<TABLE>
<CAPTION>
=========================================================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1999
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.
- ------------ ----------------------------------- ------------------
<S> <C> <C>
1-3526 The Southern Company 58-0690070
(a Delaware Corporation)
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(404) 506-5000
1-3164 Alabama Power Company 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 257-1000
1-6468 Georgia Power Company 58-0257110
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308
(404) 506-6526
0-2429 Gulf Power Company 59-0276810
(A Maine Corporation)
One Energy Place
Pensacola, Florida 32520
(850) 444-6111
0-6849 Mississippi Power Company 64-0205820
(A Mississippi Corporation)
2992 West Beach
Gulfport, Mississippi 39501
(228) 864-1211
1-5072 Savannah Electric and Power Company 58-0418070
(A Georgia Corporation)
600 East Bay Street
Savannah, Georgia 31401
(912) 644-7171
===================================================================================================================
</TABLE>
<PAGE>
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 October 31, 1999
- ---------- ------------ -------------------
<S> <C> <C>
The Southern Company Par Value $5 Per Share 673,093,100
Alabama Power Company Par Value $40 Per Share 5,608,955
Georgia Power Company No Par Value 7,761,500
Gulf Power Company No Par Value 992,717
Mississippi Power Company Without Par Value 1,121,000
Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
This combined Form 10-Q is separately filed by The Southern Company,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company and Savannah Electric and Power Company. Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each company makes no representation as to information relating to the
other companies.
</TABLE>
2
<PAGE>
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1999
<TABLE>
<CAPTION>
Page
Number
<S> <C>
DEFINITIONS........................................................................................................ 4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition
The Southern Company and Subsidiary Companies
Condensed Consolidated Statements of Income........................................................ 6
Condensed Consolidated Statements of Cash Flows.................................................... 7
Condensed Consolidated Balance Sheets.............................................................. 8
Condensed Consolidated Statements of Comprehensive Income and
Accumulated Other Comprehensive Income.......................................................... 10
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 11
Alabama Power Company
Condensed Statements of Income..................................................................... 22
Condensed Statements of Cash Flows................................................................. 23
Condensed Balance Sheets........................................................................... 24
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 26
Exhibit 1 - Report of Independent Public Accountants............................................... 30
Georgia Power Company
Condensed Statements of Income..................................................................... 32
Condensed Statements of Cash Flows................................................................. 33
Condensed Balance Sheets........................................................................... 34
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 36
Exhibit 1 - Report of Independent Public Accountants............................................... 41
Gulf Power Company
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
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
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
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................ 69
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................................................................... 74
Item 2. Changes in Securities..................................................................................... Inapplicable
Item 3. Defaults Upon Senior Securities........................................................................... Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders....................................................... Inapplicable
Item 5. Other Information......................................................................................... Inapplicable
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 74
Signatures ............................................................................................... 76
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS
TERM MEANING
<S> <C>
affiliates.................................. ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
ALABAMA..................................... Alabama Power Company
BEWAG....................................... Berliner Kraft und Licht AG
CEPA........................................ Consolidated Electric Power Asia Limited
Clean Air Act............................... Clean Air Act Amendments of 1990
ECO Plan.................................... Environmental Compliance Overview Plan
Energy Act.................................. Energy Policy Act of 1992
EPA......................................... U. S. Environmental Protection Agency
EWG......................................... Exempt wholesale generator
FASB........................................ Financial Accounting Standards Board
FERC........................................ Federal Energy Regulatory Commission
Form 10-K................................... Combined Annual Report on Form 10-K of SOUTHERN, ALABAMA,
GEORGIA, GULF, MISSISSIPPI and SAVANNAH for the year ended
December 31, 1998
FUCO........................................ Foreign utility company
GEORGIA..................................... Georgia Power Company
GULF........................................ Gulf Power Company
MISSISSIPPI................................. Mississippi Power Company
Mobile Energy............................... Mobile Energy Services Company, L.L.C. and Mobile Energy Services
Holdings, Inc.
OPC......................................... Oglethorpe Power Corporation
operating affiliates........................ see affiliates
operating companies......................... see affiliates
PEP......................................... Performance Evaluation Plan
PSC......................................... Public Service Commission
SAVANNAH.................................... Savannah Electric and Power Company
SCS......................................... Southern Company Services, Inc.
SEC......................................... Securities and Exchange Commission
SOUTHERN.................................... The Southern Company
Southern Energy............................. Southern Energy, Inc.
including SOUTHERN subsidiaries managed or controlled by Southern
Energy
SOUTHERN system............................. SOUTHERN, affiliates, Southern Energy, and other subsidiaries
SWEB........................................ South Western Electricity plc (United Kingdom)
TVA......................................... Tennessee Valley Authority
</TABLE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q includes forward-looking statements
in addition to historical information. The registrants caution that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the electric utility industry; the extent and timing of the
entry of additional competition in the markets of SOUTHERN's subsidiaries;
challenges related to Year 2000 readiness; potential business strategies,
including acquisitions or dispositions of assets or internal restructuring, that
may be pursued by the registrants; state and federal rate regulation in the
United States; changes in or application of environmental and other laws and
regulations to which SOUTHERN and its subsidiaries are subject; political, legal
and economic conditions and developments in the United States and in foreign
countries in which the subsidiaries operate; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; the performance of projects undertaken by
the non-traditional business and the success of efforts to invest in and develop
new opportunities; and other factors discussed elsewhere herein and in other
reports (including Form 10-K) filed from time to time by the registrants with
the SEC.
4
<PAGE>
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
5
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES $3,736,649 $3,456,785 $8,969,294 $8,865,043
-------------- --------------- -------------- --------------
OPERATING EXPENSES:
Operation--
Fuel 893,394 738,223 2,062,750 1,829,055
Purchased power 350,731 329,493 869,309 940,470
Other 623,259 539,234 1,628,892 1,532,917
Maintenance 195,224 207,988 650,455 642,657
Depreciation and amortization 335,731 426,489 975,975 1,192,775
Taxes other than income taxes 159,199 148,614 450,521 439,105
Income taxes 331,802 315,510 600,305 609,502
Write down of investment in Mobile Energy 68,999 - 68,999 -
-------------- --------------- -------------- --------------
Total operating charges 2,958,339 2,705,551 7,307,206 7,186,481
-------------- --------------- -------------- --------------
OPERATING INCOME 778,310 751,234 1,662,088 1,678,562
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated subsidiaries 7,926 32,012 150,849 77,148
Interest income 45,910 44,420 115,538 195,833
Gains on asset sales 283,507 185 292,891 49,623
Other, net (7,679) (26,175) 20,603 (73,831)
Income taxes applicable to other income (71,637) 25,192 (80,491) 26,114
-------------- --------------- -------------- --------------
INCOME BEFORE INTEREST CHARGES 1,036,337 826,868 2,161,478 1,953,449
-------------- --------------- -------------- --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 164,769 179,428 495,477 532,177
Interest on notes payable 53,648 24,391 125,163 85,827
Amortization of debt discount, premium and expense, net 10,159 16,356 29,170 56,828
Other interest charges 22,350 18,459 51,603 64,467
Minority interests in subsidiaries' income 118,518 27,280 154,702 56,990
Distributions on capital and preferred
securities of subsidiary companies 46,248 38,953 136,196 109,619
Preferred dividends of subsidiary companies 5,462 5,972 15,683 19,037
-------------- --------------- -------------- --------------
Interest charges and other, net 421,154 310,839 1,007,994 924,945
-------------- --------------- -------------- --------------
CONSOLIDATED NET INCOME $ 615,183 $ 516,029 $1,153,484 $1,028,504
============== =============== ============== ==============
AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (Thousands) 678,472 697,797 690,155 696,836
BASIC AND DILUTED EARNINGS
PER SHARE OF COMMON STOCK $0.90 $0.74 $1.67 $1.48
CASH DIVIDENDS PAID PER SHARE $0.335 $0.335 $1.005 $1.005
OF COMMON STOCK
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
----------------------------------
1999 1998
-------------- ---------------
OPERATING ACTIVITIES:
<S> <C> <C>
Consolidated net income $1,153,484 $1,028,504
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 1,048,897 1,350,767
Deferred income taxes and investment tax credits 155,668 (41,190)
Write down of investment in Mobile Energy 68,999 -
Gain on asset sales (292,298) (32,597)
Equity in earnings of unconsolidated subsidiaries (150,849) (77,148)
Other, net 148,143 108,328
Changes in certain current assets and liabilities
excluding effects from acquisitions --
Receivables, net (441,995) (336,406)
Special deposits-other (11,078) 4,248
Fossil fuel stock 21,311 3,879
Materials and supplies (8,085) 19,470
Prepayments (17,805) (27,507)
Accounts payable (296,786) (210,481)
Taxes accrued 329,333 272,111
Other 232,630 (34,734)
-------------- ---------------
Net cash provided from operating activities 1,939,569 2,027,244
-------------- ---------------
INVESTING ACTIVITIES:
Gross property additions (1,695,779) (1,374,245)
Southern Energy business acquisitions, net of cash acquired (1,472,217) (235,157)
Sales of property 286,554 189,142
Other (71,979) 14,910
-------------- ---------------
Net cash used for investing activities (2,953,421) (1,405,350)
-------------- ---------------
FINANCING ACTIVITIES:
Proceeds--
Common stock 23,793 168,491
Capital and preferred securities 250,000 245,000
Pollution control obligations 339,650 210,300
Other long-term debt 1,742,128 1,773,488
Notes receivable 228,000 240,792
Retirements/repurchases--
Common stock repurchased (648,764) (60,307)
Preferred stock (85,980) (49,432)
First mortgage bonds (889,800) (774,845)
Pollution control obligations (337,650) (209,780)
Other long-term debt (416,809) (215,699)
Notes receivable (82,354) (89,679)
Special deposits-redemption funds (129) (5)
Notes payable, net 1,569,554 (801,777)
Payment of common stock dividends (696,014) (699,835)
Miscellaneous (85,505) (101,133)
-------------- ---------------
Net cash provided from (used for) financing activities 910,120 (364,421)
-------------- ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (103,732) 257,473
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 871,353 600,820
============== ===============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $767,621 $858,293
============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $764,750 $814,573
Income taxes $311,336 $534,502
Southern Energy business acquisitions--
Fair value of assets acquired $1,505,042 $199,526
Less cash paid for common stock 1,472,217 199,526
============== ===============
Liabilities assumed $32,825 -
============== ===============
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30,
1999 At December 31,
(Unaudited) 1998
---------------- ----------------
UTILITY PLANT:
<S> <C> <C>
Plant in service $36,520,022 $35,185,013
Less accumulated provision for depreciation 13,857,102 13,239,140
---------------- ----------------
22,662,920 21,945,873
Nuclear fuel, at amortized cost 214,452 216,744
Construction work in progress 2,384,733 1,782,482
---------------- ----------------
Total 25,262,105 23,945,099
---------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Equity investments in unconsolidated subsidiaries 1,497,706 1,548,951
Property rights, net of accumulated amortization
of $200,916 at September 30, 1999 and $169,339 at December 31, 1998 1,191,503 1,184,734
Goodwill, net of accumulated amortization
of $144,192 at September 30, 1999 and $105,755 at December 31, 1998 1,944,700 1,949,213
Other Intangibles, net of accumulated amortization
of $12,740 at September 30, 1999 and $791 at December 31, 1998 596,752 308,009
Nuclear decommissioning trusts 585,764 516,719
Miscellaneous 702,413 643,280
---------------- ----------------
Total 6,518,838 6,150,906
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 767,621 871,353
Special deposits 71,638 86,592
Receivables, less accumulated provisions for uncollectible accounts
of $88,619 at September 30, 1999 and $112,511 at December 31, 1998 2,065,379 1,797,913
Fossil fuel stock, at average cost 296,398 251,974
Materials and supplies, at average cost 552,971 515,715
Prepayments 134,091 101,843
Vacation pay deferred 79,949 80,752
---------------- ----------------
Total 3,968,047 3,706,142
---------------- ----------------
DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges related to income taxes 1,009,662 1,035,724
Prepaid pension costs 566,935 489,572
Debt expense, being amortized 132,194 129,257
Premium on reacquired debt, being amortized 305,023 294,055
Miscellaneous 461,795 440,754
---------------- ----------------
Total 2,475,609 2,389,362
---------------- ----------------
TOTAL ASSETS $38,224,599 $36,191,509
================ ================
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
---------------- ----------------
CAPITALIZATION:
<S> <C> <C>
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Issued -- September 30, 1999: 700,618,730 shares;
-- December 31, 1998: 699,772,723 shares $3,503,094 $3,498,864
Paid-in capital 2,480,060 2,462,116
Treasury, at cost -- September 30, 1999: 25,959,448 shares;
-- December 31, 1998: 2,025,536 shares (705,554) (57,863)
Retained earnings 4,335,584 3,878,332
Accumulated other comprehensive income (87,459) 15,400
---------------- ----------------
9,525,725 9,796,849
Preferred stock of subsidiaries 368,760 369,084
Company or subsidiary obligated mandatorily redeemable
capital and preferred securities 2,428,595 2,179,440
Long-term debt 11,509,697 10,471,692
---------------- ----------------
Total 23,832,777 22,817,065
---------------- ----------------
CURRENT LIABILITIES:
Amount of securities due within one year 495,079 1,525,596
Notes payable 3,366,513 1,827,808
Accounts payable 706,915 1,026,869
Customer deposits 130,774 125,078
Taxes accrued--
Income taxes 348,517 49,923
Other 335,829 299,051
Interest accrued 224,926 233,355
Vacation pay accrued 78,398 111,611
Miscellaneous 765,352 542,836
---------------- ----------------
Total 6,452,303 5,742,127
---------------- ----------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 4,531,001 4,480,970
Deferred credits related to income taxes 678,615 714,665
Accumulated deferred investment tax credits 700,913 723,393
Employee benefits provisions 523,973 473,734
Minority interests in subsidiaries 709,106 535,145
Prepaid capacity revenues 84,259 96,080
Department of Energy assessments 64,191 64,191
Disallowed Plant Vogtle capacity buyback costs 53,315 54,458
Storm damage reserves 26,752 23,980
Miscellaneous 567,394 465,701
---------------- ----------------
Total 7,939,519 7,632,317
---------------- ----------------
TOTAL CAPITALIZATION AND LIABILITIES $38,224,599 $36,191,509
================ ================
The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Consolidated net income $615,183 $516,029 $1,153,484 $1,028,504
Other comprehensive income:
Foreign currency translation adjustments 19,746 21,069 (158,245) 24,067
Less applicable income taxes 6,911 7,374 (55,386) 8,423
-------------- -------------- -------------- --------------
CONSOLIDATED COMPREHENSIVE INCOME $628,018 $529,724 $1,050,625 $1,044,148
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
(Stated in Thousands of Dollars)
At September 30, At December 31,
1999 1998
---------------- --------------
(Unaudited)
<S> <C> <C>
Balance at beginning of period $ 15,400 $ 7,176
Change in current period (102,859) 8,224
-------------- --------------
BALANCE AT END OF PERIOD $(87,459) $15,400
============== ==============
</TABLE>
10
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
SOUTHERN's traditional business is primarily represented by its five domestic
electric utility operating companies, which provide electric service in four
Southeastern states. Another significant portion of SOUTHERN's business is its
non-traditional business primarily represented by Southern Energy, which owns
and manages international and domestic businesses for SOUTHERN. Businesses
acquired by Southern Energy have been included in the consolidated statements of
income since the date of acquisition. Certain changes in operating revenues and
expenses from the prior period result from such acquisitions.
