel oil pump block, an air intake filter, a unit auxiliary transformer and a transfer switch module), the enclosures housing the same and a main step-up transformer which are to be used solely in connection with Plant McIntosh CT Nos. 05 and 06, all as the foregoing list of personal property may be modified or supplemented at the Closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with Plant McIntosh CT Nos. 05 or 06 or both; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional -14- facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 05 and 06 under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep Plant McIntosh CT Nos. 05 and 06 (or either of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over Plant McIntosh CT Nos. 05 and 06, or (2) be agreed to by the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 05 and 06; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(ap). (aq) PLANT MCINTOSH CT NOS. 07 AND 08. Plant McIntosh CT Nos. 07 and 08 shall refer to: (i) That certain real property upon which shall be constructed and located two (2) complete combustion turbine- generator units to be known as Plant McIntosh CT Nos. 07 and 08, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land approximately 200 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "CT Nos. 07 and 08 Parcel" on Exhibit A7/8 hereof and incorporated herein, together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(aq). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A7/8 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as Plant McIntosh CT Nos. 07 and 08, including, without limitation, two complete -15- combustion turbine-generator units (each comprising a gas turbine block, a combustion chamber, a generator exciter block, a stack, a fin fan cooler, an auxiliary skid, a water injection block, a cooling water block, a power and control module, a battery module, a generator breaker module, a generator bus duct, unit auxiliary transformer secondary switchgear, a fuel oil pump block, an air intake filter, a unit auxiliary transformer and a transfer switch module), the enclosures housing the same and a main step-up transformer which are to be used solely in connection with Plant McIntosh CT Nos. 07 and 08, all as the foregoing list of personal property may be modified or supplemented at the Closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with Plant McIntosh CT Nos. 07 or 08 or both; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 07 and 08 under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep Plant McIntosh CT Nos. 07 and 08 (or either of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over Plant McIntosh CT Nos. 07 and 08, or (2) be agreed to by the Participant having an ownership interest in the personal property comprising Plant McIntosh CT Nos. 07 and 08; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(aq). -16- (ar) PLANT MCINTOSH CT PROJECT. The "Plant McIntosh CT Project" shall refer to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply. (as) PLANT MCINTOSH CTS. The "Plant McIntosh CTs" shall consist collectively of Plant McIntosh CT Nos. 01 and 02, Plant McIntosh CT Nos. 03 and 04, Plant McIntosh CT Nos. 05 and 06, Plant McIntosh CT Nos. 07 and 08, and one or more of the Additional Plant McIntosh CTs, any one of which shall be a Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Plant McIntosh CTs until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs; and provided further that the Plant McIntosh CTs shall not include any Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (at) PLANT MCINTOSH CTS SITE. The "Plant McIntosh CTs Site" shall refer to that portion of the Plant McIntosh CTs which constitutes real property. (au) 1994 PLANT MCINTOSH CTS. The "1994 Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 07 and 08, Plant McIntosh CT Nos. 05 and 06, and Plant McIntosh CT Nos. 03 and 04, any one (of the six) of which shall be a 1994 Plant McIntosh CT; provided, however, that the 1994 Plant McIntosh CTs shall not include any 1994 Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (av) 1995 PLANT MCINTOSH CTS. The "1995 Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 01 and 02, either one of which shall be a 1995 Plant McIntosh CT; provided, however, that the 1995 Plant McIntosh CTs shall not include any 1995 Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (aw) PLANT MCINTOSH SITE. The "Plant McIntosh Site" shall refer to the real property which is described in Exhibit F attached hereto and made a part hereof. (ax) PRIME RATE. The "Prime Rate" shall mean the per annum rate of interest announced from time to time by Chemical Bank as its prime rate, and with respect to any payment or reimbursement to be made hereunder to which interest is to be added (other than -17- an adjustment to the Purchase Price), shall be determined as of the date such payment or reimbursement is due, and with respect to any adjustment to the Purchase Price as to which interest is to be added pursuant to the terms hereof, shall be determined as of the date of the Closing for which such adjustment is to be made. The Prime Rate shall be calculated on the basis of a 365- day year for the actual number of days that the payment, reimbursement or purchase price adjustment, as the case may be, has not been made. (ay) PRO FORMA OWNERSHIP INTEREST. A "Pro Forma Ownership Interest" shall mean for each Participant the number of the Plant McIntosh CTs (whether or not completed) owned by such Participant divided by the total number of Plant McIntosh CTs (whether or not completed); provided, however, that none of the Additional Plant McIntosh CTs shall be included in the calculation of Pro Forma Ownership Interest until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs; provided further that, for purposes of this definition of Pro Forma Ownership Interest, no Plant McIntosh CT shall be included which has been cancelled by the Participant owning such Plant McIntosh CT and which is identified in a written notice of cancellation to the other Participant. (az) PROJECT MANAGEMENT BOARD. The "Project Management Board" shall refer to the Plant McIntosh CT Project Management Board established pursuant to Section 5(k), PLANT MCINTOSH CT PROJECT MANAGEMENT BOARD, hereof. (ba) PRUDENT UTILITY PRACTICE. "Prudent Utility Practice" at a particular time shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts, which in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement and the Operating Agreement. Compliance by Savannah with the provisions of any budget estimate which has been altered by the Participants pursuant to this Agreement or the Operating Agreement, as the -18- case may be, from any such estimate submitted by Savannah shall not, in and of itself, constitute a breach by Savannah of its obligation to discharge its responsibilities as Agent for the Participants hereunder in accordance with Prudent Utility Practice. (bb) PURCHASE PRICE. The "Purchase Price" shall have the meaning assigned in subsection (i) of Section 3(b), PURCHASE PRICE AND PAYMENT, hereof. (bc) RELEASE. "Release" shall mean a release executed and delivered by the holder of a mortgage, deed to secure debt or other security interest (including, without limitation, NationsBank of Georgia, National Association, as Trustee under the Indenture) sufficient to release the real or personal property which is the subject thereof from the lien, security title and effect of such mortgage, deed to secure debt or other security insterest and, with respect to any release given as to real property, sufficient to eliminate such mortgage, deed to secure debt or other security interest as an exception to the coverage under an owner's title insurance policy. (bd) RENT. The "Rent" shall have the meaning assigned in subsection (i) of Section 4(b), RENT AND PAYMENT, hereof. (be) SAVANNAH PLANT MCINTOSH CTS. The "Savannah Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 05 and 06 and one or more of the Additional Plant McIntosh CTs, any one of which is a Savannah Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Savannah Plant McIntosh CTs until such time as Savannah provides written notice to GPC that Savannah is planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve Savannah's energy needs; and provided further that the Savannah Plant McIntosh CTs shall not include any Savannah Plant McIntosh CT which Savannah decides shall not be constructed and which is so identified in a written notice to GPC. (bf) SAVANNAH PLANT MCINTOSH CTS SITE. The "Savannah Plant McIntosh CTs Site" shall refer to so much of the Savannah Plant McIntosh CTs as constitutes real property. (bg) SCSI. "SCSI" shall mean Southern Company Services, Inc., a corporation organized and existing under the laws of the State of Alabama, and any successor corporation. -19- (bh) SEC. The "SEC" shall refer to the Securities and Exchange Commission or any governmental agency succeeding to the powers and functions thereof. (bi) SITE REPRESENTATIVE. "Site Representative" shall refer to the term as described in Section 5(e), ON-SITE OBSERVATION AND INSPECTION, hereof. (bj) THE SOUTHERN COMPANY. "The Southern Company" shall refer to The Southern Company, a corporation organized and existing under the laws of the State of Delaware. (bk) UNIFORM SYSTEM OF ACCOUNTS. The "Uniform System of Accounts" shall mean the FERC Uniform System of Accounts prescribed for Public Utilities and Licensees (Class A and Class B), as the same now exists or may be hereafter amended by the FERC. 2. REPRESENTATIONS AND WARRANTIES. (a) GPC REPRESENTATIONS AND WARRANTIES. GPC hereby represents and warrants to Savannah as follows: (i) Organization and Existence. GPC is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has sufficient corporate power and authority to own and lease those portions of the Plant McIntosh CT Project as it is required to own and lease from time to time pursuant to the terms of this Agreement, to execute and deliver this Agreement and the Operating Agreement and to perform its obligations hereunder and thereunder and to carry on its business as it is now being conducted and as it is contemplated hereunder and thereunder to be conducted in the future. (ii) Due Authorization. (A) The execution, delivery and performance of this Agreement by GPC has been duly and effectively authorized by all requisite corporate action. This Agreement constitutes the legal, valid and binding obligation of GPC, enforceable against GPC in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity. -20- (B) The execution, delivery and performance of the Operating Agreement by GPC has been duly and effectively authorized by all requisite corporate action. The Operating Agreement constitutes the legal, valid and binding obligation of GPC, enforceable against GPC in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity. (iii) Litigation. Other than as may be disclosed in GPC's Annual Report on Form 10-K for the year ended 1991, its quarterly reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1992, or as may be otherwise disclosed in writing by GPC to Savannah, there is no action, suit, claim, proceeding or investigation pending or threatened against GPC by or before any Governmental Authority having jurisdiction over GPC or its ownership interest in the Plant McIntosh CT Project which, if adversely determined, would have a material adverse effect upon GPC's ability to enter into and perform its material obligations and consummate the material transactions contemplated by this Agreement and the Operating Agreement or the material rights of Savannah as a tenant in common in the CT Common Facilities and the CT Fuel Supply. GPC is not subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Authority having jurisdiction over GPC or its ownership interest in the Plant McIntosh CT Project which would materially and adversely affect its ability to enter into and perform its material obligations under this Agreement and the Operating Agreement or the material rights of Savannah as a tenant in common in the CT Common Facilities and the CT Fuel Supply. (iv) No Material Violation, No Material Impairment. There is no provision of GPC's charter or bylaws, nor any existing statute, law, regulation, material note, bond, resolution, indenture, agreement or instrument to which GPC is a party and which is enforceable against GPC which would be materially violated by or which would materially impair GPC's entry into this Agreement or the Operating Agreement, the performance by GPC of its material obligations hereunder and thereunder in accordance with the terms hereof and thereof or the consummation of the material transactions contemplated hereby or thereby in accordance with the terms hereof and thereof. -21- (v) Approvals. Other than (A) the approval by the GPSC of the GPC Application for Certification of the McIntosh Combustion Turbine Project, (B) the approval of the SEC under the Public Utility Holding Company Act of 1935, (C) the approval of the GEPD, the Army Corps of Engineers and Effingham County for certain permits or licenses, and (D) the agreement of the Parties hereto to the terms and provisions and execution and delivery of the Operating Agreement, there are no approvals or consents other than those referenced in Section 8, CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY, and Section 9, CONDITIONS PRECEDENT TO CLOSING, hereof, the absence of which would materially impair GPC's ability to consummate the transactions described in Section 3, SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT, and Section 4, LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE, hereof. (b) SAVANNAH REPRESENTATIONS AND WARRANTIES. Savannah hereby represents and warrants to GPC as follows: (i) Organization and Existence. Savannah is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has sufficient corporate power and authority to own those portions of the Plant McIntosh CT Project as it now owns and as it is required to own from time to time pursuant to the terms of this Agreement, to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder and to carry on its business as it is now being conducted and as it is contemplated hereunder and thereunder to be conducted in the future. (ii) Due Authorization. (A) The execution, delivery and performance of this Agreement by Savannah has been duly and effectively authorized by all requisite corporate action. This Agreement constitutes the legal, valid and binding obligation of Savannah, enforceable against Savannah in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity. -22- (B) The execution, delivery and performance of the Collateral Documents by Savannah has been duly and effectively authorized by all requisite corporate action. The Collateral Documents constitute the legal, valid and binding obligations of Savannah, enforceable against Savannah in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity. (iii) Litigation. Other than as may be disclosed in Savannah's Annual Report on Form 10-K for the year ended 1991, its quarterly reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1992, or as may be otherwise disclosed in writing by Savannah to GPC, there is no action, suit, claim, proceeding or investigation pending or threatened against Savannah by or before any Governmental Authority having jurisdiction over Savannah or its ownership interest in Plant McIntosh which, if adversely determined, would have a material adverse effect upon Savannah's ability to enter into and perform its material obligations and consummate the material transactions contemplated by this Agreement and the Collateral Documents or the material rights of GPC as a tenant in common in the CT Common Facilities and the CT Fuel Supply. Savannah is not subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Authority having jurisdiction over Savannah or its ownership interest in Plant McIntosh which would materially and adversely affect its ability to enter into and perform its material obligations under this Agreement and the Collateral Documents or the material rights of GPC as a tenant in common in the CT Common Facilities and the CT Fuel Supply. (iv) No Material Violation, No Material Impairment. There is no provision of Savannah's charter or bylaws, nor any existing statute, law, regulation, material note, bond, resolution, indenture, agreement or instrument to which Savannah is a party and which is enforceable against Savannah which would be materially violated by or which would materially impair Savannah's entry into this Agreement or the Collateral Documents, the performance by Savannah of its material obligations hereunder and thereunder in accordance with the terms hereof and thereof or the consummation of the material transactions contemplated hereby or thereby in accordance with the terms hereof and thereof; provided, however, no representation or warranty is -23- given with respect to the provisions of the Indenture in the event of a default by Savannah under the Indenture. (v) Approvals. Other than (A) the approval by the GPSC of the Savannah Application for Certification of the McIntosh Combustion Turbine Project, (B) the approval of the SEC under the Public Utility Holding Company Act of 1935, (C) the approval of the GEPD, the Army Corps of Engineers and Effingham County for certain permits or licenses, and (D) the agreement of the Parties hereto to the terms and provisions and the execution and delivery of the Operating Agreement, there are no approvals or consents other than those referenced in Section 8, CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY, and Section 9, CONDITIONS PRECEDENT TO CLOSING, hereof, the absence of which would materially impair Savannah's ability to consummate the transactions described in Section 3, SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT, and Section 4, LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE, hereof. 3. SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT. (a) SALE OF ASSETS. Subject to the terms and conditions of this Agreement, at the Closing Savannah will sell and convey to GPC and GPC will purchase from Savannah a percentage undivided ownership interest, equivalent to GPC's Pro Forma Ownership Interest, as it may appear at the time, as a tenant in common with Savannah, in that portion of the CT Common Facilities (excluding the CT Common Facilities Site) which has been acquired, constructed or completed prior to the Closing and which, prior to the Closing, is exclusively the property of Savannah. Such conveyance will be by Bill of Sale substantially in the form of Exhibit D attached hereto and made a part hereof. At the Closing, Savannah will furnish to GPC a Release from any and all mortgages, deeds to secure debt or other security interests on such undivided ownership interests in that portion of the CT Common Facilities equipment being conveyed to GPC at the Closing. (b) PURCHASE PRICE AND PAYMENT. (i) The purchase price for the assets to be acquired by GPC at the Closing pursuant to subsection (i) of Section 3(a), SALE OF ASSETS, hereof ("Purchase Price") will be the original book cost of such assets less depreciation. The -24- Purchase Price shall be payable to Savannah at the Closing in immediately available funds. (ii) From time to time after the Closing, Savannah and GPC shall execute and deliver such other instruments of conveyance and transfer as may be necessary or appropriate or as either of them may reasonably request to vest in GPC its respective undivided ownership interests in and to that portion of the CT Common Facilities equipment being conveyed to GPC at the Closing. (c) CLOSING. Subject to the provisions of Section 9, CONDITIONS PRECEDENT TO CLOSING, hereof, the closing of the sale and transfer contemplated in Section 3(a), SALE OF ASSETS, hereof (the "Closing") will take place at 10:00 a.m., 20 Business Days prior to the scheduled first Commercial Operation date of any of the Plant McIntosh CTs. Savannah shall provide GPC with written notice of the Commercial Operation schedule 40 Business Days prior to the scheduled first Commercial Operation date. The Closing shall take place at the offices of Bouhan, Williams & Levy, 447 Bull Street, Savannah, Georgia 31401. If the Closing has not occurred on or prior to May 1, 1994, and postponement of the Closing is not mutually agreed to in writing by GPC and Savannah, the Closing shall be cancelled and all obligations, duties and rights of Savannah to GPC and GPC to Savannah under this Agreement and the Operating Agreement shall be of no further force and effect and Savannah shall have no liability to GPC nor shall GPC have any liability to Savannah hereunder except for the liability of Savannah or GPC for the breach of its obligations hereunder on or prior to such date and except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof. If on the date of the Closing, Savannah or GPC is unable to consummate the transactions to be consummated on such date due to the failure to receive a regulatory approval stated herein to be a condition precedent to its ability to perform, such approval has been applied for and has been diligently pursued, and such approval remains pending and not refused or rejected on such date, then Savannah or GPC, as the case may be, shall be entitled to a reasonable extension of the Closing in order to permit Savannah or GPC, as the case may be, to obtain such pending approval. -25- 4. LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE. (a) LEASE OF LAND. Subject to the terms and conditions of this Agreement, at the Execution and Delivery Savannah will execute and deliver to GPC a lease ("Lease") conveying (i) a 100% leasehold interest in the GPC Plant McIntosh CTs Site, and (ii) a percentage undivided interest, equivalent to GPC's Pro Forma Ownership Interest, as it may appear at the time, in a leasehold estate, as a tenant in common with Savannah, in the CT Common Facilities Site. Such Lease will be substantially in the form of Exhibit E attached hereto and made a part hereof. The Lease shall terminate upon the earlier of (i) the termination of the Operating Agreement, or (ii) the date which is 100 years from the date of the Lease. At the Execution and Delivery, Savannah will furnish to GPC a Release of such leasehold interests conveyed to GPC in the GPC Plant McIntosh CTs Site and the CT Common Facilities Site from the holder of any and all mortgages, deeds to secure debt or other security interests, including, without limitation, the Indenture. In addition to the foregoing conveyances, Savannah shall convey to GPC at the Execution and Delivery, easement rights as follows: a non-exclusive easement, for the term of the Lease, in, upon, over, under, through and across the Plant McIntosh Site, less and except from the Plant McIntosh Site the GPC Plant McIntosh CTs Site and the CT Common Facilities Site, but including with respect to such grant of easement the Savannah Plant McIntosh CTs Site. The terms and conditions of the easement are as set forth in the Lease. As to the easement rights to be granted in the Lease by Savannah to GPC, GPC acknowledges and agrees that (i) Savannah reserves the right to use the easement area in a manner wholly consistent with the terms of the Lease, this Agreement, and the Operating Agreement, (ii) the location of any improvements constructed or installed by GPC pursuant to such easement shall be subject to the terms of this Agreement, the Operating Agreement, the Lease and, if not expressly governed thereby, to the prior, reasonable approval of Savannah, and (iii) the use of such easement shall be for purposes reasonably necessary or reasonably appropriate from time to time in the operation of the Plant McIntosh CT Project or for purposes for the benefit of or to be used in connection with the Plant McIntosh CT Project. From time to time after the Execution and Delivery, Savannah and GPC shall execute and deliver such other instruments of conveyance and transfer as may be necessary or appropriate or as either of them may reasonably request to vest in GPC its respective leasehold interests in and to the GPC Plant McIntosh -26- CTs Site and the CT Common Facilities Site, as well as to provide necessary easements appurtenant thereto. (b) RENT AND PAYMENT. The rent for the leasehold interests conveyed to GPC in Section 4(a), LEASE OF LAND, hereof ("Rent") shall be the sum of: (A) the original book cost of the GPC Plant McIntosh CTs Site, plus (B) the original book cost of the CT Common Facilities Site times GPC's Pro Forma Ownership Interest; which sum shall then be multiplied by Savannah's weighted cost of pretax capital as of December 31, 1991. The Rent shall be paid to Savannah by July 1 of each year following GPC's receipt of an annual invoice from Savannah for such Rent on or about June 15 of each year. The first payment of the Rent shall be prorated by the fraction of the number of days between the Execution and Delivery and the date of Savannah's first invoice divided by 365. (c) EXECUTION AND DELIVERY. Subject to the provisions of Section 8, CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY hereof, the execution and delivery of the Lease contemplated in Section 4(a), LEASE OF LAND, hereof (the "Execution and Delivery") will take place at 10:00 a.m., 30 Business Days following receipt by Savannah and GPC of all requisite approvals set forth in such Section 8, but not later than April 1, 1994 at the offices of Bouhan, Williams & Levy, 447 Bull Street, Savannah, Georgia. If the Execution and Delivery has not occurred on or prior to April 1, 1994, and postponement of the Execution and Delivery is not mutually agreed to in writing by GPC and Savannah, the Execution and Delivery shall be cancelled and all obligations, duties and rights of Savannah to GPC and GPC to Savannah under this Agreement and the Operating Agreement shall be of no further force and effect and Savannah shall have no liability to GPC nor shall GPC have any liability to Savannah hereunder except for the liability of Savannah or GPC for the breach of its obligations hereunder on or prior to such date and except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof. If on the date of Execution and Delivery, Savannah or GPC is unable to consummate the transactions to be consummated on such date due to the failure to receive a regulatory approval stated herein to be a condition precedent to its ability to perform, such approval has been applied for and has been diligently pursued, and such approval remains pending and not refused or rejected on such date, then Savannah or GPC, as the case may be, shall be entitled to a reasonable extension of the Execution and Delivery in order to permit Savannah or GPC, as the case may be, to obtain such pending approval. -27- (d) AMENDMENT OF LEASE IN CONNECTION WITH THE CONSTRUCTION OF ONE OR MORE ADDITIONAL PLANT MCINTOSH CTS. (i) The obligations of the Participants under this Section 4(d) are subject to Section 7(c), APPROVALS, hereof. In the event that GPC serves one or more notices that it plans to construct one or more of the Additional Plant McIntosh CTs, Savannah agrees that it will proceed diligently in accordance with subsections (ii), (iii) and (iv) of this Section 4(d) to a closing at which time Savannah and GPC shall amend the Lease in order to convey to GPC a 100% leasehold interest in the real property associated with such one or more Additional Plant McIntosh CTs such that GPC will always hold a 100% leasehold interest in the GPC Plant McIntosh CTs Site. (ii) Not more than 30 days following the date GPC serves each notice that it plans to construct one or more of the Additional Plant McIntosh CTs, GPC shall deliver to Savannah a notice specifying the date on which the closing contemplated in subsection (i) of this Section 4(d) shall occur (the "closing notice"). Following receipt of each such closing notice, the Participants shall proceed diligently to such closing, at which time the closing described in Section 10(u), OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES, hereof, shall also be consummated. At such closing, Savannah and GPC shall execute an amendment to the Lease, which shall substitute for Exhibit A of said Lease the revised real property description of the GPC Plant McIntosh CTs Site, such that the Lease will convey a 100% leasehold interest in the additional real property which is a part of such Additional Plant McIntosh CTs. In connection with such amendment to the Lease, Savannah shall deliver to GPC a properly executed Release from the holder of any and all mortgages, deeds to secure debt or other security interests of such leasehold interest being conveyed by Savannah to GPC. (iii) The increase in the Rent paid by GPC for each conveyance of a leasehold interest pursuant to subsection (i) of this Section 4(d), shall be the original book cost of that percentage of the GPC Plant McIntosh CTs Site being conveyed multiplied by Savannah's weighted cost of pretax capital as of December 31, 1991. (iv) From time to time after each closing pursuant to this Section 4(d), the Participants shall execute and deliver such other instruments of conveyance and transfer as may be necessary or appropriate or as either of them may -28- reasonably request to vest in GPC the leasehold interest in that portion of the GPC Plant McIntosh CTs Site being conveyed at such closing, including without limitation, any necessary easements appurtenant thereto. 5. AGENCY. (a) APPOINTMENT. Effective on the date of Execution and Delivery, subject to the terms of this Agreement and the Operating Agreement, the Participants hereby irrevocably appoint Savannah as their Agent in connection with the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply to act on behalf of the Participants in performing the Agency Functions. Savannah hereby accepts such appointment and agrees that it shall discharge its responsibilities as Agent for the Participants in accordance with the terms of this Agreement and in accordance with Prudent Utility Practice. (b) AUTHORITY AND RESPONSIBILITY. Subject to the provisions of this Agreement and the Operating Agreement, as Agent for the Participants, Savannah shall have sole authority and responsibility with respect to the Agency Functions, and in respect thereof, Savannah as Agent is authorized to take and shall take, in the name and on behalf of the Participants all reasonable actions which, in the discretion and judgment of Savannah, are deemed necessary or advisable to effect the Agency Functions, including, without limitation, the following: (i) The making of such agreements and modifications of existing agreements, other than this Agreement and the Operating Agreement, and the taking of such other action as Savannah as Agent deems necessary or appropriate, in its sole discretion, or as may be required under the regulations or directives of any Governmental Authority having jurisdiction, with respect to the Agency Functions, which such agreements and modifications shall, together with all such existing agreements, be held by Savannah as Agent; provided, however, that Savannah will develop procedures, with respect to the purchase of equipment and materials and the supply of services, which are mutually acceptable to the Participants and which shall provide opportunity for the Participants to participate in procurement decisions; (ii) With respect to the disposal (including, without limitation, retirement and salvaging) of all or any part of the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the making of such agreements and modifications of existing agreements (other than this -29- Agreement and the Operating Agreement) and the taking of such other action as may be required under the regulations or directives of any Governmental Authority having jurisdiction or as Savannah as Agent deems necessary or appropriate, with the consent in each case of the Participants owning such Plant McIntosh CTs, which such agreements and modifications, together with such existing agreements, shall be held by Savannah as Agent; provided, however, that Savannah shall not be required to obtain the consent of any Participant prior to disposing of any machinery, apparatus, supplies, equipment, tools or implements which are (1) valued at less than $50,000.00 (original book cost), and (2) replaced or substituted for with similar property of value at least equal to that of the disposed property; provided, further, that Savannah is not authorized by GPC to have any direct contact with the GPSC on behalf of GPC without the written consent of GPC; (iii) With respect to the disposal (including, without limitation, retirement and salvaging) of all or any part of the CT Common Facilities and the CT Fuel Supply, the making of such agreements and modifications of existing agreements (other than this Agreement and the Operating Agreement) and the taking of such other action as may be required under the regulations or directives of any Governmental Authority having jurisdiction or as Savannah as Agent deems necessary or appropriate, with the consent in each case of all the Participants, which such agreements and modifications, together with such existing agreements, shall be held by Savannah as Agent; provided, however, that Savannah shall not be required to obtain the consent of any Participant prior to disposing of any machinery, apparatus, supplies, equipment, tools or implements which are (1) valued at less than $50,000.00 (original book cost), and (2) replaced or substituted for with similar property of value at least equal to that of the disposed property; (iv) The execution and filing, with any Governmental Authority having jurisdiction (except the GPSC on behalf of GPC), of applications, amendments, reports and other documents and filings in or in connection with the licensing and other regulatory matters with respect to the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply or any combination thereof; (v) The receipt of any notice or other communication from any Governmental Authority having jurisdiction (except the GPSC on behalf of GPC) as to any licensing or other similar matter with respect to the Plant McIntosh CTs, the -30- CT Common Facilities, the CT Fuel Supply or any combination thereof; and (vi) The provision of, or contracting with any third party to purchase or provide, any equipment or facilities or perform services in connection with the Plant McIntosh CTs, the CT Common Facilities, or both, in accordance with the provisions of this Agreement and the Operating Agreement. GPC and Savannah agree that all such agreements which relate to the Plant McIntosh CTs, the CT Common Facilities or the CT Fuel Supply, described in this Section 5(b) which are entered into after the effective date hereof shall, by their terms, be made assignable by Savannah as Agent to any replacement or successor Agent for the Agency Functions, pursuant to this Agreement and the Operating Agreement; provided, however, that any agreements between Savannah, as Agent, and its Affiliates shall not be made assignable to any replacement or successor Agent who is not also an Affiliate of Savannah. (c) LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY. (i) Notwithstanding any provision of law or any provision of this Agreement, (A) in the event Savannah as Agent fails to comply at any time with the provisions of Section 7(a), NO ADVERSE DISTINCTION, hereof, or (B) in the event that Savannah fails at any time to perform its duties, responsibilities, obligations or functions hereunder as Agent in accordance with Prudent Utility Practice, or (C) in the event that Savannah conveys all of its undivided ownership interest in the Plant McIntosh CT Project, then the Participants shall have the right as their sole and exclusive remedy to remove Savannah as Agent hereunder and under the Operating Agreement in accordance with all of the provisions of subsection (iv) of this Section 5(c). GPC, in performing services, or acting as agent, for Savannah in connection with the Plant McIntosh CT Project, shall have equivalent limitations on its liability as are set forth above for Savannah, as Agent. (ii) The limitations upon the liability of Savannah and the Participants herein shall also apply to the work performed by Savannah and the Participants prior to the date hereof and prior to the Execution and Delivery with respect to the Plant McIntosh CTs, the CT Common Facilities or the CT Fuel Supply. -31- (iii) In the event that any particular application of any of the limitations of liability contained in this Section 5(c) should be finally adjudicated to be void as a violation of the public policy of the State of Georgia, then such limitation of liability shall not apply with respect to such application to the extent (but only to the extent) required in order for such limitation of liability not to be void as a violation of such public policy, and such limitations of liability shall remain in full force and effect with respect to all other applications to the fullest extent permitted by law. (iv) The removal and replacement of Savannah as Agent under this Agreement and under the Operating Agreement pursuant to any provisions of this Agreement or the Operating Agreement authorizing such removal and replacement, shall be conducted in accordance with all of the following provisions of this Section 5(c)(iv): (A) The removal of Savannah as Agent under this Agreement and the Operating Agreement with respect to the Plant McIntosh CT Project (other than the Savannah Plant McIntosh CTs) and the appointment of a successor Agent shall be effected, subject to approval of any Governmental Authority having jurisdiction, upon written notice to Savannah executed by the Participant or Participants owning the Plant McIntosh CT Project (other than Savannah). Any such notice must identify the date upon which such removal and appointment shall be effective, the cause for such removal and the provi- sions hereof or of the Operating Agreement or both upon which such removal is based, and either the name of the successor Agent appointed to replace Savannah as Agent or the names of two potential successor Agents, one of whom shall be appointed to replace Savannah as Agent. In the event such notice of removal identifies two potential successor Agents, the Participants owning the Plant McIntosh CT Project (other than Savannah) shall notify Savannah in writing of the identity of the one appointed to replace Savannah as Agent forthwith upon its appointment, which shall occur no later than the date upon which the removal of Savannah as Agent is to be effective as set forth in such notice of removal. (B) Except as provided in the preceding paragraph (A), Savannah shall have no obligation to continue as Agent under this Agreement or under the Operating Agreement from and after the date upon which its removal as Agent is to be effective as set forth in -32- said notice of removal. In addition, from and after the date upon which such removal of Savannah as Agent with respect to the Plant McIntosh CT Project (other than the Savannah Plant McIntosh CTs) is to be effective as set forth in the notice of removal, the Participants (other than Savannah) shall indemnify and hold Savannah harmless from and against any loss, cost and expense resulting from the failure of the successor Agent to assume such position on such effective date. (C) Savannah agrees that it will cooperate with the successor Agent in facilitating the assumption of such position by the successor Agent and in generally familiarizing the successor Agent and its employees and agents with the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply and with their physical orientation and operation. (d) MANAGEMENT AND CONSTRUCTION AUDITS. Each Participant shall have the