-----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, K/mTQAdgL/TbmNzclw0GK/LJS8TVI4WP7XHf8yGSDJyWw07oiHNOCwWobCjhS8IN uScCaPk6MdvUrKri5W/++g== 0000950144-94-001496.txt : 19940816 0000950144-94-001496.hdr.sgml : 19940816 ACCESSION NUMBER: 0000950144-94-001496 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03526 FILM NUMBER: 94544082 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03164 FILM NUMBER: 94544083 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06468 FILM NUMBER: 94544084 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02429 FILM NUMBER: 94544085 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11229 FILM NUMBER: 94544086 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05072 FILM NUMBER: 94544087 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-Q 1 SOUTHERN COMPANY 10-Q - JUNE 30, 1994 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1994 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 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 ---- ----
DESCRIPTION OF SHARES OUTSTANDING REGISTRANT COMMON STOCK AT JULY 31, 1994 - ---------- ------------- ---------------- THE SOUTHERN COMPANY PAR VALUE $5 PER SHARE 649,066,487 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
This combined Form 10-Q 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. 3 Table of Contents PART I
PAGE DEFINITIONS THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES Management's Opinion as to Fair Statement of Results 6 Condensed Statements of Income 7 Condensed Statements of Cash Flows 8 Condensed Balance Sheets 9 Management's Discussion and Analysis of Results of Operations and Financial Condition 11 ALABAMA POWER COMPANY Management's Opinion as to Fair Statement of Results 18 Review by Independent Public Accountants 18 Condensed Statements of Income 19 Condensed Statements of Cash Flows 20 Condensed Balance Sheets 21 Management's Discussion and Analysis of Results of Operations and Financial Condition 23 Exhibit 1 - Report of Independent Public Accountants 27 GEORGIA POWER COMPANY Management's Opinion as to Fair Statement of Results 29 Review by Independent Public Accountants 29 Condensed Statements of Income 30 Condensed Statements of Cash Flows 31 Condensed Balance Sheets 32 Management's Discussion and Analysis of Results of Operations and Financial Condition 34 Exhibit 1 - Report of Independent Public Accountants 40 GULF POWER COMPANY Management's Opinion as to Fair Statement of Results 42 Condensed Statements of Income 43 Condensed Statements of Cash Flows 44 Condensed Balance Sheets 45 Management's Discussion and Analysis of Results of Operations and Financial Condition 47 MISSISSIPPI POWER COMPANY Management's Opinion as to Fair Statement of Results 51 Condensed Statements of Income 52 Condensed Statements of Cash Flows 53 Condensed Balance Sheets 54 Management's Discussion and Analysis of Results of Operations and Financial Condition 56 SAVANNAH ELECTRIC AND POWER COMPANY Management's Opinion as to Fair Statement of Results 60 Condensed Statements of Income 61 Condensed Statements of Cash Flows 62 Condensed Balance Sheets 63 Management's Discussion and Analysis of Results of Operations and Financial Condition 65 NOTES TO THE CONDENSED FINANCIAL STATEMENTS 68
3 4 Table of Contents (Continued)
PAGE PART II Item 1. Legal Proceedings 73 Item 4. Submission of Matters to a Vote of Security Holders 73 Item 6. Exhibits and Reports on Form 8-K 76 SIGNATURES 77
DEFINITIONS
TERM MEANING ---- ------- AFUDC . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for Funds Used During Construction ALABAMA . . . . . . . . . . . . . . . . . . . . . . . . . Alabama Power Company Clean Air Act . . . . . . . . . . . . . . . . . . . . . . Clean Air Act Amendments of 1990 ECO Plan . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Compliance Overview Plan Energy Act . . . . . . . . . . . . . . . . . . . . . . . . Energy Policy Act of 1992 FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission GEORGIA . . . . . . . . . . . . . . . . . . . . . . . . . Georgia Power Company GULF . . . . . . . . . . . . . . . . . . . . . . . . . . . Gulf Power Company Gulf States . . . . . . . . . . . . . . . . . . . . . . . Gulf States Utilities Company IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Revenue Service MEAG . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal Electric Authority of Georgia MISSISSIPPI . . . . . . . . . . . . . . . . . . . . . . . Mississippi Power Company NRC . . . . . . . . . . . . . . . . . . . . . . . . . . . Nuclear Regulatory Commission OPC . . . . . . . . . . . . . . . . . . . . . . . . . . . Oglethorpe Power Corporation PEP . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Evaluation Plan (PEP-1A) PSC . . . . . . . . . . . . . . . . . . . . . . . . . . . Public Service Commission SAVANNAH . . . . . . . . . . . . . . . . . . . . . . . . Savannah Electric and Power Company SCS . . . . . . . . . . . . . . . . . . . . . . . . . . . Southern Company Services, Inc. SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities and Exchange Commission SEGCO . . . . . . . . . . . . . . . . . . . . . . . . . . Southern Electric Generating Company SOUTHERN . . . . . . . . . . . . . . . . . . . . . . . . The Southern Company
4 5 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES 5 6 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of SOUTHERN included herein have been prepared by SOUTHERN, without audit, pursuant to the rules and regulations of the SEC. In the opinion of SOUTHERN's management, subject to the effect of such adjustments, if any, as might have been required had the outcome of the uncertainty with respect to the actions of the regulators regarding the recoverability of GEORGIA's investment in the Rocky Mountain pumped storage hydroelectric project, as more fully discussed in Note (G) to the Condensed Financial Statements herein, been known, the information furnished herein reflects all adjustments (which, except for the provision for separation benefits recorded in 1994, included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although SOUTHERN believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in SOUTHERN's latest annual report on Form 10-K and, with respect to nuclear decommissioning, the March 31, 1994 quarterly report on Form 10-Q. 6 7 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, -------------- -------------- -------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES $2,068,485 $2,068,126 $4,000,915 $3,907,688 $8,582,372 $8,160,865 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 536,681 556,579 1,016,672 1,013,966 2,267,713 2,141,588 Purchased power 42,948 90,379 123,608 184,594 274,702 398,377 Provision for separation benefits 3,668 - 96,818 - 96,818 - Other 360,837 350,832 691,010 661,627 1,475,081 1,344,805 Maintenance 161,089 164,346 334,876 321,811 665,629 642,073 Depreciation and amortization 202,176 201,213 402,386 395,607 800,261 781,937 Amortization of deferred Plant Vogtle expenses, net (Note F) 15,789 6,012 28,407 9,039 55,652 1,451 Taxes other than income taxes 118,015 112,625 236,951 227,667 470,714 445,344 Federal and state income taxes 187,292 160,498 299,885 290,373 743,496 656,660 ---------- ---------- ---------- ---------- ---------- ---------- Total operating expenses 1,628,495 1,642,484 3,230,613 3,104,684 6,850,066 6,412,235 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING INCOME 439,990 425,642 770,302 803,004 1,732,306 1,748,630 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 2,492 1,137 5,775 1,884 12,873 6,921 Interest income 7,443 5,901 13,541 12,429 31,265 30,115 Other, net (138) 33,314 (16,014) 25,169 (82,519) (20,930) Income taxes applicable to other income (1,336) 19,696 4,725 23,101 38,839 56,162 ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 448,451 485,690 778,329 865,587 1,732,764 1,820,898 ---------- ---------- ---------- ---------- ---------- ---------- INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest on long-term debt 146,087 150,905 288,658 306,567 576,836 636,862 Allowance for debt funds used during construction (5,342) (3,426) (9,726) (6,080) (16,897) (11,389) Interest on interim obligations 8,323 7,389 17,572 13,152 34,255 20,272 Amortization of debt discount, premium and expense, net 7,482 6,612 14,843 12,116 29,022 20,859 Other interest charges 13,970 50,675 26,114 64,989 48,208 82,709 Preferred dividends of subsidiary companies 21,732 23,051 43,066 47,356 89,177 98,748 ---------- ---------- ---------- ---------- ---------- ---------- Net interest charges and preferred dividends 192,252 235,206 380,527 438,100 760,601 848,061 ---------- ---------- ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME $ 256,199 $ 250,484 $ 397,802 $ 427,487 $ 972,163 $ 972,837 ========== ========== ========== ========== ========== ========== AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING *(THOUSANDS) 648,347 636,108 647,399 634,837 643,600 633,608 EARNINGS PER SHARE OF COMMON STOCK* $ 0.39 $ 0.39 $ 0.61 $ 0.67 $ 1.51 $ 1.54 CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK* $ 0.295 $ 0.285 $ 0.59 $ 0.57 $ 1.16 $ 1.12
*The data for 1993 are adjusted to reflect a two-for-one common stock split in the form of a stock distribution for each share issued and outstanding as of February 7, 1994. ( ) Denotes red figure. The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 7 8 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30, -------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Consolidated net income $ 397,802 $ 427,487 Adjustments to reconcile consolidated net income to net cash provided by operating activities-- Depreciation and amortization 519,402 497,429 Deferred income taxes, net (10,499) 43,618 Allowance for equity funds used during construction (5,775) (1,884) Deferred Plant Vogtle costs 28,407 9,039 Provision for separation benefits 83,962 - Gain on asset sales (23,582) (35,108) Other, net (23,628) (43,062) Changes in certain current assets and liabilities-- Receivables, net 11,956 59,070 Fossil fuel stock (74,858) (67,656) Materials and supplies (6,062) (11,829) Accounts payable (24,435) (81,746) Other (5,963) 26,093 --------- ----------- Net cash provided from operating activities 866,727 821,451 --------- ----------- INVESTING ACTIVITIES: Gross property additions (696,330) (631,307) Sales of property 141,931 253,032 Other (70,069) (40,209) --------- ----------- Net cash used in investing activities (624,468) (418,484) --------- ----------- FINANCING ACTIVITIES: Proceeds-- Common stock 121,766 108,867 Preferred stock - 75,000 First mortgage bonds 35,000 1,630,000 Pollution control bonds 106,165 244,461 Other long-term debt 428,178 12,114 Retirements-- Preferred stock (1,000) (107,500) First mortgage bonds (106,679) (1,572,143) Pollution control bonds (52,555) (175,870) Other long-term debt (159,744) (34,482) Special deposits-redemption funds (187,259) (288,510) Interim obligations, net (8,655) 295,901 Payment of common stock dividends (382,525) (361,330) Miscellaneous (8,667) (80,215) --------- ----------- Net cash provided from (used in) financing activities (215,975) (253,707) --------- ----------- NET CHANGE IN CASH AND CASH EQUIVALENTS 26,284 149,260 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 178,346 97,313 --------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 204,630 $ 246,573 ========= =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 307,537 $ 365,360 Income taxes 291,612 188,318
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 8 9 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- UTILITY PLANT: Plant in service (Note C) $28,103,178 $27,686,539 Less accumulated provision for depreciation 9,240,085 8,933,717 ----------- ----------- 18,863,093 18,752,822 Nuclear fuel, at amortized cost 224,946 229,293 Construction work in progress 1,014,775 1,031,240 ----------- ----------- Total 20,102,814 20,013,355 ----------- ----------- OTHER PROPERTY AND INVESTMENTS: Foreign utility operations, being amortized 539,221 558,960 Nuclear decommissioning trusts (Note C) 113,689 87,487 Miscellaneous 94,960 89,425 ----------- ----------- Total 747,870 735,872 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents 204,630 178,346 Special deposits - redemption funds 187,259 - Receivables, less accumulated provisions for uncollectible accounts of $9,567 at June 30, 1994 and $9,067 at December 31, 1993 1,132,032 1,146,774 Fossil fuel stock, at average cost 321,447 254,026 Materials and supplies, at average cost 540,784 534,722 Prepayments 187,757 147,915 Miscellaneous 72,574 73,074 ----------- ----------- Total 2,646,483 2,334,857 ----------- ----------- DEFERRED CHARGES: Deferred charges related to income taxes 1,498,635 1,546,338 Deferred Plant Vogtle costs (Note F) 478,573 506,980 Debt expense and loss, being amortized 322,412 320,515 Deferred fuel charges 58,954 70,404 Miscellaneous 445,951 382,336 ----------- ----------- Total 2,804,525 2,826,573 ----------- ----------- TOTAL ASSETS $26,301,692 $25,910,657 =========== ===========
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 9 10 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: Common stock, par value $5 per share - Authorized - 1 billion shares; Outstanding - June 30, 1994: 648,346,540 shares December 31, 1993: 642,661,658 shares* $ 3,241,733 $ 3,213,308 Paid-in capital 1,595,140 1,502,193 Premium on preferred stock 1,012 1,012 Retained earnings 2,983,973 2,967,706 ----------- ----------- 7,821,858 7,684,219 Preferred stock 1,332,203 1,332,203 Preferred stock subject to mandatory redemption 500 1,000 Long-term debt 7,546,946 7,411,455 ----------- ----------- Total 16,701,507 16,428,877 ----------- ----------- CURRENT LIABILITIES: Preferred stock due within one year 500 1,000 Long-term debt due within one year 272,860 155,638 Notes payable 622,478 865,381 Commercial paper 309,775 75,527 Accounts payable 636,703 697,749 Customer deposits 103,918 102,822 Taxes accrued-- Federal and state income 69,315 34,023 Other 148,182 171,673 Interest accrued 196,094 186,057 Vacation pay accrued 92,015 90,206 Miscellaneous 190,074 190,638 ----------- ----------- Total 2,641,914 2,570,714 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 3,992,013 3,978,889 Deferred credits related to income taxes 1,022,696 1,050,512 Accumulated deferred investment tax credits 878,701 900,203 Disallowed Plant Vogtle capacity buyback costs 57,244 63,067 Prepaid capacity revenues, net 141,155 143,762 Miscellaneous 866,462 774,633 ----------- ----------- Total 6,958,271 6,911,066 ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $26,301,692 $25,910,657 =========== ===========
