-----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, EjuQf/b2G6Zko80+E46ZRmRADr8gdoZKDMouWXWVfNRBYkXYPs2mj+dp4bwUBFzF LTZU2a3tI1FbK/pGjzolkw== 0000950144-94-001977.txt : 19941116 0000950144-94-001977.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950144-94-001977 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE 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: 94559154 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: 94559155 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: 94559156 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: 94559157 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: 94559158 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: 94559159 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-Q 1 THE SOUTHERN COMPANY FORM 10-Q 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 September 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 OCTOBER 31, 1994 - ---------- ------------- ------------------- THE SOUTHERN COMPANY PAR VALUE $5 PER SHARE 653,416,983 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 4 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 61 Condensed Statements of Income 62 Condensed Statements of Cash Flows 63 Condensed Balance Sheets 64 Management's Discussion and Analysis of Results of Operations and Financial Condition 66 NOTES TO THE CONDENSED FINANCIAL STATEMENTS 69
3 4 Table of Contents (Continued)
PAGE PART II Item 1. Legal Proceedings 74 Item 4. Submission of Matters to a Vote of Security Holders 74 Item 6. Exhibits and Reports on Form 8-K 75 SIGNATURES 76
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 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 September 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 Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, ------------------- ------------------- ------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES $2,381,335 $2,636,381 $6,382,250 $6,544,069 $8,327,327 $8,411,656 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 591,568 724,876 1,608,240 1,738,842 2,134,401 2,224,477 Purchased power 48,171 86,461 171,779 271,055 236,410 374,021 Provision for separation benefits (573) - 96,245 - 96,245 - Other 335,275 398,022 1,026,285 1,059,649 1,412,339 1,411,940 Maintenance 162,201 140,242 497,077 462,053 687,587 651,190 Depreciation and amortization 204,664 198,688 607,050 594,295 806,241 788,402 Amortization of deferred Plant Vogtle expenses, net (Note F) 22,847 11,982 51,254 21,021 66,517 17,856 Taxes other than income taxes 121,309 121,370 358,260 349,037 470,652 451,502 Federal and state income taxes 289,316 317,934 589,201 608,307 714,876 714,680 ---------- ---------- ----------- ---------- ---------- ---------- Total operating expenses 1,774,778 1,999,575 5,005,391 5,104,259 6,625,268 6,634,068 ---------- ---------- ----------- ---------- ---------- ---------- OPERATING INCOME 606,557 636,806 1,376,859 1,439,810 1,702,059 1,777,588 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 2,680 2,804 8,455 4,688 12,749 6,898 Interest income 7,834 12,417 21,375 24,846 26,678 30,292 Other, net (26,571) (27,412) (42,585) (2,243) (81,677) (39,322) Income taxes applicable to other income 12,339 10,936 17,064 34,037 40,243 65,251 ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 602,839 635,551 1,381,168 1,501,138 1,700,052 1,840,707 ---------- ---------- ---------- ---------- ---------- ---------- INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest on long-term debt 141,496 146,302 430,154 452,869 572,029 609,782 Allowance for debt funds used during construction (4,061) (3,355) (13,787) (9,435) (17,604) (11,360) Interest on interim obligations 7,142 8,308 24,714 21,460 33,085 25,685 Amortization of debt discount, premium and expense, net 7,598 6,985 22,441 19,101 29,636 24,112 Other interest charges 12,682 12,809 38,796 77,798 48,086 86,685 Preferred dividends of subsidiary companies 22,030 22,826 65,096 70,182 88,381 95,407 ---------- ---------- ---------- ---------- ---------- ---------- Net interest charges and preferred dividends 186,887 193,875 567,414 631,975 753,613 830,311 ---------- ---------- ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME $ 415,952 $ 441,676 $ 813,754 $ 869,163 $ 946,439 $1,010,396 ========== ========== ========== ========== ========== ========== AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING *(THOUSANDS) 650,454 638,828 648,417 636,167 646,507 635,355 EARNINGS PER SHARE OF COMMON STOCK* $ 0.64 $ 0.70 $ 1.25 $ 1.37 $ 1.46 $ 1.59 CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK* $ 0.295 $ 0.285 $ 0.885 $ 0.855 $ 1.17 $ 1.13
*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 Nine Months Ended September 30, -------------------------- 1994 1993 ---------- ----------- OPERATING ACTIVITIES: Consolidated net income $ 813,754 $ 869,163 Adjustments to reconcile consolidated net income to net cash provided by operating activities-- Depreciation and amortization 786,836 761,792 Deferred income taxes, net 28,076 77,581 Allowance for equity funds used during construction (8,455) (4,688) Deferred Plant Vogtle costs 51,254 21,021 Provision for separation benefits 78,993 - Gain on asset sales (23,375) (35,271) Other, net 34,066 (59,043) Changes in certain current assets and liabilities-- Receivables, net (24,708) (197,118) Fossil fuel stock (50,138) 119,162 Materials and supplies (8,167) (12,286) Accounts payable (47,910) 28,958 Other 82,066 167,525 ----------- ----------- Net cash provided from operating activities 1,712,292 1,736,796 ----------- ----------- INVESTING ACTIVITIES: Gross property additions (1,034,060) (974,241) Sales of property 141,496 253,032 Foreign utility operations - (354,790) Other (108,508) (51,006) ----------- ----------- Net cash used in investing activities (1,001,072) (1,127,005) ----------- ----------- FINANCING ACTIVITIES: Proceeds-- Common stock 206,368 144,510 Preferred stock - 156,404 First mortgage bonds 35,000 2,085,000 Pollution control bonds 609,815 352,496 Other long-term debt 377,185 110,075 Retirements-- Preferred stock (1,000) (256,404) First mortgage bonds (240,238) (2,019,205) Pollution control bonds (469,910) (317,520) Other long-term debt (181,359) (71,024) Special deposits-redemption funds (143,819) (20,000) Interim obligations, net (366,702) (33,463) Payment of common stock dividends (573,999) (543,221) Miscellaneous (23,808) (118,417) ----------- ----------- Net cash provided from (used in) financing activities (772,467) (530,769) ----------- ----------- NET CHANGE IN CASH AND CASH EQUIVALENTS (61,247) 79,022 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 178,346 97,313 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 117,099 $ 176,335 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 485,613 $ 526,479 Income taxes 515,503 365,040
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 September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- UTILITY PLANT: Plant in service (Note C) $28,243,277 $27,686,539 Less accumulated provision for depreciation 9,359,513 8,933,717 ----------- ----------- 18,883,764 18,752,822 Nuclear fuel, at amortized cost 230,013 229,293 Construction work in progress 1,061,018 1,031,240 ----------- ----------- Total 20,174,795 20,013,355 ----------- ----------- OTHER PROPERTY AND INVESTMENTS: Foreign utility operations, being amortized 533,456 558,960 Nuclear decommissioning trusts (Note C) 114,520 87,487 Miscellaneous 131,796 89,425 ----------- ----------- Total 779,772 735,872 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents 117,099 178,346 Special deposits - redemption funds 143,819 - Receivables, less accumulated provisions for uncollectible accounts of $10,311 at September 30, 1994 and $9,067 at December 31, 1993 1,178,881 1,146,774 Fossil fuel stock, at average cost 294,490 254,026 Materials and supplies, at average cost 542,889 534,722 Prepayments 171,646 147,915 Miscellaneous 71,657 73,074 ----------- ----------- Total 2,520,481 2,334,857 ----------- ----------- DEFERRED CHARGES: Deferred charges related to income taxes 1,483,204 1,546,338 Deferred Plant Vogtle costs (Note F) 455,726 506,980 Debt expense and loss, being amortized 328,735 320,515 Deferred fuel charges 52,411 70,404 Miscellaneous 474,617 382,336 ----------- ----------- Total 2,794,693 2,826,573 ----------- ----------- TOTAL ASSETS $26,269,741 $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 September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- CAPITALIZATION: Common stock, par value $5 per share - Authorized - 1 billion shares; Outstanding - September 30, 1994: 652,919,369 shares December 31, 1993: 642,661,658 shares* $ 3,264,599 $ 3,213,308 Paid-in capital 1,656,764 1,502,193 Premium on preferred stock 1,012 1,012 Retained earnings 3,207,850 2,967,706 ----------- ----------- 8,130,225 7,684,219 Preferred stock 1,332,203 1,332,203 Preferred stock subject to mandatory redemption - 1,000 Long-term debt 7,145,776 7,411,455 ----------- ----------- Total 16,608,204 16,428,877 ----------- ----------- CURRENT LIABILITIES: Preferred stock due within one year 1,000 1,000 Long-term debt due within one year 550,410 155,638 Notes payable 335,070 865,381 Commercial paper 239,136 75,527 Accounts payable 628,480 697,749 Customer deposits 103,333 102,822 Taxes accrued-- Federal and state income 52,774 34,023 Other 250,221 171,673 Interest accrued 175,530 186,057 Vacation pay accrued 91,113 90,206 Miscellaneous 226,370 190,638 ----------- ----------- Total 2,653,437 2,570,714 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 4,026,267 3,978,889 Deferred credits related to income taxes 1,009,321 1,050,512 Accumulated deferred investment tax credits 870,257 900,203 Disallowed Plant Vogtle capacity buyback costs 55,610 63,067 Prepaid capacity revenues, net 139,805 143,762 Miscellaneous 906,840 774,633 ----------- ----------- Total 7,008,100 6,911,066 ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $26,269,741 $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 third quarter of 1994 fell below the earnings recorded in the same period of 1993 primarily because of lower revenues. Consolidated net income was $416 million for the third quarter of 1994, compared to $442 million for the third quarter of 1993. Earnings per share were $0.64 and $0.70 in the third quarter of 1994 and 1993, respectively. REVENUES Revenues decreased due to lower fuel clause revenues, reduced sales to off-system utilities and weather influences. The summer of 1993 was exceptionally hot in contrast to the milder than normal temperatures experienced this past summer. As discussed further in Note (N) to the Condensed Financial Statements herein, ALABAMA recorded an additional $28 million in unbilled revenues as a result of adopting a new procedure for estimating such sales. Excluding ALABAMA's recognition of additional unbilled energy sales, retail energy sales for the third quarter of 1994 decreased 4.4%, compared to the third quarter of 1993, however, because of continued economic development in the Southeast, sales to industrial customers increased 2.3%. Wholesale energy sales decreased 22.9% due to reduced demand and contractually scheduled reductions in off-system contracts. As a result, total energy sales decreased 7.5%, excluding ALABAMA's additional unbilled energy sales. Capacity revenues for the third quarter of 1994 were $17 million less than in the third quarter of 1993. The capacity revenues decreased as scheduled, a significant portion of which coincides with GEORGIA completing the third sale of a portion of Plant Scherer Unit 4 in June 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 third quarter of 1994, compared to the corresponding period of 1993, was significantly lower due primarily to a decrease in the average cost of coal and less generation which reflects lower demand. 