right from time to time to conduct management and construction audits, at its own cost, of Savannah's performance as Agent hereunder, either by its own officers and employees or through its duly authorized agents or representatives. Savannah shall cooperate with each Participant in conducting any such audit and, subject to the applicable regulations of any Governmental Authority having jurisdiction, give each Participant reasonable access to all contracts, records, and other documents relating to the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities, the CT Fuel Supply or any combination thereof. (e) ON-SITE OBSERVATION AND INSPECTION. Each Participant shall be entitled to have a reasonable number of Site Representatives at the Plant McIntosh CT Project, on a full or part time basis (whether on site or off site), as determined by each Participant. Reasonable office space and facilities shall be made available to such Site Representative and the Participant represented by such Site Representative shall be solely responsible for the Operating Costs and Cost of Construction, if construction of such office space is required, for such office space. Each Site Representative shall have the right to review expenditures, audit records, inspect equipment, advise on procurement, construction and repairs required for equipment, review the progress of licensing, design, procurement, construction, testing, startup, outages, review maintenance and operating practices and otherwise observe all activities -33- respecting the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities and the CT Fuel Supply. (f) INDEMNIFICATION. Except as provided in subsection (iii) of Section 5(c), LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY, hereof, in the event Savannah, in its performance as Agent hereunder, or any Participant in its capacity as such, or GPC in performing services, or acting as agent, for Savannah, incurs any liability to any third party, any reasonable amount paid by Savannah on account of such liability shall, to the extent such liability would be classified as Operating Costs under the Uniform System of Accounts, be considered an Operating Cost and apportioned between the Participants pursuant to Sections 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, and 5(g), SHARING OF COSTS - GENERAL, of the Operating Agreement, and to the extent such liability would be classified as a Cost of Construction under the Uniform System of Accounts, be considered a Cost of Construction and apportioned between the Participants pursuant to Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof and Sections 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, and 5(g), SHARING OF COSTS - GENERAL, of the Operating Agreement, as appropriate. (g) AVAILABILITY OF RECORDS. Savannah, as Agent, will at all times make available to each Participant and its duly authorized agents and representatives, and each Participant and its duly authorized agents and representatives may audit all books and records regarding Cost of Construction sufficiently to allow it to determine that such costs and expenditures attributed to the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities, the CT Fuel Supply or any combination thereof by Savannah, as Agent, pursuant to this Agreement are appropriate or as needed to satisfy requests from Governmental Authorities. No payment made pursuant to the provisions of this Agreement shall constitute a waiver of any right of a Participant to question or contest the correctness of any charge or credit by Savannah, as Agent. (h) RIGHT TO COPIES. Any Participant and any successor Agent hereunder or under the Operating Agreement shall be entitled to copy (i) any and all contracts, books, records, reports and other documents and papers to which such Participants, their respective officers, employees, duly authorized agents or representatives and consultants or any successor Agent is permitted access, or which Savannah has agreed shall be available for audit, under the terms of this Agreement or the Operating Agreement, and (ii) any and all planning, licensing, construction, testing, architectural, engineering and design drawings and specifications that have been or shall -34- hereafter be prepared in connection with the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply, or any combination thereof. (i) PLANT TOURS. Upon prior approval of Savannah (which approval shall not be unreasonably withheld), any Participant may schedule plant tours and visits (for individuals other than the Site Representatives) at the Plant McIntosh CT Project, subject to the rules and regulations of Governmental Authorities. (j) BILLING AND ACCOUNTING. Notwithstanding any reference to Savannah's standard accounting practices contained herein, all billing and accounting matters, including, without limitation, payments to be made by the Participants and the Agent, shall be carried out in a manner consistent with Section 13(b) of the Public Utility Holding Company Act of 1935, as amended. (k) PLANT MCINTOSH CT PROJECT MANAGEMENT BOARD. From and after the date hereof, there is established a Plant McIntosh CT Project Management Board to supervise, manage and control the planning, licensing, design, procurement, acquisition, construction, completion, testing and startup of the Plant McIntosh CT Project. The Project Management Board shall consist of two members, and an alternate for each, designated by each of the Participants and one member and an alternate designated by SCSI. The Project Management Board shall continue to function until the last Commercial Operation date of the 1995 Plant McIntosh CTs substantially as contemplated in that certain July 25, 1991 letter signed by Savannah, GPC and SCSI and designating the members of the Project Management Board. (l) RECORD KEEPING. In furtherance of its duties as Agent, Savannah shall also keep and maintain appropriate plant records in accordance with applicable Legal Requirements and Savannah's record retention policies, and upon request from time to time by a Participant, Savannah will inform such Participant of the location of such records and provide access thereto. To the extent that any Participant would like to retain records for longer periods of time than Savannah would retain such records, then, upon written request from such Participant, Savannah shall provide such Participant, at such Participant's sole expense, with originals or copies as appropriate of such records on or prior to the date that Savannah would dispose of such records. -35- 6. OWNERSHIP, RIGHTS AND OBLIGATIONS. (a) OWNERSHIP. (i) The Participants shall own the Plant McIntosh CTs as follows: (A) GPC shall have sole title to the GPC Plant McIntosh CTs (other than the GPC Plant McIntosh CTs Site), and (B) Savannah shall have sole title to the Savannah Plant McIntosh CTs. (ii) The Participants shall have title to the CT Common Facilities (other than the CT Common Facilities Site) and the CT Fuel Supply, as tenants in common with undivided ownership interests therein, subject to the terms of this Agreement and the Operating Agreement, and shall own the foregoing property and possess rights and obligations related thereto, including, without limitation, payment therefor, in the proportions equal to their respective Pro Forma Ownership Interests as they may appear from time to time. The Participants shall be entitled to the capacity and, subject to the Operating Agreement, the associated energy of each Plant McIntosh CT which they may own from time to time. (iii) The Participants shall have the following real property interests in the Savannah Plant McIntosh CTs Site, the GPC Plant McIntosh CTs Site and the CT Common Facilities Site: (A) Savannah shall own fee simple title to the Savannah Plant McIntosh CTs Site, the GPC Plant McIntosh CTs Site and the CT Common Facilities Site, subject to the leasehold interests and easements conveyed by Savannah to GPC pursuant to the Lease described herein; and (B) GPC shall have a 100% leasehold interest in the GPC Plant McIntosh CTs Site and a percentage undivided interest, equivalent to GPC's Pro Forma Ownership Interest as it may appear from time to time, in a leasehold estate, as a tenant in common with Savannah, in the CT Common Facilities Site, together with the easements appurtenant to such leasehold estate conveyed by Savannah to GPC pursuant to the Lease described herein. (iv) Savannah reserves the right to hold, own, use and possess the Plant McIntosh Site, less and except therefrom the GPC Plant McIntosh CTs Site and the CT Common Facilities Site, but including the Savannah Plant McIntosh CTs Site, at all times during the term of this Agreement, the Operating Agreement and the Lease in a manner wholly consistent with the terms, covenants, agreements and -36- provisions of this Agreement, the Operating Agreement and the Lease. (b) NONPAYMENT. (i) Payments due from a Participant hereunder and payments due from the Agent to a Participant, if any, not made when due shall bear interest, compounded monthly until paid, at a rate per annum equal to the lesser of (A) the highest interest rate allowed by law, or (B) the higher of (1) a rate five percentage points above the average yield on the issue of six-month United States Treasury Bills, as reported by the Federal Reserve Bank of New York, at the sale of such Treasury Bills by the United States Treasury next preceding the due date of such payment, or (2) a rate five percentage points above the highest of the net interest costs on the most recent issue of bonds or other long-term obligations by any Participant or the Agent. Such interest shall accrue and is and shall be expressed in simple interest terms per annum in accordance with Section 7-4-2(a) of the Official Code of Georgia Annotated (1989), as amended. (ii) A nonpaying Participant shall have no right to any output of capacity and energy of the Plant McIntosh CT Project or to exercise any other right of a Participant until all amounts overdue from that Participant have been paid, together with interest at the rate provided in subsection (i) of this Section 6(b), into the Construction Account, Operating Account, the Capital Account or to another Participant if the latter has paid such overdue amount on behalf of such nonpaying Participant, as appropriate. Such overdue amounts, together with such interest, shall be paid into the Construction Account, the Operating Account or the Capital Account, as appropriate, only to the extent that such amounts have not been paid by another Participant pursuant to the further provisions of this Section 6(b). Notwithstanding any of the provisions of this Section 6(b), if Savannah is the nonpaying Participant, Savannah, as Agent, shall continue to plan, license, procure, acquire, construct, complete, test, start-up, manage, control, operate, maintain, renew, add, replace, modify and dispose of the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities and the CT Fuel Supply in accordance with the provisions of this Agreement and the Operating Agreement. (iii) Any output of capacity and energy of the Plant McIntosh CTs of any nonpaying Participant may be sold or utilized by any non-defaulting Participant and Savannah as -37- Agent in the manner and upon the terms and conditions set forth in Section 5(l), NONPAYMENT, of the Operating Agreement. (iv) In addition to all other rights of the Participants pursuant to the foregoing provisions of this Section 6(b), with respect to the CT Common Facilities, the other Participant or Participants shall have the right, subject to the receipt of all requisite regulatory approvals, but not the obligation, to make any payment of interest or principal due and owing (A) to Chemical Bank, as Trustee under GPC's First Mortgage Bonds, or other lender or trustee, as the case may be, if any, from GPC in respect of such First Mortgage Bonds, pollution control revenue bonds, or other bonds or notes for financing GPC's obligations hereunder, which GPC fails to make when due, or (B) to NationsBank of Georgia, National Association, as Trustee under Savannah's Mortgage Bonds, or other lender or trustee, as the case may be, if any, from Savannah in respect of such mortgage bonds, pollution control revenue bonds, or other bonds or notes for financing Savannah's obligations hereunder, which Savannah fails to make when due, or (C) to the corresponding lenders or trustees from any other Participant hereunder in respect of a financing of such Participant's obligations hereunder, which such Participant fails to make when due, and in each such case to be promptly reimbursed in full therefor by GPC, Savannah or such other Participant, as the case may be, together with interest at the rate provided in subsection (i) of this Section 6(b). (v) No remedy referred to in this Section 6(b) is intended to be exclusive of any other remedy set forth in this section, but every such remedy herein provided shall be cumulative and may be exercised from time to time and as often as may be deemed expedient except where the exercise of any one of such remedies precludes its further exercise or the exercise of any other remedy. No delay or failure to exercise any remedy herein provided shall impair the right to exercise any such remedy or be construed to be a waiver of such right or of any default by a Participant or by the Agent. Notwithstanding the foregoing, the remedies which are set forth in this Section 6(b) shall constitute the sole and exclusive remedies of the Participants, legal or equitable, for the failure of any Participant to make any payment when due under this Agreement. (vi) Notwithstanding the other provisions of this Section 6(b), any Participant who disagrees with or disputes the amount of any payment claimed by the Agent to be due -38- pursuant to this Agreement shall make such payment under protest and shall be reimbursed, together with all accrued interest at the Prime Rate from the date of payment to the date of reimbursement, for any amount charged in error after the settlement of such disagreement or dispute as provided in Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof, and Sections 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS and 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, of the Operating Agreement, as appropriate. (vii) The foregoing provisions of this Section 6(b) shall not apply to nonpayment of amounts to be paid pursuant to Section 3, SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT, Section 4, LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE, or Section 10(u), OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES, hereof. (c) ALIENATION AND ASSIGNMENT. (i) Until the earlier of (A) 15 years after the expiration of the term of the Operating Agreement, or (B) 20 years and 11 months after the death of the last survivor of the now living lineal descendants of Mrs. Rose F. Kennedy, mother of the thirty-fifth President of the United States of America, no Participant shall have the right to sell, lease, convey, transfer, assign, encumber or alienate in any manner whatsoever, except as otherwise provided herein, its ownership or leasehold interests, or any portion or portions thereof, in the Plant McIntosh CTs, the CT Common Facilities, or any rights under this Agreement without first offering, subject to all requisite regulatory approvals, including, without limitation, the approval of the SEC pursuant to the Public Utility Holding Company Act of 1935, such sale, lease or conveyance to GPC, upon the same terms and conditions as the proposed sale, lease or conveyance to another party (unless, pursuant to the terms of the Public Utility Holding Company Act of 1935 and any amendments or successor legislation thereto, the terms and conditions of such conveyance are regulated, in which case the terms and conditions of such conveyance shall not be inconsistent with such Act), which offer shall be made in the form of a proposed contract and shall be open for acceptance by GPC for a period of 60 days for all of the interests being offered, and in the event such offer is accepted by GPC, the offering Participant and GPC shall proceed to a closing for the interests accepted by GPC pursuant to the terms of the aforesaid contract in an expeditious manner; provided, -39- however, that with respect to any proposed sale by GPC of all or any part of its ownership or leasehold interests in the Plant McIntosh CTs and the CT Common Facilities, Savannah shall have a right of first refusal upon the same terms as set forth above for an offer to GPC. (ii) In the event none of the offers pursuant to subsection (i) of this Section 6(c) is accepted, the offering Participant shall next offer, subject to all requisite regulatory approvals, including, without limitation, the approval of the SEC pursuant to the Public Utility Holding Company Act of 1935, such sale, lease or other conveyance of the ownership or ownership and leasehold interests not accepted pursuant to subsection (i) to the other Participants, if any, (other than GPC or Savannah) pro rata in accordance with their respective Pro Forma Ownership Interests, as they may appear at the time, upon the same terms and conditions as the proposed sale, lease or conveyance to another party (other than GPC or Savannah), which offer shall be made in the form of a proposed contract and shall be open for acceptance by the other Participants for a period of 60 days, and in the event such offer is accepted by all of the other Participants, the offering Participant and all of the other Participants shall proceed to a closing pursuant to the terms of the aforesaid contract in an expeditious manner. In the event that there are three or more Participants and such offer is accepted by one or more but not by all of the other Participants within the aforesaid 60-day period, the offering Participant shall offer such unaccepted portion to such of the other Participants who have accepted such original offer, and such other Participants shall have ten Business Days to accept such offer with respect to such unaccepted portion. In the event that any of such offers is not timely accepted, the offering Participant shall be entitled to consummate the proposed sale, lease or other conveyance to such other party. (iii) If the offering Participant does not consummate the proposed sale, lease or other conveyance of such interests to the Participant hereof within a period of one year after the date of its offer pursuant to subsection (i) or if the offering Participant does not consummate the proposed sale, lease or other conveyance of such interests within a period of one year after the date of its offer to the other Participants, no such sale, lease or other conveyance may be consummated without re-offering the sale, lease or conveyance pursuant to subsection (i) and if not accepted then pursuant to subsection (ii). In no event -40- shall the offering Participant sell, lease or convey such interest to any party (including, without limitation, GPC or Savannah) which is not financially responsible or do so on any terms materially different from those set forth in the aforesaid offer. Each Participant shall notify the other Participants in writing as soon as possible after it learns that any lien or security interest in respect of an obligation or liability in excess of $100,000 (other than a lien or security interest created by such Participant as security for bonds or other obligations issued or to be issued) has been or will be imposed upon its ownership or leasehold interests in the Plant McIntosh CT Project or any portion or portions thereof or has reason to believe that such a lien or security interest will be imposed. In the event of any sale, lease, conveyance, transfer, assignment or alienation (other than solely as security for an indebtedness) by one of the Participants of its ownership or ownership and leasehold interests in the Plant McIntosh CTs or any portion or portions thereof such Participant shall also (A) sell to the transferee thereof and such transferee shall purchase an equivalent portion of such Participant's corresponding portion of the CT Common Facilities (other than the CT Common Facilities site) and an equivalent portion of such Participant's corresponding portion of the CT Fuel Supply, and (B) assign the lease (or, in the case of Savannah, grant a lease) to the transferee thereof to an equivalent portion of such Participant's corresponding interest in the CT Common Facilities Site. As a condition precedent to the consummation of the foregoing transactions, the transferring Participant shall cause the transferee of such interests to become a Party to this Agreement and assume the obligations of the transferor hereunder in proportion to the interests so sold, leased, conveyed, transferred, assigned, or alienated, whereupon such transferee shall be a Participant hereunder. Each Participant hereby expressly waives and renounces for the term of the Operating Agreement for itself, its successors, transferees and assigns, all rights to a partition of the CT Common Facilities and the CT Fuel Supply and to an accounting associated therewith. (iv) Notwithstanding subsections (i), (ii) and (vii) of this Section 6(c) each Participant shall have the right to mortgage or to convey a security interest in its ownership or leasehold interests in the Plant McIntosh CT Project or any portion or portions thereof as security for bonds or other obligations issued or to be issued. -41- (v) Notwithstanding any other provisions of this Agreement to the contrary, any Participant shall have the right to sell, convey, transfer or assign its ownership or leasehold interests, or any portion or portions thereof, in the Plant McIntosh CT Project to any governmental or political subdivision or authority in connection with the financing of pollution control or solid waste disposal facilities without the consent of Savannah or the other Participants and without complying with the provisions of this Section 6(c). Any provision of this Agreement to the contrary notwithstanding, no sale, lease, conveyance, transfer, assignment or alienation whatsoever by Savannah of any or all of its undivided ownership interest in the Plant McIntosh CT Project or any portion or portions thereof, whether as security for an indebtedness, in connection with the financing of pollution control or solid waste disposal facilities or otherwise, shall relieve Savannah of its obligations to act as Agent hereunder and under the Operating Agreement. (vi) In the event any Participant sells or conveys to any party (including, without limitation, GPC or Savannah) any ownership or ownership and leasehold interests in the Plant McIntosh CT Project in accordance with the provisions of subsection (i) or (ii) of this Section 6(c) or pursuant to any other provisions of this Agreement authorizing such sale, such Participant's rights and obligations hereunder as a Participant and co-owner of the CT Common Facilities and the CT Fuel Supply, including, without limitation, the obligation to make payments of the Cost of Construction, Operating Costs and Fuel Costs, shall be reduced to the extent of the interests so sold, and the other Participants shall look solely to such purchaser for performance of the corresponding obligations relating to the interests sold. (vii) Until the earlier of (A) 15 years after the expiration of the term of the Operating Agreement, or (B) 20 years and 11 months after the death of the last survivor of the now living lineal descendants of Mrs. Rose F. Kennedy, mother of the thirty-fifth President of the United States of America, Savannah shall not sell, lease, convey, transfer, assign, encumber or alienate in any manner whatsoever, except as otherwise provided herein, its ownership interest in the Plant McIntosh facilities utilized to provide support services to the Plant McIntosh CT Project, or any portion or portions thereof, without first offering, subject to all requisite regulatory approval, including, without limitation, the SEC pursuant to the Public Utility Holding Company Act of 1935, such sale, lease or conveyance to GPC, -42- upon the same terms and conditions as the proposed sale, lease or conveyance to another party (unless, pursuant to the terms of the Public Utility Holding Company Act of 1935, and any amendments or successor legislation thereto, the terms and conditions of such conveyance are regulated, in which case the terms and conditions of such conveyance shall not be inconsistent with such Act), which offer shall be made in the form of a proposed contract and shall be open for acceptance by GPC for a period of 60 days for all of the interests being offered, and in the event such offer is accepted by GPC, Savannah and GPC shall proceed to a closing for the interests accepted by GPC pursuant to the terms of the aforesaid contract in an expeditious manner. (viii) If, pursuant to this Section 6(c), any Participant makes a sale, lease, transfer or assignment of all or any portion of its ownership or ownership and leasehold interests in the Plant McIntosh CT Project (other than solely as security for indebtedness or to facilitate the financing of pollution control or solid waste disposal facilities), such Participant shall also assign the Operating Agreement pro tanto, and shall cause the transferee to assume to the same extent the rights and obligations of such Participant thereunder; provided, however, that Savannah shall not assign its responsibilities as Agent hereunder without the prior written approval of the Participants which shall not be unreasonably withheld. Any attempted or purported assignment of this Agreement not in compliance with this Section 6(c) shall be null and void and of no force or effect whatsoever. (d) DAMAGE OR DESTRUCTION. Subject to the receipt of all requisite approvals of any Governmental Authority having jurisdiction: (i) In the event the CT Common Facilities or any portion thereof is damaged or destroyed, and the cost of repairs or reconstruction is estimated to be fully covered by the aggregate amount of insurance coverage procured and maintained by the Agent on behalf of the Participants (less applicable deductibles) covering such repairs or reconstruction, then, unless Participants owning in the aggregate more than 51% Pro Forma Ownership Interest in the Plant McIntosh CT Project determine not to repair or reconstruct the CT Common Facilities, the CT Common Facilities shall be repaired or reconstructed. (ii) In the event the CT Common Facilities or any portion thereof is damaged or destroyed, and the cost of -43- repairs or reconstruction is estimated to be more than the aggregate amount of insurance coverage procured and maintained by the Agent on behalf of the Participants (less applicable deductibles) covering such repairs or reconstruction, then, unless Participants owning in the aggregate more than 51% Pro Forma Ownership Interest in the Plant McIntosh CT Project determine to repair or reconstruct the CT Common Facilities, the CT Common Facilities shall not be repaired or reconstructed. (iii) If as a result of the preceding subsections (i) and (ii), the CT Common Facilities are not to be repaired or reconstructed but one or more Participants desire the repair or reconstruction thereof, the CT Common Facilities shall be repaired or reconstructed; provided, however, that the Participants desiring to repair or reconstruct the CT Common Facilities shall bear the full cost of such repair or reconstruction (after taking into account available insurance proceeds of such Participants); and provided further, that if any other Participant should thereafter desire to obtain its entitlement of energy from its respective portion of the Plant McIntosh CT Project but would not have been able to obtain such entitlement but for the repairs or reconstruction effected pursuant to this paragraph (iii), such other Participant shall reimburse the repairing or reconstructing Participants their pro rata share of the original book cost of such repairs or reconstruction less depreciation, which shall include the cost of capital. (e) TAXES. To the extent possible, each Participant shall separately report, file returns with respect to, be responsible for and pay all real property, franchise, business, or other taxes or fees (except payroll taxes for Savannah employees and sales or use taxes for items purchased by Savannah as Agent, and except to the extent that Savannah and GPC, as subsidiaries of The Southern Company, file or have filed on their behalf consolidated income tax returns), arising out of its ownership or leasehold interests in the Plant McIntosh CT Project; provided, however, that to the extent that such taxes or fees may be levied on or assessed against the Plant McIntosh CT Project, its operation, or the Participants in such a manner so as to make impossible the carrying out of the foregoing provisions of this Section 6(e), or upon mutual agreement of the Participants, such taxes or fees shall be considered a Cost of Construction and paid from the Construction Account or the Capital Account, as appropriate, in accordance with the provisions of Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof, or Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, of the Operating -44- Agreement, but in no event shall any taxes or fees from the payment of which any Participant is exempt by law be considered a Cost of Construction. Ad valorem taxes for the year in which the Execution and Delivery occurs shall be a Cost of Construction and paid by the Participants in accordance with Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof. All such prorations shall be based on estimated taxes and shall be adjusted among the Participants upon receipt of the actual tax bills. All sales and transfer taxes, recording and filing fees, if any, incurred in connection with the conveyance to GPC of (i) any undivided ownership interest in that portion of the CT Common Facilities equipment pursuant to Section 3, SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT, hereof, or (ii) any leasehold interest in the GPC Plant McIntosh CTs Site and the CT Common Facilities Site, pursuant to Section 4, LEASE TO GPC OF THE GPC PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE, hereof, or the conveyance of any ownership and leasehold interests in the CT Common Facilities to a Participant pursuant to Section 10(u), OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES, hereof, shall be paid by the Participants in proportion to their Pro Forma Ownership Interests. (f) INSURANCE. Except as may otherwise be provided in the Operating Agreement, during the period of its construction and operation of the Plant McIntosh CT Project, Savannah shall carry in the name of the Participants, as their interests appear, insurance covering (i) workers' compensation, which shall include employers' liability, (ii) commercial general liability, which shall include broad form contractual and products/completed operations liability, and (iii) "all risk" property, including coverage for boiler and machinery, in such amounts and with such deductible or self-insurance features as is consistent with The Southern Company's customary practices, provided such insurance shall have the following minimum limits of liability: (w) workers' compensation, statutory limits; (x) employers' liability, $100,000 per accident; (y) commercial general liability, which shall include broad form contractual and products/completed operations liability, $50,000,000 combined single limit per occurrence and (z) "all risk" property insurance, $200,000,000 per occurrence; or such greater limits as may be determined, from time to time, by mutual agreement of the Participants. The maximum aggregate deductible amount under all insurance policies for any occurrence shall be an amount consistent with industry practice for utilities of similar size and exposure, provided that such insurance is obtainable with a deductible amount not exceeding such maximum deductible amount and at commercially reasonable premiums. The aggregate cost of all such insurance shall be considered (i) Cost of Construction -45- for any such costs which are incurred with respect to any portion or portions of the Plant McIntosh CT Project which has not yet entered Commercial Operation, and (ii) Operating Costs for any such costs which are incurred with respect to any portion or portions of the Plant McIntosh CT Project which has entered Commercial Operation, and shall be paid in accordance with the provisions of Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof, or Section 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, of the Operating Agreement, as appropriate. For any policy furnished by Savannah, the Participants shall each be designated as an additional insured (including, without limitation, for purposes of protecting their interests as owners) and such policy shall be endorsed to be primary to any insurance which may be maintained by any Participant. Each other Participant may also maintain additional or other insurance, at its own cost and expense, which it deems necessary or advisable to protect its respective interest in any portion of the Plant McIntosh CT Project provided that such additional insurance does not reduce or diminish in any way the coverage of the insurance procured and maintained by Savannah pursuant to this Section 6(f). Notwithstanding the foregoing, such Participant (other than Savannah) shall separately procure and maintain in force, at its own expense, workers' compensation and employers' liability insurance for its Site Representatives and its other employees visiting the Plant McIntosh CT Project with the minimum limits of liability set forth above. (g) RESERVED. (h) POLLUTION CONTROL AND OTHER FACILITIES. The Participants and the Agent shall cooperate with each other in any financing undertaken by a Participant on its own behalf of its respective interest in certain facilities and equipment located at the Plant McIntosh CT Project site for the control of environmental pollution and for such other purposes or facilities as tax-exempt bonds may be issued from time to time through the Development Authority of Effingham County, or its successors or assigns or any other political subdivision or authority, of its industrial revenue notes or bonds, or both, the interest on which will be excluded from gross income for Federal income tax purposes. (i) NO IMPUTATION OF KNOWLEDGE. Savannah acknowledges that subsequent to the Execution and Delivery, Savannah, although acting as Agent for GPC with respect to the Agency Functions, will not be acting as agent with respect to the conveyance to GPC -46- of (i) leasehold interests in the GPC Plant McIntosh CT Site and the CT Common Facilities Site, and (ii) undivided ownership interests in those portions of the CT Common Facilities equipment conveyed to GPC pursuant to this Agreement. Accordingly, GPC shall not be deemed to have any knowledge imputed to it as a result of the agency relationship between Savannah and GPC. (j) CONSTRUCTION BUDGETS AND SCHEDULES. (i) Within 30 days of the date hereof, Savannah, as Agent for the Participants in the construction of the Plant McIntosh CT Project, will deliver to the other Participants an initial Construction Budget setting forth the amounts estimated to be expended by the Participants for the Cost of Construction with respect to each Plant McIntosh CT and the CT Common Facilities (for which payment is to be made in accordance with the provisions of Section 6(k), PAYMENTS TO BE MADE DURING CONSTRUCTION, hereof) and a summary cash flow setting forth the amounts estimated to be expended, and which have been expended as of that date, in each month until the last estimated Commercial Operation date. By July 1 and January 1 of each year until the last date of Commercial Operation, Savannah will deliver to the Participants additional Construction Budget estimates, based on information reasonably available, supported by detail reasonably adequate for the purpose of each Participant's reasonable review thereof. Each such budget estimate shall include a construction schedule containing a critical path analysis for the design and construction of each Plant McIntosh CT, as well as the CT Common Facilities, a plan and timetable for obtaining the necessary permits, licenses and approvals from the appropriate Governmental Authorities, the then current expected dates of Commercial Operation and such other plans, timetables or schedules, if any, as Savannah may deem appropriate. (ii) Within 30 days after receipt of the initial Construction Budget and, thereafter, by August 1 and February 1 of each year, respectively, (A) the Construction Budget and construction schedule for each Participant's Plant McIntosh CTs shall be approved or disapproved by the Participant owning such Plant McIntosh CTs, and (B) the Construction Budget and construction schedule for the CT Common Facilities shall be approved by mutual agreement of the Participants, in the absence of which such budget or schedule, as the case may be, shall be disapproved, in its entirety. If any Construction Budget or construction schedule is disapproved, the Participants shall then have until September 1 and March 1, respectively, to agree on an -47- alternative revised Construction Budget or construction schedule, as the case may be, which shall comply with Prudent Utility Practice and Legal Requirements. In the event that the Participants are unable to agree on a complete revised budget or schedule which complies with Prudent Utility Practice and Legal Requirements by September 1 and March 1, respectively, then the budget or schedule, as the case may be, to be utilized shall consist only of such portions of the Construction Budget or construction schedule as revised on which the Participants agree. The Participants and Savannah, as Agent, agree to cooperate with one another to revise to the extent practicable, any Construction Budget or construction schedule in effect from time to time to accommodate changed circumstances. (iii) Savannah, as Agent, shall attempt to construct the Plant McIntosh CT Project in accordance with the then current Construction Budget estimate and construction schedule such that (A) payments to be made by the Participants for the costs contained therein shall be, as nearly as practicable, within the then current Construction Budget and the schedules of expenditures contained therein, and (B) the Plant McIntosh CTs meet their intended Commercial Operation dates. Notwithstanding the foregoing, Savannah makes no representation, warranty or promise of any kind as to the accuracy of any estimate contained in a Construction Budget or construction schedule or any revisions thereto or that any such attempt referred to in the preceding sentence will be successful, and in no event shall Savannah, as Agent, have any liability to any of the Participants in these regards. (k) PAYMENTS MADE DURING CONSTRUCTION. (i) Savannah, as Agent, shall be responsible for making, and shall make, payment to third parties, and such of the Participants which have rendered services to Savannah in connection with the Plant McIntosh CT Project, of all Cost of Construction only to the extent that funds are available therefor in the Construction Account; provided, however, that all payments of Cost of Construction made by Savannah prior to the date hereof shall also be allocated among and paid by the Participants in accordance with this Agreement. (ii) Within 30 days of the date hereof, and thereafter, on or before the first Business Day of each month, Savannah, as Agent, will notify the other -48- Participants of the nature and amount of all Cost of Construction expended to date and anticipated to be