*Adjusted to reflect a two-for-one common stock split in the form of a stock distribution for each share issued and outstanding as of February 7, 1994. The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 10 11 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS EARNINGS SOUTHERN's earnings for the second quarter of 1994 were slightly higher than earnings recorded in the same period of 1993 primarily because of lower capital costs. Consolidated net income was $256 million for the second quarter of 1994, compared to $250 million for the second quarter of 1993. Earnings per share were $0.39 in the second quarter of both 1994 and 1993. Also, refer to "Other Income" later in this discussion for details of the gains recorded from the sales of a portion of Plant Scherer Unit 4 in June of 1993 and 1994. REVENUES Retail energy sales increased 4.0% primarily because of an increase in the number of customers served and the improvement in the economy. Energy sales to residential, commercial and industrial customers increased 3.8%, 6.5% and 2.5%, respectively. Wholesale energy sales decreased 41.6% due to reduced demand and scheduled reductions in off-system contracts. As a result, total energy sales decreased 4.9%. Capacity revenues for the second quarter of 1994 were $20 million less than in the second quarter of 1993. The capacity revenues decreased as scheduled, coinciding with GEORGIA completing the second and third sales of a portion of Plant Scherer Unit 4 in June 1993 and 1994. The final sale in a series of four transactions for the sale of this generating unit is scheduled for June 1995. The generation from this unit has been dedicated to unit power sales. EXPENSES Fuel expense for the second quarter of 1994, compared to the corresponding period of 1993, was lower due primarily to a decrease in the average cost of coal. Purchased power expense decreased because of the reduction in capacity buyback payments by GEORGIA to the co-owners of plants Vogtle and Scherer and lower demand from wholesale customers. See Note (F) to the Condensed Financial Statements herein for information regarding the Georgia PSC's retail rate order that required the levelization of capacity buyback expense for Plant Vogtle. The Southern electric system has instituted a number of initiatives to curb the growth of expenses, including workforce reduction programs. Disregarding the one-time cost of these programs, they are projected to yield pre-tax savings of approximately $26 million in 1994 and approximately $51 million in each succeeding year. See Note (K) to the Condensed Financial Statements herein for further information on these programs. Maintenance expenses decreased due to the timing of scheduled maintenance on generating units. Taxes other than income taxes were higher primarily because of increased investment in plant. The increase in income tax expense was due to higher earnings and the enactment of a federal income tax rate increase in August 1993. 11 12 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) The settlement of an IRS audit for the tax years 1983 through 1987 in May 1993 resulted in an increase in depreciation and amortization in the second quarter of 1993 due to the reversal of the amortization of certain investment tax credits. The settlement also resulted in interest charges and a reduction in tax expense applicable to other income due to the recognition of tax credits previously deferred. While the settlement resulted in the payment of additional taxes during the second quarter of 1993, there was no material effect on net income. INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK The decrease in interest on long-term debt and dividends on preferred stock reflects the SOUTHERN system's efforts to decrease its capital costs. In response to the low interest rate levels prevailing during 1992 and 1993, the SOUTHERN system refinanced a significant portion of its long-term debt and preferred stock. To the extent it is economically feasible, efforts to reduce capital costs will continue. Other interest charges for the second quarter of 1993 reflect the accrual of interest on the settlement of an IRS audit in May 1993. OTHER INCOME On June 1 of 1993 and 1994, GEORGIA completed the second and third sales in a series of four separate transactions to sell Plant Scherer Unit 4. The second sale for 31.44% of the unit was made for $253 million and resulted in a pre-tax gain of $35.1 million ($18.4 million, after taxes). The latter sale for 16.55% of the unit was made for $133 million and resulted in a pre-tax gain of $21.7 million ($11.3 million, after taxes). Additionally, income taxes applicable to other income in the second quarter of 1993 were reduced as a result of the tax effect of the interest charges in the settlement of an IRS audit and the recognition of tax credits previously deferred. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AFUDC represents the cost of capital charged to utility plant under construction and not included in rate base. The equity portion represents non-cash income. However, when facilities are completed and included in rate base, previously capitalized amounts significantly increase cash flow because revenues are higher as a result of the increased rate base and additional depreciation expense. FUTURE EARNINGS POTENTIAL The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings is contingent upon numerous factors ranging from regulatory matters to growth in energy sales. Reference is made to the Notes to the Condensed Financial Statements herein for further discussion of various uncertainties and legal proceedings related to: the actions of regulators regarding the recovery of GEORGIA's investment in the Rocky Mountain pumped storage hydroelectric project; a civil suit filed against ALABAMA related to financing agreements; a suit 12 13 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) filed against GULF related to fuel transportation; the outcome of a proceeding initiated by the FERC to determine the appropriate return on equity on wholesale power and transmission contracts; and complaints filed by MEAG and OPC seeking to recover from GEORGIA an aggregate of $22.8 million (including interest) in alleged partial requirements rates overcharges. Pursuant to an Integrated Resource Plan approved by the Georgia PSC, GEORGIA has implemented various demand-side option programs and had been authorized by the Georgia PSC to recover associated program costs through rate riders. A superior court judge s ruling that recovery of these costs through rate riders was unlawful was reversed by the Georgia Court of Appeals in July 1994. GEORGIA has ceased collection of the rate riders and the Georgia PSC has allowed the deferral of program costs pending the final outcome of this matter. For additional information on this matter, see Note (H) to the Condensed Financial Statements herein. The IRS has notified SOUTHERN that its tax accounting for the sale by GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax deficiency and interest arising from this issue amount to approximately $30 million and $33 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid, therefore only the interest could impact future income. See Note (I) to the Condensed Financial Statements herein for further discussion of this matter. Compliance costs related to the Clean Air Act will reduce earnings if such increased costs cannot be offset. The Clean Air Act is discussed under "Environmental Matters" in Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993 Annual Report on Form 10-K. Also see Note (M) to the Condensed Financial Statements herein for information regarding a list of sites, including a number of sites owned by GEORGIA, compiled by the State of Georgia that may require environmental remediation. 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 SOUTHERN's service area. The enactment of the Energy Act will have a profound effect on the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993 Annual Report on Form 10-K. The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements. In response to these questions, the Financial Accounting Standards Board has decided to review the accounting for nuclear decommissioning. If current electric utility industry accounting practices for such decommissioning costs are changed: (1) 13 14 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) annual provisions for decommissioning could increase and (2) the total estimated cost for decommissioning may be required to be recorded as a liability on the balance sheet. ALABAMA and GEORGIA do not believe that such changes, if required, would have a significant adverse effect on results of operations due to their current and expected future ability to recover decommissioning costs through rates. Further discussion of nuclear decommissioning costs is made in Note (C) to the Condensed Financial Statements herein. FINANCIAL CONDITION OVERVIEW The major changes in SOUTHERN's financial condition during the first half of 1994 were the addition of approximately $696 million to utility plant, the commercial operation of seven combustion turbine generating units having an aggregate nameplate capacity of approximately 635 megawatts, the sale of a portion of Plant Scherer Unit 4, recognition of the liability associated with the implementation of workforce reduction programs and the sale of SOUTHERN's common stock for $122 million. The funds for gross property additions and other capital requirements were derived primarily from operations, the sale of a portion of Plant Scherer, an increase in other long-term debt and security sales. See SOUTHERN's Condensed Statements of Cash Flows for further details. Additionally, SOUTHERN's board of directors declared a two-for-one common stock split in the form of a stock distribution for each share issued and outstanding as of February 7, 1994. CAPITAL STRUCTURE One of SOUTHERN's goals is to maintain common equity as a percent of total capitalization, including short-term debt and the current portion of capitalization, within a range of 40 to 45%. This ratio was 43.7% at June 30, 1994, compared to 43.8% at December 31, 1993. The market price of SOUTHERN's common stock at June 30, 1994, was $18.75 per share, compared to a book value of $12.06. This represents a market-to-book value ratio of 155%. The quarterly dividend for the second quarter of 1994 was 29.5 cents per share. CAPITAL REQUIREMENTS FOR CONSTRUCTION The construction program of the Southern electric system is budgeted at $4.3 billion for the three years 1994 through 1996 ($1.5 billion in 1994, $1.3 billion in 1995 and $1.5 billion in 1996). Actual construction costs may vary from this estimate because of such factors as changes in business conditions; changes in nuclear plants to meet new regulations; changes in environmental regulations; revised load growth projections; increasing costs of labor, equipment and materials; and the cost of capital. Current energy demand forecasts do not require any additional baseload generating facilities until well into the future. However, the construction of combustion turbine peaking units of approximately 1,700 megawatts is planned by 1996, including those that began commercial operation in 1994, to 14 15 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) meet the increased peak-hour demands. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. GEORGIA and OPC have entered into a joint ownership agreement for the latter to assume responsibility for the construction and completion of the Rocky Mountain project. This agreement is described further in Note 4 to the financial statements in Item 8 of SOUTHERN's 1993 Annual Report on Form 10-K. Changes in environmental regulations could substantially increase the Southern electric system's capital requirements and operating costs. The acid rain compliance provision of the Clean Air Act will have a significant impact on the Southern electric system. This legislation, as well as other legislation and regulations, are described under "Environmental Matters" in Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993 Annual Report on Form 10-K. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. OTHER CAPITAL REQUIREMENTS In addition to the funds needed for the construction program, approximately $86 million, excluding those funds on deposit with trustees and which are specifically designated for called redemptions, will be required by June 30, 1995, for present sinking fund requirements and maturities of long-term debt and preferred stock. Also, the operating subsidiaries plan to continue, to the extent possible, a program to retire high-cost debt and preferred stock and replace these obligations with lower-cost capital. SOURCES OF FUNDS In addition to the sale of common stock in the first half of 1994, SOUTHERN may require additional equity capital during the remainder of the year. The amounts and timing of additional equity capital to be raised in 1994, as well as in subsequent years, will be contingent on SOUTHERN's investment opportunities. 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 financings will depend on market conditions, maintenance of adequate earnings, and regulatory approval. Additionally, GEORGIA expects to receive approximately $130 million in 1995 from the sale of its remaining ownership interest in Plant Scherer Unit 4. These property sales are discussed further in Note 7 to the financial statements in Item 8 in SOUTHERN's 1993 Annual Report on Form 10-K. To meet short-term cash needs and contingencies, the SOUTHERN system had at June 30, 1994, approximately $205 million of cash and cash equivalents and approximately $1.2 billion of unused credit arrangements with banks. At June 30, 1994, the system companies had outstanding $622 million of notes payable and $310 million of commercial paper. The level of short-term indebtedness is seasonal and by the conclusion 15 16 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) of summer such levels of short-term debt should be greatly pared. The short-term lines of credit may not be utilized in their entirety without additional regulatory approval. Since the construction program with respect to major generating projects has been completed, management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. In order to issue additional long-term debt and preferred stock, the operating subsidiaries must comply with certain earnings coverage requirements outlined in their respective mortgage indentures and corporate charters. The coverage ratios of SOUTHERN's operating subsidiaries are sufficiently high to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which they will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. 16 17 ALABAMA POWER COMPANY 17 18 ALABAMA POWER COMPANY MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of ALABAMA included herein have been prepared by ALABAMA, without audit, pursuant to the rules and regulations of the SEC. In the opinion of ALABAMA's management, the information regarding ALABAMA furnished herein reflects all adjustments (which included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although ALABAMA believes that the disclosures regarding ALABAMA are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in ALABAMA's latest annual report on Form 10-K and, with respect to nuclear decommissioning, the March 31, 1994 quarterly report on Form 10-Q. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS The condensed financial statements of ALABAMA included herein have been reviewed by ALABAMA's independent public accountants as set forth in their report included herein as Exhibit 1. 18 19 ALABAMA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, ------------- ------------- ------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $711,174 $680,810 $1,365,487 $1,277,036 $2,914,084 $2,676,639 Revenues from affiliates 48,225 52,779 80,759 92,112 170,622 169,134 -------- -------- ---------- ---------- ---------- ---------- Total operating revenues 759,399 733,589 1,446,246 1,369,148 3,084,706 2,845,773 -------- -------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 219,869 209,493 404,869 369,923 912,046 783,898 Purchased power from non-affiliates 4,377 3,394 9,635 7,114 17,751 16,087 Purchased power from affiliates 25,113 27,800 51,695 55,195 116,830 116,464 Other 113,536 116,244 224,170 220,737 474,248 452,335 Maintenance 52,045 56,128 119,704 116,019 256,191 237,485 Depreciation and amortization 72,757 71,665 145,359 144,739 290,929 284,599 Taxes other than income taxes 45,021 43,485 91,444 90,411 180,030 176,004 Federal and state income taxes 63,985 46,357 108,051 81,631 233,631 189,461 -------- -------- ---------- ---------- ---------- ---------- Total operating expenses 596,703 574,566 1,154,927 1,085,769 2,481,656 2,256,333 -------- -------- ---------- ---------- ---------- ---------- OPERATING INCOME 162,696 159,023 291,319 283,379 603,050 589,440 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 503 711 1,170 1,139 3,291 2,126 Interest income 4,028 3,690 8,258 7,804 21,229 16,106 Other, net (15,735) (1,363) (19,483) (4,166) (38,608) (18,485) Income taxes applicable to other income 6,268 958 6,935 1,729 15,444 11,164 -------- -------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 157,760 163,019 288,199 289,885 604,406 600,351 -------- -------- ---------- ---------- ---------- ---------- INTEREST CHARGES: Interest on long-term debt 44,648 46,225 89,137 95,432 178,565 195,283 Allowance for debt funds used during construction (766) (984) (1,449) (1,578) (2,863) (2,318) Interest on interim obligations 1,499 1,575 2,309 2,369 3,700 4,034 Amortization of debt discount, premium, and expense, net 2,423 2,260 4,895 4,120 9,712 6,976 Other interest charges 4,784 15,398 9,745 25,337 19,882 35,119 -------- -------- ---------- ---------- ---------- ---------- Net interest charges 52,588 64,474 104,637 125,680 208,996 239,094 -------- -------- ---------- ---------- ---------- ---------- NET INCOME 105,172 98,545 183,562 164,205 395,410 361,257 DIVIDENDS ON PREFERRED STOCK 6,504 7,097 12,863 14,901 27,521 31,987 -------- -------- ---------- ---------- ---------- ---------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 98,668 $ 91,448 $ 170,699 $ 149,304 $ 367,889 $ 329,270 ======== ======== ========== ========== ========== ==========