Earnings
SOUTHERN's consolidated net income for the third quarter
and year-to-date 1999 was $615 million ($0.90 per share) and $1.153 billion
($1.67 per share), respectively, compared to $516 million ($0.74 per share) and
$1.029 billion ($1.48 per share) for the corresponding periods of 1998. Earnings
for the traditional business during the quarter were up $69.6 million or 14%
primarily due to increased revenues and lower operating expenses. Year-to-date
earnings for the traditional business were up $46.5 million or 4.9% due mainly
to lower operating expenses, primarily lower depreciation charges. For the
non-traditional business, during the quarter and year-to-date, earnings were up
$35.8 million and $102.4 million, respectively, due mainly to growing
profitability from its Asian business units and its investments in
power-generation businesses in New England, California and New York. In the
third quarter 1999, Southern Energy recorded several one-time items: a $78
million after-tax gain on the sale of its share of SWEB's supply business (the
distribution business is now named Western Power Distribution), a $16 million
after-tax charge at Bewag for costs related to early retirement and severance
packages and a $69 million after-tax write down of SOUTHERN's investment in
Mobile Energy. These items are recorded in Gain on asset sales, Equity in
earnings of unconsolidated subsidiaries, and Write down of investment in Mobile
Energy, respectively, on SOUTHERN's Condensed Consolidated Statements of Income.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Operating revenues............................... $279,864 8.1 $104,251 1.2
Fuel expense..................................... 155,171 21.0 233,695 12.8
Purchased power expense.......................... 21,238 6.4 (71,161) (7.6)
Other operation expense.......................... 84,025 15.6 95,975 6.3
Depreciation and amortization expense............ (90,758) (21.3) (216,800) (18.2)
Write down of investment in
Mobile Energy................................. 68,999 - 68,999 -
Equity in earnings of unconsolidated
subsidiaries.................................. (24,086) (75.2) 73,701 95.5
Interest income.................................. 1,490 3.4 (80,295) (41.0)
</TABLE>
11
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
<TABLE>
<CAPTION>
Increase (Decrease) (Continued)
---------------------------------------------------------------
Third Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Gain on asset sales.............................. 283,322 N/M 243,268 490.2
Income taxes applicable to other income.......... (96,829) (384.4) (106,605) (408.2)
Interest on notes payable........................ 29,257 119.9 39,336 45.8
Amortization of debt discount, premium and
expense, net.................................. (6,197) (37.9) (27,658) (48.7)
Other interest charges........................... 3,891 21.1 (12,864) (20.0)
Minority interests in subsidiaries' income....... 91,238 334.5 97,712 171.5
</TABLE>
N/M - Not meaningful
Operating revenues. For the traditional business, operating revenues
increased by $14.5 million or 0.5% for the quarter and decreased by $245.8
million or 3.3% year-to-date. Quarterly revenues for the traditional business
were positively impacted by a 4.5% increase in retail energy sales and growth in
the number of customers. However, revenues for the current quarter and
year-to-date continue to be significantly affected by the retail rate reductions
ordered by the Georgia PSC. Operating revenues for Southern Energy were up for
the third quarter and year-to-date by $252.3 million or 58.1% and $324.6 million
or 23.4%, respectively. Southern Energy's revenues were up due mainly to results
from its recent investments in power-generation businesses in New England,
California and New York and were partially offset by decreased revenues from
SWEB and the deconsolidation of Mobile Energy. Effective with the bankruptcy
filing in January 1999, Mobile Energy is accounted for under the equity method,
rather than being consolidated as before. See Note (N) in the "Notes to the
Condensed Financial Statements" herein for further information regarding Mobile
Energy. Reference is also made to Item 1 - BUSINESS - "Non-Traditional Business"
and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential"
of SOUTHERN in the Form 10-K.
Fuel expense. This expense increased for the third quarter and year-to-date
1999 due primarily to Southern Energy's acquisitions of power-generating
businesses in New England, California and New York.
Purchased power expense. The third quarter increase is attributed primarily
to the traditional business where the demand for energy increased due to hot
weather and growth in the number of customers. The year-to-date decrease is
primarily attributed to Southern Energy, which recorded a decrease of $65.6
million or 11.0% mainly due to a decrease in purchased power at SWEB due to
volume reductions.
Other operation expense. Third quarter and year-to-date increases are
mainly due to increased administrative and general expenses resulting from
Southern Energy's acquisitions since the corresponding periods of 1998 and an
increase in the bad debt expense reserve at CEPA.
Depreciation and amortization expense. Third quarter and year-to-date 1999
decreases when compared to the corresponding periods in 1998 are principally
attributed to higher depreciation charges recognized in 1998 under the prior
accounting order and the completion in 1998 of the amortization of deferred
Plant Vogtle costs.
12
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Write down of investment in Mobile Energy. During this third quarter of
1999, SOUTHERN wrote down its investment in Mobile Energy due primarily to
recent settlement discussions with Kimberly-Clark Corporation and the
bondholders. For additional information, see Note (N) in the "Notes to the
Condensed Financial Statements" herein.
Equity in earnings of unconsolidated subsidiaries. The decrease for the
third quarter is due, in large part, to Bewag's provision for costs associated
with early retirement and severance packages. The year-to-date increase in this
item reflects the $54 million settlement of Southern Energy's claims against a
contractor relating to the Shajiao C construction project and the improvement in
profitability of the Shajiao C operations. The amount of the settlement of
contractor claims was partially offset by other related expenses included in
other income accounts and other operation expenses.
Interest income. The year-to-date decrease is directly related to the 1998
settlement of tax issues between SOUTHERN and the Internal Revenue Service.
Gain on asset sales. The third quarter and year-to-date increases are
primarily due to SWEB's sale of its supply business. Southern Energy's portion
of the total gain was $78 million, after taxes. For additional information, see
"Future Earnings Potential" herein.
Income taxes applicable to other income. The third quarter and year-to-date
increases are mainly attributed to Southern Energy as a result of income taxes
related to the sale of SWEB's supply business.
Interest on notes payable. The third quarter and year-to-date 1999
increases are attributed to increased borrowings related to Southern Energy's
acquisitions in California, New England and New York, repurchases of SOUTHERN's
common stock and other working capital needs. For additional information on the
stock repurchase programs, see Note (O) in the "Notes to the Condensed Financial
Statements" herein.
Amortization of debt discount, premium and expense, net. These decreases
are related to accelerated amortization charges recognized in 1998 for premiums
incurred to refinance high-cost debt.
Other interest charges. These charges decreased year-to-date 1999 when
compared to the same period in 1998 due to the recognition in 1998 of increased
interest related to tax issues between SOUTHERN and the Internal Revenue Service
which were settled during 1998.
Minority interests in subsidiaries' income. The third quarter and
year-to-date increases in this item primarily represent PP&L Resources' minority
interest in the gain on the sale of SWEB's supply business.
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 weather to energy sales growth to a less regulated, more
competitive environment, with non-traditional business becoming more
significant. For additional
13
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
information relating to non-traditional business activities, see Item 1 -
BUSINESS - "Non-Traditional Business" in the Form 10-K.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SOUTHERN is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SOUTHERN in the Form 10-K.
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
In April 1999, SOUTHERN, through its subsidiary Southern Energy, completed
the purchase of 3,065 megawatts of generating assets in California from Pacific
Gas & Electric for approximately $801 million.
In June 1999, SOUTHERN, through its subsidiary Southern Energy, completed
its $484 million acquisition of 1,776 megawatts of generating capacity from
Orange and Rockland Utilities, Inc. and Consolidated Edison Company of New York.
Also, in June 1999, Southern Energy announced that SWEB had signed an agreement
to sell its supply business to London Electricity plc for $256 million or
(pound)160 million and the assumption of certain liabilities. Further, Southern
Energy acquired a 9.99% interest in Shandong International Power Development
Company Limited for $104 million. On September 30, 1999, the sale of SWEB's
supply business to London Electricity plc was completed and the distribution
business was renamed Western Power Distribution as the SWEB name was transferred
to London Electricity plc.
For information relating to Year 2000 readiness, see "YEAR 2000 READINESS"
below.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). SOUTHERN has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings and other
comprehensive income.
Reference is made to Notes (B) through (D), (F), (H) through (L), (N) and
(O) in the "Notes to the Condensed Financial Statements" herein for discussion
of various contingencies and other matters which may affect future earnings
potential. Reference is also made to Part II - Item 1 - "Legal Proceedings"
herein.
14
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
YEAR 2000 READINESS
Year 2000 Challenge
In recent decades, computer programmers shortened the year portion of date
entries to two digits to save processing time and storage space. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach was used until the mid-1990s. Unless corrected before
the Year 2000, affected systems and devices containing a chip or microprocessor
with date and time functions could incorrectly process dates or the systems may
cease to function.
SOUTHERN depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. SOUTHERN met its Year
2000 readiness goal, when in June 1999 it announced that systems critical to
generating and delivering electricity to its customers in the Southeast are
ready for 2000. Year 2000 ready means that a system or application is determined
suitable for continued use through the Year 2000 and beyond. Critical systems
include, but are not limited to, reactor control systems, safe shutdown systems,
turbine generator systems, control center computer systems, customer service
systems, energy management systems, and telephone switches and equipment.
Year 2000 Program and Status
SOUTHERN's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed regularly by a steering committee
of SOUTHERN executives.
SOUTHERN's traditional business refers to the integrated utility services
within Alabama, Florida, Georgia, and Mississippi. For this traditional
business, the work was divided into two phases. Phase 1 began in 1996 and
consisted of identifying and assessing corporate assets related to software
systems and devices that contain a computer chip or clock. The first phase was
completed in June 1997. Phase 2 consisted of testing and remediating high
priority systems and devices. Also, contingency planning is included in this
phase. The second phase was completed on schedule in June 1999. The Millennium
Project will continue to monitor the affected computer systems, devices, and
applications into the Year 2000.
For the traditional business, SOUTHERN completed the activities contained
in its work plan by function as follows:
<TABLE>
<CAPTION>
Work Plan
-----------------------------------------------------------------
Remediation Completion
Inventory Assessment and Testing Date
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Generation 100% 100% 100% 6/99
Energy Management 100 100 100 6/99
Transmission and
Distribution 100 100 100 1/99
Telecommunications 100 100 100 6/99
Corporate Applications 100 100 100 3/99
- ---------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
For the non-traditional business, Southern Energy has adopted a three-phase
plan to address the Year 2000 challenge at its North American and international
business units in which they have management control. The first phase consisted
of awareness and planning, inventory and assessment, and it included the
identification of potentially impacted systems and an assessment of their
individual Year 2000 readiness. The second phase, which includes testing,
remediation, and validation, consists of modification or replacement of impacted
equipment, and verification that those modifications have addressed the issue.
Contingency planning is the third phase, and it includes backup plans for
unexpected events with critical systems, staffing plans for critical date
rollovers, and plans to address external dependencies. Business units are using
Year 2000 readiness information received from suppliers, including fuel
suppliers, to determine if inventory adjustments are needed for the transition
period.
The following three tables summarize the status of progress of Southern
Energy's North American and international business units as of September 30,
1999.
<TABLE>
<CAPTION>
North American Business Units:
Phase Status Completion Date
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Awareness and planning, inventory and Complete November 30, 1998
assessment
Testing, remediation, and validation Complete June 30, 1999
Contingency planning Complete June 30, 1999
- -----------------------------------------------------------------------------------------------
International Business Units where Southern Energy has management control:
Phase Status Completion Date
- -----------------------------------------------------------------------------------------------
Awareness and planning, inventory and
assessment Complete February 22, 1999
Testing, remediation, and validation Complete September 30, 1999
Contingency planning Complete August 31, 1999
- -----------------------------------------------------------------------------------------------
Other International Business Units:
Phase Status Projected Completion
- -----------------------------------------------------------------------------------------------
Awareness and planning, inventory and
assessment Complete May 31, 1999
Testing, remediation, and validation In progress November 30, 1999
Contingency planning In progress November 15, 1999
- -----------------------------------------------------------------------------------------------
</TABLE>
In a number of the international business units, Southern Energy is neither
the majority owner nor the managing concern. In these circumstances, Southern
Energy is providing technical assistance but does not control the schedule or
progress.
16
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Year 2000 Costs
For the traditional business, current budgeted costs for Year 2000 readiness are
approximately $91 million, which includes $6 million of cost billed to
non-affiliated companies. These costs include labor necessary to identify, test,
and renovate affected devices and systems. From its inception through September
30, 1999, the Year 2000 program costs, recognized primarily as expense, amounted
to $82 million based on SOUTHERN's ownership interest. In addition to the
traditional business costs, current projections for Year 2000 program costs are
approximately $20 million for the non-traditional business - based on SOUTHERN's
ownership interest - of which $16 million has been spent through September 30,
1999.
Year 2000 Risks
SOUTHERN has implemented a detailed process to minimize the possibility of
service interruptions related to the Year 2000. Based on tests we have
conducted, we believe service interruptions related to Year 2000 challenges are
unlikely. These tests increase confidence, but do not guarantee error-free
operations. The company has taken what it believes to be prudent steps to
prepare for the Year 2000, and it expects any interruptions in service that may
occur within the traditional business service territory to be isolated and short
in duration, similar to service loss during a storm.
SOUTHERN expects the risks associated with Year 2000 transition to be no
more severe than the scenarios that its electric system is routinely prepared to
handle. The most likely worst case scenario consists of the service loss of one
of the largest generating units and/or the service loss of any single bulk
transmission element in its traditional business service territory. There is a
smaller risk of sporadic and temporary fluctuations of power levels that would
be aggravated in the event of rapid and unscheduled changes to load patterns
that resulted from the activity of third parties. SOUTHERN has followed a proven
methodology for identifying and assessing software and devices containing
potential Year 2000 challenges. Remediation and testing of those devices is
complete.
SOUTHERN continues to review the Year 2000 readiness of material third
parties that provide goods and services crucial to SOUTHERN's operations. Among
such critical third parties are fuel, transportation, telecommunications, water,
chemical, and other suppliers. There is some risk associated with
representations by third parties regarding their readiness and completion of
their own Year 2000 related work. Contingency plans based on the assessment of
each third party's ability to continue supplying critical goods and services to
SOUTHERN have been developed and are being reviewed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their own Year 2000 challenges. The risk
associated with the progress of some operations outside the United States is a
function of the local regulatory environment and the priorities of the entities
with management control. Year 2000 challenges are included in the list of due
diligence activities associated with acquisitions; there is some risk associated
with the subsequent validation of any given seller's representations.
17
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Contingency Plans
Because of experience with hurricanes and other storms, the traditional business
is skilled at developing and using contingency plans in unusual circumstances.
As part of Year 2000 business continuity and contingency planning, SOUTHERN has
drawn on that experience to make risk assessments and develop additional plans
to deal specifically with Year 2000 challenges. SOUTHERN is identifying critical
operational locations, and scheduling key employees to be on duty at those
locations during the Year 2000 transition. SOUTHERN has already participated in
two successful North American Electric Reliability Council-coordinated national
drills during 1999, and plans to conduct additional drills. These drills focus
on SOUTHERN's ability to maintain critical voice and data exchange during
partial loss of primary voice and data communications systems. Because of the
level of detail of the contingency planning process, management feels that the
contingency plans will keep any service interruptions that may occur within the
traditional business service territory isolated and short in duration, similar
to service loss during a storm.
Contingency planning efforts for the non-traditional business are complete
for North American assets and are near completion for international assets.
These contingency plans are being developed by utilizing consistent formats and
guidelines.
FINANCIAL CONDITION
Overview
Major changes in SOUTHERN's financial condition during the first nine months of
1999 included $1.7 billion used for gross property additions to utility plant,
$1.5 billion used for Southern Energy acquisitions and $649 million used for
common stock repurchases. The funds for these additions and other capital
requirements were from operations, sales of senior securities and short-term
borrowings. See SOUTHERN's Condensed Consolidated Statements of Cash Flows for
further details.
Reference is made to the SOUTHERN's Condensed Consolidated Statements of
Comprehensive Income herein for information relating to other comprehensive
income. During the first nine months, Southern Energy recognized $103 million of
after-tax foreign exchange translation losses in other comprehensive income
which were principally related to shifts in exchange rates between the U.S.
dollar and the pound sterling and the Deutschemark, and to the 50% devaluation
of the Brazilian Real.