incurred during the succeeding calendar month in respect of the planning, design, licensing, procurement, construction, acquisition, completion, testing and startup of the Plant McIntosh CTs or the CT Common Facilities, or both, plus or minus any adjustments for costs incurred in prior months but not previously charged or credited to the Participants under the provisions of this Section 6(k) with separate computations as to each of the Plant McIntosh CTs and the CT Common Facilities. Savannah, as Agent, will give each Participant as much notice as is reasonably practicable of any major anticipated cost. Each such notification made by Savannah, as Agent, of anticipated costs and adjustments shall be accompanied and adjusted by an accounting of costs incurred and credits, if any, received for preceding months. Each Participant shall make payment into the Construction Account in immediately available funds of its respective percentage share of the Cost of Construction incurred prior to Commercial Operation in accordance with the provisions of this Section 6(k) during the succeeding month in accordance with the schedule determined and delivered to it by Savannah, as Agent. Each Participant's respective percentage share of such Cost of Construction shall be consistent with its respective ownership interests in the Plant McIntosh CT Project. Each Participant's share of the Cost of Construction associated with the 1994 Plant McIntosh CTs shall equal the number of 1994 Plant McIntosh CTs which such Participant owns divided by the total number of 1994 Plant McIntosh CTs; provided, however, in the event that a Participant makes unique additions to or delays the construction of one or more of the 1994 Plant McIntosh CTs, then each Participant shall pay the Cost of Construction associated with the 1994 Plant McIntosh CTs which such Participant owns; provided further that each Participant who elects to cancel any one or more of the 1994 Plant McIntosh CTs shall bear all Cost of Construction associated with such cancelled 1994 Plant McIntosh CTs. Each Participant's share of the Cost of Construction associated with the 1995 Plant McIntosh CTs shall equal the number of 1995 Plant McIntosh CTs which such Participant owns divided by the total number of the 1995 Plant McIntosh CTs; provided, however, in the event that a Participant makes unique additions to or delays the construction of one or more of the 1995 Plant McIntosh CTs, then each Participant shall pay the Cost of Construction associated with the 1995 Plant McIntosh CTs which such Participant owns; provided further that each Participant who elects to cancel any one or more of the 1995 Plant McIntosh CTs shall bear all Cost of Construction -49- associated with such cancelled 1995 Plant McIntosh CTs. Each Participant's share of the Cost of Construction associated with the Additional Plant McIntosh CTs shall equal the number of Additional Plant McIntosh CTs which such Participant owns divided by the total number of Additional Plant McIntosh CTs; provided, however, that for purposes of the calculation in this sentence, no Additional Plant McIntosh CTs shall be included until such time as one or more Participants have provided written notice to the other Participants that such one or more Participants are planning to construct one or more Additional Plant McIntosh CTs, as the case may be, in order to meet their energy needs; provided further in the event that a Participant makes unique additions to or delays the construction of one or more of the Additional Plant McIntosh CTs, then each Participant shall pay the Cost of Construction associated with the Additional Plant McIntosh CTs which such Participant owns; and provided further that each Participant who elects to cancel any one or more of the Additional Plant McIntosh CTs shall bear all Cost of Construction associated with such cancelled Additional Plant McIntosh CTs. Each Participant's share of the Cost of Construction associated with the CT Common Facilities shall equal such Participant's Pro Forma Ownership Interest, as it may appear from time to time; provided, however, that each Participant who elects to construct one or more of the Additional Plant McIntosh CTs shall bear all Cost of Construction associated with any additions to the CT Common Facilities required to support such Additional Plant McIntosh CTs, subject to the provisions of Section 10(u) hereof; provided further that each Participant who elects to cancel the construction of any Plant McIntosh CT shall bear all Cost of Construction associated with the CT Common Facilities which, but for the initial decision to construct such cancelled Plant McIntosh CT, would not have been expended. (iii) Each Participant shall have until (A) the 180th day after the later of (1) the commencement of Commercial Operation of all of the 1994 Plant McIntosh CTs, with respect to the 1994 Plant McIntosh CTs, and the commencement of Commercial Operation of all of the 1995 Plant McIntosh CTs, with respect to the 1995 Plant McIntosh CTs, and the commencement of Commercial Operation of each of the Additional Plant McIntosh CTs, with respect to each respective Additional Plant McIntosh CT, or (2) the furnishing of an accounting by Savannah, as Agent, of all items of the Cost of Construction incurred prior to the Commercial Operation of one or more of the Plant McIntosh CTs (but including Cost of Construction attributable only to -50- such of the CT Common Facilities as may have been required for Commercial Operation of such Plant McIntosh CTs), or (B) such time as the Parties may otherwise agree, to question or contest the correctness of such charge or credit after which time the correctness of such charge or credit shall be conclusively presumed. In the event that any Participant by timely notice questions or contests the correctness of any such charge or credit, Savannah, as Agent, shall promptly review the questioned charge or credit and shall within 55 days following notice from a Participant questioning or contesting such charge or credit notify each Participant of the amount of any error and the amount of reimbursement, if any, that each Participant is required to make or is entitled to receive in respect of such error. Not later than the fifth Business Day after receipt of such notice from Savannah, as Agent, each Participant required to make reimbursement shall deposit the amount specified in such notice into the Construction Account in immediately available funds. Any such reimbursement required to be made by Savannah, as Agent, shall be so deposited by Savannah, as Agent, not later than the fifth Business Day after Savannah, as Agent, notifies the other Participants of the amount of such reimbursement that it is required to make. From the amount so deposited, Savannah, as Agent, shall immediately thereafter distribute the amount that each Participant is entitled to receive (or if the amount so deposited is insufficient to reimburse in full all Participants entitled to receive reimbursement, then Savannah, as Agent, shall distribute the amount so deposited among the Participants entitled to receive such reimbursement pro rata in accordance with each Participant's entitlement to reimbursement in respect of such error), except that if any such Participant is then in default in respect of any payments required to be made under this Agreement or the Operating Agreement, an amount equal to such defaulting Participant's share of the amount so deposited with respect to such reimbursement shall be retained in the Construction Account and distributed in accordance with the provisions of Section 6(l), CONSTRUCTION ACCOUNT, hereof. Savannah shall have no responsibility or liability for the failure of any Participant (other than itself) to deposit funds as provided in this Section 6(k). (iv) Savannah, as Agent, will provide each Participant with such information as is reasonably required by such Participant in order to account for payments made pursuant to this Section 6(k) on such Participant's books. -51- (l) CONSTRUCTION ACCOUNT. (i) Within 30 days of the date hereof, Savannah, as Agent, shall establish the Construction Account. Contemporaneously with the establishment of the Construction Account, Savannah shall transfer to the Construction Account all moneys which have been delivered to and are held by Savannah for the payment of Cost of Construction. Henceforth, all payments (for which provision is made in Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof) of Cost of Construction incurred by the Participants shall be deposited by the Participants in the Construction Account and unless the Participants shall otherwise agree, Savannah, as Agent, shall withdraw and apply funds from the Construction Account only as necessary to pay Cost of Construction in accordance with the provisions of Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof. In the event that during any month the balance in the Construction Account is insufficient to pay such Cost of Construction required to be paid that month (other than as a result of the nonpayment by a Participant of an amount due from it pursuant to Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, hereof), Savannah, as Agent, shall promptly so notify the other Participants by telephone or telecopy of the amount required to be paid by each Participant and thereafter promptly confirm the same in writing, together with a description of the cause of such deficit. Each of the Participants shall pay its respective share of such deficit into the Construction Account in immediately available funds not later than the fifth Business Day after receipt of such notice from Savannah, as Agent. Savannah shall have no responsibility or liability to make up any such deficit out of its own funds in excess of the proportionate share of such deficit which it owes as a Participant. (ii) Until the last Commercial Operation date, each Participant shall continue to own and maintain its undivided ownership interest in the Construction Account (other than amounts, if any, deposited in the Construction Account pursuant to subsection (iii) of Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, above, which amounts shall be owned solely by the Participants to whom such amounts are to be distributed as provided in such subsection); provided, however, that Savannah, as Agent, shall have the sole right and authority to make withdrawals from the Construction Account; and provided further, that a Participant shall not own any undivided ownership interest in any amount in the -52- Construction Account in respect of interest paid into such Construction Account by or on behalf of such Participant pursuant to the provisions of Section 6(b), NONPAYMENT, hereof, which amount shall, if there is only one other Participant, be owned entirely by such other Participant and credited against payments required to be made into such Construction Account by such other Participant in the performance of its obligations under this Agreement, and which amount shall, if there are three or more Participants, be owned in common by, and credited against payments required to be made into such Construction Account by, the other Participants not then in default in the performance of their obligations under this Agreement in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. Savannah, as Agent, shall not commingle any funds deposited in the Construction Account with any other funds owned or maintained by Savannah unless the Participants shall otherwise agree. (iii) Upon the last Commercial Operation date of the 1995 Plant McIntosh CTs and settlement of all obligations relating to Cost of Construction incurred prior to such last Commercial Operation date, and again upon the last Commercial Operation date of the Additional Plant McIntosh CTs and settlement of all obligations relating to Cost of Construction incurred prior to such last Commercial Operation date, Savannah, as Agent, shall close the Construction Account and distribute to each Participant its undivided ownership interest of any balance remaining in the Construction Account at such times (exclusive of amounts therein, if any, in which such Participant shall not own any undivided ownership interest), except that if a Participant shall then be in default with respect to any payment required to be made under this Agreement or under the Operating Agreement, an amount equal to the liability of such defaulting Participant on account of such default (or if such amount exceeds such Participant's share of the balance in the Construction Account, its entire share of such balance) shall first be distributed to the non- defaulting Participant or, if there is more than one non- defaulting Participant, to the non-defaulting Participants in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. -53- (m) SHARING OF COSTS - GENERAL. Except as otherwise provided in this Agreement, each Participant shall be responsible for the payment of its respective percentage share of all Cost of Construction in accordance with this Agreement and the Operating Agreement. In the event that (i) the Execution and Delivery does not take place as contemplated herein, or (ii) the Closing does not take place as contemplated herein, in the absence of any breach of this Agreement all Cost of Construction incurred prior to the date on which either (i) or (ii) of this Section 6(m) occurs shall be paid by the Participants in accordance with this Section 6(m); provided, however, to the extent that any Participant has deposited funds into the Construction Account which funds are not expended by Savannah, as Agent, in accordance with this Agreement, such funds shall be returned to such Participant. It is the absolute intent of the Participants to share all items of cost, obligation and liability incurred in connection with the Plant McIntosh CT Project (other than the financing of each Participant's respective ownership or leasehold interests in the Plant McIntosh CT Project) which are not otherwise expressly provided for in this Agreement or in the Operating Agreement in proportion to their respective Pro Forma Ownership Interests, as they may appear from time to time; provided, however, that any such cost, obligation or liability incurred at the request of and for the sole benefit of a particular Participant shall be the sole responsibility of such Participant and such Participant hereby agrees to indemnify all other Participants against any claims, costs, damages, expenses, losses or any other liability of any kind arising from such costs, obligations or liability. Notwithstanding the foregoing provisions of this Section 6(m) or any other provision of this Agreement, in the event any Participant sells or leases to any other person (including, without limitation, a Participant) any ownership or ownership and leasehold interests in the Plant McIntosh CT Project in accordance with the provisions of Section 6(c), ALIENATION AND ASSIGNMENT, hereof, (other than a sale or conveyance as security for an indebtedness or in connection with the financing of pollution control or solid waste disposal facilities), such conveying Participant's rights and obligations hereunder as a Participant, including, without limitation, the obligation to make payments of Cost of Construction and any other costs to be shared by the Participants hereunder, shall be reduced to the extent of the ownership or ownership and leasehold interests so conveyed, and the Agent and all Participants shall look solely to such purchaser for payment of the corresponding -54- portion of the Cost of Construction and other costs to be shared by the Participants hereunder. 7. CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTICIPANTS. Savannah, as Agent, and the Participants hereby mutually covenant and agree as follows: (a) NO ADVERSE DISTINCTION. Notwithstanding any other provision of this Agreement, in discharging their respective responsibilities pursuant to this Agreement, neither Savannah as Agent, or as a Participant, nor any other Participant, shall make any adverse distinction between that portion of the Plant McIntosh CT Project in which it has an interest, and any other portion of the Plant McIntosh CT Project, because of its ownership of (or ownership and leasehold interests in) a portion of the Plant McIntosh CTs or an undivided share of the CT Common Facilities with the other Participants. (b) COOPERATION. The Participants and Savannah, as Agent, will cooperate with each other in all activities relating to the Plant McIntosh CT Project, including, without limitation, the execution and filing of applications for authorizations, permits and licenses with Governmental Authorities having jurisdiction (except that Savannah is not authorized to have any contact with the GPSC on behalf of GPC without the written consent of GPC), fuel procurement and the execution of such other documents as may be reasonably necessary to carry out the provisions of this Agreement. Without Savannah's written consent, no other Participant shall incur any obligation in connection with the Plant McIntosh CT Project which would or could obligate Savannah to any third party. (c) APPROVALS. Following the execution and delivery of this Agreement, GPC and Savannah shall use their reasonable best efforts to obtain as quickly as possible all requisite and contemplated judicial, governmental, regulatory and vendor (with regard to assignment of contractual rights and obligations, if any) approvals for the consummation of the transactions contemplated hereby. The obligations of any Participant to consummate any transaction contemplated by Section 10(u), OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES, hereof is subject to the receipt of all requisite approvals of Governmental Authorities. (d) COMPLIANCE WITH LAWS AND ENVIRONMENTAL MATTERS. (i) The Participants acknowledge and agree that Savannah, as Agent, shall plan, design, license, procure, -55- construct, acquire, complete, test, startup, manage, control, operate, maintain, add to, renew, modify, replace and dispose of the Plant McIntosh CT Project substantially in accordance with all local, state and federal laws, regulations, ordinances or orders now or hereinafter in effect; provided, however, that any failure to substantially comply with such local, state or federal laws, regulations, ordinances or orders shall not be deemed a breach of this Agreement if, and so long as, such failure is (A) caused by a Force Majeure Event, or (B) in accordance with a court order or decree, or a formal agreement with the regulatory agency having jurisdiction over the subject matter of noncompliance or having authority to issue the required approval. (ii) Each Participant, in addition to the Agent, shall be a permittee for any air quality permit(s) issued for such Participant's Plant McIntosh CTs by a Governmental Authority if such Governmental Authority determines that the Participants are required to be joint permittees. (iii) The Agent shall not use, treat, store, dispose, or recycle, at the Plant McIntosh CT Project any Environmental Material (as hereinafter defined) in amounts or under circumstances requiring notification of, or a permit, license, or approval from any Governmental Authority of competent jurisdiction, unless such Environmental Material was generated at the Plant McIntosh CT Project or related to the generation of electric power at the Plant McIntosh CT Project. For purposes of this subsection (iii) of Section 7(d), "Environmental Material" shall mean and include asbestos, radioactive material, petroleum, petroleum products, petroleum fractions, petroleum distillates, and any substance, material or waste designated as hazardous under the Comprehensive Environmental Response, Compensation, and Liability Act and amendments thereto, or designated as toxic or hazardous or otherwise regulated under the Toxic Substances Control Act and amendments thereto, the Resource Conservation and Recovery Act and amendments thereto, the Clean Water Act and amendments thereto, the Clean Air Act and amendments thereto, the Georgia Air Quality Act and amendments thereto, the Georgia Hazardous Waste Management Act and amendments thereto, or the Georgia Water Quality Control Act and amendments thereto. (e) SAFETY. The Participants acknowledge and agree that in the acquisition, construction and completion of the Plant McIntosh CT Project, Savannah shall at all times take all -56- reasonable precautions for the safety of employees on the work site and of the public, and shall comply with all applicable provisions of federal, state, and municipal safety laws and building and construction codes, including, without limitation, all regulations of the Occupational Safety and Health Administration. The requirements of this paragraph shall be for the sole benefit of the Participants only and shall not create or impose any standard of care or duty to any third party or to any employee or subcontractor's employee or to the public, beyond the duty incumbent upon Savannah which would exist under applicable law without reference to any term or provision of this Agreement. (f) EQUAL EMPLOYMENT OPPORTUNITY AND CIVIL RIGHTS. Savannah, as Agent, shall conform to the requirements of the Equal Employment Opportunity clause in Section 202, Paragraphs 1 through 7 of Executive Order 11246, as amended, and applicable portions of Executive Orders 11701 and 11758, relative to Equal Employment Opportunity and the Implementing Rules and Regulations of the Office of Federal Contract Compliance Programs. 8. CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY. (a) SAVANNAH'S CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, all obligations of Savannah to GPC under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Execution and Delivery, of each of the conditions contained in clauses (i) through (iv) below (or the waiver in writing of such conditions by Savannah): (i) Representations and Warranties Correct; Performance by GPC. GPC's representations and warranties contained in this Agreement shall have been materially true and correct at the date hereof, and (other than the representation and warranty set forth in subsection (iii) of Section 2(a), GPC REPRESENTATIONS AND WARRANTIES, hereof) shall be deemed to have been made again at and as of the time of the Execution and Delivery and shall then be true and correct in all material respects; GPC shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Execution and Delivery; and Savannah shall have been furnished with a certificate of the President or a vice president of GPC, dated the date of the Execution and Delivery, certifying in such detail as Savannah may request to the fulfillment of the foregoing conditions. -57- (ii) Litigation Certificate. GPC shall have delivered to Savannah a certificate executed by the President or a vice president of GPC that, as of the time of the Execution and Delivery, such officer of GPC has no personal knowledge of actual or threatened litigation against GPC which might materially adversely affect the rights of Savannah as a tenant in common in the CT Common Facilities and the CT Fuel Supply other than such pending or threatened litigation described or referred to in such certificate, and the contents of such certificate shall be reasonably satisfactory to Savannah. (iii) Other Documents. At or prior to the time of the Execution and Delivery, GPC shall have entered into the Operating Agreement and such Operating Agreement shall be in full force and effect. At the Execution and Delivery, GPC shall not be in material breach of the Operating Agreement. (iv) Opinion of GPC's Counsel. Savannah shall have been furnished with an opinion of Troutman Sanders, counsel for GPC, dated the date of the Execution and Delivery, to the effect that: (A) GPC is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the requisite power and authority to own and to lease those portions of the Plant McIntosh CT Project as GPC is required to own and lease following the Execution and Delivery, to execute and deliver this Agreement and the Operating Agreement and to perform its obligations hereunder and thereunder, and to conduct its business as it is then being conducted; (B) the execution, delivery and performance of this Agreement and the Operating Agreement by GPC have been duly and effectively authorized by all requisite corporate action; and (C) GPC had full power and authority to execute this Agreement and the Operating Agreement, and this Agreement and the Operating Agreement have been fully executed and delivered by GPC and are the legal, valid and binding obligations of GPC enforceable against it in accordance with their terms (except as the provisions hereof or thereof may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors' rights and by other laws of general application -58- affecting the rights and remedies of creditors, except that the availability of the remedy of specific enforcement or of injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought, and except that no opinion shall be expressed as to the validity and enforceability of the restrictions on alienation set forth in Sections 6(c), ALIENATION AND ASSIGNMENT hereof). Such opinion shall cover such other matters as Savannah may reasonably request and shall be reasonably satisfactory to Savannah's counsel. (b) GPC'S CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, all obligations of GPC under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Execution and Delivery, of each of the following conditions (or the waiver in writing of such conditions by GPC): (i) Representations and Warranties Correct; Performance by Savannah. Savannah's representations and warranties contained in this Agreement shall have been materially true and correct at the date hereof and (other than the representation and warranty set forth in subsection (iii) of Section 2(b), SAVANNAH REPRESENTATIONS AND WARRANTIES hereof) shall be deemed to have been made again at and as of the time of the Execution and Delivery and shall then be true and correct in all material respects; Savannah shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Execution and Delivery; and GPC shall have been furnished with a certificate of the President or a vice president of Savannah, dated the date of the Execution and Delivery, certifying in such detail as GPC may request to the fulfillment of the foregoing conditions. (ii) Litigation Certificate. Savannah shall have delivered to GPC a certificate executed by the President or a vice president of Savannah that, as of the time of the Execution and Delivery, such officer of Savannah has no personal knowledge of actual or threatened litigation against Savannah which might materially adversely affect the rights of GPC as a tenant in common in the CT Common Facilities and the CT Fuel Supply other than such pending or threatened litigation described or referred to in such -59- certificate, and the contents of such certificate shall be reasonably satisfactory to GPC. (iii) Collateral Documents. At or prior to the time of the Execution and Delivery, Savannah shall have entered into the Collateral Documents and such Collateral Documents shall be in full force and effect. At the Execution and Delivery, neither Savannah nor SCSI shall be in material breach of any of the Collateral Documents. (iv) Title Insurance. GPC shall have received, at its own expense, at the Execution and Delivery an owner's policy of title insurance in favor of GPC containing no exceptions other than those exceptions set forth on Exhibit G attached hereto and incorporated herein by reference (hereinafter referred to as the "Permitted Exceptions"), insuring GPC's leasehold estate in the real property being demised to GPC at the Execution and Delivery. Savannah shall have provided to GPC, or its title insurer, a corporate officer's affidavit, dated the date of such Execution and Delivery and executed by a vice president of Savannah, covering such matters as may be reasonable and customary in transactions involving commercial real property in the State of Georgia. (v) No Material Change. Between the date of this Agreement and the Execution and Delivery, there shall not have been any material adverse change in any portion of the GPC Plant McIntosh CTs Site or the CT Common Facilities Site that is being leased by GPC at the Execution and Delivery and such assets shall not have suffered any material loss by fire, explosion or other casualty. (vi) Opinion of Savannah's Counsel. GPC shall have been furnished with an opinion of Bouhan, Williams & Levy, counsel for Savannah, dated the date of the Execution and Delivery, to the effect that: (A) Savannah is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the requisite power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder, and to conduct its business as it is then being conducted; (B) the execution, delivery and performance of this Agreement and the Collateral Documents by Savannah -60- have been duly and effectively authorized by all requisite corporate action; and (C) Savannah had full power and authority to execute this Agreement and the Collateral Documents, and this Agreement and the Collateral Documents have been fully executed and delivered by Savannah and are the legal, valid and binding obligations of Savannah enforceable against it in accordance with their terms (except as the provisions hereof or thereof may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors' rights and by other laws of general application affecting the rights and remedies of creditors, except that the availability of the remedy of specific enforcement or of injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought, and except that no opinion shall be expressed as to the validity and enforceability of the restrictions on alienation set forth in Sections 6(c), ALIENATION AND ASSIGNMENT hereof). Such opinion shall cover other matters as GPC may reasonably request and shall be reasonably satisfactory to GPC's counsel. (vii) Due Diligence Satisfactory. GPC shall have had adequate opportunity to conduct Due Diligence and in the course thereof shall not have discovered any information, state of facts, condition or event which, in the exercise of reasonable judgment, causes GPC to determine that (i) it would be materially deprived of the value of the bargain intended to be obtained thereby on the date hereof, or (ii) that consummation of the Execution and Delivery would subject GPC to any claims, liabilities, or obligations estimated to be, singly or in the aggregate, in excess of $50,000.00 over and above all amounts which Savannah has otherwise agreed to pay to GPC with respect to such claims, liabilities, or obligations. (c) MUTUAL CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, the respective obligations of GPC and Savannah under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Execution and Delivery (unless waived in writing by GPC and Savannah prior to or at the Execution and Delivery), of the further conditions that the following shall have been achieved: (i) the receipt of all requisite or contemplated -61- governmental, regulatory, judicial or other authorizations, consents, orders, permits, licenses, certifications, filings, waivers or approvals with respect to such Execution and Delivery (including, without limitation, those of the GPSC, the SEC, the GEPD, the Army Corps of Engineers, or Effingham County), (ii) the execution, delivery and performance (to the extent required prior to or at the Execution and Delivery) of this Agreement and the Collateral Documents and the consummation of the transactions contemplated thereby by GPC and Savannah (including, without limitation, the substitution of land surveys for Exhibits A1/2, A3/4, A5/6 and A7/8 pursuant to Sections 1(an), PLANT MCINTOSH CTS NOS. 01 AND 02, 1(ao), PLANT MCINTOSH CTS NOS. 03 AND 04, 1(ap), PLANT MCINTOSH CTS NOS. 05 AND 06, and 1(aq), PLANT MCINTOSH CTS NOS. 07 AND 08, hereof), and (iii) the receipt of the Release by NationsBank of Georgia, National Association, as Trustee under the Indenture of the leasehold estate to be conveyed to GPC at the Execution and Delivery hereunder from the lien of such Indenture. 9. CONDITIONS PRECEDENT TO CLOSING. (a) SAVANNAH'S CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, all obligations of Savannah to GPC under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Closing, of each of the conditions contained in clauses (i) through (iv) below (or the waiver in writing of such conditions by Savannah): (i) Representations and Warranties Correct; Performance by GPC. GPC's representations and warranties contained in this Agreement shall have been materially true and correct at the date hereof, and (other than the representation and warranty set forth in subsection (iii) of Section 2(a), GPC REPRESENTATIONS AND WARRANTIES, hereof) shall be deemed to have been made again at and as of the time of the Closing and shall then be true and correct in all material respects; GPC shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; and Savannah shall have been furnished with a certificate of the President or a vice president of GPC, dated the date of the Closing, certifying in such detail as Savannah may request to the fulfillment of the foregoing conditions. (ii) Litigation Certificate. GPC shall have delivered to Savannah a certificate executed by the -62- President or a vice president of GPC that, as of the time of the Closing, such officer of GPC has no personal knowledge of actual or threatened litigation against GPC which might materially adversely affect the rights of Savannah as a tenant in common in the CT Common Facilities and the CT Fuel Supply other than such pending or threatened litigation described or referred to in such certificate, and the contents of such certificate shall be reasonably satisfactory to Savannah. (iii) Other Documents. At or prior to the time of the Closing, GPC shall have entered into the Operating Agreement and such Operating Agreement shall be in full force and effect. At the Closing, GPC shall not be in material breach of the Operating Agreement. (iv) Opinion of GPC's Counsel. Savannah shall have been furnished with an opinion of Troutman Sanders, counsel for GPC, dated the date of the Closing, to the effect that: (A) GPC is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the requisite power and authority to own and to lease those portions of the Plant McIntosh CT Project as GPC is required to own and lease following the Closing, to execute and deliver this Agreement and the Operating Agreement and to perform its obligations hereunder and thereunder, and to conduct its business as it is then being conducted; (B) the execution, delivery and performance of this Agreement and the Operating Agreement by GPC have been duly and effectively authorized by all requisite corporate action; and (C) GPC had full power and authority to execute this Agreement and the Operating Agreement, and this Agreement and the Operating Agreement have been fully executed and delivered by GPC and are the legal, valid and binding obligations of GPC enforceable against it in accordance with their terms (except as the provisions hereof or thereof may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors' rights and by other laws of general application affecting the rights and remedies of creditors, except that the availability of the remedy of specific enforcement or of injunctive relief is subject to the discretion of the court before which any proceeding -63- therefor may be brought, and except that no opinion shall be expressed as to the validity and enforceability of the restrictions on alienation set forth in Sections 6(c), ALIENATION AND ASSIGNMENT hereof). Such opinion shall cover such other matters as Savannah may reasonably request and shall be reasonably satisfactory to Savannah's counsel. (b) GPC'S CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, all obligations of GPC under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions (or the waiver in writing of such conditions by GPC): (i) Representations and Warranties Correct; Performance by Savannah. Savannah's representations and warranties contained in this Agreement shall have been materially true and correct at the date hereof and (other than the representation and warranty set forth in subsection (iii) of Section 2(b), SAVANNAH REPRESENTATIONS AND WARRANTIES hereof) shall be deemed to have been made again at and as of the time of the Closing and shall then be true and correct in all material respects; Savannah shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; and GPC shall have been furnished with a certificate of the President or a vice president of Savannah, dated the date of the Closing, certifying in such detail as GPC may request to the fulfillment of the foregoing conditions. (ii) Litigation Certificate. Savannah shall have delivered to GPC a certificate executed by the President or a vice president of Savannah that, as of the time of the Closing, such officer of Savannah has no personal knowledge of actual or threatened litigation against Savannah which might materially adversely affect the rights of GPC as a tenant in common in the CT Common Facilities and the CT Fuel Supply other than such pending or threatened litigation described or referred to in such certificate, and the contents of such certificate shall be reasonably satisfactory to GPC. (iii) Collateral Documents. At or prior to the time of the Closing, Savannah shall have entered into the Collateral Documents and such Collateral Documents shall be -64- in full force and effect. At the Closing, neither Savannah nor SCSI shall be in material breach of any of the Collateral Documents. (iv) No Material Change. Between the date of this Agreement and the Closing, there shall not have been any material adverse change in any of that portion of the CT Common Facilities equipment being conveyed to GPC at the Closing and such assets shall not have suffered any material loss by fire, explosion or other casualty. (v) Opinion of Savannah's Counsel. GPC shall have been furnished with an opinion of Bouhan, Williams & Levy, counsel for Savannah, dated the date of the Closing, to the effect that: (A) Savannah is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the requisite power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder, and to conduct its business as it is then being conducted; (B) the execution, delivery and performance of this Agreement and the Collateral Documents by Savannah have been duly and effectively authorized by all requisite corporate action; and (C) Savannah had full power and authority to execute this Agreement and the Collateral Documents, and this Agreement and the Collateral Documents have been fully executed and delivered by Savannah and are the legal, valid and binding obligations of Savannah enforceable against it in accordance with their terms (except as the provisions hereof or thereof may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors' rights and by other laws of general application affecting the rights and remedies of creditors, except that the availability of the remedy of specific enforcement or of injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought, and except that no opinion shall be expressed as to the validity and enforceability of the restrictions on alienation set forth in Sections 6(c), ALIENATION AND ASSIGNMENT hereof). -65- Such opinion shall cover other matters as GPC may reasonably request and shall be reasonably satisfactory to GPC's counsel. (vi) Due Diligence Satisfactory. GPC shall have had adequate opportunity to conduct Due Diligence and in the course thereof shall not have discovered any information, state of facts, condition or event which, in the exercise of reasonable judgment, causes GPC to determine that (i) it would be materially deprived of the value of the bargain intended to be obtained thereby on the date hereof, or (ii) that consummation of the Closing would subject GPC to any claims, liabilities, or obligations estimated to be, singly or in the aggregate, in excess of $50,000.00 over and above all amounts which Savannah has otherwise agreed to pay to GPC with respect to such claims, liabilities, or obligations. (c) MUTUAL CONDITIONS. Except as may otherwise be provided in Section 6(m), SHARING OF COSTS - GENERAL, hereof, the respective obligations of GPC and Savannah under this Agreement and the Operating Agreement are subject to the fulfillment, prior to or at the Closing (unless waived in writing by GPC and Savannah prior to or at the Closing), of the further conditions that the following shall have been achieved: (i) the receipt of all requisite or contemplated governmental, regulatory, judicial or other authorizations, consents, orders, permits, licenses, certifications, filings, waivers or approvals with respect to such Closing (including, without limitation, those of the FERC, GPSC, the SEC, the GEPD, the Army Corps of Engineers, or Effingham County), (ii) the execution, delivery and performance (to the extent required prior to or at the Closing) of this Agreement and the Collateral Documents and the consummation of the transactions contemplated thereby by GPC and Savannah, and (iii) the receipt of the Release by NationsBank of Georgia, National Association, as Trustee under the Indenture of the undivided ownership interest in that portion of the CT Common Facilities equipment to be conveyed to GPC at the Closing hereunder from the lien of such Indenture. 