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. Other operation expenses dropped sharply in the third quarter of 1994, compared to the corresponding period of 1993. However, the expenses for 1993 included such costs as $20 million for an automotive fleet reduction program, $12 million for environmental remediation, $4 million for SAVANNAH's work force reduction program, the recognition of higher employee benefit costs and higher reserves for uncollectible accounts. Other operation expenses in the third quarter of 1994 reflect lower pension costs as indicated by updated actuarial estimates. The increase in maintenance expenses is attributable to ALABAMA accruing $28 million for the establishment of a Natural 11 12 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) Disaster Reserve. This new reserve is offset by ALABAMA's recognition of additional unbilled energy and revenues, as discussed above. The Southern electric system has instituted a number of initiatives to curb the growth of expenses, including workforce reduction programs. The one-time cost of these programs (approximately $96 million expensed and $15 million deferred) is expected to be recovered within three years through operation and maintenance and capital cost savings. See Note (M) to the Condensed Financial Statements herein for further information on these programs. The decrease in income tax expense was due to lower earnings and because the SOUTHERN system recorded additional income tax expense in the third quarter of 1993 due to the enactment of the retroactive federal income tax rate increase in August 1993. 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. 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; the outcome of proceedings 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. 12 13 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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. During the third quarter of 1994, OPC gave GEORGIA notice, as contractually required, of its intent to decrease its purchases of capacity under a power supply agreement. As a result, GEORGIA's capacity revenues from OPC will decline approximately $7.5 million in 1996 and an additional $15.5 million in 1997. 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. In September 1994, GEORGIA deposited $46 million with the IRS to prevent additional interest charges should GEORGIA's position on this issue not prevail. 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 (K) 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 13 14 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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 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 nine months of 1994 were the addition of approximately $1.0 billion to utility plant, the commercial operation of seven combustion turbine generating units having an aggregate nameplate capacity of approximately 555 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 $206 million. The funds for gross property additions and other capital requirements were derived primarily from operations, the sale of a portion of Plant Scherer and other 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 45.8% at September 30, 1994, compared to 43.8% at December 31, 1993. The market price of SOUTHERN's common stock at September 30, 1994, was $18.625 per share, compared to a book value of $12.45. This represents a market-to-book value ratio of 150%. The quarterly dividend for the third 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. 14 15 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) 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 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 $408 million, excluding those funds on deposit with trustees and which are specifically designated for called redemptions, will be required by September 30, 1995, for present sinking fund requirements, redemptions 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 nine months 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. 15 16 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) To meet short-term cash needs and contingencies, the SOUTHERN system had at September 30, 1994 approximately $117 million of cash and cash equivalents and approximately $1.3 billion of unused credit arrangements with banks. At September 30, 1994, the system companies had outstanding $335 million of notes payable and $239 million of commercial paper. 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, except for the adjustment to revenues and the establishment of a Natural Disaster Reserve in September 1994, included only normal recurring adjustments) necessary to present fairly the results for the periods ended September 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 Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, -------------------- ------------------- --------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $803,220 $871,658 $2,168,707 $2,148,694 $2,845,647 $2,770,462 Revenues from affiliates 35,707 48,276 116,466 140,388 158,053 173,776 -------- -------- ---------- ---------- ---------- ---------- Total operating revenues 838,927 919,934 2,285,173 2,289,082 3,003,700 2,944,238 -------- -------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 217,901 286,727 622,770 656,650 843,219 833,081 Purchased power from non-affiliates 2,265 5,892 11,900 13,006 14,123 16,704 Purchased power from affiliates 26,900 35,698 78,595 90,893 108,032 119,044 Other 109,231 124,157 333,401 344,894 459,322 467,604 Maintenance 78,716 51,730 198,420 167,749 283,177 245,557 Depreciation and amortization 72,878 72,558 218,237 217,297 291,251 286,925 Taxes other than income taxes 45,833 44,296 137,277 134,707 181,567 177,064 Federal and state income taxes 85,467 93,725 193,518 175,356 225,373 203,931 -------- -------- ---------- ---------- ---------- ---------- Total operating expenses 639,191 714,783 1,794,118 1,800,552 2,406,064 2,349,910 -------- -------- ---------- ---------- ---------- ---------- OPERATING INCOME 199,736 205,151 491,055 488,530 597,636 594,328 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 579 1,296 1,749 2,435 2,574 2,947 Interest income 4,242 8,796 12,500 16,600 16,674 17,318 Other, net (6,258) (4,119) (25,741) (8,285) (40,748) (21,281) Income taxes applicable to other income 2,941 10 9,876 1,739 18,376 12,785 -------- -------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 201,240 211,134 489,439 501,019 594,512 606,097 -------- -------- ---------- ---------- ---------- ---------- INTEREST CHARGES: Interest on long-term debt 44,544 45,291 133,681 140,723 177,819 186,629 Allowance for debt funds used during construction (716) (657) (2,165) (2,235) (2,923) (2,240) Interest on interim obligations 1,868 1,143 4,177 3,512 4,424 4,698 Amortization of debt discount, premium, and expense, net 2,505 2,378 7,400 6,498 9,839 8,126 Other interest charges 5,200 5,059 14,945 30,396 20,024 35,311 -------- -------- ---------- ---------- ---------- ---------- Net interest charges 53,401 53,214 158,038 178,894 209,183 232,524 -------- -------- ---------- ---------- ---------- ---------- NET INCOME 147,839 157,920 331,401 322,125 385,329 373,573 DIVIDENDS ON PREFERRED STOCK 6,625 7,102 19,488 22,003 27,044 30,229 -------- -------- ---------- ---------- ---------- ---------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $141,214 $150,818 $ 311,913 $ 300,122 $ 358,285 $ 343,344 ======== ======== ========== ========== ========== ==========
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 Nine Months Ended September 30, ------------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 331,401 $ 322,125 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 268,500 270,935 Deferred income taxes, net 2,377 435 Allowance for equity funds used during construction (1,749) (2,435) Other, net 42,708 45,770 Change in certain current assets and liabilities: Receivables, net (18,679) (9,968) Inventories (7,449) 24,799 Payables (116,613) (34,972) Taxes accrued 50,471 62,270 Energy cost recovery, retail (2,478) (24,842) Other (22,105) (30,505) --------- --------- Net cash provided from operating activities 526,384 623,612 --------- --------- INVESTING ACTIVITIES: Gross property additions (334,366) (312,309) Other (23,359) 3,694 --------- --------- Net cash used for investing activities (357,725) (308,615) --------- --------- FINANCING ACTIVITIES: Proceeds: Preferred stock - 38,000 First mortgage bonds - 760,000 Other long-term debt 208,910 174,110 Retirements: Preferred stock - (87,000) First mortgage bonds (20,387) (666,504) Other long-term debt (108,653) (173,002) Special deposits - redemption funds (101,650) - Interim obligations, net 81,516 (108,955) Payment of preferred stock dividends (18,723) (23,883) Payment of common stock dividends (200,400) (189,400) Miscellaneous (4,415) (46,765) --------- --------- Net cash provided from (used for) financing activities (163,802) (323,399) --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS 4,857 (8,402) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,233 13,629 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,090 $ 5,227 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 140,343 $ 134,129 Income taxes 157,331 134,722