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements. 19 20 ALABAMA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30 ------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $183,562 $164,205 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 177,518 180,032 Deferred income taxes, net (8,453) (18,052) Allowance for equity funds used during construction (1,170) (1,139) Other, net (8,763) 35,545 Change in certain current assets and liabilities: Receivables, net 7,528 23,549 Inventories (16,738) (70,943) Payables (49,046) (35,696) Taxes accrued 29,139 23,049 Energy cost recovery, retail (9,745) 16,415 Other (43,592) (34,221) -------- -------- Net cash provided from operating activities 260,240 282,744 -------- -------- INVESTING ACTIVITIES: Gross property additions (217,500) (197,989) Other (20,101) (3,819) -------- -------- Net cash used for investing activities (237,601) (201,808) -------- -------- FINANCING ACTIVITIES: Proceeds: First mortgage bonds - 610,000 Other long-term debt 107,433 108,887 Retirements: Preferred stock - (49,000) First mortgage bonds (20,387) (516,504) Other long-term debt (43,641) (118,019) Special deposits - redemption funds (53,700) - Interim obligations, net 142,845 60,402 Payment of preferred stock dividends (12,107) (16,067) Payment of common stock dividends (133,500) (126,000) Miscellaneous (1,063) (29,693) -------- -------- Net cash provided from (used for) financing activities (14,120) (75,994) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 8,519 4,942 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,233 13,629 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,752 $ 18,571 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 89,088 $ 87,781 Income taxes 103,811 94,181
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements. 20 21 ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- UTILITY PLANT: Plant in service, at original cost (Note C) $9,870,270 $9,757,141 Less accumulated provision for depreciation 3,508,370 3,384,156 ---------- ---------- 6,361,900 6,372,985 Nuclear fuel, at amortized cost 95,570 93,551 Construction work in progress 276,736 225,786 ---------- ---------- Total 6,734,206 6,692,322 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 111,830 99,185 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 11,752 3,233 Special deposit - redemption funds 53,700 - Receivables -- Customer accounts receivable 329,895 312,090 Other accounts and notes receivable 41,072 48,808 Affiliated companies 38,419 40,216 Accumulated provision for uncollectible accounts (2,299) (2,632) Refundable income taxes 5,552 11,940 Fossil fuel stock, at average cost 102,082 88,481 Materials and supplies, at average cost 179,867 176,728 Prepayments-- Income taxes 17,327 18,980 Other 97,068 60,227 Vacation pay deferred 22,680 22,680 ---------- ---------- Total 897,115 780,751 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 462,873 469,010 Debt expense and loss, being amortized 106,905 109,698 Uranium enrichment decontamination and decommissioning fund 45,149 45,554 Miscellaneous 59,174 52,163 ---------- ---------- Total 674,101 676,425 ---------- ---------- TOTAL ASSETS $8,417,252 $8,248,683 ========== ==========
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements. 21 22 ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: Common stock equity -- Common stock, par value $40 per share--authorized 6,000,000 shares, outstanding 5,608,955 shares $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 146 146 Retained earnings 1,034,255 997,199 ---------- ----------- 2,563,404 2,526,348 Preferred stock 440,400 440,400 Long-term debt 2,364,726 2,362,852 ---------- ----------- Total 5,368,530 5,329,600 ---------- ----------- CURRENT LIABILITIES: Long-term debt due within one year 101,801 58,998 Notes payable 22,000 40,000 Commercial paper 160,845 - Accounts payable-- Affiliated companies 54,167 62,507 Other 227,423 272,491 Customer deposits 32,153 31,198 Taxes accrued -- Federal and state income 16,734 25,730 Other 43,553 14,414 Interest accrued 54,231 52,809 Miscellaneous 65,390 73,106 ---------- ----------- Total 778,297 631,253 ---------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 1,169,293 1,165,127 Accumulated deferred investment tax credits 323,380 329,909 Prepaid capacity revenues, net 141,155 143,762 Uranium enrichment decontamination and decommissioning fund 41,676 39,644 Deferred credits related to income taxes 429,280 441,240 Miscellaneous 165,641 168,148 ---------- ----------- Total 2,270,425 2,287,830 ---------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $8,417,252 $8,248,683 ========== ==========
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements. 22 23 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS ALABAMA's financial performance during the second quarter of 1994 improved, compared to the same period of 1993, due primarily to higher retail revenues and lower financing costs. Net income after dividends on preferred stock was $98.7 million during the second quarter of 1994, compared to $91.4 million in the corresponding period of 1993. REVENUES Operating revenues in the second quarter of 1994 increased over the corresponding period of 1993 due to higher energy sales to retail customers. The 4.6% increase in retail energy sales is attributable primarily to an increase in customers served, weather and the improving economy in Alabama. Revenues from non-affiliated wholesale customers also increased, including a $6.6 million increase in capacity revenues. Total energy sales increased 3.4%. Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from period to period depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. EXPENSES Fuel expense increased because of a 12.5% increase in coal-fired generation. Coal-fired generation increased due to greater demand and lower nuclear generation. ALABAMA accrues estimated operation and maintenance expenses related to nuclear refueling outages during the period between outages. During the second quarter of 1994, ALABAMA reduced the accrual to reflect actual incurred costs. As a result, both other operation expenses and maintenance expenses were lower than the amounts recorded in the second quarter of 1993. The increase in depreciation and amortization reflects the additions to utility plant. Taxes other than income taxes increased because of higher revenues and the addition of new facilities. The increase in income tax expense reflected the improvement in earnings and an increase in the federal income tax rate enacted in August 1993. OTHER INCOME AND ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION The change in "Other, net" is primarily attributable to increases in contributions to non-profit organizations. 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 is realized over the service life of the plant through increased revenues resulting from a higher rate base and higher depreciation expense. INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK The decrease in interest on long-term debt and dividends on preferred stock reflects ALABAMA's efforts to decrease its capital costs. ALABAMA, in response to the low interest rate levels prevailing 23 24 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) during 1992 and 1993, refinanced a significant portion of its long-term debt and preferred stock. Other interest charges for the second quarter of 1993 include interest accrued on the settlement of the IRS audit for the years 1983 through 1987. The settlement of this audit had minimal impact on earnings. FUTURE EARNINGS POTENTIAL The results of operations discussed above 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. Discussed in the Notes to the Condensed Financial Statements herein are certain regulatory and legal proceedings that may impact ALABAMA's future earnings. The issues include a civil suit related to financing agreements and proceedings concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts. Compliance costs related to the Clean Air Act will reduce earnings if such cost increases cannot be offset. The Clean Air Act and other environmental issues are discussed under "Environmental Issues" in Item 7 - Management's Discussion and Analysis in ALABAMA's 1993 Annual Report on Form 10-K. Future earnings 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 ALABAMA's service area. The enactment of the Energy Act will have a profound effect on the future of the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in ALABAMA's 1993 Annual Report on Form 10-K. The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements. In response to these questions, the Financial Accounting Standards Board has decided to review the accounting for nuclear decommissioning. If current electric utility industry accounting practices for such decommissioning costs are changed: (1) annual provisions for decommissioning could increase and (2) the total estimated cost for decommissioning may be required to be recorded as a liability on the balance sheet. ALABAMA does not believe that such changes, if required, would have a significant adverse effect on results of operations due to its current and expected future ability to recover decommissioning costs through 24 25 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) rates. Further discussion of nuclear decommissioning costs is made in Note (C) to the Condensed Financial Statements herein. FINANCIAL CONDITION OVERVIEW The principal change in ALABAMA's financial condition in the first six months of 1994 was gross property additions of $218 million to utility plant. The funds for gross property additions were derived from operating activities and an increase in short-term debt. See ALABAMA's Condensed Statements of Cash Flows herein for further details. During the first six months of 1994, ALABAMA refinanced $78.1 million of pollution control bonds. ALABAMA's common equity as a percent of total capitalization was 47.7% at June 30, 1994, compared to 47.4% at year-end 1993. LIQUIDITY AND CAPITAL RESOURCES ALABAMA has regulatory approval for short-term borrowings of up to $450 million. At June 30, 1994, ALABAMA had outstanding $161 million of commercial paper and $22 million of notes payable and had $539 million of committed lines of credit available. Capital expenditures are estimated to total $1.7 billion for the three years 1994 through 1996 ($588 million in 1994, $572 million in 1995 and $531 million in 1996). Current energy demand forecasts do not require any additional baseload generating facilities 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. The capital budget is subject to periodic review and revision and capital costs incurred may vary from estimates because of several factors, including changes in business conditions; revised load growth projections; changes in environmental regulations; changes in existing nuclear plant to meet new regulatory requirements; increasing costs of labor, equipment and materials; and the cost of capital. In addition to the funds needed for the capital budget, approximately $101.8 million will be required by June 30, 1995, for debt maturities. This amount includes $53.7 million for pollution control bonds that have been refinanced. The funds for these redemptions are on deposit with the Trustee and are specifically designated for only that purpose. Also, ALABAMA plans to continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital. 25 26 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) It is anticipated that the funds required will be derived from sources similar to those used in the past. In order to issue additional first mortgage bonds and preferred stock, ALABAMA must comply with certain earnings coverage requirements contained in its mortgage indenture and corporate charter. ALABAMA's coverages are at a level that would permit necessary amounts of security sales at current interest and dividend rates. 26 27 ARTHUR ANDERSEN & CO. Exhibit 1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO ALABAMA POWER COMPANY: We have reviewed the accompanying condensed balance sheet of ALABAMA POWER COMPANY as of June 30, 1994, and the related condensed statements of income for the three-month, six-month and twelve-month periods ended June 30, 1994 and 1993, and condensed statements of cash flows for the six-month periods ended June 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1993 (not presented herein) and, in our report dated February 16, 1994, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1993 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ ARTHUR ANDERSEN & CO. Birmingham, Alabama August 5, 1994 27 28 GEORGIA POWER COMPANY 28 29 GEORGIA POWER COMPANY MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of GEORGIA included herein have been prepared by GEORGIA, without audit, pursuant to the rules and regulations of the SEC. As more fully discussed in Note (G) to the Condensed Financial Statements herein, an uncertainty exists with respect to the actions of the regulators regarding the recoverability of GEORGIA's investment in the Rocky Mountain pumped storage hydroelectric project. In the opinion of GEORGIA's management, subject to the effect of such adjustments, if any, as might have been required had the outcome of the uncertainty been known, the information regarding GEORGIA furnished herein reflects all adjustments (which, except for the provision for separation benefits recorded in 1994, included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although GEORGIA believes that the disclosures regarding GEORGIA are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in GEORGIA's latest annual report on Form 10-K and, with respect to nuclear decommissioning, the March 31, 1994 quarterly report on Form 10-Q. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS The condensed financial statements of GEORGIA included herein have been reviewed by GEORGIA's independent public accountants as set forth in their report included herein as Exhibit 1. 29 30 GEORGIA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, -------------- -------------- -------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $1,017,589 $1,083,977 $1,985,648 $2,067,538 $4,307,622 $4,303,735 Revenues from affiliates 12,876 12,195 37,149 32,449 66,368 68,396 ---------- ---------- ---------- ---------- ---------- ---------- Total operating revenues 1,030,465 1,096,172 2,022,797 2,099,987 4,373,990 4,372,131 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 217,259 238,755 429,254 451,267 929,495 948,568 Purchased power from non-affiliates 32,374 86,218 104,131 176,120 241,181 379,368 Purchased power from affiliates 48,068 56,933 76,518 98,538 172,004 178,807 Provision for separation benefits 3,208 - 87,897 - 87,897 5,398 Other 169,043 167,653 321,669 315,715 681,236 633,387 Maintenance 70,328 75,467 145,417 140,034 289,904 279,445 Depreciation and amortization 95,395 100,045 189,444 192,414 376,455 382,042 Amortization of deferred Plant Vogtle expenses, net (Note F) 15,789 6,012 28,407 9,039 55,652 1,451 Taxes other than income taxes 48,913 47,816 98,449 94,875 196,246 183,432 Federal and state income taxes 103,551 97,826 157,934 181,608 428,447 400,475 ---------- ---------- ---------- ---------- ---------- ---------- Total operating expenses 803,928 876,725 1,639,120 1,659,610 3,458,517 3,392,373 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING INCOME 226,537 219,447 383,677 440,377 915,473 979,758 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 1,275 51 2,912 180 5,899 3,615 Interest income 828 1,494 1,189 2,968 2,026 10,226 Other, net 24,340 43,099 23,240 40,643 (1,372) 19,575 Income taxes applicable to other income (10,187) 16,954 (7,576) 19,213 10,872 39,230 ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 242,793 281,045 403,442 503,381 932,898 1,052,404 ---------- ---------- ---------- ---------- ---------- ---------- INTEREST CHARGES: Interest on long-term debt 79,770 88,648 159,869 180,177 323,328 375,686 Allowance for debt funds used during construction (3,658) (1,993) (6,334) (3,873) (10,733) (7,877) Interest on interim obligations 4,891 4,700 8,418 9,073 14,876 13,583 Amortization of debt discount, premium and expense, net 3,892 3,549 7,766 6,464 15,327 11,093 Other interest charges 6,576 32,228 13,079 35,987 24,482 42,751 ---------- ---------- ---------- ---------- ---------- ---------- Net interest charges 91,471 127,132 182,798 227,828 367,280 435,236 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME 151,322 153,913 220,644 275,553 565,618 617,168 DIVIDENDS ON PREFERRED STOCK 11,948 12,736 23,661 26,011 48,324 54,293 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 139,374 $ 141,177 $ 196,983 $ 249,542 $ 517,294 $ 562,875 ========== ========== ========== ========== ========== ==========
