<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____TO_____
COMMISSION REGISTRANT, STATE OF INCORPORATION, I.R.S. EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ---------------------------- ------------------
1-3526 THE SOUTHERN COMPANY 58-0690070
(A Delaware Corporation)
64 Perimeter Center East
Atlanta, Georgia 30346
(404) 393-0650
1-3164 ALABAMA POWER COMPANY 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 250-1000
1-6468 GEORGIA POWER COMPANY 58-0257110
(A Georgia Corporation)
333 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(404) 526-6526
0-2429 GULF POWER COMPANY 59-0276810
(A Maine Corporation)
500 Bayfront Parkway
Pensacola, Florida 32501
(904) 444-6111
0-6849 MISSISSIPPI POWER COMPANy 64-0205820
(A Mississippi Corporation)
2992 West Beach
Gulfport, Mississippi 39501
(601) 864-1211
1-5072 SAVANNAH ELECTRIC AND POWER COMPANY 58-0418070
(A Georgia Corporation)
600 Bay Street, East
Savannah, Georgia 31401
(912) 232-7171
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<PAGE> 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
---- ----
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES OUTSTANDING
REGISTRANT COMMON STOCK AT JULY 31, 1994
- ---------- ------------- ----------------
<S> <C> <C>
THE SOUTHERN COMPANY PAR VALUE $5 PER SHARE 649,066,487
ALABAMA POWER COMPANY PAR VALUE $40 PER SHARE 5,608,955
GEORGIA POWER COMPANY NO PAR VALUE 7,761,500
GULF POWER COMPANY NO PAR VALUE 992,717
MISSISSIPPI POWER COMPANY WITHOUT PAR VALUE 1,121,000
SAVANNAH ELECTRIC AND POWER COMPANY PAR VALUE $5 PER SHARE 10,844,635
</TABLE>
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.
<PAGE> 3
Table of Contents
PART I
<TABLE>
<CAPTION>
PAGE
DEFINITIONS
<S> <C>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
Management's Opinion as to Fair Statement of Results 6
Condensed Statements of Income 7
Condensed Statements of Cash Flows 8
Condensed Balance Sheets 9
Management's Discussion and Analysis of Results of Operations and Financial Condition 11
ALABAMA POWER COMPANY
Management's Opinion as to Fair Statement of Results 18
Review by Independent Public Accountants 18
Condensed Statements of Income 19
Condensed Statements of Cash Flows 20
Condensed Balance Sheets 21
Management's Discussion and Analysis of Results of Operations and Financial Condition 23
Exhibit 1 - Report of Independent Public Accountants 27
GEORGIA POWER COMPANY
Management's Opinion as to Fair Statement of Results 29
Review by Independent Public Accountants 29
Condensed Statements of Income 30
Condensed Statements of Cash Flows 31
Condensed Balance Sheets 32
Management's Discussion and Analysis of Results of Operations and Financial Condition 34
Exhibit 1 - Report of Independent Public Accountants 40
GULF POWER COMPANY
Management's Opinion as to Fair Statement of Results 42
Condensed Statements of Income 43
Condensed Statements of Cash Flows 44
Condensed Balance Sheets 45
Management's Discussion and Analysis of Results of Operations and Financial Condition 47
MISSISSIPPI POWER COMPANY
Management's Opinion as to Fair Statement of Results 51
Condensed Statements of Income 52
Condensed Statements of Cash Flows 53
Condensed Balance Sheets 54
Management's Discussion and Analysis of Results of Operations and Financial Condition 56
SAVANNAH ELECTRIC AND POWER COMPANY
Management's Opinion as to Fair Statement of Results 60
Condensed Statements of Income 61
Condensed Statements of Cash Flows 62
Condensed Balance Sheets 63
Management's Discussion and Analysis of Results of Operations and Financial Condition 65
NOTES TO THE CONDENSED FINANCIAL STATEMENTS 68
</TABLE>
3
<PAGE> 4
Table of Contents
(Continued)
<TABLE>
<CAPTION>
PAGE
PART II
<S> <C>
Item 1. Legal Proceedings 73
Item 4. Submission of Matters to a Vote of Security Holders 73
Item 6. Exhibits and Reports on Form 8-K 76
SIGNATURES 77
</TABLE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM MEANING
---- -------
<S> <C>
AFUDC . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for Funds Used During Construction
ALABAMA . . . . . . . . . . . . . . . . . . . . . . . . . Alabama Power Company
Clean Air Act . . . . . . . . . . . . . . . . . . . . . . Clean Air Act Amendments of 1990
ECO Plan . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Compliance Overview Plan
Energy Act . . . . . . . . . . . . . . . . . . . . . . . . Energy Policy Act of 1992
FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission
GEORGIA . . . . . . . . . . . . . . . . . . . . . . . . . Georgia Power Company
GULF . . . . . . . . . . . . . . . . . . . . . . . . . . . Gulf Power Company
Gulf States . . . . . . . . . . . . . . . . . . . . . . . Gulf States Utilities Company
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Revenue Service
MEAG . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal Electric Authority of Georgia
MISSISSIPPI . . . . . . . . . . . . . . . . . . . . . . . Mississippi Power Company
NRC . . . . . . . . . . . . . . . . . . . . . . . . . . . Nuclear Regulatory Commission
OPC . . . . . . . . . . . . . . . . . . . . . . . . . . . Oglethorpe Power Corporation
PEP . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Evaluation Plan (PEP-1A)
PSC . . . . . . . . . . . . . . . . . . . . . . . . . . . Public Service Commission
SAVANNAH . . . . . . . . . . . . . . . . . . . . . . . . Savannah Electric and Power Company
SCS . . . . . . . . . . . . . . . . . . . . . . . . . . . Southern Company Services, Inc.
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities and Exchange Commission
SEGCO . . . . . . . . . . . . . . . . . . . . . . . . . . Southern Electric Generating Company
SOUTHERN . . . . . . . . . . . . . . . . . . . . . . . . The Southern Company
</TABLE>
4
<PAGE> 5
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
5
<PAGE> 6
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of SOUTHERN included herein have been
prepared by SOUTHERN, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of SOUTHERN's management, subject to the effect of
such adjustments, if any, as might have been required had the outcome of the
uncertainty with respect to the actions of the regulators regarding the
recoverability of GEORGIA's investment in the Rocky Mountain pumped storage
hydroelectric project, as more fully discussed in Note (G) to the Condensed
Financial Statements herein, been known, the information furnished herein
reflects all adjustments (which, except for the provision for separation
benefits recorded in 1994, included only normal recurring adjustments)
necessary to present fairly the results for the periods ended June 30, 1994 and
1993. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although SOUTHERN believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in SOUTHERN's latest annual report on
Form 10-K and, with respect to nuclear decommissioning, the March 31, 1994
quarterly report on Form 10-Q.
6
<PAGE> 7
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $2,068,485 $2,068,126 $4,000,915 $3,907,688 $8,582,372 $8,160,865
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 536,681 556,579 1,016,672 1,013,966 2,267,713 2,141,588
Purchased power 42,948 90,379 123,608 184,594 274,702 398,377
Provision for separation benefits 3,668 - 96,818 - 96,818 -
Other 360,837 350,832 691,010 661,627 1,475,081 1,344,805
Maintenance 161,089 164,346 334,876 321,811 665,629 642,073
Depreciation and amortization 202,176 201,213 402,386 395,607 800,261 781,937
Amortization of deferred Plant Vogtle
expenses, net (Note F) 15,789 6,012 28,407 9,039 55,652 1,451
Taxes other than income taxes 118,015 112,625 236,951 227,667 470,714 445,344
Federal and state income taxes 187,292 160,498 299,885 290,373 743,496 656,660
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses 1,628,495 1,642,484 3,230,613 3,104,684 6,850,066 6,412,235
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME 439,990 425,642 770,302 803,004 1,732,306 1,748,630
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 2,492 1,137 5,775 1,884 12,873 6,921
Interest income 7,443 5,901 13,541 12,429 31,265 30,115
Other, net (138) 33,314 (16,014) 25,169 (82,519) (20,930)
Income taxes applicable to other income (1,336) 19,696 4,725 23,101 38,839 56,162
---------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 448,451 485,690 778,329 865,587 1,732,764 1,820,898
---------- ---------- ---------- ---------- ---------- ----------
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 146,087 150,905 288,658 306,567 576,836 636,862
Allowance for debt funds used during construction (5,342) (3,426) (9,726) (6,080) (16,897) (11,389)
Interest on interim obligations 8,323 7,389 17,572 13,152 34,255 20,272
Amortization of debt discount, premium and expense, net 7,482 6,612 14,843 12,116 29,022 20,859
Other interest charges 13,970 50,675 26,114 64,989 48,208 82,709
Preferred dividends of subsidiary companies 21,732 23,051 43,066 47,356 89,177 98,748
---------- ---------- ---------- ---------- ---------- ----------
Net interest charges and preferred dividends 192,252 235,206 380,527 438,100 760,601 848,061
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME $ 256,199 $ 250,484 $ 397,802 $ 427,487 $ 972,163 $ 972,837
========== ========== ========== ========== ========== ==========
AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING *(THOUSANDS) 648,347 636,108 647,399 634,837 643,600 633,608
EARNINGS PER SHARE OF COMMON STOCK* $ 0.39 $ 0.39 $ 0.61 $ 0.67 $ 1.51 $ 1.54
CASH DIVIDENDS PAID PER SHARE
OF COMMON STOCK* $ 0.295 $ 0.285 $ 0.59 $ 0.57 $ 1.16 $ 1.12
</TABLE>
*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
<PAGE> 8
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Consolidated net income $ 397,802 $ 427,487
Adjustments to reconcile consolidated net income to net cash provided by operating activities--
Depreciation and amortization 519,402 497,429
Deferred income taxes, net (10,499) 43,618
Allowance for equity funds used during construction (5,775) (1,884)
Deferred Plant Vogtle costs 28,407 9,039
Provision for separation benefits 83,962 -
Gain on asset sales (23,582) (35,108)
Other, net (23,628) (43,062)
Changes in certain current assets and liabilities--
Receivables, net 11,956 59,070
Fossil fuel stock (74,858) (67,656)
Materials and supplies (6,062) (11,829)
Accounts payable (24,435) (81,746)
Other (5,963) 26,093
--------- -----------
Net cash provided from operating activities 866,727 821,451
--------- -----------
INVESTING ACTIVITIES:
Gross property additions (696,330) (631,307)
Sales of property 141,931 253,032
Other (70,069) (40,209)
--------- -----------
Net cash used in investing activities (624,468) (418,484)
--------- -----------
FINANCING ACTIVITIES:
Proceeds--
Common stock 121,766 108,867
Preferred stock - 75,000
First mortgage bonds 35,000 1,630,000
Pollution control bonds 106,165 244,461
Other long-term debt 428,178 12,114
Retirements--
Preferred stock (1,000) (107,500)
First mortgage bonds (106,679) (1,572,143)
Pollution control bonds (52,555) (175,870)
Other long-term debt (159,744) (34,482)
Special deposits-redemption funds (187,259) (288,510)
Interim obligations, net (8,655) 295,901
Payment of common stock dividends (382,525) (361,330)
Miscellaneous (8,667) (80,215)
--------- -----------
Net cash provided from (used in) financing activities (215,975) (253,707)
--------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 26,284 149,260
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 178,346 97,313
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 204,630 $ 246,573
========= ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 307,537 $ 365,360
Income taxes 291,612 188,318
</TABLE>
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
8
<PAGE> 9
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service (Note C) $28,103,178 $27,686,539
Less accumulated provision for depreciation 9,240,085 8,933,717
----------- -----------
18,863,093 18,752,822
Nuclear fuel, at amortized cost 224,946 229,293
Construction work in progress 1,014,775 1,031,240
----------- -----------
Total 20,102,814 20,013,355
----------- -----------
OTHER PROPERTY AND INVESTMENTS:
Foreign utility operations, being amortized 539,221 558,960
Nuclear decommissioning trusts (Note C) 113,689 87,487
Miscellaneous 94,960 89,425
----------- -----------
Total 747,870 735,872
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 204,630 178,346
Special deposits - redemption funds 187,259 -
Receivables, less accumulated provisions for uncollectible accounts
of $9,567 at June 30, 1994 and $9,067 at December 31, 1993 1,132,032 1,146,774
Fossil fuel stock, at average cost 321,447 254,026
Materials and supplies, at average cost 540,784 534,722
Prepayments 187,757 147,915
Miscellaneous 72,574 73,074
----------- -----------
Total 2,646,483 2,334,857
----------- -----------
DEFERRED CHARGES:
Deferred charges related to income taxes 1,498,635 1,546,338
Deferred Plant Vogtle costs (Note F) 478,573 506,980
Debt expense and loss, being amortized 322,412 320,515
Deferred fuel charges 58,954 70,404
Miscellaneous 445,951 382,336
----------- -----------
Total 2,804,525 2,826,573
----------- -----------
TOTAL ASSETS $26,301,692 $25,910,657
=========== ===========
</TABLE>
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
9
<PAGE> 10
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock, par value $5 per share -
Authorized - 1 billion shares;
Outstanding - June 30, 1994: 648,346,540 shares
December 31, 1993: 642,661,658 shares* $ 3,241,733 $ 3,213,308
Paid-in capital 1,595,140 1,502,193
Premium on preferred stock 1,012 1,012
Retained earnings 2,983,973 2,967,706
----------- -----------
7,821,858 7,684,219
Preferred stock 1,332,203 1,332,203
Preferred stock subject to mandatory redemption 500 1,000
Long-term debt 7,546,946 7,411,455
----------- -----------
Total 16,701,507 16,428,877
----------- -----------
CURRENT LIABILITIES:
Preferred stock due within one year 500 1,000
Long-term debt due within one year 272,860 155,638
Notes payable 622,478 865,381
Commercial paper 309,775 75,527
Accounts payable 636,703 697,749
Customer deposits 103,918 102,822
Taxes accrued--
Federal and state income 69,315 34,023
Other 148,182 171,673
Interest accrued 196,094 186,057
Vacation pay accrued 92,015 90,206
Miscellaneous 190,074 190,638
----------- -----------
Total 2,641,914 2,570,714
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 3,992,013 3,978,889
Deferred credits related to income taxes 1,022,696 1,050,512
Accumulated deferred investment tax credits 878,701 900,203
Disallowed Plant Vogtle capacity buyback costs 57,244 63,067
Prepaid capacity revenues, net 141,155 143,762
Miscellaneous 866,462 774,633
----------- -----------
Total 6,958,271 6,911,066
----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $26,301,692 $25,910,657
=========== ===========
</TABLE>
*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
<PAGE> 11
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
SOUTHERN's earnings for the second quarter of 1994 were slightly higher than
earnings recorded in the same period of 1993 primarily because of lower capital
costs. Consolidated net income was $256 million for the second quarter of
1994, compared to $250 million for the second quarter of 1993. Earnings per
share were $0.39 in the second quarter of both 1994 and 1993. Also, refer to
"Other Income" later in this discussion for details of the gains recorded from
the sales of a portion of Plant Scherer Unit 4 in June of 1993 and 1994.