Financing Activities
During the first nine months of 1999, retirements and redemptions of the
operating companies' first mortgage bonds and preferred stock totaled $1.2
billion and $86 million, respectively. In February 1999, Alabama Power Capital
Trust III, a statutory business trust established for the purpose of holding
ALABAMA's junior subordinated notes and issuing trust preferred securities and
common securities, sold $50 million of its capital auction preferred securities
which are guaranteed by ALABAMA. Also, in February 1999, Georgia Power
18
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital Trust IV, a statutory business trust established for the purpose of
holding GEORGIA's junior subordinated notes and issuing trust preferred
securities and common securities, sold $200 million of its 6.85% trust preferred
securities, which are guaranteed by GEORGIA. Additionally, in March 1999,
GEORGIA issued $100 million of 6 5/8% senior notes due March 31, 2039. The
proceeds from this issuance were used to repay a portion of GEORGIA's
outstanding short-term indebtedness.
In May 1999, ALABAMA issued $200 million of 6.75% senior notes due June 30,
2039. The proceeds were used to repay a portion of its outstanding short-term
indebtedness and for other general corporate purposes. Also, in May 1999,
GEORGIA sold, through public authorities, $53 million of 5.45% pollution control
revenue bonds due May 1, 2034; $85 million of 5.40% pollution control revenue
bonds due May 1, 2034; and $100 million of 5.25% pollution control revenue bonds
due May 1, 2034. The proceeds of these sales were used to redeem $50 million
aggregate principal amount of 6.35% pollution control revenue bonds in June
1999; $125 million aggregate principal amount of 6.60% pollution control revenue
bonds in July 1999; and $60 million aggregate principal amount of 6 3/8%
pollution control revenue bonds in August 1999. In June 1999, ALABAMA sold,
through public authorities, $101.6 million aggregate principal amount of
variable rate pollution control revenue refunding bonds due June 1, 2022. The
proceeds from the sale were applied to the full redemption of the Series 1994 6
1/2% pollution control revenue refunding bonds in September 1999.
In July 1999, Southern Energy issued $700 million aggregate principal
amount of senior notes which consisted of $200 million of 7.40% senior notes due
2004 and $500 million of 7.90% senior notes due 2009. Proceeds received from the
sales of these notes are being used for general corporate purposes, including
repayment of short-term debt.
In August and September 1999, ALABAMA issued $250 million of 7.125% senior
notes due August 15, 2004 and issued $200 million of 7 1/8% senior notes due
October 1, 2007. The proceeds of both issuances were used to repay a portion of
its outstanding short-term indebtedness and for other general corporate
purposes. Also in August 1999, GULF issued $50 million of 7.05% senior notes due
August 15, 2004. The proceeds were used to repay a portion of its outstanding
short-term indebtedness.
Reference is made to Note (O) in the "Notes to the Condensed Financial
Statements" herein for discussion of programs to repurchase SOUTHERN's common
stock. As reflected in SOUTHERN's Condensed Consolidated Statements of Cash
Flows herein, for the first nine months of 1999, SOUTHERN has spent
approximately $649 million in connection with such repurchases.
During the first nine months of 1999, SOUTHERN raised approximately $24
million from the issuance of 887 thousand shares of common stock under
SOUTHERN's various stock plans. The market price of SOUTHERN's common stock at
September 30, 1999 was $25.75 per share and the book value was $14.12 per share,
representing a market-to-book ratio of 182%, compared to $29.0625, $14.04 and
207%, respectively, at the end of 1998. The dividend for the third quarter of
1999 was $0.335 per share.
19
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital
Requirements for Construction", "Other Capital Requirements" and "Environmental
Matters" of SOUTHERN in the Form 10-K for a description of the Southern electric
system's capital requirements for its construction program, sinking fund
requirements and maturing debt, and environmental compliance efforts.
Approximately $495 million will be required by September 30, 2000, for
redemptions and maturities of long-term debt. Also, the operating companies plan
to continue, to the extent possible, a program to retire higher-cost debt and
preferred stock and replace these securities with lower-cost capital.
Sources of Capital
In addition to the financing activities previously described, SOUTHERN may
require additional equity capital during the remainder of the year. The amounts
and timing of additional equity capital to be raised in 1999, as well as in
subsequent years, will be contingent on SOUTHERN's investment opportunities. The
operating companies plan to obtain the funds required for construction and other
purposes from sources similar to those used in the past. The amount, type and
timing of any financings--if needed--will depend upon maintenance of adequate
earnings, regulatory approval, prevailing market conditions and other factors.
See Item 1 - BUSINESS - "Financing Programs" in the Form 10-K for additional
information.
To meet short-term cash needs and contingencies, the SOUTHERN system had at
September 30, 1999, approximately $768 million of cash and cash equivalents and
approximately $5.8 billion of unused credit arrangements with banks. These
unused credit arrangements also provide liquidity support to variable rate
pollution control bonds and commercial paper programs. At September 30, 1999,
the system companies had outstanding approximately $1.0 billion of short-term
notes payable and $2.4 billion of commercial paper. Management believes that the
need for working capital can be adequately met by utilizing lines of credit
without maintaining large cash balances.
See Note (D) in the "Notes to the Condensed Financial Statements" herein
for discussion of financial derivative contracts entered into by SOUTHERN.
20
<PAGE>
ALABAMA POWER COMPANY
21
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------------- -------------------------------
1999 1998 1999 1998
--------------- --------------- -------------- --------------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Revenues $ 1,101,783 $ 1,044,460 $2,569,439 $2,569,085
Revenues from affiliates 14,192 13,528 83,476 69,123
--------------- --------------- -------------- ---------------
Total operating revenues 1,115,975 1,057,988 2,652,915 2,638,208
--------------- --------------- -------------- ---------------
OPERATING EXPENSES:
Operation--
Fuel 256,249 262,473 656,083 671,118
Purchased power from non-affiliates 53,476 39,191 79,051 81,876
Purchased power from affiliates 82,404 66,021 145,922 128,270
Other 139,956 138,141 392,454 378,396
Maintenance 59,922 80,053 205,735 230,389
Depreciation and amortization 86,286 84,256 261,102 256,636
Taxes other than income taxes 50,153 45,544 153,815 141,104
Federal and state income taxes 121,771 100,246 216,351 198,899
--------------- --------------- -------------- ---------------
Total operating expenses 850,217 815,925 2,110,513 2,086,688
--------------- --------------- -------------- ---------------
OPERATING INCOME 265,758 242,063 542,402 551,520
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 2,989 1,414 7,422 2,309
Equity in earnings of subsidiaries 589 967 2,066 4,372
Interest income 21,215 17,209 44,983 55,707
Other, net (10,928) (10,145) (23,660) (27,152)
Income taxes applicable to other income 1,499 5,600 2,735 3,284
--------------- --------------- -------------- ---------------
INCOME BEFORE INTEREST CHARGES AND OTHER 281,122 257,108 575,948 590,040
--------------- --------------- -------------- ---------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 48,260 48,524 139,286 140,955
Allowance for debt funds used during construction (3,591) (1,298) (8,924) (2,850)
Interest on interim obligations 3,348 3,177 8,908 10,524
Amortization of debt discount, premium and expense, net 2,816 10,143 8,306 40,024
Other interest charges 18,487 13,736 40,698 39,971
Distributions on preferred securities of subsidiary companies 6,253 5,588 18,286 16,765
--------------- --------------- -------------- ---------------
Interest charges and other, net 75,573 79,870 206,560 245,389
--------------- --------------- -------------- ---------------
NET INCOME 205,549 177,238 369,388 344,651
DIVIDENDS ON PREFERRED STOCK 4,728 3,280 12,455 9,902
--------------- --------------- -------------- ---------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $200,821 $173,958 $ 356,933 $ 334,749
=============== =============== ============== ===============
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
-------------------------------
1999 1998
------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 369,388 $ 344,651
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 306,408 332,663
Deferred income taxes and investment tax credits, net 57,901 21,431
Allowance for equity funds used during construction (7,422) (2,309)
Other, net 32,075 (2,592)
Changes in certain current assets and liabilities--
Receivables, net (51,759) (38,485)
Inventories (11,334) 1,972
Prepayments (11,731) (5,973)
Payables (69,441) (59,857)
Taxes accrued 59,374 70,046
Energy cost recovery, retail (83,174) (75,508)
Other (13,876) (39,553)
------------- -------------
Net cash provided from operating activities 576,409 546,486
------------- -------------
INVESTING ACTIVITIES:
Gross property additions (563,946) (420,660)
Other (44,503) (19,822)
------------- -------------
Net cash used for investing activities (608,449) (440,482)
------------- -------------
FINANCING ACTIVITIES:
Proceeds--
Capital contributions - 30,000
Company obligated mandatorily redeemable preferred securities 50,000 -
Preferred stock - 200,000
Pollution control bonds 101,650 106,790
Other long-term debt 650,000 815,000
Retirements--
Preferred stock (50,000) -
Pollution control bonds (102,650) (106,790)
First mortgage bonds (470,000) (396,500)
Other long-term debt (1,807) (753)
Interim obligations, net 88,421 (214,873)
Payment of preferred stock dividends (11,921) (10,053)
Payment of common stock dividends (296,100) (271,700)
Miscellaneous (15,425) (49,919)
------------- -------------
Net cash provided from (used for) financing activities (57,832) 101,202
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (89,872) 207,206
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 134,248 23,957
============= =============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,376 $ 231,163
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $167,163 $188,933
Income taxes 94,202 155,010
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30,
1999 At December 31,
(Unaudited) 1998
--------------- ----------------
UTILITY PLANT:
<S> <C> <C>
Plant in service, at original cost $11,595,364 $11,352,838
Less accumulated provision for depreciation 4,859,121 4,666,513
--------------- ----------------
6,736,243 6,686,325
Nuclear fuel, at amortized cost 95,483 95,575
Construction work in progress 714,510 525,359
--------------- ----------------
Total 7,546,236 7,307,259
--------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Equity investments in subsidiaries 34,208 34,298
Nuclear decommissioning trusts, at market 264,109 232,183
Miscellaneous 12,119 12,915
--------------- ----------------
Total 310,436 279,396
--------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 44,376 134,248
Receivables --
Customer accounts receivable 512,395 343,630
Other accounts and notes receivable 43,600 32,394
Affiliated companies 50,664 39,981
Accumulated provision for uncollectible accounts (5,459) (1,855)
Refundable income taxes - 52,117
Fossil fuel stock, at average cost 79,257 83,238
Materials and supplies, at average cost 164,984 149,669
Prepayments 28,891 17,160
Vacation pay deferred 28,390 28,390
--------------- ----------------
Total 947,098 878,972
--------------- ----------------
DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges related to income taxes 350,071 362,953
Debt expense, being amortized 9,303 8,602
Premium on reacquired debt, being amortized 85,919 83,440
Prepaid pension costs 202,827 169,393
Department of Energy assessments 31,088 31,088
Miscellaneous 102,516 104,595
--------------- ----------------
Total 781,724 760,071
--------------- ----------------
TOTAL ASSETS $9,585,494 $9,225,698
=============== ================
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
--------------- ----------------
CAPITALIZATION:
<S> <C> <C>
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 1,334,645 1,334,645
Premium on preferred stock 99 99
Retained earnings 1,285,865 1,224,965
--------------- ----------------
2,844,967 2,784,067
Preferred stock 317,512 317,512
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts holding Company Junior Subordinated Notes 347,000 297,000
Long-term debt 3,190,069 2,646,566
--------------- ----------------
Total 6,699,548 6,045,145
--------------- ----------------
CURRENT LIABILITIES:
Preferred stock due within one year - 50,000
Long-term debt due within one year 100,976 471,209
Commercial paper 88,421 -
Accounts payable --
Affiliated companies 99,011 79,844
Other 97,056 188,074
Customer deposits 30,844 29,235
Taxes accrued--
Federal and state income 101,996 82,219
Other 67,536 17,559
Interest and distributions accrued 30,561 38,166
Vacation pay accrued 28,390 28,390
Miscellaneous 71,680 79,095
--------------- ----------------
Total 716,471 1,063,791
--------------- ----------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,253,364 1,202,971
Accumulated deferred investment tax credits 263,177 271,611
Prepaid capacity revenues, net 84,259 96,080
Department of Energy assessments 27,202 27,202
Deferred credits related to income taxes 299,979 315,735
Natural disaster reserve 18,177 19,385
Miscellaneous 223,317 183,778
--------------- ----------------
Total 2,169,475 2,116,762
--------------- ----------------
TOTAL CAPITALIZATION AND LIABILITIES $9,585,494 $9,225,698
=============== ================
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
25
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
Earnings
ALABAMA's net income after dividends on preferred stock for the third quarter
and year-to-date 1999 was $200.8 million and $356.9 million, respectively,
compared to $174.0 million and $334.7 million for the same periods of 1998.
Earnings for the third quarter increased $26.9 million or 15.4% due principally
to an increase in territorial sales combined with a decrease in non-fuel
operation and maintenance expenses. Year-to-date 1999 earnings increased $22.2
million or 6.6% due to an increase in territorial sales combined with decreased
non-fuel operation and maintenance expenses and decreased amortization of debt
discount, premium and expense, net.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
---------------------------------------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C>
Revenues......................................... $57,323 5.5 $ 354 -
Revenues from affiliates......................... 664 4.9 14,353 20.8
Purchased power from non-affiliates.............. 14,285 36.4 (2,825) (3.5)
Purchased power from affiliates.................. 16,383 24.8 17,652 13.8
Maintenance expense.............................. (20,131) (25.1) (24,654) (10.7)
Taxes other than income taxes.................... 4,609 10.1 12,711 9.0
Interest income.................................. 4,006 23.3 (10,724) (19.3)
Amortization of debt discount, premium and
expense, net (7,327) (72.2) (31,718) (79.2)
Other interest charges........................... 4,751 34.6 727 1.8
</TABLE>
Revenues. Including fuel revenues, revenues were up for the third quarter
1999 but were relatively unchanged year-to-date 1999 when compared to the same
periods in 1998. The primary reason for the third quarter increase in revenues
was an increase in territorial energy sales. Territorial energy sales also
increased year-to-date; however, the increase was substantially offset by a
decrease in revenues from unit power sales attributable to lower energy revenues
and a lowering of the equity return under formula rate contracts. See Note (F)
in the " Notes to the Condensed Financial Statements" herein for further
details. Territorial revenues, excluding those revenues which represent the
recovery of fuel expense and certain other expenses and do not affect income,
increased $33.8 million for the current quarter and $25.5 million year-to-date.
Revenues from affiliates and Purchased power from affiliates. 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 did not have a significant impact on earnings.
26
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Purchased power from non-affiliates. The third quarter increase in this
expense is mainly due to the increased demand for energy. These expenses were
lower year-to-date 1999 when compared to the same period in 1998 due primarily
to increased purchases in 1998 related to power marketing activities, a majority
of which were resold to non-affiliated third parties. These transactions had no
significant effect on net income.
Maintenance expense. These expenses were lower for the third quarter and
year-to-date 1999 primarily due to decreased expenses during the third quarter
of 1999 for maintenance of distribution lines and nuclear plant.
Taxes other than income taxes. The increases in this item for the quarter
and year-to-date are due primarily to increases in real and personal property
taxes.
Interest income. For the third quarter 1999, this item increased primarily
as a result of recognized gains on investments held by the nuclear
decommissioning trust. The increases in interest income related to the nuclear
decommissioning trust were offset by a concurrent recognition of other interest
charges in accordance with FERC requirements. The decrease for year-to-date 1999
mainly results from the recording by ALABAMA during the second quarter of 1998
of its portion of the tax settlement between SOUTHERN and the Internal Revenue
Service. For additional information, see Note 3 to the financial statements of
ALABAMA under the caption "Tax Litigation" in Item 8 of the Form 10-K.
Amortization of debt discount, premium and expense, net. Third quarter and
year-to-date decreases are directly related to accelerated amortization in 1998
of premiums incurred to refinance high-cost debt. For additional information,
see Note 3 to the financial statements of ALABAMA under the caption "Retail Rate
Adjustment Procedures" in Item 8 of the Form 10-K.