( ) Denotes red figure. The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements. 30 31 GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30, -------------- 1994 1993 ---- ---- OPERATING ACTIVITIES Net income $220,644 $275,553 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 238,231 232,216 Deferred income taxes, net 7,468 62,450 Allowance for equity funds used during construction (2,912) (180) Deferred Plant Vogtle costs 28,407 9,039 Provision for separation benefits 76,312 - Gain on asset sales (22,230) (35,108) Other, net (22,312) (20,712) Changes in current assets and liabilities-- Receivables, net 61,464 36,405 Inventories (50,097) 4,769 Payables 8,059 (23,390) Taxes accrued (26,663) 32,575 Other 21,408 (22,346) -------- -------- NET CASH PROVIDED FROM OPERATING ACTIVITIES 537,779 551,271 -------- -------- INVESTING ACTIVITIES Property additions (283,718) (306,209) Sales of property 132,644 253,032 Other (26,013) (18,952) -------- -------- NET CASH USED FOR INVESTING ACTIVITIES (177,087) (72,129) -------- -------- FINANCING ACTIVITIES Proceeds-- Preferred stock - 75,000 First mortgage bonds - 935,000 Pollution control bonds 28,065 73,490 Retirements-- Preferred stock - (57,500) First mortgage bonds - (985,247) Pollution control bonds (28,155) (73,510) Other long-term debt (132) (295) Special deposits - redemption funds (133,559) (254,062) Interim obligations, net 18,103 71,299 Payment of preferred stock dividends (23,076) (26,850) Payment of common stock dividends (213,800) (200,500) Miscellaneous (1,803) (46,067) -------- -------- NET CASH USED FOR FINANCING ACTIVITIES (354,357) (489,242) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 6,335 (10,100) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,896 22,114 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,231 $ 12,014 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION-- Interest (net of amount capitalized) $167,995 $239,600 Income taxes 158,583 63,439
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements. 31 32 GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- UTILITY PLANT: Plant in service (Note C) $13,882,445 $13,743,521 Less accumulated provision for depreciation 3,968,856 3,822,344 ----------- ----------- 9,913,589 9,921,177 Nuclear fuel, at amortized cost 129,376 135,742 Construction work in progress 531,319 584,013 ----------- ----------- Total 10,574,284 10,640,932 ----------- ----------- OTHER PROPERTY AND INVESTMENTS: SEGCO, at equity 28,267 29,201 Nuclear decommissioning trusts (Note C) 54,282 37,937 Miscellaneous 35,043 31,941 ----------- ----------- Total 117,592 99,079 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents 12,231 5,896 Special deposits - redemption funds 133,559 - Receivables-- Customer accounts receivable 457,535 486,947 Other accounts and notes receivable 80,291 117,249 Affiliated companies 17,871 14,832 Accumulated provision for uncollectible accounts (5,300) (4,300) Fossil fuel stock, at average cost 161,254 111,620 Materials and supplies, at average cost 288,014 287,551 Prepayments 69,706 65,269 Vacation pay deferred 41,075 41,575 ----------- ----------- Total 1,256,236 1,126,639 ----------- ----------- DEFERRED CHARGES: Deferred charges related to income taxes 952,190 992,510 Deferred Plant Vogtle costs (Note F) 478,573 506,980 Debt expense and loss, being amortized 169,273 173,876 Miscellaneous 225,841 196,094 ----------- ----------- Total 1,825,877 1,869,460 ----------- ----------- TOTAL ASSETS $13,773,989 $13,736,110 =========== ===========
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements. 32 33 GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: 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 2,384,348 Premium on preferred stock 413 413 Retained earnings 1,299,531 1,316,447 ----------- ----------- 4,028,542 4,045,458 Preferred stock 692,787 692,787 Long-term debt 3,899,151 4,031,387 ----------- ----------- Total 8,620,480 8,769,632 ----------- ----------- CURRENT LIABILITIES: Long-term debt due within one year 144,017 10,543 Notes payable to banks 351,400 406,700 Commercial paper 148,930 75,527 Accounts payable-- Affiliated companies 40,315 38,115 Other 283,266 285,929 Customer deposits 46,220 45,922 Taxes accrued-- Federal and state income 31,099 31,639 Other 95,731 121,854 Interest accrued 117,534 110,497 Miscellaneous 119,294 104,587 ----------- ----------- Total 1,377,806 1,231,313 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 2,496,417 2,479,720 Accumulated deferred investment tax credits 465,715 478,334 Disallowed Plant Vogtle capacity buyback costs 57,244 63,067 Deferred credits related to income taxes 441,040 452,819 Miscellaneous 315,287 261,225 ----------- ----------- Total 3,775,703 3,735,165 ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $13,773,989 $13,736,110 =========== ===========
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements. 33 34 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS EARNINGS GEORGIA's earnings for the second quarter of 1994 declined slightly compared to the corresponding quarter of 1993. Net income after dividends on preferred stock was $139.4 million in the second quarter of 1994 and $141.2 million in the second quarter of 1993. The decline is due primarily to the gain recorded from the sale of Plant Scherer Unit 4 in June of 1993, partially offset by lower financing costs. See "Other Income" later in this discussion for further details. REVENUES Total operating revenues decreased compared to the second quarter of 1993 because of the decrease in energy sales to non-affiliated wholesale customers and the impact of a new rate tariff for territorial wholesale customers. Excluding fuel clause revenues, which represent the pass-through of fuel expenses and do not affect income, operating revenues for the second quarter of 1994 decreased $10.1 million, compared to the corresponding period of 1993. Retail - Retail energy sales for the second quarter of 1994 increased 3.1% primarily because of continued improvement in Georgia's economy and an increase in customers served. Residential, commercial and industrial energy sales increased 0.1%, 5.3% and 3.3%, respectively. Total non-fuel retail revenues increased $11.3 million. Wholesale - Energy sales to non-affiliated wholesale customers for the second quarter of 1994 decreased almost 70%, compared to the corresponding period of 1993. Capacity revenues from non-affiliated utilities outside the service area, which do affect earnings, were down $25.2 million. These capacity revenues decreased as scheduled, coinciding with GEORGIA completing the second and third sales in a series of four transactions for the sale of Plant Scherer Unit 4 in June of 1993 and 1994. The final transaction for the sale of this unit is scheduled for June 1995 and coincides with scheduled reductions in capacity revenues of approximately $19 million in 1995. Energy revenues from non-affiliated utilities outside the service area decreased $12 million. The energy component of contract sales is priced at approximately the variable production cost and does not materially affect earnings. Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from period to period depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. OPERATING EXPENSES Fuel and Purchased Power - Fuel expense decreased primarily because of lower generation and the displacement of coal-fired generation with lower cost nuclear generation. Purchased power expense for the second quarter of 1994 decreased primarily due to scheduled reductions 34 35 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) in capacity buyback payments to the co-owners of plants Vogtle and Scherer and, as discussed earlier, due to a new rate tariff for territorial wholesale customers which also resulted in decreased purchased power from these customers. See Note (F) to the Condensed Financial Statements herein for information regarding the levelization of capacity buyback expense for Plant Vogtle. In addition, GEORGIA purchased less energy from affiliated companies because of lower wholesale energy demands. Other - Other operation and maintenance expenses remained relatively constant compared to the second quarter of 1993. See Note (K) to the Condensed Financial Statements herein for information regarding workforce reduction programs instituted in the first quarter of 1994 by GEORGIA and SCS. The decrease in depreciation and amortization is due to the settlement of an IRS audit in May 1993. The settlement resulted in an increase in depreciation and amortization in the second quarter of 1993 due to the reversal of the amortization of certain investment tax credits. The settlement also resulted in interest charges and a reduction in tax expense applicable to other income due to the recognition of tax credits previously deferred. While the settlement resulted in GEORGIA paying additional taxes during the second quarter of 1993, there was no effect on net income. OTHER INCOME On June 1 of 1993 and 1994, GEORGIA completed the second and third sales in a series of four separate transactions to sell Plant Scherer Unit 4. The 1993 sale for 31.44% of the unit was made for $253 million and resulted in a pre-tax gain of $35.1 million ($18.4 million, after taxes). The 1994 sale for 16.55% of the unit was made for $133 million and resulted in a pre-tax gain of $21.7 million ($11.3 million, after taxes). Income taxes applicable to other income in the second quarter of 1993 were reduced as a result of the tax effect of the interest charges in the IRS settlement and the recognition of tax credits previously deferred. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AFUDC represents the cost of capital charged to utility plant under construction and is included in rate base. The equity portion of AFUDC represents non-cash income. The amount of AFUDC has increased because of GEORGIA's increased investment in the construction of combustion turbine peaking units scheduled for completion in 1994 and 1995. Four of these units began commercial operation in 1994. Based upon GEORGIA's construction budget, AFUDC is estimated to total $19 million in 1994 and $27 million in 1995. 35 36 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK Interest charges and preferred stock dividends have declined due to refinancing efforts over the past twelve months. Also, GEORGIA used the proceeds from the Plant Scherer sales in 1993 and 1994 to redeem high cost securities. As discussed earlier, the higher amount of other interest charges in the second quarter of 1993 was due to the interest charges incurred from the settlement of the IRS audit. FUTURE EARNINGS POTENTIAL The results of operations discussed above are not necessarily indicative of future earnings. The level of future earnings is contingent upon numerous factors ranging from regulatory matters to growth in energy sales. 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 GEORGIA s service area. Pursuant to an Integrated Resource Plan approved by the Georgia PSC, GEORGIA has implemented various demand-side option programs and had been authorized by the Georgia PSC to recover associated program costs through rate riders. In October 1993, a superior court judge ruled that recovery of these costs through rate riders was unlawful. GEORGIA ceased collection of the rate riders and the Georgia PSC allowed the deferral of program costs pending the final outcome of this matter. In July 1994, the Georgia Court of Appeals reversed the lower court's ruling concerning the rate riders. For additional information on this matter, see Note (H) to the Condensed Financial Statements herein. The IRS has notified SOUTHERN that its tax accounting for the sale by GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax deficiency and interest arising from this issue amount to approximately $30 million and $33 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid, therefore only the interest could impact future income. See Note (I) to the Condensed Financial Statements herein for further discussion of this matter. In compliance with the recently enacted Georgia Hazardous Site Response Act, the State of Georgia was required to compile an inventory of all sites where hazardous wastes, constituents or substances have been disposed or released in quantities deemed reportable by the State. In developing this list, the State of Georgia identified several hundred properties throughout the State, including 23 sites which may require environmental remediation by GEORGIA. If all sites were required to be remediated, GEORGIA could incur expenses of up to $25 million in additional clean-up costs and construction expenditures of up to $100 million. See Note (M) to the Condensed Financial Statements herein for further information on this matter. 36 37 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) The addition of new peaking capacity in 1994 and 1995, as well as the Rocky Mountain pumped storage hydroelectric project in 1995, will result in increased operation, maintenance and depreciation expense. GEORGIA is scheduled to sell its remaining ownership interest (16.55%) in Plant Scherer Unit 4 to Florida Power & Light and the Jacksonville Electric Authority in June 1995. This transaction will generate approximately $130 million in cash, including an estimated after-tax gain of approximately $10 million. This transaction coincides with scheduled reductions in capacity sales to these utilities under wholesale power contracts. OPC and MEAG have filed joint complaints in two separate venues seeking to recover from GEORGIA approximately $16.5 million in alleged overcharges, plus approximately $6.3 million in interest. See Note (L) to the Condensed Financial Statements herein for further discussion of this matter. The enactment of the Energy Act will have a profound effect on the future of the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management s Discussion and Analysis in GEORGIA s 1993 Annual Report on Form 10-K. The FERC has initiated a proceeding concerning the equity returns on wholesale power and transmission contracts. Management does not believe that the final outcome of this proceeding will have a material adverse effect on earnings. See Note 3 to GEORGIA's financial statements in Item 8 to GEORGIA s 1993 Annual Report on Form 10-K for further information on this proceeding. As described in Note (G) to the Condensed Financial Statements herein, GEORGIA faces an uncertainty with respect to the actions of regulators regarding the recovery of GEORGIA's investment in the Rocky Mountain pumped storage hydroelectric project. The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements. In response to these questions, the Financial Accounting Standards Board has decided to review the accounting for nuclear decommissioning. If current electric utility industry practices for such decommissioning costs are changed: (1) annual provisions for decommissioning could increase and (2) the total estimated cost for decommissioning may be required to be recorded as a liability on the balance sheet. GEORGIA does not believe that such changes, if required, would have a significant adverse effect on results of operations due to its current and expected future ability to recover decommissioning costs through rates. Further discussion of nuclear decommissioning costs is made in Note (C) to the Condensed Financial Statements herein. 