10. MISCELLANEOUS. (a) SURVIVAL. The agreements, covenants, representations and warranties contained in Sections 1, DEFINITIONS, 2, REPRESENTATIONS AND WARRANTIES, 3, SALE TO GPC OF AN UNDIVIDED OWNERSHIP INTEREST IN CERTAIN OF THE CT COMMON FACILITIES EQUIPMENT, 4, LEASE TO GPC OF THE PLANT MCINTOSH CTS SITE AND THE CT COMMON FACILITIES SITE, 5, AGENCY, 6, OWNERSHIP, RIGHTS AND -66- OBLIGATIONS, 7, CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTICIPANTS, and 10, MISCELLANEOUS, of this Agreement shall survive the Closing; provided, however, that such agreements, covenants, representations and warranties shall remain in effect only so long as the Operating Agreement remains in effect, pursuant to Section 7(b), TERM, of the Operating Agreement. (b) FURTHER ASSURANCES. From time to time after the date hereof, each Party will execute and deliver such instruments of conveyance and other documents, upon the request of another Party, as may be necessary or appropriate to carry out the intent of this Agreement. (c) GOVERNING LAW. The validity, interpretation, and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Georgia. (d) NOTICE. (i) Any notice, request, consent or other communication permitted or required by this Agreement (including, without limitation, any offer or acceptance pursuant to Section 6(c), ALIENATION AND ASSIGNMENT, hereof) shall be in writing. All notices pertaining to or affecting the provisions of this Agreement shall be deemed given when deposited in the United States Mail, and sent by registered or certified mail to the Parties at the following addresses: GPC: Georgia Power Company 333 Piedmont Avenue Atlanta, Georgia 30308 Attention: Senior Vice President - Bulk Power Markets Telephone Number: (404) 526-6599 Telecopy Number: (404) 526-7407 Savannah (in its capacity as a Participant and as Agent): Savannah Electric and Power Company 600 East Bay Street Savannah, Georgia 31402 Attention: Vice President - Operations Telephone Number: (912) 238-2250 Telecopy Number: (912) 944-1378 -67- (ii) Any Party shall be entitled to specify a different officer or address upon notice in writing to the other Parties. (e) SECTION HEADINGS NOT TO AFFECT MEANING. The descriptive headings of the various sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof. (f) NO PARTNERSHIP. Notwithstanding any provision of this Agreement, none of the Parties intend to create hereby any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit either among themselves or with any one or more of the Participants. (g) TIME OF ESSENCE. Time is of the essence of this Agreement. (h) AMENDMENTS. This Agreement may be amended by and only by a written instrument duly executed by each of the Parties. (i) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon each of the Parties and their respective successors and upon their assigns pursuant to the provisions of Section 6(c), ALIENATION AND ASSIGNMENT, hereof. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies hereunder, except that any transferee of an ownership or ownership and leasehold interest in the Plant McIntosh CT Project or any portion or portions thereof, from any Participant in accordance with this Agreement and pursuant to an agreement under which the other Participants have been made third-party beneficiaries of such transferee's obligations thereunder shall be a third-party beneficiary of such other Participants' respective obligations hereunder and shall be deemed a Participant for all purposes of this Agreement. (j) COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (k) "AS IS" SALE. EXCEPT AND TO THE EXTENT AS OTHERWISE EXPRESSLY SET FORTH HEREIN OR IN ANY BILL OF SALE TO BE DELIVERED PURSUANT TO THIS AGREEMENT: (A) ANY PORTION OF THE CT COMMON FACILITIES EQUIPMENT TO BE CONVEYED HEREUNDER SHALL BE SOLD "AS IS" AND "WHERE IS"; (B) NEITHER GPC NOR SAVANNAH MAKES ANY REPRESENTATION OR WARRANTY WHATSOEVER IN THIS AGREEMENT, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY -68- REPRESENTATION OR WARRANTY AS TO THE VALUE, QUANTITY, CONDITION, SALABILITY, OBSOLESCENCE, MERCHANTABILITY, FITNESS OR SUITABILITY FOR USE OR WORKING ORDER OF ANY PORTION OF THE CT COMMON FACILITIES EQUIPMENT TO BE CONVEYED HEREUNDER; AND (C) NEITHER GPC NOR SAVANNAH REPRESENT OR WARRANT THAT THE USE OR OPERATION OF ANY PORTION OF THE CT COMMON FACILITIES EQUIPMENT CONVEYED HEREUNDER WILL NOT VIOLATE PATENT, TRADEMARK OR SERVICE MARK RIGHTS OF ANY THIRD PARTIES. GPC AND SAVANNAH ARE WILLING TO PURCHASE THOSE PORTIONS OF THE CT COMMON FACILITIES EQUIPMENT CONVEYED HEREUNDER "AS IS" AND "WHERE IS" SUBJECT TO AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT. Notwithstanding the foregoing, GPC and Savannah shall have the benefit, consistent with their ownership and leasehold interests in the Plant McIntosh CT Project, of all manufacturers' and vendors' warranties and all patent, trademark and service mark rights running to GPC and Savannah, respectively, in connection with the Plant McIntosh CT Project. (l) COMPUTATION OF PERCENTAGE UNDIVIDED OWNERSHIP INTEREST. Notwithstanding any other provision of this Agreement, whenever, pursuant to any provision of this Agreement, any action is required to be agreed to or taken by any one or more of the Participants hereunder (other than any action to be taken by Savannah in its capacity as Agent hereunder), (i) only those Participants not in default in the payment of any amounts (together with interest, if appropriate) required under any provisions of this Agreement or the Operating Agreement at the time such action is to be agreed to or taken shall have the right to participate in such agreement or the taking of such action, and (ii) the computation of the aggregate Pro Forma Ownership Interest in the Plant McIntosh CT Project of the Participants agreeing to or taking any such action shall be based solely upon the Pro Forma Ownership Interests in the Plant McIntosh CT Project of the Participants not so in default. (m) SUCCESSOR AGENT. In the event that Savannah (or any successor Agent) is removed as Agent for the Participants hereunder or under the Operating Agreement or in the event Savannah (with prior written approval from the Participants which shall not be unreasonably withheld) assigns its responsibilities as Agent, any successor Agent for the Participants as contemplated hereby shall exercise all of the rights and powers and shall be subject to all of the duties and obligations of Savannah as Agent hereunder or under the Operating Agreement and shall be subject to removal by the Participants in the same manner as Savannah, and Savannah shall take all action and execute (and file where appropriate) all documents and instruments which shall be requested by the successor Agent to effect the transfer to such successor Agent of such rights, -69- powers, duties and obligations, including, but not limited to, taking such actions and executing such documents and instruments necessary to enable the successor Agent to operate and maintain those facilities and equipment of Plant McIntosh owned by Savannah which provide support services to the Plant McIntosh CT Project. (n) THE PLANT MCINTOSH CT UNITS. In the event that at any time the same party shall not serve as Agent with respect to all the Plant McIntosh CTs, Participants mutually agree (and agree to exercise their reasonable best efforts to obtain the agreement of any other Agent), if any or more than one of them is an Agent with respect to any of the Plant McIntosh CTs, to exercise the rights, powers, duties and obligations of an Agent hereunder and under the Operating Agreement in such a manner as will not unreasonably interfere with the rights of any Participant under this Agreement or the Operating Agreement. (o) INSPECTION PRIOR TO EXECUTION AND DELIVERY AND PRIOR TO CLOSING. Prior to the Execution and Delivery, GPC shall have the right to inspect the GPC Plant McIntosh CTs Site and the CT Common Facilities Site and prior to the Closing GPC shall have the right to inspect that portion of the CT Common Facilities equipment to be conveyed to GPC at the Closing. During such inspections, GPC may take pictures for the purpose of determining the inventory of personal property located at the CT Common Facilities Site and for such other purposes as may be reasonably requested by GPC in connection with the Execution and Delivery and the Closing and the consummation of the transactions contem- plated hereby. (p) CONTINUING DUE DILIGENCE. (i) From the date hereof and until the consummation of the Execution and Delivery, GPC shall, in addition to any other rights conferred otherwise hereunder or under the Operating Agreement, be entitled to conduct such reasonable review of the GPC Plant McIntosh CTs Site and the CT Common Facilities Site as it may reasonably deem appropriate. (ii) From the date hereof and until the consummation of the Closing, GPC shall, in addition to any other rights conferred otherwise hereunder or under the Operating Agreement, be entitled to conduct such reasonable review of that portion of the CT Common Facilities equipment being conveyed to GPC at the Closing as it may reasonably deem appropriate. -70- (iii) The reviews described in subsections (i) and (ii) of this Section 10(p) shall be collectively referred to herein as "Due Diligence." (q) SEVERAL AGREEMENTS. The agreements and obligations of the Participants set forth in this Agreement shall be the several, and not joint, agreements and obligations of the Participants. (r) SPECIAL PROVISIONS RELATING TO THE CT COMMON FACILITIES. (i) The CT Common Facilities shall be used for the mutual benefit and enjoyment of the Participants and in such a manner as will not unreasonably interfere with the use, benefit and enjoyment of any Participant. No area of the CT Common Facilities may be used exclusively by less than all the Participants without the approval of all Participants; provided, however, that if such use is essential to the operation of any of the Plant McIntosh CTs, such approval will not be unreasonably withheld. (ii) For purposes of the various provisions of this Agreement and of the Operating Agreement permitting or requiring the vote, consent, concurrence or approval of the Participants owning a designated percentage undivided ownership interest in the Plant McIntosh CT Project, the Plant McIntosh CTs or the CT Common Facilities, a Participant's percentage undivided ownership interest in the Plant McIntosh CT Project, the Plant McIntosh CTs or the CT Common Facilities at any particular time shall be deemed to be equivalent to that Participant's Pro Forma Ownership Interest at such time. (s) CONSTRUCTION OF "INCLUDING". Wherever the term "including" is used in this Agreement, such term shall not be construed as limiting the generality of any statement, clause, phrase or term and shall not be deemed to exclude any person or thing otherwise within the meaning of the statement, clause, phrase or term which it modifies. (t) NO DELAY. No disagreement or dispute of any kind between or among any of the Participants concerning any matter, including, without limitation, the amount of any payment due from any Participant or the correctness of any charge made to any Participant, shall permit any Participant to delay or withhold any payment pursuant to this Agreement. -71- (u) OBLIGATION TO CONVEY INTERESTS IN THE CT COMMON FACILITIES. (i) The obligations of Participants under this Section 10(u) are subject to Section 7(c), APPROVALS, hereof. In the event that any one or more Participants serve notice that they plan to construct one or more of the Additional Plant McIntosh CTs, each Participant agrees that it shall proceed diligently to a closing in accordance with subsections (ii), (iii), (iv) and (v) of this Section 10(u) to effect (A) a sale and purchase of such percentage ownership interest in the CT Common Facilities (other than the CT Common Facilities Site) as is necessary to adjust each Participant's percentage ownership interest in the CT Common Facilities (other than the CT Common Facilities Site) to a percentage equivalent to each Participant's respective Pro Forma Ownership Interest, and (B) an amendment to the Lease so as to adjust GPC's leasehold interest in the CT Common Facilities Site to a percentage equivalent to GPC's Pro Forma Ownership Interest. (ii) Not more than 30 days following the date any Participant serves a notice that such Participant plans to construct one or more of the Additional Plant McIntosh CTs, each Participant owning such Additional Plant McIntosh CTs, shall deliver to the other Participants notices specifying the date on which the closing described in subsection (i) of this Section 10(u) shall occur. Following receipt of each such notice, each Participant shall proceed diligently to such closing, which, if GPC is serving such notice, shall coincide with the respective closing described in Section 4(d), AMENDMENT TO LEASE IN CONNECTION WITH THE CONSTRUCTION OF ONE OR MORE ADDITIONAL PLANT MCINTOSH CTS, hereof. At such closing, there shall be delivered to GPC or to Savannah, as the case may be, (A) a bill of sale, with respect to the sale described in subsection (i)(A) of this Section 10(u), equivalent in form to Exhibit D of this Agreement, and (B) an amendment to the Lease, with respect to the conveyance of the leasehold interest described in subsection (i)(B) of this Section 10(u), with a term commensurate with the term of the Lease described in Section 4(a), LEASE OF LAND, hereof. At such closing, there shall also be delivered to GPC or to Savannah, as the case may be, a properly executed Release of that portion of the CT Common Facilities being conveyed from the holder of any and all mortgages, deeds to secure debt or other security interests in such undivided ownership interests and leasehold interests. -72- (iii) The purchase price for each conveyance of a percentage undivided ownership interest in the CT Common Facilities (other than the CT Common Facilities Site) pursuant to subsection (i)(A) of this Section 10(u), shall be book value. Such purchase price shall be payable at the closing in immediately available funds. (iv) The reduction or increase in the Rent paid by GPC, as the case may be, for each conveyance of a leasehold interest in the CT Common Facilities Site pursuant to subsection (i)(B) of this Section 10(u), shall be the original book cost of that percentage of the CT Common Facilities Site being conveyed multiplied by Savannah's weighted cost of pretax capital as of December 31, 1991. (v) From time to time after each closing pursuant to this Section 10(u), the Participants shall execute and deliver such other instruments of conveyance and transfer as may be necessary or appropriate or as any of them may reasonably request to vest the percentage undivided ownership interest and leasehold interest in the CT Common Facilities being conveyed at such closing, including without limitation, any necessary easements appurtenant thereto. [The remainder of this page is intentionally left blank.] -73- IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal as of the date first above written. Signed, sealed and delivered GEORGIA POWER COMPANY, as a in the presence of: Participant ___________________________ By: ________________________ ___________________________ Attest: ____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered SAVANNAH ELECTRIC AND in the presence of: POWER COMPANY, as Agent and as a Participant ___________________________ By: _________________________ ___________________________ Attest: _____________________ Notary Public (CORPORATE SEAL) -74- EX-10.A58 9 EXHIBIT 10(A)58 - MCINTOSH CT OP AGMT-GPC&SAV-DTD 12/15/92 Exhibit 10(a)58 PLANT MCINTOSH COMBUSTION TURBINE OPERATING AGREEMENT between GEORGIA POWER COMPANY and SAVANNAH ELECTRIC AND POWER COMPANY Dated as of December 15, 1992 Plant McIntosh Combustion Turbine Operating Agreement TABLE OF CONTENTS Section No. Page 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1 (a) ADDITIONAL PLANT MCINTOSH CTS . . . . . . . . . . 1 (b) AFFILIATE . . . . . . . . . . . . . . . . . . . . 3 (c) AGENCY FUNCTIONS . . . . . . . . . . . . . . . . . 3 (d) AGENT . . . . . . . . . . . . . . . . . . . . . . 3 (e) ASSIGNMENT OF CT PURCHASE AGREEMENT . . . . . . . 3 (f) BUDGET . . . . . . . . . . . . . . . . . . . . . . 3 (g) BUSINESS DAY . . . . . . . . . . . . . . . . . . . 3 (h) CAPITAL ACCOUNT . . . . . . . . . . . . . . . . . 4 (i) CAPITAL BUDGET . . . . . . . . . . . . . . . . . . 4 (j) CLOSING . . . . . . . . . . . . . . . . . . . . . 4 (k) COMMERCIAL OPERATION . . . . . . . . . . . . . . . 4 (l) CONSTRUCTION ACCOUNT . . . . . . . . . . . . . . . 4 (m) CONSTRUCTION BUDGET . . . . . . . . . . . . . . . 5 (n) COST OF CONSTRUCTION . . . . . . . . . . . . . . . 5 (o) CT COMMON FACILITIES . . . . . . . . . . . . . . . 5 (p) CT COMMON FACILITIES SITE . . . . . . . . . . . . 6 (q) CT FUEL SUPPLY . . . . . . . . . . . . . . . . . . 6 (r) EXECUTION AND DELIVERY . . . . . . . . . . . . . . 6 (s) FERC . . . . . . . . . . . . . . . . . . . . . . . 6 (t) FORCE MAJEURE EVENT . . . . . . . . . . . . . . . 6 (u) FUEL COSTS . . . . . . . . . . . . . . . . . . . . 6 (v) FUEL OIL TANK . . . . . . . . . . . . . . . . . . 7 (w) FUEL PLAN . . . . . . . . . . . . . . . . . . . . 7 (x) GOVERNMENTAL AUTHORITY . . . . . . . . . . . . . . 7 (y) GPC PLANT MCINTOSH CTS . . . . . . . . . . . . . . 7 (z) GPC PLANT MCINTOSH CTS SITE . . . . . . . . . . . 7 (aa) GPSC . . . . . . . . . . . . . . . . . . . . . . . 7 (ab) INTERCOMPANY INTERCHANGE CONTRACT . . . . . . . . 8 (ac) LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . 8 (ad) OPERATING ACCOUNT . . . . . . . . . . . . . . . . 8 (ae) OPERATING BUDGET . . . . . . . . . . . . . . . . . 8 (af) OPERATING COSTS . . . . . . . . . . . . . . . . . 8 (ag) OWNERSHIP AGREEMENT . . . . . . . . . . . . . . . 9 (ah) PARTICIPANTS . . . . . . . . . . . . . . . . . . . 9 (ai) PARTY . . . . . . . . . . . . . . . . . . . . . . 9 (aj) PLANT MCINTOSH . . . . . . . . . . . . . . . . . . 9 (ak) PLANT MCINTOSH CT NOS. 01 AND 02 . . . . . . . . . 9 (al) PLANT MCINTOSH CT NOS. 03 AND 04 . . . . . . . . . 9 (am) PLANT MCINTOSH CT NOS. 05 AND 06 . . . . . . . . . 9 (an) PLANT MCINTOSH CT NOS. 07 AND 08 . . . . . . . . . 9 (ao) PLANT MCINTOSH CT PROJECT . . . . . . . . . . . . 10 (ap) PLANT MCINTOSH CTS . . . . . . . . . . . . . . . . 10 (aq) 1994 PLANT MCINTOSH CTS . . . . . . . . . . . . . 10 (ar) 1995 PLANT MCINTOSH CTS . . . . . . . . . . . . . 10 (as) PLANT MCINTOSH SITE . . . . . . . . . . . . . . . 10 (at) PRIME RATE . . . . . . . . . . . . . . . . . . . . 10 (au) PRO FORMA OWNERSHIP INTEREST . . . . . . . . . . . 11 (av) PRUDENT UTILITY PRACTICE . . . . . . . . . . . . . 11 (aw) PURCHASE PRICE . . . . . . . . . . . . . . . . . . 11 (ax) SAVANNAH PLANT MCINTOSH CTS . . . . . . . . . . . 11 (ay) SAVANNAH PLANT MCINTOSH CTs SITE . . . . . . . . . 12 (az) SCSI . . . . . . . . . . . . . . . . . . . . . . . 12 (ba) SEC . . . . . . . . . . . . . . . . . . . . . . . 12 (bb) SITE REPRESENTATIVE . . . . . . . . . . . . . . . 12 (bc) THE SOUTHERN COMPANY . . . . . . . . . . . . . . . 12 (bd) UNIFORM SYSTEM OF ACCOUNTS . . . . . . . . . . . . 12 (be) VARIABLE OPERATING COSTS . . . . . . . . . . . . . 12 2. OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 12 (a) AGENT . . . . . . . . . . . . . . . . . . . . . . 12 (b) COMMITTEES . . . . . . . . . . . . . . . . . . . . 13 (c) DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES . . . 13 (d) RECORD KEEPING . . . . . . . . . . . . . . . . . . 14 3. AUTHORITY AND RESPONSIBILITY FOR OPERATION . . . . . . . 15 (a) OPERATION . . . . . . . . . . . . . . . . . . . . 15 (b) OTHER CONTRACTS . . . . . . . . . . . . . . . . . 17 (c) FOSSIL FUEL . . . . . . . . . . . . . . . . . . . 17 4. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . 18 5. OPERATION, RIGHTS AND OBLIGATIONS . . . . . . . . . . . 18 (a) AVAILABILITY OF OUTPUT . . . . . . . . . . . . . . 18 (b) SCHEDULING AND DISPATCHING . . . . . . . . . . . . 18 (c) FUEL PLAN . . . . . . . . . . . . . . . . . . . . 18 (d) MAINTENANCE SCHEDULE . . . . . . . . . . . . . . . 19 (e) BILLING AND ACCOUNTING . . . . . . . . . . . . . . 20 (f) METERING . . . . . . . . . . . . . . . . . . . . . 20 (g) SHARING OF COSTS - GENERAL . . . . . . . . . . . . 21 (h) PAYMENT AND SETTLEMENT OF OPERATING COSTS . . . . 22 (i) OPERATING ACCOUNT . . . . . . . . . . . . . . . . 23 (j) PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION . . 25 (k) CAPITAL ACCOUNT . . . . . . . . . . . . . . . . . 27 (l) NONPAYMENT . . . . . . . . . . . . . . . . . . . . 28 (m) INSURANCE . . . . . . . . . . . . . . . . . . . . 31 6. CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTICIPANTS . . 33 (a) NO ADVERSE DISTINCTION . . . . . . . . . . . . . . 33 (b) COOPERATION . . . . . . . . . . . . . . . . . . . 33 (c) LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY . 33 (d) INDEMNIFICATION . . . . . . . . . . . . . . . . . 35 (e) AVAILABILITY OF RECORDS . . . . . . . . . . . . . 35 (f) RIGHT TO COPIES . . . . . . . . . . . . . . . . . 36 (g) COMPLIANCE WITH LAWS AND ENVIRONMENTAL MATTERS . . 36 (h) SAFETY . . . . . . . . . . . . . . . . . . . . . . 37 (i) MANAGEMENT AND OPERATING AUDITS . . . . . . . . . 38 Section No. Page (j) ON-SITE OBSERVATION AND INSPECTION . . . . . . . . 38 (k) PLANT TOURS . . . . . . . . . . . . . . . . . . . 39 7. ASSIGNMENT AND TERMINATION. . . . . . . . . . . . . . . . 39 (a) LIMITATION ON ASSIGNABILITY . . . . . . . . . . . 39 (b) TERM . . . . . . . . . . . . . . . . . . . . . . . 39 8. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 40 (a) GOVERNING LAW . . . . . . . . . . . . . . . . . . 40 (b) NO DELAY . . . . . . . . . . . . . . . . . . . . . 40 (c) NOTICE . . . . . . . . . . . . . . . . . . . . . . 40 (d) SECTION HEADINGS NOT TO AFFECT MEANING . . . . . . 41 (e) NO PARTNERSHIP . . . . . . . . . . . . . . . . . . 41 (f) AMENDMENTS . . . . . . . . . . . . . . . . . . . . 41 (g) SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . 41 (h) COUNTERPARTS . . . . . . . . . . . . . . . . . . . 41 (i) TIME IS OF THE ESSENCE . . . . . . . . . . . . . . 41 (j) FURTHER ASSURANCES . . . . . . . . . . . . . . . . 41 (k) COMPUTATION OF PERCENTAGE UNDIVIDED OWNERSHIP INTEREST . . . . . . . . . . . . . . . . . . . . 41 (l) SUCCESSOR AGENT . . . . . . . . . . . . . . . . . 42 (m) SEVERAL AGREEMENTS . . . . . . . . . . . . . . . . 42 (n) SPECIAL PROVISIONS RELATING TO THE CT COMMON FACILITIES . . . . . . . . . . . . . . . . . . . 42 (o) CONSTRUCTION OF "INCLUDING" . . . . . . . . . . . 43 (p) EQUAL EMPLOYMENT OPPORTUNITY AND CIVIL RIGHTS . . 43 (q) THE PLANT MCINTOSH CT UNITS . . . . . . . . . . . 43 THIS PLANT MCINTOSH COMBUSTION TURBINE OPERATING AGREEMENT ("Agreement"), dated as of December 15, 1992, is between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("GPC") and SAVANNAH ELECTRIC AND POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("Savannah"). W I T N E S S E T H: A. GPC and Savannah have heretofore entered into that certain Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement dated as of the date hereof providing for the ownership by them of their respective undivided ownership interests in the Plant McIntosh CT Project. B. As set forth in the Ownership Agreement, Savannah and GPC are to have undivided ownership interests and are to share the costs of the Plant McIntosh CTs, the CT Common Facilities, and the CT Fuel Supply as provided for in the Ownership Agreement and this Agreement. By this Agreement, the Participants intend to provide for the management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply in all respects not covered by the Ownership Agreement and for the entitlement and use of capacity and energy from the Plant McIntosh CT Project and the sharing of the costs thereof by the Participants in accordance with their respective undivided ownership interests. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, GPC and Savannah hereby agree as follows: 1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated which meanings shall be equally applicable to both singular and plural forms of such terms except as otherwise expressly provided: (a) ADDITIONAL PLANT MCINTOSH CTS. The "Additional Plant McIntosh CTs" shall consist of: (i) That certain real property upon which may be constructed and located one or more of eight (8) complete combustion turbine-generator units to be known as the Additional Plant McIntosh CTs, the exact legal description for which land shall be determined upon completion of such construction, and which shall comprise a parcel of land - 1 - approximately 800 feet by 300 feet, and which parcel is approximately shown as crosshatched and labeled as the "Additional CTs Parcel" on Exhibit A9-16 hereof and incorporated herein (which parcel shall be reduced, as necessary, to suit the actual number of individual Additional Plant McIntosh CTs constructed), together with all such additional land, appurtenant easements or other rights therein as may hereafter be acquired for the purposes specified in subsection (iii) of this Section 1(a). GPC and Savannah agree that the exact legal description for the aforedescribed parcel of land shall be substituted for Exhibit A9-16 hereof upon completion of the survey of such parcel of land and the approval of such survey by GPC, and such legal description shall become a part hereof automatically upon such substitution; (ii) All personal property comprising the combustion turbine-generator units to be known as the Additional Plant McIntosh CTs, including, without limitation, eight complete combustion turbine-generator units, the enclosures housing the same and the main step-up transformers which are to be used solely in connection with the Additional Plant McIntosh CTs, all as the foregoing list of personal property may be modified or supplemented at the closing; (iii) Such additional land, easements or other rights therein as may be acquired, and such additional facilities and other tangible property as may be acquired, constructed, installed or replaced solely in connection with the Additional Plant McIntosh CTs or any one or more of them; provided that (A) the cost of such additional land, easements or other rights therein or of such additional facilities or other tangible property shall be properly recordable in accordance with the Uniform System of Accounts, (B) such additional land, easements or other rights therein or such additional facilities or other tangible property shall have been acquired, constructed, installed or replaced for the use of the Participants having an ownership interest in the personal property comprising the Additional Plant McIntosh CTs under and subject to the provisions of this Agreement, and (C) the acquisition of such additional land, easements or other rights therein or the acquisition, construction, installation or replacement of such additional facilities or other tangible property shall (1) be necessary in order to keep the Additional Plant McIntosh CTs (or any one or more of them) in good operating condition or to satisfy the requirements of any Governmental Authority having jurisdiction over the Additional Plant McIntosh CTs, or (2) be agreed to by the Participants having an ownership interest in the personal property comprising the Additional Plant McIntosh CTs; and (iv) Existing intangible property rights, and such additional intangible property rights as may be hereafter acquired, associated with the planning, licensing, design, construction, acquisition, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of any of the items in this Section 1(a). (b) AFFILIATE. An "Affiliate" of a Participant shall mean any corporation, partnership (limited or general) or other person or entity controlling, under common control with, or controlled by such Participant. (c) AGENCY FUNCTIONS. The "Agency Functions" shall mean those activities which the Agent shall undertake on behalf of the Participants which relate to the planning, design, licensing, procurement, acquisition (other than acquisition by GPC of a leasehold interest in the GPC Plant McIntosh CTs Site and the CT Common Facilities Site and of an undivided ownership interest in certain of the CT Common Facilities equipment pursuant to the Ownership Agreement), construction, completion, testing, startup, management, control, operation, maintenance, renewal, addition, replacement, modification and disposal of the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, as the case may be, under this Agreement and the Ownership Agreement. (d) AGENT. "Agent" shall mean Savannah or its successors with respect to its rights and obligations in the performance of the Agency Functions on behalf of the Participants with respect to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply. The term "Agent" shall also mean and refer to Savannah (or its successor as Agent) acting on its own behalf with respect to the Savannah Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply for so long as Savannah (or its successor as Agent) owns an undivided ownership interest in the Plant McIntosh CTs, the CT Common Facilities, and the CT Fuel Supply, respectively. (e) ASSIGNMENT OF CT PURCHASE AGREEMENT. The "Assignment of CT Purchase Agreement" shall refer to that certain Assignment of Contract between SCSI and Savannah dated April 22, 1992 under which SCSI assigned to Savannah that certain Agreement for the Purchase and Sale of Combustion Turbine Generators and Auxiliaries between ABB Energy Services, Inc. and SCSI, dated as of January 31, 1991, as amended by that certain Amendment Number One, dated as of April 22, 1992. (f) BUDGET. A "Budget" shall mean any Capital Budget or Operating Budget. (g) BUSINESS DAY. A "Business Day" shall be any Monday, Tuesday, Wednesday, Thursday or Friday other than a day which has been established by law or required by executive order as a - 3 - holiday for any commercial banking institution in the State of Georgia. (h) CAPITAL ACCOUNT. The "Capital Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of this Agreement, for the payment of additional Cost of Construction and Fuel Costs. (i) CAPITAL BUDGET. The "Capital Budget" shall refer to the Budgets pertaining to additional Cost of Construction and Fuel Costs for that portion of the Plant McIntosh CT Project which has achieved Commercial Operation to be delivered to the Participants pursuant to the terms of Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, of this Agreement. (j) CLOSING. The "Closing" shall have the meaning assigned in Section 3(c), CLOSING, of the Ownership Agreement. (k) COMMERCIAL OPERATION. "Commercial Operation" shall refer to the date or dates when any of the Plant McIntosh CTs are completed and declared fully operable by Savannah, as Agent for the Participants with respect to construction; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Plant McIntosh CTs until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs. It is the intent of the Parties that Plant McIntosh CT Nos. 07 and 08 achieve Commercial Operation on January 24, 1994 (unit No. 08) and February 28, 1994 (unit No. 07), that Plant McIntosh CT Nos. 05 and 06 achieve Commercial Operation on March 9, 1994 (unit No. 06) and April 7, 1994 (unit No. 05), that Plant McIntosh CT Nos. 03 and 04 achieve Commercial Operation on May 5, 1994 (unit No. 04) and June 3, 1994 (unit No. 03), and that Plant McIntosh CT Nos. 01 and 02 achieve Commercial Operation on April 13, 1995 (unit No. 02) and May 26, 1995 (unit No. 01). (l) CONSTRUCTION ACCOUNT. The "Construction Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of the Ownership Agreement, for the payment of Cost of Construction. - 4 - (m) CONSTRUCTION BUDGET. The "Construction Budget" shall refer to the budgets pertaining to the Cost of Construction to be delivered to the Participants pursuant to the terms of Section 6(j), CONSTRUCTION BUDGETS AND SCHEDULES, of the Ownership Agreement. (n) COST OF CONSTRUCTION. The "Cost of Construction" shall refer to all costs incurred by Savannah, as Agent, for the Participants in connection with the planning, design, licensing, procurement, acquisition, construction, completion, testing, startup, renewal, addition, modification, replacement or disposal of the Plant McIntosh CTs and the CT Common Facilities, or any portion thereof, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to the Plant McIntosh CTs and the CT Common Facilities and for which Savannah has not been otherwise reimbursed by the Participants, which costs are properly recordable in accordance with the Electric Plant Instructions and in appropriate accounts as set forth in the Uniform System of Accounts, and shall also include all costs incurred by Savannah, as Agent for the Participants in connection with the purchase and acquisition of (i) the initial supply of fuel for the Plant McIntosh CTs to the extent such fuel is consumed by any of the Plant McIntosh CTs prior to the respective dates of Commercial Operation of such Plant McIntosh CTs, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to such acquisition of fuel for the Plant McIntosh CTs and for which Savannah has not been otherwise reimbursed by the Participants, and (ii) the initial supply of spare parts, and any replacements for such spare parts utilized during pre-Commercial Operation construction activities, for the Plant McIntosh CTs and the CT Common Facilities, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to such acquisition of spare parts and for which Savannah has not been otherwise reimbursed by the Participants; provided, however, that Cost of Construction shall not include (i) costs incurred by Savannah in connection with the draining and cleaning (except sand-blasting) of the existing Fuel Oil Tank as preparatory to its becoming part of the CT Common Facilities, (ii) interest cost attributable to the carrying of any Participant's respective investment in the Plant McIntosh CTs or the CT Common Facilities, or (iii) costs and expenses incurred by any Participant in connection with the development of this Agreement, the Ownership Agreement or the Assignment of CT Purchase Agreement. (o) CT COMMON FACILITIES. The "CT Common Facilities" shall have the meaning assigned in Section 1(p), CT COMMON FACILITIES, of the Ownership Agreement. - 5 - (p) CT COMMON FACILITIES SITE. The "CT Common Facilities Site" shall refer to so much of the CT Common Facilities as constitutes real property. (q) CT FUEL SUPPLY. The "CT Fuel Supply" shall mean the fossil fuel supply of oil maintained in the fuel oil storage tank or of natural gas provided by pipeline, as the case may be, for the Plant McIntosh CTs pursuant to Section 3(c), FOSSIL FUEL, hereof. (r) EXECUTION AND DELIVERY. The "Execution and Delivery" shall have the meaning assigned in Section 4(c), EXECUTION AND DELIVERY, of the Ownership Agreement. (s) FERC. The "FERC" shall mean the Federal Energy Regulatory Commission or any entity succeeding to the powers and functions thereof. (t) FORCE MAJEURE EVENT. A "Force Majeure Event" shall refer to any event which occurs due to no fault of the Party asserting the occurrence of such event, and which is beyond the reasonable control of such Party, including, but not limited to: strike or other labor difficulty or dispute; lockout; act of God; change in Legal Requirements; absence as of any particular time of precise engineering and scientific knowledge generally available to fashion a method for compliance with Legal Requirements or absence as of any particular time of appropriate technology generally available which may be required for compliance with Legal Requirements; act or omission of any Governmental Authority; act or omission of any third party other than the Party asserting a Force Majeure Event; act of a public enemy; expropriation or confiscation of facilities; riot; rebellion; sabotage; embargo; blockade; quarantine; restriction; epidemic; accident; wreck or delay in transportation; unavailability or shortage of fuel, power, material or labor; equipment failure; declared or undeclared war; or damage resulting from wind, lightning, fire, flood, earthquake, explosion or other physical disaster; provided, however, that no Party shall be required by the foregoing provisions to settle a strike, lockout or other labor difficulty or dispute except when, according to its own best judgment, such a settlement seems advisable. (u) FUEL COSTS. The "Fuel Costs" shall mean all costs incurred by the Agent for the Participants that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of fuel for the CT Fuel Supply, including, without limitation, any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including, without limitation, that portion of administrative and general - 6 - expenses which is properly and reasonably allocable to acquisition and management of fuel for the CT Fuel Supply and for which the Agent has not been otherwise reimbursed by the Participants; provided, however, that Fuel Costs shall not include any costs allocable to the purchase and acquisition of the initial supply of fuel oil for the Plant McIntosh CT Project to the extent such fuel is consumed by any of the Plant McIntosh CTs prior to the respective dates of Commercial Operation of such Plant McIntosh CTs. (v) FUEL OIL TANK. The "Fuel Oil Tank" shall refer to the existing nine million gallon fuel oil storage tank, wholly owned by Savannah prior to the Closing, a percentage undivided ownership interest in which will be conveyed to GPC at the Closing, and which shall be used to store water for the Plant McIntosh CTs. (w) FUEL PLAN. The "Fuel Plan" shall refer to the fuel supply plan covering at least a five-year period that the Agent shall prepare and submit annually to the Participants as set forth in Section 5(c), FUEL PLAN, hereof. (x) GOVERNMENTAL AUTHORITY. A "Governmental Authority" shall mean any local, state, regional or federal administrative, legal, judicial, or executive agency, court, commission, department or other entity, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee. (y) GPC PLANT