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 September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- UTILITY PLANT: Plant in service, at original cost (Note C) $9,949,238 $9,757,141 Less accumulated provision for depreciation 3,559,940 3,384,156 ---------- ---------- 6,389,298 6,372,985 Nuclear fuel, at amortized cost 87,471 93,551 Construction work in progress 282,859 225,786 ---------- ---------- Total 6,759,628 6,692,322 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 106,118 99,185 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 8,090 3,233 Special deposit - redemption funds 101,650 - Receivables -- Customer accounts receivable 363,541 312,090 Other accounts and notes receivable 35,843 48,808 Affiliated companies 34,716 40,216 Accumulated provision for uncollectible accounts (2,521) (2,632) Refundable income taxes - 11,940 Fossil fuel stock, at average cost 93,979 88,481 Materials and supplies, at average cost 178,679 176,728 Prepayments-- Income taxes 9,363 18,980 Other 90,223 60,227 Vacation pay deferred 22,680 22,680 ---------- ---------- Total 936,243 780,751 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 459,807 469,010 Debt expense and loss, being amortized 106,819 109,698 Uranium enrichment decontamination and decommissioning fund 45,149 45,554 Miscellaneous 53,058 52,163 ---------- ---------- Total 664,833 676,425 ---------- ---------- TOTAL ASSETS $8,466,822 $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 September 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 1,108,522 997,199 ---------- ----------- 2,637,671 2,526,348 Preferred stock 440,400 440,400 Long-term debt 2,304,611 2,362,852 ---------- ----------- Total 5,382,682 5,329,600 ---------- ----------- CURRENT LIABILITIES: Long-term debt due within one year 197,484 58,998 Notes payable 25,000 40,000 Commercial paper 96,516 - Accounts payable-- Affiliated companies 47,380 62,507 Other 165,084 272,491 Customer deposits 32,416 31,198 Taxes accrued -- Federal and state income 29,121 25,730 Other 59,682 14,414 Interest accrued 50,324 52,809 Miscellaneous 76,310 73,106 ---------- ----------- Total 779,317 631,253 ---------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 1,174,859 1,165,127 Accumulated deferred investment tax credits 320,115 329,909 Prepaid capacity revenues, net 139,805 143,762 Uranium enrichment decontamination and decommissioning fund 41,676 39,644 Deferred credits related to income taxes 423,374 441,240 Miscellaneous 204,994 168,148 ---------- ----------- Total 2,304,823 2,287,830 ---------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $8,466,822 $ 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 third quarter of 1994 declined, compared to the same period of 1993, due primarily to lower revenues. Net income after dividends on preferred stock was $141.2 million during the third quarter of 1994, compared to $150.8 million in the corresponding period of 1993. REVENUES Operating revenues in the third quarter of 1994 decreased from the corresponding period of 1993 due to lower fuel clause revenues, a decrease in wholesale energy sales and mild weather during this more recent period. Also, capacity revenues from non-affiliated wholesale customers decreased $8.4 million. As discussed further in Note (N) to the Condensed Financial Statements herein, ALABAMA in September 1994 recorded an additional $28 million in estimated unbilled revenues due to a new procedure to compute such sales. 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 decreased because of a 12.3% decrease in coal-fired generation and a lower average cost of fuel consumed. Coal-fired generation decreased because it was displaced with lower cost nuclear and hydro generation and because of lower demand. Other operation expenses for the third quarter of 1994 reflect a reduction in ALABAMA's portion of the costs of the system service company's work force reduction program and, in response to updated actuarial estimates, lower accruals for pension costs. Other operation expenses in the third quarter of 1993 included the costs of an automotive fleet reduction program, raising the reserve for uncollectible accounts and recording its portion of environmental remediation costs for a SOUTHERN system research facility which together totaled $11.5 million. The increase in maintenance expense reflects the establishment of a Natural Disaster Reserve as discussed further in Note (N) to the Condensed Financial Statements herein. Taxes other than income taxes increased because of the addition of new facilities. The decrease in income tax expense reflected the change in earnings and the recognition of additional income taxes in the third quarter of 1993 to reflect the retroactive federal income tax rate increase enacted in August 1993. 23 24 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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 decreases in interest on long-term debt and dividends on preferred stock reflect ALABAMA's efforts to decrease its capital costs. ALABAMA, 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. 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. Also discussed therein is the establishment of a Natural Disaster Reserve, a new procedure for estimating unbilled sales and a retail rate increase moratorium. 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 24 25 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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 rates. Further discussion of nuclear decommissioning costs is made in Note (C) to the Condensed Financial Statements herein. FINANCIAL CONDITION OVERVIEW The principal changes in ALABAMA's financial condition in the first nine months of 1994 were gross property additions of $334 million to utility plant and the establishment of the Natural Disaster Reserve. 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 nine months of 1994, ALABAMA refinanced $180 million of pollution control bonds. ALABAMA's common equity as a percent of total capitalization was 49.0% at September 30, 1994, compared to 47.4% at year-end 1993. LIQUIDITY AND CAPITAL RESOURCES ALABAMA has committed lines of credit and regulatory approval for short-term borrowings of up to $530 million. At September 30, 1994, ALABAMA had outstanding $97 million of commercial paper and $25 million of notes payable. 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. 25 26 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) In addition to the funds needed for the capital budget, approximately $197.5 million will be required by September 30, 1995, for debt maturities. This amount includes $101.65 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. 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 LLP 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 September 30, 1994, and the related condensed statements of income for the three-month, nine-month and twelve-month periods ended September 30, 1994 and 1993, and condensed statements of cash flows for the nine-month periods ended September 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 LLP - ----------------------- Birmingham, Alabama November 9, 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 September 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 Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, -------------------- ------------------- ------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $1,197,061 $1,363,713 $3,182,709 $3,431,251 $4,140,971 $4,405,033 Revenues from affiliates 15,576 11,949 52,725 44,398 69,995 62,966 ---------- ---------- ---------- ---------- ---------- ---------- Total operating revenues 1,212,637 1,375,662 3,235,434 3,475,649 4,210,966 4,467,999 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 254,677 286,895 683,931 738,162 897,276 954,306 Purchased power from non-affiliates 44,165 76,509 148,296 252,629 208,838 351,179 Purchased power from affiliates 39,102 57,020 115,620 155,558 154,085 194,219 Provision for separation benefits 2,204 - 90,101 - 90,101 5,026 Other 148,796 188,655 470,465 504,370 641,379 664,008 Maintenance 58,059 62,895 203,476 202,929 285,068 282,042 Depreciation and amortization 94,702 93,401 284,146 285,815 377,757 381,779 Amortization of deferred Plant Vogtle expenses, net (Note F) 22,847 11,982 51,254 21,021 66,517 17,856 Taxes other than income taxes 49,367 52,682 147,816 147,557 192,930 186,986 Federal and state income taxes 167,652 189,865 325,586 371,473 406,234 437,268 ---------- ---------- ---------- ---------- ---------- ---------- Total operating expenses 881,571 1,019,904 2,520,691 2,679,514 3,320,185 3,474,669 ---------- ---------- ---------- ---------- ---------- ---------- OPERATING INCOME 331,066 355,758 714,743 796,135 890,781 993,330 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 1,538 826 4,450 1,006 6,611 2,546 Interest income 1,326 1,587 2,515 4,555 1,765 8,386 Other, net (6,290) (16,220) 16,950 24,423 8,558 7,803 Income taxes applicable to other income 6,115 10,390 (1,461) 29,603 6,597 46,569 ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 333,755 352,341 737,197 855,722 914,312 1,058,634 ---------- ---------- ---------- ---------- ---------- ---------- INTEREST CHARGES: Interest on long-term debt 76,279 82,394 236,148 262,571 317,212 358,175 Allowance for debt funds used during construction (2,882) (1,940) (9,216) (5,813) (11,674) (7,484) Interest on interim obligations 4,229 3,898 12,647 12,971 15,206 15,557 Amortization of debt discount, premium and expense, net 3,927 3,726 11,693 10,190 15,528 12,862 Other interest charges 6,830 7,187 19,909 43,174 24,125 46,563 ---------- ---------- ---------- ---------- ---------- ---------- Net interest charges 88,383 95,265 271,181 323,093 360,397 425,673 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME 245,372 257,076 466,016 532,629 553,915 632,961 DIVIDENDS ON PREFERRED STOCK 12,112 12,399 35,773 38,410 48,038 52,162 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 233,260 $ 244,677 $ 430,243 $ 494,219 $ 505,877 $ 580,799 ========== ========== ========== ========== ========== ==========