37 38 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION OVERVIEW The principal changes in GEORGIA's financial condition during the first six months of 1994 were additions of $284 million to utility plant, the commercial operation of four 80-megawatt combustion turbine peaking units, the sale of a portion of Plant Scherer Unit 4 and recognition of the liability associated with the implementation of workforce reduction programs. The funds needed for gross property additions are currently provided from operations. See GEORGIA's Condensed Statements of Cash Flows for further details. CONSTRUCTION AND OTHER CAPITAL REQUIREMENTS Estimated construction expenditures for the years 1994 through 1996 are $688 million, $555 million and $629 million, respectively. These estimated expenditures reflect planned but unidentified reductions of $63 million in 1995 and $85 million in 1996 under GEORGIA's business stategy to curtail growth in costs. Additionally, based on GEORGIA s preliminary energy and demand forecast for 1995 and beyond, GEORGIA has canceled the construction of eight combustion turbine generating units originally scheduled for completion by 1997. As a result, estimated construction expenditures will be reduced by $4 million in 1995 and $140 million in 1996 from the estimates shown above. The Clean Air Act will have a significant impact on the capital requirements of the Southern electric system. This legislation, as well as other legislation and regulations are described under "Environmental Issues" in Item 7 - Management's Discussion and Analysis in GEORGIA's 1993 Annual Report on Form 10-K. As a result of requirements by the NRC, GEORGIA has established external sinking funds for the purpose of funding nuclear decommissioning costs. For 1994 through 1996, the amount to be funded for GEORGIA totals $16 million annually. For additional information concerning nuclear decommissioning costs, see Note (C) to the Condensed Financial Statements herein. Cash requirements for long-term debt maturities and redemptions total approximately $144.0 million for the twelve months ending June 30, 1995. However, of this amount, $133.6 million is on deposit with trustees and specifically designated to redeem certain securities. SOURCES OF FUNDS GEORGIA expects to meet future capital requirements primarily using funds from operations and, if needed, by the issuance of new debt and equity securities, term loans and short-term borrowings. Cash from operations for the first six months of 1994 decreased, as compared to the corresponding period in 1993, primarily because of the receipt in 1993 of cash payments from Gulf States as partial settlement of litigation and higher estimated income tax payments in 1994. 38 39 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) GEORGIA must comply with coverage requirements of its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. GEORGIA'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. To meet short-term cash needs and contingencies, GEORGIA had approximately $393 million of unused credit arrangements with banks at the beginning of the third quarter of 1994. Additionally, the completion of the remaining transaction for the sale of Plant Scherer Unit 4 will generate approximately $130 million in 1995. 39 40 ARTHUR ANDERSEN & CO. Exhibit 1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO GEORGIA POWER COMPANY: We have reviewed the accompanying condensed balance sheet of GEORGIA POWER COMPANY (a Georgia corporation) as of June 30, 1994, and the related condensed statements of income for the three-month, six-month and twelve-month periods ended June 30, 1994 and 1993, and the condensed statements of cash flows for the six-month periods ended June 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. As more fully discussed in Note (G) to the Condensed 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 presently be determined. Accordingly, no provision for any writedown of the costs associated with the Rocky Mountain facility resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying Condensed Financial Statements. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1993 (not presented herein), and, in our report dated February 16, 1994, we included an explanatory paragraph which describes an uncertainty with respect to the actions of the regulators regarding the recoverability of the Company's investment in the Rocky Mountain pumped storage hydroelectric project. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1993, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ ARTHUR ANDERSEN & CO. Atlanta, Georgia August 5, 1994 40 41 GULF POWER COMPANY 41 42 GULF POWER COMPANY MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of GULF included herein have been prepared by GULF, without audit, pursuant to the rules and regulations of the SEC. In the opinion of GULF's management, the information regarding GULF furnished herein reflects all adjustments (which included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although GULF believes that the disclosures regarding GULF are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in GULF's latest annual report on Form 10-K. 42 43 GULF POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, -------------- -------------- -------------- 1994 1993 1994 1993 1994 1994 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $140,664 $135,337 $274,893 $258,170 $576,700 $551,594 Revenues from affiliates 6,105 3,526 9,964 7,729 25,401 21,547 -------- -------- -------- -------- -------- -------- Total operating revenues 146,769 138,863 284,857 265,899 602,101 573,141 -------- -------- -------- -------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 41,163 40,682 77,104 77,350 170,239 176,910 Purchased power from non-affiliates 1,631 312 3,699 581 7,504 1,272 Purchased power from affiliates 3,983 8,471 12,774 16,913 28,134 30,791 Other 33,148 26,073 63,602 48,820 123,946 100,724 Maintenance 17,177 16,112 28,159 29,234 44,929 50,979 Depreciation and amortization 13,937 13,743 27,974 27,414 55,869 54,294 Taxes other than income taxes 10,366 9,238 20,645 18,755 42,094 38,585 Federal and state income taxes 5,407 4,670 11,789 9,624 34,895 29,002 -------- -------- -------- -------- -------- -------- Total operating expenses 126,812 119,301 245,746 228,691 507,610 482,557 -------- -------- -------- -------- -------- -------- OPERATING INCOME 19,957 19,562 39,111 37,208 94,491 90,584 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 112 86 272 109 675 119 Interest income 504 285 763 682 1,409 2,020 Other, net (16) (48) (168) (292) (1,114) (1,700) Gain on sale of investment securities - - - 3,820 - 3,820 Income taxes applicable to other income (193) (65) (257) (1,541) 363 (863) -------- -------- -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 20,364 19,820 39,721 39,986 95,824 93,980 -------- -------- -------- -------- -------- -------- INTEREST CHARGES: Interest on long-term debt 6,877 8,285 13,748 15,745 29,347 33,036 Allowance for debt funds used during construction (191) (204) (333) (264) (524) (298) Interest on notes payable 416 324 658 582 947 1,002 Amortization of debt discount, premium and expense, net 446 312 904 622 1,694 1,153 Other interest charges 2,455 2,404 2,810 2,780 2,910 3,512 -------- -------- -------- -------- -------- -------- Net interest charges 10,003 11,121 17,787 19,465 34,374 38,405 -------- -------- -------- -------- -------- -------- NET INCOME 10,361 8,699 21,934 20,521 61,450 55,575 DIVIDENDS ON PREFERRED STOCK 1,475 1,387 2,931 2,783 5,875 5,443 -------- -------- -------- -------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 8,886 $ 7,312 $ 19,003 $ 17,738 $ 55,575 $ 50,132 ======== ======== ======== ======== ======== ========
The accompanying notes as they relate to GULF are an integral part of these condensed statements. 43 44 GULF POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30, -------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $21,934 $20,521 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 45,434 34,828 Deferred income taxes, net (2,861) (2,948) Allowance for equity funds used during construction (272) (109 Other, net 6,970 874 Changes in certain current assets and liabilities-- Receivables, net (7,120) 8,500 Inventories (3,017) (11,939) Payables 2,396 954 Other 20 7,515 ------- ------- Net Cash Provided From Operating Activities 63,484 58,196 ------- ------- INVESTING ACTIVITIES: Gross property additions (47,331) (32,788) Other (3,386) (16,016) ------- ------- Net Cash Used For Investing Activities (50,717) (48,804) ------- ------- FINANCING ACTIVITIES: Proceeds: First mortgage bonds - 15,000 Pollution control bonds - 45,550 Other long-term debt 32,108 - Retirements: Preferred stock subject to mandatory redemption (1,000) (1,000) First mortgage bonds (48,856) (19,092) Pollution control bonds - (125) Other long-term debt (17,520) (5,066) Special deposits-redemption funds - (34,448) Notes payable, net 43,447 17,500 Payment of preferred stock dividends (2,931) (2,783) Payment of common stock dividends (21,900) (20,800) Miscellaneous (912) (1,581) ------- ------- Net Cash Used For Financing Activities (17,564) (6,845) ------- ------- NET CHANGE IN CASH AND CASH EQUIVALENTS (4,797) 2,547 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,576 1,204 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 779 $ 3,751 ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amounts capitalized) $15,553 $15,647 Income taxes 13,467 13,418
The accompanying notes as they relate to GULF are an integral part of these condensed statements. 44 45 GULF POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- UTILITY PLANT: Plant in service, at original cost $1,625,820 $1,611,704 Less accumulated provision for depreciation 629,781 610,542 ---------- ---------- 996,039 1,001,162 Construction work in progress 58,528 34,591 ---------- ---------- Total 1,054,567 1,035,753 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 9,287 13,242 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 779 5,576 Receivables-- Customer accounts receivable 63,511 57,226 Other accounts and notes receivable 2,761 5,904 Affiliated companies 5,229 1,241 Accumulated provision for uncollectible accounts (458) (447) Fuel stock, at average cost 24,905 20,652 Materials and supplies, at average cost 35,154 36,390 Current portion of deferred coal contract costs 4,866 12,535 Regulatory clauses under recovery 7,559 3,244 Prepayments 1,502 2,160 Vacation pay deferred 4,022 4,022 ---------- ---------- Total 149,830 148,503 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 30,896 31,334 Debt expense and loss, being amortized 21,336 21,247 Deferred coal contract costs 45,454 52,884 Miscellaneous 6,124 4,846 ---------- ---------- Total 103,810 110,311 ---------- ---------- TOTAL ASSETS $1,317,494 $1,307,809 ========== ==========
The accompanying notes as they relate to GULF are an integral part of these condensed statements. 45 46 GULF POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: Common stock equity-- Common stock (without par value)--authorized and outstanding 992,717 shares $ 38,060 $ 38,060 Paid-in capital 218,282 218,282 Premium on preferred stock 81 81 Retained earnings 154,826 157,773 ---------- ---------- 411,249 414,196 Preferred stock 89,602 89,602 Preferred stock subject to mandatory redemption 500 1,000 Long-term debt 363,232 369,259 ---------- ---------- Total 864,583 874,057 ---------- ---------- CURRENT LIABILITIES: Preferred stock due within one year 500 1,000 Long-term debt due within one year 13,443 41,552 Notes payable 49,500 6,053 Accounts payable-- Affiliated companies 10,689 18,560 Other 24,505 20,139 Customer deposits 14,817 15,082 Taxes accrued-- Federal and state income 9,203 10,330 Other 11,226 2,685 Interest accrued 6,327 5,420 Regulatory clauses over recovery - 840 Vacation pay accrued 4,022 4,022 Miscellaneous 4,386 8,527 ---------- ---------- Total 148,618 134,210 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 153,317 151,743 Deferred credits related to income taxes 74,571 76,876 Accumulated deferred investment tax credits 39,578 40,770 Accumulated provision for property damage 11,344 10,509 Accumulated provision for postretirement benefits 12,554 10,749 Miscellaneous 12,929 8,895 ---------- ---------- Total 304,293 299,542 ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $1,317,494 $1,307,809 ========== ==========
The accompanying notes as they relate to GULF are an integral part of these condensed statements. 46 47 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS EARNINGS GULF's net income after dividends on preferred stock for the second quarter of 1994 was $8.9 million, compared to $7.3 million for the same period of 1993. The improvement in earnings was primarily due to increased revenues and lower capital costs. REVENUES Retail energy sales for the second quarter of 1994 increased 2.0% over the corresponding period of 1993 due primarily to the mild temperatures experienced during the second quarter of 1993 and an increase in the number of customers served. However, this increase in retail energy sales was reduced because GULF's formerly largest industrial customer began operating its co-generation facility in August 1993. Wholesale energy sales to non-affiliates decreased slightly with capacity revenues $0.3 million lower, compared to the second quarter of 1993. EXPENSES Fuel expenses for the second quarter of 1994 increased over the same period of 1993 due to a 17.6% increase in generation. However, because GULF renegotiated, bought out or otherwise terminated various coal supply contracts, the average cost of fuel consumed decreased. Purchased power transactions (both sales and purchases) among the affiliated companies within the Southern electric system will vary from period to period depending on demand and the availability and cost of generating resources at each company. Other operation expenses increased because of the recognition of higher costs associated with the buyouts and renegotiation of coal supply contracts. The expenses recognized are based, in part, on the amount of fuel consumed at the generating plants. These costs are recoverable through the fuel clause and, thus, have no impact on earnings. Also, other operation expenses were increased due to the recognition of higher employee benefit costs. Maintenance expenses increased because of the scheduling of maintenance on production facilities. Taxes other than income taxes rose because of higher revenues and additions to plant. The increase in income tax expense is attributable to the federal tax rate increase enacted in August 1993 and higher earnings. INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK The decrease in interest on long-term debt reflects GULF's efforts to decrease its capital costs. GULF, in response to the low interest rate levels prevailing during 1992 and 1993, refinanced a significant portion of its long-term debt and preferred stock. To the extent it is economically feasible, GULF will continue its efforts to lower its capital costs. FUTURE EARNINGS POTENTIAL The results of operations discussed above 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. 