MCINTOSH CTS. The "GPC Plant McIntosh CTs" shall refer collectively to Plant McIntosh CT Nos. 01 and 02, Plant McIntosh CT Nos. 03 and 04, Plant McIntosh CT Nos. 07 and 08, and one or more of the Additional Plant McIntosh CTs, any one of which shall be a GPC Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the GPC Plant McIntosh CTs until such time as GPC provides written notice to Savannah that GPC is planning to construct one or more Additional Plant McIntosh CTs, as the case may be, in order to serve GPC's energy needs; and provided, further, that the GPC Plant McIntosh CTs shall not include any GPC Plant McIntosh CT which GPC decides shall not be constructed and which is so identified in a written notice to Savannah. (z) GPC PLANT MCINTOSH CTS SITE. The "GPC Plant McIntosh CTs Site" shall refer to so much of the GPC Plant McIntosh CTs as constitutes real property. (aa) GPSC. The "GPSC" shall mean the Georgia Public Service Commission or any governmental agency succeeding to the powers and functions thereof. - 7 - (ab) INTERCOMPANY INTERCHANGE CONTRACT. The "Intercompany Interchange Contract" shall refer to that certain "Southern Company System Intercompany Interchange Contract" entered into on October 31, 1988 by and among Alabama Power Company, GPC, Gulf Power Company, Mississippi Power Company, Savannah and SCSI, as the same may be amended from time to time. (ac) LEGAL REQUIREMENTS. "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to Savannah, as Agent, or any Participant, as required by the context in which used, or to the Plant McIntosh CT Project, or to the use, manner of use, occupancy, possession, planning, licensing, design, procurement, construction, acquisition, testing, startup, operation, maintenance, management, control, addition, renewal, modification, replacement or disposal of the Plant McIntosh CT Project, or any portion or portions thereof. (ad) OPERATING ACCOUNT. The "Operating Account" shall refer to the separate, interest bearing account or accounts, in a bank or banks, the deposits in which are insured, subject to applicable limits, by the Federal Deposit Insurance Corporation and which meets or meet all applicable requirements imposed upon depositories of Savannah, established by Savannah as Agent, pursuant to the terms of this Agreement, for the payment of Operating Costs. (ae) OPERATING BUDGET. The "Operating Budget" shall refer to the Budgets pertaining to Operating Costs to be delivered to the Participants pursuant to the terms of Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, of this Agreement. (af) OPERATING COSTS. The "Operating Costs" shall mean all costs and expenses (other than Cost of Construction and Fuel Costs) incurred by Savannah, as Agent for the Participants in respect of the management, control, operation or maintenance, including, without limitation, scheduling and dispatching, of the Plant McIntosh CTs or the CT Common Facilities, or both, including, without limitation, that portion of administrative and general expenses incurred by Savannah, as Agent, which is properly and reasonably allocable to the Plant McIntosh CTs or the CT Common Facilities, or both, and which costs and expenses are properly recordable in accordance with the Operating Expense Instructions and in appropriate accounts as set forth in the Uniform System of Accounts and, to the extent practicable, Operating Costs shall be properly allocated among each Plant McIntosh CT and the CT Common Facilities; provided, however, that there shall not be included as Operating Costs any costs - 8 - attributable to Plant McIntosh exclusive of the Plant McIntosh CT Project. (ag) OWNERSHIP AGREEMENT. The "Ownership Agreement" shall refer to that certain Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement, dated as of the date hereof, between GPC and Savannah, as such agreement may be amended from time to time. (ah) PARTICIPANTS. "Participant" and "Participants" shall refer individually or collectively, as the case may be, to GPC and Savannah (in their capacities as owners of one or more of the Plant McIntosh CTs) and to any permitted transferee or assignee of either of them of an ownership or leasehold interest in the Plant McIntosh CT Project pursuant to Section 6(c), ALIENATION AND ASSIGNMENT, of the Ownership Agreement made in conformity with those provisions of this Agreement and the Ownership Agreement pertaining to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, provided, however, such references shall only refer to an entity for so long as said entity has an ownership or an ownership and a leasehold interest in the Plant McIntosh CT Project. (ai) PARTY. A "Party" shall refer to any entity which is now or hereafter a party to this Agreement; provided, however, such reference shall only refer to an entity for so long as such entity is a party to this Agreement. (aj) PLANT MCINTOSH. "Plant McIntosh" shall consist of the Plant McIntosh Site plus all improvements thereon including, without limitation, the Plant McIntosh CT Project and that certain Plant McIntosh 170 Mw coal-fired generating plant owned by Savannah, together with its supporting facilities and equipment. (ak) PLANT MCINTOSH CT NOS. 01 AND 02. "Plant McIntosh CT Nos. 01 and 02" shall have the meaning assigned in Section 1(an), PLANT MCINTOSH CT NOS. 01 AND 02, of the Ownership Agreement. (al) PLANT MCINTOSH CT NOS. 03 AND 04. "Plant McIntosh CT Nos. 03 and 04" shall have the meaning assigned in Section 1(ao), PLANT MCINTOSH CT NOS. 03 AND 04, of the Ownership Agreement. (am) PLANT MCINTOSH CT NOS. 05 AND 06. "Plant McIntosh CT Nos. 05 and 06" shall have the meaning assigned in Section 1(ap), PLANT MCINTOSH CT NOS. 05 AND 06, of the Ownership Agreement. (an) PLANT MCINTOSH CT NOS. 07 AND 08. "Plant McIntosh CT Nos. 07 and 08" shall have the meaning assigned in Section 1(aq), PLANT MCINTOSH CT NOS. 07 AND 08, of the Ownership Agreement. - 9 - (ao) PLANT MCINTOSH CT PROJECT. The "Plant McIntosh CT Project" shall refer to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply. (ap) PLANT MCINTOSH CTS. The "Plant McIntosh CTs" shall consist collectively of Plant McIntosh CT Nos. 01 and 02, Plant McIntosh CT Nos. 03 and 04, Plant McIntosh CT Nos. 05 and 06, Plant McIntosh CT Nos. 07 and 08, and any one or more of the Additional Plant McIntosh CTs, any one of which shall be a Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Plant McIntosh CTs until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs; and provided, further, that the Plant McIntosh CTs shall not include any Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (aq) 1994 PLANT MCINTOSH CTS. The "1994 Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 07 and 08, Plant McIntosh CT Nos. 05 and 06, and Plant McIntosh CT Nos. 03 and 04, any one (of the six) of which shall be a 1994 Plant McIntosh CT; provided, however, that the 1994 Plant McIntosh CTs shall not include any 1994 Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (ar) 1995 PLANT MCINTOSH CTS. The "1995 Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 01 and 02, either one of which shall be a 1995 Plant McIntosh CT; provided, however, that the 1995 Plant McIntosh CTs shall not include any 1995 Plant McIntosh CT which the Participant owning such unit decides shall not be constructed and which is so identified in a written notice to the other Participant. (as) PLANT MCINTOSH SITE. The "Plant McIntosh Site" shall refer to the real property which is described in Exhibit F attached to the Ownership Agreement. (at) PRIME RATE. The "Prime Rate" shall mean the per annum rate of interest announced from time to time by Chemical Bank as its prime rate, and with respect to any payment or reimbursement to be made hereunder to which interest is to be added (other than an adjustment to the Purchase Price), shall be determined as of the date such payment or reimbursement is due, and with respect to any adjustment to the Purchase Price as to which interest is to be added pursuant to the terms hereof, shall be determined as of the date of the Closing for which such adjustment is to be made. The Prime Rate shall be calculated on the basis of a 365- - 10 - day year for the actual number of days that the payment, reimbursement or purchase price adjustment, as the case may be, has not been made. (au) PRO FORMA OWNERSHIP INTEREST. A "Pro Forma Ownership Interest" shall mean for each Participant the number of the Plant McIntosh CTs (whether or not completed) owned by such Participant divided by the total number of Plant McIntosh CTs (whether or not completed); provided, however, that none of the Additional Plant McIntosh CTs shall be included in the calculation of Pro Forma Ownership Interest until such time as one or more Participants provide written notice to the other Participants that they are planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve such Participants' energy needs; provided further that, for purposes of this definition of Pro Forma Ownership Interest, no Plant McIntosh CT shall be included which has been cancelled by the Participant owning such Plant McIntosh CT and which is identified in a written notice of cancellation to the other Participants. (av) PRUDENT UTILITY PRACTICE. "Prudent Utility Practice" at a particular time shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts, which in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement and the Ownership Agreement. Compliance by Savannah with the provisions of any Budget estimate which has been altered by the Participants pursuant to this Agreement or the Ownership Agreement, as the case may be, from any such estimate submitted by Savannah shall not, in and of itself, constitute a breach by Savannah of its obligation to discharge its responsibilities as Agent for the Participants hereunder in accordance with Prudent Utility Practice. (aw) PURCHASE PRICE. The "Purchase Price" shall have the meaning assigned in subsection (i) of Section 3(b), PURCHASE PRICE AND PAYMENT, of the Ownership Agreement. (ax) SAVANNAH PLANT MCINTOSH CTS. The "Savannah Plant McIntosh CTs" shall refer to Plant McIntosh CT Nos. 05 and 06 and one or more of the Additional Plant McIntosh CTs, any one of - 11 - which is a Savannah Plant McIntosh CT; provided, however, that none of the Additional Plant McIntosh CTs shall be included in the Savannah Plant McIntosh CTs until such time as Savannah provides written notice to GPC that Savannah is planning to construct one or more of the Additional Plant McIntosh CTs, as the case may be, in order to serve Savannah's energy needs; and provided, further, that the Savannah Plant McIntosh CTs shall not include any Savannah Plant McIntosh CT which Savannah decides shall not be constructed and which is so identified in a written notice to GPC. (ay) SAVANNAH PLANT MCINTOSH CTs SITE. The "Savannah Plant McIntosh CTs Site" shall refer to so much of the Savannah Plant McIntosh CTs as constitutes real property. (az) SCSI. "SCSI" shall mean Southern Company Services, Inc., a corporation organized and existing under the laws of the State of Alabama, and any successor corporation. (ba) SEC. The "SEC" shall refer to the Securities and Exchange Commission or any governmental agency succeeding to the powers and functions thereof. (bb) SITE REPRESENTATIVE. "Site Representative" shall refer to the term as described in Section 6(j), ON-SITE OBSERVATION AND INSPECTION, hereof. (bc) THE SOUTHERN COMPANY. "The Southern Company" shall refer to The Southern Company, a corporation organized and existing under the laws of the State of Delaware. (bd) UNIFORM SYSTEM OF ACCOUNTS. The "Uniform System of Accounts" shall mean the FERC Uniform System of Accounts prescribed for Public Utilities and Licensees (Class A and Class B), as the same now exists or may be hereafter amended by the FERC. (be) VARIABLE OPERATING COSTS. "Variable Operating Costs" shall mean those Operating Costs identified as variable operation and maintenance expenses from time to time in the Intercompany Interchange Contract. 2. OPERATIONS. (a) AGENT. Subject to the terms of this Agreement and of the Ownership Agreement, the Participants hereby irrevocably appoint Savannah as their Agent in connection with the Plant McIntosh CT Project, to act on behalf of the Participants in performing the Agency Functions. Savannah hereby accepts such appointment and agrees that it shall discharge its - 12 - responsibilities as Agent in accordance with this Agreement, the Ownership Agreement and Prudent Utility Practice. (b) COMMITTEES. From time to time the Participants may appoint and charge committees to study and make recommendations on any subject, as the Participants may designate. The purpose, charge and duty of each committee so appointed shall not exist for more than one year unless the committee is reappointed by the Participants. (c) DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES. Prior to a reasonable period in advance of the date when the Agent is required under this Agreement to deliver any Budget, plan or schedule to the Participants, each Participant shall have the right to provide the Agent information (whether in writing or in person, as determined by the Participants) to be used in the formation of the subsequent year's Operating Budget, the Capital Budget and such other plans and schedules as the Participants shall reasonably request, including, without limitation, the Fuel Plan and the maintenance schedule. Taking into account such information from the Participants, Savannah, as Agent, shall prepare proposed Capital Budgets (including separate Capital Budgets for each Participant's Plant McIntosh CTs and for the CT Common Facilities), a proposed Operating Budget, and other appropriate proposed plans and schedules and shall submit them to the Participants as provided below. Such Budgets, plans and schedules shall be based upon information reasonably available and shall contain such information as is reasonably adequate for the purpose of each Participant's reasonable review thereof. The proposed Budgets, plans and schedules for each calendar year shall be submitted to the Participants by August 1 of the preceding year, beginning on August 1, 1993. On or before September 1 of each year, beginning with September 1, 1993, the Participants shall approve by mutual agreement or disapprove each Budget, plan and schedule separately, other than the Capital Budgets for each Participant's Plant McIntosh CTs which shall be approved or disapproved by the respective Participants owning the personal property comprising such Plant McIntosh CTs. In the event that any proposed Budget, plan or schedule as submitted is disapproved, the Participants shall have until October 1 of each year to agree on revised Budgets, plans or schedules, as the case may be, which shall comply with Prudent Utility Practice and Legal Requirements. In the event that the Participants are unable to agree on complete revised Budgets, plans or schedules which comply with Prudent Utility Practice and Legal Requirements by October 1 of each year, then the Budgets, plans and schedules to be utilized shall consist only of such portions of the Budgets, plans and schedules on which the Participants agree. The Agent shall have reasonable day-to-day discretion with respect to individual expenditures, provided that such - 13 - expenditures shall be generally consistent with the guidelines set forth in such Budgets and, unless otherwise approved by the Participants (or, in the case of any of the Plant McIntosh CTs, by the respective Participants owning the personal property comprising such Plant McIntosh CTs), such aggregate expenditures for Operating Costs or Cost of Construction, as the case may be, shall not exceed 100% of the Capital Budgets (excluding any budgeted amount for Fuel Costs) or Operating Budget, as the case may be, without the approval of the affected Participants. Notwithstanding the foregoing, Savannah, as Agent, may make or incur such expenditures as are reasonably required to respond appropriately to emergencies, and the Participants shall make payment for such expenditures as Operating Costs or Cost of Construction; provided, however, that any expenditures beyond the period of the emergency may not be incurred without the prior approval of the affected Participants. The Participants and Savannah, as Agent, agree to cooperate with one another to revise, to the extent practicable, any Budget, plan or schedule in effect from time to time to accommodate changed circumstances. The Agent shall provide the Participants with such other information as the Participants may reasonably request; provided, however, that such information shall be provided only for the convenience of the Participants except as the Agent may otherwise agree from time to time. Notwithstanding the foregoing, Savannah, as Agent, makes no representation, warranty or promise of any kind as to the accuracy of any estimate contained in any Budget, plan or schedule or in any revision thereto or that any information referred to in the preceding sentence will be sufficient, and in no event shall Savannah, as Agent, have any liability to any of the Participants in these regards. (d) RECORD KEEPING. In furtherance of its duties as Agent, Savannah shall also keep and maintain appropriate plant records in accordance with applicable Legal Requirements and Savannah's record retention policies, and upon request from time to time by a Participant, Savannah will inform such Participant of the location of such records and provide access thereto. To the extent that any Participant would like to retain records for longer periods of time than Savannah would retain such records, then, upon written request from such Participant, Savannah shall provide such Participant, at such Participant's sole expense, with originals or copies as appropriate of such records on or prior to the date that Savannah would dispose of such records. - 14 - 3. AUTHORITY AND RESPONSIBILITY FOR OPERATION (a) OPERATION. Subject to the provisions of this Agreement and the Ownership Agreement, Savannah, as Agent for the Participants, shall have sole authority and responsibility with respect to the Agency Functions, and in respect thereof, Savannah, as Agent, is authorized to take and shall take, in the name and on behalf of the Participants all reasonable actions which, in the discretion and judgment of Savannah, are deemed necessary or advisable to effect the Agency Functions, including, without limitation, the following: (i) The making of such agreements and modifications of existing agreements, other than this Agreement and the Ownership Agreement, and the taking of such other action as Savannah, as Agent, deems necessary or appropriate, in its sole discretion, or as may be required under the regulations or directives of any Governmental Authority having jurisdiction, with respect to the Agency Functions, which such agreements and modifications, together with all such existing agreements, shall be held by Savannah as Agent; provided, however, that Savannah will develop procedures, with respect to the purchase of equipment and materials and the supply of services, which are mutually acceptable to the Participants and which shall provide opportunity for the Participants to participate in procurement decisions; (ii) With respect to the disposal (including, without limitation, retirement and salvaging) of all or any part of the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the making of such agreements and modifications of existing agreements (other than this Agreement and the Ownership Agreement) and the taking of such other action as may be required under the regulations or directives of any Governmental Authority having jurisdiction or as Savannah, as Agent, deems necessary or appropriate, with the consent in each case of the Participants owning such Plant McIntosh CTs, which such agreements and modifications, together with such existing agreements, shall be held by Savannah, as Agent; provided, however, that Savannah shall not be required to obtain the consent of any Participant prior to disposing of any machinery, apparatus, supplies, equipment, tools or implements which are (1) valued at less than $50,000.00 (original book cost), and (2) replaced or substituted for with similar property of value at least equal to that of the disposed property; provided, further, that Savannah is not authorized by GPC to have any direct contact with the GPSC on behalf of GPC without the written consent of GPC; (iii) With respect to the disposal (including, without limitation, retirement and salvaging) of all or any part of - 15 - the CT Common Facilities and the CT Fuel Supply, the making of such agreements and modifications of existing agreements (other than this Agreement and the Ownership Agreement) and the taking of such other action as may be required under the regulations or directives of any Governmental Authority having jurisdiction or as Savannah, as Agent, deems necessary or appropriate, with the consent in each case of all the Participants, which such agreements and modifications, together with such existing agreements, shall be held by Savannah, as Agent; provided, however, that Savannah shall not be required to obtain the consent of any Participant prior to disposing of any machinery, apparatus, supplies, equipment, tools or implements which are (1) valued at less than $50,000.00 (original book cost), and (2) replaced or substituted for with similar property of value at least equal to that of the disposed property; (iv) The execution and filing, with any Governmental Authority having jurisdiction (except the GPSC on behalf of GPC), of applications, amendments, reports and other documents and filings in or in connection with the licensing and other regulatory matters with respect to the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply or any combination thereof; (v) The receipt of any notice or other communication from any Governmental Authority having jurisdiction (except the GPSC on behalf of GPC), as to any licensing or other similar matter with respect to the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply or any combination thereof; and (vi) The provision of, or contracting with any third party to purchase or provide, any equipment or facilities or perform services in connection with the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply or any combination thereof. GPC and Savannah agree that all such agreements which relate to the Plant McIntosh CTs, the CT Common Facilities or the CT Fuel Supply, described in this Section 3(a) which are entered into after the effective date hereof shall, by their terms, be made assignable by Savannah, as Agent, to any replacement or successor Agent for the Agency Functions, pursuant to this Agreement and the Ownership Agreement; provided, however, that any agreements between Savannah, as Agent, and its Affiliates shall not be made assignable to any replacement or successor Agent who is not also an Affiliate of Savannah. Savannah, as Agent, shall also, at all times, be responsible for ensuring the continued availability of any equipment and - 16 - services necessary to support the operation and maintenance of the Plant McIntosh CT Project (including, without limitation, fire protection, potable water and the intake structure), which equipment and services are to be supplied from portions of Plant McIntosh wholly owned by Savannah. (b) OTHER CONTRACTS. In discharging its obligations as Agent hereunder, Savannah shall have the right, on behalf of the Participants, to provide, or contract with any of its Affiliates to purchase or provide, at cost, any equipment or facilities or to perform, or contract with any of its Affiliates to perform, at cost, services in connection with the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply or any combination thereof. (c) FOSSIL FUEL. (i) Savannah, as Agent, shall have sole authority to and shall arrange for and acquire all fossil fuel and fuel transportation for the Plant McIntosh CT Project consistent with such policies and procedures with respect thereto as may be adopted from time to time by the Participants by mutual agreement, and shall have sole authority to administer all fuel standards for fossil fuel for the Plant McIntosh CT Project consistent with such standards with respect thereto as may be adopted from time to time by the Participants by mutual agreement. (ii) Each Participant shall have the right to make whatever financial arrangements it may desire, whether by lease, security transaction or otherwise, for the discharge of its fossil fuel payment obligations so long as such arrangements do not adversely affect the rights of the other Participants. (iii) The Participants shall pay Fuel Costs and shall own fuel in the CT Fuel Supply in proportion to (A) their respective undivided ownership interests in the personal property comprising the 1994 Plant McIntosh CTs prior to the last Commercial Operation date of the 1995 Plant McIntosh CTs, and (B) their respective Pro Forma Ownership Interests in the Plant McIntosh CT Project after the last Commercial Operation date of the 1995 Plant McIntosh CTs. (iv) All Fuel Costs incurred in connection with the CT Fuel Supply shall be allocated among the Participants at the time such Fuel Costs are incurred in accordance with subsection (iii) of this Section 3(c) and such Fuel Costs shall be paid as provided in Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof; provided, however, that at the end of each calendar month Savannah, as Agent, shall cause an adjustment to be made among the Participants in - 17 - accordance with the amount of fuel actually consumed by each Participant, all in accordance with Savannah's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time. (v) At least once each calendar quarter, Savannah, as Agent, shall cause a physical inventory of the CT Fuel Supply to be performed. All discrepancies between the book inventory and the physical inventory of the CT Fuel Supply shall be charged or credited, as appropriate, among the respective accounts of each Participant in accordance with their respective undivided ownership interests (determined as provided in subsection (iii) of this Section 3(c)) during the physical inventory period to which such discrepancy relates, all as determined in accordance with Savannah's standard accounting practices which shall comply with the Uniform System of Accounts in effect from time to time. 4. INTENTIONALLY OMITTED. 5. OPERATION, RIGHTS AND OBLIGATIONS. (a) AVAILABILITY OF OUTPUT. Subject to the further provisions of this Agreement and the provisions of the Ownership Agreement, at any given time each Participant shall each be entitled to (i) the net capacity of such Participant's Plant McIntosh CTs, as specified in the Ownership Agreement, and (ii) the net energy output of such Participant's Plant McIntosh CTs dispatched in accordance with the provisions of Section 5(b), SCHEDULING AND DISPATCHING, hereof. (b) SCHEDULING AND DISPATCHING. The Plant McIntosh CTs will be dispatched in order of costs regardless of ownership to meet Southern electric system requirements. If the Plant McIntosh CTs have no cost differences, the Agent, upon notification by the Southern electric system dispatcher of the need for generation from the Plant McIntosh CTs, will dispatch the required number of Plant McIntosh CTs using its reasonable best efforts to ensure that over the operating lives of the Plant McIntosh CTs each Plant McIntosh CT accumulates equivalent operating hours and equivalent numbers of starts. (c) FUEL PLAN. In connection with the development of each Operating Budget and Capital Budget beginning with the first such Budgets, Savannah, as Agent, shall prepare and submit annually to the Participants for their approval, in accordance with the provisions in Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, hereof, a Fuel Plan covering at least a five-year period for the Plant McIntosh CT Project. Each Fuel Plan shall - 18 - describe such reasonable information as the Participants may request and each action or contemplated action and payment and the estimated dates thereof relating to the acquisition, transportation, delivery, storage and inventory of fossil fuel for the Plant McIntosh CT Project, the entitlement (or estimates thereof) of each Participant to the energy generated by such Participant's Plant McIntosh CTs for each calendar year of the Fuel Plan pursuant to Sections 5(a), AVAILABILITY OF OUTPUT, and 5(b), SCHEDULING AND DISPATCHING, hereof, a cash flow analysis of forecasted expenditures and credits for each Participant for each major cost component of the Fuel Plan by year for the period covered by the Fuel Plan, and cash flow by month (or other period as agreed to by the Agent and the Participants) for the first three years of each such period. Savannah, as Agent, shall attempt to acquire, transport, deliver and store fuel for the Plant McIntosh CT Project in accordance with the Fuel Plan to the extent reasonably practicable; provided, however, that Savannah, as Agent, makes no representation, warranty or promise of any kind as to the accuracy of any estimate or forecast or other information contained in any Fuel Plan or that any attempt to acquire, transport, deliver and store fuel for the Plant McIntosh CT Project in accordance with the Fuel Plan will be successful, and in no event shall Savannah, as Agent, have any liability to any of the Participants in these regards. (d) MAINTENANCE SCHEDULE. In connection with the development of the Operating Budget and Capital Budgets, beginning with the first such Budgets, and after receiving and taking into consideration input from the Participants, Savannah shall submit annually for approval by the Participants, in accordance with the schedule provided in Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, hereof, a maintenance plan which covers all planned and potential maintenance for the succeeding two years for such portion of the Plant McIntosh CT Project as is in Commercial Operation. To the extent that the desired maintenance plan of any Participant adversely affects any other Participant, Savannah, as Agent, and the Participants shall prioritize the maintenance work to be performed giving due regard to the relative burdens on and benefits to the Participants, including, without limitation, the effect of the timing and duration of scheduled outages, and giving due regard to past burdens and benefits which resulted from the resolution of prior similar conflicts. Such prioritization shall take place and be communicated in a timely manner to limit any unreasonable delays in the maintenance schedule. Each such maintenance plan shall describe, in reasonable detail, the contemplated time and duration of each outage and maintenance work to be done and the estimated cost thereof. The maintenance plan for the Plant McIntosh CTs and the CT Common - 19 - Facilities shall be subject to approval, rejection or revisions as provided in Section 2(c), DEVELOPMENT OF BUDGETS, PLANS AND SCHEDULES, hereof; provided, however, that any rejection of or revisions to such recommended plan shall comply with the requirements of Prudent Utility Practice and the other requirements of this Section 5(d). Proposed changes to the maintenance plan may be submitted by Savannah, as Agent, or by any Participant, from time to time. Such proposed changes shall be prioritized as provided in this Section 5(d). Savannah, as Agent, makes no representation, warranty or promise of any kind as to the accuracy of any estimate or other information contained in any maintenance plan, and in no event shall Savannah, as Agent, have any liability to any of the Participants in these regards. (e) BILLING AND ACCOUNTING. Notwithstanding any reference to Savannah's standard accounting practices contained herein, all billing and accounting matters, including, without limitation, payments to be made by the Participants and the Agent, shall be carried out in a manner consistent with Section 13(b) of the Public Utility Holding Company Act of 1935, as amended. (f) METERING. Savannah, as Agent, shall install and maintain the necessary metering equipment so as to determine (i) the gross output, auxiliary requirements, net output and reactive power of each Plant McIntosh CT each hour to the transmission grid in the State of Georgia, and (ii) the monthly power, fuel and water consumption of each Plant McIntosh CT. All metering equipment shall meet the standards set by the Participants which shall be consistent with Prudent Utility Practice. Each meter used pursuant to this Section 5(f) shall, by comparison with accurate standards, be tested and calibrated by Savannah, as Agent, at approximately 12-month intervals. If a meter is found not registering within 1% accuracy, it shall be restored to an accurate condition or an accurate meter shall be substituted. Any meter tested and found to be within 1% accuracy shall be considered to be accurate. If, as a result of any test, any meter is found to register not within 1% accuracy, Savannah, as Agent, shall meet with the affected Participant or Participants, as soon as practicable, after the meter has been repaired or replaced to resolve any correction for measurement inaccuracy. The correction shall be calculated from the day the inaccurate meter was repaired or replaced, working back to the last meter reading date that was deemed accurate, as agreed to between Savannah, as Agent, and the affected Participant or Participants. The energy produced during the time of any electrical meter error shall be calculated in whole megawatt-hours and scheduled for payback either to or from Savannah in a time frame agreeable to Savannah and the affected Participant or Participants. All metering records and tests shall be available to authorized representatives of the Participants. All costs incurred in - 20 - connection with such metering equipment and compliance with the provisions of this Section 5(f) shall be Cost of Construction or Operating Costs, as appropriate, and as such shall be paid by the Participants in accordance with the provisions of Section 5(g), SHARING OF COSTS - GENERAL, hereof. (g) SHARING OF COSTS - GENERAL. Except as otherwise provided in this Section 5, each Participant shall be responsible for the payment of its respective percentage share of all Operating Costs and Cost of Construction in accordance with this Agreement and the Ownership Agreement. Notwithstanding the foregoing sentence, the allocation among the Participants of all Variable Operating Costs for any given month shall be adjusted at the end of such month such that each Participant pays that fraction of such Variable Operating Costs equal to the twelve- month rolling average of gross generation of such Participant ending in such month divided by the total twelve-month rolling average of gross generation of all Participants ending in such month. The Participants shall be responsible for the payment of Fuel Costs in accordance with the provisions of Sections 3(c), FOSSIL FUEL, and 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof. It is the absolute intent of the Participants to share all items of cost, obligation and liability incurred in connection with the Plant McIntosh CT Project (other than the financing of each Participant's respective ownership or leasehold interests in the Plant McIntosh CT Project), which are not otherwise expressly provided for in this Agreement or in the Ownership Agreement in proportion to their respective Pro Forma Ownership Interests, as they may appear from time to time; provided, however, that any such cost, obligation or liability incurred at the request of and for the sole benefit of a particular Participant shall be the sole responsibility of such Participant and such Participant hereby agrees to indemnify all other Participants against any claims, costs, damages, expenses, losses or any other liability of any kind arising from such costs, obligations or liability. Notwithstanding the foregoing provisions of this Section 5(g) or any other provision of this Agreement, in the event any Participant sells or conveys to any other person (including, without limitation, a Participant) any ownership or ownership and leasehold interest in the Plant McIntosh CT Project in accordance with the provisions of Section 6(c), ALIENATION AND ASSIGNMENT, of the Ownership Agreement (other than a sale or conveyance as security for an indebtedness or in connection with the financing of pollution control or solid waste disposal facilities), such selling or conveying Participant's rights and obligations hereunder as a Participant, including, without limitation, the obligation to make payments of the Operating Costs, Cost of Construction and Fuel Costs and any other costs to be shared by - 21 - the Participants hereunder, shall be reduced to the extent of the ownership or ownership and leasehold interests so sold or conveyed, and the Agent and all Participants shall look solely to such purchaser for payment of the corresponding portion of the Operating Costs, Cost of Construction and Fuel Costs and other costs to be shared by the Participants hereunder. (h) PAYMENT AND SETTLEMENT OF OPERATING COSTS. (i) Savannah, as Agent, shall be responsible for making, and shall make, payment to third parties of all Operating Costs only to the extent that funds are available therefor in the Operating Account. (ii) As Agent for the Participants, Savannah will, from and after the first Commercial Operation date, and on or before the first day of each month thereafter, notify the Participants of the Operating Costs anticipated to be due and payable during the succeeding calendar month, plus or minus any adjustments of Operating Costs incurred in prior months but not previously charged or credited to the Participants under the provisions of this Section 5(h), with separate computations as to each of the Plant McIntosh CTs and the CT Common Facilities. Each Participant shall make payment into the Operating Account in immediately available funds during such succeeding month, in accordance with the schedule determined and delivered to it by Savannah, as Agent, of its respective percentage share of such Operating Costs. Each Participant shall pay all Operating Costs associated with the Plant McIntosh CTs owned by such Participant. Each Participant's share of the Operating Costs associated with the CT Common Facilities shall be equivalent to the proportion which the number of Plant McIntosh CTs in Commercial Operation owned by such Participant bears to the total number of Plant McIntosh CTs in Commercial Operation. Each such notification made by Savannah, as Agent, of anticipated Operating Costs and adjustments shall be accompanied and adjusted by an accounting of the Operating Costs incurred and credits, if any, accrued for preceding months. (iii) Each Participant shall have until (A) the 180th day after the furnishing of such accounting by Savannah, as Agent, for any charge or credit made to it pursuant to this Section 5(h), or (B) such time as the Parties may otherwise agree, to question or contest the correctness of such charge or credit after which time the correctness of such charge or credit shall be conclusively presumed. In the event that any Participant by timely notice questions or contests the correctness of any such charge or credit, Savannah shall promptly review the questioned charge or credit and shall within 55 days following notice from a Participant questioning - 22 - or contesting such charge or credit notify each Participant of the amount of any error and the amount of reimbursement, if any, that each Participant is required to make or is entitled to receive in respect of such error. Not later than the fifth Business Day after receipt of such notice