<PAGE>
CENTRAL OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
CONTENTS
Page
Statements of Income and Retained Earnings 1
Balance Sheets 2-3
Information Concerning Mine Operations and
Capital Improvements 4-5
Calculation of Cost of Capital and
Statement of Cost of Commercial Coal Sold and Shipped 6
Statement of Cost of Operation 7
Analysis of Mining Plant in Service 8
<PAGE>
CENTRAL OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(in thousands)
OPERATING REVENUES $ 7,858
COST OF OPERATION 9,070
OPERATING LOSS (1,212)
NONOPERATING INCOME 1,153
LOSS BEFORE FEDERAL INCOME TAXES (59)
FEDERAL INCOME TAX CREDIT (59)
NET INCOME $ -
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $2
NET INCOME -
BALANCE AT END OF PERIOD $2
The common stock of the Company is wholly owned by Ohio Power Company.
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CENTRAL OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
September 30,
2000
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $ 50,416
Accumulated Depreciation and Amortization 49,778
NET MINING PLANT 638
OTHER PROPERTY AND INVESTMENTS 12,566
CURRENT ASSETS:
Cash and Cash Equivalents 254
Accounts Receivable:
General 69
Affiliated Companies 5,088
Advances to Affiliates 42,174
Coal 688
Materials and Supplies 6,078
Accrued Tax Benefit 548
Prepayments 90
TOTAL CURRENT ASSETS 54,989
DEFERRED INCOME TAXES 52,813
DEFERRED CHARGES 1,238
TOTAL $122,244
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CENTRAL OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
September 30,
2000
(in thousands)
CAPITALIZATION AND LIABILITIES
SHAREHOLDER'S EQUITY:
Common Stock - Par Value $0.10:
Authorized - 100,000 Shares
Outstanding - 69,000 Shares $ 7
Retained Earnings 2
TOTAL SHAREHOLDER'S EQUITY 9
OTHER NONCURRENT LIABILITIES:
Accrued Postretirement Benefits Other Than Pensions 52,794
Accrued Reclamation Costs 35,747
Mine Closure Costs 1,258
Other Operating Reserves 19,199
TOTAL OTHER NONCURRENT LIABILITIES 108,998
CURRENT LIABILITIES:
Accounts Payable:
General 1,140
Affiliated Companies 380
Accrued Reclamation Costs 4,469
Accrued Vacation Pay 531
Workers' Compensation Claims 1,128
Other 2,681
TOTAL CURRENT LIABILITIES 10,329
DEFERRED CREDITS 2,908
TOTAL $122,244
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CENTRAL OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
Litigation
As discussed in Note 2 of the Notes to Financial Statements in the 1999 Annual
Report, the deductibility of certain interest deductions related to AEP's
corporate owned life insurance (COLI) program for taxable years 1991 through
1996 is under review by the Internal Revenue Service (IRS). Adjustments have
been or will be proposed by the IRS disallowing COLI interest deductions. A
disallowance of COLI interest deductions through September 30, 2000 would
increase expenses by approximately $10.9 million (including interest). The
Company has made no provision for any possible impact from this matter.
The Company made payments of taxes and interest attributable to COLI interest
deductions for taxable years 1991 through 1998 to avoid the potential assessment
by the IRS of any additional above market rate interest on the contested amount.
The payments to the IRS are included on the Balance Sheet in other property and
investments pending the resolution of this matter. The Company is seeking
refunds of all amounts paid plus interest through litigation.
In order to resolve this issue, the Company filed suit in 1998 against the
United States in the U.S. District Court for the Southern District of Ohio. The
trial began on October 30, 2000. In 1999 a U.S. Tax Court judge decided in the
Winn-Dixie Stores v. Commissioner case that a corporate taxpayer's COLI interest
deduction should be disallowed. In October 2000, a judge for the U.S. District
Court for Delaware reached a similar decision in Internal Revenue Service vs.
C.M. Holdings, Inc. Notwithstanding the Tax Court's and U.S. District Court's
decisions, management has made no provision for any possible adverse earnings
impact from this matter because it believes, and has been advised by outside
counsel, that it has a meritorious position and will vigorously pursue its
lawsuit. In the event the resolution of this matter is unfavorable, the Company
expects to recover from Ohio Power Company (OPCo) all of its costs under terms
of the coal supply agreement.