REVENUES
Retail energy sales increased 4.0% primarily because of an increase in the
number of customers served and the improvement in the economy. Energy sales to
residential, commercial and industrial customers increased 3.8%, 6.5% and 2.5%,
respectively. Wholesale energy sales decreased 41.6% due to reduced demand and
scheduled reductions in off-system contracts. As a result, total energy sales
decreased 4.9%. Capacity revenues for the second quarter of 1994 were $20
million less than in the second quarter of 1993. The capacity revenues
decreased as scheduled, coinciding with GEORGIA completing the second and third
sales of a portion of Plant Scherer Unit 4 in June 1993 and 1994. The final
sale in a series of four transactions for the sale of this generating unit is
scheduled for June 1995. The generation from this unit has been dedicated to
unit power sales.
EXPENSES
Fuel expense for the second quarter of 1994, compared to the corresponding
period of 1993, was lower due primarily to a decrease in the average cost of
coal. Purchased power expense decreased because of the reduction in capacity
buyback payments by GEORGIA to the co-owners of plants Vogtle and Scherer and
lower demand from wholesale customers. See Note (F) to the Condensed Financial
Statements herein for information regarding the Georgia PSC's retail rate order
that required the levelization of capacity buyback expense for Plant Vogtle.
The Southern electric system has instituted a number of initiatives to curb
the growth of expenses, including workforce reduction programs. Disregarding
the one-time cost of these programs, they are projected to yield pre-tax
savings of approximately $26 million in 1994 and approximately $51 million in
each succeeding year. See Note (K) to the Condensed Financial Statements
herein for further information on these programs. Maintenance expenses
decreased due to the timing of scheduled maintenance on generating units.
Taxes other than income taxes were higher primarily because of increased
investment in plant. The increase in income tax expense was due to higher
earnings and the enactment of a federal income tax rate increase in August
1993.
11
<PAGE> 12
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
The settlement of an IRS audit for the tax years 1983 through 1987 in May
1993 resulted in an increase in depreciation and amortization in the second
quarter of 1993 due to the reversal of the amortization of certain investment
tax credits. The settlement also resulted in interest charges and a reduction
in tax expense applicable to other income due to the recognition of tax credits
previously deferred. While the settlement resulted in the payment of
additional taxes during the second quarter of 1993, there was no material
effect on net income.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decrease in interest on long-term debt and dividends on preferred stock
reflects the SOUTHERN system's efforts to decrease its capital costs. In
response to the low interest rate levels prevailing during 1992 and 1993, the
SOUTHERN system refinanced a significant portion of its long-term debt and
preferred stock. To the extent it is economically feasible, efforts to reduce
capital costs will continue. Other interest charges for the second quarter of
1993 reflect the accrual of interest on the settlement of an IRS audit in May
1993.
OTHER INCOME
On June 1 of 1993 and 1994, GEORGIA completed the second and third sales in a
series of four separate transactions to sell Plant Scherer Unit 4. The second
sale for 31.44% of the unit was made for $253 million and resulted in a pre-tax
gain of $35.1 million ($18.4 million, after taxes). The latter sale for 16.55%
of the unit was made for $133 million and resulted in a pre-tax gain of $21.7
million ($11.3 million, after taxes). Additionally, income taxes applicable to
other income in the second quarter of 1993 were reduced as a result of the tax
effect of the interest charges in the settlement of an IRS audit and the
recognition of tax credits previously deferred.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and not included in rate base. The equity portion represents
non-cash income. However, when facilities are completed and included in rate
base, previously capitalized amounts significantly increase cash flow because
revenues are higher as a result of the increased rate base and additional
depreciation expense.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings is contingent upon
numerous factors ranging from regulatory matters to growth in energy sales.
Reference is made to the Notes to the Condensed Financial Statements herein
for further discussion of various uncertainties and legal proceedings related
to: the actions of regulators regarding the recovery of GEORGIA's investment
in the Rocky Mountain pumped storage hydroelectric project; a civil suit filed
against ALABAMA related to financing agreements; a suit
12
<PAGE> 13
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
filed against GULF related to fuel transportation; the outcome of a proceeding
initiated by the FERC to determine the appropriate return on equity on
wholesale power and transmission contracts; and complaints filed by MEAG and
OPC seeking to recover from GEORGIA an aggregate of $22.8 million (including
interest) in alleged partial requirements rates overcharges.
Pursuant to an Integrated Resource Plan approved by the Georgia PSC,
GEORGIA has implemented various demand-side option programs and had been
authorized by the Georgia PSC to recover associated program costs through rate
riders. A superior court judge s ruling that recovery of these costs through
rate riders was unlawful was reversed by the Georgia Court of Appeals in July
1994. GEORGIA has ceased collection of the rate riders and the Georgia PSC has
allowed the deferral of program costs pending the final outcome of this matter.
For additional information on this matter, see Note (H) to the Condensed
Financial Statements herein.
The IRS has notified SOUTHERN that its tax accounting for the sale by
GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax
deficiency and interest arising from this issue amount to approximately $30
million and $33 million, respectively. The tax deficiency relates to a timing
issue as to when taxes are paid, therefore only the interest could impact
future income. See Note (I) to the Condensed Financial Statements herein for
further discussion of this matter.
Compliance costs related to the Clean Air Act will reduce earnings if such
increased costs cannot be offset. The Clean Air Act is discussed under
"Environmental Matters" in Item 7 - Management's Discussion and Analysis in
SOUTHERN's 1993 Annual Report on Form 10-K. Also see Note (M) to the Condensed
Financial Statements herein for information regarding a list of sites,
including a number of sites owned by GEORGIA, compiled by the State of Georgia
that may require environmental remediation.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, and the rate of economic growth in SOUTHERN's service area. The
enactment of the Energy Act will have a profound effect on the electric utility
industry. A discussion of the potential impact of the Energy Act and
particularly its effect on competition is found under "Future Earnings
Potential" in Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993
Annual Report on Form 10-K.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in financial statements. In response to these questions, the
Financial Accounting Standards Board has decided to review the accounting for
nuclear decommissioning. If current electric utility industry accounting
practices for such decommissioning costs are changed: (1)
13
<PAGE> 14
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
annual provisions for decommissioning could increase and (2) the total
estimated cost for decommissioning may be required to be recorded as a
liability on the balance sheet. ALABAMA and GEORGIA do not believe that such
changes, if required, would have a significant adverse effect on results of
operations due to their current and expected future ability to recover
decommissioning costs through rates. Further discussion of nuclear
decommissioning costs is made in Note (C) to the Condensed Financial Statements
herein.
FINANCIAL CONDITION
OVERVIEW
The major changes in SOUTHERN's financial condition during the first half of
1994 were the addition of approximately $696 million to utility plant, the
commercial operation of seven combustion turbine generating units having an
aggregate nameplate capacity of approximately 635 megawatts, the sale of a
portion of Plant Scherer Unit 4, recognition of the liability associated with
the implementation of workforce reduction programs and the sale of SOUTHERN's
common stock for $122 million. The funds for gross property additions and
other capital requirements were derived primarily from operations, the sale of
a portion of Plant Scherer, an increase in other long-term debt and security
sales. See SOUTHERN's Condensed Statements of Cash Flows for further details.
Additionally, SOUTHERN's board of directors declared a two-for-one common
stock split in the form of a stock distribution for each share issued and
outstanding as of February 7, 1994.
CAPITAL STRUCTURE
One of SOUTHERN's goals is to maintain common equity as a percent of total
capitalization, including short-term debt and the current portion of
capitalization, within a range of 40 to 45%. This ratio was 43.7% at June 30,
1994, compared to 43.8% at December 31, 1993. The market price of SOUTHERN's
common stock at June 30, 1994, was $18.75 per share, compared to a book value
of $12.06. This represents a market-to-book value ratio of 155%. The
quarterly dividend for the second quarter of 1994 was 29.5 cents per share.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
The construction program of the Southern electric system is budgeted at $4.3
billion for the three years 1994 through 1996 ($1.5 billion in 1994, $1.3
billion in 1995 and $1.5 billion in 1996). Actual construction costs may vary
from this estimate because of such factors as changes in business conditions;
changes in nuclear plants to meet new regulations; changes in environmental
regulations; revised load growth projections; increasing costs of labor,
equipment and materials; and the cost of capital.
Current energy demand forecasts do not require any additional baseload
generating facilities until well into the future. However, the construction of
combustion turbine peaking units of approximately 1,700 megawatts is planned by
1996, including those that began commercial operation in 1994, to
14
<PAGE> 15
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
meet the increased peak-hour demands. In addition, significant construction
will continue related to transmission and distribution facilities and the
upgrading and extension of the useful lives of generating plants. GEORGIA and
OPC have entered into a joint ownership agreement for the latter to assume
responsibility for the construction and completion of the Rocky Mountain
project. This agreement is described further in Note 4 to the financial
statements in Item 8 of SOUTHERN's 1993 Annual Report on Form 10-K.
Changes in environmental regulations could substantially increase the
Southern electric system's capital requirements and operating costs. The acid
rain compliance provision of the Clean Air Act will have a significant impact
on the Southern electric system. This legislation, as well as other
legislation and regulations, are described under "Environmental Matters" in
Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993 Annual Report
on Form 10-K. The full impact of these requirements cannot be determined at
this time, pending the development and implementation of applicable
regulations.
OTHER CAPITAL REQUIREMENTS
In addition to the funds needed for the construction program, approximately $86
million, excluding those funds on deposit with trustees and which are
specifically designated for called redemptions, will be required by June 30,
1995, for present sinking fund requirements and maturities of long-term debt
and preferred stock. Also, the operating subsidiaries plan to continue, to the
extent possible, a program to retire high-cost debt and preferred stock and
replace these obligations with lower-cost capital.
SOURCES OF FUNDS
In addition to the sale of common stock in the first half of 1994, SOUTHERN may
require additional equity capital during the remainder of the year. The
amounts and timing of additional equity capital to be raised in 1994, as well
as in subsequent years, will be contingent on SOUTHERN's investment
opportunities. The operating subsidiaries plan to obtain the funds required
for construction and other purposes from sources similar to those used in the
past. However, the type and timing of financings will depend on market
conditions, maintenance of adequate earnings, and regulatory approval.
Additionally, GEORGIA expects to receive approximately $130 million in 1995
from the sale of its remaining ownership interest in Plant Scherer Unit 4.
These property sales are discussed further in Note 7 to the financial
statements in Item 8 in SOUTHERN's 1993 Annual Report on Form 10-K.
To meet short-term cash needs and contingencies, the SOUTHERN system had at
June 30, 1994, approximately $205 million of cash and cash equivalents and
approximately $1.2 billion of unused credit arrangements with banks.
At June 30, 1994, the system companies had outstanding $622 million of
notes payable and $310 million of commercial paper. The level of short-term
indebtedness is seasonal and by the conclusion
15
<PAGE> 16
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
of summer such levels of short-term debt should be greatly pared. The
short-term lines of credit may not be utilized in their entirety without
additional regulatory approval. Since the construction program with respect to
major generating projects has been completed, management believes that the need
for working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.
In order to issue additional long-term debt and preferred stock, the
operating subsidiaries must comply with certain earnings coverage requirements
outlined in their respective mortgage indentures and corporate charters. The
coverage ratios of SOUTHERN's operating subsidiaries are sufficiently high to
permit, at present interest rate levels, any foreseeable security sales. The
amount of securities which they will be permitted to issue in the future will
depend upon market conditions and other factors prevailing at that time.
16
<PAGE> 17
ALABAMA POWER COMPANY
17
<PAGE> 18
ALABAMA POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of ALABAMA included herein have been
prepared by ALABAMA, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of ALABAMA's management, the information regarding
ALABAMA furnished herein reflects all adjustments (which included only normal
recurring adjustments) necessary to present fairly the results for the periods
ended June 30, 1994 and 1993. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although ALABAMA believes that the disclosures regarding
ALABAMA are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in ALABAMA's latest
annual report on Form 10-K and, with respect to nuclear decommissioning, the
March 31, 1994 quarterly report on Form 10-Q.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The condensed financial statements of ALABAMA included herein have been
reviewed by ALABAMA's independent public accountants as set forth in their
report included herein as Exhibit 1.