Other interest charges. The increase in other interest charges for the
third quarter is related to the nuclear decommissioning trust. These charges
were offset by a concurrent recognition of interest income in accordance with
FERC requirements.
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 weather to energy sales growth to a less regulated, more
competitive environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, ALABAMA is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of ALABAMA in the Form 10-K.
27
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
ALABAMA's plans to achieve Year 2000 readiness have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
ALABAMA's Year 2000 program, including ALABAMA's share of costs of Southern
Nuclear Operating Company, are expected to be $37.0 million. From its inception
through September 30, 1999, the Year 2000 program costs, recognized primarily as
expense, amounted to $28.3 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - "Future Earnings Potential" herein.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). ALABAMA has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in reported earnings.
Reference is made to Notes (B), (C), and (F) through (J) in the "Notes to
the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in ALABAMA's financial condition during the first nine months of
1999 included the addition of approximately $563.9 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operating activities. See ALABAMA's Condensed Statements of Cash Flows for
further details.
Financing Activities
During the first nine months of 1999, redemptions of first mortgage bonds and
preferred stock by ALABAMA totaled $470 million and $50 million, respectively.
In February 1999, Alabama Power Capital Trust III (the "Trust"), a statutory
business trust established for the purpose of holding ALABAMA's junior
subordinated notes and issuing trust preferred securities and common securities,
sold $50 million of its capital auction preferred securities which are
guaranteed by ALABAMA. The Trust invested the proceeds in Series C junior
subordinated notes. The net proceeds received by ALABAMA were used to repay a
portion of ALABAMA's outstanding short-term indebtedness. See Note (G) in the "
Notes to the Condensed Financial Statements" herein for additional information.
In May 1999, ALABAMA issued $200 million of 6.75% senior notes due June 30,
2039. The proceeds were used to repay a portion of its outstanding short-term
indebtedness and
28
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
for other general corporate purposes. In June 1999, ALABAMA sold, through public
authorities, $101.6 million aggregate principal amount of variable rate
pollution control revenue refunding bonds due June 1, 2022. The proceeds from
the sale were applied to the full redemption of the Series 1994 6 1/2% pollution
control revenue refunding bonds in September 1999. In August and September 1999,
ALABAMA issued $250 million of 7.125% senior notes due August 15, 2004 and $200
million of 7 1/8% senior notes due October 1, 2007, respectively. The proceeds
of both issuances were used to repay a portion of its outstanding short-term
indebtedness and for other general corporate purposes.
ALABAMA will continue to retire higher-cost debt and preferred stock and
replace these securities with lower-cost capital as market conditions permit.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of ALABAMA
under "Capital Requirements," "Other Capital Requirements" and "Environmental
Matters" in the Form 10-K for a description of ALABAMA's capital requirements
for its construction program, maturing debt and environmental compliance
efforts.
Sources of Capital
In addition to the financing activities previously described herein, ALABAMA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- - BUSINESS "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, ALABAMA had at September
30, 1999, approximately $44.4 million of cash and cash equivalents and had
unused committed lines of credit of approximately $906.7 million (including
$417.6 million of such lines under which borrowings may be made only to fund
purchase obligations relating to variable rate pollution control bonds).
Additionally, in July 1999, ALABAMA entered into a $96 million extendible
commercial note agreement. ALABAMA has regulatory authority for up to $750
million of short-term borrowings. At September 30, 1999, ALABAMA had outstanding
$88.4 million of commercial paper.
29
<PAGE>
Exhibit 1
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ALABAMA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of September 30, 1999, and the related condensed statements of income
for the three-month and nine-month periods ended September 30, 1999 and 1998 and
cash flows for the nine-month periods ended September 30, 1999 and 1998. 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, 1998
(not presented herein) and, in our report dated February 10, 1999, 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, 1998 is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.
/s/ ARTHUR ANDERSEN LLP
Birmingham, Alabama
November 9, 1999
30
<PAGE>
GEORGIA POWER COMPANY
31
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
--------------- -------------- -------------- --------------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Revenues $1,423,790 $1,482,495 $3,423,880 $3,667,980
Revenues from affiliates 42,217 47,832 64,605 72,804
--------------- -------------- -------------- --------------
Total operating revenues 1,466,007 1,530,327 3,488,485 3,740,784
--------------- -------------- -------------- --------------
OPERATING EXPENSES:
Operation--
Fuel 299,684 298,338 715,470 722,999
Purchased power from non-affiliates 90,284 90,912 170,194 195,140
Purchased power from affiliates 39,051 35,119 137,822 115,481
Other 200,575 212,741 553,178 576,433
Maintenance 81,445 79,006 263,918 251,044
Depreciation and amortization 140,538 241,528 412,262 655,962
Taxes other than income taxes 56,974 58,645 155,127 166,079
Federal and state income taxes 192,348 189,490 346,493 368,133
--------------- -------------- -------------- --------------
Total operating expenses 1,100,899 1,205,779 2,754,464 3,051,271
--------------- -------------- -------------- --------------
OPERATING INCOME 365,108 324,548 734,021 689,513
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 317 1,172 317 1,350
Equity in earnings of unconsolidated subsidiary 651 913 2,115 2,753
Interest income 1,151 3,033 3,516 67,944
Other, net (8,051) (11,339) (18,077) (39,838)
Income taxes applicable to other income 2,644 3,586 5,600 (9,626)
--------------- -------------- -------------- --------------
INCOME BEFORE INTEREST CHARGES 361,820 321,913 727,492 712,096
--------------- -------------- -------------- --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 40,050 44,489 124,033 134,797
Allowance for debt funds used during construction (2,881) (2,061) (8,191) (6,063)
Interest on interim obligations 4,399 2,561 14,233 11,074
Amortization of debt discount, premium and expense, net 3,835 3,323 11,435 9,974
Other interest charges 2,838 3,089 8,875 18,223
Distributions on preferred securities of subsidiary companies 17,026 13,601 49,023 40,726
--------------- -------------- -------------- --------------
Interest charges and other, net 65,267 65,002 199,408 208,731
--------------- -------------- -------------- --------------
NET INCOME 296,553 256,911 528,084 503,365
DIVIDENDS ON PREFERRED STOCK 177 1,447 1,556 5,311
--------------- -------------- -------------- --------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 296,376 $ 255,464 $ 526,528 $ 498,054
=============== ============== ============== ==============
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
---------------------------------
1999 1998
-------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $528,084 $503,365
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 405,738 708,055
Deferred income taxes and investment tax credits, net (45,534) (73,091)
Other, net 167,383 27,132
Changes in certain current assets and liabilities--
Receivables, net (102,460) (348,649)
Inventories (31,517) 24,199
Payables (34,894) 12,431
Taxes accrued 194,975 186,591
Energy cost recovery, retail (6,116) (7,827)
Other 97,111 16,923
-------------- --------------
Net cash provided from operating activities 1,172,770 1,049,129
-------------- --------------
INVESTING ACTIVITIES:
Gross property additions (516,767) (334,113)
Other (30,043) 16,396
-------------- --------------
Net cash used for investing activities (546,810) (317,717)
-------------- --------------
FINANCING ACTIVITIES:
Proceeds--
Preferred securities 200,000 -
Pollution control bonds 238,000 89,990
Senior notes 100,000 145,000
Retirements--
Preferred stock (35,980) (40,679)
First mortgage bonds (404,000) (220,460)
Pollution control bonds (235,000) (89,990)
Capital leases (322) -
Interim obligations, net (23,413) (265,407)
Payment of preferred stock dividends (707) (7,342)
Payment of common stock dividends (402,300) (397,100)
Miscellaneous (29,178) (6,876)
-------------- --------------
Net cash used for financing activities (592,900) (792,864)
-------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 33,060 (61,452)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,272 83,333
============== ==============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,332 $ 21,881
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $191,792 $210,226
Income taxes (net of refunds) 210,944 308,271
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30,
1999 At December 31,
(Unaudited) 1998
--------------- ----------------
UTILITY PLANT:
<S> <C> <C>
Plant in service $15,672,526 $15,441,146
Less accumulated provision for depreciation 6,407,881 6,109,331
--------------- ----------------
9,264,645 9,331,815
Nuclear fuel, at amortized cost 118,969 121,169
Construction work in progress 347,699 189,849
--------------- ----------------
Total 9,731,313 9,642,833
--------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity 24,319 24,360
Nuclear decommissioning trusts, at market 321,655 284,536
Miscellaneous 32,185 34,781
--------------- ----------------
Total 378,159 343,677
--------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 49,332 16,272
Receivables --
Customer accounts receivable 540,946 439,420
Other accounts and notes receivable 78,794 99,574
Affiliated companies 30,264 16,817
Accumulated provision for uncollectible accounts (6,000) (5,500)
Fossil fuel stock, at average cost 124,437 104,133
Materials and supplies, at average cost 254,690 243,477
Prepayments 43,649 29,670
Vacation pay deferred 42,807 43,610
--------------- ----------------
Total 1,158,919 987,473
--------------- ----------------
DEFERRED CHARGES:
Deferred charges related to income taxes 593,332 604,488
Premium on reacquired debt, being amortized 184,336 173,858
Prepaid pension costs 135,359 103,606
Debt expense, being amortized 59,311 51,261
Miscellaneous 131,877 126,422
--------------- ----------------
Total 1,104,215 1,059,635
--------------- ----------------
TOTAL ASSETS $12,372,606 $12,033,618
=============== ================
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
--------------- ----------------
CAPITALIZATION:
<S> <C> <C>
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 1,790,254 1,660,206
Premium on preferred stock 40 158
Retained earnings 1,903,783 1,779,558
--------------- ----------------
4,038,327 3,784,172
Preferred stock 15,203 15,527
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes 889,250 689,250
Long-term debt 2,743,542 2,744,362
--------------- ----------------
Total 7,686,322 7,233,311
--------------- ----------------
CURRENT LIABILITIES:
Preferred stock due within one year - 35,656
Long-term debt due within one year 100,611 399,429
Notes payable to banks 119,516 117,634
Commercial paper 197,923 223,218
Accounts payable --
Affiliated companies 54,036 75,774
Other 284,682 326,317
Customer deposits 73,379 69,584
Taxes accrued--
Federal and state income 191,284 15,801
Other 141,851 122,359
Interest accrued 56,368 60,187
Miscellaneous 194,419 100,793
--------------- ----------------
Total 1,414,069 1,546,752
--------------- ----------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 2,219,600 2,249,613
Accumulated deferred investment tax credits 370,814 381,914
Deferred credits related to income taxes 269,048 284,017
Employee benefits provisions 187,892 177,148
Miscellaneous 224,861 160,863
--------------- ----------------
Total 3,272,215 3,253,555
--------------- ----------------
TOTAL CAPITALIZATION AND LIABILITIES $12,372,606 $12,033,618
=============== ================
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
35
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
Earnings
GEORGIA's net income after dividends on preferred stock for the third quarter
and year-to-date 1999 was $296.4 million and $526.5 million, respectively,
compared to $255.5 million and $498.1 million for the same periods in 1998.
Third quarter 1999 earnings increased by $40.9 million or 16.0% and year-to-date
1999 earnings increased by $28.5 million or 5.7% due primarily to decreased
operating expenses and the effects of the 1998 Georgia PSC rate order. See Note
(K) in the "Notes to the Condensed Financial Statements" herein for further
details regarding the retail rate order.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
---------------------------------------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues......................................... $(58,705) (4.0) $(244,100) (6.7)
Revenues from affiliates......................... (5,615) (11.7) (8,199) (11.3)
Purchased power from non-affiliates.............. (628) (0.7) (24,946) (12.8)
Purchased power from affiliates.................. 3,932 11.2 22,341 19.3
Other operation expense.......................... (12,166) (5.7) (23,255) (4.0)
Depreciation and amortization.................... (100,990) (41.8) (243,700) (37.2)
Interest income.................................. (1,882) (62.1) (64,428) (94.8)
Other, net....................................... 3,288 29.0 21,761 54.6
Interest on long-term debt....................... (4,439) (10.0) (10,764) (8.0)
Other interest charges........................... (251) (8.1) (9,348) (51.3)
Distributions on preferred securities of
subsidiary companies........................... 3,425 25.2 8,297 20.4
</TABLE>
Revenues. Retail revenues, excluding fuel revenues which generally do not
affect income, decreased $75.0 million and $251.8 million, respectively, for the
third quarter and year-to-date 1999 when compared to the corresponding periods
in 1998 primarily due to retail rate reductions under the 1998 Georgia PSC
order. Total retail energy sales were up 3.9% for the third quarter and 1.5%
year-to-date 1999, but the associated revenues were down 4.7% and 6.9%,
respectively.
36
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Wholesale revenues decreased $2.2 million and $28.2 million, respectively,
during the third quarter and year-to-date 1999. The third quarter and
year-to-date decreases are primarily the result of reductions in capacity
revenues under a power supply agreement with OPC of $2.0 million and $13.5
million, respectively, for the third quarter and year-to-date 1999, and a
decrease in energy sales. The decreases in wholesale energy sales were primarily
offset by the decreases in purchased power from non-affiliates and, as a result,
had no significant effect on net income.
Revenues from affiliates and Purchased power from affiliates. 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 did not have a significant impact on earnings.
Purchased power from non-affiliates. The year-to-date 1999 decrease
resulted from higher demand in 1998 for energy and higher energy purchases in
1998 related to power marketing activities, a majority of which were resold to
non-affiliated third parties. As stated above, these transactions had no
significant effect on net income.
Other operation expense. The decreases for the current quarter and
year-to-date 1999 are primarily due to a reduction in the charges related to a
customer service system, decreased year 2000 readiness costs, and decreased
employee benefit provisions.
Depreciation and amortization expense. These decreases in the third quarter
and year-to-date 1999 when compared to the same periods in 1998 are attributed
to higher depreciation charges recognized in 1998 under the prior accounting
order and the completion in 1998 of the amortization of deferred Plant Vogtle
costs.
Interest income. The year-to-date 1999 decrease is related to the
recognition, in the same period of 1998, of increased interest income resulting
from the resolution of tax issues between SOUTHERN and the Internal Revenue
Service.
Other, net. The third quarter and year-to-date 1999 changes are attributed
to reduced donations and contributions in these periods when compared to the
corresponding periods in 1998.
Interest on long-term debt. The third quarter and year-to-date 1999
decreases are due to redemptions of first mortgage bonds and the refinancing of
higher cost long-term debt.
Other interest charges. The year-to-date 1999 decrease when compared to the
same period in 1998 is attributed to the recognition in 1998 of interest related
to tax issues.
Distributions on preferred securities of subsidiary companies. The
increases for the third quarter and year-to-date 1999 result from the issuance
of additional mandatorily redeemable preferred securities in February 1999.
37
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 including weather, regulatory matters and energy sales.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, GEORGIA is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in the Form
10-K.
Effective January 1, 1999, GEORGIA began operating under a new three-year
retail rate order. Under the order, GEORGIA's earnings are evaluated against a
retail return on common equity range of 10% to 12.5%. In compliance with the
order, retail rates were decreased by $262 million on an annual basis effective
January 1, 1999. Reference is made to Note (K) in the "Notes to the Condensed
Financial Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GEORGIA in the Form 10-K for additional
information.
Compliance costs related to the Clean Air Act and other environmental
issues could affect earnings. The State of Georgia submitted a plan for nitrogen
oxide emission reductions in Atlanta's ozone non-attainment area on October 29,
1999. Based on the plan submitted by the State to the EPA, GEORGIA estimates its
capital costs to comply with the plan to be approximately $664 million. At the
direction of the EPA, the State of Georgia is required to pursue additional
control on all sources of nitrogen oxide emissions and volatile organic
compounds. The plan for those additional controls must be submitted to the EPA
by the fall of 2000. It is uncertain at this time what additional controls may
be required at GEORGIA's plants beyond the recently submitted plan. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Issues" of GEORGIA in the Form 10-K.