( ) 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 Nine Months Ended September 30, ------------------- 1994 1993 ---- ---- OPERATING ACTIVITIES Net income $ 466,016 $ 532,629 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 360,874 354,494 Deferred income taxes, net 30,869 74,260 Allowance for equity funds used during construction (4,450) (1,006) Deferred Plant Vogtle costs 51,254 21,021 Provision for separation benefits 74,112 - Gain on asset sales (22,474) (35,271) Other, net (45,500) (6,327) Changes in current assets and liabilities-- Receivables, net (5,021) (42,755) Inventories (39,947) 57,990 Payables 8,076 (1,650) Taxes accrued 11,027 131,607 Energy cost recovery, retail 36,139 (68,447) Other 13,071 (19,247) ---------- ---------- NET CASH PROVIDED FROM OPERATING ACTIVITIES 934,046 997,298 ---------- ---------- INVESTING ACTIVITIES Property additions (420,025) (462,961) Sales of property 132,644 253,032 Other (63,394) (50,788) ---------- ---------- NET CASH USED FOR INVESTING ACTIVITIES (350,775) (260,717) ---------- ---------- FINANCING ACTIVITIES Proceeds-- Preferred stock - 75,000 First mortgage bonds - 1,135,000 Pollution control bonds 388,065 145,425 Retirements-- Preferred stock - (145,000) First mortgage bonds (133,559) (1,239,309) Pollution control bonds (391,810) (145,445) Other long-term debt (132) (432) Interim obligations, net (98,952) (164,877) Payment of preferred stock dividends (35,001) (39,060) Payment of common stock dividends (285,800) (301,300) Miscellaneous (12,121) (59,405) ---------- ---------- NET CASH USED FOR FINANCING ACTIVITIES (569,310) (739,403) ---------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS 13,961 (2,822) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,896 22,114 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,857 $ 19,292 ========== ========== SUPPLEMENTAL CASH FLOW INFORMATION-- Interest (net of amount capitalized) $ 267,367 $ 340,407 Income taxes 300,417 178,038
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 September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- UTILITY PLANT: Plant in service (Note C) $13,914,703 $13,743,521 Less accumulated provision for depreciation 4,011,588 3,822,344 ----------- ----------- 9,903,115 9,921,177 Nuclear fuel, at amortized cost 142,542 135,742 Construction work in progress 545,611 584,013 ----------- ----------- Total 10,591,268 10,640,932 OTHER PROPERTY AND INVESTMENTS: SEGCO, at equity 27,784 29,201 Nuclear decommissioning trusts (Note C) 54,758 37,937 Miscellaneous 80,944 31,941 ----------- ----------- Total 163,486 99,079 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents 19,857 5,896 Receivables-- Customer accounts receivable 491,400 486,947 Other accounts and notes receivable 91,697 117,249 Affiliated companies 14,521 14,832 Accumulated provision for uncollectible accounts (5,300) (4,300) Fossil fuel stock, at average cost 148,696 111,620 Materials and supplies, at average cost 290,422 287,551 Prepayments 75,726 65,269 Vacation pay deferred 40,158 41,575 ----------- ----------- Total 1,167,177 1,126,639 ----------- ----------- DEFERRED CHARGES: Deferred charges related to income taxes 940,449 992,510 Deferred Plant Vogtle costs (Note F) 455,726 506,980 Debt expense and loss, being amortized 182,662 173,876 Miscellaneous 244,779 196,094 ----------- ----------- Total 1,823,616 1,869,460 ----------- ----------- TOTAL ASSETS $13,745,547 $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 September 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 1,425,541 1,316,447 ----------- ----------- 4,154,552 4,045,458 Preferred stock 692,787 692,787 Long-term debt 3,660,414 4,031,387 ----------- ----------- Total 8,507,753 8,769,632 ----------- ----------- CURRENT LIABILITIES: Long-term debt due within one year 252,534 10,543 Notes payable to banks 240,655 406,700 Commercial paper 142,620 75,527 Accounts payable-- Affiliated companies 44,136 38,115 Other 297,561 285,929 Customer deposits 46,314 45,922 Taxes accrued-- Federal and state income 27,401 31,639 Other 137,120 121,854 Interest accrued 102,617 110,497 Miscellaneous 159,627 104,587 ----------- ----------- Total 1,450,585 1,231,313 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 2,518,711 2,479,720 Accumulated deferred investment tax credits 461,716 478,334 Disallowed Plant Vogtle capacity buyback costs 55,610 63,067 Deferred credits related to income taxes 435,609 452,819 Miscellaneous 315,563 261,225 ----------- ----------- Total 3,787,209 3,735,165 ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $13,745,547 $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 third quarter of 1994 declined compared to the corresponding quarter of 1993. Net income after dividends on preferred stock was $233.3 million in the third quarter of 1994 and $244.7 million in the third quarter of 1993. The decline is the result of lower retail revenues primarily due to weather, partially offset by reductions in other operation expenses and lower financing costs. REVENUES Total operating revenues decreased compared to the third quarter of 1993 because of the decrease in energy sales to retail and non-affiliated wholesale customers. Excluding fuel clause revenues, which represent the pass-through of fuel expenses and do not affect income, operating revenues for the third quarter of 1994 decreased $96.6 million, compared to the corresponding period of 1993. Retail - Retail energy sales for the third quarter of 1994 decreased 6.0%. The summer of 1993 was exceptionally hot, whereas the summer of 1994 was milder than normal. Residential and commercial energy sales decreased 17.2% and 3.0%, respectively, while industrial sales increased 1.4%. Total non-fuel retail revenues decreased $92.2 million. Wholesale - Energy sales to non-affiliated wholesale customers for the third quarter of 1994 decreased 37.7%, compared to the corresponding period of 1993. Capacity revenues from non-affiliated utilities outside the service area were down $6.4 million. These capacity revenues decreased as scheduled, coinciding with GEORGIA completing the third sale in a series of four transactions for the sale of Plant Scherer Unit 4 in June 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 and an additional $11 million in 1996. Energy revenues from non-affiliated utilities outside the service area decreased $10.5 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. 34 35 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) OPERATING EXPENSES Fuel and Purchased Power - Fuel expense decreased primarily because of lower generation, the displacement of coal-fired generation with lower cost hydro generation and the lower cost of fuel. Purchased power expense for the third quarter of 1994 decreased primarily due to GEORGIA purchasing less energy because of lower demand and scheduled reductions in capacity buyback payments to the co-owners of plants Vogtle and Scherer. See Note (F) to the Condensed Financial Statements herein for information regarding the levelization of capacity buyback expense for Plant Vogtle. Other - Other operation expenses were down compared to the third quarter of 1993 due primarily to the recognition in 1993 of a one-time cost of approximately $15 million for an automotive fleet reduction program, environmental remediation costs at various locations of approximately $7 million in the third quarter of 1993, compared to approximately $2 million in 1994, and lower uncollectible accounts and pension expense during 1994. See Note (M) to the Condensed Financial Statements herein for information regarding work force reduction programs instituted in the first quarter of 1994 by GEORGIA and SCS. Maintenance expenses decreased because of the timing of scheduled maintenance. The reduction in taxes other than income taxes was related to lower revenues. Income taxes in the third quarter of 1993 were higher because GEORGIA recorded additional income tax expense in 1993 in response to the retroactive federal tax increase enacted in August 1993. OTHER INCOME In the third quarter of 1993, GEORGIA recognized a pre-tax loss of approximately $10 million related to the impending shut-down of a coal receipt and delivery facility. 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 and, because of the rise in short-term interest rates, an increase in the rate at which AFUDC is computed. Four of these peaking units began commercial operation in 1994 with the other four units scheduled for completion in 1995. 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 recent refinancing efforts. Also, GEORGIA used the proceeds from the Plant Scherer sales in 1993 and 1994 to redeem high cost securities. 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. In September 1994, GEORGIA deposited $46 million with the IRS to prevent additional interest charges should GEORGIA's position on this issue not prevail. 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 24 sites which may require environmental remediation by GEORGIA. If all sites were required to be remediated, GEORGIA could incur expenses of up to $23 million in additional clean-up costs and construction expenditures of up to $100 million. See Note (K) 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 revenues from these utilities under wholesale power contracts of approximately $19 million in 1995 and an additional $11 million in 1996. During the third quarter of 1994, OPC gave GEORGIA notice, as contractually required, of its intent to decrease its purchases of capacity under a power supply agreement. As a result, GEORGIA's capacity revenues from OPC will decline approximately $7.5 million in 1996 and an additional $15.5 million in 1997. 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 (J) 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 proceedings concerning the equity returns on wholesale power and transmission contracts. Management does not believe that the final outcome of these proceedings will have a material adverse effect on earnings. See Note (B) to the Condensed Financial Statements herein for further information on this matter. 