18
<PAGE> 19
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
------------- ------------- -------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $711,174 $680,810 $1,365,487 $1,277,036 $2,914,084 $2,676,639
Revenues from affiliates 48,225 52,779 80,759 92,112 170,622 169,134
-------- -------- ---------- ---------- ---------- ----------
Total operating revenues 759,399 733,589 1,446,246 1,369,148 3,084,706 2,845,773
-------- -------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 219,869 209,493 404,869 369,923 912,046 783,898
Purchased power from non-affiliates 4,377 3,394 9,635 7,114 17,751 16,087
Purchased power from affiliates 25,113 27,800 51,695 55,195 116,830 116,464
Other 113,536 116,244 224,170 220,737 474,248 452,335
Maintenance 52,045 56,128 119,704 116,019 256,191 237,485
Depreciation and amortization 72,757 71,665 145,359 144,739 290,929 284,599
Taxes other than income taxes 45,021 43,485 91,444 90,411 180,030 176,004
Federal and state income taxes 63,985 46,357 108,051 81,631 233,631 189,461
-------- -------- ---------- ---------- ---------- ----------
Total operating expenses 596,703 574,566 1,154,927 1,085,769 2,481,656 2,256,333
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME 162,696 159,023 291,319 283,379 603,050 589,440
OTHER INCOME (EXPENSE):
Allowance for equity funds used
during construction 503 711 1,170 1,139 3,291 2,126
Interest income 4,028 3,690 8,258 7,804 21,229 16,106
Other, net (15,735) (1,363) (19,483) (4,166) (38,608) (18,485)
Income taxes applicable to
other income 6,268 958 6,935 1,729 15,444 11,164
-------- -------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 157,760 163,019 288,199 289,885 604,406 600,351
-------- -------- ---------- ---------- ---------- ----------
INTEREST CHARGES:
Interest on long-term debt 44,648 46,225 89,137 95,432 178,565 195,283
Allowance for debt funds used
during construction (766) (984) (1,449) (1,578) (2,863) (2,318)
Interest on interim obligations 1,499 1,575 2,309 2,369 3,700 4,034
Amortization of debt discount,
premium, and expense, net 2,423 2,260 4,895 4,120 9,712 6,976
Other interest charges 4,784 15,398 9,745 25,337 19,882 35,119
-------- -------- ---------- ---------- ---------- ----------
Net interest charges 52,588 64,474 104,637 125,680 208,996 239,094
-------- -------- ---------- ---------- ---------- ----------
NET INCOME 105,172 98,545 183,562 164,205 395,410 361,257
DIVIDENDS ON PREFERRED STOCK 6,504 7,097 12,863 14,901 27,521 31,987
-------- -------- ---------- ---------- ---------- ----------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 98,668 $ 91,448 $ 170,699 $ 149,304 $ 367,889 $ 329,270
======== ======== ========== ========== ========== ==========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
19
<PAGE> 20
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
-------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $183,562 $164,205
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 177,518 180,032
Deferred income taxes, net (8,453) (18,052)
Allowance for equity funds used during construction (1,170) (1,139)
Other, net (8,763) 35,545
Change in certain current assets and liabilities:
Receivables, net 7,528 23,549
Inventories (16,738) (70,943)
Payables (49,046) (35,696)
Taxes accrued 29,139 23,049
Energy cost recovery, retail (9,745) 16,415
Other (43,592) (34,221)
-------- --------
Net cash provided from operating activities 260,240 282,744
-------- --------
INVESTING ACTIVITIES:
Gross property additions (217,500) (197,989)
Other (20,101) (3,819)
-------- --------
Net cash used for investing activities (237,601) (201,808)
-------- --------
FINANCING ACTIVITIES:
Proceeds:
First mortgage bonds - 610,000
Other long-term debt 107,433 108,887
Retirements:
Preferred stock - (49,000)
First mortgage bonds (20,387) (516,504)
Other long-term debt (43,641) (118,019)
Special deposits - redemption funds (53,700) -
Interim obligations, net 142,845 60,402
Payment of preferred stock dividends (12,107) (16,067)
Payment of common stock dividends (133,500) (126,000)
Miscellaneous (1,063) (29,693)
-------- --------
Net cash provided from (used for) financing activities (14,120) (75,994)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 8,519 4,942
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,233 13,629
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,752 $ 18,571
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 89,088 $ 87,781
Income taxes 103,811 94,181
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
20
<PAGE> 21
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost (Note C) $9,870,270 $9,757,141
Less accumulated provision for depreciation 3,508,370 3,384,156
---------- ----------
6,361,900 6,372,985
Nuclear fuel, at amortized cost 95,570 93,551
Construction work in progress 276,736 225,786
---------- ----------
Total 6,734,206 6,692,322
---------- ----------
OTHER PROPERTY AND INVESTMENTS 111,830 99,185
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 11,752 3,233
Special deposit - redemption funds 53,700 -
Receivables --
Customer accounts receivable 329,895 312,090
Other accounts and notes receivable 41,072 48,808
Affiliated companies 38,419 40,216
Accumulated provision for uncollectible accounts (2,299) (2,632)
Refundable income taxes 5,552 11,940
Fossil fuel stock, at average cost 102,082 88,481
Materials and supplies, at average cost 179,867 176,728
Prepayments--
Income taxes 17,327 18,980
Other 97,068 60,227
Vacation pay deferred 22,680 22,680
---------- ----------
Total 897,115 780,751
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 462,873 469,010
Debt expense and loss, being amortized 106,905 109,698
Uranium enrichment decontamination and decommissioning fund 45,149 45,554
Miscellaneous 59,174 52,163
---------- ----------
Total 674,101 676,425
---------- ----------
TOTAL ASSETS $8,417,252 $8,248,683
========== ==========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
21
<PAGE> 22
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity --
Common stock, par value $40 per share--authorized 6,000,000
shares, outstanding 5,608,955 shares $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 146 146
Retained earnings 1,034,255 997,199
---------- -----------
2,563,404 2,526,348
Preferred stock 440,400 440,400
Long-term debt 2,364,726 2,362,852
---------- -----------
Total 5,368,530 5,329,600
---------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 101,801 58,998
Notes payable 22,000 40,000
Commercial paper 160,845 -
Accounts payable--
Affiliated companies 54,167 62,507
Other 227,423 272,491
Customer deposits 32,153 31,198
Taxes accrued --
Federal and state income 16,734 25,730
Other 43,553 14,414
Interest accrued 54,231 52,809
Miscellaneous 65,390 73,106
---------- -----------
Total 778,297 631,253
---------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,169,293 1,165,127
Accumulated deferred investment tax credits 323,380 329,909
Prepaid capacity revenues, net 141,155 143,762
Uranium enrichment decontamination and decommissioning fund 41,676 39,644
Deferred credits related to income taxes 429,280 441,240
Miscellaneous 165,641 168,148
---------- -----------
Total 2,270,425 2,287,830
---------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $8,417,252 $8,248,683
========== ==========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
22
<PAGE> 23
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
ALABAMA's financial performance during the second quarter of 1994 improved,
compared to the same period of 1993, due primarily to higher retail revenues
and lower financing costs. Net income after dividends on preferred stock was
$98.7 million during the second quarter of 1994, compared to $91.4 million in
the corresponding period of 1993.
REVENUES
Operating revenues in the second quarter of 1994 increased over the
corresponding period of 1993 due to higher energy sales to retail customers.
The 4.6% increase in retail energy sales is attributable primarily to an
increase in customers served, weather and the improving economy in Alabama.
Revenues from non-affiliated wholesale customers also increased, including a
$6.6 million increase in capacity revenues. Total energy sales increased 3.4%.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from period to period
depending on demand and the availability and cost of generating resources at
each company. These transactions do not have a significant impact on earnings.
EXPENSES
Fuel expense increased because of a 12.5% increase in coal-fired generation.
Coal-fired generation increased due to greater demand and lower nuclear
generation. ALABAMA accrues estimated operation and maintenance expenses
related to nuclear refueling outages during the period between outages. During
the second quarter of 1994, ALABAMA reduced the accrual to reflect actual
incurred costs. As a result, both other operation expenses and maintenance
expenses were lower than the amounts recorded in the second quarter of 1993.
The increase in depreciation and amortization reflects the additions to utility
plant.
Taxes other than income taxes increased because of higher revenues and the
addition of new facilities. The increase in income tax expense reflected the
improvement in earnings and an increase in the federal income tax rate enacted
in August 1993.
OTHER INCOME AND ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The change in "Other, net" is primarily attributable to increases in
contributions to non-profit organizations. AFUDC represents the estimated debt
and equity costs of capital funds that are necessary to finance the
construction of new facilities. While cash is not realized currently from such
allowance, it is realized over the service life of the plant through increased
revenues resulting from a higher rate base and higher depreciation expense.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decrease in interest on long-term debt and dividends on preferred stock
reflects ALABAMA's efforts to decrease its capital costs. ALABAMA, in response
to the low interest rate levels prevailing
23
<PAGE> 24
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
during 1992 and 1993, refinanced a significant portion of its long-term debt
and preferred stock. Other interest charges for the second quarter of 1993
include interest accrued on the settlement of the IRS audit for the years 1983
through 1987. The settlement of this audit had minimal impact on earnings.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from regulatory matters to growth in energy sales.
Discussed in the Notes to the Condensed Financial Statements herein are
certain regulatory and legal proceedings that may impact ALABAMA's future
earnings. The issues include a civil suit related to financing agreements and
proceedings concerning the reasonableness of the Southern electric system's
wholesale rate schedules and contracts.
Compliance costs related to the Clean Air Act will reduce earnings if such
cost increases cannot be offset. The Clean Air Act and other environmental
issues are discussed under "Environmental Issues" in Item 7 - Management's
Discussion and Analysis in ALABAMA's 1993 Annual Report on Form 10-K.
Future earnings will also depend upon growth in electric sales which are
subject to a number of factors. Traditionally, these factors have included
changes in contracts with neighboring utilities, energy conservation practiced
by customers, the elasticity of demand, weather, competition, and the rate of
economic growth in ALABAMA's service area. The enactment of the Energy Act
will have a profound effect on the future of the electric utility industry. A
discussion of the potential impact of the Energy Act and particularly its
effect on competition is found under "Future Earnings Potential" in Item 7 -
Management's Discussion and Analysis in ALABAMA's 1993 Annual Report on Form
10-K.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in financial statements. In response to these questions, the
Financial Accounting Standards Board has decided to review the accounting for
nuclear decommissioning. If current electric utility industry accounting
practices for such decommissioning costs are changed: (1) annual provisions for
decommissioning could increase and (2) the total estimated cost for
decommissioning may be required to be recorded as a liability on the balance
sheet. ALABAMA does not believe that such changes, if required, would have a
significant adverse effect on results of operations due to its current and
expected future ability to recover decommissioning costs through
24
<PAGE> 25
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
rates. Further discussion of nuclear decommissioning costs is made in Note (C)
to the Condensed Financial Statements herein.
FINANCIAL CONDITION
OVERVIEW
The principal change in ALABAMA's financial condition in the first six months
of 1994 was gross property additions of $218 million to utility plant. The
funds for gross property additions were derived from operating activities and
an increase in short-term debt. See ALABAMA's Condensed Statements of Cash
Flows herein for further details.
During the first six months of 1994, ALABAMA refinanced $78.1 million of
pollution control bonds. ALABAMA's common equity as a percent of total
capitalization was 47.7% at June 30, 1994, compared to 47.4% at year-end 1993.
LIQUIDITY AND CAPITAL RESOURCES
ALABAMA has regulatory approval for short-term borrowings of up to $450
million. At June 30, 1994, ALABAMA had outstanding $161 million of commercial
paper and $22 million of notes payable and had $539 million of committed lines
of credit available.
Capital expenditures are estimated to total $1.7 billion for the three years
1994 through 1996 ($588 million in 1994, $572 million in 1995 and $531 million
in 1996). Current energy demand forecasts do not require any additional
baseload generating facilities until well into the future. However, the
construction of combustion turbine peaking units of approximately 720 megawatts
of capacity is planned by 1996 to meet increased peak-hour demands. In
addition, significant construction of transmission and distribution facilities
and upgrading of generating plants will continue.
The capital budget is subject to periodic review and revision and capital
costs incurred may vary from estimates because of several factors, including
changes in business conditions; revised load growth projections; changes in
environmental regulations; changes in existing nuclear plant to meet new
regulatory requirements; increasing costs of labor, equipment and materials;
and the cost of capital.
In addition to the funds needed for the capital budget, approximately $101.8
million will be required by June 30, 1995, for debt maturities. This amount
includes $53.7 million for pollution control bonds that have been refinanced.
The funds for these redemptions are on deposit with the Trustee and are
specifically designated for only that purpose. Also, ALABAMA plans to continue
to retire higher-cost debt and preferred stock and replace these obligations
with lower-cost capital.
25
<PAGE> 26
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
It is anticipated that the funds required will be derived from sources
similar to those used in the past. In order to issue additional first mortgage
bonds and preferred stock, ALABAMA must comply with certain earnings coverage
requirements contained in its mortgage indenture and corporate charter.
ALABAMA's coverages are at a level that would permit necessary amounts of
security sales at current interest and dividend rates.
26
<PAGE> 27
ARTHUR ANDERSEN & CO.
Exhibit 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ALABAMA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of June 30, 1994, and the related condensed statements of income for
the three-month, six-month and twelve-month periods ended June 30, 1994 and
1993, and condensed statements of cash flows for the six-month periods ended
June 30, 1994 and 1993. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1993
(not presented herein) and, in our report dated February 16, 1994, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1993 is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.
/s/ ARTHUR ANDERSEN & CO.
Birmingham, Alabama
August 5, 1994
27
<PAGE> 28
GEORGIA POWER COMPANY
28
<PAGE> 29
GEORGIA POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of GEORGIA included herein have been
prepared by GEORGIA, without audit, pursuant to the rules and regulations of
the SEC. As more fully discussed in Note (G) to the Condensed Financial
Statements herein, an uncertainty exists with respect to the actions of the
regulators regarding the recoverability of GEORGIA's investment in the Rocky
Mountain pumped storage hydroelectric project. In the opinion of GEORGIA's
management, subject to the effect of such adjustments, if any, as might have
been required had the outcome of the uncertainty been known, the information
regarding GEORGIA furnished herein reflects all adjustments (which, except for
the provision for separation benefits recorded in 1994, included only normal
recurring adjustments) necessary to present fairly the results for the periods
ended June 30, 1994 and 1993. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to SEC
rules and regulations, although GEORGIA believes that the disclosures regarding
GEORGIA are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in GEORGIA's latest
annual report on Form 10-K and, with respect to nuclear decommissioning, the
March 31, 1994 quarterly report on Form 10-Q.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The condensed financial statements of GEORGIA included herein have been
reviewed by GEORGIA's independent public accountants as set forth in their
report included herein as Exhibit 1.