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
GEORGIA's plans to achieve Year 2000 readiness have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
GEORGIA's Year 2000 program, including GEORGIA's share of costs of Southern
Nuclear Operating Company, are expected to be approximately $42.8 million. From
its inception through September 30, 1999, the Year 2000 program costs,
recognized as expense, amounted to $40 million. For additional information, see
SOUTHERN's MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - "Future Earnings Potential" herein.
38
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). GEORGIA has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.
Reference is made to Notes (B), (C), (F), (G), (K) and (L) in the "Notes to
the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
The major change in GEORGIA's financial condition during the first nine months
of 1999 was the addition of approximately $516.8 million to gross plant. The
funds for these additions and other capital requirements were derived primarily
from operations. See GEORGIA's Condensed Statements of Cash Flows for further
details.
Financing Activities
During the first nine months of 1999, redemptions of first mortgage bonds and
preferred stock by GEORGIA totaled $404 million and $36 million, respectively.
In February 1999, Georgia Power Capital Trust IV, a statutory business trust
established for the purpose of holding GEORGIA's junior subordinated notes and
issuing trust preferred securities and common securities, sold $200 million of
its 6.85% trust preferred securities, which are guaranteed by GEORGIA. (See Note
(G) in the " Notes to the Condensed Financial Statements" herein and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Financing Activities" of GEORGIA in the
Form 10-K for further details.) In March 1999, GEORGIA issued $100 million of 6
5/8% senior notes due March 31, 2039. The proceeds from this issuance were used
to repay a portion of GEORGIA's outstanding short-term indebtedness. In May
1999, GEORGIA sold, through public authorities, $53 million of 5.45% pollution
control revenue bonds due May 1, 2034; $85 million of 5.40% pollution control
revenue bonds due May 1, 2034; and $100 million of 5.25% pollution control
revenue bonds due May 1, 2034. The proceeds of these sales were used to redeem
$50 million aggregate principal amount of 6.35% pollution control revenue bonds
in June 1999; $125 million aggregate principal amount of 6.60% pollution control
revenue bonds in July 1999; and $60 million aggregate principal amount of 6 3/8%
pollution control revenue bonds in August 1999.
GEORGIA plans to continue, to the extent possible, a program to retire
higher-cost debt and preferred stock and replace these securities with
lower-cost capital.
39
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA
under "Liquidity and Capital Requirements" and "Environmental Issues" in the
Form 10-K for a description of GEORGIA's capital requirements for its
construction program and environmental compliance efforts.
Sources of Capital
In addition to the financing activities previously described herein, GEORGIA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- - BUSINESS "Financing Programs" in the
Form 10-K for additional information.
To meet short-term cash needs and contingencies, GEORGIA had at September
30, 1999, approximately $49.3 million of cash and cash equivalents and
approximately $1.3 billion of unused credit arrangements with banks. The credit
arrangements provide liquidity support to GEORGIA's variable rate pollution
control bonds and its commercial paper program. At September 30, 1999, GEORGIA
had $119.5 million and $197.9 million outstanding in short-term notes payable to
banks and commercial paper, respectively. Management believes that the need for
working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.
40
<PAGE>
Exhibit 1
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO GEORGIA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of September 30, 1999, and the related
condensed statements of income for the three-month and nine-month periods ended
September 30, 1999 and 1998 and cash flows for the nine-month periods ended
September 30, 1999 and 1998. 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 GEORGIA POWER COMPANY as of December 31, 1998
(not presented herein), and, in our report dated February 10, 1999, 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, 1998, is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 9, 1999
41
<PAGE>
GULF POWER COMPANY
42
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Revenues $192,779 $186,983 $473,419 $481,597
Revenues from affiliates 25,485 12,394 46,166 35,860
------------- ------------ ------------- ------------
Total operating revenues 218,264 199,377 519,585 517,457
------------- ------------ ------------- ------------
OPERATING EXPENSES:
Operation--
Fuel 64,223 61,694 156,184 158,580
Purchased power from non-affiliates 26,009 12,823 39,303 25,812
Purchased power from affiliates 3,309 5,925 9,984 12,358
Other 29,055 27,942 83,977 93,392
Maintenance 10,203 11,858 42,699 39,345
Depreciation and amortization 16,198 14,819 48,310 45,931
Taxes other than income taxes 14,838 14,479 39,781 39,583
Federal and state income taxes 17,376 15,767 27,712 29,407
------------- ------------ ------------- ------------
Total operating expenses 181,211 165,307 447,950 444,408
------------- ------------ ------------- ------------
OPERATING INCOME 37,053 34,070 71,635 73,049
OTHER INCOME (EXPENSE):
Interest income 427 213 928 530
Other, net 3 (307) (900) (1,713)
Income taxes applicable to other income (328) 921 (337) 1,221
------------- ------------ ------------- ------------
INCOME BEFORE INTEREST CHARGES 37,155 34,897 71,326 73,087
------------- ------------ ------------- ------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 5,598 5,098 15,580 14,700
Other interest charges 223 327 834 3,427
Interest on notes payable 649 274 2,005 1,093
Amortization of debt discount, premium and expense, net 499 498 1,488 1,598
Distributions on preferred securities of subsidiary companies 1,550 1,550 4,650 4,484
------------- ------------ ------------- ------------
Interest charges and other, net 8,519 7,747 24,557 25,302
------------- ------------ ------------- ------------
NET INCOME 28,636 27,150 46,769 47,785
DIVIDENDS ON PREFERRED STOCK 54 161 162 579
------------- ------------ ------------- ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $28,582 $26,989 $46,607 $47,206
============= ============ ============= ============
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
----------------------------
1999 1998
------------ -----------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 46,769 $ 47,785
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 51,368 51,498
Deferred income taxes (3,133) (5,437)
Other, net 4,803 13,005
Changes in certain current assets and liabilities--
Receivables, net (14,063) 1,493
Inventories (8,519) (4,870)
Payables (8,403) (8,366)
Taxes accrued 33,359 18,465
Current costs of 1995 coal contract renegotiation - 812
Other (9,352) (7,842)
------------ -----------
Net cash provided from operating activities 92,829 106,543
------------ -----------
INVESTING ACTIVITIES:
Gross property additions (48,442) (39,940)
Other (12,753) (3,215)
------------ -----------
Net cash used for investing activities (61,195) (43,155)
------------ -----------
FINANCING ACTIVITIES:
Proceeds--
Preferred securities - 45,000
Other long-term debt 49,950 50,000
Retirements--
Preferred stock - (8,666)
First mortgage bonds - (45,000)
Other long-term debt - (8,327)
Notes payable, net (31,500) (36,500)
Payment of preferred stock dividends (162) (726)
Payment of common stock dividends (45,400) (52,300)
Miscellaneous (233) (4,158)
------------ -----------
Net cash used for financing activities (27,345) (60,677)
------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,289 2,711
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 969 4,707
============ ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,258 $ 7,418
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $20,197 $19,261
Income taxes 12,754 22,065
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30,
1999 At December 31,
(Unaudited) 1998
-----------------------------------
UTILITY PLANT:
<S> <C> <C>
Plant in service $1,845,433 $1,809,901
Less accumulated provision for depreciation 813,720 784,111
-------------- --------------
1,031,713 1,025,790
Construction work in progress 29,029 34,863
-------------- --------------
Total 1,060,742 1,060,653
-------------- --------------
OTHER PROPERTY AND INVESTMENTS: 1,481 588
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 5,258 969
Receivables --
Customer accounts receivable 63,860 49,067
Other accounts and notes receivable 2,442 3,514
Affiliated companies 3,813 3,442
Accumulated provision for uncollectible accounts (1,025) (996)
Fossil fuel stock, at average cost 30,798 24,213
Materials and supplies, at average cost 29,959 28,025
Regulatory clauses under recovery 17,458 9,737
Prepayments 1,311 5,690
Vacation pay deferred 4,035 4,035
-------------- --------------
Total 157,909 127,696
-------------- --------------
DEFERRED CHARGES:
Deferred charges related to income taxes 25,275 25,308
Debt expense, being amortized 20,290 21,448
Prepaid pension costs 16,743 13,770
Miscellaneous 20,388 18,438
-------------- --------------
Total 82,696 78,964
-------------- --------------
TOTAL ASSETS $1,302,828 $1,267,901
============== ==============
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
---------------------------------------
CAPITALIZATION:
<S> <C> <C>
Common stock equity --
Common stock (without par value) --
authorized and outstanding -- 992,717 shares $ 38,060 $ 38,060
Paid-in capital 218,961 218,960
Premium on preferred stock 12 12
Retained earnings 171,827 170,620
-------------- --------------
428,860 427,652
Preferred stock 4,236 4,236
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts holding Company Junior Subordinated Notes 85,000 85,000
Long-term debt 367,386 317,341
-------------- --------------
Total 885,482 834,229
-------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 27,000 27,000
Notes payable - 31,500
Accounts payable --
Affiliated companies 7,018 19,756
Other 19,089 23,697
Customer deposits 12,727 12,560
Taxes accrued 36,571 7,432
Interest accrued 7,110 5,184
Regulatory clauses over recovery 3,632 6,037
Vacation pay accrued 4,035 4,035
Dividends declared 54 54
Miscellaneous 2,810 3,960
-------------- --------------
Total 120,046 141,215
-------------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 164,703 166,118
Deferred credits related to income taxes 50,386 52,465
Accumulated provision for property damage 5,881 1,605
Accumulated deferred investment tax credits 28,192 29,632
Accumulated provision for postretirement benefits 26,067 23,534
Miscellaneous 22,071 19,103
-------------- --------------
Total 297,300 292,457
-------------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $1,302,828 $1,267,901
============== ==============
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
46
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
Earnings
GULF's net income after dividends on preferred stock for the third quarter and
year-to-date 1999 was $28.6 million and $46.6 million, respectively, compared to
$27.0 million and $47.2 million for the same periods in 1998. The third quarter
improvement in earnings of $1.6 million or 5.9% was primarily due to the
increase in operating revenues.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
---------------------------------------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues......................................... $5,796 3.1 $(8,178) (1.7)
Revenues from affiliates......................... 13,091 105.6 10,306 28.7
Purchased power from non-affiliates.............. 13,186 102.8 13,491 52.3
Purchased power from affiliates.................. (2,616) (44.2) (2,374) (19.2)
Other operation expense.......................... 1,113 4.0 (9,415) (10.1)
Maintenance expense.............................. (1,655) (14.0) 3,354 8.5
Depreciation and amortization.................... 1,379 9.3 2,379 5.2
</TABLE>
Revenues. Revenues were higher for the third quarter due to a 6.9% increase
in total energy sales. The increase in total energy sales is primarily
attributed to growth in the number of customers served by GULF, as well as
warmer weather during the third quarter of 1999. The year-to-date 1999 decrease
reflects the recovery of lower fuel costs. Excluding recovery of fuel expense
and certain other expenses that do not affect income, retail revenues increased
$3.6 million for the quarter due to a 4.0% increase in retail energy sales,
which can primarily be attributed to an increase in the demand for energy
resulting from an increase in the number of residential customers and warmer
weather during the third quarter of 1999. Retail revenues decreased $1.9 million
year-to-date due, for the most part, to a decrease in revenues from industrial
customers during the first nine months of 1999 when compared to the same period
in 1998. Revenues from non-territorial wholesale energy sales decreased $1.2
million and $5.1 million for the third quarter and year-to-date 1999,
respectively, when compared to the same periods of 1998. The decreases in
non-territorial wholesale energy sales are attributed to decreased power
marketing activities.
Revenues from affiliates and purchased power from affiliates. Revenues from
sales to affiliated companies within the Southern electric system, as well as
purchases, 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.
Purchased power from non-affiliates. Increases for this item in the third
quarter and year-to-date 1999 result from an increased demand for energy due to
warmer weather during the third quarter and an increase in the number of
customers when compared to the corresponding periods in 1998.
47
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Other operation expense. This item increased in the third quarter when
compared to the same period in 1998 due to an increase in other production
expenses. The year-to-date decrease is attributed primarily to lower
administrative and general expenses during the first half of 1999, as well as
prior year prepayments related to renegotiations of coal supply contracts being
fully amortized in 1998.
Maintenance expense. The decrease for the current quarter is mainly due to
routine line maintenance performed during the third quarter of 1998. The
year-to-date 1999 increase reflects scheduled maintenance on steam plant
facilities.
Depreciation and amortization expense. The third quarter and year-to-date
increases are primarily attributed to additions to plant during 1999 and
increased amortization expense related to the amortization of gains from the
sale of emission allowances when compared to the corresponding periods of 1998.
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 weather to energy sales growth to a less regulated, more
competitive environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, GULF is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings
Potential" of GULF and Item 1 - BUSINESS - "Competition" in the Form 10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs are not fully recovered through GULF's Environmental Cost Recovery Clause.
For additional information about the Clean Air Act and other environmental
issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental
Matters" of GULF in the Form 10-K.
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
GULF's plans to achieve Year 2000 readiness have been implemented and are
included in the SOUTHERN system's Year 2000 Program. The costs related to GULF's
Year 2000 program are expected to be $5.2 million. From its inception through
September 30, 1999, the Year 2000 program costs, recognized as expense, amounted
to $4.5 million. For additional information, see SOUTHERN's MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -
"Future Earnings Potential" herein.
In reference to the ongoing matters with the Florida PSC concerning GULF's
authorized return on equity (ROE) and the outstanding balances of certain
regulatory assets, GULF, the Office of the Public Counsel, the Coalition for
Equitable Rates, and the Florida Industrial Power Users Group jointly filed a
stipulation and settlement in October 1999 to effect an informal disposition and
complete and binding resolution of all matters before the Florida PSC related to
the investigation into earnings and reduction of the authorized ROE and the
48
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
petition for a full revenue requirements rate case (for additional information,
see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Future Earnings Potential"
and Item 1 - Business - "Regulation - State Commissions" of GULF in the Form
10-K). The stipulation calls for base rates to be reduced by $10 million
annually and provides for revenues above certain levels to be shared for
1999-2002. Customers will receive two-thirds of any revenue within the ranges
and GULF will retain one-third. The sharing plan will be in place until the
earlier of the day prior to the in-service date of GULF's Plant Smith Unit 3 or
December 31, 2002. GULF filed a request to prospectively reduce its authorized
ROE range from 11% - 13% to 10.5% - 12.5% in order to help ensure that the
Florida PSC would approve the stipulation. Both the stipulation and the rate of
return request were approved by the Florida PSC at the agenda conference on
October 5, 1999. The decisions of the Florida PSC have been reflected in final
orders.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). GULF has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.
Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in GULF's financial condition during the first nine months of 1999
included the addition of approximately $48.4 million to utility plant. The funds
for these additions and other capital requirements were derived primarily from
operations. See GULF's Condensed Statements of Cash Flows for further details.
Financing Activities
In August 1999, GULF issued $50 million of 7.05% senior notes due August 15,
2004. The proceeds were used to repay a portion of its outstanding short-term
indebtedness. GULF plans to continue, to the extent possible, a program to
retire higher-cost debt and preferred stock and replace these securities with
lower-cost capital.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF under
"Capital Requirements for Construction," "Environmental Matters" and "Other
Capital Requirements" in the Form 10-K for a description of GULF's capital
requirements for its construction program, environmental compliance efforts and
maturing debt.
49
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Sources of Capital
In addition to the financing activities previously described herein, GULF plans
to obtain the funds required for construction and other purposes from sources
similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- - BUSINESS "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, GULF had at September 30,
1999, approximately $5.3 million of cash and cash equivalents and $41.5 million
of unused committed lines of credit with banks in addition to $61.9 million
liquidity support for variable rate pollution control bonds. Management believes
that the need for working capital can be adequately met by utilizing lines of
credit without maintaining large cash balances.