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 37 38 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS (Continued) 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. FINANCIAL CONDITION OVERVIEW The principal changes in GEORGIA's financial condition during the first nine months of 1994 were additions of $420 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 work force 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, $551 million and $489 million, respectively. These estimated expenditures reflect planned but unidentified reductions of $63 million in 1995 and $85 million in 1996 under GEORGIA's business strategy to curtail growth in costs. Additionally, these estimated construction expenditures reflect reductions of $4 million in 1995 and $140 million in 1996 as a result of GEORGIA canceling the construction of eight combustion turbine generating units originally scheduled for completion by 1997. 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 $253 million for the twelve months ending September 30, 1995. Short-term debt at quarter-end totaled $383 million. 38 39 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) 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 nine 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. The $46 million GEORGIA deposited with the IRS to prevent additional interest charges related to the tax accounting for the property sale in 1984 was recorded in Other Property and Investments on the balance sheet. 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 $473 million of unused credit arrangements with banks at September 30, 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 LLP 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 September 30, 1994, and the related condensed statements of income for the three-month, nine-month and twelve-month periods ended September 30, 1994 and 1993, and the condensed statements of cash flows for the nine-month periods ended September 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 LLP - ----------------------- Atlanta, Georgia November 9, 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 September 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 Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, ------------------- ------------------- ------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $157,637 $166,342 $432,530 $424,512 $567,994 $559,491 Revenues from affiliates 4,506 9,622 14,470 17,351 20,285 26,829 -------- -------- -------- -------- -------- -------- Total operating revenues 162,143 175,964 447,000 441,863 588,279 586,320 -------- -------- -------- -------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 48,273 60,131 125,377 137,481 158,381 184,548 Purchased power from non-affiliates 1,234 2,462 4,933 3,043 6,276 3,363 Purchased power from affiliates 6,002 2,788 18,776 19,701 31,348 26,264 Other 26,488 29,074 90,090 77,894 121,360 104,796 Maintenance 9,469 9,657 37,628 38,891 44,741 51,869 Depreciation and amortization 14,453 13,863 42,427 41,277 56,459 54,613 Taxes other than income taxes 11,399 11,125 32,044 29,880 42,368 39,446 Federal and state income taxes 13,702 14,081 25,491 23,705 34,516 30,498 -------- -------- -------- -------- -------- -------- Total operating expenses 131,020 143,181 376,766 371,872 495,449 495,397 -------- -------- -------- -------- -------- -------- OPERATING INCOME 31,123 32,783 70,234 69,991 92,830 90,923 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 129 96 401 205 707 212 Interest income 346 339 1,109 1,021 1,416 1,647 Other, net (100) (231) (268) (523) (981) (1,911) Gain on sale of investment securities - - - 3,820 - 3,820 Income taxes applicable to other income (190) (43) (447) (1,584) 215 (648) -------- -------- -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 31,308 32,944 71,029 72,930 94,187 94,043 -------- -------- -------- -------- -------- -------- INTEREST CHARGES: Interest on long-term debt 6,838 8,445 20,586 24,190 27,740 32,028 Allowance for debt funds used during construction (158) (228) (491) (492) (453) (515) Interest on notes payable 443 264 1,101 846 1,125 1,095 Amortization of debt discount, premium and expense, net 456 378 1,360 1,000 1,772 1,292 Other interest charges 411 333 3,221 3,113 2,986 3,503 -------- -------- -------- -------- -------- -------- Net interest charges 7,990 9,192 25,777 28,657 33,170 37,403 -------- -------- -------- -------- -------- -------- NET INCOME 23,318 23,752 45,252 44,273 61,017 56,640 DIVIDENDS ON PREFERRED STOCK 1,487 1,386 4,418 4,169 5,976 5,585 -------- -------- -------- -------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 21,831 $ 22,366 $ 40,834 $ 40,104 $ 55,041 $ 51,055 ======== ======== ======== ======== ======== ========
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 Nine Months Ended September 30, ------------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 45,252 $ 44,273 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 67,292 55,996 Deferred income taxes, net (4,836) 1,271 Allowance for equity funds used during construction (401) (205) Other, net 5,189 221 Changes in certain current assets and liabilities-- Receivables, net (713) 3,387 Inventories (5,267) 14,186 Payables (6,596) (3,902) Other 17,196 9,196 -------- -------- Net Cash Provided From Operating Activities 117,116 124,423 -------- -------- INVESTING ACTIVITIES: Gross property additions (63,344) (50,041) Other (3,303) (14,756) -------- -------- Net Cash Used For Investing Activities (66,647) (64,797) -------- -------- FINANCING ACTIVITIES: Proceeds: Preferred stock - 20,000 First mortgage bonds - 75,000 Pollution control bonds 42,000 45,550 Other long-term debt 32,108 - Retirements: Preferred stock subject to mandatory redemption (1,000) (1,000) First mortgage bonds (48,856) (62,092) Pollution control bonds - (32,675) Other long-term debt (19,950) (7,522) Special deposits-redemption funds (42,169) (20,000) Notes payable, net 21,447 (34,000) Payment of preferred stock dividends (4,418) (4,170) Payment of common stock dividends (32,900) (31,300) Miscellaneous (1,381) (4,935) -------- -------- Net Cash Used For Financing Activities (55,119) (57,144) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS (4,650) 2,482 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,576 1,204 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 926 $ 3,686 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amounts capitalized) $ 20,002 $ 17,623 Income taxes 24,595 21,303
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 September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- UTILITY PLANT: Plant in service, at original cost $1,646,506 $1,611,704 Less accumulated provision for depreciation 643,299 610,542 ---------- ---------- 1,003,207 1,001,162 Construction work in progress 53,233 34,591 ---------- ---------- Total 1,056,440 1,035,753 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 8,174 13,242 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 926 5,576 Special deposits - redemption funds 42,169 - Receivables-- Customer accounts receivable 62,067 57,226 Other accounts and notes receivable 2,820 5,904 Affiliated companies 329 1,241 Accumulated provision for uncollectible accounts (579) (447) Fuel stock, at average cost 26,569 20,652 Materials and supplies, at average cost 35,740 36,390 Current portion of deferred coal contract costs 2,510 12,535 Regulatory clauses under recovery 6,032 3,244 Prepayments 2,323 2,160 Vacation pay deferred 4,022 4,022 ---------- ---------- Total 184,928 148,503 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 30,677 31,334 Debt expense and loss, being amortized 20,868 21,247 Deferred coal contract costs 41,341 52,884 Miscellaneous 5,606 4,846 ---------- ---------- Total 98,492 110,311 ---------- ---------- TOTAL ASSETS $1,348,034 $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 September 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 165,656 157,773 ---------- ---------- 422,079 414,196 Preferred stock 89,602 89,602 Preferred stock subject to mandatory redemption - 1,000 Long-term debt 360,322 369,259 ---------- ---------- Total 872,003 874,057 ---------- ---------- CURRENT LIABILITIES: Preferred stock due within one year 1,000 1,000 Long-term debt due within one year 55,443 41,552 Notes payable 27,500 6,053 Accounts payable-- Affiliated companies 7,899 18,560 Other 18,570 20,139 Customer deposits 13,920 15,082 Taxes accrued-- Federal and state income 12,903 10,330 Other 16,010 2,685 Interest accrued 10,007 5,420 Regulatory clauses over recovery 420 840 Vacation pay accrued 4,022 4,022 Miscellaneous 5,775 8,527 ---------- ---------- Total 173,469 134,210 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 153,320 151,743 Deferred credits related to income taxes 73,419 76,876 Accumulated deferred investment tax credits 38,983 40,770 Accumulated provision for property damage 11,644 10,509 Accumulated provision for postretirement benefits 13,114 10,749 Miscellaneous 12,082 8,895 ---------- ---------- Total 302,562 299,542 ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $1,348,034 $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 third quarter of 1994 was $21.8 million, compared to $22.4 million for the same period of 1993. The decline in earnings was primarily due to lower revenues partially offset by lower operation expenses and capital costs. REVENUES Retail energy sales for the third quarter of 1994 decreased 5.6% from the corresponding period of 1993 due primarily to the mild temperatures experienced during the summer of 1994 in contrast to a hotter than normal summer of 1993. Also, energy sales were reduced because GULF's formerly largest industrial customer began operating its co-generation facility in August 1993. Wholesale energy sales to non-affiliates decreased 1.0% with capacity revenues $1.2 million lower, compared to the third quarter of 1993. EXPENSES Fuel expenses for the third quarter of 1994 decreased compared to the same period of 1993 due to a 13.6% decrease in generation. Additionally, 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 generation at each company. Other operation expenses decreased because of the reduction of 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 decreased due to a reduction in expenses related to employee benefits. Additionally, the third quarter of 1993 included the one-time costs associated with a automobile fleet reduction program. The decrease in income tax expense is attributable to lower 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 (B) to the Condensed Financial Statements herein 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 (L) to the Condensed Financial Statements herein for a discussion of the settlement of a suit filed against GULF concerning fuel transportation. 