29
<PAGE> 30
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $1,017,589 $1,083,977 $1,985,648 $2,067,538 $4,307,622 $4,303,735
Revenues from affiliates 12,876 12,195 37,149 32,449 66,368 68,396
---------- ---------- ---------- ---------- ---------- ----------
Total operating revenues 1,030,465 1,096,172 2,022,797 2,099,987 4,373,990 4,372,131
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 217,259 238,755 429,254 451,267 929,495 948,568
Purchased power from non-affiliates 32,374 86,218 104,131 176,120 241,181 379,368
Purchased power from affiliates 48,068 56,933 76,518 98,538 172,004 178,807
Provision for separation benefits 3,208 - 87,897 - 87,897 5,398
Other 169,043 167,653 321,669 315,715 681,236 633,387
Maintenance 70,328 75,467 145,417 140,034 289,904 279,445
Depreciation and amortization 95,395 100,045 189,444 192,414 376,455 382,042
Amortization of deferred
Plant Vogtle expenses, net
(Note F) 15,789 6,012 28,407 9,039 55,652 1,451
Taxes other than income taxes 48,913 47,816 98,449 94,875 196,246 183,432
Federal and state income taxes 103,551 97,826 157,934 181,608 428,447 400,475
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses 803,928 876,725 1,639,120 1,659,610 3,458,517 3,392,373
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME 226,537 219,447 383,677 440,377 915,473 979,758
OTHER INCOME (EXPENSE):
Allowance for equity funds
used during construction 1,275 51 2,912 180 5,899 3,615
Interest income 828 1,494 1,189 2,968 2,026 10,226
Other, net 24,340 43,099 23,240 40,643 (1,372) 19,575
Income taxes applicable to other income (10,187) 16,954 (7,576) 19,213 10,872 39,230
---------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 242,793 281,045 403,442 503,381 932,898 1,052,404
---------- ---------- ---------- ---------- ---------- ----------
INTEREST CHARGES:
Interest on long-term debt 79,770 88,648 159,869 180,177 323,328 375,686
Allowance for debt funds used
during construction (3,658) (1,993) (6,334) (3,873) (10,733) (7,877)
Interest on interim obligations 4,891 4,700 8,418 9,073 14,876 13,583
Amortization of debt discount,
premium and expense, net 3,892 3,549 7,766 6,464 15,327 11,093
Other interest charges 6,576 32,228 13,079 35,987 24,482 42,751
---------- ---------- ---------- ---------- ---------- ----------
Net interest charges 91,471 127,132 182,798 227,828 367,280 435,236
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME 151,322 153,913 220,644 275,553 565,618 617,168
DIVIDENDS ON PREFERRED STOCK 11,948 12,736 23,661 26,011 48,324 54,293
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 139,374 $ 141,177 $ 196,983 $ 249,542 $ 517,294 $ 562,875
========== ========== ========== ========== ========== ==========
</TABLE>
( ) Denotes red figure.
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
30
<PAGE> 31
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $220,644 $275,553
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 238,231 232,216
Deferred income taxes, net 7,468 62,450
Allowance for equity funds used during construction (2,912) (180)
Deferred Plant Vogtle costs 28,407 9,039
Provision for separation benefits 76,312 -
Gain on asset sales (22,230) (35,108)
Other, net (22,312) (20,712)
Changes in current assets and liabilities--
Receivables, net 61,464 36,405
Inventories (50,097) 4,769
Payables 8,059 (23,390)
Taxes accrued (26,663) 32,575
Other 21,408 (22,346)
-------- --------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 537,779 551,271
-------- --------
INVESTING ACTIVITIES
Property additions (283,718) (306,209)
Sales of property 132,644 253,032
Other (26,013) (18,952)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (177,087) (72,129)
-------- --------
FINANCING ACTIVITIES
Proceeds--
Preferred stock - 75,000
First mortgage bonds - 935,000
Pollution control bonds 28,065 73,490
Retirements--
Preferred stock - (57,500)
First mortgage bonds - (985,247)
Pollution control bonds (28,155) (73,510)
Other long-term debt (132) (295)
Special deposits - redemption funds (133,559) (254,062)
Interim obligations, net 18,103 71,299
Payment of preferred stock dividends (23,076) (26,850)
Payment of common stock dividends (213,800) (200,500)
Miscellaneous (1,803) (46,067)
-------- --------
NET CASH USED FOR FINANCING ACTIVITIES (354,357) (489,242)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 6,335 (10,100)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,896 22,114
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,231 $ 12,014
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION--
Interest (net of amount capitalized) $167,995 $239,600
Income taxes 158,583 63,439
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
31
<PAGE> 32
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service (Note C) $13,882,445 $13,743,521
Less accumulated provision for depreciation 3,968,856 3,822,344
----------- -----------
9,913,589 9,921,177
Nuclear fuel, at amortized cost 129,376 135,742
Construction work in progress 531,319 584,013
----------- -----------
Total 10,574,284 10,640,932
----------- -----------
OTHER PROPERTY AND INVESTMENTS:
SEGCO, at equity 28,267 29,201
Nuclear decommissioning trusts (Note C) 54,282 37,937
Miscellaneous 35,043 31,941
----------- -----------
Total 117,592 99,079
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 12,231 5,896
Special deposits - redemption funds 133,559 -
Receivables--
Customer accounts receivable 457,535 486,947
Other accounts and notes receivable 80,291 117,249
Affiliated companies 17,871 14,832
Accumulated provision for uncollectible accounts (5,300) (4,300)
Fossil fuel stock, at average cost 161,254 111,620
Materials and supplies, at average cost 288,014 287,551
Prepayments 69,706 65,269
Vacation pay deferred 41,075 41,575
----------- -----------
Total 1,256,236 1,126,639
----------- -----------
DEFERRED CHARGES:
Deferred charges related to income taxes 952,190 992,510
Deferred Plant Vogtle costs (Note F) 478,573 506,980
Debt expense and loss, being amortized 169,273 173,876
Miscellaneous 225,841 196,094
----------- -----------
Total 1,825,877 1,869,460
----------- -----------
TOTAL ASSETS $13,773,989 $13,736,110
=========== ===========
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
32
<PAGE> 33
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value)-- authorized 15,000,000 shares,
outstanding 7,761,500 shares $ 344,250 $ 344,250
Paid-in capital 2,384,348 2,384,348
Premium on preferred stock 413 413
Retained earnings 1,299,531 1,316,447
----------- -----------
4,028,542 4,045,458
Preferred stock 692,787 692,787
Long-term debt 3,899,151 4,031,387
----------- -----------
Total 8,620,480 8,769,632
----------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 144,017 10,543
Notes payable to banks 351,400 406,700
Commercial paper 148,930 75,527
Accounts payable--
Affiliated companies 40,315 38,115
Other 283,266 285,929
Customer deposits 46,220 45,922
Taxes accrued--
Federal and state income 31,099 31,639
Other 95,731 121,854
Interest accrued 117,534 110,497
Miscellaneous 119,294 104,587
----------- -----------
Total 1,377,806 1,231,313
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 2,496,417 2,479,720
Accumulated deferred investment tax credits 465,715 478,334
Disallowed Plant Vogtle capacity buyback costs 57,244 63,067
Deferred credits related to income taxes 441,040 452,819
Miscellaneous 315,287 261,225
----------- -----------
Total 3,775,703 3,735,165
----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $13,773,989 $13,736,110
=========== ===========
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
33
<PAGE> 34
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
GEORGIA's earnings for the second quarter of 1994 declined slightly compared to
the corresponding quarter of 1993. Net income after dividends on preferred
stock was $139.4 million in the second quarter of 1994 and $141.2 million in
the second quarter of 1993. The decline is due primarily to the gain recorded
from the sale of Plant Scherer Unit 4 in June of 1993, partially offset by
lower financing costs. See "Other Income" later in this discussion for further
details.
REVENUES
Total operating revenues decreased compared to the second quarter of 1993
because of the decrease in energy sales to non-affiliated wholesale customers
and the impact of a new rate tariff for territorial wholesale customers.
Excluding fuel clause revenues, which represent the pass-through of fuel
expenses and do not affect income, operating revenues for the second quarter of
1994 decreased $10.1 million, compared to the corresponding period of 1993.
Retail - Retail energy sales for the second quarter of 1994 increased 3.1%
primarily because of continued improvement in Georgia's economy and an increase
in customers served. Residential, commercial and industrial energy sales
increased 0.1%, 5.3% and 3.3%, respectively. Total non-fuel retail revenues
increased $11.3 million.
Wholesale - Energy sales to non-affiliated wholesale customers for the
second quarter of 1994 decreased almost 70%, compared to the corresponding
period of 1993. Capacity revenues from non-affiliated utilities outside the
service area, which do affect earnings, were down $25.2 million. These
capacity revenues decreased as scheduled, coinciding with GEORGIA completing
the second and third sales in a series of four transactions for the sale of
Plant Scherer Unit 4 in June of 1993 and 1994. The final transaction for the
sale of this unit is scheduled for June 1995 and coincides with scheduled
reductions in capacity revenues of approximately $19 million in 1995. Energy
revenues from non-affiliated utilities outside the service area decreased $12
million. The energy component of contract sales is priced at approximately the
variable production cost and does not materially affect earnings.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from period to period
depending on demand and the availability and cost of generating resources at
each company. These transactions do not have a significant impact on earnings.
OPERATING EXPENSES
Fuel and Purchased Power - Fuel expense decreased primarily because of lower
generation and the displacement of coal-fired generation with lower cost
nuclear generation. Purchased power expense for the second quarter of 1994
decreased primarily due to scheduled reductions
34
<PAGE> 35
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
in capacity buyback payments to the co-owners of plants Vogtle and Scherer and,
as discussed earlier, due to a new rate tariff for territorial wholesale
customers which also resulted in decreased purchased power from these
customers. See Note (F) to the Condensed Financial Statements herein for
information regarding the levelization of capacity buyback expense for Plant
Vogtle. In addition, GEORGIA purchased less energy from affiliated companies
because of lower wholesale energy demands.
Other - Other operation and maintenance expenses remained relatively
constant compared to the second quarter of 1993. See Note (K) to the Condensed
Financial Statements herein for information regarding workforce reduction
programs instituted in the first quarter of 1994 by GEORGIA and SCS.
The decrease in depreciation and amortization is due to the settlement of an
IRS audit in May 1993. The settlement resulted in an increase in depreciation
and amortization in the second quarter of 1993 due to the reversal of the
amortization of certain investment tax credits. The settlement also resulted
in interest charges and a reduction in tax expense applicable to other income
due to the recognition of tax credits previously deferred. While the
settlement resulted in GEORGIA paying additional taxes during the second
quarter of 1993, there was no effect on net income.
OTHER INCOME
On June 1 of 1993 and 1994, GEORGIA completed the second and third sales in a
series of four separate transactions to sell Plant Scherer Unit 4. The 1993
sale for 31.44% of the unit was made for $253 million and resulted in a pre-tax
gain of $35.1 million ($18.4 million, after taxes). The 1994 sale for 16.55%
of the unit was made for $133 million and resulted in a pre-tax gain of $21.7
million ($11.3 million, after taxes). Income taxes applicable to other income
in the second quarter of 1993 were reduced as a result of the tax effect of the
interest charges in the IRS settlement and the recognition of tax credits
previously deferred.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and is included in rate base. The equity portion of AFUDC
represents non-cash income. The amount of AFUDC has increased because of
GEORGIA's increased investment in the construction of combustion turbine
peaking units scheduled for completion in 1994 and 1995. Four of these units
began commercial operation in 1994. Based upon GEORGIA's construction budget,
AFUDC is estimated to total $19 million in 1994 and $27 million in 1995.
35
<PAGE> 36
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
Interest charges and preferred stock dividends have declined due to refinancing
efforts over the past twelve months. Also, GEORGIA used the proceeds from the
Plant Scherer sales in 1993 and 1994 to redeem high cost securities. As
discussed earlier, the higher amount of other interest charges in the second
quarter of 1993 was due to the interest charges incurred from the settlement of
the IRS audit.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings. The level of future earnings is contingent upon numerous
factors ranging from regulatory matters to growth in energy sales. Growth in
energy sales is subject to a number of factors which traditionally have
included changes in contracts with neighboring utilities, energy conservation
practiced by customers, the elasticity of demand, weather, competition, and the
rate of economic growth in GEORGIA s service area.
Pursuant to an Integrated Resource Plan approved by the Georgia PSC,
GEORGIA has implemented various demand-side option programs and had been
authorized by the Georgia PSC to recover associated program costs through rate
riders. In October 1993, a superior court judge ruled that recovery of these
costs through rate riders was unlawful. GEORGIA ceased collection of the rate
riders and the Georgia PSC allowed the deferral of program costs pending the
final outcome of this matter. In July 1994, the Georgia Court of Appeals
reversed the lower court's ruling concerning the rate riders. For additional
information on this matter, see Note (H) to the Condensed Financial Statements
herein.
The IRS has notified SOUTHERN that its tax accounting for the sale by
GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax
deficiency and interest arising from this issue amount to approximately $30
million and $33 million, respectively. The tax deficiency relates to a timing
issue as to when taxes are paid, therefore only the interest could impact
future income. See Note (I) to the Condensed Financial Statements herein for
further discussion of this matter.
In compliance with the recently enacted Georgia Hazardous Site Response
Act, the State of Georgia was required to compile an inventory of all sites
where hazardous wastes, constituents or substances have been disposed or
released in quantities deemed reportable by the State. In developing this
list, the State of Georgia identified several hundred properties throughout the
State, including 23 sites which may require environmental remediation by
GEORGIA. If all sites were required to be remediated, GEORGIA could incur
expenses of up to $25 million in additional clean-up costs and construction
expenditures of up to $100 million. See Note (M) to the Condensed Financial
Statements herein for further information on this matter.
36
<PAGE> 37
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
The addition of new peaking capacity in 1994 and 1995, as well as the Rocky
Mountain pumped storage hydroelectric project in 1995, will result in increased
operation, maintenance and depreciation expense. GEORGIA is scheduled to sell
its remaining ownership interest (16.55%) in Plant Scherer Unit 4 to Florida
Power & Light and the Jacksonville Electric Authority in June 1995. This
transaction will generate approximately $130 million in cash, including an
estimated after-tax gain of approximately $10 million. This transaction
coincides with scheduled reductions in capacity sales to these utilities under
wholesale power contracts.
OPC and MEAG have filed joint complaints in two separate venues seeking to
recover from GEORGIA approximately $16.5 million in alleged overcharges, plus
approximately $6.3 million in interest. See Note (L) to the Condensed
Financial Statements herein for further discussion of this matter.
The enactment of the Energy Act will have a profound effect on the future
of the electric utility industry. A discussion of the potential impact of the
Energy Act and particularly its effect on competition is found under "Future
Earnings Potential" in Item 7 - Management s Discussion and Analysis in GEORGIA
s 1993 Annual Report on Form 10-K.
The FERC has initiated a proceeding concerning the equity returns on
wholesale power and transmission contracts. Management does not believe that
the final outcome of this proceeding will have a material adverse effect on
earnings. See Note 3 to GEORGIA's financial statements in Item 8 to GEORGIA s
1993 Annual Report on Form 10-K for further information on this proceeding.
As described in Note (G) to the Condensed Financial Statements herein,
GEORGIA faces an uncertainty with respect to the actions of regulators
regarding the recovery of GEORGIA's investment in the Rocky Mountain pumped
storage hydroelectric project.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in financial statements. In response to these questions, the
Financial Accounting Standards Board has decided to review the accounting for
nuclear decommissioning. If current electric utility industry practices for
such decommissioning costs are changed: (1) annual provisions for
decommissioning could increase and (2) the total estimated cost for
decommissioning may be required to be recorded as a liability on the balance
sheet. GEORGIA does not believe that such changes, if required, would have a
significant adverse effect on results of operations due to its current and
expected future ability to recover decommissioning costs through rates.