50
<PAGE>
MISSISSIPPI POWER COMPANY
51
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Revenues $188,440 $183,293 $465,173 $452,638
Revenues from affiliates 13,154 8,406 17,446 17,829
------------- ------------ ------------- ------------
Total operating revenues 201,594 191,699 482,619 470,467
------------- ------------ ------------- ------------
OPERATING EXPENSES:
Operation--
Fuel 54,224 53,763 132,452 126,164
Purchased power from non-affiliates 26,457 17,880 35,964 31,168
Purchased power from affiliates 8,609 8,498 25,008 24,912
Other 30,479 24,213 85,209 81,161
Maintenance 5,741 12,672 31,607 35,630
Depreciation and amortization 11,884 11,456 35,453 34,550
Taxes other than income taxes 12,591 12,269 35,906 35,509
Federal and state income taxes 16,809 16,781 30,183 31,716
------------- ------------ ------------- ------------
Total operating expenses 166,794 157,532 411,782 400,810
------------- ------------ ------------- ------------
OPERATING INCOME 34,800 34,167 70,837 69,657
OTHER INCOME (EXPENSE):
Interest income 53 337 203 600
Other, net 704 1,016 1,925 1,879
Income taxes applicable to other income (280) 358 (912) 4
------------- ------------ ------------- ------------
INCOME BEFORE INTEREST CHARGES 35,277 35,878 72,053 72,140
------------- ------------ ------------- ------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 5,072 5,510 15,116 15,431
Interest on notes payable 751 - 2,037 918
Amortization of debt discount, premium and expense, net 358 364 1,075 1,087
Other interest charges 581 493 759 696
Distributions on preferred securities of subsidiary companies 699 699 2,097 2,097
------------- ------------ ------------- ------------
Interest and other charges, net 7,461 7,066 21,084 20,229
------------- ------------ ------------- ------------
NET INCOME 27,816 28,812 50,969 51,911
DIVIDENDS ON PREFERRED STOCK 503 503 1,510 1,502
------------- ------------ ------------- ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $27,313 $28,309 $49,459 $50,409
============= ============ ============= ============
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
----------------------------
1999 1998
------------ -----------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 50,969 $ 51,911
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 38,592 37,604
Deferred income taxes 3,853 (1,480)
Other, net (6,115) (4,127)
Changes in certain current assets and liabilities--
Receivables, net (28,547) (7,959)
Inventories (5,375) (2,921)
Payables (6,018) (3,046)
Taxes accrued 16,756 16,140
Other 2,981 (997)
------------ -----------
Net cash provided from operating activities 67,096 85,125
------------ -----------
INVESTING ACTIVITIES:
Gross property additions (52,099) (45,269)
Other (2,827) (266)
------------ -----------
Net cash used for investing activities (54,926) (45,535)
------------ -----------
FINANCING ACTIVITIES:
Proceeds--
Pollution control bonds - 13,520
Other long-term debt - 90,000
Retirements--
Preferred stock - (87)
First mortgage bonds - (75,000)
Pollution control bonds - (13,000)
Senior Notes (184) -
Notes payable, net 30,200 -
Payment of preferred stock dividends (1,510) (1,502)
Payment of common stock dividends (41,600) (38,300)
Miscellaneous (242) (2,178)
------------ -----------
Net cash used for financing activities (13,336) (26,547)
------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,166) 13,043
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,327 4,432
============ ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 161 $ 17,475
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $19,310 $16,612
Income taxes 7,207 9,259
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30, At December 31,
1999 1998
(Unaudited)
---------------------------------
UTILITY PLANT:
<S> <C> <C>
Plant in service, at original cost $1,582,881 $1,553,112
Less accumulated provision for depreciation 617,748 583,957
-------------- --------------
965,133 969,155
Construction work in progress 67,474 51,517
-------------- --------------
Total 1,032,607 1,020,672
-------------- --------------
OTHER PROPERTY AND INVESTMENTS: 1,395 979
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 161 1,327
Receivables --
Customer accounts receivable 40,131 29,829
Regulatory clauses under recovery 21,499 8,042
Other accounts and notes receivable 19,451 12,495
Affiliated companies 8,976 10,946
Accumulated provision for uncollectible accounts (690) (621)
Fossil fuel stock, at average cost 20,431 16,418
Materials and supplies, at average cost 20,097 18,735
Current portion of accumulated deferred income taxes - 4,248
Prepayments 2,013 1,651
Vacation pay deferred 4,717 4,717
-------------- --------------
Total 136,786 107,787
-------------- --------------
DEFERRED CHARGES:
Debt expense and loss, being amortized 12,838 13,713
Deferred charges related to income taxes 21,516 22,697
Long-term notes receivable 1,503 2,072
Work force reduction plan 6,646 12,748
Miscellaneous 16,917 8,937
-------------- --------------
Total 59,420 60,167
-------------- --------------
TOTAL ASSETS $1,230,208 $1,189,605
============== ==============
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
---------------------------------
CAPITALIZATION:
<S> <C> <C>
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 179,474 179,474
Premium on preferred stock 326 326
Retained earnings 181,599 173,740
-------------- --------------
399,090 391,231
Preferred stock 31,809 31,809
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding Company Junior Subordinated Notes 35,000 35,000
Long-term debt 292,646 292,744
-------------- --------------
Total 758,545 750,784
-------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 50,020 50,020
Notes payable 43,200 13,000
Accounts payable --
Affiliated companies 14,666 8,788
Regulatory clauses over recovery - 4,412
Other 33,597 47,113
Customer deposits 3,649 3,272
Taxes accrued--
Federal and state income 22,896 1,124
Other 28,322 31,379
Interest accrued 5,051 2,955
Miscellaneous 12,795 11,753
-------------- --------------
Total 214,196 173,816
-------------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 140,680 143,852
Accumulated deferred investment tax credits 24,998 25,913
Deferred credits related to income taxes 35,293 37,277
Postretirement benefits other than pension 26,338 25,869
Accumulated provision for property damage 356 910
Work force reduction plan 11,663 13,051
Miscellaneous 18,139 18,133
-------------- --------------
Total 257,467 265,005
-------------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $1,230,208 $1,189,605
============== ==============
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
55
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
Earnings
MISSISSIPPI's net income after dividends on preferred stock for the third
quarter and year-to-date 1999 was $27.3 million and $49.5 million, respectively,
compared to $28.3 million and $50.4 million for the corresponding periods of
1998. The slight decrease in earnings for the current quarter and year-to-date
resulted from higher operating expenses which offset increased operating
revenues.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
---------------------------------------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues......................................... $5,147 2.8 $12,535 2.8
Revenues from affiliates......................... 4,748 56.5 (383) (2.1)
Purchased power from non-affiliates.............. 8,577 48.0 4,796 15.4
Other operation expense.......................... 6,266 25.9 4,048 5.0
Maintenance expense.............................. (6,931) (54.7) (4,023) (11.3)
</TABLE>
Revenues. Third quarter and year-to-date increases are essentially due to
higher retail energy sales. Retail energy sales were up 5.1% for the quarter and
2.4% year-to-date. Retail sales to residential customers were down 4.8% and
5.6%, for the quarter and year-to-date, respectively, due to milder temperatures
when compared to the same periods of 1998. Commercial and industrial sales were
up 2.5% and 14.2%, respectively, for the quarter and 3.6% and 6.4%,
respectively, year-to-date. Industrial energy sales were positively impacted by
increased production by several larger industrial customers, while commercial
energy sales were positively impacted by increased tourism and strong growth in
this sector. Retail revenues, excluding those revenues which represent the
recovery of fuel expense and certain other expenses and do not affect income,
increased $1.7 million for the current quarter and $2.3 million year-to-date.
Wholesale territorial revenues, excluding fuel revenues which do not affect
income, increased $3.0 million for the current quarter and $8.7 million
year-to-date.
Revenues from affiliates. Revenues from sales to 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.
Purchased power from non-affiliates. The increases in the current quarter
and year-to-date 1999 when compared to the corresponding periods in 1998
reflects the higher demand for energy.
56
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Other operation expense. These changes in this expense when compared to the
same periods in 1998 are primarily due to timing differences related to the
amortization of costs associated with the work force reduction plan during the
third quarter and higher distribution expenses year-to-date.
Maintenance expense. This item is down for the third quarter and
year-to-date 1999 due to reduced maintenance expense and the
performance in the third quarter of 1998 of scheduled transmission and
distribution line maintenance.
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 weather to energy sales growth to a less regulated, more
competitive environment. Operating revenues will be affected by any 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. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of MISSISSIPPI in the Form 10-K.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, MISSISSIPPI is positioning
the business to meet the challenge of increasing competition. For additional
information, see Item 1 BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of MISSISSIPPI in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be recovered. MISSISSIPPI's 1999 ECO Plan filing was approved, as
filed, by the Mississippi PSC on March 18, 1999 and resulted in a slight
increase in customer prices. For additional information about the Clean Air Act
and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K.
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
MISSISSIPPI's plans to achieve Year 2000 readiness have been implemented
and are included in the SOUTHERN system's Year 2000 Program. The costs related
to MISSISSIPPI's Year 2000 program are expected to be $5.6 million. From its
inception through September 30, 1999, the Year 2000 program costs, recognized as
expense, amounted to $5.1 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - "Future Earnings Potential" herein.
57
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which was to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement
No. 133, which delayed adoption until the year 2001. MISSISSIPPI has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.
Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in MISSISSIPPI's financial condition during the first nine months
of 1999 included the addition of approximately $52.1 million to utility plant.
The funds for these additions and other capital requirements were derived
primarily from operations. See MISSISSIPPI's Condensed Statements of Cash Flows
for further details.
Financing Activities
MISSISSIPPI plans to continue, to the extent possible, a program to retire
higher-cost debt and replace these securities with lower-cost capital.
Capital Requirements
In April 1999, MISSISSIPPI and Escatawpa Funding, Limited Partnership
("Escatawpa"), entered into a lease agreement whereby MISSISSIPPI will design
and construct, as agent for Escatawpa, a 1,080 megawatt natural gas combined
cycle facility. It is expected that the project will cost approximately $406
million, and upon completion of the facility, MISSISSIPPI will lease the
facility from Escatawpa for an initial term of approximately 10 years. For
additional information, reference is made to Item 7 - MANAGEMENT'S DISCUSSION
AND ANALYSIS - "Capital Requirements for Construction" of MISSISSIPPI and Notes
3 and 4 to the financial statements of MISSISSIPPI in Item 8 of the Form 10-K.
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
MISSISSIPPI under "Capital Requirements for Construction," "Environmental
Matters" and "Other Capital Requirements" in the Form 10-K for a description of
MISSISSIPPI's capital requirements for its construction program, environmental
compliance efforts, sinking fund requirements and maturities of long-term debt.
58
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Sources of Capital
In addition to the financing activities previously described herein, MISSISSIPPI
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
BUSINESS - "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, MISSISSIPPI had at
September 30, 1999, approximately $161 thousand of cash and cash equivalents and
approximately $74.5 million of unused committed credit arrangements with banks
(including $10.8 million of such arrangements under which borrowings may be made
only to fund purchase obligations relating to variable rate pollution control
bonds). At September 30, 1999, MISSISSIPPI had short-term notes payable
outstanding of $43.2 million. Management believes that the need for working
capital can be adequately met by utilizing lines of credit without maintaining
large cash balances.
59
<PAGE>
SAVANNAH ELECTRIC
AND
POWER COMPANY
60
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Revenues $ 89,566 $ 82,746 $197,412 $199,437
Revenues from Affiliates 2,283 1,478 3,227 2,784
------------- ------------ ------------- ------------
Total operating revenues 91,849 84,224 200,639 202,221
------------- ------------ ------------- ------------
OPERATING EXPENSES:
Operation--
Fuel 20,998 21,193 38,542 42,447
Purchased power from non-affiliates 8,842 4,514 12,295 8,450
Purchased power from affiliates 9,184 8,830 28,637 28,210
Other 13,138 11,958 36,378 34,795
Maintenance 3,016 3,747 12,214 12,309
Depreciation and amortization 5,950 5,759 17,893 16,275
Taxes other than income taxes 3,640 3,446 9,467 9,412
Federal and state income taxes 8,833 8,721 12,936 16,447
------------- ------------ ------------- ------------
Total operating expenses 73,601 68,168 168,362 168,345
------------- ------------ ------------- ------------
OPERATING INCOME 18,248 16,056 32,277 33,876
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 21 46 34 91
Interest income 62 120 125 255
Other, net (832) (821) (1,764) (1,691)
Income taxes applicable to other income 298 561 634 839
------------- ------------ ------------- ------------
INCOME BEFORE INTEREST CHARGES 17,797 15,962 31,306 33,370
------------- ------------ ------------- ------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 2,110 2,542 7,048 7,860
Allowance for debt funds used during construction (42) (34) (169) (82)
Interest on notes payable 334 40 532 178
Amortization of debt discount, premium and expense, net 241 221 709 628
Distributions on preferred securities of subsidiary trust 685 - 2,055 -
Other interest charges 764 94 949 292
------------- ------------ ------------- ------------
Interest and other charges, net 4,092 2,863 11,124 8,876
------------- ------------ ------------- ------------
NET INCOME 13,705 13,099 20,182 24,494
DIVIDENDS ON PREFERRED STOCK - 581 - 1,743
------------- ------------ ------------- ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 13,705 $ 12,518 $20,182 $22,751
============= ============ ============= ============
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Nine Months
Ended September 30,
-----------------------------
1999 1998
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $20,182 $ 24,494
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 19,027 17,552
Deferred income taxes and investment tax credits, net 1,881 6,077
Allowance for equity funds used during construction (34) (91)
Other, net 2,014 (893)
Changes in certain current assets and liabilities--
Receivables, net (19,828) (16,866)
Inventories (2,770) (256)
Payables 5,501 3,729
Taxes accrued 3,605 2,655
Other 2,656 (1,655)
------------ ------------
Net cash provided from operating activities 32,234 34,746
------------ ------------
INVESTING ACTIVITIES:
Gross property additions (21,536) (9,800)
Other (3,205) (660)
------------ ------------
Net cash used for investing activities (24,741) (10,460)
------------ ------------
FINANCING ACTIVITIES:
Proceeds--
Other long-term debt - 50,000
Retirements--
First mortgage bonds (15,800) (30,000)
Other long-term debt (288) (20,522)
Notes payable, net 26,100 1,000
Payment of preferred stock dividends - (1,743)
Payment of common stock dividends (18,700) (17,400)
Miscellaneous 251 (2,232)
------------ ------------
Net cash used for financing activities (8,437) (20,897)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (944) 3,389
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,962 6,144
============ ============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,018 $ 9,533
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $10,126 $9,335
Income taxes 3,925 5,138
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At September 30,
1999 At December 31,
(Unaudited) 1998
------------------------------
UTILITY PLANT:
<S> <C> <C>
Plant in service, at original cost $795,222 $781,964
Less accumulated provision for depreciation 357,265 341,930
------------ -------------
437,957 440,034
Construction work in progress 9,699 2,908
------------ -------------
Total 447,656 442,942
------------ -------------
OTHER PROPERTY AND INVESTMENTS: 1,493 1,420
------------ -------------
CURRENT ASSETS:
Cash and cash equivalents 5,018 5,962
Receivables --
Customer accounts receivable 28,802 18,030
Other accounts and notes receivable 4,512 3,543
Affiliated companies 3,371 1,388
Accumulated provision for uncollectible accounts (303) (284)
Fuel cost under recovery 23,751 17,628
Fossil fuel stock, at average cost 7,434 4,984
Materials and supplies, at average cost 6,816 6,496
Prepayments 581 4,772
------------ -------------
Total 79,982 62,519
------------ -------------
DEFERRED CHARGES:
Deferred charges related to income taxes 16,407 17,130
Debt issue expense, being amortized 3,192 3,554
Premium on reacquired debt, being amortized 8,588 8,570
Prepaid pension costs 1,721 3,281
Cash surrender value of life insurance for deferred compensation plans 14,179 14,179
Miscellaneous 2,449 2,204
------------ -------------
Total 46,536 48,918
------------ -------------
TOTAL ASSETS $575,667 $555,799
============ =============
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At September 30,
1999 At December 31,
(Unaudited) 1998
------------------------------
CAPITALIZATION:
<S> <C> <C>
Common stock equity --
Common stock (par value value $5 per share) --
authorized 16,000,000 shares; outstanding 10,844,635 shares $54,223 $54,223
Paid-in capital 8,688 8,688
Retained earnings 114,436 112,954
------------ -------------
177,347 175,865
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding Company Junior Subordinated Notes 40,000 40,000
Long-term debt 147,384 163,443
------------ -------------
Total 364,731 379,308
------------ -------------
CURRENT LIABILITIES:
Long-term debt due within one year 660 689
Notes payable 26,100 -
Accounts payable --
Affiliated companies 5,113 5,014
Other 13,562 10,833
Customer deposits 5,389 5,224
Taxes accrued--
Federal and state income 5,801 2,467
Other 4,072 2,891
Interest accrued 4,057 3,815
Vacation pay accrued 2,068 1,978
Miscellaneous 4,668 6,700
------------ -------------
Total 71,490 39,611
------------ -------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 84,145 82,778
Accumulated deferred investment tax credits 11,446 11,943
Deferred credits related to income taxes 20,231 21,349
Deferred compensation plans 10,172 9,788
Postretirement benefits 7,475 6,434
Miscellaneous 5,977 4,588
------------ -------------
Total 139,446 136,880
------------ -------------
TOTAL CAPITALIZATION AND LIABILITIES $575,667 $555,799
============ =============
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
64
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1999 vs. THIRD QUARTER 1998
AND
YEAR-TO-DATE 1999 vs. YEAR-TO-DATE 1998
RESULTS OF OPERATIONS
Earnings
SAVANNAH's net income after dividends on preferred stock for the third quarter
and year-to-date 1999 was $13.7 million and $20.2 million, respectively, as
compared to $12.5 million and $22.8 million for the corresponding periods of
1998. The third quarter earnings increase is attributed to higher operating
revenues. The year-to-date earnings decrease is mainly due to lower operating
revenues primarily reflecting the Georgia PSC's accounting order, lower
industrial retail energy sales and higher operation expenses. For additional
information, see Note (M) in the "Notes to the Condensed Financial Statements"
herein for details regarding the accounting order.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Third Quarter Year-To-Date
---------------------------------------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues......................................... $6,820 8.2 $(2,025) (1.0)
Revenues from affiliates......................... 805 54.5 443 15.9
Purchased power from non-affiliates.............. 4,328 95.9 3,845 45.5
Other operation expense.......................... 1,180 9.9 1,583 4.5
Other interest charges........................... 670 N/M 657 225.0
</TABLE>
N/M - Not meaningful
Revenues. The third quarter 1999 revenues were up primarily due to
increased retail energy sales to residential and commercial customers. Energy
sales to those customers during the quarter rose by 5.1% and 9.6%, respectively,
due mainly to hotter temperatures recorded in August 1999. Year-to-date 1999
revenues were down primarily due to the impact of the Georgia PSC's accounting
order and lower industrial energy sales. Industrial energy sales were down by
18.1% and 19.8% for the quarter and year-to-date, respectively, due to reduced
demand from one industrial customer and the shut-down of another industrial
customer's facilities. In the third quarter and year-to-date 1999, the impacts
on SAVANNAH's revenues from this shut-down were $0.3 million and $0.7 million,
respectively. For additional information, see "Future Earnings Potential"
herein.