from Savannah, as Agent, each Participant required to make reimbursement shall deposit the amount specified in such notice into the Operating Account in immediately available funds. Any such reimbursement required to be made by Savannah, as Agent, shall be so deposited by Savannah, as Agent, not later than the fifth Business Day after Savannah, as Agent, notifies the Participants of the amount of such reimbursement that they are required to make. From the amount so deposited, Savannah, as Agent, shall immediately thereafter distribute the amount that each Participant is entitled to receive (or if the amount so deposited is insufficient to reimburse in full all Participants entitled to receive reimbursement, Savannah, as Agent, shall distribute the amount so deposited among the Participants entitled to receive such reimbursement pro rata in accordance with each Participant's entitlement to reimbursement in respect of such error), except that if any such Participant is then in default in respect of any payments required to be made under this Agreement or the Ownership Agreement, an amount equal to such defaulting Participant's share of the amount so deposited with respect to such reimbursement shall be retained in the Operating Account and distributed in accordance with the provisions of Section 5(i), OPERATING ACCOUNT, hereof. Savannah shall have no responsibility or liability for the failure of any Participant (other than itself) to deposit funds as provided in this subsection (iii) of Section 5(h). (iv) Savannah, as Agent, will provide each Participant with such information as is reasonably required by such Participant in order to account for payments made pursuant to this Section 5(h) on such Participant's books. (i) OPERATING ACCOUNT. Prior to the first Commercial Operation date, Savannah, as Agent, shall establish the Operating Account. All monies paid by the Participants for Operating Costs shall be deposited by the Participants in the Operating Account and, unless otherwise agreed to by the Participants with respect to Operating Costs, Savannah, as Agent, shall withdraw and apply funds therefrom only as necessary to pay Operating Costs. In the event that during any month the balance in the Operating Account is insufficient to pay the Operating Costs required to be paid that month (other than as the result of the non-payment by a Participant of amounts due pursuant to Section 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, hereof), Savannah, as Agent, shall promptly so notify the Participants by telephone or telecopy of the amount required to be paid by each Participant and thereafter - 23 - promptly confirm the same in writing, together with a description of the cause of the deficit. Each of the Participants shall pay its respective share of such deficit into the Operating Account in immediately available funds not later than the fifth Business Day after receipt of such telephone or telecopy notice from Savannah, as Agent. Savannah, as Agent, shall have no responsibility or liability to make up any such deficit out of its own funds in excess of the proportionate share of such deficit which it owes as a Participant. Until retirement of the Plant McIntosh CT Project and settlement of all the obligations relating to Operating Costs, each Participant shall continue to own and maintain its undivided ownership interest in the Operating Account (other than amounts, if any, deposited in the Operating Account pursuant to subsection (iii) of Section 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, hereof, which amounts shall be owned solely by the Participants to whom such amounts are to be distributed as provided in such subsection); provided, however, that Savannah, as Agent, shall have the sole right and authority to make withdrawals from the Operating Account; and provided further, that a Participant shall not own any undivided ownership interest in any amount in the Operating Account in respect of interest paid into such Operating Account by or on behalf of such Participant pursuant to the provisions of Section 5(l), NONPAYMENT, hereof, which amount, in the event there are two Participants, shall be owned by the other Participant and credited against payments required to be made into such account by such other Participant in the performance of its obligations under this Agreement, and which amount, in the event there are three or more Participants, shall be owned in common by, and credited against payments required to be made into such account by, the other Participants not then in default in the performance of their obligations under this Agreement in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. Savannah, as Agent, shall not commingle any funds deposited in the Operating Account with any other funds owned or maintained by Savannah unless otherwise agreed to by the Participants. Upon retirement of the Plant McIntosh CTs and settlement of all the obligations relating to Operating Costs and payment of all decommissioning costs, Savannah, as Agent, shall close the Operating Account and distribute to each Participant its undivided ownership interest of any balance remaining in such Operating Account (exclusive of amounts therein, if any, in which such Participant shall not own any undivided ownership interest), except that if a Participant shall then be in default with respect to any payment required to be made under this Agreement or under the Ownership Agreement, an amount equal to the liability of such defaulting Participant on account of such - 24 - default (of if such amount exceeds such Participant's share of the balance in the Operating Account, its entire share of such balance) shall first be distributed to the non-defaulting Participant, or, if there is more than one non-defaulting Participant, to the non-defaulting Participants in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. (j) PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION. (i) Savannah, as Agent, shall be responsible for making, and shall make, payment to third parties of all additional Cost of Construction only to the extent that funds are available therefor in the Capital Account. (ii) As Agent for the Participants, Savannah will, from and after the first Commercial Operation date, and on or before the first day of each month thereafter, notify the Participants of the nature and amount of all additional Cost of Construction anticipated to be incurred during the succeeding calendar month, including, without limitation, that portion of the Plant McIntosh CTs and the CT Common Facilities to which reference is made in subsection (iii) of Section 1(an), PLANT MCINTOSH CT NOS. 01 AND 02, of the Ownership Agreement, subsection (iii) of Section 1(ao), PLANT MCINTOSH CT NOS. 03 AND 04, of the Ownership Agreement, subsection (iii) of Section 1(ap), PLANT MCINTOSH CT NOS. 05 AND 06, of the Ownership Agreement, subsection (iii) of Section 1(aq), PLANT MCINTOSH CT NOS. 07 AND 08 of the Ownership Agreement and subsection (ii) of Section 1(p), CT COMMON FACILITIES, of the Ownership Agreement, respectively, in respect of completions, renewals, additions, replacements, modifications or disposals of the Plant McIntosh CTs, the CT Common Facilities, or any portion or portions thereof and the amount of Fuel Costs anticipated to be incurred during such succeeding calendar month, plus or minus any adjustments for costs incurred in prior months but not previously charged or credited to the Participants under the provisions of this Section 5(j) with separate computations as to each of the Plant McIntosh CTs and the CT Common Facilities. Savannah, as Agent, will give each Participant as much notice as is reasonably practicable of any major anticipated cost. Each Participant shall make payment into the Capital Account in immediately available funds of its respective percentage shares of such additional Cost of Construction and its respective share of such Fuel Costs in accordance with the provisions of this Section 5(j) during the succeeding month in accordance with the schedule determined and delivered to it by Savannah, as Agent. Each Participant shall pay all such additional Cost of Construction associated with the Plant - 25 - McIntosh CTs owned by such Participant. Each Participant's share of the additional Cost of Construction associated with the CT Common Facilities shall be equivalent to the Pro Forma Ownership Interest of such Participant, as it may appear at the time. Each Participant's share of Fuel Costs shall be as provided in Section 3(c), FOSSIL FUEL, hereof. Each such notification made by Savannah, as Agent, of anticipated costs and adjustments shall be accompanied and adjusted by an accounting of costs incurred and credits, if any, received for preceding months. (iii) Each Participant shall have until (A) the 180th day after the furnishing of such accounting by Savannah, as Agent, for any charge or credit made to it pursuant to this Section 5(j), or (B) such time as the Parties may otherwise agree, to question or contest the correctness of such charge or credit after which time the correctness of such charge or credit shall be conclusively presumed. In the event that any Participant by timely notice questions or contests the correctness of any such charge or credit, Savannah, as Agent, shall promptly review the questioned charge or credit and shall within 55 days following notice from a Participant questioning or contesting such charge or credit notify each Participant of the amount of any error and the amount of reimbursement, if any, that each Participant is required to make or is entitled to receive in respect of such error. Not later than the fifth Business Day after receipt of such notice from Savannah, as Agent, each Participant required to make reimbursement shall deposit the amount specified in such notice into the Capital Account in immediately available funds. Any such reimbursement required to be made by Savannah, as Agent, shall be so deposited by Savannah, as Agent, not later than the fifth Business Day after Savannah, as Agent, notifies the other Participants of the amount of such reimbursement that it is required to make. From the amount so deposited, Savannah, as Agent, shall immediately thereafter distribute the amount that each Participant is entitled to receive (or if the amount so deposited is insufficient to reimburse in full all Participants entitled to receive reimbursement, then Savannah, as Agent, shall distribute the amount so deposited among the Participants entitled to receive such reimbursement pro rata in accordance with each Participant's entitlement to reimbursement in respect of such error), except that if any such Participant is then in default in respect of any payments required to be made under this Agreement or the Ownership Agreement, an amount equal to such defaulting Participant's share of the amount so deposited with respect to such reimbursement shall be retained in the Capital Account and distributed in accordance with the provisions of Section 5(k), CAPITAL ACCOUNT, hereof. Savannah shall have no responsibility or liability for the failure of - 26 - any Participant (other than itself) to deposit funds as provided in this Section 5(j). (iv) Savannah, as Agent, will provide each Participant with such information as is reasonably required by such Participant in order to account for payments made pursuant to this Section 5(j) on such Participant's books. (k) CAPITAL ACCOUNT. Prior to the first Commercial Operation date, Savannah, as Agent, shall establish the Capital Account. All payments (for which provision is made in Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof) of additional Cost of Construction and Fuel Costs incurred by the Participants shall be deposited by the Participants in the Capital Account and unless the Participants shall otherwise agree, Savannah, as Agent, shall withdraw and apply funds from the Capital Account only as necessary to pay additional Cost of Construction and Fuel Costs in accordance with the provisions of Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof. In the event that during any month the balance in the Capital Account is insufficient to pay such additional Cost of Construction and Fuel Costs required to be paid that month (other than as a result of the nonpayment by a Participant of an amount due from it pursuant to Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof), Savannah, as Agent, shall promptly so notify the other Participants by telephone or telecopy of the amount required to be paid by each Participant and thereafter promptly confirm the same in writing, together with a description of the cause of such deficit. Each of the Participants shall pay its respective share of such deficit into the Capital Account in immediately available funds not later than the fifth Business Day after receipt of such telephone or telecopy notice from Savannah, as Agent. Savannah shall have no responsibility or liability to make up any such deficit out of its own funds in excess of the proportionate share of such deficit which it owes as a Participant. Until retirement of the Plant McIntosh CT Project and settlement of all obligations relating to Cost of Construction and Fuel Costs, each Participant shall continue to own and maintain its undivided ownership interest in the Capital Account (other than amounts, if any, deposited in the Capital Account pursuant to subsection (iii) of Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, above, which amounts shall be owned solely by the Participants to whom such amounts are to be distributed as provided in such subsection); provided, however, that Savannah, as Agent, shall have the sole right and authority to make withdrawals from the Capital Account; and provided further, that a Participant shall not own any undivided ownership interest in any amount in the Capital Account in respect of interest paid into such Capital Account by or on behalf of such - 27 - Participant pursuant to the provisions of Section 5(l), NONPAYMENT, hereof, which amount shall, if there is only one other Participant, be owned entirely by such other Participant and credited against payments required to be made into such Capital Account by such other Participant in the performance of its obligations under this Agreement, and which amount shall, if there are three or more Participants, be owned in common by, and credited against payments required to be made into such Capital Account by, the other Participants not then in default in the performance of their obligations under this Agreement in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. Savannah, as Agent, shall not commingle any funds deposited in any Capital Account with any other funds owned or maintained by Savannah unless the Participants shall otherwise agree. Upon retirement of the Plant McIntosh CT Project and settlement of all obligations relating to Cost of Construction and Fuel Costs, including, without limitation, all costs incurred in the disposal of the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply, Savannah, as Agent, shall close the Capital Account and distribute to each Participant its undivided ownership interest of any balance remaining in the Capital Account (exclusive of amounts therein, if any, in which such Participant shall not own any undivided ownership interest), except that if a Participant shall then be in default with respect to any payment required to be made under this Agreement or under the Ownership Agreement, an amount equal to the liability of such defaulting Participant on account of such default (or if such amount exceeds such Participant's share of the balance in the Capital Account, its entire share of such balance) shall first be distributed to the non-defaulting Participant or, if there is more than one non-defaulting Participant, to the non-defaulting Participants in the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may appear at the time. (l) NONPAYMENT. (i) Payments due from a Participant hereunder and payments due from the Agent to the Participants, if any, not made when due shall bear interest, compounded monthly until paid, at a rate per annum equal to the lesser of (A) the highest interest rate allowed by law, or (B) the higher of (1) a rate five percentage points above the average yield on the issue of six-month United States Treasury Bills, as reported by the Federal Reserve Bank of New York, at the sale of such Treasury Bills by the United States Treasury next preceding the due date of such payment, or (2) a rate five - 28 - percentage points above the highest of the net interest costs on the most recent issue of bonds or other long-term obligations by any Participant or the Agent. Such interest shall accrue and is and shall be expressed in simple interest terms per annum in accordance with Section 7-4-2(a) of the Official Code of Georgia Annotated (1989), as amended. (ii) A nonpaying Participant shall have no right to any output of capacity and energy of the Plant McIntosh CT Project or to exercise any other right of a Participant until all amounts overdue from that Participant have been paid, together with interest at the rate provided in subsection (i) of this Section 5(l), into the Construction Account, the Operating Account, the Capital Account or to another Participant if it has paid such overdue amount on behalf of such nonpaying Participant, as appropriate. Such overdue amounts, together with such interest, shall be paid into the Construction Account, the Operating Account or the Capital Account, as appropriate, only to the extent that such amounts have not been paid by another Participant pursuant to the further provisions of this Section 5(l). Notwithstanding any of the provisions of this Section 5(l), if Savannah is the nonpaying Participant, Savannah, as Agent for the other Participants, shall continue to renew, add, replace, modify, manage, control, operate, maintain and dispose of the Plant McIntosh CT Project in accordance with the provisions of this Agreement and the Ownership Agreement. (iii) Any output of capacity and energy of the Plant McIntosh CTs of any nonpaying Participant may be sold or utilized by any non-defaulting Participant, at its option (provided that if two or more Participants elect to exercise such right, it shall be exercised pursuant to the fourth sentence of this subsection (iii) of this Section 5(l)), to reduce the liability of the nonpaying Participant until all amounts due from such nonpaying Participant, together with interest at the rate provided in subsection (i) of this Section 5(l), have been paid. Each Participant (A) electing to sell the energy of a nonpaying Participant shall endeavor to make such sales at then prevailing market prices, and (B) electing to utilize the energy of a nonpaying Participant shall pay on behalf of or credit the nonpaying Participant in an amount equal to the hourly decremental energy cost of the Participant utilizing such energy. If two or more Participants wish to exercise the aforesaid right of sale or utilization, unless such Participants shall otherwise agree, they shall be entitled to the benefits of such sale or utilization on a pro rata basis in accordance with the proportion which their respective Pro Forma Ownership Interests, as they may appear at the time, bear to the aggregate of their Pro Forma Ownership Interests, as they may - 29 - appear at the time. The net proceeds of such sale or utilization shall be applied to reduce the liability of such nonpaying Participant arising from such nonpayment (including, without limitation, interest as provided in subsection (i) of this Section 5(l)) as follows: (A) If any Participant or the Agent exercising such right of sale or utilization has advanced monies into the Construction Account, the Operating Account or the Capital Account on behalf of the defaulting Participant, then the net proceeds of sale or credit from utilization shall be applied to reduce the liability of such defaulting Participant; and (B) To the extent that no such liability is owed to any Participant or the Agent exercising such right of sale or utilization, then the net proceeds of such sale or, in the case of utilization, the amount payable with respect to such utilization, shall be paid into the Construction Account, the Operating Account or the Capital Account, as appropriate, to reduce the liability of the defaulting Participant. Any such net proceeds from sale or amounts payable for utilization in excess of the amount of such liability of the nonpaying Participant shall be applied as a credit against such nonpaying Participant's share of future Operating Costs or Cost of Construction, as appropriate. Notwithstanding the foregoing provisions of this subsection (iii) of this Section 5(l), any non-defaulting Participant shall have the right, but not the obligation, to advance monies into the Construction Account, the Operating Account, the Capital Account, or both, on behalf of any nonpaying Participant and to be reimbursed therefor (including, without limitation, interest as provided in subsection (i) of this Section 5(l)) and to exercise the right of sale or utilization set forth in this subsection (iii) of this Section 5(l) to the exclusion of all Participants which have not advanced monies on behalf of such nonpaying Participant and been fully reimbursed therefor; provided, however, that if more than one Party elects to advance monies pursuant to this sentence, the Parties advancing such monies shall be entitled to exercise such right of sale or utilization in proportion to the respective amounts advanced by them (including, without limitation, interest as provided in subsection (i) of this Section 5(l)) which remain outstanding from time to time; provided further, however, in the event the Participants do not elect to advance all such monies due from time to time from nonpaying Participants, the Agent shall also have the right, but not the obligation, to exercise the rights described in this sentence. (iv) In addition to all other rights of the Participants pursuant to the foregoing provisions of this Section 5(l), the other Participant or Participants shall have the right, subject to the receipt of all requisite regulatory approvals, but not the obligation, to make any payment of interest or - 30 - principal due and owing (A) to Chemical Bank, as Trustee under GPC's First Mortgage Bonds, pollution control revenue bonds, or other lender or trustee, as the case may be, if any, from GPC in respect of such First Mortgage Bonds, or other bonds or notes for financing GPC's obligations hereunder, which GPC fails to make when due, or (B) to NationsBank of Georgia, National Association, as Trustee under Savannah's First Mortgage Bonds, or other lender or trustee, as the case may be, if any, from Savannah in respect of such First Mortgage Bonds, pollution control revenue bonds, or other bonds or notes for financing Savannah's obligations hereunder, which Savannah fails to make when due, or (C) to the corresponding lenders or trustees from any other Participant hereunder in respect of a financing of such Participant's obligations hereunder, which such Participant fails to make when due, and in each such case to be promptly reimbursed in full therefor by GPC, Savannah or such other Participant, as the case may be, together with interest at the rate provided in subsection (i) of this Section 5(l). (v) No remedy referred to in this Section 5(l) is intended to be exclusive of any other remedy set forth in this Section 5(l), but every such remedy herein provided shall be cumulative and may be exercised from time to time and as often as may be deemed expedient except where the exercise of any one of such remedies precludes its further exercise or the exercise of any other remedy. No delay or failure to exercise any remedy herein provided shall impair the right to exercise any such remedy or be construed to be a waiver of such right or of any default by a Participant or by the Agent. Notwithstanding the foregoing, the remedies which are set forth in this Section 5(l) shall constitute the sole and exclusive remedies of the Participants, legal or equitable, for the failure of any Participant to make any payment when due under this Agreement. (vi) Notwithstanding the foregoing provisions of this Section 5(l), any Participant who disagrees with or disputes the amount of any payment claimed by the Agent to be due pursuant to this Agreement shall make such payment under protest and shall be reimbursed, together with all accrued interest at the Prime Rate from the date of payment to the date of reimbursement, for any amount charged in error after the settlement of such disagreement or dispute as provided in Sections 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, and 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof, as appropriate. (m) INSURANCE. Except as may otherwise be agreed to by the Participants, during the period of its construction and operation of the Plant McIntosh CT Project, Savannah, as Agent, shall carry - 31 - in the name of the Participants as their interests appear, insurance covering (i) workers' compensation, which shall include employers' liability, (ii) commercial general liability, which shall include broad form contractual and products/completed operations liability, and (iii) "all risk" property, which shall include coverage for boiler and machinery, in such amounts and with such deductible or self-insurance features as is consistent with The Southern Company's customary practices, provided such insurance shall have the following minimum limits of liability: (w) workers' compensation, statutory limits; (x) employers' liability, $100,000 per accident; (y) commercial general liability, which shall include broad form contractual and products/completed operations liability, $50,000,000 combined single limit per occurrence; and (z) "all risk" property insurance, $200,000,000 per occurrence; or such greater limits as may be determined, from time to time, by mutual agreement of the Participants. The maximum aggregate deductible amount under all insurance policies for any occurrence shall be an amount consistent with industry practice for utilities of similar size and exposure provided that such insurance is obtainable with a deductible amount not exceeding such maximum deductible amount and at commercially reasonable premiums. The aggregate cost of all such insurance shall be considered (i) Cost of Construction for any such costs which are incurred with respect to any portion or portions of the Plant McIntosh CT Project which has not yet entered Commercial Operation, and (ii) Operating Costs for any such costs which are incurred with respect to any portion or portions of the Plant McIntosh CT Project which has entered Commercial Operation, and shall be paid in accordance with the provisions of Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, of the Ownership Agreement, or Section 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, hereof, as appropriate. For any policy furnished by Savannah, the Participants shall each be designated as an additional insured (including, without limitation, for purposes of protecting their interests as owners) and such policy shall be endorsed to be primary to any insurance which may be maintained by any Participant. Each other Participant may also maintain additional or other insurance, at its own cost and expense, which it deems necessary or advisable to protect its respective interest in any portion of the Plant McIntosh CT Project, provided that such additional insurance does not reduce or diminish in any way the coverage of the insurance procured and maintained by Savannah pursuant to this Section 5(m). Notwithstanding the foregoing, each Participant (other than Savannah) shall separately procure and maintain in force, at its own expense, workers' compensation and employer's liability insurance for its Site Representatives and its other employees - 32 - visiting the Plant McIntosh CT Project with the minimum limits of liability set forth above. 6. CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTICIPANTS. The Agent and the Participants hereby covenant and agree as follows: (a) NO ADVERSE DISTINCTION. Notwithstanding any other provision of this Agreement, in discharging their respective responsibilities pursuant to this Agreement, neither Savannah, as Agent or as a Participant, nor any other Participant, shall make any adverse distinction between that portion of the Plant McIntosh CT Project in which it has an interest, and any other portion of the Plant McIntosh CT Project because of its ownership of (or ownership and leasehold interest in) a portion of the Plant McIntosh CTs or an undivided share of the CT Common Facilities with the other Participants. (b) COOPERATION. The Participants and Savannah, as Agent, will cooperate with each other in all activities relating to the Plant McIntosh CT Project, including, without limitation, the execution and filing of applications for authorizations, permits and licenses with Governmental Authorities having jurisdiction (except that Savannah is not authorized to have any contact with the GPSC on behalf of GPC without the written consent of GPC), fuel procurement and the execution of such other documents as may be reasonably necessary to carry out the provisions of this Agreement. Without Savannah's written consent, no other Participant shall incur any obligation in connection with the Plant McIntosh CT Project which would or could obligate Savannah to any third party. (c) LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY. (i) Notwithstanding any provision of law or any provision of this Agreement, (A) in the event Savannah, as Agent, fails to comply at any time with the provisions of Section 6(a), NO ADVERSE DISTINCTION, hereof, or (B) in the event Savannah fails at any time to perform its duties, responsibilities, obligations or functions hereunder as Agent in accordance with Prudent Utility Practice, or (C) in the event that Savannah conveys all of its undivided ownership interest in the Plant McIntosh CT Project, then the Participants shall have the right as their sole and exclusive remedy to remove Savannah, as Agent, hereunder and under the Ownership Agreement in accordance with all of the provisions of subsection (iv) of this Section 6(c). - 33 - GPC, in performing services, or acting as agent, for Savannah in connection with the Plant McIntosh CT Project, shall have equivalent limitations on its liability as are set forth above for Savannah, as Agent. (ii) The limitations upon the liability of Savannah and GPC herein shall also apply to the work performed by Savannah and GPC prior to the date hereof and prior to the Execution and Delivery with respect to the Plant McIntosh CTs, the CT Common Facilities and the CT Fuel Supply. (iii) In the event that any particular application of any of the limitations of liability contained in this Section 6(c) should be finally adjudicated to be void as a violation of the public policy of the State of Georgia, then such limitation of liability shall not apply with respect to such application to the extent (but only to the extent) required in order for such limitation of liability not to be void as a violation of such public policy, and such limitations of liability shall remain in full force and effect with respect to all other applications to the fullest extent permitted by law. (iv) The removal and replacement of Savannah as Agent under this Agreement and under the Ownership Agreement pursuant to any provisions of this Agreement or the Ownership Agreement authorizing such removal and replacement, shall be conducted in accordance with all of the following provisions of this subsection (iv) of Section 6(c): (A) The removal of Savannah as Agent under this Agree- ment and under the Ownership Agreement with respect to the Plant McIntosh CT Project (other than the Savannah Plant McIntosh CTs) and the appointment of a successor Agent shall be effected, subject to approval of any Governmental Authority having jurisdiction, upon written notice to Savannah executed by the Participant or Participants owning the Plant McIntosh CT Project (other than Savannah). Any such notice must identify the date upon which such removal and appointment shall be effective, the cause for such removal and the provisions hereof or of the Ownership Agreement or both upon which such removal is based, and either the name of the successor Agent appointed to replace Savannah, as Agent, or the names of two potential successor Agents, one of whom shall be appointed to replace Savannah, as Agent. In the event such notice of removal identifies two potential successor Agents, the Participant or Participants owning the Plant McIntosh CT Project (other than Savannah) shall notify Savannah in writing of the identity of the one appointed to replace Savannah, as Agent, forthwith upon its appointment, which shall occur no later than the date upon which the removal of Savannah, as - 34 - Agent, is to be effective as set forth in such notice of removal. (B) Except as provided in the preceding paragraph (A), Savannah shall have no obligation to continue as Agent under this Agreement or under the Ownership Agreement from and after the date upon which its removal as Agent is to be effective as set forth in such notice of removal. In addition, from and after the date upon which such removal of Savannah, as Agent with respect to the Plant McIntosh CT Project (other than the Savannah Plant McIntosh CTs), is to be effective as set forth in the notice of removal, the Participants (other than Savannah) shall indemnify and hold Savannah harmless from and against any loss, cost and expense resulting from the failure of the successor Agent to assume such position on such effective date. (C) Savannah agrees that it will cooperate with the successor Agent in facilitating the assumption of such position by the successor Agent and in generally familiarizing the successor Agent and its employees and agents with the Plant McIntosh CTs or the CT Common Facilities, as the case may be, and with their physical orientation and operation. (d) INDEMNIFICATION. Except as provided in subsection (iii) of Section 6(c), LIABILITIES, REMEDIES AND LIMITATIONS OF LIABILITY, hereof, in the event Savannah, in its performance as Agent hereunder, or any Participant in its capacity as such, or GPC in performing services, or acting as agent, for Savannah, incurs any liability to any third party, any reasonable amount paid on account of such liability shall, to the extent such liability would be classified as Operating Costs under the Uniform System of Accounts, be considered an Operating Cost and apportioned among the Participants pursuant to Section 5(h), PAYMENT AND SETTLEMENT OF OPERATING COSTS, hereof, and to the extent such liability would be classified as a Cost of Construction under the Uniform System of Accounts, be considered a Cost of Construction and apportioned among the Participants pursuant to Section 6(k), PAYMENTS MADE DURING CONSTRUCTION, of the Ownership Agreement and Section 5(j), PAYMENT AND SETTLEMENT OF COST OF CONSTRUCTION, hereof, as appropriate. (e) AVAILABILITY OF RECORDS. Savannah, as Agent, will at all times make available to each Participant and its duly authorized agents and representatives, and each Participant and its duly authorized agents and representatives may audit all books and records regarding Cost of Construction, Operating Costs and Fuel Costs sufficiently to allow it to determine that such costs and expenditures attributed to the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common - 35 - Facilities, the CT Fuel Supply or any combination thereof by Savannah, as Agent, pursuant to Sections 5, OPERATION, RIGHTS AND OBLIGATIONS, or 3, AUTHORITY AND RESPONSIBILITY FOR OPERATION, hereof, are appropriate or as needed to satisfy requests from Governmental Authorities. No payment made pursuant to the provisions of such Section 5 or such Section 3 shall constitute a waiver of any right of a Participant to question or contest the correctness of any charge or credit by Savannah, as Agent. (f) RIGHT TO COPIES. Any Participant and any successor Agent hereunder or under the Ownership Agreement shall be entitled to copy (i) any and all contracts, books, records, reports and other documents and papers to which such Participants, their respective officers, employees, duly authorized agents or representatives and consultants or any successor Agent is permitted access, or which Savannah has agreed shall be available for audit, under the terms of this Agreement or the Ownership Agreement, and (ii) any and all planning, licensing, construction, testing, architectural, engineering and design drawings and specifications that have been or shall hereafter be prepared in connection with the Plant McIntosh CTs, the CT Common Facilities, the CT Fuel Supply, or any combination thereof. (g) COMPLIANCE WITH LAWS AND ENVIRONMENTAL MATTERS. (i) The Participants acknowledge and agree that Savannah, as Agent, shall plan, design, license, procure, construct, acquire, complete, test, startup, manage, control, operate, maintain, add to, renew, modify, replace and dispose of the Plant McIntosh CT Project substantially in accordance with all local, state and federal laws, regulations, ordinances or orders now or hereinafter in effect; provided, however, that any failure to substantially comply with such local, state or federal laws, regulations, ordinances or orders shall not be deemed a breach of this Operating Agreement if, and so long as, such failure is (A) caused by a Force Majeure Event, or (B) in accordance with a court order or decree, or a formal agreement with the regulatory agency having jurisdiction over the subject matter of noncompliance or having authority to issue the required approval. (ii) Each Participant shall be solely responsible for providing any Allowances required to operate such Participant's Plant McIntosh CTs in compliance with the Clean Air Act, as amended, and any regulations and requirements arising thereunder, at the operating level utilized by such Participant. "Allowance" shall have the meaning set forth in Title IV of the Clean Air Act. Savannah, as Agent, shall develop procedures mutually agreeable to the Participants for determining the volume of the emissions attributable to each - 36 - Participant for the purpose of determining the Allowances required of each Participant. Each Participant shall provide information reasonably satisfactory to the Agent that such Allowances are or will be available in order to operate such Participant's Plant McIntosh CTs at the actual and anticipated levels of operation. Each Participant, in addition to the Agent, shall be a permittee for any air quality permit(s) issued for such Participant's Plant McIntosh CTs by a Governmental Authority if such Governmental Authority determines that the Participants are required to be joint permittees. (iii) The Agent shall not use, treat, store, dispose, or recycle at the Plant McIntosh CT Project any Environmental Material (as hereinafter defined) in amounts or under circumstances requiring notification of, or a permit, license, or approval from, any Governmental Authority of competent jurisdiction unless such Environmental Material was generated at the Plant McIntosh CT Project or related to the generation of electric power at the Plant McIntosh CT Project. For purposes of this subsection (iii) of Section 6(g), "Environmental Material" shall mean and include asbestos, radioactive material, petroleum, petroleum products, petroleum fractions, petroleum distillates, and any substance, material or waste designated as hazardous under the Comprehensive Environmental Response, Compensation, and Liability Act and amendments thereto, or designated as toxic or hazardous or otherwise regulated under the Toxic Substances Control Act and amendments thereto, the Resource Conservation and Recovery Act and amendments thereto, the Clean Water Act and amendments thereto, the Clean Air Act and amendments thereto, the Georgia Air Quality Act and amendments thereto, the Georgia Hazardous Waste Management Act and amendments thereto, or the Georgia Water Quality Control Act and amendments thereto. (h) SAFETY. The Participants acknowledge and agree that in the management, control, operation, maintenance, renewal, addition, replacement, modification or disposal of the Plant McIntosh CT Project pursuant to this Agreement, Savannah shall at all times take all reasonable precautions for the safety of employees on the work site and of the public, and shall comply with all applicable provisions of federal, state, and municipal safety laws and building and construction codes, including, without limitation, all regulations of the Occupational Safety and Health Administration. The requirements of this paragraph shall be for the sole benefit of the Participants only and shall not create or impose any standard of care or duty to any third party or to any employee or subcontractor's employee or to the public, beyond the duty incumbent upon Savannah which would exist - 37 - under applicable law without reference to any term or provision of this Agreement. (i) MANAGEMENT AND OPERATING AUDITS. Each Participant shall have the right from time to time to conduct management and operating audits, at its own cost, of Savannah's performance as Agent hereunder, either by its own officers and employees or through its duly authorized agents or representatives. Savannah shall cooperate with each Participant in the conducting of any such audit and, subject to the applicable regulations of any Governmental Authority having jurisdiction, give each Participant reasonable access to all contracts, records, and other documents relating to the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities, the CT Fuel Supply or any combination thereof. (j) ON-SITE OBSERVATION AND INSPECTION. (i) Each Participant shall be entitled to have a reasonable number of Site Representatives at the Plant McIntosh CT Project, on a full or part time basis (whether on site or off site), as determined by the Participant. Reasonable office space and facilities shall be made available to such Site Representatives and the Participant represented by such Site Representatives shall be solely responsible for the Operating Costs and Cost of Construction, if construction of such office space is required, for such office space. Each Site Representative shall have the right to review expenditures, audit records, inspect equipment, advise on repairs required for equipment, review the progress of outages, review maintenance and operating practices and otherwise observe all activities respecting the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities and the CT Fuel Supply. (ii) Each Participant shall also be entitled to have its employees and other authorized representatives, including, without limitation, outside consultants, visit the Plant McIntosh CT Project site at reasonable times to observe and inspect the Plant McIntosh CTs (other than the Savannah Plant McIntosh CTs), the CT Common Facilities and the CT Fuel Supply and the activities by Savannah, as Agent; provided, however, that such employees and representatives shall be subject to, and required to conduct themselves in accordance with, the directives of Savannah's senior site official to the end that their on-site activities shall not interfere with Savannah's performance of its obligations as Agent hereunder and under the Ownership Agreement. - 38 - (k) PLANT TOURS. Upon prior approval of Savannah (which approval shall not be unreasonably withheld), any Participant may schedule plant tours and visits (for individuals other than the Site Representatives) at the Plant McIntosh CT Project, subject to the rules and regulations of Governmental Authorities. 