Further discussion of nuclear decommissioning costs is made in Note (C) to the
Condensed Financial Statements herein.
37
<PAGE> 38
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION
OVERVIEW
The principal changes in GEORGIA's financial condition during the first six
months of 1994 were additions of $284 million to utility plant, the commercial
operation of four 80-megawatt combustion turbine peaking units, the sale of a
portion of Plant Scherer Unit 4 and recognition of the liability associated
with the implementation of workforce reduction programs. The funds needed for
gross property additions are currently provided from operations. See GEORGIA's
Condensed Statements of Cash Flows for further details.
CONSTRUCTION AND OTHER CAPITAL REQUIREMENTS
Estimated construction expenditures for the years 1994 through 1996 are $688
million, $555 million and $629 million, respectively. These estimated
expenditures reflect planned but unidentified reductions of $63 million in 1995
and $85 million in 1996 under GEORGIA's business stategy to curtail growth in
costs. Additionally, based on GEORGIA s preliminary energy and demand forecast
for 1995 and beyond, GEORGIA has canceled the construction of eight combustion
turbine generating units originally scheduled for completion by 1997. As a
result, estimated construction expenditures will be reduced by $4 million in
1995 and $140 million in 1996 from the estimates shown above.
The Clean Air Act will have a significant impact on the capital
requirements of the Southern electric system. This legislation, as well as
other legislation and regulations are described under "Environmental Issues" in
Item 7 - Management's Discussion and Analysis in GEORGIA's 1993 Annual Report
on Form 10-K.
As a result of requirements by the NRC, GEORGIA has established external
sinking funds for the purpose of funding nuclear decommissioning costs. For
1994 through 1996, the amount to be funded for GEORGIA totals $16 million
annually. For additional information concerning nuclear decommissioning costs,
see Note (C) to the Condensed Financial Statements herein.
Cash requirements for long-term debt maturities and redemptions total
approximately $144.0 million for the twelve months ending June 30, 1995.
However, of this amount, $133.6 million is on deposit with trustees and
specifically designated to redeem certain securities.
SOURCES OF FUNDS
GEORGIA expects to meet future capital requirements primarily using funds from
operations and, if needed, by the issuance of new debt and equity securities,
term loans and short-term borrowings. Cash from operations for the first six
months of 1994 decreased, as compared to the corresponding period in 1993,
primarily because of the receipt in 1993 of cash payments from Gulf States as
partial settlement of litigation and higher estimated income tax payments in
1994.
38
<PAGE> 39
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
GEORGIA must comply with coverage requirements of its mortgage indenture
and corporate charter to issue new first mortgage bonds and preferred stock.
GEORGIA's ability to satisfy all coverage requirements is such that it could
issue new first mortgage bonds and preferred stock to provide sufficient funds
for all anticipated requirements.
To meet short-term cash needs and contingencies, GEORGIA had approximately
$393 million of unused credit arrangements with banks at the beginning of the
third quarter of 1994. Additionally, the completion of the remaining
transaction for the sale of Plant Scherer Unit 4 will generate approximately
$130 million in 1995.
39
<PAGE> 40
ARTHUR ANDERSEN & CO.
Exhibit 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO GEORGIA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of June 30, 1994, and the related condensed
statements of income for the three-month, six-month and twelve-month periods
ended June 30, 1994 and 1993, and the condensed statements of cash flows for
the six-month periods ended June 30, 1994 and 1993. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
As more fully discussed in Note (G) to the Condensed Financial Statements,
an uncertainty exists with respect to the actions of the regulators regarding
the recoverability of the Company's investment in the Rocky Mountain pumped
storage hydroelectric project. The outcome of this uncertainty cannot
presently be determined. Accordingly, no provision for any writedown of the
costs associated with the Rocky Mountain facility resulting from the potential
actions of the Georgia Public Service Commission has been made in the
accompanying Condensed Financial Statements.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1993
(not presented herein), and, in our report dated February 16, 1994, we included
an explanatory paragraph which describes an uncertainty with respect to the
actions of the regulators regarding the recoverability of the Company's
investment in the Rocky Mountain pumped storage hydroelectric project. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of December 31, 1993, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
/s/ ARTHUR ANDERSEN & CO.
Atlanta, Georgia
August 5, 1994
40
<PAGE> 41
GULF POWER COMPANY
41
<PAGE> 42
GULF POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of GULF included herein have been
prepared by GULF, without audit, pursuant to the rules and regulations of the
SEC. In the opinion of GULF's management, the information regarding GULF
furnished herein reflects all adjustments (which included only normal recurring
adjustments) necessary to present fairly the results for the periods ended June
30, 1994 and 1993. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although GULF believes that the disclosures regarding GULF are
adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in GULF's latest annual
report on Form 10-K.
42
<PAGE> 43
GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $140,664 $135,337 $274,893 $258,170 $576,700 $551,594
Revenues from affiliates 6,105 3,526 9,964 7,729 25,401 21,547
-------- -------- -------- -------- -------- --------
Total operating revenues 146,769 138,863 284,857 265,899 602,101 573,141
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 41,163 40,682 77,104 77,350 170,239 176,910
Purchased power from non-affiliates 1,631 312 3,699 581 7,504 1,272
Purchased power from affiliates 3,983 8,471 12,774 16,913 28,134 30,791
Other 33,148 26,073 63,602 48,820 123,946 100,724
Maintenance 17,177 16,112 28,159 29,234 44,929 50,979
Depreciation and amortization 13,937 13,743 27,974 27,414 55,869 54,294
Taxes other than income taxes 10,366 9,238 20,645 18,755 42,094 38,585
Federal and state income taxes 5,407 4,670 11,789 9,624 34,895 29,002
-------- -------- -------- -------- -------- --------
Total operating expenses 126,812 119,301 245,746 228,691 507,610 482,557
-------- -------- -------- -------- -------- --------
OPERATING INCOME 19,957 19,562 39,111 37,208 94,491 90,584
OTHER INCOME (EXPENSE):
Allowance for equity funds used
during construction 112 86 272 109 675 119
Interest income 504 285 763 682 1,409 2,020
Other, net (16) (48) (168) (292) (1,114) (1,700)
Gain on sale of investment securities - - - 3,820 - 3,820
Income taxes applicable to other income (193) (65) (257) (1,541) 363 (863)
-------- -------- -------- -------- -------- --------
INCOME BEFORE INTEREST CHARGES 20,364 19,820 39,721 39,986 95,824 93,980
-------- -------- -------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 6,877 8,285 13,748 15,745 29,347 33,036
Allowance for debt funds used during
construction (191) (204) (333) (264) (524) (298)
Interest on notes payable 416 324 658 582 947 1,002
Amortization of debt discount,
premium and expense, net 446 312 904 622 1,694 1,153
Other interest charges 2,455 2,404 2,810 2,780 2,910 3,512
-------- -------- -------- -------- -------- --------
Net interest charges 10,003 11,121 17,787 19,465 34,374 38,405
-------- -------- -------- -------- -------- --------
NET INCOME 10,361 8,699 21,934 20,521 61,450 55,575
DIVIDENDS ON PREFERRED STOCK 1,475 1,387 2,931 2,783 5,875 5,443
-------- -------- -------- -------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 8,886 $ 7,312 $ 19,003 $ 17,738 $ 55,575 $ 50,132
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
43
<PAGE> 44
GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $21,934 $20,521
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 45,434 34,828
Deferred income taxes, net (2,861) (2,948)
Allowance for equity funds used during construction (272) (109
Other, net 6,970 874
Changes in certain current assets and liabilities--
Receivables, net (7,120) 8,500
Inventories (3,017) (11,939)
Payables 2,396 954
Other 20 7,515
------- -------
Net Cash Provided From Operating Activities 63,484 58,196
------- -------
INVESTING ACTIVITIES:
Gross property additions (47,331) (32,788)
Other (3,386) (16,016)
------- -------
Net Cash Used For Investing Activities (50,717) (48,804)
------- -------
FINANCING ACTIVITIES:
Proceeds:
First mortgage bonds - 15,000
Pollution control bonds - 45,550
Other long-term debt 32,108 -
Retirements:
Preferred stock subject to mandatory redemption (1,000) (1,000)
First mortgage bonds (48,856) (19,092)
Pollution control bonds - (125)
Other long-term debt (17,520) (5,066)
Special deposits-redemption funds - (34,448)
Notes payable, net 43,447 17,500
Payment of preferred stock dividends (2,931) (2,783)
Payment of common stock dividends (21,900) (20,800)
Miscellaneous (912) (1,581)
------- -------
Net Cash Used For Financing Activities (17,564) (6,845)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,797) 2,547
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,576 1,204
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 779 $ 3,751
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized) $15,553 $15,647
Income taxes 13,467 13,418
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
44
<PAGE> 45
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $1,625,820 $1,611,704
Less accumulated provision for depreciation 629,781 610,542
---------- ----------
996,039 1,001,162
Construction work in progress 58,528 34,591
---------- ----------
Total 1,054,567 1,035,753
---------- ----------
OTHER PROPERTY AND INVESTMENTS 9,287 13,242
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 779 5,576
Receivables--
Customer accounts receivable 63,511 57,226
Other accounts and notes receivable 2,761 5,904
Affiliated companies 5,229 1,241
Accumulated provision for uncollectible accounts (458) (447)
Fuel stock, at average cost 24,905 20,652
Materials and supplies, at average cost 35,154 36,390
Current portion of deferred coal contract costs 4,866 12,535
Regulatory clauses under recovery 7,559 3,244
Prepayments 1,502 2,160
Vacation pay deferred 4,022 4,022
---------- ----------
Total 149,830 148,503
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 30,896 31,334
Debt expense and loss, being amortized 21,336 21,247
Deferred coal contract costs 45,454 52,884
Miscellaneous 6,124 4,846
---------- ----------
Total 103,810 110,311
---------- ----------
TOTAL ASSETS $1,317,494 $1,307,809
========== ==========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
45
<PAGE> 46
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value)--authorized
and outstanding 992,717 shares $ 38,060 $ 38,060
Paid-in capital 218,282 218,282
Premium on preferred stock 81 81
Retained earnings 154,826 157,773
---------- ----------
411,249 414,196
Preferred stock 89,602 89,602
Preferred stock subject to mandatory redemption 500 1,000
Long-term debt 363,232 369,259
---------- ----------
Total 864,583 874,057
---------- ----------
CURRENT LIABILITIES:
Preferred stock due within one year 500 1,000
Long-term debt due within one year 13,443 41,552
Notes payable 49,500 6,053
Accounts payable--
Affiliated companies 10,689 18,560
Other 24,505 20,139
Customer deposits 14,817 15,082
Taxes accrued--
Federal and state income 9,203 10,330
Other 11,226 2,685
Interest accrued 6,327 5,420
Regulatory clauses over recovery - 840
Vacation pay accrued 4,022 4,022
Miscellaneous 4,386 8,527
---------- ----------
Total 148,618 134,210
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 153,317 151,743
Deferred credits related to income taxes 74,571 76,876
Accumulated deferred investment tax credits 39,578 40,770
Accumulated provision for property damage 11,344 10,509
Accumulated provision for postretirement benefits 12,554 10,749
Miscellaneous 12,929 8,895
---------- ----------
Total 304,293 299,542
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,317,494 $1,307,809
========== ==========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
46
<PAGE> 47
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
GULF's net income after dividends on preferred stock for the second quarter of
1994 was $8.9 million, compared to $7.3 million for the same period of 1993.
The improvement in earnings was primarily due to increased revenues and lower
capital costs.
REVENUES
Retail energy sales for the second quarter of 1994 increased 2.0% over the
corresponding period of 1993 due primarily to the mild temperatures experienced
during the second quarter of 1993 and an increase in the number of customers
served. However, this increase in retail energy sales was reduced because
GULF's formerly largest industrial customer began operating its co-generation
facility in August 1993. Wholesale energy sales to non-affiliates decreased
slightly with capacity revenues $0.3 million lower, compared to the second
quarter of 1993.
EXPENSES
Fuel expenses for the second quarter of 1994 increased over the same period of
1993 due to a 17.6% increase in generation. However, because GULF
renegotiated, bought out or otherwise terminated various coal supply contracts,
the average cost of fuel consumed decreased. Purchased power transactions
(both sales and purchases) among the affiliated companies within the Southern
electric system will vary from period to period depending on demand and the
availability and cost of generating resources at each company. Other operation
expenses increased because of the recognition of higher costs associated with
the buyouts and renegotiation of coal supply contracts. The expenses
recognized are based, in part, on the amount of fuel consumed at the generating
plants. These costs are recoverable through the fuel clause and, thus, have no
impact on earnings. Also, other operation expenses were increased due to the
recognition of higher employee benefit costs. Maintenance expenses increased
because of the scheduling of maintenance on production facilities. Taxes other
than income taxes rose because of higher revenues and additions to plant. The
increase in income tax expense is attributable to the federal tax rate increase
enacted in August 1993 and higher earnings.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decrease in interest on long-term debt reflects GULF's efforts to decrease
its capital costs. GULF, in response to the low interest rate levels
prevailing during 1992 and 1993, refinanced a significant portion of its
long-term debt and preferred stock. To the extent it is economically feasible,
GULF will continue its efforts to lower its capital costs.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from regulatory matters to growth in energy sales.
47
<PAGE> 48
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, customer growth, and the rate of economic growth in GULF's service
area. The enactment of the Energy Act will have a profound effect on the
future of the electric utility industry. A discussion of the potential impact
of the Energy Act and particularly its effect on competition is found under
"Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in
GULF's 1993 Annual Report on Form 10-K.
See Note 3 to the financial statements in Item 8 in GULF's 1993 Annual
Report on Form 10-K for a discussion of the hearings ordered by the FERC
regarding the reasonableness of the return on common equity on certain of the
Southern electric system's wholesale rate schedules and contracts. Also, see
Note (J) to the Condensed Financial Statements herein for a discussion of a
suit filed against GULF concerning the transportation of coal by barge.
Compliance costs related to the Clean Air Act could reduce earnings if such
increased costs are not fully recovered. The Clean Air Act is discussed
further under "Environmental Matters" in Item 7 - Management's Discussion and
Analysis in GULF's 1993 Annual Report on Form 10-K. See Note 3 to the
financial statements in Item 8 in GULF's 1993 Annual Report on Form 10-K for a
discussion of the Environmental Cost Recovery clause which provides for the
expected recovery of such costs.