Revenues from affiliates. Revenues from sales to 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.
Purchased power from non-affiliates. The third quarter and year-to-date
increases are primarily due to higher demand for energy and increased costs for
purchased power in the third quarter of 1999.
65
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Other operation expense. The increases for the third quarter and
year-to-date 1999 reflect additional storm damage reserve accruals and expenses
associated with environmental clean-up activities at Plant Kraft.
Other interest charges. The increases in this item for the third quarter
and year-to-date 1999 are primarily related to a potential tax audit settlement.
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 weather to energy sales growth to a less regulated, more
competitive environment.
In 1998, the Georgia PSC approved a four-year accounting order for
SAVANNAH. Reference is made to Note (M) in the "Notes to the Condensed Financial
Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of SAVANNAH in the Form 10-K for additional information.
In mid-1998, one of SAVANNAH's largest industrial customers added an
additional steam turbine unit. The impact of this on SAVANNAH's revenues had
been planned for, and the customer is under contract for a minimum of 5
megawatts per year. In October 1998, another of SAVANNAH's largest customers
closed its Savannah operations. Base revenues from this customer had averaged $2
million annually. Under the terms of its contract with SAVANNAH, this customer
is obligated to pay $1 million annually through 2001.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SAVANNAH is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SAVANNAH in the Form 10-K.
Reference is made to Part II - Item 1 - "Legal Proceedings" herein for
information relating to a complaint and notice of violation brought against
certain SOUTHERN subsidiaries at the request of the EPA.
SAVANNAH's plans to achieve Year 2000 readiness have been implemented and
are included in the SOUTHERN system's Year 2000 Program. The costs related to
SAVANNAH's Year 2000 program are expected to be $1.3 million. From its inception
through September 30, 1999, the Year 2000 program costs, recognized as expense,
amounted to $1.1 million. For additional information, see SOUTHERN's
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - "Future Earnings Potential" herein.
66
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was originally to be adopted by the year 2000.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133, which amends FASB Statement No.
133 to be effective for all fiscal years beginning after June 15, 2000 (January
1, 2001 for companies with calendar-year fiscal years). SAVANNAH has not yet
quantified the impact of adopting this statement on its financial statements;
however, the adoption could increase volatility in earnings.
Reference is made to Notes (B) and (M) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in SAVANNAH's financial condition during the first nine months of
1999 included the addition of approximately $21.5 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations and credit arrangements with banks. See SAVANNAH's Condensed
Statements of Cash Flows for further details.
Financing Activities
In June 1999, SAVANNAH purchased on the open market all $15 million outstanding
of its 7 7/8% Series First Mortgage Bonds due May 1, 2025. This purchase was
financed with short-term debt. SAVANNAH plans to continue, to the extent
possible, a program to retire higher-cost debt and replace these obligations
with lower-cost capital.
Sources of Capital
SAVANNAH plans to obtain the funds required for construction and other purposes
from sources similar to those used in the past. The amount, type and timing of
any financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- - BUSINESS - "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, SAVANNAH had at September
30, 1999, approximately $5 million of cash and cash equivalents and
approximately $34.4 million of unused credit arrangements with banks. At
September 30, 1999, SAVANNAH had $26.1 million outstanding of notes payable to
banks. Since SAVANNAH has no major generating plants under construction,
management believes that the need for working capital can be adequately met by
utilizing lines of credit.
67
<PAGE>
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, H, I, J, K, L, N, O
ALABAMA A, B, C, F, G, H, I, J
GEORGIA A, B, C, F, G, K, L
GULF A, B, F
MISSISSIPPI A, B, F
SAVANNAH A, B, M
68
<PAGE>
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 THE CONDENSED FINANCIAL STATEMENTS:
(A) The condensed financial statements of the registrants included herein
have been prepared by each registrant, without audit, pursuant to the
rules and regulations of the SEC. In the opinion of each registrant's
management, the information regarding such registrant furnished herein
reflects all adjustments necessary to present fairly the results for the
periods ended September 30, 1999 and 1998. 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 each
registrant believes that the disclosures regarding such registrant are
adequate to make the information presented not misleading. It is
suggested that these condensed financial statements of each registrant be
read in conjunction with the financial statements of such registrant and
the notes thereto included in the Form 10-K. Certain prior period amounts
have been reclassified to conform with current period presentation. Due to
seasonal variations in the demand for energy, operating results for the
periods presented do not necessarily indicate operating results for the
entire year.
The condensed financial statements of ALABAMA and GEORGIA included herein
have been reviewed by ALABAMA's and GEORGIA's independent public
accountants as set forth in their reports included herein as Exhibit 1 to
ALABAMA's and GEORGIA's condensed financial statements.
(B) SOUTHERN's operating affiliates are subject to the provisions of FASB
Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of a company's operations is no
longer subject to these provisions, the company would be required to write
off related unrecoverable regulatory assets and liabilities, and determine
if any other assets have been impaired. For additional information, see
Note 1 to the financial statements of each registrant in Item 8 of the
Form 10-K.
(C) The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry--including
SOUTHERN's--regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating facilities in the financial
statements. In response to these questions, the FASB has decided to review
the accounting for obligations related to the retirement of long-lived
assets, including nuclear decommissioning. Reference is made to
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of
SOUTHERN, ALABAMA and GEORGIA in Item 7 and Note 1 to the financial
statements of SOUTHERN, ALABAMA and GEORGIA under "Depreciation and
Nuclear Decommissioning" in Item 8 of the Form 10-K.
(D) SOUTHERN engages in price risk management activities. Reference is made to
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Derivative Financial Instruments"
and Note 1 to the financial statements of SOUTHERN in Item 8 of the Form
10-K for a discussion of these activities. Activities for non-trading
purposes consist of transactions that are employed to mitigate SOUTHERN's
risk related to interest rate and foreign currency exchange rate
fluctuations. At September 30, 1999, the status of outstanding non-trading
related derivative contracts was as follows:
69
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
<TABLE>
<CAPTION>
Year of
Maturity or Notional Unrealized
Type Termination Amount Gain (Loss)
---- ------------ -------- ----------
(in thousands)
<S> <C> <C> <C>
Interest rate caps 1999 $480,000 $(94)
Interest rate swaps 2002-2012 $773,019 $(14,775)
2001-2012 (pound)600,000 $(47,938)
2002-2007 DM691,000 $(12,718)
Cross currency swaps 2001-2007 (pound)413,800 $(3,377)
Cross currency swaption 2003 DM510,000 $3,297
(pound) - Denotes British pounds sterling.
DM - Denotes Deutschemark.
</TABLE>
In January 1998, Southern Energy and Vastar Resources, Inc. combined their
energy trading and marketing activities to form a joint venture. Southern
Energy's investment in the joint venture is accounted for under the equity
method of accounting. SOUTHERN and Vastar have made guarantees to certain
counterparties regarding performance of contractual commitments by the
joint venture. At September 30, 1999, outstanding guarantees related to
the estimated fair value of net contractual commitments were approximately
$166 million. Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of SOUTHERN in Item 7 and Notes 1 and 5 to the
financial statements of SOUTHERN under the captions "Financial Instruments
for Trading Activities" and "Energy Trading and Marketing Commitments",
respectively, in Item 8 of the Form 10-K.
(E) SOUTHERN's principal business segment -- or its traditional business -- is
the five regulated electric utility operating companies that provide
electric service in four southeastern states. The other reportable
business segment is non-traditional energy services provided by Southern
Energy, which develops and manages electricity and other energy-related
projects both in the United States and abroad. Intersegment revenues are
not material. Financial data for business segments for the periods covered
in the Form 10-Q are as follows:
<TABLE>
<CAPTION>
Regulated
Domestic Southern Energy All
Electric Non-Traditional Services Other Reconciling
Utilities International (Note) Eliminations Consolidated
Domestic Total
--------------------------------------------------------------------- ---------------
Three Months Ended September 30, 1999: (in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 2,991 $ 384 $ 302 $ 686 $ 66 $ (7) $ 3,736
Segment net income (loss) 568 135 (41) 94 (39) (8) 615
Nine Months Ended September 30, 1999:
Operating revenues 7,116 1,223 488 1,711 165 (23) 8,969
Segment net income (loss) 1,000 281 (22) 259 (84) (22) 1,153
Total assets at September 30, 1999 $25,254 9,660 4,117 13,777 1,203 (2,009) 38,225
--------------------------------------------------------------------------------------------------------------- ---------------
Three Months Ended September 30, 1998:
Operating revenues $2,977 $ 400 $ 34 $ 434 $ 50 $ (4) $ 3,457
Segment net income (loss) 497 51 7 58 (33) (5) 517
Nine Months Ended September 30, 1998:
Operating revenues 7,362 1,286 101 1,387 126 (10) 8,865
Segment net income (loss) 953 142 14 156 (69) (11) 1,029
Total assets at December 31, 1998 24,421 9,578 2,869 12,447 1,438 (2,114) 36,192
--------------------------------------------------------------------------------------------------------------- ---------------
</TABLE>
70
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(Note) The all other category includes parent SOUTHERN, which does not
allocate operating expenses to business segments. Also, this category
includes segments below the quantitative threshold for separate
disclosure. These segments include a wireless communication company and a
developmental company for energy products and services. Non-traditional
services exclude interest expense to parent SOUTHERN.
(F) Reference is made to Notes 3 and 7 to each of the registrant's financial
statements, except SAVANNAH'S, in Item 8 of the Form 10-K for a discussion
of the FERC orders in proceedings regarding the reasonableness of the
return on common equity on certain of the Southern electric system's
wholesale rate schedules and contracts and a discussion of the long-term
power sales agreements. On October 14, 1999, the FERC approved a settlement
agreement relating to the proceedings pending at the FERC which provides
for an equity return of 11% under the formula rates. These rates are
effective as of January 5, 1999 for three unit power sales contracts, and
as of July 1, 1999 for the other contracts. Since the rates were placed in
effect on July 1, 1999 under an interim order of the FERC, a total refund
of approximately $4 million ($2.9 million for ALABAMA, $0.7 million for
GEORGIA and $0.4 million for GULF) is required to reflect the change in the
equity return from 12.5% to 11% under the three unit power sales contracts
for the period January 5, 1999 through June 30, 1999. A liability for the
refund is reflected in the September 30, 1999 balance sheet of the affected
registrants.
(G) During the first nine months of 1999, statutory business trusts, formed by
ALABAMA and GEORGIA of which such companies own all the common securities,
issued mandatorily redeemable preferred securities as follows: (in
thousands)
<TABLE>
<CAPTION>
Maturity Date
Company Date of Issue Amount Rate Notes of Notes
------- ------------- ------ ---- ----- -------------
<S> <C> <C> <C> <C> <C>
ALABAMA 2/25/99 $50,000 Auction $51,550 2/28/2029
GEORGIA 2/25/99 $200,000 6.85% $206,186 3/31/2029
</TABLE>
Substantially all the assets of each trust are junior subordinated notes
issued by the related company in the respective approximate principal
amounts set forth above. ALABAMA and GEORGIA consider that the mechanisms
and obligations relating to the preferred securities issued for its
benefit, taken together, constitute a full and unconditional guarantee by
it of the respective trusts' payment obligations with respect to the
preferred securities.
(H) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the Form 10-K for information relating to retail
rate adjustment procedures.
(I) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the Form 10-K for information relating to a judgment
against ALABAMA arising from discharges into Lake Martin. The trial court
has denied the defendants' motion for a new trial and for remittitur, and
ALABAMA has appealed to the Supreme Court of Alabama.
71
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(J) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the Form 10-K for information relating to a class
action charging ALABAMA with fraud and non-compliance with regulatory
statutes relating to the offer, sale and financing of "extended service
contracts" in connection with the sale of electric appliances. This action
has been settled for an insignificant amount, and the case has been
dismissed.
(K) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information concerning a three-year
rate order approved by the Georgia PSC effective January 1, 1999. The order
decreased annual retail rates by $262 million effective January 1, 1999 and
by an additional $24 million effective January 1, 2000. The order further
provides for $85 million each year, plus up to $50 million annually of any
earnings in excess of a 12.5% retail return on common equity during the
second and third years, to be applied to accelerated amortization or
depreciation of assets. Two-thirds of any additional earnings in excess of
the 12.5% return will be applied to rate reductions and the remaining
one-third retained by GEORGIA. Pursuant to this provision, GEORGIA
recognized, as a reduction to revenue, $77 million in the third quarter for
potential rate refunds related to two-thirds of estimated earnings in
excess of 12.5% return.
Under a previous three-year accounting order ending December 1998,
GEORGIA's earnings were evaluated against a retail return on common equity
range of 10% to 12.5%. Earnings in excess of 12.5% were used to accelerate
the depreciation of electric plant. For earnings in excess of the 12.5%
retail return, GEORGIA recorded charges of $113.8 million and $281.3
million, respectively, during the third quarter and year-to-date 1998.
(L) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's
designation as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and other
environmental contingencies.
(M) In 1998, the Georgia PSC approved a new accounting order for SAVANNAH.