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 changes in GULF's financial condition during the first nine months of 1994 were gross property additions of $63.3 million and the settlement of litigation related to fuel transportation. 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 $219 million for the three years 1994 through 1996 ($81 million in 1994, $62 million in 1995 and $76 million in 1996). The estimates of property additions for the three-year period include $23 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, $56.4 million will be required by September 30, 1995, in connection with maturities and redemptions of long-term debt and preferred stock subject to mandatory redemption. This amount includes approximately $42.0 million of pollution control bonds that have been refinanced and will be redeemed December 1, 1994. The funds for these redemptions are on deposit with the Trustee and are designated for that purpose only. At September 30, 1994, GULF had $0.9 million of cash and $67.3 million of unused credit arrangements with banks to meet its short-term cash needs. GULF had $27.5 million of short-term bank borrowings outstanding at quarter-end. 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 September 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 Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, ------------------- ------------------- ------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $140,191 $142,115 $380,777 $353,220 $486,922 $452,819 Revenues from affiliates 2,149 5,987 7,489 14,198 8,809 15,897 -------- -------- -------- -------- -------- -------- Total operating revenues 142,340 148,102 388,266 367,418 495,731 468,716 -------- -------- -------- -------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 36,756 40,665 81,084 91,652 103,417 109,595 Purchased power from non-affiliates 367 1,298 2,152 1,811 2,539 2,101 Purchased power from affiliates 10,877 14,197 53,886 41,836 70,069 59,363 Other 24,705 29,639 71,177 76,186 95,374 99,893 Maintenance 9,913 10,322 35,683 32,629 47,055 43,785 Depreciation and amortization 8,945 8,844 27,189 26,474 33,814 35,106 Taxes other than income taxes 10,938 10,018 31,153 27,842 40,456 35,903 Federal and state income taxes 13,627 10,742 26,929 18,935 30,661 21,950 -------- -------- -------- -------- -------- -------- Total operating expenses 116,128 125,725 329,253 317,365 423,385 407,696 -------- -------- -------- -------- -------- -------- OPERATING INCOME 26,212 22,377 59,013 50,053 72,346 61,020 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 263 201 939 465 1,484 548 Other, net 243 1,068 3,073 3,167 4,395 4,630 Income taxes applicable to other income 31 (225) (739) (1,264) (633) (1,606) -------- -------- -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 26,749 23,421 62,286 52,421 77,592 64,592 -------- -------- -------- -------- -------- -------- INTEREST CHARGES: Interest on long-term debt 3,460 5,005 13,586 13,539 17,737 17,681 Allowance for debt funds used during construction (180) (260) (882) (474) (1,196) (646) Interest on notes payable 412 234 1,163 769 1,394 958 Amortization of debt discount, premium and expense, net 372 334 1,101 923 1,439 1,178 Other interest charges 103 84 277 653 352 695 -------- -------- -------- -------- -------- -------- Net interest charges 4,167 5,397 15,245 15,410 19,726 19,866 -------- -------- -------- -------- -------- -------- NET INCOME 22,582 18,024 47,041 37,011 57,866 44,726 DIVIDENDS ON PREFERRED STOCK 1,225 1,464 3,674 4,175 4,899 5,531 -------- -------- -------- -------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 21,357 $ 16,560 $ 43,367 $ 32,836 $ 52,967 $ 39,195 ======== ======== ======== ======== ======== ========
( ) 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 Nine Months Ended September 30, ------------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 47,041 $ 37,011 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 36,449 37,578 Deferred income taxes, net (849) 689 Allowance for equity funds used during construction (939) (465) Other, net (524) (1,945) Change in certain current assets and liabilities-- Receivables, net (8,746) (12,293) Inventories (5,972) 11,712 Payables (5,920) 5,426 Taxes accrued 6,243 (1,382) Other 4,953 1,114 -------- --------- Net cash provided from operating activities 71,736 77,445 -------- --------- INVESTING ACTIVITIES: Gross property additions (81,175) (87,447) Other (15,817) (14,515) -------- --------- Net cash used for investing activities (96,992) (101,962) -------- --------- FINANCING ACTIVITIES: Proceeds-- Capital contributions from parent company 25,000 30,000 Preferred stock - 23,404 First mortgage bonds 35,000 70,000 Pollution control bonds - 13,000 Other long-term debt 50,309 - Retirements-- Preferred stock - (23,404) First mortgage bonds (32,371) (51,300) Other long-term debt (7,108) (7,844) Notes payable, net (15,000) (1,000) Payment of preferred stock dividends (3,674) (4,175) Payment of common stock dividends (25,500) (21,700) Miscellaneous (1,182) (5,184) -------- --------- Net cash provided (used) from financings 25,474 21,797 -------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS 218 (2,720) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 878 7,417 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,096 $ 4,697 ======== ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 13,574 $ 12,426 Income taxes 15,177 16,851
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 September 30, 1994 At December 31, (Unaudited) 1993 ------------- ------------- UTILITY PLANT: Plant in service, at original cost $1,352,609 $1,238,847 Less accumulated provision for depreciation 472,354 462,725 ---------- ---------- Total 880,255 776,122 Construction work in progress 58,845 108,063 ---------- ---------- Total 939,100 884,185 ---------- ---------- OTHER PROPERTY AND INVESTMENTS 6,367 11,289 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 1,096 878 Receivables-- Customer accounts receivable 39,039 31,376 Other accounts and notes receivable 6,156 5,581 Affiliated companies 7,348 6,698 Accumulated provision for uncollectible accounts (879) (737) Fuel stock, at average cost 12,967 11,185 Materials and supplies, at average cost 25,335 21,145 Current portion of deferred fuel charges 791 440 Prepayments 5,550 7,843 Vacation pay deferred 4,797 4,797 ---------- ---------- Total 102,200 89,206 ---------- ---------- DEFERRED CHARGES: Deferred charges related to income taxes 25,196 25,267 Deferred fuel charges 11,070 17,520 Debt expense and loss, being amortized 11,205 11,666 Deferred early retirement program costs (Note M) 14,286 - Miscellaneous 13,340 10,073 ---------- ---------- Total 75,097 64,526 ---------- ---------- TOTAL ASSETS $1,122,764 $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 September 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 148,104 129,343 ---------- ---------- 365,529 321,768 Cumulative preferred stock 74,414 74,414 Long-term debt 274,019 250,391 ---------- ---------- Total 713,962 646,573 ---------- ---------- CURRENT LIABILITIES: Long-term debt due within one year 41,077 19,345 Notes payable 25,000 40,000 Accounts payable-- Affiliated companies 4,229 10,197 Other 32,592 50,731 Customer deposits 2,714 2,786 Taxes accrued-- Federal and state income 8,681 186 Other 24,700 26,952 Interest accrued 4,598 4,237 Miscellaneous 15,259 14,120 ---------- ---------- Total 158,850 168,554 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 125,754 123,206 Accumulated deferred investment tax credits 31,599 32,710 Deferred credits related to income taxes 46,606 48,228 Accumulated provision for property damage 10,530 10,538 Miscellaneous 35,463 19,397 ---------- ---------- Total 249,952 234,079 ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $1,122,764 $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 third quarter of 1994 was $21.4 million, compared to $16.6 million for the corresponding period of 1993. Net income rose primarily because of lower other operation expenses and capital costs. REVENUES Revenues for the third quarter of 1994 decreased, compared to the same period of 1993, because of milder than normal weather during the summer of 1994. Because of lower demand for both MISSISSIPPI and the SOUTHERN system, MISSISSIPPI relied on its most cost efficient generating facilities and had access to lower cost energy from other sources, which translated into lower fuel clause revenues. Despite the milder temperatures during the summer of 1994, contrasted with above average temperatures in the summer of 1993, retail energy sales increased 0.7% and territorial wholesale energy sales increased 0.6%. These increased energy sales reflect an improving economy in coastal Mississippi due in large measure to an increasing number of casinos and ancillary services and the attendant rise in personal income. Energy sales to industrial customers increased 5.9%. EXPENSES Fuel and purchased power expense declined in the third quarter of 1994 due to weather effects during the summer months. The cooler temperatures resulted in less purchases of energy and fuel. Fuel expenses also decreased because of the lower average cost of fuel consumed. 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 generation at each company. Other operation expenses decreased due to lower sales, marketing and administrative expenses, reduced billings from the system service company, decreased expenses associated with a fuel supply contract buyout, and, in response to updated actuarial estimates, lower pension and other postretirement benefit costs. Taxes other than income taxes increased because of additions to utility plant. The increase in income tax expense reflects the increase in earnings. The decrease in interest expense was due primarily to refinancings. 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) OTHER INCOME Included in "Other, net" for the third quarter of 1994 is $1.0 million to fund a program to encourage employee use of electric products and upgrade energy efficiency. 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. The Mississippi PSC has increased from $10.9 million to $18 million, the maximum amount MISSISSIPPI may accumulate in its Property Damage Reserve. The monthly accrual for this reserve did not change. 