FINANCIAL CONDITION
OVERVIEW
The major change in GULF's financial condition during the first six months of
1994 was gross property additions of $47.3 million. The principal sources of
funds for these additions and other capital requirements were provided from
operations and an increase in notes payable. See the Condensed Statements of
Cash Flows for further details.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
GULF's gross property additions, including those amounts related to
environmental compliance, are estimated to total approximately $200 million for
the three years 1994 through 1996 ($77 million in 1994, $55 million in 1995 and
$68 million in 1996). The estimates of property additions for the three-year
period include $25 million committed to meeting the requirements of the Clean
Air Act, the cost of which is expected to be recovered through the
Environmental Cost Recovery clause. Actual construction costs may vary from
these estimates because of factors such as the granting of timely and adequate
rate increases, changes in environmental regulations, revised load projections,
the cost and efficiency of construction labor, equipment, and materials, and
the cost of capital.
48
<PAGE> 49
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
Various environmental legislation and other related regulations are
described in "Environmental Matters" in Item 7 - Management's Discussion and
Analysis in GULF's 1993 Annual Report on Form 10-K. The full impact of these
requirements cannot be determined at this time, pending the development and
implementation of applicable regulations.
In addition to the funds required for the construction program, $13.9
million will be required by June 30, 1995, in connection with maturities and
redemptions of long-term debt and preferred stock subject to mandatory
redemption. This amount includes approximately $9.0 million of long-term notes
payable issued to refinance the termination of a coal supply contract.
At June 30, 1994, GULF had $0.8 million of cash and $38 million of unused
credit arrangements with banks to meet its short-term cash needs. GULF had
$49.5 million of short-term bank borrowings outstanding at June 30, 1994. The
increase in short-term indebtedness is seasonal and the amount outstanding at
the end of summer should be appreciably lower.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations, the sale of additional first mortgage bonds and preferred
stock, and capital contributions from SOUTHERN. GULF is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. GULF's coverage
ratios are sufficient to permit, at present interest rate levels, any
foreseeable security sales. The amount of securities which GULF will be
permitted to issue in the future will depend upon market conditions and other
factors prevailing at that time.
49
<PAGE> 50
MISSISSIPPI POWER COMPANY
50
<PAGE> 51
MISSISSIPPI POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of MISSISSIPPI included herein have been
prepared by MISSISSIPPI, without audit, pursuant to the rules and regulations
of the SEC. In the opinion of MISSISSIPPI's management, the information
regarding MISSISSIPPI furnished herein reflects all adjustments (which included
only normal recurring adjustments) necessary to present fairly the results for
the periods ended June 30, 1994 and 1993. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although MISSISSIPPI believes that the
disclosures regarding MISSISSIPPI are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in MISSISSIPPI's latest annual report on Form 10-K.
51
<PAGE> 52
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $128,886 $113,636 $240,586 $211,105 $488,846 $437,782
Revenues from affiliates 2,906 4,128 5,340 8,211 12,647 11,850
-------- -------- -------- -------- -------- --------
Total operating revenues 131,792 117,764 245,926 219,316 501,493 449,632
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 26,727 30,302 44,328 50,987 107,327 100,872
Purchased power from non-affiliates 819 280 1,785 513 3,471 1,148
Purchased power from affiliates 18,853 11,501 43,009 27,639 73,389 61,105
Other 25,091 24,713 46,472 46,547 100,306 95,628
Maintenance 12,624 8,713 25,770 22,307 47,464 45,896
Depreciation and amortization 8,945 8,787 18,244 17,630 33,713 34,523
Taxes other than income taxes 10,410 9,123 20,215 17,824 39,536 35,418
Federal and state income taxes 8,432 6,198 13,302 8,193 27,776 17,487
-------- -------- -------- -------- -------- --------
Total operating expenses 111,901 99,617 213,125 191,640 432,982 392,077
-------- -------- -------- -------- -------- --------
OPERATING INCOME 19,891 18,147 32,801 27,676 68,511 57,555
OTHER INCOME (EXPENSE):
Allowance for equity funds used
during construction 271 137 676 264 1,422 533
Interest income 28 121 56 253 321 677
Other, net 1,274 1,108 2,774 1,846 4,898 4,569
Income taxes applicable to other income (325) (789) (770) (1,039) (889) (1,717)
-------- -------- -------- -------- -------- --------
INCOME BEFORE INTEREST CHARGES 21,139 18,724 35,537 29,000 74,263 61,617
-------- -------- -------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 5,614 4,404 10,126 8,534 19,280 18,883
Allowance for debt funds used
during construction (332) (120) (702) (214) (1,276) (544)
Interest on notes payable 425 422 751 535 1,217 809
Amortization of debt discount, premium
and expense, net 372 330 729 589 1,402 1,001
Other interest charges 92 480 174 569 331 700
-------- -------- -------- -------- -------- --------
Net interest charges 6,171 5,516 11,078 10,013 20,954 20,849
-------- -------- -------- -------- -------- --------
NET INCOME 14,968 13,208 24,459 18,987 53,309 40,768
DIVIDENDS ON PREFERRED STOCK 1,224 1,356 2,449 2,711 5,139 5,125
-------- -------- -------- -------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 13,744 $ 11,852 $ 22,010 $ 16,276 $ 48,170 $ 35,643
======== ======== ======== ======== ======== ========
</TABLE>
( ) Denotes negative figure.
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
52
<PAGE> 53
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 24,459 $ 18,987
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 24,211 23,750
Deferred income taxes, net (7,657) 1,539
Allowance for equity funds used during construction (676) (264)
Other, net (2,409) 493
Change in certain current assets and liabilities--
Receivables, net (8,637) (3,254)
Inventories (11,581) 28
Payables 340 (3,745)
Taxes accrued (729) (11,119)
Other 4,794 (1,997)
-------- --------
Net cash provided from operating activities 22,115 24,418
-------- --------
INVESTING ACTIVITIES:
Gross property additions (58,624) (59,639)
Other (17,012) 545
-------- --------
Net cash used for investing activities (75,636) (59,094)
-------- --------
FINANCING ACTIVITIES:
Proceeds--
Capital contributions from parent company 25,000 30,000
First mortgage bonds 35,000 70,000
Pollution control bonds - 13,000
Other long-term debt 50,310 -
Retirements--
First mortgage bonds (32,371) (51,300)
Other long-term debt (4,560) (5,279)
Notes payable, net 3,000 (7,000)
Payment of preferred stock dividends (2,449) (2,711)
Payment of common stock dividends (17,000) (14,400)
Miscellaneous (1,182) (2,686)
-------- --------
Net cash provided (used) from financings 55,748 29,624
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,227 (5,052)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 878 7,417
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,105 $ 2,365
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 9,157 $ 8,505
Income taxes 8,308 7,841
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
53
<PAGE> 54
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- --------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $1,346,195 $1,238,847
Less accumulated provision for depreciation 470,247 462,725
---------- ----------
Total 875,948 776,122
Construction work in progress 51,065 108,063
---------- ----------
Total 927,013 884,185
---------- ----------
OTHER PROPERTY AND INVESTMENTS 8,815 11,289
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 3,105 878
Receivables--
Customer accounts receivable 39,774 31,376
Other accounts and notes receivable 5,281 5,581
Affiliated companies 7,035 6,698
Accumulated provision for uncollectible accounts (535) (737)
Fuel stock, at average cost 19,033 11,185
Materials and supplies, at average cost 24,878 21,145
Current portion of deferred fuel charges 672 440
Prepayments 5,875 7,843
Vacation pay deferred 4,797 4,797
---------- ----------
Total 109,915 89,206
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 25,220 25,267
Deferred fuel charges 13,500 17,520
Debt expense and loss, being amortized 11,497 11,666
Deferred early retirement program costs (Note K) 15,375 -
Miscellaneous 13,559 10,073
---------- ----------
Total 79,151 64,526
---------- ---------
TOTAL ASSETS $1,124,894 $1,049,206
========== ==========
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
54
<PAGE> 55
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value), authorized 1,130,000 shares,
outstanding 1,121,000 shares $ 37,691 $ 37,691
Paid-in capital 179,362 154,362
Premium on preferred stock 372 372
Retained earnings 135,794 129,343
---------- ----------
353,219 321,768
Cumulative preferred stock 74,414 74,414
Long-term debt 306,627 250,391
---------- ----------
Total 734,260 646,573
---------- ----------
CURRENT LIABILITIES:
Long-term debt due within one year 10,938 19,345
Notes payable 43,000 40,000
Accounts payable--
Affiliated companies 8,744 10,197
Other 35,532 50,731
Customer deposits 2,766 2,786
Taxes accrued--
Federal and state income 9,613 186
Other 16,796 26,952
Interest accrued 4,792 4,237
Miscellaneous 14,996 14,120
---------- ----------
Total 147,177 168,554
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 118,404 123,206
Accumulated deferred investment tax credits 31,972 32,710
Deferred credits related to income taxes 47,147 48,228
Accumulated provision for property damage 10,928 10,538
Miscellaneous 35,006 19,397
---------- ----------
Total 243,457 234,079
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,124,894 $1,049,206
========== ==========
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
55
<PAGE> 56
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
MISSISSIPPI's net income after dividends on preferred stock for the second
quarter of 1994 was $13.7 million, compared to $11.9 million for the
corresponding period of 1993. Net income rose primarily because of higher
retail and territorial wholesale energy sales, retail rate increases under PEP
and the ECO Plan and a wholesale rate increase.
REVENUES
Revenues for the second quarter of 1994 increased, compared to the same period
of 1993, because of an increase of 10.2% in retail energy sales, a 15.6%
increase in territorial wholesale energy sales, the retail rate increases
granted under PEP effective July 1993 and the ECO Plan effective in April 1994,
and a wholesale rate increase effective in April 1994. The increase in retail
energy sales was due to an improving economy in Southeast Mississippi, an
increase in the number of customers served and weather influences. Energy
sales to residential customers increased by 8.0% and to commercial customers by
12.9%, with the latter reflecting sales to an increasing number of casinos
within MISSISSIPPI's service area. Energy sales to industrial customers
increased 9.9%.
EXPENSES
Fuel expenses decreased and purchased power expenses increased in the second
quarter of 1994, compared to the corresponding period of 1993, because of lower
generation, which stemmed from the timing of maintenance on generating
facilities. Purchased power transactions (both sales and purchases) among the
affiliated companies within the Southern electric system will vary from period
to period depending on demand and the availability and cost of generating
resources at each company.
Taxes other than income taxes increased because of additions to utility
plant and higher revenues. The increase in income tax expense reflects the
increase in earnings and the federal tax rate increase enacted in August 1993.
The increase in interest expense was due to the sale or issuance of
additional debt instruments.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction. The equity portion of AFUDC represents non-cash income.
However, when facilities are completed and included in rate base, previously
capitalized amounts increase cash flow because revenues are higher as a result
of the increased rate base and additional depreciation expense. In May 1994,
MISSISSIPPI began commercial operation of a 74.6-megawatt combustion turbine
unit whose entire output is dedicated to a single industrial customer. The
recording of AFUDC for a construction project ceases upon commercial operation
of the project.
56
<PAGE> 57
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings is contingent upon
numerous factors ranging from regulatory matters to growth in energy sales.
Operating revenues will be affected by changes in rates under the PEP and ECO
plans. The PEP has proven to be a stabilizing force on electric rates, with
only moderate changes in rates taking place. Also see Note (B) to the
Condensed Financial Statements herein for information regarding FERC's review
of equity returns.
MISSISSIPPI's 1994 annual filing under the ECO Plan with the Mississippi
PSC resulted in an approved annual revenue requirement increase of $7.6
million, effective in April 1994. The FERC approved MISSISSIPPI's wholesale
rate increase petition for $3.6 million, effective April 1994.
MISSISSIPPI initiated an early retirement incentive program in April 1994.
The costs associated with this program, as well as MISSISSIPPI's pro rata share
of a similar program at SCS, have been deferred. For further information on
these programs and the accounting treatment, see Note (K) to the Condensed
Financial Statements herein.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included the rate of economic growth in MISSISSIPPI's service area,
customer growth, competition, weather, changes in contracts with neighboring
utilities, energy conservation practiced by customers, and the elasticity of
demand. The enactment of the Energy Act will have a profound effect on the
future of the electric utility industry. A discussion of the potential impact
of the Energy Act and particularly its effect on competition is found under
"Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in
MISSISSIPPI's 1993 Annual Report on Form 10-K.
FINANCIAL CONDITION
OVERVIEW
During the first six months of 1994, gross property additions were $58.6
million. The funds for these additions and other capital requirements were
derived primarily from internal sources, the sale of $35 million of first
mortgage bonds, the issuance of $50 million of long-term notes payable and the
receipt of $25 million in capital contributions. See the Condensed Statements
of Cash Flows for further details.
At June 30, 1994, cash totaled approximately $3.1 million and MISSISSIPPI
had $96 million of unused credit arrangements with banks to meet short-term
cash needs. MISSISSIPPI had $43 million of notes payable outstanding at
quarter-end. It is MISSISSIPPI s strategy to maintain a permanent
57
<PAGE> 58
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
layer of short-term debt, approximately $40 million through the end of 1994,
consistent with its overall risk capital strategy.
CAPITAL REQUIREMENTS
MISSISSIPPI's gross property additions for the next three years are estimated
to be $256 million ($96 million in 1994, $62 million in 1995 and $98 million in
1996). The major emphasis within the construction program will be on complying
with Clean Air Act regulations and upgrading existing facilities. Revisions
may be necessary because of factors such as revised load projections, the
availability and cost of capital and changes in environmental regulations.
In addition to the funds required for the construction program,
approximately $10.9 million will be required by June 30, 1995, for maturities
of long-term debt. It is anticipated that the funds required for construction
and other purposes, including compliance with environmental regulations, will
be derived from operations, the sale of additional first mortgage bonds,
pollution control bonds and preferred stock and the receipt of additional
capital contributions from SOUTHERN. MISSISSIPPI is required to meet certain
coverage requirements specified in its mortgage indenture and corporate charter
to issue new first mortgage bonds and preferred stock. MISSISSIPPI's coverage
ratios are sufficiently high to permit, at present interest rate levels, any
foreseeable security sales. The amount of securities which MISSISSIPPI will be
able to issue in the future will depend upon market conditions and other
factors prevailing at that time.