7. ASSIGNMENT AND TERMINATION. (a) LIMITATION ON ASSIGNABILITY. If, pursuant to the Ownership Agreement, any Participant makes a sale, transfer or assignment of all or any portion of its ownership or leasehold interests in the Plant McIntosh CT Project (other than solely as security for indebtedness or to facilitate the financing of pollution control or solid waste disposal facilities), such Participant shall also assign this Agreement pro tanto, and shall cause the transferee to assume to the same extent the rights and obligations of such Participant hereunder; provided, however, that Savannah shall not assign its responsibilities as Agent hereunder without the prior written approval of the Participants which shall not be unreasonably withheld. No other assignment of this Agreement shall be made except in connection with a sale, transfer or assignment of the assignor's interest in the Plant McIntosh CT Project pursuant to the Ownership Agreement. Any attempted or purported assignment of this Agreement not in compliance with this Section 7(a) shall be null and void and of no force or effect whatsoever. (b) TERM. Subject to the provisions of Section 8, CONDITIONS PRECEDENT TO EXECUTION AND DELIVERY, and Section 9, CONDITIONS PRECEDENT TO CLOSING, of the Ownership Agreement, this Agreement shall become effective upon the Execution and Delivery of the Lease pursuant to Section 4(c), EXECUTION AND DELIVERY, of the Ownership Agreement and shall remain in effect until final retirement and decommissioning of the Plant McIntosh CT Project. Upon termination of this Agreement in connection with the retirement and decommissioning of the Plant McIntosh CT Project, Savannah, as Agent, shall retain such powers hereunder as shall be necessary in connection with the decommissioning of the property included in the Plant McIntosh CT Project at the time of such termination, and the respective rights and obligations of the Participants hereunder shall continue with respect to any action taken hereunder in connection with such decommissioning, and for all necessary expenses incurred in connection with such decommissioning. - 39 - 8. GENERAL. (a) GOVERNING LAW. The validity, interpretation and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Georgia. (b) NO DELAY. No disagreement or dispute of any kind between or among any of the Participants concerning any matter, including, without limitation, the amount of any payment due from any Participant or the correctness of any charge made to any Participant, shall permit such Participant to delay or withhold any payment pursuant to this Agreement. (c) NOTICE. (i) Except as otherwise provided in Sections 5(i), OPERATING ACCOUNT, and 5(k), CAPITAL ACCOUNT, hereof, any notice, request, consent or other communication permitted or required by this Agreement shall be in writing. All notices pertaining to or affecting the provisions of this Agreement shall be deemed given when deposited in the United States Mail and sent by registered or certified mail to the Parties at the following addresses: GPC: Georgia Power Company 333 Piedmont Avenue Atlanta, Georgia 30308 Attention: Senior Vice President - Bulk Power Markets Telephone Number: (404) 526-6599 Telecopy Number: (404) 526-7407 Savannah (in its capacity as a Participant and as Agent): Savannah Electric and Power Company 600 East Bay Street Savannah, Georgia 31402 Attention: Vice President - Operations Telephone Number: (912) 238-2250 Telecopy Number: (912) 944-1378 (ii) Any Party shall be entitled to specify a different officer or address upon notice in writing to the other Parties. - 40 - (d) SECTION HEADINGS NOT TO AFFECT MEANING. The descriptive headings of the various sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. (e) NO PARTNERSHIP. Notwithstanding any provision of this Agreement, none of the Parties intend to create hereby any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit either among themselves or with any one or more of the Participants. (f) AMENDMENTS. This Agreement may be amended by and only by a written instrument duly executed by each of the Parties. (g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon each of the Parties and their respective successors and upon their assigns pursuant to the provisions of Section 7(a), LIMITATION ON ASSIGNABILITY, hereof. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies hereunder, except that any transferee of an ownership or an ownership and leasehold interest in the Plant McIntosh CT Project or any portion or portions thereof, from any Participant in accordance with the Ownership Agreement and pursuant to an agreement under which the other Participants have been made third-party beneficiaries of such transferee's obligations thereunder shall be a third-party beneficiary of such other Participants' respective obligations hereunder and shall be deemed a Participant for all purposes of this Agreement. (h) COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (i) TIME IS OF THE ESSENCE. Time is of the essence of this Agreement. (j) FURTHER ASSURANCES. From time to time after the date hereof, each Party will execute and deliver such instruments of conveyance and other documents, upon the request of another Party, as may be necessary or appropriate to carry out the intent of this Agreement. (k) COMPUTATION OF PERCENTAGE UNDIVIDED OWNERSHIP INTEREST. Notwithstanding any other provision of this Agreement, whenever, pursuant to any provision of this Agreement, any action is required to be agreed to or taken by any one or more of the Participants hereunder (other than any action to be taken by Savannah in its capacity as Agent hereunder), (i) only those Participants not in default in the payment of any amounts - 41 - (together with interest, if appropriate) required under any provisions of this Agreement or the Ownership Agreement at the time such action is to be agreed to or taken shall have the right to participate in such agreement or the taking of such action, and (ii) the computation of the aggregate Pro Forma Ownership Interests in the Plant McIntosh CT Project of the Participants agreeing to or taking any such actions shall be based solely upon the Pro Forma Ownership Interests in the Plant McIntosh CT Project of the Participants not so in default. (l) SUCCESSOR AGENT. In the event that Savannah (or any successor Agent) is removed as Agent for the Participants hereunder or under the Ownership Agreement, or in the event that Savannah (with prior written approval from the Participants which approval shall not be unreasonably withheld) assigns its responsibilities as Agent, any successor Agent for the Participants as contemplated hereby shall exercise all of the rights and powers and shall be subject to all of the duties and obligations of Savannah, as Agent, hereunder or under the Ownership Agreement and shall be subject to removal by the Participants in the same manner as Savannah, and Savannah shall take all action and execute (and file where appropriate) all documents and instruments which shall be reasonably requested by the successor Agent to effect the transfer to such replacement or successor Agent of such rights, powers, duties and obligations, including, but not limited to, taking such actions and executing such documents and instruments necessary to enable the successor Agent to operate and maintain those facilities and equipment of Plant McIntosh owned by Savannah which provide support services to the Plant McIntosh CT Project. (m) SEVERAL AGREEMENTS. The agreements and obligations of the Participants set forth in this Agreement shall be the several, and not joint, agreements and obligations of the Participants. (n) SPECIAL PROVISIONS RELATING TO THE CT COMMON FACILITIES. (i) The CT Common Facilities shall be used for the mutual benefit and enjoyment of the Participants and in such a manner as will not unreasonably interfere with the use, benefit and enjoyment of any Participant. No area of the CT Common Facilities may be used exclusively by less than all the Participants without the approval of all Participants; provided, however, that if such use is essential to the operation of any of the Plant McIntosh CTs, such approval will not be unreasonably withheld. (ii) For purposes of the various provisions of this Agreement and of the Ownership Agreement permitting or requiring the vote, consent, concurrence or approval of the - 42 - Participants owning a designated percentage undivided ownership interest in the Plant McIntosh CT Project, the Plant McIntosh CTs or CT Common Facilities, a Participant's percentage undivided ownership interest in the Plant McIntosh CT Project, the Plant McIntosh CTs or the CT Common Facilities at any particular time shall be deemed to be equivalent to that Participant's Pro Forma Ownership Interest at such time. (o) CONSTRUCTION OF "INCLUDING". Wherever the term "including" is used in this Agreement such term shall not be construed as limiting the generality of any statement, clause, phrase or term and shall not be deemed to exclude any person or thing otherwise within the meaning of the statement, clause, phrase or term which it modifies. (p) EQUAL EMPLOYMENT OPPORTUNITY AND CIVIL RIGHTS. Savannah, as Agent, shall conform to the requirements of the Equal Employment Opportunity clause in Section 202, Paragraphs 1 through 7 of Executive Order 11246, as amended, and applicable portions of Executive Orders 11701 and 11758, relative to Equal Employment Opportunity and the Implementing Rules and Regulations of the Office of Federal Contract Compliance Programs. (q) THE PLANT MCINTOSH CT UNITS. In the event that at any time the same party shall not serve as Agent with respect to all the Plant McIntosh CTs, the Participants mutually agree (and agree to exercise their reasonable best efforts to obtain the agreement of any other Agent), if any or more than one of them is an Agent with respect to any of the Plant McIntosh CTs, to exercise the rights, powers, duties and obligations of an Agent hereunder and under the Ownership Agreement in such a manner as will not unreasonably interfere with the rights of any Participant under this Agreement or the Ownership Agreement. [The remainder of this page is intentionally left blank.] - 43 - IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement under seal as of the date first above written. Signed, sealed and GEORGIA POWER COMPANY, as a delivered in the Participant presence of: By:_________________________ _____________________________ Attest:_____________________ _____________________________ Notary Public (CORPORATE SEAL) Signed, sealed and SAVANNAH ELECTRIC AND POWER delivered in the COMPANY, as Agent and as a presence of: Participant By:__________________________ _____________________________ Attest:______________________ _____________________________ Notary Public (CORPORATE SEAL) - 44 - EX-10.A59 10 EXHIBIT 10(A)59 - PWR PURCH AGMT-GPC & FPC-DTD 12/3/93 Exhibit 10(a)59 POWER PURCHASE AGREEMENT between GEORGIA POWER COMPANY and FLORIDA POWER CORPORATION Dated as of December 3, 1993 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS 1.1 Certain Definitions . . . . . . . . . . . . . . . . 2 1.2 Interpretation . . . . . . . . . . . . . . . . . . 7 ARTICLE 2 TERM 2.1 Term . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 3 SYSTEM PEAKING CAPACITY 3.1 Guaranteed System Peaking Capacity . . . . . . . . 8 3.2 Capacity to be Purchased and Sold . . . . . . . . . 9 3.3 Advancement Option. . . . . . . . . . . . . . . . . 9 3.4 Termination Options. . . . . . . . . . . . . . . . 10 3.5 Calculation of Monthly Capacity Payments . . . . . 12 ARTICLE 4 ENERGY AVAILABILITY 4.1 Energy . . . . . . . . . . . . . . . . . . . . . . 12 4.2 Scheduling of Energy . . . . . . . . . . . . . . . 13 4.3 Availability of Committed System Peaking Capacity . 13 4.4 Interconnection Points . . . . . . . . . . . . . . 13 4.5 Metering . . . . . . . . . . . . . . . . . . . . . 13 4.6 Calculation of Monthly Energy Payments . . . . . . 14 ARTICLE 5 BILLING AND COLLECTIONS 5.1 Capacity and Energy Billing and Payment . . . . . . 14 5.2 Billing Disputes and Final Accounting . . . . . . . 15 5.3 Interest . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 6 OPERATION AND MAINTENANCE 6.1 General Standards . . . . . . . . . . . . . . . . . 16 6.2 Standard of Performance of Obligations . . . . . . 16 6.3 Establishment of Operating Committee . . . . . . . 17 6.4 Responsibilities of the Peaking Capacity Operating Committee . . . . . . . . . . . . . . . . . . . . . 17 6.5 Peaking Capacity Operating Committee Meetings . . . 18 ARTICLE 7 FORCE MAJEURE 7.1 Definition of Force Majeure Event . . . . . . . . . 19 7.2 No Breach or Liability . . . . . . . . . . . . . . 19 7.3 Mitigation . . . . . . . . . . . . . . . . . . . . 20 -i- 7.4 Suspension of Performance . . . . . . . . . . . . . 20 7.5 Extended Force Majeure Events . . . . . . . . . . . 21 7.6 Capacity and Energy Payments during Force Majeure Events . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE 8 INABILITY TO MEET LEGAL REQUIREMENTS 8.1 Cure Period and Default. . . . . . . . . . . . . . 21 8.2 Mitigation. . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 9 CHANGES TO LEGAL REQUIREMENTS 9.1 Changes to Legal Requirements . . . . . . . . . . . 23 ARTICLE 10 REGULATORY APPROVALS 10.1 GPSC Approval . . . . . . . . . . . . . . . . . . . 24 10.2 FERC Approval . . . . . . . . . . . . . . . . . . . 26 ARTICLE 11 DEFAULT AND REMEDIES 11.1 Default by Seller . . . . . . . . . . . . . . . . . 28 11.2 Default by Buyer . . . . . . . . . . . . . . . . . 31 11.3 Remedies . . . . . . . . . . . . . . . . . . . . . 34 11.4 Suspension of Performance . . . . . . . . . . . . . 34 ARTICLE 12 REPRESENTATIONS, WARRANTIES AND COVENANTS 12.1 Representations, Warranties and Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . 35 12.2 Representations and Warranties of Buyer . . . . . . 37 ARTICLE 13 MISCELLANEOUS PROVISIONS 13.1 Interrelationship with Interchange Contract . . . . 39 13.2 Assignment and Assumption of Obligations . . . . . 40 13.3 No Consequential Damages . . . . . . . . . . . . . 40 13.4 Amendments . . . . . . . . . . . . . . . . . . . . 41 13.5 Binding Effect . . . . . . . . . . . . . . . . . . 41 13.6 Counterparts . . . . . . . . . . . . . . . . . . . 41 13.7 Notices . . . . . . . . . . . . . . . . . . . . . . 41 13.8 Entire Agreement . . . . . . . . . . . . . . . . . 42 13.9 Governing Law . . . . . . . . . . . . . . . . . . . 42 13.10 Waiver . . . . . . . . . . . . . . . . . . . . 43 13.11 Headings . . . . . . . . . . . . . . . . . . . 43 13.12 Third Parties . . . . . . . . . . . . . . . . 43 -ii- 13.13 Agency . . . . . . . . . . . . . . . . . . . . 44 13.14 Severability. . . . . . . . . . . . . . . . . 44 -iii- EXHIBITS AND SCHEDULES EXHIBIT A SYSTEM PEAKING UNITS EXHIBIT B DISPATCH CHARACTERISTICS OF SYSTEM PEAKING CAPACITY SCHEDULE A MONTHLY CAPACITY PAYMENT CALCULATION SCHEDULE B MONTHLY ENERGY PAYMENT CALCULATION POWER PURCHASE AGREEMENT THIS POWER PURCHASE AGREEMENT ("Agreement"), dated as of December 3, 1993, between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("Buyer") and FLORIDA POWER CORPORATION, a corporation organized and existing under the laws of the State of Florida ("Seller"). W I T N E S E T H: WHEREAS, Buyer is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the generation, transmission, sale and distribution of electricity; WHEREAS, Seller is authorized by its Certificate of Incorporation and by the State of Florida to engage in the generation, transmission, sale and distribution of electricity; WHEREAS, Buyer and Seller, together with Alabama Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company and Southern Company Services, Inc. are parties to an Interchange Contract dated December 22, 1988, as amended ("Interchange Contract"); and WHEREAS, Buyer desires to purchase and Seller desires to sell peaking capacity and associated energy from peaking units on Seller's electric system in designated amounts during the periods specified herein; NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Buyer and Seller each intending to be legally bound, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 Certain Definitions. In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below: 1.1.1 "Actual Demand Availability" - has the meaning defined in Schedule A attached hereto and by this reference incorporated herein. 1.1.2 "Affiliate" - of any specified entity means any other entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified entity. For purposes of this definition, "control" when used with respect to any entity means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract -2- or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 1.1.3 "Commencement of Service Date" - means June 1, 1996 unless Buyer exercises its advancement option pursuant to Section 3.3, in which case the Commencement of Service Date shall be June 1, 1995. 1.1.4 "Committed System Peaking Capacity" - means the amount of Guaranteed System Peaking Capacity which Buyer agrees to purchase during a Summer Period pursuant to Sections 3.2 and 3.3. 1.1.5 "Cumulative Escalation for Fixed O&M" - has the meaning defined in Schedule A. 1.1.6 "Day" - means a calendar day. 1.1.7 "Event of Default" - has the meanings ascribed to it in Section 11.1 for Seller and Section 11.2 for Buyer. 1.1.8 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof as relevant to this Agreement. -3- 1.1.9 "Force Majeure Event" - has the meaning defined in Section 7.1. 1.1.10 "GPSC" - means the Georgia Public Service Commission or any Governmental Authority succeeding to the powers and functions thereof as relevant to this Agreement. 1.1.11 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagor. 1.1.12 "Guaranteed System Peaking Capacity" - means the capacity of the System Peaking Units that Seller guarantees will be available to Buyer at a demand availability rate of 98% at those times and in those amounts specified in Section 3.1. 1.1.13 "Interconnection Points" - means one or more of the points of interconnection specified in Section 4.4 of this Agreement for the delivery to Buyer of the energy associated with the Committed System Peaking Capacity. 1.1.14 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order -4- or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the execution of this Agreement or anytime thereafter during the Term. 1.1.15 "Month" - means a calendar month, commencing at the beginning of the first Day of such calendar month. "Monthly" - - has a meaning correlative to that of Month. 1.1.16 "Monthly Capacity Payment" - for a particular Month of a Summer Period, means the Monthly amount to be paid by Buyer to Seller for Buyer's purchase of Committed System Peaking Capacity, as the same is calculated by Seller as provided in Section 3.5 and Schedule A. 1.1.17 "Monthly Energy Payment" - for a particular Month of a Summer Period, means the Monthly amount to be paid by Buyer to Seller for Buyer's purchase of energy associated with the Committed System Peaking Capacity, as the same is calculated by Seller as provided in Section 4.6 and Schedule B attached hereto and by this reference incorporated herein. 1.1.18 "Monthly Maximum Capacity Payment" - has the meaning defined in Schedule A. -5- 1.1.19 "Party" - means either Buyer or Seller and their respective successors and assigns. 1.1.20 "Penalty Interest Rate" - means one hundred and five percent (105%) of the prime rate quoted on the date a payment is due by Chemical Bank in New York, New York. 1.1.21 "Prudent Utility Practices" - means, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement. 1.1.22 "Summer Period" - means the Months of June, July, August and September in each of the Years during the Term -6- in which Buyer purchases Committed System Peaking Capacity from Seller. 1.1.23 "System Peaking Units" - means those certain combustion turbine electric generating units referred to on Exhibit A attached hereto and by this reference incorporated herein. 1.1.24 "Term" - means the term of this Agreement as specified in Article 2. 1.1.25 "Termination of Service Date" - means September 30, 1999 unless this Agreement is earlier terminated in accordance with its terms. 1.1.26 "Year" - means a calendar year, commencing on January 1 of a year and ending on December 31 of that year. 1.2 Interpretation. In this Agreement and the Exhibits and the Schedules attached hereto, unless the context otherwise requires: 1.2.1 words generally importing the singular shall include the plural and vice versa; 1.2.2 references to "entity" include, without limitation, corporations, partnerships, associations and Governmental Authorities. -7- ARTICLE 2 TERM 2.1 Term. This Agreement shall become effective when executed by both Buyer and Seller and shall remain in full force and effect until the Termination of Service Date. Applicable provisions of this Agreement shall continue in effect after termination of this Agreement to the extent necessary to provide for final billings and adjustments. ARTICLE 3 SYSTEM PEAKING CAPACITY 3.1 Guaranteed System Peaking Capacity. The Guaranteed System Peaking Capacity shall be as follows during the periods indicated: Period Guaranteed System Peaking Capacity June 1, 1995 - September 30, 1995 300 MW June 1, 1996 - September 30, 1996 500 MW June 1, 1997 - September 30, 1997 400 MW June 1, 1998 - September 30, 1998 200 MW June 1, 1999 - September 30, 1999 200 MW -8- 3.2 Capacity to be Purchased and Sold. 3.2.1 Except as provided in Section 3.3, Buyer shall provide Seller written notice by May 31 of the Year preceding each Summer Period of the amount of Guaranteed System Peaking Capacity which Buyer desires to purchase from Seller during such Summer Period. The amount of Guaranteed System Peaking Capacity which Buyer requests be made available to Buyer during a Summer Period shall be referred to herein as "Committed System Peaking Capacity". 3.2.2 Subject to Buyer's right to terminate this Agreement pursuant to Section 3.4, Buyer agrees that the minimum amounts of Committed System Peaking Capacity shall be 400 MW in each Month of the 1996 Summer Period, 300 MW in each Month of the 1997 Summer Period, 150 MW in each Month of the 1998 Summer Period and 150 MW in each Month of the 1999 Summer Period. 3.2.3 Seller agrees to sell and Buyer agrees to purchase the Committed System Peaking Capacity and any energy associated therewith which shall be delivered to and measured at one of more of the Interconnection Points. 3.3 Advancement Option. Buyer shall have the option, exercisable in its sole discretion, to commence taking Guaranteed System Peaking Capacity in an amount up to 300 MW, for the period June 1, 1995 through September 30, 1995, upon advance written notice to Seller by December 31, 1994 of the amount of Committed -9- System Peaking Capacity that Buyer agrees to purchase during such period. 3.4 Termination Options. 3.4.1 Buyer may terminate this Agreement at any time prior to December 31, 1994 upon prior written notice to Seller and payment to Seller of a termination fee in the amount of $100,000, and neither Buyer nor Seller shall have any further obligations to the other hereunder upon such termination. 3.4.2 Between January 1, 1995 and May 31, 1996 Buyer may cancel its obligation to purchase Committed System Peaking Capacity in the 1997, 1998 and 1999 Summer Periods upon prior written notice to Seller and payment to Seller of a termination fee in an amount of the sum of (i) the product of .50 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1997 Summer Period (assuming Committed System Peaking Capacity is 400 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation notice to Seller; and Actual Demand Availability is 1.0), plus (ii) the product of .25 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1998 Summer Period (assuming Committed System Peaking Capacity is 200 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation -10- notice to Seller; and Actual Demand Availability is 1.0), plus (iii) the product of .25 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1999 Summer Period (assuming Committed System Peaking Capacity is 200 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation notice to Seller; and Actual Demand Availability is 1.0). 3.4.3 Between June 1, 1996 and May 31, 1997 Buyer may cancel its obligation to purchase Committed System Peaking Capacity in the 1998 and 1999 Summer Periods upon prior written notice to Seller and payment to Seller of a termination fee in the amount of the sum of (i) the product of .50 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1998 Summer Period (assuming Committed System Peaking Capacity is 200 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation notice to Seller; and Actual Demand Availability is 1.0), plus (ii) the product of .25 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1999 Summer Period (assuming Committed System Peaking Capacity is 200 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation notice to Seller; and Actual Demand Availability is 1.0). 3.4.4 Between June 1, 1997 and May 31, 1998 Buyer may cancel its obligation to purchase Committed System Peaking Capacity in the 1999 Summer Period upon prior written notice to -11- Seller and payment to Seller of a termination fee in the amount of .50 times the sum of the Monthly Maximum Capacity Payments for each Month of the 1999 Summer Period (assuming Committed System Peaking Capacity is 200 MW; Cumulative Escalation for Fixed O&M has a maximum value as of January 1 of the Year in which Buyer gives its cancellation notice to Seller; and Actual Demand Availability is 1.0). 3.5 Calculation of Monthly Capacity Payments. Buyer shall pay Seller for each Month of a Summer Period a Monthly Capacity Payment which shall be calculated in accordance with Schedule A. ARTICLE 4 ENERGY AVAILABILITY 4.1 Energy. During a Summer Period, Buyer will be entitled to schedule energy in amounts up to the Committed System Peaking Capacity for such Summer Period on an hourly basis subject only to the dispatch restrictions set forth on Exhibit B attached hereto and by this reference incorporated herein. All scheduling times specified herein are based on established practices and procedures between the Parties and are subject to change upon mutual agreement of the Parties. All times specified herein shall be prevailing Central Time unless otherwise agreed. -12- 4.2 Scheduling of Energy. Buyer shall provide Seller on or before 1:30 p.m. of the Friday prior to the commencement of each week during a Summer Period, an estimated schedule of capacity usage for each hour of each Day of the following week. 4.3 Availability of Committed System Peaking Capacity. Committed System Peaking Capacity shall be available to Buyer for scheduling and dispatch during a Summer Period at a demand availability rate of 98% twenty-four (24) hours a Day and seven (7) Days a week. 4.4 Interconnection Points. Seller shall deliver the energy scheduled by Buyer hereunder to one or more of the points of delivery listed on that certain Exhibit A to the Interchange Contract or such other delivery points on the Buyer's transmission system as Seller may arrange from time to time with the prior consent of Buyer, which such consent shall not be unreasonably withheld. 4.5 Metering. Metering of Committed System Peaking Capacity and energy associated therewith shall be done in accordance with Article VI of the Interchange Contract, Delivery Points and Metering. -13- 4.6 Calculation of Monthly Energy Payments. Buyer shall pay Seller for each Month of a Summer Period a Monthly Energy Payment which shall be calculated in accordance with Schedule B. ARTICLE 5 BILLING AND COLLECTIONS 5.1 Capacity and Energy Billing and Payment. 5.1.1 By the (10th) tenth Day after each Month in a Summer Period, Seller shall send Buyer an invoice stating the Monthly Capacity Payment and Monthly Energy Payment for the immediately previous Month. Each Monthly invoice shall contain a statement explaining in reasonable detail how the invoice was calculated pursuant to Sections 3.5 and 4.6. 5.1.2 All such invoices of capacity payments and energy payments shall be due and payable by Buyer on or before the twentieth (20th) Day after the postmark date of such invoice. If any such twentieth (20th) Day is not a banking Day in either Georgia or Florida, then payment shall be due on the next succeeding common banking Day. Buyer shall make payment to Seller in accordance with such invoices on or before the date due in immediately available funds, through wire transfer of funds to an account designated by Seller, or other means acceptable to Seller. Remittance received by mail will be accepted without interest charges if such payment is postmarked on or before the due date. -14- 5.2 Billing Disputes and Final Accounting. If Buyer reasonably questions or contests the amount of any payment claimed by Seller to be due pursuant to this Agreement, Buyer shall provide Seller with written notice of the disputed amount. Buyer shall make payment to Seller of amounts not in dispute, but may withhold disputed amounts until after the settlement of such question or contest. Seller shall promptly review the amount of any payment disputed by Buyer and shall notify Buyer of the amount of any error and the amount of any payment that Buyer is required to make in respect of such alleged error. Not later than the twentieth (20th) Day after a billing dispute is resolved and receipt by Buyer of notice from Seller as to the amount of any payment that Buyer is required to make, Buyer shall make payment to Seller in immediately available funds. Payments made by the Buyer under this Section 5.2 shall include interest from the date the original payment was due until the date such payment together with interest is made, which interest shall accrue in simple interest terms at the prime rate quoted on the date a payment is due by Chemical Bank in New York, New York. Buyer shall have until the end of one (1) year after its receipt of any invoice to question or contest the correctness of any charge or credit made to Buyer on such invoice. Seller shall make available to Buyer at Seller's offices, after reasonable notice, such books and records as were necessary for Seller to calculate the Monthly Capacity Payment and the Monthly Energy Payment shown on Seller's invoice to allow Buyer to verify the -15- accuracy of the amounts billed to Buyer on Seller's invoice. If an invoice has not been questioned or contested by Buyer during this one (1) year period, such invoice shall become final for all purposes and no longer subject to adjustment. 5.3 Interest. If Buyer or Seller does not make a payment required by this Agreement when due, then interest shall be added to the overdue payment from the date such overdue payment was due until such overdue payment together with interest is paid, which interest shall accrue in simple interest terms per annum at the Penalty Interest Rate. ARTICLE 6 OPERATION AND MAINTENANCE 6.1 General Standards. Seller shall construct, own, operate and maintain the System Peaking Units and all components of Seller's transmission system which directly affect Seller's obligations to supply Committed System Peaking Capacity and to deliver associated energy hereunder in a manner consistent with Prudent Utility Practices and in accordance with operating and interconnection procedures in existence from time to time between Buyer and Seller. 6.2 Standard of Performance of Obligations. In connection with the construction, operation and maintenance of the System -16- Peaking Units and those components of Seller's transmission system which directly affect Seller's obligations to supply Committed System Peaking Capacity and to deliver associated energy hereunder, Seller's standard of management and performance during the Term shall be at least equal to the standard which it would use if those System Peaking Units and components were solely for the benefit of its own territorial customers. 6.3 Establishment of Operating Committee. Buyer and Seller shall each appoint one representative ("Operating Representative") to act for it in matters pertaining to detailed operating arrangements for delivery of power hereunder, and the Buyer and Seller may each appoint an alternate to act for it in the absence of its Operating Representative. The two Operating Representatives, or their alternates, comprise and shall be referred to as the "Peaking Capacity Operating Committee". Evidence of such appointment shall be given by written notice to the other Party, and such appointments may be changed at any time by similar notice. 6.4 Responsibilities of the Peaking Capacity Operating Committee. The Peaking Capacity Operating Committee shall be responsible for the following: (1) Establishment of procedures for communications with respect to energy availability and scheduling under Article 4. -17- (2) Establishment of arrangements for metering, telemetering, computer data link, telecommunications, data acquisition, etc., associated with the supply of capacity and delivery of energy hereunder. (3) Establishment of control and operating procedures. (4) Establishment of ramping levels and procedures for the energy scheduled hereunder. (5) Such other duties as may be conferred upon it by mutual agreement of Buyer and Seller. Both Buyer and Seller shall cooperate in providing to the Peaking Capacity Operating Committee all information required in the performance of its duties. If the Peaking Capacity Operating Committee is unable to agree on any matter falling under its jurisdiction, such matter shall be referred by the representatives to their principals for decision. Failure of the principals to agree on any matter referred to them shall not constitute a basis for termination of this Agreement. All decisions and agreements made by the Peaking Capacity Operating Committee with respect to matters falling under its jurisdiction shall be evidenced in writing. 6.5 Peaking Capacity Operating Committee Meetings. The Peaking Capacity Operating Committee shall hold an annual meeting at a time and place agreed upon by its members and review the duties set forth herein. When requested by either Buyer or Seller, the Peaking Capacity Operating Committee shall also meet at the earliest opportunity for consideration of matters under its jurisdiction. -18- ARTICLE 7 FORCE MAJEURE 7.1 Definition of Force Majeure Event. For the purposes of this Agreement, a "Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set of circumstances that is unforeseeable and beyond the reasonable control of such Party, including without limitation, flood, ice, earthquake, windstorm or eruption; fire or explosion; invasion, civil war, strike, commotion or insurrection; sabotage or vandalism; military or usurped power; or act of God or of a public enemy; provided, however, in no event shall the inability to meet a Legal Requirement constitute a Force Majeure Event. 7.2 No Breach or Liability. 7.2.1 Seller shall not be responsible or liable for or deemed in breach or default hereof because of any delay in performance of, or inability to perform, its obligations hereunder, including, without limitation, Seller's obligations under Articles 3 and 4 hereof, due to or resulting from a Force Majeure Event affecting Seller or to any act or omission of Buyer. 7.2.2 Buyer shall not be responsible or liable for or deemed in breach or default hereof because of any delay in performance of, or inability to perform, its obligations hereunder due to or resulting from a Force Majeure Event -19- affecting Buyer or to any act or omission of Seller; provided, however, that Buyer shall not be relieved of its obligation to pay for Committed System Peaking Capacity and associated energy actually received by Buyer hereunder. 