47 48 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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, customer growth, and the rate of economic growth in GULF's service area. The enactment of the Energy Act will have a profound effect on the future of the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in GULF's 1993 Annual Report on Form 10-K. See Note 3 to the financial statements in Item 8 in GULF's 1993 Annual Report on Form 10-K for a discussion of the hearings ordered by the FERC regarding the reasonableness of the return on common equity on certain of the Southern electric system's wholesale rate schedules and contracts. Also, see Note (J) to the Condensed Financial Statements herein for a discussion of a suit filed against GULF concerning the transportation of coal by barge. Compliance costs related to the Clean Air Act could reduce earnings if such increased costs are not fully recovered. The Clean Air Act is discussed further under "Environmental Matters" in Item 7 - Management's Discussion and Analysis in GULF's 1993 Annual Report on Form 10-K. See Note 3 to the financial statements in Item 8 in GULF's 1993 Annual Report on Form 10-K for a discussion of the Environmental Cost Recovery clause which provides for the expected recovery of such costs. FINANCIAL CONDITION OVERVIEW The major change in GULF's financial condition during the first six months of 1994 was gross property additions of $47.3 million. The principal sources of funds for these additions and other capital requirements were provided from operations and an increase in notes payable. See the Condensed Statements of Cash Flows for further details. CAPITAL REQUIREMENTS FOR CONSTRUCTION GULF's gross property additions, including those amounts related to environmental compliance, are estimated to total approximately $200 million for the three years 1994 through 1996 ($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 Environmental Cost Recovery clause. Actual construction costs may vary from these estimates 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. 48 49 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) Various environmental legislation and other related regulations are described in "Environmental Matters" in Item 7 - Management's Discussion and Analysis in GULF's 1993 Annual Report on Form 10-K. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. In addition to the funds required for the construction program, $13.9 million will be required by June 30, 1995, in connection with maturities and redemptions of long-term debt and preferred stock subject to mandatory redemption. This amount includes approximately $9.0 million of long-term notes payable issued to refinance the termination of a coal supply contract. At June 30, 1994, GULF had $0.8 million of cash and $38 million of unused credit arrangements with banks to meet its short-term cash needs. GULF had $49.5 million of short-term bank borrowings outstanding at June 30, 1994. The increase in short-term indebtedness is seasonal and the amount outstanding at the end of summer should be appreciably lower. 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 and preferred stock, and capital contributions from SOUTHERN. GULF is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. GULF's coverage ratios are sufficient to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which GULF will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. 49 50 MISSISSIPPI POWER COMPANY 50 51 MISSISSIPPI POWER COMPANY MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of MISSISSIPPI included herein have been prepared by MISSISSIPPI, without audit, pursuant to the rules and regulations of the SEC. In the opinion of MISSISSIPPI's management, the information regarding MISSISSIPPI furnished herein reflects all adjustments (which included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although MISSISSIPPI believes that the disclosures regarding MISSISSIPPI are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in MISSISSIPPI's latest annual report on Form 10-K. 51 52 MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, -------------- -------------- -------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $128,886 $113,636 $240,586 $211,105 $488,846 $437,782 Revenues from affiliates 2,906 4,128 5,340 8,211 12,647 11,850 -------- -------- -------- -------- -------- -------- Total operating revenues 131,792 117,764 245,926 219,316 501,493 449,632 -------- -------- -------- -------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 26,727 30,302 44,328 50,987 107,327 100,872 Purchased power from non-affiliates 819 280 1,785 513 3,471 1,148 Purchased power from affiliates 18,853 11,501 43,009 27,639 73,389 61,105 Other 25,091 24,713 46,472 46,547 100,306 95,628 Maintenance 12,624 8,713 25,770 22,307 47,464 45,896 Depreciation and amortization 8,945 8,787 18,244 17,630 33,713 34,523 Taxes other than income taxes 10,410 9,123 20,215 17,824 39,536 35,418 Federal and state income taxes 8,432 6,198 13,302 8,193 27,776 17,487 -------- -------- -------- -------- -------- -------- Total operating expenses 111,901 99,617 213,125 191,640 432,982 392,077 -------- -------- -------- -------- -------- -------- OPERATING INCOME 19,891 18,147 32,801 27,676 68,511 57,555 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 271 137 676 264 1,422 533 Interest income 28 121 56 253 321 677 Other, net 1,274 1,108 2,774 1,846 4,898 4,569 Income taxes applicable to other income (325) (789) (770) (1,039) (889) (1,717) -------- -------- -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 21,139 18,724 35,537 29,000 74,263 61,617 -------- -------- -------- -------- -------- -------- INTEREST CHARGES: Interest on long-term debt 5,614 4,404 10,126 8,534 19,280 18,883 Allowance for debt funds used during construction (332) (120) (702) (214) (1,276) (544) Interest on notes payable 425 422 751 535 1,217 809 Amortization of debt discount, premium and expense, net 372 330 729 589 1,402 1,001 Other interest charges 92 480 174 569 331 700 -------- -------- -------- -------- -------- -------- Net interest charges 6,171 5,516 11,078 10,013 20,954 20,849 -------- -------- -------- -------- -------- -------- NET INCOME 14,968 13,208 24,459 18,987 53,309 40,768 DIVIDENDS ON PREFERRED STOCK 1,224 1,356 2,449 2,711 5,139 5,125 -------- -------- -------- -------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 13,744 $ 11,852 $ 22,010 $ 16,276 $ 48,170 $ 35,643 ======== ======== ======== ======== ======== ========
( ) Denotes negative figure. The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements. 52 53 MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30, -------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 24,459 $ 18,987 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 24,211 23,750 Deferred income taxes, net (7,657) 1,539 Allowance for equity funds used during construction (676) (264) Other, net (2,409) 493 Change in certain current assets and liabilities-- Receivables, net (8,637) (3,254) Inventories (11,581) 28 Payables 340 (3,745) Taxes accrued (729) (11,119) Other 4,794 (1,997) -------- -------- Net cash provided from operating activities 22,115 24,418 -------- -------- INVESTING ACTIVITIES: Gross property additions (58,624) (59,639) Other (17,012) 545 -------- -------- Net cash used for investing activities (75,636) (59,094) -------- -------- FINANCING ACTIVITIES: Proceeds-- Capital contributions from parent company 25,000 30,000 First mortgage bonds 35,000 70,000 Pollution control bonds - 13,000 Other long-term debt 50,310 - Retirements-- First mortgage bonds (32,371) (51,300) Other long-term debt (4,560) (5,279) Notes payable, net 3,000 (7,000) Payment of preferred stock dividends (2,449) (2,711) Payment of common stock dividends (17,000) (14,400) Miscellaneous (1,182) (2,686) -------- -------- Net cash provided (used) from financings 55,748 29,624 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 2,227 (5,052) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 878 7,417 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,105 $ 2,365 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 9,157 $ 8,505 Income taxes 8,308 7,841
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements. 53 54 MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- -------------- UTILITY PLANT: Plant in service, at original cost $1,346,195 $1,238,847 Less accumulated provision for depreciation 470,247 462,725 ---------- ---------- Total 875,948 776,122 Construction work in progress 51,065 108,063 ---------- ---------- Total 927,013 884,185 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 8,815 11,289 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 3,105 878 Receivables-- Customer accounts receivable 39,774 31,376 Other accounts and notes receivable 5,281 5,581 Affiliated companies 7,035 6,698 Accumulated provision for uncollectible accounts (535) (737) Fuel stock, at average cost 19,033 11,185 Materials and supplies, at average cost 24,878 21,145 Current portion of deferred fuel charges 672 440 Prepayments 5,875 7,843 Vacation pay deferred 4,797 4,797 ---------- ---------- Total 109,915 89,206 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 25,220 25,267 Deferred fuel charges 13,500 17,520 Debt expense and loss, being amortized 11,497 11,666 Deferred early retirement program costs (Note K) 15,375 - Miscellaneous 13,559 10,073 ---------- ---------- Total 79,151 64,526 ---------- --------- TOTAL ASSETS $1,124,894 $1,049,206 ========== ==========
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements. 54 55 MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: Common stock equity-- Common stock (without par value), authorized 1,130,000 shares, outstanding 1,121,000 shares $ 37,691 $ 37,691 Paid-in capital 179,362 154,362 Premium on preferred stock 372 372 Retained earnings 135,794 129,343 ---------- ---------- 353,219 321,768 Cumulative preferred stock 74,414 74,414 Long-term debt 306,627 250,391 ---------- ---------- Total 734,260 646,573 ---------- ---------- CURRENT LIABILITIES: Long-term debt due within one year 10,938 19,345 Notes payable 43,000 40,000 Accounts payable-- Affiliated companies 8,744 10,197 Other 35,532 50,731 Customer deposits 2,766 2,786 Taxes accrued-- Federal and state income 9,613 186 Other 16,796 26,952 Interest accrued 4,792 4,237 Miscellaneous 14,996 14,120 ---------- ---------- Total 147,177 168,554 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 118,404 123,206 Accumulated deferred investment tax credits 31,972 32,710 Deferred credits related to income taxes 47,147 48,228 Accumulated provision for property damage 10,928 10,538 Miscellaneous 35,006 19,397 ---------- ---------- Total 243,457 234,079 ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $1,124,894 $1,049,206 ========== ==========
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements. 55 56 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS NET INCOME MISSISSIPPI's net income after dividends on preferred stock for the second quarter of 1994 was $13.7 million, compared to $11.9 million for the corresponding period of 1993. Net income rose primarily because of higher retail and territorial wholesale energy sales, retail rate increases under PEP and the ECO Plan and a wholesale rate increase. REVENUES Revenues for the second quarter of 1994 increased, compared to the same period of 1993, because of an increase of 10.2% in retail energy sales, a 15.6% increase in territorial wholesale energy sales, the retail rate increases granted under PEP effective July 1993 and the ECO Plan effective in April 1994, and a wholesale rate increase effective in April 1994. The increase in retail energy sales was due to an improving economy in Southeast Mississippi, an increase in the number of customers served and weather influences. Energy sales to residential customers increased by 8.0% and to commercial customers by 12.9%, with the latter reflecting sales to an increasing number of casinos within MISSISSIPPI's service area. Energy sales to industrial customers increased 9.9%. EXPENSES Fuel expenses decreased and purchased power expenses increased in the second quarter of 1994, compared to the corresponding period of 1993, because of lower generation, which stemmed from the timing of maintenance on generating facilities. Purchased power transactions (both sales and purchases) among the affiliated companies within the Southern electric system will vary from period to period depending on demand and the availability and cost of generating resources at each company. Taxes other than income taxes increased because of additions to utility plant and higher revenues. The increase in income tax expense reflects the increase in earnings and the federal tax rate increase enacted in August 1993. The increase in interest expense was due to the sale or issuance of additional debt instruments. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AFUDC represents the cost of capital charged to utility plant under construction. The equity portion of AFUDC represents non-cash income. However, when facilities are completed and included in rate base, previously capitalized amounts increase cash flow because revenues are higher as a result of the increased rate base and additional depreciation expense. In May 1994, MISSISSIPPI began commercial operation of a 74.6-megawatt combustion turbine unit whose entire output is dedicated to a single industrial customer. The recording of AFUDC for a construction project ceases upon commercial operation of the project. 56 57 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) FUTURE EARNINGS POTENTIAL The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings is contingent upon numerous factors ranging from regulatory matters to growth in energy sales. Operating revenues will be affected by changes in rates under the PEP and ECO plans. The PEP has proven to be a stabilizing force on electric rates, with only moderate changes in rates taking place. Also see Note (B) to the Condensed Financial Statements herein for information regarding FERC's review of equity returns. MISSISSIPPI's 1994 annual filing under the ECO Plan with the Mississippi PSC resulted in an approved annual revenue requirement increase of $7.6 million, effective in April 1994. The FERC approved MISSISSIPPI's wholesale rate increase petition for $3.6 million, effective April 1994. MISSISSIPPI initiated an early retirement incentive program in April 1994. The costs associated with this program, as well as MISSISSIPPI's pro rata share of a similar program at SCS, have been deferred. For further information on these programs and the accounting treatment, see Note (K) to the Condensed Financial Statements herein. 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 the rate of economic growth in MISSISSIPPI's service area, customer growth, competition, weather, changes in contracts with neighboring utilities, energy conservation practiced by customers, and the elasticity of demand. The enactment of the Energy Act will have a profound effect on the future of the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in MISSISSIPPI's 1993 Annual Report on Form 10-K. FINANCIAL CONDITION OVERVIEW During the first six months of 1994, gross property additions were $58.6 million. The funds for these additions and other capital requirements were derived primarily from internal sources, the sale of $35 million of first mortgage bonds, the issuance of $50 million of long-term notes payable and the receipt of $25 million in capital contributions. See the Condensed Statements of Cash Flows for further details. At June 30, 1994, cash totaled approximately $3.1 million and MISSISSIPPI had $96 million of unused credit arrangements with banks to meet short-term cash needs. MISSISSIPPI had $43 million of notes payable outstanding at quarter-end. It is MISSISSIPPI s strategy to maintain a permanent 57 58 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) layer of short-term debt, approximately $40 million through the end of 1994, consistent with its overall risk capital strategy. CAPITAL REQUIREMENTS MISSISSIPPI's gross property additions for the next three years are estimated to be $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 and upgrading existing facilities. Revisions may be necessary because of factors such as revised load projections, the availability and cost of capital and changes in environmental regulations. In addition to the funds required for the construction program, approximately $10.9 million will be required by June 30, 1995, for maturities of long-term debt. 