ENVIRONMENTAL MATTERS
Changes in environmental regulations could substantially increase the Southern
electric system's capital requirements and operating costs. The acid rain
compliance provision of the Clean Air Act will have a significant impact on the
Southern electric system. This legislation, as well as other legislation and
regulations, are described under "Environmental Matters" in Item 7 -
Management's Discussion and Analysis in MISSISSIPPI's 1993 Annual Report on
Form 10-K. The full impact of these requirements cannot be determined at this
time pending the development and implementation of applicable regulations.
MISSISSIPPI's management believes that the ECO Plan will provide for retail
recovery of the Clean Air Act costs.
MISSISSIPPI must comply with environmental laws and regulations that cover
the handling and disposal of hazardous waste. Under these various laws and
regulations, MISSISSIPPI could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites MISSISSIPPI conducts
studies to determine the extent of any required clean-up costs. Sites with
potential for remediation are being investigated, but no prediction can
presently be made regarding the extent, if any, of contamination or possible
cleanup. Should remediation be determined to be probable, reasonable estimates
of costs to clean up such sites are developed and recognized in the financial
statements.
58
<PAGE> 59
SAVANNAH ELECTRIC
AND
POWER COMPANY
59
<PAGE> 60
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of SAVANNAH included herein have been
prepared by SAVANNAH, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of SAVANNAH's management, the information regarding
SAVANNAH furnished herein reflects all adjustments (which, except for the
provision for separation benefits recorded in the third and fourth quarters of
1993 and the first quarter of 1994, included only normal recurring adjustments)
necessary to present fairly the results for the periods ended June 30, 1994 and
1993. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although SAVANNAH believes that the disclosures regarding SAVANNAH
are adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in SAVANNAH's latest annual
report on Form 10-K.
60
<PAGE> 61
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Six Months For the Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $55,097 $52,356 $101,497 $95,104 $222,402 $199,802
Revenues from affiliates 1,280 519 1,597 644 3,386 1,824
------- ------- -------- ------- -------- --------
Total operating revenues 56,377 52,875 103,094 95,748 225,788 201,626
------- ------- -------- ------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 7,186 7,667 9,325 8,683 25,618 16,475
Purchased power from non-affiliates 1,084 114 1,443 205 2,031 439
Purchased power from affiliates 13,652 11,971 28,881 25,810 59,345 55,116
Provision for separation benefits - - 551 - 5,006 -
Other 10,385 9,736 19,262 19,292 41,124 38,367
Maintenance 2,984 3,030 5,631 6,309 12,838 14,263
Depreciation and amortization 4,372 4,079 8,622 8,157 16,932 16,604
Taxes other than income taxes 2,705 2,630 5,267 5,110 11,292 10,602
Federal and state income taxes 4,454 4,347 7,427 6,758 16,108 15,336
------- ------- -------- ------- -------- --------
Total operating expenses 46,822 43,574 86,409 80,324 190,294 167,202
------- ------- -------- ------- -------- --------
OPERATING INCOME 9,555 9,301 16,685 15,424 35,494 34,424
OTHER INCOME (EXPENSE):
Allowance for equity funds used
during construction 290 108 677 221 1,413 394
Other, net (266) (237) (497) (477) (1,651) (1,350)
Income taxes applicable to other income 104 89 192 180 1,129 824
------- ------- -------- ------- -------- --------
INCOME BEFORE INTEREST CHARGES 9,683 9,261 17,057 15,348 36,385 34,292
------- ------- -------- ------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 3,134 2,321 6,286 4,667 12,315 9,829
Allowance for debt funds used during construction (375) (101) (875) (161) (1,412) (284)
Amortization of debt discount,
premium and expense, net 138 129 275 258 551 511
Other interest charges 154 226 260 404 434 631
------- ------- -------- ------- -------- --------
Net interest charges 3,051 2,575 5,946 5,168 11,888 10,687
------- ------- -------- ------- -------- --------
NET INCOME 6,632 6,686 11,111 10,180 24,497 23,605
DIVIDENDS ON PREFERRED STOCK 581 475 1,162 950 2,318 1,900
------- ------- -------- ------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 6,051 $ 6,211 $ 9,949 $ 9,230 $ 22,179 $ 21,705
======= ======= ======== ======= ======== ========
</TABLE>
( ) Denotes red figure.
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
61
<PAGE> 62
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 11,111 $ 10,180
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 9,351 8,926
Deferred taxes, net 2,290 700
Allowance for equity funds used during construction (677) (221)
Other, net 575 (466)
Changes in certain current assets and liabilities--
Receivables, net 7,434 (3,492)
Inventories 561 777
Payables (13,918) 1,486
Taxes accrued 336 (817)
Other 555 (1,055)
-------- --------
Net Cash Provided From Operating Activities 17,618 16,018
-------- --------
INVESTING ACTIVITIES:
Gross property additions (17,341) (23,619)
Other (1,074) (671)
-------- --------
Net Cash Used For Investing Activities (18,415) (24,290)
-------- --------
FINANCING ACTIVITIES:
Proceeds:
Pollution control bonds - 4,085
Other long-term debt 8,500 10,000
Retirements:
First mortgage bonds (5,065) -
Pollution control bonds - (4,085)
Other long-term debt (392) (449)
Notes payable, net 9,000 10,000
Payment of preferred stock dividends (967) (950)
Payment of common stock dividends (8,200) (10,000)
Miscellaneous (74) (18)
-------- --------
Cash Provided From (Used For) Financing Activities 2,802 8,583
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,005 311
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,915 1,788
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,920 $ 2,099
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the period for--
Interest (net of amount capitalized) $ 5,542 $ 5,192
Income taxes 5,506 5,771
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
62
<PAGE> 63
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $678,208 $622,521
Less accumulated provision for depreciation 259,352 251,565
-------- --------
418,856 370,956
Construction work in progress 10,102 49,797
-------- --------
Total 428,958 420,753
-------- --------
OTHER PROPERTY AND INVESTMENTS 1,791 1,793
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 5,920 3,915
Receivables--
Customer accounts receivable 21,948 18,551
Other accounts and notes receivable 478 790
Affiliated companies 173 12,924
Accumulated provision for uncollectible accounts (762) (762)
Fuel cost under recovery 9,425 7,112
Fuel stock, at average cost 7,739 8,419
Materials and supplies, at average cost 9,477 9,358
Prepayments 5,324 4,849
-------- --------
Total 59,722 65,156
-------- --------
DEFERRED CHARGES:
Premium on reacquired debt, being amortized 3,544 3,792
Deferred charges related to income taxes 24,117 24,890
Miscellaneous 11,631 10,803
-------- --------
Total 39,292 39,485
-------- --------
TOTAL ASSETS $529,763 $527,187
======== ========
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
63
<PAGE> 64
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At June 30,
1994 At December 31,
(Unaudited) 1993
----------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock ($5 par value)-- authorized 16,000,000 shares;
outstanding 10,844,635 shares $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Additional minimum liability for under-funded pension obligations (2,121) (2,121)
Retained earnings 95,146 93,479
-------- --------
155,936 154,269
Preferred stock 35,000 35,000
Long-term debt 158,133 151,338
-------- --------
Total 349,069 340,607
-------- --------
CURRENT LIABILITIES:
Long-term debt due within one year 772 4,499
Notes payable 12,000 3,000
Accounts payable--
Affiliated companies 5,482 6,041
Other 9,446 24,401
Customer deposits 4,716 4,714
Taxes accrued--
Federal and state income - 342
Other 1,865 1,187
Interest accrued 6,752 6,730
Vacation pay accrued 1,674 1,638
Pensions accrued 1,847 1,792
Work force reduction costs accrued 3,923 3,926
Miscellaneous 3,340 2,985
-------- --------
Total 51,817 61,255
-------- --------
DEFERRED CREDITS:
Accumulated deferred income taxes 68,958 66,947
Accumulated deferred investment tax credits 14,969 15,301
Deferred credits related to income taxes 25,633 26,173
Deferred compensation plans 6,488 6,117
Deferred under-funded accrued benefit obligation 5,870 5,855
Miscellaneous 6,959 4,932
-------- --------
Total 128,877 125,325
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $529,763 $527,187
======== ========
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
64
<PAGE> 65
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
SAVANNAH's net income after dividends on preferred stock for the second quarter
of 1994 dipped to $6.1 million, compared to $6.2 million in the corresponding
period of 1993. The decrease in net income was primarily due to higher
interest costs because of a greater amount of debt outstanding and the increase
in the federal income tax rate.
REVENUES
Revenues for the second quarter of 1994 increased, compared to the
corresponding period in 1993, due to higher retail energy sales. Energy sales
to retail customers increased 2.6% due to an improving economy in SAVANNAH's
service territory and an increase in the number of customers served. Wholesale
energy sales to non-affiliated companies decreased, however, only the capacity
revenues of such sales have any measurable effect on earnings. Capacity
revenues fell $133,000.
EXPENSES
Fuel expenses during the second quarter of 1994 decreased, compared to those
recorded in the second quarter of 1993, because of a 22.1% drop in generation.
This was partially offset by an increase in the average cost of coal on the
spot market (SAVANNAH has no long-term coal supply contracts) due to a coal
miners strike and higher freight charges. Purchased power transactions (both
sales and purchases) among the affiliated companies within the Southern
electric system will vary from period to period depending on demand and the
availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings. Other operation
expenses increased due, in part, to the costs incurred to restore electric
service which was interrupted by a severe storm in June 1994. Income taxes
increased because of the higher federal income tax rates enacted in August
1993.
The increases in interest on long-term debt and dividends on preferred
stock reflect the sale by SAVANNAH in 1993 of $45 million of first mortgage
bonds and $35 million of preferred stock.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and is included in rate base. The equity portion of AFUDC
represents non-cash income. In addition, when facilities are completed and
included in rate base, previously capitalized amounts increase cash flow
because revenues are higher as a result of the increased rate base and
additional depreciation expense. The amount of AFUDC recorded has risen
because of SAVANNAH's investment in the construction of two 80-megawatt
combustion turbine peaking units. These units were placed in service in April
and May 1994.
65
<PAGE> 66
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from regulatory matters to growth in energy sales.
Compliance costs related to the Clean Air Act will reduce earnings if such
increased costs cannot be offset. The Clean Air Act is discussed under
"Capital Requirements for Construction" in Item 7 - Management's Discussion and
Analysis in SAVANNAH's 1993 Annual Report on Form 10-K.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, and the rate of economic growth in SAVANNAH's service area. The
enactment of the Energy Act will have a profound effect on the future of the
electric utility industry. A discussion of the potential impact of the Energy
Act and particularly its effect on competition is found under "Future Earnings
Potential" in Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993
Annual Report on Form 10-K.
FINANCIAL CONDITION
OVERVIEW
During the first six months of 1994, SAVANNAH made gross property additions to
utility plant of $17.3 million. The funds for these additions and other
capital requirements came from an increase in short-term and long-term debt and
from operating activities, principally from earnings and noncash charges to
income such as depreciation. See the Condensed Statements of Cash Flows for
further details.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
SAVANNAH's construction program is budgeted at $98 million for the three years
1994 through 1996 ($33 million in 1994, $32 million in 1995 and $33 million in
1996). Actual construction costs may vary from this estimate because of such
factors as changes in environmental regulations; the cost and efficiency of
construction labor, equipment and materials; revised load projections and the
cost of capital. The largest project during this period is the addition of two
80-megawatt combustion turbine units, which were placed in service in April and
May 1994.
Changes in environmental regulations could substantially increase the
Southern electric system's capital requirements and operating costs. The acid
rain compliance provision of the Clean Air Act will have a significant impact
on the Southern electric system. This legislation, as well as other
legislation and regulations, are described under "Environmental Matters" in
Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993 Annual Report
on Form 10-K. The full impact of these
66
<PAGE> 67
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
requirements cannot be determined at this time, pending the development and
implementation of applicable regulations. There can be no assurance that
compliance costs will be recovered through corresponding increases in rates.
SOURCES OF CAPITAL
At June 30, 1994, SAVANNAH had $5.9 million in cash and cash equivalents and
$20 million of unused credit arrangements with banks to meet its short-term
cash needs. SAVANNAH had $12 million of short-term debt outstanding at
quarter-end. The increase in short-term indebtedness is primarily seasonal and
the amount outstanding is expected to be reduced by the end of the summer.
SAVANNAH has received the authority from the SEC to have outstanding at any one
time an amount of up to $70 million in short-term borrowings.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations and the sale of additional first mortgage bonds and preferred
stock and capital contributions from SOUTHERN. SAVANNAH is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. SAVANNAH's
coverage ratios are sufficiently high to permit, at present interest rate
levels, any foreseeable security sales. The amount of securities which
SAVANNAH will be permitted to issue in the future will depend upon market
conditions and other factors prevailing at that time.
67
<PAGE> 68
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT
REGISTRANT APPLICABLE NOTES
SOUTHERN A, B, C, D, E, F, G, H, I, J, K, L, M
ALABAMA B, C, D, E, K
GEORGIA B, C, D, F, G, H, I, K, L, M
GULF B, J, K
MISSISSIPPI B, K
SAVANNAH K
68
<PAGE> 69
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS:
(A) Reference is made to Item 3 - LEGAL PROCEEDINGS in the SOUTHERN system's
combined Annual Report on Form 10-K for the year ended December 31, 1993
for a description of the proceedings related to a derivative action filed
against certain current and former directors and officers of SOUTHERN. In
April 1994, the Court of Appeals reversed the dismissal and remanded the
case to the trial court, finding that allegations by the plaintiffs
created a reasonable doubt that the board validly exercised its business
judgment in refusing the earlier demand.
(B) Reference is made to Note 3 to each of the registrant's, except SAVANNAH's
notes to the financial statements in Item 8 in the SOUTHERN system's
combined 1993 Annual Report on Form 10-K for a discussion of the hearings
ordered by the FERC regarding the reasonableness of the return on common
equity on certain of the Southern electric system's wholesale rate
schedules and contracts.
(C) For information regarding the expected costs of decommissioning nuclear
facilities reference is made to Note (C) to the Condensed Financial
Statements in the SOUTHERN system s combined Quarterly Report on Form 10-Q
for March 31, 1994.
(D) For information regarding nuclear insurance reference is made to Notes 13,
11 and 4 to the financial statements of SOUTHERN, ALABAMA and GEORGIA,
respectively, in Item 8 in the SOUTHERN system s combined 1993 Annual
Report on Form 10-K and Note (D) to the Condensed Financial Statements in
the SOUTHERN system s combined Quarterly Report on Form 10-Q for March 31,
1994. During the second quarter of 1994, the by-laws of Nuclear Mutual
Limited were amended whereby a member cannot receive a refund in the event
insurance coverage is terminated.