7.3 Mitigation. Following the occurrence of a Force Majeure Event, the affected Party shall: 7.3.1 give the other Party notice thereof, followed by written notice if the first notice is not written, as promptly as practicable after such Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event; 7.3.2 use its reasonable best efforts to remedy its inability to perform as soon as practicable, provided that neither Party shall be required to settle a strike on terms which in the sole judgment of the affected Party are contrary to its interests; and 7.3.3 when it is able to resume performance of its obligations under this Agreement, give the other Party written notice to that effect. 7.4 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no larger duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term. -20- 7.5 Extended Force Majeure Events. If any Force Majeure Event delays a Party's performance for a time period greater than sixty (60) Days, the Party not delayed by such Force Majeure Event may terminate this Agreement, without further obligation, or extend such period at its sole discretion if the Party delayed by such Force Majeure Event is exercising due diligence in its efforts to cure the Force Majeure Event. 7.6 Capacity and Energy Payments during Force Majeure Events. Buyer shall be relieved of its obligation to make Monthly Capacity Payments and Monthly Energy Payments during the suspension of performance due to or resulting from a Force Majeure Event affecting Seller to the extent capacity and energy are unavailable to Buyer during such Force Majeure Event; provided, however, that Buyer shall not be relieved of its obligation to pay Seller for Committed System Peaking Capacity and associated energy actually received by Buyer prior to and during such Force Majeure Event. ARTICLE 8 INABILITY TO MEET LEGAL REQUIREMENTS 8.1 Cure Period and Default. In the event Seller is unable to perform its obligations hereunder due to its inability to meet a Legal Requirement, Seller shall be excused from performance of its obligation to supply Committed System Peaking Capacity and to -21- deliver associated energy to Buyer through the Summer Period which commences after the effectiveness of the Legal Requirement prohibiting performance. Notwithstanding the foregoing sentence, if within one (1) year of the effectiveness of the Legal Requirement which renders Seller unable to perform its obligations hereunder Seller is unable to demonstrate to the reasonable satisfaction of Buyer that Seller is able to perform its obligations for the remainder of the Term, Buyer may declare Seller in default hereunder and pursue the remedies set forth in Section 11.3. Buyer shall be relieved of its obligation to make Monthly Capacity Payments and Monthly Energy Payments during the suspension of performance due to Seller's inability to meet a Legal Requirement to the extent capacity and energy are unavailable to Buyer during such suspension of performance; provided that Buyer shall not be relieved of its obligation to pay Seller for Committed System Peaking Capacity and associated energy actually received by Buyer prior to and during such suspension of performance. 8.2 Mitigation. Following the effectiveness of a Legal Requirement which renders Seller unable to perform its obligations hereunder, Seller shall: 8.2.1 give Buyer notice as promptly as practicable after Seller becomes aware that such Legal Requirement will prohibit Seller from performing during the Summer Period following the effectiveness of such Legal Requirement; and -22- 8.2.2 use its reasonable best efforts to remedy its inability to perform as soon as practicable, including, without limitation, the payment of all amounts necessary or appropriate to remedy such inability. ARTICLE 9 CHANGES TO LEGAL REQUIREMENTS 9.1 Changes to Legal Requirements. In the event that after the date of this Agreement there are changes to Legal Requirements, including, without limitation, changes to environmental laws or regulations, or tax laws or regulations, which cause Seller to incur additional costs in carrying out its obligations under this Agreement, Seller agrees to pay all costs associated with such changes to Legal Requirements and acknowledges that the capacity and energy payments made by Buyer to Seller pursuant to this Agreement shall not be altered as a result of such changes to Legal Requirements. Notwithstanding the foregoing sentence, Buyer agrees that changes to Legal Requirements which result in increases in the fuel prices reported in Platt's Oilgram Price Report (or such other fuel index as may be agreed to by the Parties) shall be paid by Buyer in accordance with the Monthly Energy Payment calculation set forth on Schedule B. -23- ARTICLE 10 REGULATORY APPROVALS 10.1 GPSC Approval. 10.1.1 GPSC approval of this Agreement shall be a condition precedent to Buyer's and Seller's obligations to purchase and sell capacity and energy hereunder. 10.1.2 Buyer shall use its reasonable best efforts to obtain and maintain in effect during the Term an order of the GPSC approving this Agreement and the recovery by Buyer from its customers of all payments required or contemplated to be made to Seller pursuant to Sections 3.5 and 4.6 of this Agreement. Seller agrees to use its reasonable best efforts to assist Buyer in obtaining GPSC approval and to comply with any reasonable request for information of the GPSC pertaining to any aspect of the power purchase; provided, however, that Seller shall have no obligation to supply confidential, proprietary, privileged or commercially sensitive information without assurances reasonably satisfactory to Seller, in its sole discretion, that confidentiality will be protected. 10.1.3 Notwithstanding the foregoing, if the GPSC has not issued a final non-appealable order in form and substance satisfactory to Buyer and Seller approving this Agreement within twelve (12) months after the filing of this Agreement with the GPSC, then either Party may thereafter terminate this Agreement -24- upon prior written notice to the other Party, and neither Party shall have any further liability to the other hereunder. 10.1.4 If at any time after the initial approval of this Agreement and the rates charged hereunder, Buyer, notwithstanding its obligations pursuant to Section 10.1.2, is denied the authorization by the GPSC to recover from its customers any or all of the payments made or contemplated to be made to Seller pursuant to Sections 3.5 and 4.6 due to Buyer's malfeasance or intentional or wilful misconduct, Seller may terminate this Agreement upon prior written notice to Buyer, and neither Party shall have any further liability to the other hereunder. Buyer agrees to use its reasonable best efforts to exhaust all opportunities for administrative and judicial appeal of any such GPSC determination. 10.1.5 If at any time after the initial approval of this Agreement and the rates charged hereunder, Buyer, notwithstanding its obligations pursuant to Section 10.1.2, is denied the authorization by the GPSC to recover from its customers any or all of the payments made or contemplated to be made to the Seller pursuant to Sections 3.5 and 4.6 for any reason other than Buyer's malfeasance or intentional or wilful misconduct, Buyer may, prospectively from the final effective date of such GPSC determination, adjust the payments to be made under this Agreement to the amount which Buyer is authorized to recover from its customers; provided, however, that Seller shall have the right to terminate this Agreement twelve (12) months -25- after the effective date of the GPSC determination and any time thereafter upon prior written notice to Buyer. Buyer agrees to use its reasonable best efforts to exhaust all opportunities for administrative and judicial appeal of any such GPSC determination. 10.2 FERC Approval. 10.2.1 FERC acceptance for filing of this Agreement and authorization for the recovery by Seller of all payments and charges to be made by Buyer under this Agreement, without a refund condition, shall be a condition precedent to Buyer's and Seller's obligations to purchase and sell capacity and energy hereunder. 10.2.2 If Seller fails to tender this Agreement for filing with the FERC within ninety (90) Days after the execution of this Agreement, Seller shall pay Buyer an amount of $45,000 per Day by wire transfer within seventy-two (72) hours after the end of each such Day until this condition has been met. 10.2.3 Seller shall use its reasonable best efforts to obtain an order of the FERC accepting for filing this Agreement and authorizing the recovery by Seller of all payments specified in Sections 3.5 and 4.6 of this Agreement. Buyer agrees to use its reasonable best efforts to assist Seller in obtaining FERC acceptance for filing of this Agreement and the authorization of the rates and charges hereunder. -26- 10.2.4 Notwithstanding the foregoing, if the FERC has not issued a final non-appealable order in form and substance satisfactory to Buyer and Seller accepting for filing this Agreement and authorizing the rates and charges hereunder within twelve (12) months after tender for filing of this Agreement with the FERC, then either Party may thereafter terminate this Agreement upon prior written notice to the other Party, and neither Party shall have any further liability to the other hereunder. 10.2.5 The Parties agree that the results of the formulae provided in Schedules A and B shall constitute the rates to be charged for Committed System Peaking Capacity and associated energy hereunder and are fixed for the Term, subject to change only by FERC under Section 206 of the Federal Power Act. If the FERC seeks to amend the rates for Committed System Peaking Capacity and energy under this Agreement, the Parties intend that the FERC will make any such changes only under the "public interest" standard, as opposed to a "just and reasonable and non-discriminatory" standard. If, after the initial acceptance for filing of this Agreement and the authorization of the rates charged hereunder, FERC issues a rule, regulation, order or other requirement which causes a reduction in the capacity and energy rates charged under this Agreement, Seller agrees to be bound by such reduction and agrees to prospectively adjust the capacity and energy rates charged under this Agreement -27- accordingly (subject however, to Seller's right to appeal such rule, regulation, order or other requirement). ARTICLE 11 DEFAULT AND REMEDIES 11.1 Default by Seller. The occurrence of any of the following events at any time during the Term, unless caused by an act or omission of Buyer or circumstances on Buyer's system or unless due to or the result of a Force Majeure Event or an excused suspension of performance due to Seller's inability to meet a Legal Requirement pursuant to Section 8.1, shall constitute an Event of Default by Seller: 11.1.1 Seller fails, following a prior request by Buyer, to demonstrate to the reasonable satisfaction of Buyer that Seller's electric system is capable of providing the Committed System Peaking Capacity on any weekday from 12:00 noon until 6:00 p.m. during the fourteen (14) Day period prior to the Commencement of Service Date. If Buyer schedules energy during this fourteen (14) Day period to assure demonstration of the Committed System Peaking Capacity, Buyer shall pay for such test energy at the rate set forth on Schedule B; 11.1.2 Seller fails for a period of five (5) or more consecutive Days, during which time Buyer requests some positive amount of energy for at least one (1) hour of each such Day, to -28- deliver energy in at least one (1) hour of such period in the amount requested by Buyer. 11.1.3 Seller fails to manage, control, operate and maintain the System Peaking Units and all components of Seller's transmission system which directly affect Seller's ability to supply Committed System Peaking Capacity and to deliver associated energy hereunder in accordance with Prudent Utility Practices and the provisions of this Agreement and fails to promptly commence and diligently pursue action to cure such default after receipt of written demand therefor from Buyer; 11.1.4 Seller fails to pay an amount due and payable to Buyer in accordance with Section 10.2.2; 11.1.5 Any representation or warranty made by Seller herein shall prove to be incorrect in any material respect when made, unless (i) the fact, circumstance or condition that is the subject of such representation or warranty is made true within thirty (30) Days after notice thereof has been given to Seller by Buyer and (ii) such cure removes any adverse effect on Buyer of such fact, circumstance or condition being otherwise than as first represented, or unless such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect Buyer; 11.1.6 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or -29- (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Seller under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller or of any substantial part of its affairs; provided, however, that if Seller can demonstrate that the bankruptcy, insolvency or reorganization is not likely to lead to a rejection of this Agreement and Seller can still perform under this Agreement, then such event shall not be deemed an Event of Default; 11.1.7 Seller shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Seller in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Seller or of any substantial part of its property, or (v) make an -30- assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing; provided, however, that if Seller can demonstrate that the bankruptcy, insolvency or reorganization is not likely to lead to a rejection of this Agreement and Seller can still perform under this Agreement, then such event shall not be deemed an Event of Default; and 11.1.8 Seller fails in the performance or observance of any material obligation of Seller under this Agreement, other than those obligations included in this Section 11.1, the occurrence of which default materially and adversely affects the ability of Seller or Buyer to perform its respective obligations under this Agreement and fails to promptly commence and diligently pursue action to cure such default after receipt of written demand therefor from Buyer. 11.2 Default by Buyer. The occurrence of any of the following events at any time during the Term, unless caused by an act or omission of Seller or unless due to or the result of a Force Majeure Event shall constitute an Event of Default by Buyer: 11.2.1 Buyer shall fail to pay pursuant to this Agreement any sum due and payable to Seller hereunder which failure has continued for thirty (30) Days after notice thereof has been given by Seller to Buyer; -31- 11.2.2 Any representation or warranty made by Buyer herein shall prove to be incorrect in any material respect when made, unless (i) the fact, circumstance or condition that is the subject of such representation or warranty is made true within thirty (30) Days after notice thereof has been given to Buyer by Seller and (ii) such cure removes any adverse effect on Seller of such fact, circumstance or condition being otherwise than as first represented, or unless such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect Seller; 11.2.3 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Buyer in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Buyer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Buyer under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Buyer or of any substantial part of its affairs; provided, however, that if Buyer can demonstrate that the bankruptcy, insolvency or reorganization is not likely to lead to a rejection of this Agreement and Buyer can still perform under this Agreement, then such event shall not be deemed an Event of Default; -32- 11.2.4 Buyer shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Buyer in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Buyer or of any substantial part of its property, or (v) make an assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing; provided, however, that if Buyer can demonstrate that the bankruptcy, insolvency or reorganization is not likely to lead to a rejection of this Agreement and Buyer can still perform under this Agreement, then such event shall not be deemed an Event of Default; 11.2.5 Buyer fails in the performance or observance of any material obligation of Buyer under this Agreement, other than those obligations included in this Section 11.2 the occurrence of -33- which default materially and adversely affects the ability of Buyer or Seller to perform its respective obligations under this Agreement and fails to promptly commence and diligently pursue action to cure such default after receipt of written demand therefor from Seller. 11.3 Remedies. If an Event of Default has occurred and is continuing, then the non-defaulting Party may, at its discretion, take either or both of the following actions: (i) proceed by appropriate proceedings, judicial, administrative or otherwise at law, in equity or otherwise, to protect and enforce its rights, to recover any damages to which it may be entitled, and to enforce performance by the defaulting Party, including specific performance of the defaulting Party's obligations hereunder; and (ii) terminate this Agreement by giving written notice thereof to the defaulting Party. 11.4 Suspension of Performance. In addition to the remedies set forth above, whenever an Event of Default shall have occurred and is continuing, the non-defaulting Party, to the extent permitted by law, shall be entitled to suspend immediately its performance under this Agreement until such Event of Default is cured; provided, however, that Buyer shall not be relieved of its obligation to pay Seller for Committed System Peaking Capacity and associated energy actually received by Buyer (1) prior to such Event of Default or (2) after such Event of Default if Buyer -34- has not exercised its right to terminate this Agreement as provided in Section 11.3. ARTICLE 12 REPRESENTATIONS, WARRANTIES AND COVENANTS 12.1 Representations, Warranties and Covenants of Seller. Seller hereby makes the following representations and warranties to Buyer: 12.1.1 Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, that it is qualified to do business in the State of Florida and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. 12.1.2 The execution, delivery and performance by the Seller of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval of the Seller's Board of Directors or shareholders. 12.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this -35- Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which the Seller is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing. 12.1.4 This Agreement is the legal, valid and binding obligation of the Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. 12.1.5 There is no pending, or to the knowledge of Seller, threatened action or proceeding affecting Seller before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof. 12.1.6 Seller covenants to Buyer that it will at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon Seller or Buyer by reason of the sale or purchase of Committed System Peaking Capacity and associated energy hereunder. -36- 12.1.7 Seller covenants that as of the Commencement of Service Date and for the Term, Seller shall (i) be in substantial compliance with all Legal Requirements with respect to the construction, ownership, operation and maintenance of the System Peaking Units and all components of Seller's transmission system which directly affect Seller's obligations to supply Committed System Peaking Capacity and associated energy hereunder, including without limitation, all relevant requirements to seek, obtain, maintain, comply with and, as necessary, renew and modify from time to time, any and all applicable certificates, licenses, permits and government approvals and all applicable environmental certificates, licenses, permits and approvals, and (ii) except as provided in Section 9.1, with respect to fuel prices reported in Platt's Oilgram Price Report, pay all costs, expenses, charges and fees in connection therewith. 12.2 Representations and Warranties of Buyer. Buyer hereby makes the following representations and warranties to Seller: 12.2.1 Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed pursuant to this Agreement. -37- 12.2.2 The execution, delivery and performance by the Buyer of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval of the Buyer's Board of Directors or shareholders. 12.2.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of the compliance with the provisions of this Agreement will not conflict with or constitute a breach of or a default under, any of the terms, conditions, or provisions of any Legal Requirements, the certificate of incorporation or by-laws of Buyer, or any contractual limitation, corporate restriction or outstanding trust indenture, deed or trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Buyer is a party or by which it or any of its property is bound or result in a breach of or default under any of the foregoing. 12.2.4 This Agreement is the legal, valid and binding obligation of the Buyer enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. 12.2.5 There is no pending, or to the knowledge of Buyer, threatened action or proceeding affecting Buyer before any -38- Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof. ARTICLE 13 MISCELLANEOUS PROVISIONS 13.1 Interrelationship with Interchange Contract. 13.1.1 It is recognized by the Parties that the Interchange Contract as in effect from time to time between the Parties governs the interconnected operations of the Parties necessary for conduct of the transactions contemplated hereunder. To the extent not inconsistent herewith, the Interchange Contract, including any amendments thereto, shall govern the operations of the Parties hereunder. 13.1.2 In the event such Interchange Contract is terminated or cancelled during the Term, the provisions of such Interchange Contract which are essential for the continuation of transactions hereunder shall survive the termination or cancellation of such Interchange Contract. 13.1.3 The Parties acknowledge and agree that the following provisions of the Interchange Contract are inconsistent with provisions set forth in this Agreement and that the terms and conditions of this Agreement which address the topics of the listed provisions shall govern the operation of the Parties -39- hereunder and that the listed provisions shall not apply to this Agreement: Article IV Services to be Rendered. Article VIII Billing and Payment. Section 10.2 Force Majeure. Section 10.4 Regulation. Section 10.8 Tax Adjustment. 13.2 Assignment and Assumption of Obligations. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party (except that Buyer may assign this Agreement or any portion thereof to any Affiliate of the Buyer without the consent of Seller); but provided, further that: (i) any assignee shall expressly assume assignor's obligations hereunder and (ii) unless expressly approved by the other Party to this Agreement, which approval shall not be unreasonably withheld, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform. 13.3 No Consequential Damages. Notwithstanding any other provision of this Agreement, neither Buyer nor Seller shall be liable to the other for special, indirect, incidental or consequential damages under, arising out of, due to or in connection with its performance or non-performance of this Agreement or any of its obligations herein, whether based on -40- contract, tort (including without limitation negligence), strict liability, warranty or otherwise. 13.4 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of Buyer and Seller, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof. 13.5 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Parties and their respective successors and assigns. 13.6 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 13.7 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows: -41- To Seller: Florida Power Corporation 6565 38th Avenue North St. Petersburg, Florida 33710 Attn: Director, Energy Control To Buyer: Bulk Power Markets Georgia Power Company 333 Piedmont Avenue Atlanta, Georgia 30308 Attn: Manager, Purchased Power or to such other address as may be designated by the Parties; or (ii) when sent by telecopy, provided such telecopy is confirmed by mailing a hard copy confirmation, as provided in clause (i) above, within one business Day after the sending of the telecopy. 13.8 Entire Agreement. This Agreement constitutes the entire understanding between the Parties as to the subject matter hereof and supersedes any previous agreements between the Parties relating to such subject matter. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein. 13.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. -42- 13.10 Waiver. The failure of either Party to enforce at any time any of the provisions of this Agreement, or to acquire at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of this Agreement shall be valid unless reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties. 13.11 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement. 13.12 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement. -43- 13.13 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties or to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party. 13.14 Severability. Subject only to the right of Buyer or Seller to terminate this Agreement pursuant to Sections 10.1.3 and 10.2.4, if any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. [Remainder of page intentionally left blank.] -44- IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement as of the date first above written. GEORGIA POWER COMPANY "Buyer" _________________________________ By:______________________________ Title:________________________ _________________________________ Attest:__________________________ Title:________________________ [SEAL] FLORIDA POWER CORPORATION "Seller" ___________________________________ By:________________________________ Title:_____________________________ ___________________________________ Attest:____________________________ Title:___________________________ [SEAL] -45- EXHIBIT A SYSTEM PEAKING UNITS Nominal Net Name of Facility Number of Units Summer Ratings Intercession City 10 580 Debary 10 580 Bayboro 4 172 Suwannee 3 153 Bartow 4 176 Turner 4 148 Avon Park 2 44 Higgins 4 96 Pt. St. Joe 1 13 Rio Pinar 1 13 Seller reserves the unilateral right to add to, or delete from, the above list of System Peaking Units or parts of System Peaking Units, provided that the total generating capacity of the System Peaking Units shall never be less than 1,900 MW. EXHIBIT B DISPATCH CHARACTERISTICS OF SYSTEM PEAKING CAPACITY Block Loading Size: 25 MW Time required between Block Loading: 0 minutes Notice Required to Meet Minimum Load from Cold Start: 6 minutes Notice Required to Meet Minimum if Operated Previous Day: 6 minutes Time Required to go from Minimum to Maximum Load: 7 minutes Minimum Down Time: 0 minutes Minimum Up Time: 0 minutes The System Peaking Capacity does not have to come to full output before moving to minimum Existence of Automatic Generation Control Ramping levels and procedures as determined by the Peaking Capacity Operating Committee EX-24.A 11 EXHIBIT 24(A) - POWER OF ATTORNEY FOR SOCO Exhibit 24(a) January 17, 1994 Edward L. Addison, A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm and Wayne Boston Dear Sirs: The Southern Company proposes to file or join in the filing of statements under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission with respect to the following: (1) the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 1993, and (2) the filing of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K during 1994. The Southern Company also proposes to file post-effective amendments to registration statements under the Securities Act of 1933, as amended, with the Securities and Exchange Commission with respect to certain previously filed registration statements. These post-effective amendments, in each case, would be required in order to increase the amount of remaining shares covered by such registration statements as the result of the stock split (in the form of a stock distribution) of shares of The Southern Company's common stock. The registration statements affected include File Nos. 2-78617, 33-23152, 33-23153, and 33-30171. The Southern Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the - 2 - foregoing said Annual Report on Form 10-K and any appropriate amendment or amendments thereto and any necessary exhibits, said Quarterly Reports on Form 10-Q and any necessary exhibits, any Current Reports on Form 8-K and any necessary exhibits, and said post-effective amendments to said registration statements, to be accompanied (to the extent required) by a prospectus or prospectuses and any appropriately amended or supplemented prospectus or prospectuses and any necessary exhibits. Yours very truly, THE SOUTHERN COMPANY By /s/A. W. Dahlberg A. W. Dahlberg, President - 3 - /s/Edward L. Addison /s/William A. Parker, Jr. /s/W. P. Copenhaver /s/William J. Rushton, III /s/A. W. Dahlberg /s/Gloria M. Shatto /s/Paul J. DeNicola /s/Herbert Stockham /s/Jack Edwards /s/Louis J. Willie /s/H. Allen Franklin /s/W. L. Westbrook /s/L. G. Hardman, III /s/Tommy Chisholm /s/Elmer B. Harris /s/W. Dean Hudson /s/John M. McIntosh /s/William A. Maner, III /s/Earl D. McLean, Jr. Extract from minutes of meeting of the board of directors of The Southern Company. - - - - - - - - - - RESOLVED: That for the purpose of signing the Company's Annual Report on Form 10-K for the year ended December 31, 1993, 1994 Form 10-Q's and Form 8-K's and the amendments to each of the Company's existing registration statements hereinbefore authorized and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, the members of its board of directors, and its officers, are authorized to give their several powers of attorney to Edward L. Addison, A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm, and Wayne Boston. - - - - - - - - - - The undersigned officer of The Southern Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of The Southern Company, duly held on January 17, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 THE SOUTHERN COMPANY By /s/Tommy Chisholm Tommy Chisholm Secretary EX-24.B 12 EXHIBIT 24(B) - POWER OF ATTORNEY FOR ALABAMA POWER Exhibit 24(b) February 25, 1994 W. Larry Westbrook and E. Wayne Boston 64 Perimeter Center East Atlanta, Georgia 30346 Dear Sirs: Alabama Power Company proposes to file with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on Form 10-K for the year ended December 31, 1993, and (2) its quarterly reports on Form 10-Q during 1994. Alabama Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true and lawful Attorneys for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q, and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, ALABAMA POWER COMPANY By /s/Elmer B. Harris Elmer B. Harris, President - 2 - /s/Edward L. Addison /s/Gerald H. Powell /s/Whit Armstrong /s/Robert D. Powers /s/Philip E. Austin /s/John W. Rouse ______________________________ /s/Margaret A. Carpenter William J. Rushton, III /s/Peter V. Gregerson, Sr. /s/James H. Sanford /s/Bill M. Guthrie /s/John Cox Webb, IV /s/Elmer B. Harris /s/Louis J. Willie /s/Crawford T. Johnson, III /s/John W. Woods /s/Carl E. Jones, Jr. /s/David L. Whitson ______________________________ /s/Wallace D. Malone, Jr. William B. Hutchins, III /s/William V. Muse /s/Art P. Beattie /s/John T. Porter /s/Charles D. McCrary Extract from minutes of meeting of the board of directors of Alabama Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing and filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, Alabama Power Company's annual report on Form 10-K for the year ended December 31, 1993, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, and also filing quarterly reports on Form 10-Q, Alabama Power Company, the members of its Board of Directors, and its officers are authorized to give their several powers of attorney to W. Larry Westbrook and E. Wayne Boston, in substantially the form of power of attorney presented to this meeting. - - - - - - - - - - The undersigned officer of Alabama Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Alabama Power Company, duly held on February 25, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 ALABAMA POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24.C 13 EXHIBIT 24(C) - POWER OF ATTORNEY FOR GEORGIA POWER Exhibit 24(c) February 16, 1994 W. L. Westbrook and Wayne Boston Dear Sirs: Georgia Power Company proposes to file or join in the filing of statements under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) the filing of its Annual Report on Form 10-K for the year ended December 31, 1993, and (2) the filing of its quarterly reports on Form 10-Q during 1994. Georgia Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, GEORGIA POWER COMPANY By /s/H. Allen Franklin H. Allen Franklin President and Chief Executive Officer - 2 - ______________________________ /s/Edward L. Addison William A. Parker, Jr. /s/Bennett A. Brown /s/G. Joseph Prendergast /s/William P. Copenhaver /s/Herman J. Russell /s/A. W. Dahlberg /s/Gloria M. Shatto /s/William A. Fickling, Jr. /s/Robert Strickland /s/H. Allen Franklin /s/William Jerry Vereen /s/L. G. Hardman, III /s/Thomas R. Williams /s/Warren Y. Jobe /s/C. B. Harreld /s/James R. Lientz, Jr. /s/Judy M. Anderson Extract from minutes of meeting of the board of directors of Georgia Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing reports under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to (a) the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1993, and (b) quarterly filings on Form 10-Q during 1994; and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company and the members of its Board of Directors authorize their several powers of attorney to W. L. Westbrook, John F. Young and Wayne Boston. - - - - - - - - - - The undersigned officer of Georgia Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Georgia Power Company, duly held on February 16, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 GEORGIA POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24.D 14 EXHIBIT 24(D) - POWER OF ATTORNEY FOR GULF POWER Exhibit 24(d) February 25, 1994 Mr. W. L. Westbrook Mr. Wayne Boston Southern Company Services, Inc. Southern Company Services, Inc. 64 Perimeter Center East 64 Perimeter Center East Atlanta, Georgia 30346 Atlanta, Georgia 30346 Dear Sirs: Re: Forms 10-K and 10-Q Gulf Power Company proposes to file or join in the filing of statements under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) its Annual Report on Form 10-K for the year ended December 31, 1993, and (2) its 1994 quarterly reports on Form 10-Q. Gulf Power Company and the undersigned Directors and Officers of said Company, individually as a Director and/or as an Officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Sincerely, /s/Douglas L. McCrary Douglas L. McCrary Chairman of the Board and Chief Executive Officer - 2 - /s/Reed Bell /s/D. L. McCrary /s/Travis J. Bowden /s/C. Walter Ruckel /s/Paul J. DeNicola /s/Joseph K. Tannehill /s/Fred C. Donovan /s/Arlan E. Scarbrough /s/W. D. Hull, Jr. /s/Warren E. Tate Extract from minutes of meeting of the board of directors of Gulf Power Company. - - - - - - - - - - RESOLVED, That for the purpose of signing the statements under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 1993, and its 1994 quarterly reports on Form 10-Q, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments (both before and after such statements become effective), this Company, the members of its Board of Directors, and its Officers, are authorized to give their several powers of attorney to W. L. Westbrook and Wayne Boston. - - - - - - - - - - The undersigned officer of Gulf Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Gulf Power Company, duly held on February 25, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 GULF POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24.E 15 EXHIBIT 24(E) - POWER OF ATTORNEY FOR MISS. POWER Exhibit 24(e) February 24, 1994 W. L. Westbrook, John F. Young and Wayne Boston Dear Sirs: Mississippi Power Company proposes to file or join in the filing of statements under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) the filing of its Annual Report on Form 10-K for the year ended December 31, 1993, and (2) the filing of its quarterly reports on Form 10-Q during 1994. Mississippi Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, MISSISSIPPI POWER COMPANY By /s/David M. Ratcliffe David M. Ratcliffe President - 2 - /s/Paul J. DeNicola /s/Gerald J. St. Pe' /s/Edwin E. Downer /s/Leo W. Seal, Jr. /s/Robert S. Gaddis /s/N. Eugene Warr /s/Walter H. Hurt, III /s/Thomas A. Fanning /s/Aubrey K. Lucas /s/W. E. Gilmore /s/Earl D. McLean, Jr. /s/Frances V. Turnage /s/David M. Ratcliffe Extract from minutes of meeting of the board of directors of Mississippi Power Company. - - - - - - - - - - RESOLVED: That the members of this Company's Board of Directors and its officers are authorized to give their several powers of attorney to W. L. Westbrook, John F. Young and Wayne Boston for the purpose of signing the statements under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1993, and the filing of this Company's quarterly reports to the Securities and Exchange Commission on Form 10-Q for the year 1994. - - - - - - - - - - The undersigned officer of Mississippi Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Mississippi Power Company, duly held on February 24, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 MISSISSIPPI POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24.F 16 EXHIBIT 24(F) - POWER OF ATTORNEY FOR SAV. ELECTRIC Exhibit 24(f) February 16, 1994 W. L. Westbrook, John F. Young and Wayne Boston Dear Sirs: Savannah Electric and Power Company proposes to file with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on Form 10-K for the year ended December 31, 1993, and (2) its quarterly reports on Form 10-Q during 1994. Savannah Electric and Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint W. L. Westbrook, John F. Young and Wayne Boston our true and lawful Attorneys for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q, and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, SAVANNAH ELECTRIC AND POWER COMPANY By /s/Arthur M. Gignilliat, Jr. Arthur M. Gignilliat, Jr. President and Chief Executive Officer - 2 - /s/Helen Q. Artley /s/Robert B. Miller, III /s/Paul J. DeNicola /s/James M. Piette /s/Brian R. Foster /s/Arnold M. Tenenbaum /s/Arthur M. Gignilliat, Jr. /s/Frederick F. Williams, Jr. /s/Walter D. Gnann /s/K. R. Willis /s/John M. McIntosh Extract from minutes of meeting of the board of directors of Savannah Electric and Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing statements under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to (a) the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 1993, and (b) quarterly reports on Form 10-Q during 1994; and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, the members of its Board of Directors, and its officers, are authorized to give their several powers of attorney to W. L. Westbrook, John F. Young, and Wayne Boston. - - - - - - - - - - The undersigned officer of Savannah Electric and Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Savannah Electric and Power Company, duly held on February 16, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 25, 1994 SAVANNAH ELECTRIC AND POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----