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 the receipt of additional capital contributions from SOUTHERN. MISSISSIPPI is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. MISSISSIPPI's coverage ratios are sufficiently high to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which MISSISSIPPI will be able to issue in the future will depend upon market conditions and other factors prevailing at that time. ENVIRONMENTAL MATTERS Changes in environmental regulations could substantially increase the Southern electric system's capital requirements and operating costs. The acid rain compliance provision of the Clean Air Act will have a significant impact on the Southern electric system. This legislation, as well as other legislation and regulations, are described under "Environmental Matters" in Item 7 - Management's Discussion and Analysis in MISSISSIPPI's 1993 Annual Report on Form 10-K. The full impact of these requirements cannot be determined at this time pending the development and implementation of applicable regulations. MISSISSIPPI's management believes that the ECO Plan will provide for retail recovery of the Clean Air Act costs. MISSISSIPPI must comply with environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, MISSISSIPPI could incur costs to clean up properties currently or previously owned. Upon identifying potential sites MISSISSIPPI conducts studies to determine the extent of any required clean-up costs. Sites with potential for remediation are being investigated, but no prediction can presently be made regarding the extent, if any, of contamination or possible cleanup. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. 58 59 SAVANNAH ELECTRIC AND POWER COMPANY 59 60 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS The condensed financial statements of SAVANNAH included herein have been prepared by SAVANNAH, without audit, pursuant to the rules and regulations of the SEC. In the opinion of SAVANNAH's management, the information regarding SAVANNAH furnished herein reflects all adjustments (which, except for the provision for separation benefits recorded in the third and fourth quarters of 1993 and the first quarter of 1994, included only normal recurring adjustments) necessary to present fairly the results for the periods ended June 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although SAVANNAH believes that the disclosures regarding SAVANNAH are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in SAVANNAH's latest annual report on Form 10-K. 60 61 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Six Months For the Twelve Months Ended June 30, Ended June 30, Ended June 30, -------------- -------------- -------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $55,097 $52,356 $101,497 $95,104 $222,402 $199,802 Revenues from affiliates 1,280 519 1,597 644 3,386 1,824 ------- ------- -------- ------- -------- -------- Total operating revenues 56,377 52,875 103,094 95,748 225,788 201,626 ------- ------- -------- ------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 7,186 7,667 9,325 8,683 25,618 16,475 Purchased power from non-affiliates 1,084 114 1,443 205 2,031 439 Purchased power from affiliates 13,652 11,971 28,881 25,810 59,345 55,116 Provision for separation benefits - - 551 - 5,006 - Other 10,385 9,736 19,262 19,292 41,124 38,367 Maintenance 2,984 3,030 5,631 6,309 12,838 14,263 Depreciation and amortization 4,372 4,079 8,622 8,157 16,932 16,604 Taxes other than income taxes 2,705 2,630 5,267 5,110 11,292 10,602 Federal and state income taxes 4,454 4,347 7,427 6,758 16,108 15,336 ------- ------- -------- ------- -------- -------- Total operating expenses 46,822 43,574 86,409 80,324 190,294 167,202 ------- ------- -------- ------- -------- -------- OPERATING INCOME 9,555 9,301 16,685 15,424 35,494 34,424 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 290 108 677 221 1,413 394 Other, net (266) (237) (497) (477) (1,651) (1,350) Income taxes applicable to other income 104 89 192 180 1,129 824 ------- ------- -------- ------- -------- -------- INCOME BEFORE INTEREST CHARGES 9,683 9,261 17,057 15,348 36,385 34,292 ------- ------- -------- ------- -------- -------- INTEREST CHARGES: Interest on long-term debt 3,134 2,321 6,286 4,667 12,315 9,829 Allowance for debt funds used during construction (375) (101) (875) (161) (1,412) (284) Amortization of debt discount, premium and expense, net 138 129 275 258 551 511 Other interest charges 154 226 260 404 434 631 ------- ------- -------- ------- -------- -------- Net interest charges 3,051 2,575 5,946 5,168 11,888 10,687 ------- ------- -------- ------- -------- -------- NET INCOME 6,632 6,686 11,111 10,180 24,497 23,605 DIVIDENDS ON PREFERRED STOCK 581 475 1,162 950 2,318 1,900 ------- ------- -------- ------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 6,051 $ 6,211 $ 9,949 $ 9,230 $ 22,179 $ 21,705 ======= ======= ======== ======= ======== ========
( ) Denotes red figure. The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 61 62 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Six Months Ended June 30, -------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 11,111 $ 10,180 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 9,351 8,926 Deferred taxes, net 2,290 700 Allowance for equity funds used during construction (677) (221) Other, net 575 (466) Changes in certain current assets and liabilities-- Receivables, net 7,434 (3,492) Inventories 561 777 Payables (13,918) 1,486 Taxes accrued 336 (817) Other 555 (1,055) -------- -------- Net Cash Provided From Operating Activities 17,618 16,018 -------- -------- INVESTING ACTIVITIES: Gross property additions (17,341) (23,619) Other (1,074) (671) -------- -------- Net Cash Used For Investing Activities (18,415) (24,290) -------- -------- FINANCING ACTIVITIES: Proceeds: Pollution control bonds - 4,085 Other long-term debt 8,500 10,000 Retirements: First mortgage bonds (5,065) - Pollution control bonds - (4,085) Other long-term debt (392) (449) Notes payable, net 9,000 10,000 Payment of preferred stock dividends (967) (950) Payment of common stock dividends (8,200) (10,000) Miscellaneous (74) (18) -------- -------- Cash Provided From (Used For) Financing Activities 2,802 8,583 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 2,005 311 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,915 1,788 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,920 $ 2,099 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid (received) during the period for-- Interest (net of amount capitalized) $ 5,542 $ 5,192 Income taxes 5,506 5,771
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 62 63 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- UTILITY PLANT: Plant in service, at original cost $678,208 $622,521 Less accumulated provision for depreciation 259,352 251,565 -------- -------- 418,856 370,956 Construction work in progress 10,102 49,797 -------- -------- Total 428,958 420,753 -------- -------- OTHER PROPERTY AND INVESTMENTS 1,791 1,793 -------- -------- CURRENT ASSETS: Cash and cash equivalents 5,920 3,915 Receivables-- Customer accounts receivable 21,948 18,551 Other accounts and notes receivable 478 790 Affiliated companies 173 12,924 Accumulated provision for uncollectible accounts (762) (762) Fuel cost under recovery 9,425 7,112 Fuel stock, at average cost 7,739 8,419 Materials and supplies, at average cost 9,477 9,358 Prepayments 5,324 4,849 -------- -------- Total 59,722 65,156 -------- -------- DEFERRED CHARGES: Premium on reacquired debt, being amortized 3,544 3,792 Deferred charges related to income taxes 24,117 24,890 Miscellaneous 11,631 10,803 -------- -------- Total 39,292 39,485 -------- -------- TOTAL ASSETS $529,763 $527,187 ======== ========
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 63 64 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At June 30, 1994 At December 31, (Unaudited) 1993 ----------- --------------- CAPITALIZATION: Common stock equity-- Common stock ($5 par value)-- authorized 16,000,000 shares; outstanding 10,844,635 shares $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 Additional minimum liability for under-funded pension obligations (2,121) (2,121) Retained earnings 95,146 93,479 -------- -------- 155,936 154,269 Preferred stock 35,000 35,000 Long-term debt 158,133 151,338 -------- -------- Total 349,069 340,607 -------- -------- CURRENT LIABILITIES: Long-term debt due within one year 772 4,499 Notes payable 12,000 3,000 Accounts payable-- Affiliated companies 5,482 6,041 Other 9,446 24,401 Customer deposits 4,716 4,714 Taxes accrued-- Federal and state income - 342 Other 1,865 1,187 Interest accrued 6,752 6,730 Vacation pay accrued 1,674 1,638 Pensions accrued 1,847 1,792 Work force reduction costs accrued 3,923 3,926 Miscellaneous 3,340 2,985 -------- -------- Total 51,817 61,255 -------- -------- DEFERRED CREDITS: Accumulated deferred income taxes 68,958 66,947 Accumulated deferred investment tax credits 14,969 15,301 Deferred credits related to income taxes 25,633 26,173 Deferred compensation plans 6,488 6,117 Deferred under-funded accrued benefit obligation 5,870 5,855 Miscellaneous 6,959 4,932 -------- -------- Total 128,877 125,325 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $529,763 $527,187 ======== ========
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 64 65 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS EARNINGS SAVANNAH's net income after dividends on preferred stock for the second quarter of 1994 dipped to $6.1 million, compared to $6.2 million in the corresponding period of 1993. The decrease in net income was primarily due to higher interest costs because of a greater amount of debt outstanding and the increase in the federal income tax rate. REVENUES Revenues for the second quarter of 1994 increased, compared to the corresponding period in 1993, due to higher retail energy sales. Energy sales to retail customers increased 2.6% due to an improving economy in SAVANNAH's service territory and an increase in the number of customers served. Wholesale energy sales to non-affiliated companies decreased, however, only the capacity revenues of such sales have any measurable effect on earnings. Capacity revenues fell $133,000. EXPENSES Fuel expenses during the second quarter of 1994 decreased, compared to those recorded in the second quarter of 1993, because of a 22.1% drop in generation. This was partially offset by an increase in the average cost of coal on the spot market (SAVANNAH has no long-term coal supply contracts) due to a coal miners strike and higher freight charges. Purchased power transactions (both sales and purchases) among the affiliated companies within the Southern electric system will vary from period to period depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. Other operation expenses increased due, in part, to the costs incurred to restore electric service which was interrupted by a severe storm in June 1994. Income taxes increased because of the higher federal income tax rates enacted in August 1993. The increases in interest on long-term debt and dividends on preferred stock reflect the sale by SAVANNAH in 1993 of $45 million of first mortgage bonds and $35 million of preferred stock. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AFUDC represents the cost of capital charged to utility plant under construction and is included in rate base. The equity portion of AFUDC represents non-cash income. In addition, when facilities are completed and included in rate base, previously capitalized amounts increase cash flow because revenues are higher as a result of the increased rate base and additional depreciation expense. The amount of AFUDC recorded has risen because of SAVANNAH's investment in the construction of two 80-megawatt combustion turbine peaking units. These units were placed in service in April and May 1994. 65 66 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) FUTURE EARNINGS POTENTIAL The results of operations discussed above 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. Compliance costs related to the Clean Air Act will reduce earnings if such increased costs cannot be offset. The Clean Air Act is discussed under "Capital Requirements for Construction" in Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993 Annual Report on Form 10-K. 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 SAVANNAH's service area. The enactment of the Energy Act will have a profound effect on the future of the electric utility industry. A discussion of the potential impact of the Energy Act and particularly its effect on competition is found under "Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993 Annual Report on Form 10-K. FINANCIAL CONDITION OVERVIEW During the first six months of 1994, SAVANNAH made gross property additions to utility plant of $17.3 million. The funds for these additions and other capital requirements came from an increase in short-term and long-term debt and from operating activities, principally from earnings and noncash charges to income such as depreciation. See the Condensed Statements of Cash Flows for further details. CAPITAL REQUIREMENTS FOR CONSTRUCTION SAVANNAH's construction program is budgeted at $98 million for the three years 1994 through 1996 ($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; the cost and efficiency of construction labor, equipment and materials; revised load projections and the cost of capital. The largest project during this period is the addition of two 80-megawatt combustion turbine units, which were placed in service in April and May 1994. Changes in environmental regulations could substantially increase the Southern electric system's capital requirements and operating costs. The acid rain compliance provision of the Clean Air Act will have a significant impact on the Southern electric system. This legislation, as well as other legislation and regulations, are described under "Environmental Matters" in Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993 Annual Report on Form 10-K. The full impact of these 66 67 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) requirements cannot be determined at this time, pending the development and implementation of applicable regulations. There can be no assurance that compliance costs will be recovered through corresponding increases in rates. SOURCES OF CAPITAL At June 30, 1994, SAVANNAH had $5.9 million in cash and cash equivalents and $20 million of unused credit arrangements with banks to meet its short-term cash needs. SAVANNAH had $12 million of short-term debt outstanding at quarter-end. The increase in short-term indebtedness is primarily seasonal and the amount outstanding is expected to be reduced by the end of the summer. SAVANNAH has received the authority from the SEC to have outstanding at any one time an amount of up to $70 million in short-term borrowings. 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 SOUTHERN. SAVANNAH is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. SAVANNAH's coverage ratios are sufficiently high to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which SAVANNAH will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. 