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 (M) 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 nine months of 1994, gross property additions were $81.2 million. The funds for these additions and other capital requirements, including refundings, were derived primarily from internal sources, the sale of $35 million of first mortgage bonds, the issuance of $50 million of long-term notes 57 58 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) payable and the receipt of $25 million in capital contributions from SOUTHERN. See the Condensed Statements of Cash Flows for further details. At September 30, 1994, cash totaled approximately $1.1 million and MISSISSIPPI had $96.5 million of unused credit arrangements with banks to meet short-term cash needs. MISSISSIPPI had $25 million of notes payable outstanding at quarter-end. It is MISSISSIPPI's strategy to maintain a permanent 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 $41.1 million will be required by September 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 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 58 59 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION (Continued) MISSISSIPPI conducts studies, when possible, to determine the extent of any required clean-up costs. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. A currently owned site where manufactured gas plant operations were located is under investigation for potential remediation, but no prediction can presently be made regarding the extent, if any, of contamination or possible cleanup. If this site were required to be remediated, industry studies show MISSISSIPPI could incur clean-up costs of from $1.5 million to $10 million before giving consideration of possible recovery of clean-up costs from other parties. 59 60 SAVANNAH ELECTRIC AND POWER COMPANY 60 61 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, included only normal recurring adjustments) necessary to present fairly the results for the periods ended September 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. 61 62 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars)
For the Three Months For the Nine Months For the Twelve Months Ended September 30, Ended September 30, Ended September 30, ------------------- ------------------- ------------------- 1994 1993 1994 1993 1994 1993 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Revenues $61,264 $72,901 $162,761 $168,005 $210,764 $209,513 Revenues from affiliates 2,410 1,519 4,007 2,163 4,278 2,719 ------- ------- -------- -------- -------- -------- Total operating revenues 63,674 74,420 166,768 170,168 215,042 212,232 ------- ------- -------- -------- -------- -------- OPERATING EXPENSES: Operation-- Fuel 7,220 15,195 16,545 23,878 17,643 24,801 Purchased power from non-affiliates 134 446 1,577 651 1,719 759 Purchased power from affiliates 14,182 13,197 43,063 39,007 60,330 53,293 Provision for separation benefits (186) 4,100 365 4,100 720 4,100 Other 10,854 10,242 30,116 29,534 41,737 39,623 Maintenance 3,530 3,563 9,161 9,872 12,804 14,336 Depreciation and amortization 4,616 4,226 13,238 12,383 17,323 16,597 Taxes other than income taxes 3,096 2,924 8,363 8,034 11,465 10,791 Federal and state income taxes 6,733 7,201 14,160 13,959 15,638 14,976 ------- ------- -------- -------- -------- -------- Total operating expenses 50,179 61,094 136,588 141,418 179,379 179,276 ------- ------- -------- -------- -------- -------- OPERATING INCOME 13,495 13,326 30,180 28,750 35,663 32,956 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 119 326 796 547 1,206 584 Other, net (214) (139) (711) (616) (1,726) (1,223) Income taxes applicable to other income 85 62 277 242 1,152 785 ------- ------- -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 13,485 13,575 30,542 28,923 36,295 33,102 ------- ------- -------- -------- -------- -------- INTEREST CHARGES: Interest on long-term debt 3,139 2,926 9,425 7,593 12,528 9,993 Allowance for debt funds used during construction (99) (238) (974) (399) (1,274) (439) Amortization of debt discount, premium and expense, net 137 138 412 396 551 529 Other interest charges 180 60 440 464 556 577 ------- ------- -------- -------- -------- -------- Net interest charges 3,357 2,886 9,303 8,054 12,361 10,660 ------- ------- -------- -------- -------- -------- NET INCOME 10,128 10,689 21,239 20,869 23,934 22,442 DIVIDENDS ON PREFERRED STOCK 581 475 1,743 1,425 2,424 1,900 ------- ------- -------- -------- -------- -------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 9,547 $10,214 $ 19,496 $ 19,444 $ 21,510 $ 20,542 ======= ======= ======== ======== ======== ========
( ) Denotes red figure. The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 62 63 SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars)
For the Nine Months Ended September 30, ------------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income $ 21,239 $ 20,869 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 14,372 13,490 Deferred taxes, net 1,577 1,318 Allowance for equity funds used during construction (796) (547) Other, net 932 707 Changes in certain current assets and liabilities-- Receivables, net 9,900 (10,102) Inventories 942 (202) Payables (19,522) 3,742 Taxes accrued 6,204 4,998 Other (2,026) 2,135 -------- -------- Net Cash Provided From Operating Activities 32,822 36,408 -------- -------- INVESTING ACTIVITIES: Gross property additions (24,033) (44,576) Other (1,525) (152) -------- -------- Net Cash Used For Investing Activities (25,558) (44,728) -------- -------- FINANCING ACTIVITIES: Proceeds: First mortgage bonds - 45,000 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 (628) (10,619) Notes payable, net 3,000 (7,500) Payment of preferred stock dividends (1,548) (1,425) Payment of common stock dividends (12,300) (15,500) Miscellaneous (74) (778) -------- -------- Cash Provided From (Used For) Financing Activities (8,115) 19,178 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS (851) 10,858 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,915 1,788 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,064 $ 12,646 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid (received) during the period for-- Interest (net of amount capitalized) $ 10,298 $ 8,329 Income taxes 8,543 8,025
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) ASSETS
At September 30, 1994 At December 31, (Unaudited) 1993 ---------------- --------------- UTILITY PLANT: Plant in service, at original cost $683,567 $622,521 Less accumulated provision for depreciation 263,660 251,565 -------- -------- 419,907 370,956 Construction work in progress 10,766 49,797 -------- -------- Total 430,673 420,753 -------- -------- OTHER PROPERTY AND INVESTMENTS 1,791 1,793 -------- -------- CURRENT ASSETS: Cash and cash equivalents 3,064 3,915 Receivables-- Customer accounts receivable 22,456 18,551 Other accounts and notes receivable 462 790 Affiliated companies 203 12,924 Accumulated provision for uncollectible accounts (807) (762) Fuel cost under recovery 6,482 7,112 Fuel stock, at average cost 7,828 8,419 Materials and supplies, at average cost 9,007 9,358 Prepayments 6,510 4,849 -------- -------- Total 55,205 65,156 -------- -------- DEFERRED CHARGES: Premium on reacquired debt, being amortized 3,419 3,792 Deferred charges related to income taxes 23,730 24,890 Miscellaneous 11,485 10,803 -------- -------- Total 38,634 39,485 -------- -------- TOTAL ASSETS $526,303 $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 CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES
At September 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 100,592 93,479 -------- -------- 161,382 154,269 Preferred stock 35,000 35,000 Long-term debt 156,583 151,338 -------- -------- Total 352,965 340,607 -------- -------- CURRENT LIABILITIES: Long-term debt due within one year 2,099 4,499 Notes payable 6,000 3,000 Accounts payable-- Affiliated companies 4,896 6,041 Other 3,872 24,401 Customer deposits 4,721 4,714 Taxes accrued-- Federal and state income 4,104 342 Other 3,629 1,187 Interest accrued 5,157 6,730 Vacation pay accrued 1,685 1,638 Work force reduction costs accrued 3,891 3,926 Miscellaneous 3,271 4,777 -------- -------- Total 43,325 61,255 -------- -------- DEFERRED CREDITS: Accumulated deferred income taxes 69,599 66,947 Accumulated deferred investment tax credits 14,803 15,301 Deferred credits related to income taxes 25,363 26,173 Deferred compensation plans 6,636 6,117 Deferred under-funded accrued benefit obligation 5,870 5,855 Miscellaneous 7,742 4,932 -------- -------- Total 130,013 125,325 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $526,303 $527,187 ======== ========
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 65 66 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 third quarter of 1994 decreased to $9.5 million, compared to $10.2 million in the corresponding period of 1993. The decrease in net income was primarily due to lower revenues and an increase in other operation expense and higher depreciation charges. REVENUES Revenues for the third quarter of 1994 decreased, compared to the corresponding period in 1993, because total energy sales dropped 8.2%. Energy sales to retail customers decreased 7.6% due to weather influences. The summer of 1993 was exceptionally hot, compared to the generally typical temperatures this past summer. 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 $140,000. EXPENSES Fuel expenses during the third quarter of 1994 decreased, compared to those recorded in the third quarter of 1993, because of a 44.0% drop in generation, reflecting lower demand and greater use of energy from affiliates, and less generation from more expensive oil- and gas-fired generating units. 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 because, in response to updated actuarial estimates reflecting SAVANNAH's work force reductions program (see Note (M) to the Condensed Financial Statements herein), SAVANNAH recognized additional pension and other postretirement benefit costs and SAVANNAH also recorded higher damage claims. Depreciation and amortization increased because of additions to utility plant, principally two combustion turbine peaking units. 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 fallen because the largest component of SAVANNAH's construction program, two 80-megawatt combustion turbine peaking units, were placed in service in April and May 1994. 66 67 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 nine months of 1994, SAVANNAH made gross property additions to utility plant of $24.0 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 67 68 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 September 30, 1994, SAVANNAH had $3.1 million in cash and cash equivalents and $26 million of unused credit arrangements with banks to meet its short-term cash needs. SAVANNAH had $6 million of short-term debt outstanding at quarter-end. 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. 68 69 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, N ALABAMA B, C, D, E, M, N GEORGIA B, C, D, F, G, H, I, J, K, M GULF B, L, M MISSISSIPPI B, M SAVANNAH M