Under this order, SAVANNAH will reduce electric rates to its small
business customers, expense additional storm damage accruals and accrue
additional depreciation on generating assets. For additional information
concerning the four-year accounting order approved by the Georgia PSC in
June 1998, reference is made to Note 3 to the financial statements of
SAVANNAH in Item 8 of the Form 10-K.
72
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(N) Reference is made to Note 3 to the financial statements of SOUTHERN in Item
8 and to Legal Proceedings in Item 3 of the Form 10-K for information
relating to petitions for Chapter 11 bankruptcy relief which were filed in
the U. S. Bankruptcy Court for the Southern District of Alabama. Effective
with the bankruptcy filing in January 1999, Mobile Energy is accounted for
under the equity method, rather than being consolidated as before. As a
result of recent settlement discussions with Kimberly-Clark Corporation and
the bondholders, Southern Energy reevaluated possible outcomes of the
negotiations and recorded an after-tax write down of $69 million primarily
representing SOUTHERN's equity investment in Mobile Energy. At September
30, 1999, Mobile Energy had total assets of $380 million and senior debt
outstanding of $193 million of first mortgage bonds and $73 million related
to tax-exempt bonds. In connection with the bond financings, SOUTHERN
provided certain limited guarantees, in lieu of funding debt service and
maintenance reserve accounts with cash. As of September 30, 1999, under an
agreement with the bondholders, SOUTHERN had paid $38,272,000 pursuant to
the guarantees. SOUTHERN continues to have guarantees outstanding of
certain potential environmental and other obligations of Mobile Energy that
represent a maximum contingent liability of $21 million at September 30,
1999. The ultimate outcome of this matter cannot now be determined.
(O) In 1998, SOUTHERN's Board of Directors authorized SOUTHERN to make open
market purchases of its common stock in an aggregate amount not to exceed
$300 million through March 31, 1999. The purpose of the program was to
provide shares of common stock for the purchase requirements of SOUTHERN's
various stockholder, employee and outside director stock purchase plans.
Under the program, 4.4 million shares had been repurchased and 2.4 million
shares were reissued.
Also, in April 1999, SOUTHERN's board approved the repurchase of up to 50
million shares of SOUTHERN's common stock over the next two years through
open market or privately negotiated transactions. The program does not
establish a target stock price or timetable for specific repurchases.
Under this program, 25,821,200 shares have been repurchased through
November 9, 1999, with funding provided from SOUTHERN's commercial paper
program.
73
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(1) On November 3, 1999, the United States of America, acting at
the request of the EPA, brought a civil action in the U. S.
District Court for the Northern District of Georgia against
ALABAMA, GEORGIA and SCS. The complaint alleges violations of
the prevention of significant deterioration and new source
review provisions of the Clean Air Act with respect to
coal-fired generating facilities at ALABAMA's Barry, Gorgas
and Miller plants and GEORGIA's Bowen and Scherer plants and
requests civil penalties and injunctive relief, including an
order requiring the installation of the best available control
technology at the affected units.
The EPA concurrently issued a notice of violation to the
operating companies and SCS relating to ALABAMA's Barry,
Gaston, Gorgas, Greene County and Miller plants, GEORGIA's
Bowen and Scherer plants, GULF's Crist plant, MISSISSIPPI's
Watson plant and SAVANNAH's Kraft plant.
The complaint and notice of violation are similar to
those brought against and issued to several other electric
utilities. These complaints and notices of
violation allege that the utilities had failed
to secure necessary permits or install additional
pollution equipment when performing maintenance and
construction at coal burning plants constructed or under
construction prior to 1978. SOUTHERN believes that it
complied with applicable laws and the EPA's regulations and
interpretations in effect at the time the work in question
took place.
Although the outcome of this matter cannot presently be
determined, a result adverse to SOUTHERN could require the
expenditure of substantial additional capital at its existing
plants and possibly require payment of substantial penalties.
(2) Reference is made to the Notes to the Condensed Financial
Statements herein for information regarding certain legal and
administrative proceedings in which SOUTHERN and its reporting
subsidiaries are involved.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibits 15 - Letter re: unaudited interim financial
information
(a) ALABAMA
(b) GEORGIA
Exhibit 24 - (a) Powers of Attorney and
resolutions.(Designated in the Form
10-K for the year ended
December 31, 1998, 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.)
74
<PAGE>
Item 6. Exhibits and Reports on Form 8-K. (Continued)
- (b) Power of Attorney for GEORGIA.
(Designated in the Form 10-Q for the
quarter ended June 30, 1999,
File No. 1-6468, as Exhibit 24(b).)
Exhibits 27 - Financial Data Schedule
(a) SOUTHERN
(b) ALABAMA
(c) GEORGIA
(d) GULF
(e) MISSISSIPPI
(f) SAVANNAH
(b) Reports on Form 8-K.
ALABAMA filed Current Reports on Form 8-K dated
August 13, 1999 and September 21, 1999:
Items reported: Item 5
Item 7
Financial statements filed: None
GULF filed a Current Report on Form 8-K dated
August 17, 1999:
Items reported: Item 5
Item 7
Financial statements filed: None
75
<PAGE>
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 A. W. Dahlberg
Chairman and Chief Executive Officer
(Principal Executive Officer)
By W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
- -------------------------------------------------------------------------------
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
(Principal Executive Officer)
By William B. Hutchins, III
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
76
<PAGE>
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 David M. Ratcliffe
President and Chief Executive Officer
(Principal Executive Officer)
By Thomas A. Fanning
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
- --------------------------------------------------------------------------------
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
(Principal Executive Officer)
By A. E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
77
<PAGE>
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 Dwight H. Evans
President and Chief Executive Officer
(Principal Executive Officer)
By Michael W. Southern
Vice President, Secretary, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
- -------------------------------------------------------------------------------
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 G. Edison Holland, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
By Kirby R. Willis
Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: November 11, 1999
78
EXHIBIT 15(a)
ARTHUR ANDERSEN LLP
November 9, 1999
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Ladies and Gentlemen:
We are aware that Alabama Power Company has incorporated by reference in
Registration Statement 333-67453 its Form 10-Q for the quarter ended September
30, 1999 which includes our report on Alabama Power Company dated November 9,
1999 covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), such report
is not considered a part of the Registration Statement prepared or certified by
our firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
EXHIBIT 15(b)
ARTHUR ANDERSEN LLP
November 9, 1999
Georgia Power Company
241 Ralph McGill Boulevard, NE
Atlanta, Georgia 30308
Ladies and Gentlemen:
We are aware that Georgia Power Company has incorporated by reference in
Registration Statement 333-75193 its Form 10-Q for the quarter ended September
30, 1999 which includes our report on Georgia Power Company dated November 9,
1999 covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), such report
is not considered a part of the Registration Statement prepared or certified by
our firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000092122
<NAME> THE SOUTHERN COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 25,262,105
<OTHER-PROPERTY-AND-INVEST> 6,518,838
<TOTAL-CURRENT-ASSETS> 3,968,047
<TOTAL-DEFERRED-CHARGES> 2,475,609
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 38,224,599
<COMMON> 3,503,094
<CAPITAL-SURPLUS-PAID-IN> 1,774,506
<RETAINED-EARNINGS> 4,248,125
<TOTAL-COMMON-STOCKHOLDERS-EQ> 9,525,725
2,428,595
368,760
<LONG-TERM-DEBT-NET> 3,976,254
<SHORT-TERM-NOTES> 1,004,048
<LONG-TERM-NOTES-PAYABLE> 7,407,549
<COMMERCIAL-PAPER-OBLIGATIONS> 2,362,465
<LONG-TERM-DEBT-CURRENT-PORT> 489,748
0
<CAPITAL-LEASE-OBLIGATIONS> 125,894
<LEASES-CURRENT> 5,331
<OTHER-ITEMS-CAPITAL-AND-LIAB> 10,530,230
<TOT-CAPITALIZATION-AND-LIAB> 38,224,599
<GROSS-OPERATING-REVENUE> 8,969,294
<INCOME-TAX-EXPENSE> 600,305
<OTHER-OPERATING-EXPENSES> 6,706,901
<TOTAL-OPERATING-EXPENSES> 7,307,206
<OPERATING-INCOME-LOSS> 1,662,088
<OTHER-INCOME-NET> 499,390
<INCOME-BEFORE-INTEREST-EXPEN> 2,161,478
<TOTAL-INTEREST-EXPENSE> 992,311
<NET-INCOME> 1,169,167
15,683
<EARNINGS-AVAILABLE-FOR-COMM> 1,153,484
<COMMON-STOCK-DIVIDENDS> 696,014
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,939,569
<EPS-BASIC> 1.67
<EPS-DILUTED> 1.67
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000003153
<NAME> ALABAMA POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,546,236
<OTHER-PROPERTY-AND-INVEST> 310,436
<TOTAL-CURRENT-ASSETS> 947,098
<TOTAL-DEFERRED-CHARGES> 781,724
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,585,494
<COMMON> 224,358
<CAPITAL-SURPLUS-PAID-IN> 1,334,744
<RETAINED-EARNINGS> 1,285,865
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,844,967
347,000
317,512
<LONG-TERM-DEBT-NET> 986,733
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 2,198,957
<COMMERCIAL-PAPER-OBLIGATIONS> 88,421
<LONG-TERM-DEBT-CURRENT-PORT> 100,000
0
<CAPITAL-LEASE-OBLIGATIONS> 4,379
<LEASES-CURRENT> 976
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,696,549
<TOT-CAPITALIZATION-AND-LIAB> 9,585,494
<GROSS-OPERATING-REVENUE> 2,652,915
<INCOME-TAX-EXPENSE> 216,351
<OTHER-OPERATING-EXPENSES> 1,894,162
<TOTAL-OPERATING-EXPENSES> 2,110,513
<OPERATING-INCOME-LOSS> 542,402
<OTHER-INCOME-NET> 33,546
<INCOME-BEFORE-INTEREST-EXPEN> 575,948
<TOTAL-INTEREST-EXPENSE> 206,560
<NET-INCOME> 369,388
12,455
<EARNINGS-AVAILABLE-FOR-COMM> 356,933
<COMMON-STOCK-DIVIDENDS> 296,100
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 576,409
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000041091
<NAME> GEORGIA POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 9,731,313
<OTHER-PROPERTY-AND-INVEST> 378,159
<TOTAL-CURRENT-ASSETS> 1,158,919
<TOTAL-DEFERRED-CHARGES> 1,104,215
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 12,372,606
<COMMON> 344,250
<CAPITAL-SURPLUS-PAID-IN> 1,790,294
<RETAINED-EARNINGS> 1,903,783
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,038,327
889,250
15,203
<LONG-TERM-DEBT-NET> 2,063,195
<SHORT-TERM-NOTES> 119,516
<LONG-TERM-NOTES-PAYABLE> 595,000
<COMMERCIAL-PAPER-OBLIGATIONS> 197,923
<LONG-TERM-DEBT-CURRENT-PORT> 100,000
0
<CAPITAL-LEASE-OBLIGATIONS> 85,347
<LEASES-CURRENT> 611
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,268,234
<TOT-CAPITALIZATION-AND-LIAB> 12,372,606
<GROSS-OPERATING-REVENUE> 3,488,485
<INCOME-TAX-EXPENSE> 346,493
<OTHER-OPERATING-EXPENSES> 2,407,971
<TOTAL-OPERATING-EXPENSES> 2,754,464
<OPERATING-INCOME-LOSS> 734,021
<OTHER-INCOME-NET> (6,529)
<INCOME-BEFORE-INTEREST-EXPEN> 727,492
<TOTAL-INTEREST-EXPENSE> 199,408
<NET-INCOME> 528,084
1,556
<EARNINGS-AVAILABLE-FOR-COMM> 526,528
<COMMON-STOCK-DIVIDENDS> 402,300
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,172,770
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000044545
<NAME> GULF POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,060,742
<OTHER-PROPERTY-AND-INVEST> 1,481
<TOTAL-CURRENT-ASSETS> 157,909
<TOTAL-DEFERRED-CHARGES> 82,696
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,302,828
<COMMON> 38,060
<CAPITAL-SURPLUS-PAID-IN> 218,973
<RETAINED-EARNINGS> 171,827
<TOTAL-COMMON-STOCKHOLDERS-EQ> 428,860
85,000
4,236
<LONG-TERM-DEBT-NET> 247,436
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 119,950
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 27,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 390,346
<TOT-CAPITALIZATION-AND-LIAB> 1,302,828
<GROSS-OPERATING-REVENUE> 519,585
<INCOME-TAX-EXPENSE> 27,712
<OTHER-OPERATING-EXPENSES> 420,238
<TOTAL-OPERATING-EXPENSES> 447,950
<OPERATING-INCOME-LOSS> 71,635
<OTHER-INCOME-NET> (309)
<INCOME-BEFORE-INTEREST-EXPEN> 71,326
<TOTAL-INTEREST-EXPENSE> 24,557
<NET-INCOME> 46,769
162
<EARNINGS-AVAILABLE-FOR-COMM> 46,607
<COMMON-STOCK-DIVIDENDS> 45,400
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 92,829
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000066904
<NAME> MISSISSIPPI POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,032,607
<OTHER-PROPERTY-AND-INVEST> 1,395
<TOTAL-CURRENT-ASSETS> 136,786
<TOTAL-DEFERRED-CHARGES> 59,420
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,230,208
<COMMON> 37,691
<CAPITAL-SURPLUS-PAID-IN> 179,800
<RETAINED-EARNINGS> 181,599
<TOTAL-COMMON-STOCKHOLDERS-EQ> 399,090
35,000
31,809
<LONG-TERM-DEBT-NET> 172,830
<SHORT-TERM-NOTES> 43,200
<LONG-TERM-NOTES-PAYABLE> 119,816
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 50,020
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 378,443
<TOT-CAPITALIZATION-AND-LIAB> 1,230,208
<GROSS-OPERATING-REVENUE> 482,619
<INCOME-TAX-EXPENSE> 30,183
<OTHER-OPERATING-EXPENSES> 381,599
<TOTAL-OPERATING-EXPENSES> 411,782
<OPERATING-INCOME-LOSS> 70,837
<OTHER-INCOME-NET> 1,216
<INCOME-BEFORE-INTEREST-EXPEN> 72,053
<TOTAL-INTEREST-EXPENSE> 21,084
<NET-INCOME> 50,969
1,510
<EARNINGS-AVAILABLE-FOR-COMM> 49,459
<COMMON-STOCK-DIVIDENDS> 41,600
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 67,096
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the Form 10-Q for September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000086940
<NAME> SAVANNAH ELECTRIC AND POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 447,656
<OTHER-PROPERTY-AND-INVEST> 1,493
<TOTAL-CURRENT-ASSETS> 79,982
<TOTAL-DEFERRED-CHARGES> 46,536
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 575,667
<COMMON> 54,223
<CAPITAL-SURPLUS-PAID-IN> 8,688
<RETAINED-EARNINGS> 114,436
<TOTAL-COMMON-STOCKHOLDERS-EQ> 177,347
40,000
0
<LONG-TERM-DEBT-NET> 82,155
<SHORT-TERM-NOTES> 26,100
<LONG-TERM-NOTES-PAYABLE> 60,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 5,229
<LEASES-CURRENT> 660
<OTHER-ITEMS-CAPITAL-AND-LIAB> 184,176
<TOT-CAPITALIZATION-AND-LIAB> 575,667
<GROSS-OPERATING-REVENUE> 200,639
<INCOME-TAX-EXPENSE> 12,936
<OTHER-OPERATING-EXPENSES> 155,426
<TOTAL-OPERATING-EXPENSES> 168,362
<OPERATING-INCOME-LOSS> 32,277
<OTHER-INCOME-NET> (971)
<INCOME-BEFORE-INTEREST-EXPEN> 31,306
<TOTAL-INTEREST-EXPENSE> 11,124
<NET-INCOME> 20,182
0
<EARNINGS-AVAILABLE-FOR-COMM> 20,182
<COMMON-STOCK-DIVIDENDS> 18,700
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 32,234
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