67 68 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES ALABAMA POWER COMPANY GEORGIA POWER COMPANY GULF POWER COMPANY MISSISSIPPI POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT REGISTRANT APPLICABLE NOTES SOUTHERN A, B, C, D, E, F, G, H, I, J, K, L, M ALABAMA B, C, D, E, K GEORGIA B, C, D, F, G, H, I, K, L, M GULF B, J, K MISSISSIPPI B, K SAVANNAH K 68 69 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES ALABAMA POWER COMPANY GEORGIA POWER COMPANY GULF POWER COMPANY MISSISSIPPI POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS: (A) Reference is made to Item 3 - LEGAL PROCEEDINGS in the SOUTHERN system's combined Annual Report on Form 10-K for the year ended December 31, 1993 for a description of the proceedings related to a derivative action filed against certain current and former directors and officers of SOUTHERN. In April 1994, the Court of Appeals reversed the dismissal and remanded the case to the trial court, finding that allegations by the plaintiffs created a reasonable doubt that the board validly exercised its business judgment in refusing the earlier demand. (B) Reference is made to Note 3 to each of the registrant's, except SAVANNAH's notes to the financial statements in Item 8 in the SOUTHERN system's combined 1993 Annual Report on Form 10-K for a discussion of the hearings ordered by the FERC regarding the reasonableness of the return on common equity on certain of the Southern electric system's wholesale rate schedules and contracts. (C) For information regarding the expected costs of decommissioning nuclear facilities reference is made to Note (C) to the Condensed Financial Statements in the SOUTHERN system s combined Quarterly Report on Form 10-Q for March 31, 1994. (D) For information regarding nuclear insurance reference is made to Notes 13, 11 and 4 to the financial statements of SOUTHERN, ALABAMA and GEORGIA, respectively, in Item 8 in the SOUTHERN system s combined 1993 Annual Report on Form 10-K and Note (D) to the Condensed Financial Statements in the SOUTHERN system s combined Quarterly Report on Form 10-Q for March 31, 1994. During the second quarter of 1994, the by-laws of Nuclear Mutual Limited were amended whereby a member cannot receive a refund in the event insurance coverage is terminated. (E) Reference is made to Note 3 to the financial statements of SOUTHERN and ALABAMA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on Form 10-K for information with respect to a civil complaint filed regarding ALABAMA's financing of heat pumps and other merchandise. (F) Pursuant to orders from the Georgia PSC, GEORGIA deferred financing and depreciation costs under phase-in plans for Plant Vogtle units 1 and 2 until the allowed investment was fully reflected in rates as of October 1991. In addition, the Georgia PSC issued two separate accounting orders that required GEORGIA to defer substantially all operating and financing costs related to both units until rate orders addressed these costs. The Georgia PSC orders provide for recovery of deferred costs within 10 years. The Georgia PSC also ordered GEORGIA to levelize declining capacity buyback expense from the co-owners of the plant over a six-year period beginning 69 70 NOTES TO THE FINANCIAL STATEMENTS: (Continued) October 1991. The unamortized balance of these deferred costs at June 30, 1994, was $479 million. (G) Reference is made to Note 4 to the financial statements of SOUTHERN and GEORGIA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on Form 10-K for information concerning the uncertainty related to the actions of regulatory authorities with respect to the recovery of costs of the Rocky Mountain pumped storage hydroelectric project. The ultimate outcome of this matter cannot be determined at this time. (H) In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the Georgia PSC for recovery of GEORGIA's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the Georgia PSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. GEORGIA suspended collection of the demand-side conservation costs and appealed to the Georgia Court of Appeals, which reversed the court s decision as described below. In December 1993, the Georgia PSC approved GEORGIA's request for an accounting order allowing GEORGIA 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. GEORGIA's costs related to these conservation programs through June 1994 were $90 million of which $15 million has been collected and the remainder deferred. The estimated costs are $21 million for the remainder of 1994 and $43 million in 1995. In July 1994, the Georgia Court of Appeals, reversing the superior court decision discussed above, ruled that the Georgia PSC could lawfully provide for recovery of demand-side conservation program costs through rate riders. The opposing parties have filed notices of their intention to appeal to the Georgia Supreme Court. GEORGIA is continuing to defer program costs pending final resolution of this matter. 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 GEORGIA's Condensed Financial Statements. (I) In June 1994, a tax deficiency notice was received from the IRS for the years 1984 through 1987 in regards to the tax accounting by GEORGIA for a 1984 property transaction. The potential tax deficiency arising from this issue would amount to approximately $30 million of tax plus an additional $33 million of interest. The tax deficiency relates to a timing issue as to when taxes are paid, therefore only the interest portion could impact future income. Management believes that the IRS position is incorrect and will file a petition with the United States Tax Court to appeal the IRS position. 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 GEORGIA's Condensed Financial Statements. 70 71 NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued) (J) In August 1993, a complaint against GULF and SCS was filed in federal district court in Ohio by two companies with which GULF has contracted for the transportation by barge of certain of GULF's 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 Condensed Financial Statements. (K) During 1994, GEORGIA and SCS, the system service company, instituted work force reduction programs. The costs related to these programs amounted to approximately $75.9 million for GEORGIA and $25.7 million for SCS. The costs of the SCS work force reduction program were apportioned among the various entities that together form the Southern electric system. MISSISSIPPI instituted an early retirement incentive program in April 1994 and deferred the related costs of approximately $13.3 million. MISSISSIPPI has received authority from the Mississippi PSC to defer these costs, as well as its portion of the costs of a similar SCS program, and to amortize over a period not to exceed 60 months, beginning no later than January 1995. Additionally, SAVANNAH instituted a work force reduction program in late 1993 and incurred related charges of approximately $4.5 million. (L) In July 1994, OPC and MEAG filed a joint complaint with the FERC seeking to recover from GEORGIA an aggregate of approximately $16.5 million in alleged partial requirements rates overcharges, plus approximately $6.3 million in interest. OPC and MEAG claim that GEORGIA improperly reflected in such rates costs associated with capacity that had previously been sold to Gulf States pursuant to a unit power sales contract or, alternatively, that they should be allocated a portion of the proceeds received by GEORGIA as the result of a settlement with Gulf States of litigation arising out of such contract. (For information concerning the Gulf States settlement, see Note 8 and Note 3, respectively, to the financial statements of SOUTHERN and GEORGIA in Item 8 of the SOUTHERN system s combined 1993 Annual Report on Form 10-K. In August 1994, OPC and MEAG also filed a complaint in the Superior Court of Fulton County, Georgia, urging substantially the same claims and asking the court to hear the matter in the event the FERC declines jurisdiction. GEORGIA intends to contest the complaints filed against it. While the outcome of this matter cannot be determined, in management's opinion it will not have a material adverse effect on SOUTHERN's or GEORGIA's financial condition. (M) In compliance with the recently enacted Georgia Hazardous Site Response Act, the State of Georgia was required to compile an inventory of all known or suspected sites where hazardous wastes, constituents or substances have been disposed of or released in quantities deemed reportable by the State. In developing this list, the State of Georgia identified several hundred properties throughout the State, including 23 sites which may require environmental remediation by GEORGIA. The majority of these sites are electrical power substations and power generation facilities. GEORGIA has recognized $2 million in expenses for the anticipated clean-up cost for one site that GEORGIA plans to remediate. GEORGIA will conduct studies at each of the remaining sites to determine the extent of remediation and associated clean-up costs, if any, that may be required. GEORGIA has recognized $3 million in expenses for the anticipated cost of completing such studies. Any cost of remediating the remaining sites cannot presently be 71 72 NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued) determined until such studies are completed for each site, and the State of Georgia determines whether remediation is required. If all sites were required to be remediated, GEORGIA could incur expenses of up to $25 million in additional clean-up costs, and construction expenditures of up to $100 million to develop new waste management facilities or install additional pollution control devices. 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 GEORGIA's Condensed Financial Statements. 72 73 PART II - OTHER INFORMATION Item 1. Legal Proceedings. (1) Reference is made to the Notes to Condensed Financial Statements herein for information regarding certain legal and administrative proceedings in which SOUTHERN and its reporting subsidiaries are involved. (2) In May 1994, GEORGIA received a notice of violation from the NRC proposing a civil penalty in the amount of $200,000 based upon allegedly inaccurate and incomplete information relating to Plant Vogtle reported to the NRC in 1990. The NRC also issued demands for information regarding alleged performance failures by six individual employees to enable the NRC to determine whether additional enforcement actions are necessary. In its responses to the notice of violation, submitted to the NRC in August 1994, GEORGIA denied certain of the NRC's allegations and admitted others. GEORGIA further requested reconsideration of the level of the proposed civil penalty. GEORGIA has also furnished various information to the NRC in response to the demands described above. Item 4. Submission of Matters to a Vote of Security Holders. SOUTHERN SOUTHERN held its annual meeting of stockholders on May 25, 1994. The following resolutions were voted upon at this meeting. (1) A proposal requiring additional disclosure of executive compensation was defeated by a vote of 379,571,936 shares against; 87,991,908 shares for; and 13,986,686 shares abstaining. (2) A proposal seeking to limit executive compensation was defeated by a vote of 370,102,931 shares against; 95,431,564 shares for; and 16,016,838 shares abstaining. (3) A proposal to approve SOUTHERN's Outside Directors Stock Plan was adopted by a vote of 471,719,068 shares for; 48,780,681 shares against; and 13,957,376 shares abstaining. (4) A proposal to approve SOUTHERN's Productivity Plan for Executive Officers was adopted by a vote of 471,846,823 shares for; 50,114,948 shares against; and 12,494,954 shares abstaining. (5) The appointment of Arthur Andersen & Co. as independent auditors for the year 1994 was approved by a vote of 520,834,727 shares for; 8,758,096 shares against; 4,861,337 shares abstaining. 73 74 Item 4. Submission of Matters to a Vote of Security Holders. (Continued) (6) Each nominee for director of SOUTHERN received the requisite plurality of votes. The vote tabulation was as follows: Shares Shares Nominees For Withhold Vote ---------------------- ----------- ------------- Edward L. Addison 523,896,239 10,533,208 William P. Copenhaver 524,085,858 10,343,588 A. D. Correll 524,669,353 9,760,094 A. W. Dahlberg 524,854,567 9,574,879 Paul J. DeNicola 524,961,099 9,468,348 Jack Edwards 524,220,633 10,208,813 H. Allen Franklin 524,939,452 9,529,242 L. G. Hardman, III 524,981,164 9,448,282 Elmer B. Harris 524,631,660 9,837,034 Earl D. McLean, Jr. 524,706,020 9,723,426 William A. Parker, Jr. 524,808,858 9,659,836 William J. Rushton, III 524,748,248 9,681,199 Gloria M. Shatto 524,596,973 9,834,069 Herbert Stockham 524,800,208 9,629,238 ALABAMA ALABAMA held its annual common stockholders meeting on April 22, 1994, and the following persons were elected to serve as directors of ALABAMA: Whit Armstrong William V. Muse Philip E. Austin John T. Porter Margaret A. Carpenter Gerald H. Powell A. W. Dahlberg Robert D. Powers Peter V. Gregerson, Sr. John W. Rouse, Jr. Bill M. Guthrie William J. Rushton, III Elmer B. Harris James H. Sanford Crawford T. Johnson, III John Cox Webb, IV Carl E. Jones, Jr. John W. Woods Wallace D. Malone, Jr. All of the 5,608,955 outstanding shares of ALABAMA's common stock are owned by SOUTHERN and were voted for the election of such directors. 74 75 GEORGIA GEORGIA held its annual meeting of stockholders on May 18, 1994, and the following persons were elected to serve as directors of GEORGIA: Edward L. Addison James R. Lientz, Jr. Bennett A. Brown William A. Parker, Jr. William P. Copenhaver G. Joseph Prendergast A. W. Dahlberg Herman J. Russell William A. Fickling, Jr. Gloria M. Shatto H. Allen Franklin Robert Strickland L. G. Hardman, III William Jerry Vereen Warren Y. Jobe Thomas R. Williams All of the 7,761,500 outstanding shares of GEORGIA's common stock are owned by SOUTHERN and were voted for the election of such directors. GULF GULF held its annual stockholders meeting on June 28, 1994, and the following persons were elected to serve as directors of GULF: Reed Bell, Sr., M.D. W. Deck Hull, Jr. Travis J. Bowden C. Walter Ruckel Paul J. DeNicola Joseph K. Tannehill Fred C. Donovan, Sr. All of the 992,717 outstanding shares of GULF's common stock are owned by SOUTHERN and were voted for the election of such directors. MISSISSIPPI MISSISSIPPI held its annual stockholders meeting on April 5, 1994, and the following persons were elected to serve as directors of MISSISSIPPI: Paul J. DeNicola Earl D. McLean, Jr. Edwin E. Downer David M. Ratcliffe Robert S. Gaddis Gerald J. St. Pe Walter H. Hurt, III Leo W. Seal, Jr. Aubrey K. Lucas N. Eugene Warr All of the 1,121,000 outstanding shares of MISSISSIPPI's common stock are owned by SOUTHERN and were voted for the election of such directors. 75 76 SAVANNAH SAVANNAH held its annual stockholders meeting on May 17, 1994, and the following persons were elected to serve as directors of SAVANNAH: Helen Quattlebaum Artley Robert B. Miller, III Paul J. DeNicola James M. Piette Brian R. Foster Arnold M. Tenenbaum Arthur M. Gignilliat, Jr. Frederick F. Williams, Jr. Walter D. Gnann All of the 10,844,635 outstanding shares of SAVANNAH's common stock are owned by SOUTHERN and were voted for the election of such directors. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit 24 - Powers of Attorney and resolutions. (Designated in the SOUTHERN system's combined Form 10-K for the year ended December 31, 1993, File Nos. 1-3526, 1-3164, 1-6468, 0-2429, 0-6849 and 1-5072 as Exhibits 24(a), 24(b), 24(c), 24(d), 24(e) and 24(f), respectively, and incorporated herein by reference.) (b) Reports on Form 8-K. There were no Reports on Form 8-K filed during the second quarter of 1994. 76 77 SIGNATURES Pursuant to the requirements 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 (Principal Executive Officer) By W. L. Westbrook Financial Vice President (Principal Financial and Accounting Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 - -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. ALABAMA POWER COMPANY By Elmer B. Harris, President and Chief Executive Officer By William B. Hutchins, III, Executive Vice President (Principal Financial Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 77 78 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GEORGIA POWER COMPANY By H. Allen Franklin President and Chief Executive Officer (Principal Executive Officer) By Warren Y. Jobe Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 - ------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GULF POWER COMPANY By Travis J. Bowden, President and Chief Executive Officer By A. E. Scarbrough, Vice President - Finance (Principal Financial and Accounting Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 78 79 SIGNATURES Pursuant to the requirements 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 and Chief Executive Officer By Thomas A. Fanning, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 - -------------------------------------------------------------------------------- Pursuant to the requirements 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 Kirby R. Willis, Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: August 11, 1994 79 -----END PRIVACY-ENHANCED MESSAGE-----