69 70 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 the financial statements of SOUTHERN, ALABAMA, GEORGIA, GULF and MISSISSIPPI in Item 8 of the SOUTHERN system's combined 1993 Annual Report on Form 10-K for information concerning a proceeding initiated by the FERC regarding the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The refund period under that proceeding ended in October 1992. In August 1994, the FERC instituted a second such proceeding involving substantially the same issues. A new period for potential refunds commenced under this proceeding in October 1994, and will continue until January 1996, unless the proceeding is terminated prior to such time. (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 70 71 NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued) 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 October 1991. The unamortized balance of these deferred costs at September 30, 1994, was $456 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. With respect to the possible sale of GEORGIA's remaining interest in the Rocky Mountain project, as disclosed in the 1993 Form 10-K, such preliminary discussions have ceased and GEORGIA currently plans to retain its interest in the 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 legal issues are resolved 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 September 1994 were $104 million of which $15 million has been collected and the remainder deferred. The estimated costs are $11 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 appeals 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 71 72 NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued) 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 has filed a petition with the United States Tax Court to appeal the IRS position. In September 1994, GEORGIA deposited $46 million with the IRS to prevent additional interest charges should GEORGIA's position on this issue not prevail. 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. (J) 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 claimed 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.) GEORGIA's response sought dismissal of the complaint by FERC, which dismissal was ordered on November 9, 1994. In August 1994, OPC and MEAG also filed a complaint in the Superior Court of Fulton County, Georgia, urging substantially the same claims and asking the court to hear the matter in the event the FERC declines jurisdiction. Such court proceeding was subsequently stayed pending resolution of the FERC filing. 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. (K) 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 24 sites which may require environmental remediation by GEORGIA. The majority of these sites are electrical power substations and power generation facilities. GEORGIA has recognized $4 million in expenses for the anticipated clean-up cost for two sites 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 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 $23 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 NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued) (L) In August 1993, a complaint against GULF and SCS was filed in federal district court in Ohio by two companies with which GULF had contracted for the transportation by barge of certain of GULF's coal supplies. The complaint alleged breach of the contract by GULF and sought damages estimated by the plaintiffs to be in excess of $85 million. In August 1994, such complaint was dismissed with prejudice by the court in connection with the execution by the parties of a mutually acceptable amendment to the transportation agreement, and this matter is now concluded. (M) During 1994, GEORGIA and SCS, the system service company, instituted work force reduction programs. The costs related to these programs amounted to approximately $82.1 million for GEORGIA and $17.0 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 $12.9 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. (N) In September 1994, in response to a request by ALABAMA, the Alabama PSC issued an order allowing ALABAMA to establish a Natural Disaster Reserve in an amount not to exceed $32 million. Additionally, the order permits ALABAMA to change the estimating procedure for unbilled kilowatt-hours and associated revenues. This change in estimate resulted in an increase in unbilled revenues of approximately $28 million which offset the initial accrual for the Natural Disaster Reserve for the same amount. ALABAMA will accrue an additional $250,000 monthly until the reserve maximum is attained. ALABAMA further requested and was so ordered to forego any increase under Rate RSE (see Note 3 to the financial statements in Item 8 of ALABAMA's 1993 Annual Report on Form 10-K) through the July 1995 test. 73 74 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. ALABAMA ALABAMA held a special meeting of stockholders on September 21, 1994, and the following proposals were voted upon: (1) A proposal to increase on a permanent basis the permissible amount of securities representing unsecured short-term debt from the existing 10% charter limitation to a 20% restriction on all securities representing unsecured debt was approved. The vote tabulation was as follows:
CLASS OF STOCK FOR AGAINST ABSTAINED -------------- --- ------- --------- Common Stock 5,608,955 - - Preferred Stock and Class A Preferred Stock* 3,080,536 234,506 162,119
(2) Because of the passage of the above proposal, a proposal to increase until October 1, 2004, the permissible amount of securities representing short-term debt from 10% charter limitation to a 20% restriction was rendered moot. *For the purpose of tallying shares pursuant to ALABAMA s Charter, each share of Preferred Stock and Class A Preferred Stock had one vote per $100 stated value. 74 75 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.) Exhibit 27 - Financial Data Schedules (a) SOUTHERN (b) ALABAMA (c) GEORGIA (d) GULF (e) MISSISSIPPI (f) SAVANNAH (b) Reports on Form 8-K. There were no Reports on Form 8-K filed during the third quarter of 1994. 75 76 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: November 10, 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 and Chief Financial Officer (Principal Financial Officer) By /s/ Wayne Boston -------------------------------- (Wayne Boston, Attorney-in-fact) Date: November 10, 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. 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: November 10, 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: November 10, 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. 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: November 10, 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: November 10, 1994 78 EX-27.(A) 2 THE SOUTHERN COMPANY CO.-FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000092122 THE SOUTHERN COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 20,174,795 779,772 2,520,481 2,794,693 0 26,269,741 3,264,599 1,657,776 3,207,850 8,130,225 1,000 1,332,203 6,961,201 335,070 490,955 239,136 (453,134) (1,000) 244,030 (97,276) 8,535,921 26,269,741 6,382,250 589,201 4,416,190 5,005,391 1,376,859 4,309 1,381,168 502,318 878,850 65,096 813,754 573,999 0 1,712,292 1.25 0
EX-27.(B) 3 ALABAMA POWER COMPANY-FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FROM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000003153 ALABAMA POWER COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 6,759,628 106,118 936,243 664,833 0 8,466,822 224,358 1,304,791 1,108,522 2,637,671 0 440,400 2,397,074 25,000 0 96,516 (101,650) 0 105,021 (95,834) 2,765,140 8,466,822 2,285,173 193,518 1,600,600 1,794,118 491,055 (1,616) 489,439 158,038 331,401 19,488 311,913 200,400 0 526,384 0 0
EX-27.(C) 4 GEORGIA POWER COMPANY-FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FROM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000041091 GEORGIA POWER COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 10,591,268 163,486 1,167,177 1,823,616 0 13,745,547 344,250 2,384,761 1,425,541 4,154,552 0 692,787 3,778,134 240,655 47,050 142,620 (252,230) 0 87,764 (304) 4,601,985 13,745,547 3,235,434 325,586 2,195,105 2,520,691 714,743 22,454 737,197 271,181 466,016 35,773 430,243 321,000 0 934,046 0 0 CANCEL FOOTNOTE
EX-27.(D) 5 GULF POWER COMPANY COMPANY-FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000044545 GULF POWER COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 1,056,440 8,147 184,928 98,492 0 1,348,034 38,060 218,363 165,656 422,079 1,000 89,602 361,087 27,500 54,678 0 (55,443) (1,000) 0 0 392,088 1,348,034 447,000 25,491 351,275 376,766 70,234 795 71,029 25,777 45,252 4,418 40,834 32,900 0 117,116 0 0
EX-27.(E) 6 MISSISSIPPI POWER COMPANY-FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE FORM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000066904 MISSISSIPPI POWER COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 939,100 6,367 102,200 75,097 0 1,122,764 37,691 179,734 148,104 365,529 0 74,414 252,217 25,000 62,879 0 (41,077) 0 0 0 342,725 1,122,764 388,266 26,929 302,324 329,253 59,013 3,273 62,286 15,245 47,041 3,674 43,367 25,500 0 71,736 0 0
EX-27.(F) 7 SAVANNAH ELECTRIC & POWER CO.FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000086940 SAVANNAH ELECTRIC AND POWER COMPANY 1,000 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 430,673 1,791 55,205 38,634 0 526,303 54,223 8,688 98,471 161,382 0 35,000 148,499 6,000 8,500 0 (1,350) 0 1,683 (749) 165,239 526,303 166,768 14,160 122,428 136,588 30,180 362 30,542 9,303 21,239 1,743 19,496 12,300 0 32,822 0 0
-----END PRIVACY-ENHANCED MESSAGE-----