(E) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on
Form 10-K for information with respect to a civil complaint filed
regarding ALABAMA's financing of heat pumps and other merchandise.
(F) Pursuant to orders from the Georgia PSC, GEORGIA deferred financing and
depreciation costs under phase-in plans for Plant Vogtle units 1 and 2
until the allowed investment was fully reflected in rates as of October
1991. In addition, the Georgia PSC issued two separate accounting orders
that required GEORGIA to defer substantially all operating and financing
costs related to both units until rate orders addressed these costs. The
Georgia PSC orders provide for recovery of deferred costs within 10 years.
The Georgia PSC also ordered GEORGIA to levelize declining capacity
buyback expense from the co-owners of the plant over a six-year period
beginning
69
<PAGE> 70
NOTES TO THE FINANCIAL STATEMENTS: (Continued)
October 1991. The unamortized balance of these deferred costs at June 30,
1994, was $479 million.
(G) Reference is made to Note 4 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on
Form 10-K for information concerning the uncertainty related to the
actions of regulatory authorities with respect to the recovery of costs of
the Rocky Mountain pumped storage hydroelectric project. The ultimate
outcome of this matter cannot be determined at this time.
(H) In October 1993, a Superior Court of Fulton County, Georgia, judge ruled
that rate riders previously approved by the Georgia PSC for recovery of
GEORGIA's costs incurred in connection with demand-side conservation
programs were unlawful. The judge held that the Georgia PSC lacked
statutory authority to approve such rate riders except through general
rate case proceedings and that those procedures had not been followed.
GEORGIA suspended collection of the demand-side conservation costs and
appealed to the Georgia Court of Appeals, which reversed the court s
decision as described below. In December 1993, the Georgia PSC approved
GEORGIA's request for an accounting order allowing GEORGIA to defer all
current unrecovered and future costs related to these programs until the
court s decision is reversed or until the next general rate case
proceeding. An association of industrial customers has filed a petition
for review of such accounting order in the Superior Court of Fulton
County, Georgia. GEORGIA's costs related to these conservation programs
through June 1994 were $90 million of which $15 million has been collected
and the remainder deferred. The estimated costs are $21 million for the
remainder of 1994 and $43 million in 1995.
In July 1994, the Georgia Court of Appeals, reversing the superior
court decision discussed above, ruled that the Georgia PSC could lawfully
provide for recovery of demand-side conservation program costs through
rate riders. The opposing parties have filed notices of their intention
to appeal to the Georgia Supreme Court. GEORGIA is continuing to defer
program costs pending final resolution of this matter.
The final outcome of this matter cannot now be determined; however, in
management's opinion, the final outcome will not have a material adverse
effect on SOUTHERN's or GEORGIA's Condensed Financial Statements.
(I) In June 1994, a tax deficiency notice was received from the IRS for the
years 1984 through 1987 in regards to the tax accounting by GEORGIA for a
1984 property transaction. The potential tax deficiency arising from this
issue would amount to approximately $30 million of tax plus an additional
$33 million of interest. The tax deficiency relates to a timing issue as
to when taxes are paid, therefore only the interest portion could impact
future income. Management believes that the IRS position is incorrect and
will file a petition with the United States Tax Court to appeal the IRS
position. The final outcome of this matter cannot now be determined;
however, in management s opinion, the final outcome will not have a
material adverse effect on SOUTHERN's or GEORGIA's Condensed Financial
Statements.
70
<PAGE> 71
NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued)
(J) In August 1993, a complaint against GULF and SCS was filed in federal
district court in Ohio by two companies with which GULF has contracted for
the transportation by barge of certain of GULF's coal supplies. The
complaint alleges breach of the contract by GULF and seeks damages
estimated by the plaintiffs to be in excess of $85 million. The final
outcome of this matter cannot now be determined; however, in management's
opinion the final outcome will not have a material adverse effect on
SOUTHERN's or GULF's Condensed Financial Statements.
(K) During 1994, GEORGIA and SCS, the system service company, instituted work
force reduction programs. The costs related to these programs amounted to
approximately $75.9 million for GEORGIA and $25.7 million for SCS. The
costs of the SCS work force reduction program were apportioned among the
various entities that together form the Southern electric system.
MISSISSIPPI instituted an early retirement incentive program in April 1994
and deferred the related costs of approximately $13.3 million.
MISSISSIPPI has received authority from the Mississippi PSC to defer these
costs, as well as its portion of the costs of a similar SCS program, and
to amortize over a period not to exceed 60 months, beginning no later than
January 1995. Additionally, SAVANNAH instituted a work force reduction
program in late 1993 and incurred related charges of approximately $4.5
million.
(L) In July 1994, OPC and MEAG filed a joint complaint with the FERC seeking
to recover from GEORGIA an aggregate of approximately $16.5 million in
alleged partial requirements rates overcharges, plus approximately $6.3
million in interest. OPC and MEAG claim that GEORGIA improperly reflected
in such rates costs associated with capacity that had previously been sold
to Gulf States pursuant to a unit power sales contract or, alternatively,
that they should be allocated a portion of the proceeds received by
GEORGIA as the result of a settlement with Gulf States of litigation
arising out of such contract. (For information concerning the Gulf States
settlement, see Note 8 and Note 3, respectively, to the financial
statements of SOUTHERN and GEORGIA in Item 8 of the SOUTHERN system s
combined 1993 Annual Report on Form 10-K. In August 1994, OPC and MEAG
also filed a complaint in the Superior Court of Fulton County, Georgia,
urging substantially the same claims and asking the court to hear the
matter in the event the FERC declines jurisdiction. GEORGIA intends to
contest the complaints filed against it. While the outcome of this matter
cannot be determined, in management's opinion it will not have a material
adverse effect on SOUTHERN's or GEORGIA's financial condition.
(M) In compliance with the recently enacted Georgia Hazardous Site Response
Act, the State of Georgia was required to compile an inventory of all
known or suspected sites where hazardous wastes, constituents or
substances have been disposed of or released in quantities deemed
reportable by the State. In developing this list, the State of Georgia
identified several hundred properties throughout the State, including 23
sites which may require environmental remediation by GEORGIA. The
majority of these sites are electrical power substations and power
generation facilities. GEORGIA has recognized $2 million in expenses for
the anticipated clean-up cost for one site that GEORGIA plans to
remediate. GEORGIA will conduct studies at each of the remaining sites to
determine the extent of remediation and associated clean-up costs, if any,
that may be required. GEORGIA has recognized $3 million in expenses for
the anticipated cost of completing such studies. Any cost of remediating
the remaining sites cannot presently be
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NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued)
determined until such studies are completed for each site, and the State
of Georgia determines whether remediation is required. If all sites were
required to be remediated, GEORGIA could incur expenses of up to $25
million in additional clean-up costs, and construction expenditures of up
to $100 million to develop new waste management facilities or install
additional pollution control devices. The final outcome of this matter
cannot now be determined; however, in management s opinion the final
outcome will not have a material adverse effect on SOUTHERN's or GEORGIA's
Condensed Financial Statements.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(1) Reference is made to the Notes to Condensed Financial
Statements herein for information regarding certain legal
and administrative proceedings in which SOUTHERN and its
reporting subsidiaries are involved.
(2) In May 1994, GEORGIA received a notice of violation from the
NRC proposing a civil penalty in the amount of $200,000
based upon allegedly inaccurate and incomplete information
relating to Plant Vogtle reported to the NRC in 1990. The
NRC also issued demands for information regarding alleged
performance failures by six individual employees to enable
the NRC to determine whether additional enforcement actions
are necessary.
In its responses to the notice of violation, submitted
to the NRC in August 1994, GEORGIA denied certain of the
NRC's allegations and admitted others. GEORGIA further
requested reconsideration of the level of the proposed civil
penalty. GEORGIA has also furnished various information to
the NRC in response to the demands described above.
Item 4. Submission of Matters to a Vote of Security Holders.
SOUTHERN
SOUTHERN held its annual meeting of stockholders on May 25,
1994. The following resolutions were voted upon at this
meeting.
(1) A proposal requiring additional disclosure of executive
compensation was defeated by a vote of 379,571,936 shares
against; 87,991,908 shares for; and 13,986,686 shares
abstaining.
(2) A proposal seeking to limit executive compensation was
defeated by a vote of 370,102,931 shares against;
95,431,564 shares for; and 16,016,838 shares abstaining.
(3) A proposal to approve SOUTHERN's Outside Directors Stock
Plan was adopted by a vote of 471,719,068 shares for;
48,780,681 shares against; and 13,957,376 shares abstaining.
(4) A proposal to approve SOUTHERN's Productivity Plan for
Executive Officers was adopted by a vote of 471,846,823
shares for; 50,114,948 shares against; and 12,494,954
shares abstaining.
(5) The appointment of Arthur Andersen & Co. as independent
auditors for the year 1994 was approved by a vote of
520,834,727 shares for; 8,758,096 shares against;
4,861,337 shares abstaining.
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Item 4. Submission of Matters to a Vote of Security Holders.
(Continued)
(6) Each nominee for director of SOUTHERN received the requisite
plurality of votes. The vote tabulation was as follows:
Shares Shares
Nominees For Withhold Vote
---------------------- ----------- -------------
Edward L. Addison 523,896,239 10,533,208
William P. Copenhaver 524,085,858 10,343,588
A. D. Correll 524,669,353 9,760,094
A. W. Dahlberg 524,854,567 9,574,879
Paul J. DeNicola 524,961,099 9,468,348
Jack Edwards 524,220,633 10,208,813
H. Allen Franklin 524,939,452 9,529,242
L. G. Hardman, III 524,981,164 9,448,282
Elmer B. Harris 524,631,660 9,837,034
Earl D. McLean, Jr. 524,706,020 9,723,426
William A. Parker, Jr. 524,808,858 9,659,836
William J. Rushton, III 524,748,248 9,681,199
Gloria M. Shatto 524,596,973 9,834,069
Herbert Stockham 524,800,208 9,629,238
ALABAMA
ALABAMA held its annual common stockholders meeting on
April 22, 1994, and the following persons were elected to
serve as directors of ALABAMA:
Whit Armstrong William V. Muse
Philip E. Austin John T. Porter
Margaret A. Carpenter Gerald H. Powell
A. W. Dahlberg Robert D. Powers
Peter V. Gregerson, Sr. John W. Rouse, Jr.
Bill M. Guthrie William J. Rushton, III
Elmer B. Harris James H. Sanford
Crawford T. Johnson, III John Cox Webb, IV
Carl E. Jones, Jr. John W. Woods
Wallace D. Malone, Jr.
All of the 5,608,955 outstanding shares of ALABAMA's common
stock are owned by SOUTHERN and were voted for the election
of such directors.
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<PAGE> 75
GEORGIA
GEORGIA held its annual meeting of stockholders on
May 18, 1994, and the following persons were elected to
serve as directors of GEORGIA:
Edward L. Addison James R. Lientz, Jr.
Bennett A. Brown William A. Parker, Jr.
William P. Copenhaver G. Joseph Prendergast
A. W. Dahlberg Herman J. Russell
William A. Fickling, Jr. Gloria M. Shatto
H. Allen Franklin Robert Strickland
L. G. Hardman, III William Jerry Vereen
Warren Y. Jobe Thomas R. Williams
All of the 7,761,500 outstanding shares of GEORGIA's common
stock are owned by SOUTHERN and were voted for the election
of such directors.
GULF
GULF held its annual stockholders meeting on June 28, 1994,
and the following persons were elected to serve as
directors of GULF:
Reed Bell, Sr., M.D. W. Deck Hull, Jr.
Travis J. Bowden C. Walter Ruckel
Paul J. DeNicola Joseph K. Tannehill
Fred C. Donovan, Sr.
All of the 992,717 outstanding shares of GULF's common
stock are owned by SOUTHERN and were voted for the election
of such directors.
MISSISSIPPI
MISSISSIPPI held its annual stockholders meeting on
April 5, 1994, and the following persons were elected to
serve as directors of MISSISSIPPI:
Paul J. DeNicola Earl D. McLean, Jr.
Edwin E. Downer David M. Ratcliffe
Robert S. Gaddis Gerald J. St. Pe
Walter H. Hurt, III Leo W. Seal, Jr.
Aubrey K. Lucas N. Eugene Warr
All of the 1,121,000 outstanding shares of MISSISSIPPI's
common stock are owned by SOUTHERN and were voted for the
election of such directors.
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SAVANNAH
SAVANNAH held its annual stockholders meeting on
May 17, 1994, and the following persons were elected to
serve as directors of SAVANNAH:
Helen Quattlebaum Artley Robert B. Miller, III
Paul J. DeNicola James M. Piette
Brian R. Foster Arnold M. Tenenbaum
Arthur M. Gignilliat, Jr. Frederick F. Williams, Jr.
Walter D. Gnann
All of the 10,844,635 outstanding shares of SAVANNAH's
common stock are owned by SOUTHERN and were voted for the
election of such directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 24 - Powers of Attorney and resolutions.
(Designated in the SOUTHERN system's combined Form 10-K
for the year ended December 31, 1993, File Nos. 1-3526,
1-3164, 1-6468, 0-2429, 0-6849 and 1-5072 as Exhibits
24(a), 24(b), 24(c), 24(d), 24(e) and 24(f), respectively,
and incorporated herein by reference.)
(b) Reports on Form 8-K.
There were no Reports on Form 8-K filed during the second
quarter of 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
THE SOUTHERN COMPANY
By Edward L. Addison
Chairman
(Principal Executive Officer)
By W. L. Westbrook
Financial Vice President
(Principal Financial and
Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
ALABAMA POWER COMPANY
By Elmer B. Harris, President and Chief
Executive Officer
By William B. Hutchins, III, Executive Vice President
(Principal Financial Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
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<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
GEORGIA POWER COMPANY
By H. Allen Franklin
President and Chief Executive Officer
(Principal Executive Officer)
By Warren Y. Jobe
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
- -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
GULF POWER COMPANY
By Travis J. Bowden, President and Chief Executive Officer
By A. E. Scarbrough, Vice President - Finance
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
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<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
MISSISSIPPI POWER COMPANY
By David M. Ratcliffe, President and Chief Executive Officer
By Thomas A. Fanning, Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
SAVANNAH ELECTRIC AND POWER COMPANY
By Arthur M. Gignilliat, Jr., President
By Kirby R. Willis, Vice President, Treasurer and Chief Financial
Officer (Principal Financial and Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: August 11, 1994
79