Money Pool
On June 15, 2000, the Company became a participant in the American
Electric Power (AEP) System Money Pool (Money Pool). The Money Pool is a
mechanism structured to meet the short-term cash requirements of the
participants with AEP Company, Inc. acting as the primary borrower on behalf of
the Money Pool. The Company's affiliates that are U.S. domestic electric utility
operating companies and coal-mining companies are the primary participants in
the Money Pool.
The operation of the Money Pool is designed to match on a daily basis
the available cash and borrowing requirements of the participants. Participants
with excess cash loan funds to the Money Pool reducing the amount of external
funds AEP Company, Inc. needs to borrow to meet the short-term cash requirements
of other participants with advances from the Money Pool. AEP Company, Inc.
borrows the funds needed on a daily basis to meet the net cash requirements of
the Money Pool participants. A weighted average daily interest rate which is
calculated based on the outstanding short-term debt borrowings made by AEP
Company, Inc. is applied to each Money Pool participant's daily outstanding
investment or debt position to determine interest income or interest expense.
Interest income is included in nonoperating income, and interest expense is
included in interest charges. At September 30, 2000 the Company was a net
investor in the Money Pool and reports its investment in the Money Pool as
Advances to Affiliates on the Balance Sheet.
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<TABLE>
CENTRAL OHIO COAL COMPANY
CALCULATION OF COST OF CAPITAL AND STATEMENT OF COST OF COMMERCIAL COAL SOLD AND SHIPPED
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
(in thousands, except as noted)
<CAPTION> July through
September
2000
<S> <C>
I. Calculation of Cost-of-Capital Compensation:
A. Equity Investment at Beginning of Period:
Common Stock $ 7
B. Rate of Return Allowable per HCAR No. 26573:
10.27% per annum, 2.5675% per quarter .025675
C. Earnings Allowable on Equity Investment
1. Current Quarter $ -
2. Year-to-Date $ -
D. Net Income per Statement of Income $ -
Add: Interest Charges -
Less: Nonoperating Income 1,153
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ (1,153)
2. Year-to-Date $ (2,189)
II. Coal Billing Calculation:
A. Total Operating Expenses (a) $ 9,011
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I (1,153)
C. Cost Applicable to Current Quarter Coal Billings $ 7,858
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 334,405
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $23.50
(a) As represented by ?Cost of Operation? plus ?Federal Income Taxes? reported in Statement of Income.
</TABLE>
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CENTRAL OHIO COAL COMPANY
STATEMENT OF COST OF OPERATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
(in thousands)
Direct Labor-UMW* $ 323
Indirect Labor-UMW* 1,306
Benefits-UMW* 1,579
Salaries and Benefits-Nonunion 781
Operating Supplies 1,167
Repair Parts and Materials 980
Electricity and Other Utilities 512
Outside Services-Maintenance, Haulage and Reclamation 323
Taxes Other Than Federal Income Taxes** 470
Rental of Equipment 18
Mining Cost Normalization*** 3,077
Reclamation Cost-Net (2,519)
Other Production Costs 518
Subtotal 8,535
Transfers of Production Costs (to)/from Coal Inventory 535
Total $ 9,070
* United Mine Workers of America.
** Excludes FICA, Federal Unemployment and State Unemployment Taxes.
These costs are reflected in employee benefits.
*** Represents the deferral/accrual required to establish a selling price based
on forecasted results for the remainder of the year. The amount of mining
cost normalization is established on an "overall" company basis(i.e., not
itemized) and is eliminated by year-end.
<PAGE>
CENTRAL OHIO COAL COMPANY
ANALYSIS OF MINING PLANT IN SERVICE
AND RELATED ACCUMULATED PROVISIONS FOR
DEPRECIATION AND AMORTIZATION
September 30, 2000
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 324 $ - $324
Mining Structures and Equipment 47,800 47,486 314
Leasehold Improvements 2,292 2,292 -
Total Mining Plant in Service $50,416 $49,778 $638
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